vol. ix, 7 February 17, 2003

* Rona gets new credit card partner, new financing options * Canadian Tire ends year on a strong note * Kent remerchandises in anticipation of Home Depot arrival * Home Depot CEO says he'll look for president… eventually * Cold temperatures keep housing starts down in January

"Brown shoes don't make it." — Frank Zappa (1940-1993)
Toronto, ON — Despite a soft December, Canadian Tire Corp. ended the fourth quarter — and the year — on a strong note. Overall 4Q retail sales reached $2.1 billion, up 12.6% over the same period a year earlier, while earnings hit $62.3 million, a 55.8% increase. Lack of snow before Christmas in many markets depressed seasonal sales for Canadian Tire dealers. In addition, the company's retreat from low-margin home electronics and toys to more high-end giftwares adversely affected sales more than anticipated. As a result, sales in the fourth quarter dropped 0.4% from 4Q 2001 and same-store sales fell 2.5%. For the year, however, total sales at retail (a combination of Canadian Tire retail, Mark's Work Wearhouse, PartSource and gas stations) climbed 11.6% to $7.2 billion. Although sales by Mark's were essentially flat, the Mark's acquisition added incremental sales of $480 million. Sales by Canadian Tire member dealers were up only 4.7% to $5.8 billion in 2002. Same-store sales were up 1.4%. Consolidated operating revenue for the whole company reached $5.9 billion, a 10.6% increase over the company's top line in 2001. Net earnings grew 14.6% to $202.4 million from $176.7 million in 2001.
Moncton, NB — The much anticipated arrival of Home Depot to this city will occur later this Spring. It will be only the third Home Depot store in Atlantic Canada (the others are in Halifax and Dartmouth, NS). The store is expected to be about 95,000 sq.ft., but despite its slightly smaller size, Moncton is considered by many to be overstored already in the home improvement sector. Either way, the Kent Superstore, located on Trinity Drive, right on the other side of the highway, has been preparing for the new competition for at least a year. The big box store has been undergoing a fine tuning, including better displays and extensive remerchandising. The store, which has typically enjoyed some healthy margins, has also been getting more competitive, as prices have been lowering over the past year.
Boucherville, QC — Rona Inc. has signed a 10-year partnership agreement with Desjardins Group, the largest financial institution in Québec and sixth largest in Canada. The deal, effective this Spring, enables Rona to offer customers a trio of credit card options with no fees, called "Rona Visa Desjardins" in Québec and "Rona Community Visa" in the rest of Canada. The first card, for consumers, is a Visa card co-branded with Rona. It's usable anywhere and gives customers access to special card options at Rona stores. It also makes card holders eligible for personal financing instore. Called "Financement accord D" in Québec, and "Community Retail Financing" in the rest of Canada, the program creates a profile of each card holder. This profile, accessible at POS, gives the customer the option to use either their Visa card or get longer-term financing at favourable interest rates when buying materials for larger projects. The program has been on trial for about 18 months in Rona's big box store in Brossard, QC. "A lot of consumers find this possibility for financing good, because it's an easier way to get credit for a home improvement project," says Sylvain Morissette, communications director for Rona. "It takes only about 20 minutes — right in the store." The other two cards, one for contractors and one for institutions and government agencies, will be a private-label card. "For our professional customers, it's another way for them to lower their cost of operations," says Morissette. "It provides a monthly bill that's easier than establishing credit at just one Rona store."
Canadian Tire 33.65 23.96 29.14
Canfor 11.70 6.83 9.46
Costco 46.90 27.09 28.92
Emco 14.23 7.25 14.00
Goodfellow 13.99 9.50 10.95
Home Depot 52.60 20.10 21.35
Hudson's Bay 15.55 5.87 8.98
Lowe's Cos. 49.99 32.50 34.96
Rona Inc. 14.75 11.75 12.35
Sears Canada 25.10 15.15 17.51
Sodisco-Howden 2.20 1.06 1.50
Taiga Forest 7.00 5.05 6.85
Wal-Mart 63.94 43.72 46.15
West Fraser 44.42 28.90 40.00
