| DO-IT BEST REPORTS RECORD FISCAL SALES GAINS |
| FORT WAYNE, Ind. — The dealer-owned buying group Do it Best Corp. reported last week that its wholesale sales for the fiscal year ended June 26 rose 16.3% to $2.82 billion. The co-op stated that this was the highest percentage increase in annual sales in more than 25 years, and the highest dollar volume increase — $377 million — in its 59-year history.Bob Taylor, the co-op's president and CEO, attributed the gains to low interest rates and a strong housing market, which in turn has led to increased home improvement activities. In addition, he stated that Do it Best has been able to hold the line on expenses; its operating overhead in fiscal 2004 was 1.57% of sales.
The co-op patronage dividend to Do it Best members on their warehouse purchases for this year will average 13.47%, in line with the 12% average paid out by the co-op for the past 17 years. Members will receive their rebates at Do-it Best's fall market in October.
Do-It Best, the second-largest co-op in the United States behind Ace Hardware Corp., has 4,100 dealer-members in the U.S. and 45 other countries. |
| INSULATION SHORTAGE PUTS STRAIN ON SUPPLIERS |
| SPECIAL REPORT — A healthy housing and renovation market on both sides of the border has squeezed commodities supply to dealers to the point that demand — and prices — are at a high.Canadian producers are feeling extra pressure, not only to supply the domestic market, but to ship to the United States, where the housing market is red hot. Owens Corning, which has already announced expansion plans for four U.S. plants, has commited to invest in its Toronto manufacturing to increase capacity by 20%.
At Johns Manville Canada, supplies of fiberglass insulation are being managed on a weekly basis. "The runaway market in the U.S. has created even more demand from manufacturers in Canada, over and above the strong demand here," says Gino Allegro, Canadian regional sales manager for Johns Manville Canada.
Allegro says his company is feeling additional pressure, since it's the only one that offers a full line of fiberglass insulation that's completely formaldehyde-free. A recent ruling by the International Agency for Research on Cancer (IARC ) reclassified formaldehyde from Group 2a (probable carcinogen), to Group 1 (known carcinogen). This means the toxic adhesive agent joins asbestos, benzene and other compounds as known health hazards to humans. It's been linked to asthma, allergies and nausea. (Although levels of formaldehyde are low enough in fiberglass insulation that IARC has re-classified it as Group 3, not classifiable as a known carcinogen, consumer concerns over carcinogens in building materials, which collectively can result in "sick-house syndrome," are on the rise.)
Between meeting domestic demand, supplying the U.S. market, and responding to the latest environmental initiatives, Johns Manville is going flat out. "Every single batt of insulation coming off the line has got a customer's name on it," says Allegro. |
| HOME DEPOT SETTLES DISCRIMINATION LAWSUIT |
| DENVER, Colo. — Home Depot has agreed to pay $5.5 million to settle a suit brought against the company by current and former workers at some of Home Depot's stores in Colorado, who alleged the retailer discriminated against them.The settlement, which Home Depot negotiated with the federal Equal Employment Opportunity Commission, requires approval by a U.S. district judge. It calls for the distribution of $3 million among 38 plaintiffs who claimed that they had been victims of a "hostile work environment" because of their race, gender or national origin. Home Depot will pay another $2.5 million to other employees "who were harmed by the same conduct," according to a spokesperson for EEOC's office in Denver. The settlement calls for the retailer to provide training, appoint an equal employment co-ordinator, submit quarterly reports to the EEOC, and remain under monitoring for 30 months.
Allegations of workplace discrimination are nothing new for Home Depot, nor is its response — that it maintains a corporate policy of "zero tolerance" towards workplace discrimination. While it admitted no wrongdoing in Denver, it stated that it settled this complaint to avoid prolonged litigation.
About 5,000 of Home Depot's 300,000-plus employees work in Colorado, where it operates 36 stores. |
| RONA PLANS BIG BOX OPENINGS |
| BOUCHERVILLE, Que. — Rona inc. continues to open stores in a variety of formats as it entrenches itself as the number-two home improvement retailer in Canada, after Home Depot. With more than 530 stores in its organization already, Rona's expansion plans call for the addition of three to five big boxes and the same number of traditional building centres each year over the next four years.The next big box will open in the Ottawa region with a dealer-owned Rona L'entrepôt in Hull, Que. This will be Rona's 66th big-box store in Canada, operated by Martin Lacasse, whose family represents the project's key investors. Lacasse family members already own two other stores: Rona L'entrepôt de Gatineau (de la Cité Boulevard) and Rona Le Rénovateur d'Aylmer.
The dealer-owned big box model, an exclusive to Rona, is just one of the ways it is growing its store base. Corporately owned big boxes are slated to open in Regina, Sask., in September; followed by Richmond, B.C., early in 2005, then Barrie, Ont., and Calgary North, also in 2005.
