John Caulfield, Contributing Editor
 vol. x, #7 February 16, 2004

IN THIS ISSUE: * Rona wants to double market share, hints at new format * Stanley's new recruits strengthen the ties that bind with Home Depot * Ace Hardware has great growth in 2003 * Canadian Tire's year-end results are hot, hot, hot * Garden Ridge forced into Chapter 11 * New buying show gets strong start in Southwestern Ontario * Georgia-Pacific rides wave of strong housing market * Matreco Hardware begins shipping to Ontario customers

* * * * * * NOTE: Dollar amounts are stated in the currency of the country from which the story originates. — Michael McLarney, Editor & Publisher * * * * * *
"The opposite of a profound truth may well be another profound truth." — Niels Bohr (Nobel prize-winning physicist and friend of Albert Einstein)
BOUCHERVILLE, Que. — With a mandate to invest $200 million this year — not $300 million as widely, and erroneously, reported (don't get too cocky, given our track record — MM) — in its expansion for the next 30 months, Rona Inc. is committed to doubling its market share over the next five years.The company's new 320,000-sq.ft. distribution centre will open in Calgary and be fully operational by the end of March, and in the short term, some $80 million has been slated for expansion in the West. For example, $20 million of that went into the development of a new big box Rona Home & Garden store in Edmonton's Namao area, which opened last Thursday. A similar amount will be spent launching the company's next big box, which will open this summer in Regina, Sask. Another five traditional stores, weighing in at about 35,000-40,000 sq.ft., and flying either Rona's Home Centre or Building Centre banner, are also planned to open in the West before year's end. Rona already has two big boxes in Edmonton, and three in Calgary. According to Robert Dutton, president and CEO of Rona, the company plans to open up to six more big boxes before the end of the year, including Kitchener-Waterloo, Ont., and he hints at "more acquisitions in the year to come. Keep your ear to the ground," he says.
OAK BROOK, Ill. — Ace Hardware, the industry's largest dealer-owned buying group, exceeded the $100 million plateau for earnings in the first time in its 80-year history in 2003. And that was very good news for the co-op's 5,000 dealer-members.Ace reported that its net income last year increased 22.7% to $100.7 million on wholesale sales of $3.16 billion — up 4.3% over 2002. In the fourth quarter of 2003, Ace's revenue increased 11.6% to $836.4 million, and its earnings skyrocketed by 128.3% to $18.9 million. Ace said that it will pay out a record $159.4 million in patronage dividends to members for purchases of products and services. Dave Hodnik, Ace's CEO, attributed the co-op's financial performance to strong home sales and home improvement activity. He also noted that Ace's strategy to strengthen its members' market position, through merchandising, marketing and store redesign programs, was paying off. In 2003, Ace opened 1.2 million sq.ft. of new retail selling space, which translated into 118 new stores, conversions and branch additions, according to company spokesperson Paula Erickson. In the year ahead, the co-op expects to add at least 80 stores, totaling 1.6 million sq.ft.
NEW BRITAIN, Conn. — In recent weeks, Stanley Works has made two key management appointments, as it moves forward with its ongoing restructuring. Donald McInlay, a five-year company veteran, was named president of Stanley's tool group. McInlay had been running the company's Door Systems division and also oversaw Stanley's Consumer Sales America business. McInlay's resumé includes stints with Newell Rubbermaid and Gibson-Homans. At Stanley, he replaces Joe DeAngelo, who is joining one of the manufacturer's biggest customers, Home Depot, as senior vp-pro business and tool rental, two sectors that Depot has identified for future growth. DeAngelo becomes the latest alumnus of General Electric, where he worked for 17 years, to join Depot since early 2001, when Bob Nardelli — who ran GE's Power Systems division — took over as president, chairman and CEO. A week before McInlay's appointment, Stanley tapped John Lundgren to replace John Trani as its chairman and CEO, effective March 1. Prior to joining Stanley, Lundgren ran Georgia-Pacific's $2 billion consumer products division in Europe for four years. He will expand his international pedigree at Stanley, which sells tools and hardware in 41 countries around the globe. William Schultz, formerly president of the GP's Dixie business, has since been promoted to president of European consumer products, replacing Lundgren. Schultz, 42, will be based at Georgia-Pacific's European headquarters in London. (For more appointments at GP, see this issue's "People on the Move" — Michael) The 52-year-old Lundgren, whose resume includes stints at James River Corp., Gillette and American Can, will be taking over a company that, for the past several years, has been restructuring and downsizing its operations. Despite nearly doubling its fourth-quarter profits over the previous year's total, Stanley still reported a 41.7% decline in net income, to $107.9 million, for fiscal 2003, on sales that rose 12.4% to $2.68 billion. During the year, Stanley's hand tool and fastener sales were strong across all channels, but the company discontinued its entry door business, which generated another $182 million in revenue.