The rate of housing starts in Canada fell 8.7% in January to 183,200 seasonally adjusted, compared with 200,700 units in December, says CMHC. Urban single starts decreased 7.6% to 97,800 units in January from 105,800 units in December; urban multiples decreased 8.0% to 63,700 units in January from 69,200 seasonally adjusted in December. Estimated actual urban housing starts for January 2003 are 17.2% lower than for January 2002 (9,683 units compared with 11,689 units). The single-detached market increased 6.0%, while multiples decreased 34.2%. The slow start to the year is attributed to extremely cold temperatures and the high levels of housing starts in preceding months. In fact, rates overall in 2002 were up 25.9% over 2001. The New Housing Price Index rose 0.3% in December from November, says Stats Canada. Year over year, the index of contractors' selling prices was up 5.1%, the highest 12-month increase in more than 12 years. Monthly rises occurred in 12 of the 21 urban centres surveyed, with the largest increases in St. Catharines-Niagara (+0.9%) and Calgary (+0.8%). In December, consumers cut back their spending in department stores, says Stats Canada, causing sales to decline 0.3% from their November level to $1.75 billion seasonally adjusted. Department store sales levels have remained high since the start of 2002, hovering around a monthly average of $1.75 billion. Sales in 2002 totalled $21.0 billion, up 6.0% from 2001, which in turn was up 7.9%. The sales growth recorded in 2002 from 2001 was accompanied by an increase in the number of locations, with the annual average rising from 732 to 742 department stores in Canada.
Oregon-based Jeld-Wen has announced a strategy to consolidate its brands in North America under the Jeld-Wen name. This includes the changing its Canadian operation from Henderson Wholesale Building Materials to come under the Jeld-Wen name. Jeld-Wen of Canada acquired Henderson in 1998. The move is expected to establish much greater awareness for company's brand name to consumers, distributors and builders alike. Taiga Forest Products recorded 3Q sales of $203 million. That's up from $182 million for the same period in the previous year. Earnings for the quarter were $364,000, compared with $1.8 million. Sales for the nine months ending December 31, 2002 were $703 million, up from $648 million. Profits for the same period climbed to $8.5 million from $5.5 million. During the quarter, Taiga acquired LP Corp.'s Rocklin, CA building products distribution centre. West Fraser Timber Co. Ltd. announced 4Q earnings of $36 million on sales of $405 million, compared with earnings of $11 million on sales of $364 million in 4Q 2001. For the year, earnings were $138 million on sales of $1.63 billion, up from earnings of $115 million on sales of $1.56 billion in 2001. The yearly earnings increase was due primarily to increased production, along with lower unit costs. Home Depot chairman and CEO Bob Nardelli says the company needs a president as part of its succession planning, but he hasn't given a timetable for the appointment. He has hinted, though, that the job will be given to someone inside the company. Nardelli left GE in 2000 to become president and CEO of Home Depot. He assumed the chairman's title last year. Shoppers Drug Mart, Canada's largest pharmacy chain, posted 4Q profits of $62 million, up from $4 million for the same period a year earlier. For the year, the retailer earned $209 million, up from $7 million. Sales for the year rose 8.9% to $5.44 billion; same-store sales increased 7%. Shoppers expects sales in 2003 to increase 11%-12%, with growth coming from the development of large-format stores and expansion of its merchandise offerings. It also wants to revitalize its private label offerings. JDA Software Group Inc. has awarded $5.24 million of JDA Portfolio space, category management and planning software and services to Ryerson University, School of Retail Management. Ryerson will use the Portfolio applications to teach visual merchandising, product and demand planning, customer data analysis and assortment optimization. The Ryerson School of Retail Management offers the only university-level degree in retail management in Canada. Americans are responding to the threat of war with Iraq by stocking up on supplies at their local hardware stores. People are buying everything from wood stoves and drums to collect rainwater to duct tape and plastic sheeting. Stores are stocking up on lamp oil, batteries and other emergency supplies. Wal-Mart's anti-union policies are finally catching up with it. It currently faces about 40 lawsuits in the U.S. from employees for everything from unpaid overtime to sexual discrimination. Labour groups are starting to work together, intensifying efforts to get higher wages and better conditions.
Kingfisher plc has named Philippe Tible the new chief executive of Castorama France, effective February 17. He will report to Kingfisher CEO Gerry Murphy. A veteran retailer, Tible spent a decade with French home improvement retailer Leroy Merlin. He was most recently CEO of Mille Amis, a pet food retailer. He replaces Didier Hernoux, who has been acting chief executive since August 2002.

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