The emphasis on building its presence in Western Canada is also reflected in Rona's expansion plans for its traditional stores. A former Revelstoke store on Ogden Road in Calgary will re-open as a 10,000-sq.ft. Rona Building Centre before the end of this year. A Rona Home Centre planned for Prince Albert, Sask., puts Rona in a brand new market. It's scheduled to open on September 16.
Acquisitions continue to play a key role in Rona's growth. A former Irly dealer in Vernon, B.C., is the latest independent to move over to the Rona fold. |
| SCOTTS EXTENDS BRAND WITH SMITH & HAWKEN ACQUISITION |
| MARYSVILLE, Ohio — One of the leading suppliers of lawn care products in North America, The Scotts Co. will close a $72 million deal to buy Smith & Hawken, the stylish specialty retailer of outdoor living products, by October 1, according to a Scotts spokesperson.Smith & Hawken, based in Novato, Calif., sells garden tools, outdoor furniture, gardening containers, pottery, gifts, clothing and live goods from 56 stores in 22 states. Those stores are distinguished by their beautiful layouts and design. The retailer also has a broadly distributed catalogue business, and has placed licensed departments into other garden centers across the United States. Smith & Hawken generates about $145 million in annual revenue.
"The Smith & Hawken brand is the gold standard in outdoor living and is an outstanding fit with our strategy to extend our reach into adjacent lawn and garden categories and to own industry-leading brands in every category in which we compete," said Jim Hagedorn, chairman and CEO of Scotts, in a prepared statement.
This deal represents the first time that Scotts has diversified into retailing. Scotts will continue to operate those stores under the direction of Smith & Hawken's current CEO Barry Gilbert. Scotts doesn't just want the Smith & Hawken stores; the brand itself has value and is expected to complement Scotts' own brand. The company believes it can offer Smith & Hawken-branded merchandise through other dealers, such as Home Depot (where Scott's is that dealer's highest dollar-volume supplier) and Lowe's, without cutting into Smith & Hawken's own retail business.
As part of this acquisition, Scotts is assuming $14 million of Smith & Hawken's debt. It is buying the retailer from Wellesley, Mass.-based DDJ Capital Management. In February 1999, DDJ and another creditor, State of Wisconsin's Investment Board, bought Smith & Hawken for $75 million, including $25 million in assumed debt, in an auction that was part of the liquidation of CML Group, Smith & Hawken's former owner, which had declared bankruptcy. |
| GSDS CONTINUE TO RALLY UNDER NEW BUYING GROUP |
| MISSISSAUGA, Ont. — The newest buying group for building supply dealers is growing slowly but surely. The Signature Group, formed by former CGC vice-president Doug Skrepnek, has recently added Watson Building Supplies, a two-outlet operation with stores in Concord and Barrie, Ont., to the group.That brings the number of TSG members to seven, and though the ranks are small, Skrepnek says the addition of Watson makes TSG the second-largest buyer of gypsum and insulation in the province of Ontario. Other Ontario members include Patene Building Supplies in Southwestern Ontario, and Leon's and Coastal, both in the Greater Toronto Area.
TSG is positioning itself as something of a "boutique" buying group, targeting membership with a very clear GSD focus, "that works better with a smaller group of members," says Skrepnek. In fact, he doesn't expect to have more than 15 dealers in the group in total.
In the meantime, expansion efforts will continue in Eastern Canada, as all the major Western GSDs are already affiliated — and Skrepnek has stayed away from them — for now. "We've decided to take a hands-off approach in Western Canada during the middle of the year," when it's difficult for dealers to change key suppliers. However, by January 1, 2005, he intends to announce some new members, and not just in the West. Recruitment will include a key player in Quebec, he says.
"We intend to be the biggest buyer of gypsum in Canada. We're very close already." |
| WAL-MART CLOSES DOOR TO REST OF THE MALL |
| CALGARY — Wal-Mart stores in Western Canada are creating a controversy by turning their backs on the very malls they anchor.Or at least, they're closing the door.
In Calgary's Marlborough Mall, which has a Sears store at one end and Wal-Mart at the other, the door at the rear of the Wal-Mart store which leads into the mall was sealed off last year, a decade after the Wal-Mart store moved in, and merchandise put up in front of it. The result has wreaked havoc on mall traffic, which is down 19% since the giant retailer made the un-neighborly gesture back in February. Another eight stores across the West are reportedly following suit.
The situation is considered unique to Canada; Wal-Mart stores in the U.S. are more likely to be stand-alone stores.
Wal-Mart Canada did not return calls on this one. |
|
| COMPANIES IN THE NEWS |
| TORONTO — Home Depot Canada has signed a deal with New Image Paint, the number-two residential painting company in the country to expand the giant retailer's at-home services portfolio. Painting services have been offered by Home Depot in the Toronto market over the summer, and a major rollout is planned for September.BEDFORD, N.S. — Atlantic buying group AWARD Wholesale and Retail Distributors has moved offices. The new address is: 61 Bluewater Road, Bedford, N.S. B4B 1G8. The phone remains the same: 902-835-7242.