TORONTO — Canadian Tire Corp. has unveiled strong fourth-quarter profits, bolstered by solid holiday retail sales, and raised its profit projection for the second time in three months. The broad-based hard goods retailer had 4Q net earnings of $93.6 million, up a whopping 46.7% a year earlier, on sales of $2.4 billion. The year end numbers show strong performance too: net earnings were up 21.8% from $202.4 million to $246.6 million, and retail sales from all divisions — Canadian Tire, PartSource and Mark's Work Wearhouse — cilmbed 8.7% to $7.9 billion. For its Canadian Tire division, Canadian Tire Retail, dealer sales from all 452 stores reached $6.25 billion, up 7.0% from 5.84 billion in 2002. Sales to its dealers through the warehouse were also up 7.0%, to $4.64 billion. The company attributed the strong year-over-year sales to a number of factors, including increases in core categories such as hardware, lawn and garden, and sporting goods. In addition, the company enjoyed strong response to a number of special promotions and flyer-driven promotions throughout the year. Same-store sales were up 9.4% in the fourth quarter, and up 4.7% year over year. During 2003, Canadian Tire tested a new store format called Concept 20/20 stores in four markets. The concept will be further tested in 2004 as 13 more stores get retrofitted under 20/20.
LONDON, Ont. — Being in the trade show business these days is all about managing expectations. So anyone going to the brand new Winter Buying Show that expected a small, well-organized buying event with dealers from all over Ontario would not have been disappointed. The show, held last week at the Western Fair Grounds in this city about two hours west of Toronto, was put on by the Lumber and Building Materials Dealers Association of Ontario. Undoubtedly, the board of the LBMAO, including the new president, Dave Campbell, were keenly aware of the success of regional shows put on by sister associations in Western and Atlantic Canada. Those successes, coupled with the LBMAO's dissatisfaction with a former partnership it had with the Canadian Hardware and Building Materials Show, helped push the Ontario group to go it alone. Dealers from throughout the province came in for the show and the LBM focus was a big draw. "There are no pots and pans," says Kim Emmerson, president of Emmerson Lumber Ltd. in Haliburton, Ont. Despite having most of his bookings for the spring in place, he says he place a number of orders — and this is where the winter timing of the show works to the dealers' benefit. The LBMAO had a show of its own up to four years ago, but it was in November, too early for spring bookings. Emmerson is a member of the Castle Building Centres buying group, whose members, along with those of competing group TIM-BR Mart Ontario, comprised the majority of dealers walking the show (the absence of many Home Hardware dealers was due to show's conflict with the annual meeting for Home Hardware's building centre dealers). Dealers came from as far away as Kapuskasing, 1,000 kilometers (650 miles) north, and another dealer came all the way from Moosonee, on the shores of James Bay. Scott Knowles, of Kapuskasing Building Centre, says the show was a good place to do some buying. "I always like to touch base with our suppliers and we're always looking for new things," he says.
