John Caulfield, Contributing Editor
vol. x, #49, December 6, 2004

IN THIS ISSUE: • Castle launches store merchandising programs • Why Rona left the Alliance • Home Depot partners with Seniors • Kingfisher announces Chinese acquisitions • How-to website features "celebrity" columnists • Briggs & Stratton eyes parts of Murray • Home Depot, Lowe's settle credit card dispute

* * * * * * HOLIDAY PUBLISHING DATES: We'll publish on December 13, then back again on January 3. The World Headquarters will be closed December 20-28. — Michael * * * * * * NOTE: Dollar amounts are stated in the currency of the country from which the story originates. — Michael McLarney, Editor & Publisher * * * * * *
"Zest is the secret of all beauty. There is no beauty that is attractive without zest." — Christian Dior (French couturier)
MISSISSAUGA, Ont. — Castle Building Centres Group, the national LBM buying group, has introduced a full-service merchandising and store enhancement program for its dealers."The goal of the new program is to provide members with the tools and support to clean up and upgrade their stores, and to strengthen their competitive positioning in secondary markets in anticipation of big box expansion," says Mike Frame, business development manager for Castle's central region.It's a turnkey proposition, he adds, suitable for both new and existing dealers. The comprehensive store branding program is backed by a marketing and communications program. Everything from yard layouts, store layouts and traffic flow studies to in-store development such as lighting, signage, fixturing and floor and wall treatments are included in the package. At the merchandising level, attention is given to assortments, planogramming, traffic flow, and POS. The program even extends to details such as truck identification, staff uniforms and in-store announcements. The initiative has been designed by BMF Marketing & Design, a Burlington, Ont.-based group that comprises a team of store-planning veterans, including Rob Wilbrink and Phil Dwyer (both of Rona Lansing) and Leon Penchuk (former Ace Hardware and Watt Group). The newest addition to the team is former Home Depot store planner Mike Serecin. The program offers three levels of participation: generic, which includes yard cleanup and basic signage needs; entry, which also includes uniforms, faade, and some feature displays; and finally, enhanced which adds exterior faade/pylon, full yard reset, and full inline merchandising. "We had to recognize that our full membership could participate in the program," says Frame. "That includes stores that don't fly the Castle banner." However, he hopes the enhanced store design and merchandising features available to bannered dealers will serve as an inducement for some independent banners to take the next step and adopt the Castle name, as well. The program has already received strong support from member dealers. Stores across the country, including Halifax, N.S., Timmins and Windsor, Ont., and a number in Western Canada, have already signed on for some version of the store makeover. Besides building Castle as a retail brand and giving its member dealers the tools for staying competitive in the midst of other powerful retail brands, such as Home Depot and Rona, the new program is seen as an incentive for attracting new members, with not just stronger program offerings, but a better class of store overall within the Castle membership.
ATLANTA — Home Depot will expand its strategic partnership with AARP, the largest senior-citizens' group in the United States, when it launches a test next year to mark certain products sold in its stores with AARP's seal of approval.The Associated Press reports that Home Depot will begin carrying bath and electrical fixtures bearing the seal in an as-yet-unspecified number of its stores sometime in 2005, according to John Costello, the retailer's chief merchandising officer. Certain hardware items may also be included in this mix.AARP is forming a panel within its organization to establish the standards for its labeling program, with an eye towards expanding that program to other retail companies. Home Depot is hoping to tap into what has become a critical market segment for builders, contractors and home improvement dealers. Seniors account for an estimated 25% of all homebuyers in the U.S. currently, and some housing experts believe that number could rise to 40% eventually, given current demographic trends. Last February, AARP and Home Depot formed a partnership through which the organization is helping the retailer locate recruits, aged 50 or older, to fill some of the 35,000 or more jobs that open each year, as Home Depot stays on track to open 185 new stores this year, and probably the same number in 2005.
