John Caulfield, Contributing Editor
vol. xi, #9, February 28, 2005

IN THIS ISSUE: • CanWel seeks strategy for Sodisco banners • Home Depot, Lowe's post record results • Hardlines celebrates 10th anniversary with killer Conference line-up • New hardware show gets off to slow start • TruServ CEO: consumers are fickle • Is Rona eyeing the U.S.? * * * * * *

"To me, there's no greater act of courage than being the one who kisses first." — Janeane Garofalo (American comedian)
H2XTORONTO — Despite offering a forum for a number of new and innovative products, the first edition of a newly re-created hardware show for Canada, called H2X, received attendance from buyers that disappointed many exhibitors.As is so often the case at trade shows, the exhibitors most likely to get any interest from buyers were brand new, smaller companies with new products to offer. However, for most exhibitors Hardlines spoke with, not only were purchases few and far between, but so were the buyers themselves.Show organizers admitted disappointment, as well. Roland Bleinroth, president of Messe Frankfurt North America, which owns and manages the show, says frankly, it "didn't meet expectations," either in terms of exhibitors or attendance. "The show overall was much smaller than we had hoped it would be, especially on the hardware side." H2X was held in conjunction with a trade show for paint and decorating retailers called D2X. Of 154 exhibitors, about half were listed within the hardware side of the show. And of that number, almost 20% were Asian, or Asian-based, importers. The show struggled with some logistics problems, as well. Two keynote speakers were lined up for consecutive mornings, Rona CEO Robert Dutton on Monday, and Bill Morrison, head of TruServ Canada, on Tuesday. However, times were posted as 8:30 a.m. in some materials, but 9:00 a.m. on the show's website. As a result, many missed both speakers, and those who came in time were shut out of the show itself — and the coffee — for another hour, until the show opened at 10 a.m. The show suffered another blow when Dutton was a no-show, replaced at the last minute by his executive vice-president traditional stores, Claude Bernier. The handful of people who were present heard an update on Rona' expansion plans, underscored with a strong recruitment message for dealers. And only about two dozen people were fortunate enough to be on hand the next morning, when TruServ's Morrison shared some thought-provoking comments on the changing customer, and retail's need to adapt to those changes (see story in this issue). Bleinroth of Messe Frankfurt says he is talking with a number of groups within the industry to determine the fate of the show, including evaluating whether Canada can sustain a national show at all. "But a number of very important players said 'yes, we need a show'," he says. With that in mind, Messe Frankfurt is evaluating a range of options, which may include anything from a change of timing to another venue — or even a move to another city. Bleinroth is confident, however, that some kind of event for the industry will take place, "but what that will be — the jury is still out."
VANCOUVER — CanWel Building Materials is reinforcing its commitment to consolidate — and execute — at the distribution level in Canada. Its acquisition of hardware wholesaler Sodisco-Howden Group, which closed at the end of 2004, effectively turns CanWel, itself one of Canada's major distributors of lumber and building materials, into a more than $1 billion company.Because Sodisco-Howden also supports two major retail banners, Ace and Pro, it is in a position effectively to compete with CanWel's own retail customers, namely the likes of Home Hardware Stores Ltd. and Rona inc. As a result, CanWel is winding down Sodisco-Howden's retail function, to zero in on the company's core strengths as a wholesale distributor.So what becomes of the Ace and Pro banners, both of which are licensed by Sodisco-Howden in Canada? CanWel will remain a partner with Ace, but strictly at the wholesale level, says CanWel chairman Amar Doman, rather than developing bannered points of sale. "Ace wants to sell product," he says. "Ace has great value to our customers from a procurement point of view," adds Tom Donaldson, president and CEO of CanWel. "But it's not a banner strategy." As such, the dealer development function within Sodisco-Howden is being wound down, with the sole emphasis on increasing product sales. "Our job is not to convert a dealer from one banner to another," says Donaldson. Instead, Sodisco-Howden will target independent dealers, especially in the LBM buying groups, for hardware sales. "The old Sodisco-Howden was really focused on Pro and Ace. We're really focused on the independents," Doman says. "Banners aren't our business." He says the company is currently working on strategies for Pro and Ace, "to see what makes sense to the Canadian market," and expects said strategies to materialize before year's end. However, he would not provide further details. Will the separation of the two businesses be a tangible one in the eyes of the industry and — more importantly — CanWel customers? Both Doman and Donaldson are confident it will be. The two businesses will not be combined in any way. Sales forces, distribution centres and product lines will remain distinct. CanWel's focus for its new business unit is managing inventory, increasing fill rates, developing new products, and lowering costs for its customers through better procurement strategies. So far, the Sodisco-Howden acquisition has had no appreciable impact on CanWel's relationship with its existing customers. "We never take anybody's business for granted," Donaldson says. "But we haven't seen any dramatic shifts in business in the last five months."