WINNIPEG, Man. — TruServ Canada, the dealer-owned co-op wholesaler based here, has signed a wholesale supply agreement with Delroc Industries Ltd., in Langley, B.C. The new affiliation will offer Delroc's LBM members access to TruServ's hardware products and programs under a group arrangement. The terms of the deal make it possible for individual dealers to access the programs without joining TruServ or flying the True Value banner. Delroc is part of the umbrella buying group, Reliance, and even though TruServ is not part of that group (despite what you may have read in the weekly electronic press—MM), it already has supply agreements with other Reliance members besides Delroc, namely Mississauga, Ont.-based Castle Building Centres and Sexton Group, which, like TruServ, has headquarters in Winnipeg. Delroc is a national buying group with over 100 members across Canada representing about $350 million in retail sales. While many of them are specialty building materials dealers or gypsum supply dealers (GSD), more than half of Delroc's membership consists of the Windsor Building Supplies chain, which operates under the banner Windsor Plywood. These stores are more retail oriented, with about 60% of their sales going to DIYers. TruServ Canada currently supplies four Window Plywood stores, because of their geographical proximity. Three of them are in Winnipeg; a fourth is in Brandon, Man.
HOUSTON — Garden Ridge, the home décor dealer operating 44 stores in 13 states, on Feb. 2 filed for Chapter 11 bankruptcy protection from its creditors. The company stated that while it has made improvements in its store productivity — same-store sales increased by 5.4% in December 2003 and by 2.6% in January 2004 over the same months in the previous years — it continues to be saddled with lease agreements that its president and CEO, Jack Lewis, called "uneconomical." Lewis said that by filing Chapter 11, Garden Ridge would have time to "improve liquidity and reject uneconomical leases." Garden Ridge, which celebrates its 25th anniversary this year, sells a unique blend of merchandise that includes silk floral and greenery, pottery, crafts, housewares, home décor, candles, baskets, party supplies, art, frames and mirrors; home textiles, and seasonal decorations. In its court papers, the company stated that its sales for 2003 were $460.5 million. (The company did not state it sales for 2002, which Hoover's, the business information database, estimated at $400 million.) Over the following 45 days, Garden Ridge plans to close an undisclosed number of stores, and will enter into discussions with its landlords to renegotiate the terms of other leases. If those talks prove unsuccessful, Garden Ridge has indicated that one option would be to move stores to another location, with better lease terms in the same market. Lewis expects the company to emerge from Chapter 11 within 90-120 days.
MOORESVILLE, N.C. — Greg Bridgeford, who has served in several key management positions for 22 years at Lowe's Cos., has been named the retailer's executive vice-president — business development. The 49-year-old Bridgeford will oversee Lowe's development of new business opportunities, strategic planning, research and business process improvement. Over the previous eight years, Bridgeford has served in senior-level marketing, merchandising and business development positions. One of his mentors was the company's former chairman, Robert Strickland, who regularly relied on trend analysis to guide the company's strategic direction. "[Bridgeford's] ability to keep a finger on the pulse of consumer trends will continue to be invaluable to Lowe's — and help us continue to deliver an outstanding experience for our customers — well into the future," said Robert Tillman, Lowe's chairman and CEO, in a prepared statement, which also pointed out that Bridgeford played a role in devising the plan that, in the late 1980s, transformed Lowe's into a warehouse retailer.
ATLANTA — America's resilient housing market continues to pay dividends for suppliers and retailers of building products. Georgia-Pacific, one of the country's leading suppliers, pointed to home building's strength as the engine driving the company's profit of $31 million for the quarter ended January 3, 2004. That compares to a net loss of $234 million for the same period a year ago. "Record housing starts and low interest rates kept prices strong," says G-P's chairman and CEO, Pete Cornell. As a result, revenue from the company's building materials manufacturing division increased 14.2% last year to $5.84 million, and the division's operating profits jumped 194% to $379 million. Sales from the company's building materials distribution division — which is the largest in the U.S. — rose 13.8% to $4.31 billion, and net income from distribution increased 98% to $98 million. For its fiscal year, G-P reported total net sales of $20.26 billion, down 12.9% from fiscal 2002. However, the company achieved a significant, positive reversal in its profitability, as its net income jumped to $254 million, versus a loss of $735 million in fiscal 2002. Even though its business model now focuses on consumer products, G-P's manufacturing and distribution of building products still play starring roles on its balance sheet. The company saw plywood and lumber prices increase 15% and 6% respectively, and OSB prices soar by 74%.