VANCOUVER — Ainsworth Lumber Co. Ltd. has made a deal to buy three OSB mills in Minnesota from Potlatch. The plants produce about 1.3 billion sq.ft. of OSB annually. The purchase, valued at $457.5 million, will give Ainsworth an annual production capacity of about 3.3 billion sq.ft. The deal is expected to close in September.
ST. JOHN'S, Nfld. — Regatta Day is one of the largest events during the summer in this city, but it's also the scene for one of the major sales by one of Newfoundland's largest dealers. Even though stores within the city limits are required by law to close during the festive occasion, Chester Dawe held its annual Regatta Day sale recently at its Topsail Road store, which sits on the edge of town. Against the backdrop of North America's oldest sporting event, customers were reportedly lined up for miles to take advantage of Chester Dawe's once-a-year specials.
NEW YORK — Kmart Holding Co. has closed a deal to sell off 18 of its stores to Home Depot for $271 million. The original agreement called for the sale of as many as 24 Kmart stores for up to $365 million, but it turns out they were making more money than expected, so Kmart decided to hold onto them.
TOLEDO, Ohio — Owens Corning will invest in expansion of its insulation plant in Toronto to meet increasing North American demand. The capacity for production of fiberglass light density and loose fill insulation will be increased by 20%. The multi-million dollar expansion, which will be completed in early 2005, is the latest in a series of capacity increases announced by the company to meet the North American shortage in fiberglass insulation. Other upgrades will take place in Kansas City, Fairburn, Ga.; Newark, Ohio; Salt Lake City, Utah; Santa Clara, Calif.
VANCOUVER — West Fraser Timber Co. has completed its offering of 5,852,000 subscription receipts, at a price of $47 each, for gross proceeds of $275,044,000. Each subscription receipt represents the right to receive one common share of West Fraser upon closing of the previously announced acquisition of Weldwood. The net proceeds of the offering will be used to help pay for the acquisition. |
| PEOPLE ON THE MOVE |
| Mark Cohen, chairman and CEO of Sears Canada, has been replaced by Brent Hollister, as president and CEO. The ouster came following a dispute over the direction of Sears Canada. Hollister, a 35-year veteran of Sears Canada, moves over from his most recent position as the company's president and COO ... Glenn Richter, executive vice-president and CFO of Sears, Roebuck and Co., has been appointed board chairman of Sears Canada. He will continue to serve in his evp position at Sears, Roebuck. |
| U.S. MARKET INDICATORS |
| The rate of new home sales in the U.S. fell last month, reports the Commerce Department. Single-family home sales dropped 6.4%, to a 1.134 million annual rate from a 1.211 annual pace in June, the slowest pace of the year.Sales of existing homes fell by 2.9% from June to July, reports the National Association of Realtors. Sales fell to a seasonally adjusted annual rate of 6.72 million units, from June's record-high pace of 6.92 million units. However, levels were still considered buoyant, as it was still the third-best sales pace on record.
The gross domestic product in the U.S. grew by 2.8% in the second quarter, slower than expected, says the Commerce Department. Blame shrinking corporate profits and higher imports for the slowed GDP. |
| CANADIAN MARKET INDICATORS |
| Total retail sales in Canada were up slightly by 0.2% in June to $28.7 billion, after advancing 0.6% in May, reports Stats Canada. Unseasonably cool weather may have dampened retail sales in the furniture, food, clothing, building supplies and general merchandise sectors. Only auto and pharmacy showed strong gains. Excluding auto sector sales, retail sales actually fell 0.5% in June, after increasing 1.5% in May. This was the first decline in six months for non-auto retailers.The cost of the goods and services in Canada's Consumer Price Index rose 2.3% In July, says Stats Canada. However, the 12-month increase in the All-items excluding energy index was identical to June's at 1.6%. |
| OVERHEARD |
| "They're the number-two painting company in the country and we're going to make them number one." — Nick Cowling, PR manager for Home Depot Canada, on signing a national painting company to provide painting services for Home Depot customers, as part of the retailer's at-home services. |
| NOTED... |
| The second annual Golf Charity on behalf of the Daily Bread Food will be held on September 9 at Station Creek Golf Club, Gormley, Ont. Organizers invite support — and prizes. Last year, the event raised over $29,000 and this year's goal is $60,000. Corporate wear, product samples, cash donations, everything and anything will be welcome. For more info, contact: Tony Irwin, 416-318-4850; or kindly send prizes, tagged "DBFB Golf," to: Bryan Gilbart, c/o Envirogard Products, 446 Major Mackenzie Dr., Richmond Hill, Ont. L4C 4X9 |
|
John Caulfield, Contributing Editor
vol. x, #35, August 30, 2004
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