John Caulfield, Contributing Editor
vol. xi, #7, February 14, 2005

IN THIS ISSUE: • Home improvement survival guide • Canadian Tire posts strong results • Home Hardware unveils expansion plans • Regional shows offer deals • Rona opens another big box • True Value Co. strengthens Asian connection • Wal-Mart to close unionized store

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"Love does not consist in gazing at each other but in looking outward together in the same direction." — Antoine de Saint Exupéry (pilot, poet and author, 1900-1944)
Home Hardware - exteriorSt. Jacobs, Ont. — As one of Canada's three largest retail home improvement groups, (with Rona inc., it vies for number-two spot after Home Depot Canada), Home Hardware Stores Ltd. has historically been content to also be the quietest. But as the war for consumer awareness gets waged more and more in the media, the dealer-owned co-op has announced expansion plans of its own for the year ahead.With more than 1,000 locations, Home has revealed that retail sales from those stores reached $4.2 billion last year. With $77 million earmarked for growth, it's got plans to expand its retail network, distribution system and manufacturing facilities. Thirteen new stores are expected to open, while expansion plans are under way for 55 existing dealer locations. Growth is expected across all four retail banners — Home Hardware, Home Building Centre, Home Hardware Building Centre and Home Furniture — in each region across Canada."Home Hardware is committed to ensuring its dealers maintain their strong position in the Canadian retail landscape," says Paul Straus, vice-president and CEO of Home Hardware in a prepared statement. "Our entire organization is dedicated to helping our dealers create stronger businesses, and ensuring that we have state-of-the-art systems, services and facilities to back them up." Growth plans also extend to Home's distribution centers in Ontario and Alberta and its paint manufacturing facility in nearby Burford, Ont. A $10.1 million expansion at its Wetaskiwin, Alta., distribution centre is under way and will be completed over the next two years. The project will add 212,000 sq.ft., bringing the facility to more than 750,000 sq.ft.. The facility services 309 stores throughout western Canada. A $16 million expansion project is currently in progress at the company's St. Jacobs, Ont., distribution centre and corporate office. That project, which is scheduled for completion in 2005, will add 360,000 sq.ft., bringing the facility to 1.5 million sq.ft.. This distribution centre supplies 523 stores throughout central Ontario and western Quebec. The company recently completed a $4.2 million expansion project at its Debert, N.S., distribution centre. The 409,000 square foot facility supplies 180 stores in five provinces in eastern Canada. Home's Burford, Ont., paint manufacturing facility, which produces the company's private label Beauti-Tone paint and related products, will also undergo an expansion in 2005. The $2 million project will add 15,000 sq.ft. of research and development, production and storage space to accommodate the introduction of a new paint production line.
Canadian Tire - exteriorTORONTO — Canadian Tire Corp., Canada's largest retailer of hard goods, enjoyed strong profits in both its fourth quarter and year end. Quarterly net earnings increased 16.6% to $100.4 million, and sales for the quarter were up 6.1% to $2.5 billion.Profits for the year reached $291.5 million, an increase of 20.8% from $241.2 million in 2003, while sales grew to $8.4 billion from $7.9 billion in 2003.Canadian Tire Retail, which consists of 457 Canadian Tire stores, enjoyed a 34.1% increase in pre-tax earnings. Sales also accelerated in the fourth quarter, led by strong holiday sales across the home, leisure and auto categories. Especially strong results were shown by Christmas décor, toys, gift items, tools, car care and car accessories. Fourth-quarter retail sales reached $1.93 billion, a 3.7% increase compared to $1.86 billion for the same period last year. For the year, sales for the division hit $6.52 billion, up 4.4% from $6.25 billion a year earlier. Same-store sales grew by 1.1% for the quarter and by 1.8% for the year. Canadian Tire's 2004 fiscal year had one less week than 2003. Therefore, calculating their results on a more comparable basis of a 13-week quarter and 52-week year, Canadian Tire Retail's retail sales grew by 9.3% for the quarter and 6.0% for the year. On the same basis, same-store sales rose 6.5% for the quarter and 3.4% for the year. During the year, Canadian Tire expanded its Concept 20/20 store format, with a total of 19 new and six retrofitted 20/20 stores conforming to the new format. Based on the success of 20/20, Canadian Tire plans to make 19 of its 20 store openings planned for 2005 under the 20/20 format. Another 15 existing stores will be retrofitted in 2005 to the Concept 20/20 format.