MONTREAL — A new report from the trade publication Forest Certification Watch identifies a new wave of increasingly eco-sensitive procurement policies in the U.S. The year 2003 began with a procurement policy update by Home Depot, generally praising North American forestry practices. In addition, Time Inc., the world's largest paper buyer, unveiled ambitious targets for its procurement of certified products, while another major corporation, Boise, issued an environmental statement that attracted praise from its long-time detractor, the environmental group Rainforest Action Network. Forest Certification Watch presents its fifth conference April 1-2, 2004 in Vancouver, B.C., which will feature an exhibit area, field tour and a training workshop. For more info, click here
Canadian Tire 44.25 27.85 42.78
Canfor 13.25 7.60 13.10
Costco 39.50 27.00 37.61
Goodfellow 16.00 9.75 16.00
Home Depot 37.89 20.18 36.17
Hudson's Bay 14.15 7.75 13.64
Lowe's Cos. 60.42 33.37 57.60
Rona Inc. 32.97 11.75 32.82
Sears Canada 21.50 13.60 17.70
Sodisco-Howden 3.35 1.30 3.08
Taiga Forest 8.10 6.31 7.75
Wal-Mart 60.20 46.25 56.32
West Fraser 39.99 29.25 38.25
ATLANTA — Home Depot will eliminate as many as 100 jobs from its finance departments come this April, part of a restructuring of its Financial Operations group. The cuts are being made in the name of productivity and operating efficiencies, said the giant retailer in a prepared statement.TORONTO — Home Depot Canada has backed off on its offer to buy the storied Maple Leaf Gardens and turn it into an "urban" store, saying it would be just too costly. Although the deal may have been made viable by adding a condominium development, such a plan that would not pass meet the requirements of the Toronto Historical Board to preserve the art deco features of the building. WICHITA, Kan. — Star Lumber, the 10-unit pro dealer based here, is donating $250,000 worth of tools and building materials to Habitat for Humanity's resale store here. Habitat, which builds affordable housing for low-income people who participate in their homes' construction, opened that store, called HomeMart, last October to raise funds for its home-building activities. HOUSTON, Tex. — Canfor Corp. officially opened the world's largest sawmill in here yesterday, a state-of-the-art facility that has the capacity to produce 600 million board feet per year. The giant sawmill is considered a hedge by the Vancouver-based company against the damaging effects of U.S. softwood lumber duties and penalties. ITASCA, Ill. — Kitchen Distributors of America may go up for sale. It's parent company is in Chapter 11 and KDA has been hurt by the likes of Home Depot and Lowe's, which both enjoy extensive sales of kitchen cabinets through their installed sales programs... KDA, which has 19 showrooms in the Chicago area and another five in the Philadelphia market, is controlled by owners of Builders Plumbing & Heating Supply Co., which filed for Chapter 11 protection in bankruptcy court last December, owing creditors more than $29 million. LONDON, U.K. — The 10th DIY & Garden Show ended on an upbeat note, following strong attendance by buyers internationally, reports the show's organizers. The show added a DIY Industry Forum, which featured Manfred Maus, chairman of the German DIY chain, OBI, and Ian Cheshire, CEO, international development, for Kingfisher. LONGUEUIL, Que. — Canada's newest hardware wholesaler, Quincaillerie Matreco Hardware, began shipping last week to Ontario customers belonging to the TIM-BR Mart Ontario buying group. TIM-BR Mart Ontario has invested in 10 trailers to handle product distribution, while logistics are being handled by Groupe BMR, which owns the warehouse that ships on behalf of QMH. OAKVILLE, Ont. — Mutual Hardware formally welcomed the Sexton Group into its ranks at its recent annual general meeting. The group, Canada's only buying group for hardware products, represents 26 companies in industrial and retail hardware sales. MISSISSAUGA, Ont. — Wal-Mart Canada opened its fifth Sam's Club warehouse operation in Canada last week, this one in London, Ont. It is the first Sam's Club store outside the Greater Toronto Area.
