February 14, 2000 - Volume vi, #6
Michael McLarney, Editor & Publisher
Ph: 416-489-3396 Fx: 416-489-6154 "SELLING TO CONTRACTORS"AN EXCITING NEW CONFERENCE FOR DEALERS AND VENDORS, PRESENTED BY HARDLINES IN CONJUNCTION WITH CANADIAN CONTRACTOR MAGAZINE. FEBRUARY 23 AT THE RADISSON HOTEL IN MARKHAM, ONT. SPECIAL DISCOUNT FOR LBMAO DEALER MEMBERS. CALL BEVERLY FOR MORE DETAILS! Check out our incredible Classifieds section!The Hardlines Show Breakfast was a great success. There must have been at least 170 people in the room! Thanks to everybody who joined us to celebrate our fifth anniversary and to recognize our Newsmakers of the Year: Home Hardware and Sodisco-Howden Group.Thanks again to this year's sponsors:
CANADIAN HARDWARE & HOUSEWARES MANUFACTURERS ASSOCIATION
* * * * * * *Time to build the sales team? Looking for agents or new lines? Want to announce new products or services? See our "Page Three Marketplace" at the bottom of this issue. Hardlines Classifieds get results fast. They cost only $16 per line for two weeks. Call Beverly at 416-489-3396, ext. 2, for more details. -- Michael This week in Hardlines:CASHWAY TAKEOVER WILL GIVE RONA GREATER PIECE OF ONTARIO MARKETRONA Inc. confirmed its purchase of Cashway Building Centres last week in a deal worth around $50 million. The move constitutes "a major step forward and a realization of RONA's expansion strategy," claims RONA chairman Henri Drouin. The deal adds Cashway's 61 stores and 1999 sales of $322 million to RONA's network of 424 stores, for combined estimated sales of $1.8 billion. Sales in Ontario will represent about $922 million, or 14% of that province's $7 billion hardware/home improvement market. RONA already has 33% of the Québec market.The Cashway stores will be renamed "RONA Cashway." Over the next five years, the company intends to convert them to dealer-owned status.The deal will be financed with current cash reserves and bank debt, says Drouin. All shares of Cashway, as well as shares belonging to Russel Metals Inc., and Cashway chairman and CEO Craig Graham, have moved into RONA's hands. Rick Blickstead, former head of Holt Renfrew, has been hired as president and COO of RONA's newly formed retail division to oversee its big box expansion plans. Cashway president and COO Jim Pybus becomes president of RONA Cashway, reporting directly to RONA president and CEO Robert Dutton. The Cashway buying team will remain intact, as will Cashway's distribution facilities in Port Hope, Ont.Besides the takeover, RONA has announced four new locations for its large-surface stores in Ontario: Brampton, Mississauga, Kingston and a second store in the Ottawa area. (A proposed site in Cambridge has been nixed.) All four stores are expected to open before year's end. They will likely be a hybrid of the L'éntrepôt (warehouse) stores and RONA's mini-big box Rénovateur Régional outlets. While the regional stores are typically about 65,000 sq.ft., the latest ones to go up in Québec have been closer to 95,000 sq.ft. These are expected to become the footprint for Ontario expansion.* * * * * * *HOWDEN PLANS AGGRESSIVE RATIONALIZATION OF BANNERSSodisco-Howden Group used the 100th birthday of its Howden division as a springboard to introduce a new look for its PRO banner and to accelerate its online presence.The new logo ties in with Sodisco-Howden's efforts to reduce the number of its banners from five, creating a network of 750 PRO dealers across the country. "We will be the largest group of independently owned hardware stores in Canada," said Tony Molluso, president and CEO of Sodisco-Howden Group, distinguishing between independents and co-op dealers. In Québec alone, where only 30 PRO stores exist, 250 dealers will be affected, all sporting new exterior signage by July of this year. About 55 home centres in nine provinces, operating under the Do-it center sign, are not expected to switch at this time. "We will maintain our Do-it banner as long as our dealers want it. We will upgrade it and support it," Molluso said.A print and television campaign worth upwards of $3 million will kick off the new program for consumers and run throughout the year 2000. The bilingual campaign, which will air nationally during the NHL playoffs and on TSN, will feature 30-second spots that promote the PRO store as a neighbourhood destination. Molluso anticipates heightened dealer interest as a result of the strengthening of the PRO banner. By the end of 2001, he predicts, 75-100 new dealers will have signed on to take advantage of enhancements such as 1,500-plus more private label products.Molluso simultaneously announced the creation of an electronic catalogue that will give dealers access to 76,000 SKUs online. Retailers who order from the catalogue will get their delivery within 24 to 72 hours. * * * * * * *HARDWARE SHOW HOSTS BUILDING MATERIALS FOR FIRST TIMEExhibitors had hoped for more retailers and retailers had expected more show specials, but otherwise the response to this year's Canadian Hardware and Building Materials Show was largely favourable. The show, held February 6-8, was the first to incorporate the Lumber & Building Materials Association of Ontario's Canadian Home Centre Show, which had traditionally run in November in Toronto. More than 700 companies filled 1,500 booths at the National Trade Centre in Toronto, attracting an estimated 20,000 delegates.Building materials dealers in particular were happy to see an increased showing of LBM products. "The show is improving