These businesses have seen a surge in demand for their products during the pandemic. Will they be able to keep the momentum going?

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The COVID-19 pandemic has been devastating for many businesses, from airlines, to hair salons, to cinema chains. But for others, the lockdowns of the past 18 months created surging – sometimes unprecedented – demand for their products and services. Spending on “comforts of home,” such as gardening and do-it-yourself supplies, was up by nearly 60 per cent this April, compared with prepandemic levels, according to RBC Economics. Even as restrictions lifted, spending on those categories was still up by nearly 25 per cent at the start of August. But as economic and social conditions continue to shift, the businesses that saw pandemic-related boosts face a big question: Can they maintain the momentum? Some believe the shifts in consumer behaviour will be permanent, others concede their popularity was likely temporary while still others fret that supply chain bottlenecks will thwart any chance of turning a short-term bump into a long-term trend. Here, six companies that saw business boom over the past year, and what their executives think the future looks like.

Wrebbit Puzzles

Sustained demands means twice as many new designs for enthusiasts

Generally speaking, January is not a boom time in the puzzle business. Enthusiasts usually have a postholiday bounty to keep them busy for the months ahead. At Montreal-based Wrebbit Puzzles Inc., that means that in normal times, things get quieter until June, when the busy period begins to produce puzzles for fall and through the holiday season. But for more than 12 months straight, the quiet period has never come.

Wrebbit is a bit niche, even in the slightly niche entertainment space that is puzzles: The company manufactures 3-D puzzles only. The final product of the gamer’s toil is not a flat picture, but a freestanding foam structure. But similar to other puzzle makers, Wrebbit saw a big boost in demand – roughly 20 per cent – during the pandemic as people looked for entertainment while stuck at home.

“We have an increased fan base … and the regular fan base needed more puzzles,” Wrebbit president Jean Théberge said.

Wrebbit was able to scale up production to meet that demand, largely because the company does all its design and most of its production at its Montreal facility. Since roughly 80 per cent of the puzzles’ components are sourced in Canada – including the boxes, and the laminated image sheets that are attached to the puzzles’ foam backings – the company skirted many of the supply chain headaches that others experienced.

Thanks to this, Wrebbit avoided being out of stock as sales went up, and was able to fill retailers’ orders. It also means that because Wrebbit manufactures on a just-in-time model, it won’t be stuck with too much inventory if order volumes shift, Mr. Théberge said.

He is preparing for puzzles’ popularity to continue: Normally, Wrebbit releases three new puzzles each year; this year, it will be six. The new offerings include a Ghostbusters-themed puzzle, the result of a licensing deal with Sony Pictures, timed to the September release of the newest movie in the film franchise.

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While Wrebbit has an Amazon store, most of its business is through wholesale orders from retailers – it currently distributes to 45 countries – which will continue to be a focus. But after observing the consumer shift toward online shopping during the pandemic, Wrebbit is now building its own e-commerce site for the first time, which will launch for North American customers in the coming months.

Mr. Théberge acknowledges he can’t predict the future, but prepandemic sales trends give him some optimism: Demand was already growing before COVID-19, to the extent that Wrebbit has gone from producing 150,000 to 200,000 puzzles annually just a few years ago, to roughly 500,000 a year now.