MONTREAL — Rona inc. may have pulled out of one buying group, but it is still strongly allied with another — this one based in Europe.Rona made news last month when Hardlines announced that the Quebec-based retailer/distributor had quit its membership in Alliance International LLC, which still comprises Fort Wayne, Ind.-based Do it Best Corp. and Home Hardware Stores Ltd. of St. Jacobs, Ont. (see November 8/04 issue—Editor)According to Rona president and CEO Robert Dutton, membership in A.R.E.N.A. has provided more cohesive buying than he found inside the Alliance. "What I like about A.R.E.N.A. is that it's a real alliance," he told Hardlines in an exclusive interview recently. "When we make a deal, we put all our volumes behind it." Dutton comments suggest a less rigorous mandate at the Alliance. After a deal is made with a vendor, members " that, they go do that," referring to side deals that can undermine the efficacy of the Alliance arrangement. "At the end, we don't have a good price." Headquartered in Tréville, France, A.R.E.N.A. has DIY and building materials members in 12 countries, including Germany's Hagebau, ITM in France (which includes Bricomarché), and Australia's Mitre 10. Rona is the sole representative of A.R.E.N.A. in North America. The buying group has a total of 6,000 stores in 12 countries that represent total sales of 17.4 billion euros (C$27.2 billion). By comparison, the Alliance International represented C$19.2 billion at retail, more than half of that coming from Do it Best. Rona's 2003 sales were C$3.9 billion, second only to Home Depot Canada.
TORONTO — A new consumer how-to website has been launched with some of some of Canada's most familiar DIY personalities behind it. features a wide range of help columns, décor advice and problem solving articles, with content from Kimberly Seldon, host of "Design for Living;" Kathy Renwald of "Gardener's Journal" and woodworking expert Steve Maxwell, editor of Canadian Home Workshop magazine, whose columns also appear in the Toronto Star.Mag RuffmanCelebrity columnists include Steve Smith, writing under his alter ego Red Green, and our favorite handyperson, "ToolGirl" Mag Ruffman.The site is content driven, with lots of articles and photos, plus a Q&A section where Maxwell fields visitors' queries about their home improvement problems. The site can be searched by columnist, by room, or by theme (e.g., "Fix It," "Grow It," "Decorate it"). The site's biggest coup is the establishment of Home Depot Canada as a primary sponsor, along with RBC Financial Group. In addition, it has affiliated itself with Habitat for Humanity. The HomeEnvy website will raise awareness of the charitable organization's fundraising projects. The site's celebrity columnists and the sponsors, Home Depot and RBC, will join volunteers at Habitat building sites to help generate publicity, find additional sponsorships, and help build homes.
WAUWATOSA, Wis. & BRENTWOOD, Tenn. — Briggs & Stratton, the gas engine and lawn and garden equipment manufacturer, says it's evaluating the acquisition of some of the assets of Murray Co., the lawn mower supplier that on November 8 filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.B&S is one of Murray's three largest creditors and is owed an estimated $40 million by that company. If it is able to reach a deal with Murray, B&S says it would write down $30 million in fiscal 2005, and could wind up writing off more of Murray's indebtedness on its books, depending on how Murray's Chapter 11 reorganization fares. This transaction would result in the impairment of substantially all of its remaining trade receivable from Murray. Briggs would recognize an additional loss of about $30 million in the second quarter of fiscal 2005.However, B&S is not interested in buying Murray outright, says CFO James Brenn, quoted in the Nashville Business Journal. In fact, Briggs & Stratton only became interested in this asset purchase after it became clear that Murray was attracting no other suitors. B&S continues to supply Murray with engines, but on a collect-on-delivery basis. In a prepared statement, Murray said that one of the reasons it filed Chapter 11 was that its tenuous financial condition had caused it to lose the confidence of its vendors and business partners. Murray cited several factors that precipitated its bankruptcy —from limited access to credit, product recalls and rising commodities costs — but it has also suffered from its loss of sales from Home Depot. The giant retailer has effectively handed over the lion's share of its lawn mower business to John Deere.