Georgia-Pacific Corp. has made some changes to its executive ranks: Sean R. Fallmann, formerly vice-president and general manager of G-P's Dixie retail business, has been named president — Dixie business ... James E. Terrell, vice-president and controller, has elected to retire early, effective July 1, 2004, after 20 years with Georgia-Pacific. He will be succeeded by Robert P. Nelson, vice-president — finance, consumer products and packaging.Nick Cowling, formerly senior account manager at Edelman Canada, has joined Home Depot Canada as public relations manager. While at Edelman, he worked on the Home Depot account. (416-412-4142) At its AGM held recently, hardware buying group Mutual Hardware Inc. elected its new board of directors for 2004: Terry Derraugh of TruServ Canada has been elected chairman ... John Roy of Mac-Mor Industries has been elected vice-chair ... Robert Bouchard of Guillevin International, Yves Gagnon of Groupe BMR, and Claude Gingras of Cooperative Fédérée de Québec have been named to the Financial Committee ... additional board members: Lawrence Divorski, Can-Cell Industries; Gordon Illes, TSC Stores; Norman Krivoshen, Federated Cooperatives; and Glenn Wood of Windsor Factory Supply. (905-826-3970) Mette Petersen has been appointed president and managing director of Koelnmesse Inc., the North American office, based in Chicago, of Koelnmesse GmbH. She was most recently at Hanover Fairs USA. Koelnmesse owns and operates more than 40 trade shows, including the Cologne International Hardware Fair/Practical World coming up March 14-17, as well as Practical World Asia. It also has a partnership agreement with the National Hardware Show in Las Vegas, being held May 10-12. John McGinnis has joined Storeimage, a retail décor and instore design company, based in London, Ont. McGinnis's background includes business development at Emco and store planning and design for the AWARD buying group. He'll be in charge of branded environments. (519-756-6185, ext. 338) Brant Danard has been hired as service rep for box stores in the Greater Toronto Area, a newly created position at Colonial Elegance. Danard reports to Marianne Thompson, national director of sales. He was previously with Plastival as their Building Box sales rep. (1-800-361-2030) Daniel Paré has joined Royal International Corp. as a sales manager, based in Montreal. Formerly with M-Laser Inc., he will report to Jean-François Lachance, vice-president sales and marketing. (514-735-4566) ... Chris Arel, formerly president of M-Laser, will stay on with Royal International on a consultancy basis. (1-888-386-8486) Silk Systems Inc. and its subsidiary, Dimensions Retail Systems Inc., have made some changes to its top management team: Adriano Botelho has been appointed chairman and CEO of Silk Systems and Dimensions. In his new role, he will also head up product development ... Glenn Viney will assume the title of president of the two companies, taking over from Botelho. He was formerly vice-president operations for Silk Systems. Silk Systems provides business management information systems to equipment, retail, and distribution companies throughout North America. Dimensions specializes in computer software solutions for the home improvement and building materials industries. (800-731-9026)
Retail sales fell in January, says the Commerce Department. They dropped 0.3% to $322.87 billion in January, the first decline since September. Excluding autos, however, retail sales posted a stronger-than-expected 0.9% increase.December wholesaler sales were up 1.0% from the previous month, and up 8.0% over December 2002, reaching $250.9 billion, says the Commerce Department. December sales of durable goods increased 1.4% from last month and were up 9.7% from a year ago. Compared with last month, wholesale sales of lumber and other construction materials decreased 2.4%.
Housing starts dropped slightly in January from the previous month, reports CMHC, but they remained high, at 195,500 seasonally adjusted, compared with 219,400 starts in December 2003. Urban starts fell 11.4% to 169,900 units seasonally adjusted, with most of the decline coming from multiples, which decreased 15.4% in January to 74,600. Single starts declined 7.9% to 95,300 seasonally adjusted.The New Housing Price Index rose 0.3% in December, down from November's increase of 0.7%, reports Statistics Canada. For the third consecutive month, this index of contractors' selling prices advanced 5.0% on a 12-month basis. Prices were up in 13 of the 21 urban centres surveyed.
Westcoast 2004, The only trade show and convention in British Columbia for the building supply industry, will be held at the Convention and Trade Centre in Penticton, B.C., March 5-6, 2004. With more than 125 exhibitors in 200-plus booths, space is already sold out! Four out of five dealers in British Columbia are expected to attend. For more information, contact: George Tracy, president, Building Supply Dealers Association of B.C., 604-513-2205;

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