Tue | Dec 12, 2017

Hardware & Lumber to modernise stores

Published:Sunday | August 27, 2017 | 12:00 AMSteven Jackson
A 2010 file photo of a Rapid True Value store on Constant Spring Road, Kingston. Hardware & Lumber will be upgrading its 15 Rapid True Value and H&L Agro stores across Jamaica.
Lloyd Distant, CEO of Hardware & Lumber Limited.
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Hardware & Lumber Limited (H&L) plans to modernise its 15 stores, adding a new facade and in-store kiosks, with funding from the $750 million of debt capital raised from a bond issued this month.

The retail and wholesale supplier of construction, hardware and agricultural items plans to entice customers to spend more by giving them exactly what they want, according to CEO Lloyd Distant. Part of that involves improved customer care training; another aspect involves adding kiosks in key stores by Christmas.

The kiosks will allow customers to browse store inventory, see pricing, product location and specifications, Distant said in a Gleaner Business interview on Thursday.

The former telecom executive was tapped by the new owners of H&L to head the retail operation. He replaced Doran Doran, who was a legacy hire previously attached to the GraceKennedy conglomerate.

Overall, the stores will receive a facelift to modernise the company formed in 1927. The locations in Mandeville and Manor Park in Kingston were the most recent to undergo renovations, but Distant said even those stores will see changes under the current plan.

"Jamaica still hasn't seen our model store yet. In six to eight months, you will see a store that can rival any store in the world," he said.

H&L tapped the market for $600 million in a private placement earlier this month, arranged jointly JMMB and VM Wealth Management. Distant, who became CEO in January, indicated that the placement was more than 140 per cent oversubscribed and the company opted to upsize the offer to $750 million. The bond will pay interest at 12 per cent per annum and matures in 2022.

"We will spend the majority of the funds on improving the look and feel of the stores, improve the product offerings and the general customer experience," he said.

H&L is also weighing a potential expansion of the chain by adding new stores, but is yet to make a decision.

Some of the bond proceeds will pay down legacy supplier arrears, partially repay bank debt, and provide working capital support.

The lead arrangers were jointly JMMB and VM Wealth Management. Myers, Fletcher Gordon was the legal adviser. The bond offers a yield of 12 per cent for the issue which matures in 2022. The offer closed on August 11th.

H&L operates 15 stores under the Rapid True Value and H&L Agro brands. Rapid True Value sells lumber, hardware and household items, while H&L Agro retails agricultural products and equipment. The company operates with 430 staff.

Argyle Inc took over H&L from GraceKennedy in a deal that gave it just over half of the company at the end of 2015. A mandatory offer to minority owners pushed its ownership of the company to 97.8 per cent. The remaining shares are held by more than 1,000 stockholders, the majority of whom cannot be located, according to H&L's 2016 annual report.

Sales across the chain amounted to $8.3 billion in 2016, indicating that the company had improved sales by nearly a billion dollars a year into its takeover from GraceKennedy. Profit in 2016 was reported at $280 million, up from $164 million in 2015.

For the first quarter of this year, the company made net profit of $93 million from revenue of $2.3 billion. Sales grew 19 per cent while profit jumped 92 per cent in the quarter.

Distant said the improved performance was, in part, due to internal operational efficiencies along with the general improvement of the Jamaican economy. As the largest retailer and wholesaler of construction and agricultural items, H&L's financial performance remains twinned to the performance of the economy, particularly the construction and agricultural sectors.

steven.jackson@gleanerjm.com