LONDON — Kingfisher plc, Europe's leading home improvement retailer, is stepping up expansion of its B&Q chain in China with the acquisition of five vacant big box stores (8,000-9,000 sq.m.) from PriceSmart, a privately-owned Chinese company. The stores are expected to be converted to the B&Q format during 2005, strengthening B&Q's position in the burgeoning home improvement market in China.The total cost of the cash deal will be in the neighborhood of £6.95 million. The deal is conditional on completion of the transfer of each store.The new stores will extend B&Q's reach into cities in the West and Northeast of China, which had already been targeted for new openings. The new sites are in addition to the planned openings of up to nine new B&Q stores in China during 2005-2006. Kingfisher claims it is the market leader in China, with 20 stores already. The first one went in back in 1999. Since then, the China operations have been growing at a rapid rate. In its last fiscal year, B&Q China had sales of £131 million, up a whopping 64% on a constant currency basis. The business also went into the black for the first time with profit of £0.4 million, after all store opening costs.
LOS ANGELES — The industry's two largest home improvement dealers, Home Depot and Lowe's, have settled a lawsuit over their popular and sales-driving credit card promotions that could make more than two million people holding those cards eligible for $5 rebates.More than half of the $4 million settlement — $2.5 million — is earmarked for these rebates, with the rest going to pay attorneys' fees. Home Depot and Lowe's, along with Monogram Credit Card Bank of Georgia, which issued the cards, had been named in the class-action lawsuit accusing them of misleading customers participating in the chains' promotions over the past four years that offered interest-deferred credit card purchases. Shoppers were told they could defer interest charges for six months on certain store credit card purchases over $200. But they discovered that their credit card payments were being applied toward their interest-free balances, while their regular purchases continued to accrue interest, said Styant-Browne.A superior court judge has instructed the companies to begin notifying their customers of the terms of the settlement, which includes an agreement by the two retailers to give every class member who lost money as a result of the wrongful payment allocations a $5 rebate on a purchase of $15 or more. Home Depot and Lowe's also agreed to explain to their customers exactly how their credit card payments are applied and to automatically apply payments against the interest-bearing balances first, unless customers chose otherwise.
VANCOUVER — For the third time, the NAFTA panel on countervailing duties on Canadian softwood lumber to the U.S. has determined unanimously in Canada's favor. This time, the panel was made up of three U.S. panelists and two Canadians. Nevertheless, they decided the U.S. Commerce Department acted arbitrarily in determining that Canadian softwood producers received federal subsidies, and that a 27% countervailing duty on the imported Canadian wood was unfair. The U.S. government has formally requested that a NAFTA "extraordinary challenge committee" review the NAFTA decision, insisting that the U.S. market has suffered injury from the pricing on Canadian softwood. This kind of appeal has not worked in the past, however.TORONTO — For the three months ended October 31, sales and revenue for Hudson's Bay Corp. were $1.684 billion, down slightly from $1.688 billion in the same period last year. Same-store sales were up 0.6%, however, the company's home décor and accessories chain, Home Outfitters, had a substantial increase of 12.5%. For the first nine months of 2004, EBIT clocked in at a loss of $27 million, deepening a loss of $13 million in the corresponding period of 2003. EBIT in the first nine months was a loss of $27 million, from a loss of $3.4 million. The company is "adopting a cautious approach to the fourth quarter."RIVIÈRE-DU-LOUP, Que. — Last week, this city's Chamber of Commerce held its Prestige award ceremony to honor companies that had outstanding performances during the year. The big winner of the evening was Bargain Building Materials, which collected the Prestige for Innovation along with the Prestige as Enterprise of the year. Bargain Building Materials's president, Christian Richer, and Jacques Déry, general manager, received the Prestige for Innovation from Investment Quebec and the Prestige for Enterprise of the year from the Business Development Bank of Canada. ISSAQUAH, Wash. — Total sales for the four weeks ended November 28 rose 7% for warehouse retailer Costco Wholesale Corp., to $4.08 billion. That's up from $3.80 billion in November 2003. Same-store sales grew by 5%. For the first 13 weeks of its 2005 fiscal year, sales were $12.40 billion, up 10% from $11.29 billion a year ago. Same-store sales increased 7% in both U.S. and international stores for the period. LONDON — Focus Wickes, the number-two home improvement retailer in the U.K., has turned to investment bank Goldman Sachs to examine options for the 420-store chain. Options may include sale to a competitor. Analysts estimate that Focus Wickes may be worth more than £1.5 billion to a prospective buyer. TORONTO — PartSource, the national chain of auto parts specialty stores owned by Canadian Tire, has announced the acquisition of Diamond Auto Parts, an Etobicoke, Ont.-based auto parts business. Diamond's operations will be incorporated into the new PartSource store located in the Queensway area of Toronto's west end. PartSource now has eight stores throughout the Greater Toronto Area, with 47 stores in total. PartSource is a chain serving do-it-yourself automotive enthusiasts and the commercial auto parts market. HONG KONG — Wal-Mart says it hopes to open at least 11 new stores in China next year, as domestic restrictions on foreign retail are lifted under terms of World Trade Organization requirements. Wal-Mart currently has 42 stores in 20 Chinese cities, but Chinese government regulations limit foreign retailers to setting up shop in only certain cities — and even then they can only put in three stores per city. However, these restrictions will be removed on December 11.