WINNIPEG & LONDON, Ont. — While national shows lose traction both here and abroad, regional shows aimed at LBM dealers remain healthy. Two shows held recently, the WRLA Prairie Showcase and the LBMAO Winter Buying Show, both enjoyed strong attendance and a considerable level of purchases. The WRLA's show, held in Saskatoon, featured 214 exhibiting companies in 522 booth spaces — its biggest and most successful yet, reports Gary Hamilton, executive director of the WRLA. These numbers represent 36 new exhibitors and 46 additional booth spaces for 2005 — attracting more than 1,000 dealers. Even the BSDA of B.C.'s show, held January 7-8, managed to draw 152 dealers and staff, despite snow storms that closed highways and airports in the province's lower mainland. "We were quite busy," says George Tracy, president of the BSDA. "The discouraging part was the weather, but there's nothing you can do about that."Nonetheless, the regional shows face challenges of their own, and they're trying to learn from the shows that have not survived. Despite their successes, none of these events offers the kind of sheer traffic that was once the trademark of Canada's erstwhile national show, the Canadian Hardware and Building Materials Show. However, they are still buying shows, as dealers come in search of show specials, as well as the chance to talk face-to-face with some key suppliers. That's something CHS lost, and attendance declined over the past decade, causing the demise not only of the show itself, but the Canadian Retail Hardware Association, which owned the show. (That show has been replaced by a new one, H2X, which will be held in Toronto February 20-22.) A hardware show launched last year in Chicago by the American Hardware Manufacturers Association closed its doors after only one disastrous year.Don Sherwood, head of dealer association that mounts the Atlantic Building Supply Show in Moncton, being held this year March 17-19, watches the performance of the shows held by his sister associations with keen interest. Even though attendance for other shows remains strong (poor weather notwithstanding), he knows the danger of resting on one's laurels — and the importance of maintaining a buying environment. "It's important that the deals stay in the show," he says. He also knows the danger of his dealer base eroding. "If any key exhibitors were to switch banners," he says, "it could have a serious impact, not just on the show, but the association itself." Other attempts to fine tune a show can also be fraught with peril. This year, his show is being moved to being on a Thursday. "We're on the bubble for the change of days," he notes. "For example, the dealers from Newfoundland think it's wonderful, because they can be on a plane back home Saturday afternoon. But there are others who don't like it. We're trying to find a common ground for everyone."
JONQUIERE, Que. — Wal-Mart Canada will close a store in Canada that has been successfully organized by the union. According to Wal-Mart Canada, the store was not profitable, and the expectation of additional costs to accommodate the unionized workers prevents the store from being viable, Wal-Mart says. The United Food and Commercial Workers union intends to file charges of unfair labour practices; the store will be closed in the spring.Another store, in St-Hyacinthe, Que., was certified a couple of weeks ago, while a Labour Board decision on behalf of workers at a Wal-Mart store in Weyburn, Sask., is currently on hold as Wal-Mart appeals that decision.According Kevin Groh, a spokesperson for Wal-Mart Canada, the announcement of the Jonquiere store's lack of profitability was an intentional head's up to the union and the Quebec Labour Relations Board. "That was our sense," says Groh. He would not comment, however, on how many other Wal-Mart stores in Canada might also be unprofitable. Wal-Mart opened about 30 stores in Canada in 2004, and a similar number of openings are planned for 2005.