Susan Krashinsky Robertson

Global toy boom

Sales in first half of 2021 vs. 2020

+136%

+59%

+38%

+38%

+14%

+10%

THE GLOBE AND MAIL, SOURCE: ndp group

Canadian retail sales by industry

At 2012 constant prices, seasonally adjusted, in millions of dollars

June 2020

May 2021

June 2021

$1,625

Furniture and home

furnishing stores

$1,396

$1,704

$1,510

Electronics and

appliance stores

$1,780

$1,765

Sporting goods,

hobby, book

and music stores

$1,220

$939

$1,193

THE GLOBE AND MAIL, SOURCE: statistics canada

Global toy boom

Sales in first half of 2021 vs. 2020

+136%

+59%

+38%

+38%

+14%

+10%

THE GLOBE AND MAIL, SOURCE: ndp group

Canadian retail sales by industry

At 2012 constant prices, seasonally adjusted, in millions of dollars

June 2020

May 2021

June 2021

$1,625

Furniture and home

furnishing stores

$1,396

$1,704

$1,510

Electronics and

appliance stores

$1,780

$1,765

Sporting goods,

hobby, book

and music stores

$1,220

$939

$1,193

THE GLOBE AND MAIL, SOURCE: statistics canada

Global toy boom

Sales in first half of 2021 vs. 2020

+136%

+59%

+38%

+38%

+14%

+10%

Strategic trading

card games

Games and

puzzles

Outdoor sports

toys

Building

sets

Infant, toddler,

preschool toys

Dolls

THE GLOBE AND MAIL, SOURCE: ndp group

Canadian retail sales by industry

At 2012 constant prices, seasonally adjusted, in millions of dollars

June 2020

May 2021

June 2021

$1,625

Furniture and home

furnishing stores

$1,396

$1,704

$1,510

Electronics and

appliance stores

$1,780

$1,765

$1,220

Sporting goods,

hobby, book

and music stores

$939

$1,193

THE GLOBE AND MAIL, SOURCE: statistics canada

Leon’s Furniture Ltd.

Record demand for new furniture tempered somewhat by tariff woes and supply chain snarls

Leon’s Furniture Ltd. chief executive Mike Walsh feels about as comfortable predicting future sales trends as one of his salespeople does telling you when a couch will be delivered – which is to say, not very.

The problem is not selling products; it’s getting them to Canada. When customers were stuck at home with their well-worn sofas, rugs and appliances, proximity made their hearts grow colder. And unable to use their discretionary dollars to globetrot, people spent more on refreshing their homes (not to mention conjuring a workspace better than the kitchen table).

But while demand is strong, container shortages persist, preventing factories in China and Vietnam from shipping products. Freight costs are up. Even domestic producers can only get so much product out the door. Store staff are gently steering customers away from products with the longest lead times, and sometimes taking those pieces off the floor altogether. “We’re getting product in, but not at the rate I would like,” Mr. Walsh said. “…It is an interesting time.”

But despite the challenges, Leon’s – which owns more than 300 stores in Canada, including The Brick and Leon’s chains – saw its revenue grew by 31 per cent in 2020 to $2.2-billion, and net income jumped 52.8 per cent. The company had its best-ever first quarter in 2021, with revenue up 14.8 per cent and e-commerce sales more than quadrupling, up 374 per cent. After initially taking a dip in the spring and early summer, Leon’s share price has more than recovered: in late August, it was sitting at an all-time high of more than $25, a 52-per-cent gain compared with before the pandemic.

Recently, Leon’s and other furniture retailers have been heavily affected by new tariffs on some upholstered furniture from China and Vietnam. Since those were imposed in May, Leon’s has honoured customers’ orders and swallowed the extra cost – which for some items has meant selling at a loss. On Thursday, the Canadian International Trade Tribunal upheld the tariffs, which were a response to allegations by domestic manufacturers that product “dumping” was depressing prices.

Mr. Walsh said he was disappointed in the decision, and that retailers are waiting for the tribunal to issue its reasons for the findings, at which point they will consider the next steps. Combined with other supply chain challenges, he expects inventory will be a challenge for another six to 12 months.

Beyond that, Mr. Walsh believes the business will remain strong. Demand may soften compared with the peak, he said, but people are going to continue replacing furniture, appliances and mattresses. COVID also highlighted the growing importance of e-commerce. The 112-year-old company is still opening new stores – many customers want to see big-ticket items for themselves before buying, he insists – and running TV and newsprint ads, but it is now spending more on digital marketing than it did before, to attract younger shoppers.

At a time of uncertainty, the company is also working on its next five-year plan. “Nobody has a crystal ball,” Mr. Walsh said. “…The teams are focused on what they can control.”

