Richelieu Hardware is a leading manufacturer, distributor, and importer of specialty hardware and complementary products in North America. The company serves over 80,000 customers in North America through a network of 77 centers – 75 distribution centers in Canada and the U.S. and two manufacturing plants in Canada.
Richelieu Hardware is known for its diversified range of products, one-stop shopping experience, and its efficient logistics. It offers more than 110,000 products in diverse categories, ranging from hardware for furniture and buildings, kitchen and closet storage solutions to lighting systems, finishing and decorating products and ergonomic workstations. This offering is complemented by the specialty items such as veneer sheets, decorative moldings, and components for the window and door industry.
A wide choice of colors, materials, design, and utility products has made Richelieu a preferred choice in the architects and designers community.Investment Data
- Opportunity Score: 64
- Ticker: TSE:RCH
- Sector: Consumer Cyclical
- Industry: Manufacturing - Apparel & Furniture
- Market Cap: 1.46B
- P/E: 21.88
- Dividend Yield: 0.99
- Dividend Payout Ratio: 21.64
- FFO Payout Ratio: Dividend Snapshot Members Only
- FCF Payout Ratio: Dividend Snapshot Members Only
- Chowder Score: Dividend Snapshot Members Only
- Piotroski-F Score: Dividend Snapshot Members Only
- 3, 5, 10-year Revenue Growth: Dividend Snapshot Members Only
- 3, 5, 10-year Dividend Growth: Dividend Snapshot Members Only
Revenue Growth & Market Exposure
The residential and commercial renovation industry is one of Richelieu’s principal sources of growth. Its products are targeted to a large customer base of home furnishing, office furniture manufacturers, residential and commercial woodworkers, as well as hardware retailers. More than 60% of Richelieu’s overall offering is sold under its brands. Its specialty items are manufactured by two of its subsidiaries, Cedan Industries Inc. and Menuiserie des Pins Ltd.
Over the years, Richelieu has built solid relationships with the world’s leading suppliers that enables it to provide customers with the latest innovative and customized products. A strong customer and innovation focus has enabled Richelieu Hardware to maintain leadership position since the last five decades of its existence.
Richelieu witnessed the positive impact of its market development, acquisition and innovation strategies in the U.S. which subsequently drove sales up. The company acquired Euro Architectural Components, a leader in the architectural hardware and stainless steel components market. The acquisitions during the first half of the year represent an increase of nearly $30 million in annual sales for Richelieu.
Richelieu Hardware has registered a sales growth of 11.6% CAGR over the last two decades. The company is growing organically and through acquisitions. It has a proven history of 62 successful acquisitions in the U.S. and Canada. Richelieu focuses on continuously introducing diversified products each year and expanding its footprint in North America. The company also has an online presence through Richelieu.com which is the leading tool of its kind in the industry. Richelieu is targeting its future growth to come from continuous innovation, market development, and acquisitions.
Richelieu Hardware is a Canadian Dividend Aristocrat. The company has compounded its dividend growth at more than 8% over the last decade. Earnings have also grown at 8.5% CAGR during the same time. Its dividend yield stands at a modest 1% with a very low payout ratio of 21%. Richelieu repurchased 207,800 common shares for $4.5 million during the second quarter, and paid dividends totalling $3.6 million. The dividend hike was 5.4% from the same period in 2018.
The company has a strong financial position and expects cash flows from operating activities and other sources of financing to meet its ongoing contractual commitments.
Richelieu’s efforts towards market development, its sales synergies, and contribution from acquisitions are already bearing fruits. The acquisition strategy is its major growth driver. The company should gain from the synergy effects of its recent integrations by achieving new sales and operational benefits, market development in Canada and the U.S., and overall profitability. Over the years, Richelieu has developed closed knit relations with manufacturers of innovative products, offering its customers with the best decorative and functional hardware products and systems in the world. This has led to sticky customer relationships and strong ties with a network of global partners.
Richelieu Hardware operates in a highly fragmented market consisting majorly of regional distributors offering a limited range of products. The company enjoys an upper hand, thanks to its wide distribution network, a wide array of products, one-stop-shop service approach, and logistical efficiency. Given its large size, Richelieu has been successfully acquiring its rival distributors. The specialty hardware and renovation products segment is highly competitive. The company competes with the likes of Upper Canada Specialty Hardware, Allmar Inc., and McGregor & Thompson Hardware Ltd.
Richelieu Hardware enjoys strong market share positions in the decorative and functional hardware products markets in Canada and the U.S. The company’s focus on developing and offering innovative products in conjunction with strong supplier partnerships provide a wide moat to its business. Richelieu has inculcated deep relationships with customers and suppliers alike, which better positions it to understand and cater to the customized demands of its clients.
The company is smartly using its strategy to grow both organically and through acquisitions. Given its strong foothold in the industry, a deep understanding of client needs and innovative product portfolio, the company should continue its dividend growth streak in the mid-to-high single-digit range in the future. However, it’s difficult to predict growth from acquisitions.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.