At Burlington Manufacturing & Fixtures, the executional arm of BMF Marketing & Design, Mike Serecin has joined as senior store planner. He worked most recently at Home Depot's store planning department and brings with him more than 30 years experience in store design for the home improvement industry, including Lansing Buildall, Beaver Lumber, Howden and the Watt Group. (905-332-6652)
Construction spending in October 2004 was $1,009.4 billion, virtually unchanged from September but up 7.1% from October 2003. Total non-residential construction was $451.7 billion, up 0.4% from September and up 2.7% from one year ago.Consumer spending rose 0.7% in October, reports the Commerce Department, exceeding expectations and offering a positive sign for the economy going into the fourth quarter. For the third quarter, consumer spending advanced at a 5.1% annual rate.Real Gross Domestic Product grew at an annual rate of 3.9% in the third quarter of 2004, according to the Commerce Department. This beats the growth rate of 3.3% in the previous quarter. Corporate profits decreased $27.6 billion in the third quarter, following an $8.3 billion second-quarter increase.
Residential construction in the third quarter of 2004, says Stats Canada was valued at $20.2 billion, up 14.5% from $17.7 billion in the third quarter of 2003. Total residential construction investment since the beginning of 2004 was $52.2 billion, up 14.7% from the nine-month period in 2003. Investment expenditures for new housing units totalled $10.3 billion in the third quarter, up 14.3% from the third quarter of 2003. New single-family homes accounted for the largest increase in dollar terms, up12.3% to $6.9 billion. Investment in new multi-unit construction also posted a large gain, up 28.0% to $1.9 billion.Expenditures on renovations to the existing housing stock totalled $8.1 billion in the third quarter, up 14.5% from the $7.1 billion invested in the third quarter of 2004. Acquisition costs rose 16.1% to $1.8 billion.Real gross domestic product advanced 0.8% in the third quarter, bolstered by robust manufacturing, wholesale and retail sectors. This was slightly higher than the average 0.7% growth in the previous four quarters. The economy ended the quarter on a weak note, with no growth in September, following 0.4% growth in August and 0.3% in July. Overall, the Canadian economy grew at an annualized rate of 3.2% in the third quarter.
Confidence in the economy took a hit with luxury consumers in the third quarter, according to the Luxury Consumption Index, which dropped 6.7 points to 96.0, from the second quarter, according to Unity Marketing. Its latest tracking study of the luxury market ( reveals that the feelings of uncertainty, even among luxury consumers, are being played out in stores, in the travel sector and at service businesses that cater to the affluent. The average amount luxury consumers spent on luxuries in the third quarter dropped 35%, from an average of $4,275 in the second quarter to $2,779 in the third.
"It is evident that our strategy is working, and the realignment of our organization, announced earlier in the month, reflecting this strategic direction, ensures that our established growth targets will be executed with greater speed and impact. We remain confident in our ability to create substantial value..." — Whew! George Heller, president and CEO of Hudson's Bay Co., tries to explain how well the company is doing after sales stayed flat and losses doubled in the third quarter."Most of my fans either live in a home — or are in a home." — Steve Smith (aka Red Green), speaking at the launch party of, explains his involvement in the new DIY how-to website sponsored by Home Depot and RBC Financial.

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