Susan Krashinsky Robertson

Wolverine Worldwide Canada

Once people try camping, they stick with it. At least, that’s the hope

When backwoods campsites are being booked up as if they’re French Quarter hotel rooms during Mardi Gras, you know it’s a weird time.

But in 2020, people needed to get out. Suddenly, tents were a hot commodity. And for the owner of the Merrell footwear brand, demand for items such as its signature Moab hiking boot began to surge in mid-April, 2020 — and it still has not slowed down.

“Our order books right now - and you can speak to anybody in these categories – it’s very healthy,” said John Condon, president of Wolverine Worldwide Canada, the Canadian subsidiary of Rockford, Mich.-based Wolverine World Wide Inc. “There are no warning signs for us right now, that this was a blip, like it was a fad.”

Wolverine also owns the Saucony brand, which has likewise seen sales pop: When gyms were closed and many team sports were on hiatus, many people turned to running. In the first quarter of 2021 alone, the parent company reported that sales of the Saucony brand grew by 60 per cent compared with 2020, and more than 75 per cent compared with 2019.

While some attrition is expected in the months ahead, outdoor activities and running have something in common: Once people get the bug, many stick with it. On a recent conference call, Wolverine CEO Blake Krueger called it “probably the strongest demand I’ve ever seen in my career”.

The parent company recently doubled down on the fitness trend: In early August, Wolverine announced that it had acquired Lululemon competitor Sweaty Betty for US$410-million, adding the women’s e-commerce activewear retailer to its portfolio.

Wolverine has been affected by the same supply-chain challenges as other retailers and manufacturers, including shortages of shipping containers. The company is spending extra on air freight to get product into Canada. And many factories are still catching up after being temporarily closed. Suppliers of components such as outsoles have also been challenged. The company has asked retailers to submit orders earlier than usual, to help manage factory timelines – for example, trying to take advantage of capacity at slower times when factories might have fewer lines running.

“Every rock is being turned over,” Mr. Condon said. “All of the footwear retailers would say, ‘He who has product today wins.’ It’s literally that simple.”

Susan Krashinsky Robertson

M&M Food Market

Home cooking will remain popular—with some help from the freezer aisle

As COVID-19 shuttered restaurants, people were forced to cook at home more. This was great for Canadians’ pocketbooks; not so great for their mental health.

“Your average Canadian has a repertoire of maybe 10 or 15 recipes. You blow through that pretty quickly and then it’s: ‘What do I do now?’ ” said Andy O’Brien, CEO of M&M Food Market. The chain of more than 300 stores sells mostly frozen foods, and alongside the rest of the grocery industry, its business has been brisk.

Across the sector, an initial surge of panic-buying and pantry-stocking led to a record 28.7-per-cent increase in grocery sales in March, 2020, according to Statistics Canada. While buying patterns settled somewhat in subsequent months, grocery purchasing still remained elevated, and the industry recorded sales growth of 11.5 per cent for the full year. M&M’s sales rose by 16 per cent in 2020 to roughly $500-million.

Partly, this was owing to new customers under 40 discovering the chain, Mr. O’Brien said. Many of those people have rushed back to restaurants – but he believes that once patios shutter and an initial enthusiasm passes, things will settle down. M&M is opening more stores in urban markets – a prepandemic strategy – and is hoping to attract new customers in those areas. People may not eat at home seven days a week, but “the new normal will be up versus 2019,” he said.

One bright spot for M&M was meal kits. The chain sold 855,000 kits in 2020, a 40-per-cent increase compared with the previous year. That product can be a tough business: In December, 2019, Metro Inc. sold the MissFresh brand, and recently Loblaw Companies Ltd. announced it was shuttering its PC Chef line. But Mr. O’Brien believes frozen kits, which don’t expire as quickly, are an easier sell. Ready-to-eat items have also been doing well.

“We’ve seen customers, by Friday night or Saturday, not wanting to do as much work,” Mr. O’Brien said. “Our appetizers and prepared meals – all the things where there is added value – have gone through the roof.”