MOORESVILLE, N.C. & ATLANTA — Blame Canada. That, apparently, is one of the reasons why some analysts and investors greeted Home Depot's release of its financial data for the fourth quarter and fiscal year of 2004 lukewarmly. Home Depot stated that 29 of the 175 stores that it plans to open in 2005 will be in Canada and Mexico, and that it is preparing to open its first store in China. Some analysts inferred from that news that Home Depot is looking outside of the U.S. for growth and may be reaching a saturation point in its domestic store expansion. The retailer also reported quarterly earnings per share gains of 9.5% that were its lowest in two years and significantly below analysts' expectations.Home Depot's performance, as always, is gauged against its chief rival, Lowe's, which enjoyed another banner year (see chart), and whose earnings per share for the quarter and the year exceeded analysts' predictions. It's worth noting, however, that Home Depot's earnings in 2004, as a percentage of revenue, were almost a percentage point higher than Lowe's: 6.84% vs. 5.97%. Officials at Home Depot attribute the company's sales growth, in part, to a 7.3% increase, to $54.89, in its average customer transaction; and to a 27.9% gain in its installed sales business. The retailer also shelled out $3.7 billion in capital expenditures to upgrade its stores and operational systems. Home Depot projects that its sales in 2005 will expand by between 9 and 12% and its earnings per share will increase by between 10 and 14%. In 2004, Lowe's completed the rollout of its revamped installed sales program, and continued to expand its special order business. The company spent $400 million on improving and renovating the appearance of its stores. Lowe's plans to open 150 stores in 2005, and expects its revenue to increase by 17%.
Home Depot Fiscal 2004 Lowe's
73,094 Revenue (in $millions) 36,464
12.8 % chg. vs. '03 18.2
5.4 Same store sales growth (%) 6.6
5,001 Net income (in $millions) 2,176
16.2 % chg. vs. '03 15.9
1,890 Store count (units) 1,087
TORONTO — If you're spending all your time wooing the aging baby boom generation, you may be missing the boat. According to Bill Morrison, president and CEO of TruServ Canada, retailers must pay attention to the "Y Generation," to young people, and especially to young families. This important target demographic can actually spend many times more than older boomer families.Morrison spoke to a small but rapt audience at last week's new hardware show, H2X.Kids represent a $60 billion market annually, he went on to say. Decision making within that group comes both from children themselves and from the parents buying for them. So make your stores kid friendly. Offer a "safe haven" that gives enough of a comfort level to parents to enable them to spend time shopping in the store. Society is spending money more wisely, he noted. He called Canadians "a tough, cynical audience." As a result, it's important to have the right strategy to provide the consumer what they are looking for when they do choose your store, "because loyalty is a myth and shoppers are constantly adjusting their shopping patterns." Morrison also stressed the importance of keeping the retail concept fresh and updated. "Independents are in the fashion industry. Your store must be fashionable. 'Think inside the box'," he urged. Too often, a disconnect exists between what retailers think customers want and what they actually want. Morrison also touted the importance of putting one's business on the Internet. "If you're not net, you're not real."
VANCOUVER — Retail sales growth in British Columbia more than doubled in 2004 with a record-breaking $47.1 billion in total sales, according to a report released last week by Statistics Canada."Without question, British Columbia was Canada's comeback kid in terms of retail sales last year," said Kevin Evans, Western Canada vice-president for Retail Council of Canada. "Overall, B.C. exceeded our expectations, reflecting a strong economy and solid consumer confidence."Total retail sales in B.C. grew by 7% in 2004, compared with 2.6% in 2003, leading the country, along with Alberta. December holiday spending in British Columbia was up 8.6% over December of last year. The province was one of only two that saw an increase in sales from November to December, at 0.7%. "Across Canada, December sales increases were lower than anticipated, with much of that due to a decline in car sales," Evans said. "When you remove that category, December holiday sales in B.C. were actually up 29.9% over November."