HOFFMAN ESTATES, Ill. — In its first major move since agreeing to merge with Kmart, Sears, Roebuck & Co. plans to launch a new store format, called Sears Essentials, that company officials say will leverage the merchandising strengths of both retail giants.Sears has identified 25 locations from the 50 Kmarts and six Wal-Marts it acquired for $575.9 million last fall to be converted by this spring to the Sears Essentials format. Six of those stores are in California, five in Florida, three in Illinois, two each in New Jersey and Maryland, and one each in Arizona, Kentucky, Michigan, New Hampshire, Pennsylvania, Tennessee and Virginia.Alan Lacy, Sears' chairman and CEO, said Sears Essentials represents the first foray into what he characterizes as "the most aggressive growth initiative in the company's history." These mid-size, off-mall stores will range in size from 80,000 to 100,000 sq.ft. They'll feature many of the product assortments found in the larger Sears Grand format — appliances, lawn and garden, tools, electronics, apparel, and home fashions — and Sears' better-known brands such as Kenmore, Craftsman and Apostrophe. The stores, to be laid out racetrack style, will also feature those products that are considered Kmart's strengths, such as pantry, health and beauty, household goods, and pharmacy. "Sears Essentials will be a one-stop shopping destination for home and family needs, for everything from back-to-school, backyard living and birthdays to appliances, apparel and soft drink," is how the company describes the concept in a prepared statement. News reports add that the stores will also have automotive services.
CHICAGO — With a new buying team in place, the True Value Company is placing more emphasis than ever on direct sourcing from Asian suppliers. In fact, Jim Richardson, vice-president of global sourcing, got back recently from an extended trip to China with four of his global sourcing merchants.The dealer-owned co-op's current involvement in the Far East is a portent of an even greater connection to come; it's currently setting up offices of its own there. In fact, one location has been confirmed for Hong Kong, while another office will be set up eventually in Shanghai.However, True Value's buyers are going right into Chinese factories now. "It's got legs already," says Steve Mahurin, senior vice-president and chief merchandising officer, of the Asian connection. "But," he adds, "we've got to become a much bigger importer than we are today." The ability to spec and source directly will let True Value feed products into its private label programs. But Mahurin says national brands remain important. "I want national brands whenever we can. We want to be a brand name store." He expects private label products to fill in a category that has no national brand representation, or for filling "a gap in the price point or the assortment."
WORLD HEADQUARTERS, TORONTO — Can you spell data synchronization? Shanghai? What about reverse urban migration? Or succession planning? You'd better be able to, because these are the issues to watch in the retail home improvement industry for the year ahead.According to a new report, "Seven Things You Must Know to Survive in 2005," technology, consolidation and an ever-evolving customer are going to have a dramatic impact on retailers and vendors alike. The report appears in the latest issue of Hardlines Quarterly Report.Consolidation: In 1999, Canada's top four home improvement retailers accounted for almost one-third of the overall industry. By 2003, that figure had grown to almost half. From 1996 to 2000, sales by big boxes grew a staggering 277%. Now this retail sector, represented primarily by just two companies, makes up more than 20% of the industry's sales. Blurred channels and changing customers: Retailers are no longer settling for their own little piece of the pie. Companies such as TruServ Canada are moving more strategically into upscale rural markets that are being driven by reverse migration from urban centres. At the same time, Home Depot is looking for ways to enter urban markets more effectively with new store concepts of its own. Other issues that will challenge this industry in the year — and years — ahead include the rapid rate of change of technology, considerations of ethical sourcing and environmentally sound production practices, and rising opposition to the seemingly unrestrained rate of growth of large-format retailers such as Wal-Mart and Home Depot. "Seven Things You Must Know to Survive in 2005" appears in the latest issue of our sister publication, Hardlines Quarterly Report. Click here for more info.