The pandemic also increased Canadians’ familiarity with online grocery shopping, a focus for M&M. The company has partnered with Instacart for more than two years, and will also launch its own delivery service, likely early next year. The move will allow M&M to offer loyalty rewards and personalized offers, and to have access to purchasing data. (Its loyalty program currently has roughly 10 million members.) Expanding e-commerce was already in the works before COVID-19. One thing the company has learned over the past 12 to 15 months? Customers want home delivery, Mr. O’Brien says.

Susan Krashinsky Robertson

Lantham Group

Going public, based on sustained demand for private pools

Last year’s lockdowns didn’t just lead to a surge in demand for toilet paper and baking flour. According to the Pool & Hot Tub Alliance in the U.S., a trade association for the pool industry, sales of new residential in-ground pools jumped 24 per cent last year, the largest annual increase ever. It was a similar story in Canada, where pool stores fielded endless calls from bored, sweaty homeowners.

And that meant boom times for pool makers. Latham Group, a maker of fibreglass pools based in Latham, N.Y., saw its sales surge 27 per cent to more than US$400-million, with its net income doubling to US$16-million.

Riding that success, Latham took a plunge of its own in this past April, with an initial public offering that raised US$380-million. That made it the third American pool company to go public in a year.

Will the good times keep going? The company certainly thinks so. “We believe that the COVID-19 pandemic was a driver of lasting changes in consumer behaviour that favours home-related spending,” the company stated in its IPO prospectus. “We believe that these changes support short-term momentum growth, as well as long-term growth, in demand for pools.”

So far, with the economy opening up and some travel restrictions being lifted, the company has seen demand remain strong. In announcing Latham’s second quarter results, which saw year-over-year net sales jump 60.3 per cent to US$181-million, CEO Scott Rajeski said “homeowners continue to invest in their backyard.”

The company continues to invest, itself, too. Mr. Rajeski announced Latham would begin construction on its biggest fibreglass pool factory this fall, a 170,000-square-foot plant to be built in Kingston.

Jason Kirby

Dorel Industries, Inc.

Consumers’ lockdown-inspired love affair with cycling may be waning

For the past 18 months or so, Dorel Industries Inc. has been grappling with a problem many companies would love to have: too much demand and not enough supply. The Montreal-based manufacturer builds bicycles under brands such as Schwinn and Cannondale, which have been highly sought after by a pandemic-weary population desperate for outdoor activity. For Dorel, the problem is compounded by a global shortage of bicycle components.

The company has acknowledged it’s not making as much money as it could given supply constraints, but Dorel’s bicycle division has still delivered nine consecutive quarters of revenue growth. In the second quarter, the segment brought in US$317-million, a 32-per-cent jump from the same period two years ago, accounting for about 41 per cent of Dorel’s total revenue.

Even less popular models are selling out, CEO Martin Schwartz said on a recent conference call. “Demand for bikes showed no signs of slowing,” he said, adding that inventory for 2022 is nearly sold out. “That’s not to say we won’t have any inventory at all during the year that becomes available,” he said, “but it’s close to that.” To address the need, the company is upgrading its facilities in Holland and looking at expanding its U.S. operations.

There is some evidence enthusiasm for cycling is waning, however: U.S. bike sales in April fell 22 per cent compared with the same period last year. But NPD Group analyst Dirk Sorenson wrote recently he expects demand will remain strong, and noted that even with the recent decline, sales are still up 54 per cent compared with April, 2019. The challenge for industry is to balance supply, he wrote. Too many bikes and profit margins will shrink. Too few, and consumers might get frustrated and lose interest in cycling, particularly as restrictions lift and people have more ways to spend their time.

Dorel’s home furnishings division is already starting to experience a pandemic hangover. Sales jumped in 2020, when people were first stuck at home and decided to redecorate, but demand is weakening. Meanwhile its juvenile segment, which makes car seats and other child products, is continuing to grow. And while bicycle demand remains high heading into next year, the picture beyond that is murky. Dorel’s earnings have long been unpredictable, meaning as the pandemic wanes, investors will once again have to embrace the volatility.

Joe Castaldo

With a report from Irene Galea

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