Reno projects hum in Western Canada despite housing downturn
Weekend reno warriors and professional contractors alike continue to spend on home improvements in Alberta and elsewhere in Western Canada, according to Rona Inc., one of the country’s biggest sellers of building materials and tools.
But the impact of lower oil prices may well dent DIYer demand in the months ahead.
“We cannot see any changes in our business so far,” Robert Sawyer, Rona’s head, said on a conference call Tuesday afternoon. Sawyer was asked about the economic fallout from lower oil on Rona in recent months.
Far from falling, the Quebec-based retailer reported an unexpectedly strong 6-per-cent jump in sales at existing stores in the latest quarter, despite the shock waves created by crashing oil prices on the housing market and consumer confidence, particularly in Alberta and Saskatchewan.
About a third of the home improvement chain’s sales (30 per cent) comes from Western Canada, or more than $290 million in the last quarter. The balance of the remainder comes from Quebec and Ontario.
Reno slowdown looms
Still, sales of tools and building materials could experience a chill as housing market conditions deteriorate, experts predict.
Rona, which operates the Totem chain in Alberta, reported its latest results the same day that real estate data showed a sharp slowdown in sales activity in that province as well as Saskatchewan. A new report from CIBC also suggested Alberta—Canada’s biggest engine of growth in recent years— is headed for a “mild” recession.
“Risk has shifted to the outlook for the Alberta economy and its housing sector,” Keith Howlett, an investment expert at Desjardins Securities said. “The impact of the softening economy on sales may not be evident until summer.”
The number of existing homes bought and sold last month declined 17.8 per cent in Alberta, according to the Canadian Real Estate Association. Sales were down 19.3 per cent in Saskatchewan. Both figures follow data that shows weakening construction activity on new homes in Western Canada.
The housing slowdown will directly impact reno spending in the months ahead, comments from Rona execs suggest.
“Our sales are correlated to both [resales and housing starts],” Dominique Boies, Rona’s chief of finance, said. “Normally a resale brings spruce up projects. Historically [the housing market’s performance has] had a big impact.”
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