TAMPA, Fla. — Sales of home improvement-related products rose to a record $271.4 billion in 2004, a 13% increase over the previous year, according to estimates by the Home Improvement Research Institute here. Damages caused by four consecutive hurricanes that hit the southern U.S. in the last six weeks of the year drove those sales, in large measure, by creating demand that led to fourth-quarter shortages in building products such as roofing and lumber.Indeed, HIRI estimates that the lumber and building materials category saw its sales rise 19% last year. Yet, last June, the Institute said it expected that increase to be only 10% for the year. HIRI projects that hurricane-related repairs will amount to $2.5 billion in product spending in 2004, and another $1.5 billion in 2005. Another key factor in product sales has been the ongoing pace of new home construction, although HIRI expects that to slow a bit in the next few years. In fact, the Institute expects the sales growth rate for home improvement products to average 4% annually through to 2009. In 2005, it projects that sales will expand 3.8%.
HIRI projection of LBM market in U.S.
2005 $280.9 billion
2006 $288.1 billion
2007 $299.2 billion
2008 $313.4 billion
2009 $329.1 billion
WORLD HEADQUARTERS, TORONTO — Since starting out in a basement office in January 1995, Hardlines has grown from a small industry newsletter to ... well, a little bigger industry newsletter. But man, are we proud to still be here, providing our loyal readers with the latest industry news and information every single week.To celebrate our 10th anniversary, we are planning all kinds of amazing events. These include our Meet the Buyers Seminars (Toronto, April 26 and Montreal, April 28), and our International Conference program in Las Vegas (May 17 & 18). But best of all, we are lining up the most amazing Hardlines Conference ever. Once again, you can count on a gathering of top retail experts from around the world to join us September 12-13, 2005. Some of the speakers this year:
  • John Costello, executive vice-president of merchandising and marketing, Home Depot in Atlanta
  • Bill Morrison, president and CEO of TruServ Canada
  • Mark Foote, president of Canadian Tire Retail
  • Al Meyers, senior vice-president with Retail Forward
  • Albert Plant, retail consultant and former RBC Royal Bank executive
With more surprises to be announced! Be sure and set aside Sept. 12-13, 2005 right now. We want you to be part of our birthday bash!
TORONTO — Rona in the U.S.? Maybe. Or maybe not. Rona evp Claude Bernier, speaking at last week's inaugural H2X hardware show in Toronto, suggested such a move might enable the company to sustain growth. But he wouldn't identify if or when Canada's second-largest retail home improvement group might make the move. In the meantime, they're keeping busy adding dealers in Canada, and especially in the West. Since mid-December, three retailers in British Columbia, two in Alberta, four in Ontario and four in Quebec have joined Rona's ranks, adding another $35 million to the company's annual retail sales.CHICAGO — Despite flat sales, the True Value Company reported 2004 net margin of $43.2 million, up 104% from 2003 earnings of $21.2 million. The full-year impact of the refinancing that took place in August 2003 was considered the primary driver of the earnings improvement. The co-op also reported 2004 revenue of $2.0239 billion, flat with 2003 revenue of $2.0243 billion. True Value reported net margin of $10.8 million for the quarter ended December 31, 2004, up 5.9% compared to net margin of $10.2 million for the same period a year ago. The co-op also reported $474.7 million in revenue for the fourth quarter, down 8.7% from $520.2 million for the same period a year ago.BOUCHERVILLE, Que. – In the fourth quarter of 2004, Rona inc. posted net earnings of $29.8 million, up 41.0% over the same period last year. Consolidated net sales for the quarter advanced 18.0% over 2003 to $932.7 million. Net earnings for fiscal 2004 were $138.2 million, up 77.3%. Consolidated sales for the year (which comprises sales generated by its distribution centres and corporate stores, as well as the company’s share of franchised store sales and royalties from franchised sales) reached $3.68 billion, a gain of 35.8% over last year. TAYLOR, Mich. — Masco Corp., one of the largest suppliers of home improvement products in North America, reported net sales from continuing operations of $12.1 billion for the year ended Dec. 31, 2004. That represented a 14.2% increase over 2003 revenue. The company's net income in 2004 rose 10.8% to $893 million. In the fourth quarter, Masco's earnings increase 14% to $105 million on sales $3.03 billion that grew 10% over the same period a year ago. The company said its growth was impeded last year because of rising commodities prices, increased energy and freight costs, as well as costs associated with Sarbanes Oxley legislation, which has forced companies to report certain assets differently on their balance sheets.RISHON LEZION, Israel — Home Center, Israel's largest home improvement dealer, is investigating the purchase of the country's number-two chain, Ace Hardware. According to the Israeli newspaper Haaretz, the 40-unit Home Center, based here, last year generated estimated sales of 1 billion in New Israeli Shekels (about US$230 million). Ace, which operates 25 homes centers and 12 auto parts stores in Israel, did NIS570 million (US$131 million). Any merger would have to be approved by Israel's Antitrust Authority, and that approval is problematic, given the dearth of other large competitors in this country's market.