HULL, Que. — Rona inc. has opened its 66th big box store, this one across the river from the nation's capitol. The 130,000-sq.ft. Rona L'entrepôt, which carries 45,000 SKUs, has been grouped into three distinct areas: a seasonal and gardening zone, a home renovation and decoration zone, and a construction materials and basic products zone. The store also houses a 4,000-sq.ft. greenhouse and 19,150-sq.ft. outdoor garden centre with two covered sections. Martin Lacasse, the dealer-owner and president, is part of a group that owns another L'entrepôt big box in Gatineau, as well as a satellite store in Aylmer, Que., a construction materials division that will support the two L'entrepôt big boxes in the region.BRENTWOOD, Tenn., — Tractor Supply Co, the largest retail farm and ranch store chain in the United States, had net sales for the fourth quarter of $456.0 million, up 17.4% from $388.5 million last year. Same-store sales increased 7.7% during the quarter, compared with a 9.6% increase in the same quarter a year earlier. Gross profit increased 18.6% to $145.4 million and gross margin was 31.9%, compared with 31.5% in 4Q 2003.LONDON, U.K. — The opening of an Ikea store in North London attracted so many people and caused so much pandemonium that the store had to be closed down. It opened at midnight last Thursday on the heels of huge hype in the London area, with promises of big savings during the first day. Besides traffic jams, an estimated 4,000 people lined up to get in. But just half an hour after opening the doors, 20 people had collapsed from heat exhaustion or suffered at least minor injuries, causing doors to be closed and emergency services to be called in. The clamour for a $100 sofa even ended up in one stabbing. OAK BROOK, Ill. — The global expansion plans of Ace Hardware Corp. got some added muscle with the signing of a new account in Ireland. McMahon's, a family run chain of building centres that caters mainly to pros, is "very interested in growing its DIY business," says Rob Collins, Ace's director, international sales and retail development. McMahon's is a 200-year-old operation headquartered in Limerick, but its 11 stores are located throughout Ireland and Northern Ireland. Two of them have already been converted to the Ace banner, and more will likely be converted over time. In addition, the retailer wants to add new stores carrying the Ace name. SAN FRANCISCO — Building Materials Holding Corp., one of North America's largest pro dealers, last year exceeded $2 billion in sales for the first time in its history. The company reported a 47.7% increase in revenue, to $2.091 billion, for the 12 months ended Dec. 31, 2004. Net income for BMHC rose 171% to $53.9 million. ST. LOUIS, Mo. — Emerson Storage Solutions, a division of Emerson, has announced it will purchase Do-Able Products Inc., a maker of ready-to-assemble wood and steel home and garage organization and storage products. The acquisition will become part of Emerson's ClosetMaid division. Terms of the deal weren't disclosed. Do-Able is based in Chino, Calif., and had sales of 150 million dollars in 2004. HERNDON, Va. — Lafarge North America, a leading supplier of construction materials in the U.S. and Canada, reported net income from continuing operations in the fourth quarter of $98.7 million, up from $68.2 million. PERTH, Australia — While net profit declined overall by 2% for giant holding company Wesfarmers, its hardware division, Bunnings, enjoyed an increase in its first six months, as profits were up 11% to AU$230.4 million. Sales were up 7% to AU$2.1 billion. Same-store sales increased 7% during the period.
Michael Gentile has joined Philips Lighting as vice-president, general manager of lighting in Canada. He was formerly at OSRAM Sylvania, most recently as vice-president of sales, responsible for the I/C, retail, automotive and OEM sales organizations. (905-201-4100)
Although down from the previous month, housing starts in January were up compared with the same month a year earlier, reports CMHC. The level of starts reached 203,700 seasonally adjusted in January, down from 236,300 in December. The housing market is expected to exceed 215,000 units this year, following a 17-year high of 233,431 units last year. The seasonally adjusted annual rate of urban starts fell 14.9% to 175,300 units seasonally adjusted. Multiple starts fell 21.5% in January to 81,400; single starts dropped 8.1% to 93,900 on a seasonally adjusted annual basis.
The Canadian Hardware and Housewares Manufacturers Association will hold its Maple Leaf Night reception again in Las Vegas during the National Hardware Show: Tuesday, May 17, 2005. For more info, contact Maureen Hizaka at 416-282-0022, ext. 23; or

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