BURNABY, B.C. — Bill Kushlick has been appointed president and COO of Taiga Forest Products Ltd., effective March 1, 2005. He will also be appointed to the company's board of directors. Kushlick comes to Taiga with more than 35 years of sales and marketing, distribution channel, and business development experience in North America and Internationally. He was most recently president of Weiser Inc., a Tucson, Ariz.-based lock maker, before its takeover by Black & Decker. Taiga is a wholesale distributor of building products with 2004 sales of nearly $1.1 billion.At Liquidation World Inc., Jonathan Hill has assumed the position of president and CEO and Darren Gillespie has been appointed president of Liquidation World's subsidiary, Liquidation World U.S.A. Inc., as well as senior executive vice-president, Liquidation World Inc. The changes are intended to allow the company to coordinate more effectively the implementation of its strategic plans and improve management focus and accountability in both the U.S. and Canada. The company offers retail liquidation of consumer merchandise through 104 outlets across North America, as well as auctions and store-closure management.Abbas Khan has been promoted at OSRAM Sylvania to the position of vice-president of sales and marketing for retail. He was formerly general manager of OSRAM Sylvania's lighting services division. At Home Depot, Tom Ridge, former Secretary of the Department of Homeland Security and former Governor of Pennsylvania, has been appointed to the company's board of directors. Greg Paliouras has been appointed publisher of Hardware and Home Centre magazine. Prior to joining Centre, Paliouras was associate publisher of Canadian Architect magazine. His background includes extensive sales and marketing experience, as well as a strong knowledge of the construction industry. (416-510-6808)
"Service is a neat notion. We as Canadians play lip service to it, then go shop Wal-Mart." — Bill Morrison, president and CEO of TruServ Canada, sharing his marvellous insights into retailing and the customer experience, but alas, to only a very small group at last week's H2X hardware show in Toronto.

****HARDLINES MARKETPLACE**** Don't miss the products and services on the Hardlines web Marketplace: And check out Hardlines Classifieds on the web: HELP WANTED


This well-established and stable yet growing entrepreneurial building products company is enjoying success in both their retail and commercial businesses. As a result, two excellent career opportunities are currently available: National Retail Sales Manager—Vancouver Vancouver-based at their corporate offices, you will manage a small national sales force and be the point person for major accounts including Rona, Home Depot and ILDC among others. Significant growth opportunities also exist in Eastern Canada and you’ll benefit financially based on your success. Enjoy the lifestyle that the west coast has to offer while making your mark as a top Sales Manager with this dynamic high growth entrepreneurial building products manufacturer. Working knowledge of the above accounts is highly desired, along with a proven track record of business development successes and a willingness to travel as necessary. A competitive salary and bonus, along with car allowance and company benefit package is also offered, as is relocation assistance if required. Sales Representative—Ontario A terrific opportunity exists for a self-managed individual ready to move ahead as a professional Sales Representative. You will be responsible for all product sales, product knowledge sessions as well as Sales Agent liaison/supervision which includes store sets and re-sets. This position also involves business development among the large box stores, as well as lumberyards and independents primarily in Southern Ontario. Experience in outside sales and selling to home improvement retailers is required. This position offers a solid base salary, bonus, car package, RSP contribution and excellent benefits. To explore either of these opportunities in complete confidence, please contact Wolf Gugler or Lesley Fulton. Wolf Gugler & Associates Limited. Phone; (866) 848-3006. Email: Web site: (2.28/3.07.14/05) ********************************************************************************** REGIONAL SALES REPRESENTATIVE

We are a leader in the manufacturing, supply and distribution of brand name hardware & tools in the Canadian marketplace. We require a dynamic sales professional to join our team.

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