each year," said Peter Turkstra, vice-president of Turkstra Lumber in Hamilton, Ont. "Next year, I'm going to ask my store managers to come, because it's worth the day. They should see the new products.""This is actually a perfect show," said Barrie Sali, chairman of Tim-BR-Marts in Vancouver. "We don't need Chicago with this show." He noted that the addition of the LBM, as well as the timing of the event, make it well suited for building supply dealers to attend in addition to regional shows such as the WRLA's Prairie Showcase.One of his members, Don Neufeld of J+H in Saskatoon, agrees. Accompanied by store manager Jonathon Pauls, he was on the lookout for hardware, especially décor products and specialty hardware. However, despite the addition of the more LBM exhibitors, Neufeld and other out-of-province delegates often found those booths staffed mainly by Ontario reps.For exhibitors, the show drew more LBM dealers than before, but not as many as some had hoped for from the combined show. "It's a little light," said Terry Davis, vice-president of information services and dealer development for Home Hardware Stores. "But," he added, "it provides great exposure and we got to see most of the players." Indeed, buyers were present in force. Revy, for example, had "all but one of our buyers at this show," said head buyer Larry Jarvis, and Federated Co-operatives of Saskatoon brought eight people. Even Menard's from the U.S. reportedly flew in a full contingent of buyers to the show.In addition, a number of groups organized dealer meetings around the show. Castle and Homecare both hosted events for their members, while I.L.D.C. held vendor meetings in Toronto during the week prior to the show. * * * * * * *REVY ANNOUNCES NEW STORES ON THE HEELS OF PARENT'S STRONGER YEAR ENDBacked by stronger earnings by its parent, Revy is accelerating its expansion in the Greater Toronto Area. West Fraser Timber Co. Ltd. reported that sales increased 15% in fiscal 1999, with net earnings for the year of $147 million on sales of $2.204 billion, compared with 1998 net earnings of $6 million on sales of $1.863 billion.With two warehouse stores (Mississauga/Erin Mills and Woodbridge) open in Toronto by the end of 1999, Revy's retail sales increased to $788 million on operating earnings of $37 million. This included a charge before tax of $7.6 million in the fourth quarter in connection with the announced closure of a big box in Surrey and two Revelstoke building centres in the Vancouver market this year. Toronto-area expansion will continue with the of stores at the city's former Stockyards in mid-April, the Golden Mile in Scarborough in June, and Mississauga Square One this fall. These will be followed by London (Spring 2001), then new 168,000-sq.ft. locations in Kitchener, Oshawa, Newmarket and Etobicoke. According to a report in The Toronto Star, Revy/Lansing president John Kitchen will not rule out selling the company to a competitor such as Réno-Dépôt.COMPANIES IN THE NEWSCameron Ashley Building Products Inc., already subject to an executive management takeover bid for US$15.10 per share last month, has had two more offers come in only one day apart. An unsolicited proposal from Guardian Industries for US$17 per share emerged last Friday, hot on the heels of another offer by one of Cameron Ashley's major shareholders, Barry Segal of Bradco Supply, an LBM distributor with 50 outlets in 12 U.S. states. Segal offered US$16.25 per share for up to 60% of CA stock. Guardian, however, says it has the cash available to make the deal, which could be worth upwards of US$1.5 billion. According to CA president Wally Muratori, the overture is "a serious offer, not a proposal," and not considered hostile. It is currently being reviewed by CA's board.The Lumber and Building Materials Association of Ontario has struck a deal with iLumber.com Corp. whereby iLumber's LumberSurplus.com unit will provide LBMAO members with an online surplus auction market for buying and selling excess inventory and closeouts. Check it out at www.LumberSurplus.com. Québec building materials retailer Matco Ravary Inc. achieved sales of $58.2 million for the fiscal year ended October 31, 1999, compared with $49.8 million in 1998, a 17 % increase. EBITDA rose 19.3 % to $3.7 million. Earnings before income taxes grew by 34.5% to reach $2.7 million, compared with $2.0 million for the previous fiscal year. Posted net earnings reached $1.6 million, up 28.9 % over $1.2 million in 1998. Home Depot Inc. intends to be the number one or number two retailer of appliances in the U.S. Stoves, ovens, refrigerators and dishwashers will be available in all of its stores by this summer. The roll-out will be backed by national advertising support. A test in about 50 stores has involved GE and Whirlpool appliances, but Depot stopped ordering from the latter company and is now negotiating with other suppliers, as well.Lowe's Cos. broke ground February 10 on a US$80 million regional distribution centre in Perris, Calif. The 1.25 million-sq.ft. facility will employ more than 600 and supply approximately 100 new stores Lowe's plans to open in California, Nevada and Arizona in the next three to four years. It is being built on a 112-acre site and is expected to open March 1, 2001. Sears Canada will take over the former K-Mart site on 99th Street in Grand Prairie, Alta., in April and plans to open by early fall. The new location has triple the space of its current Prairie Mall location, which will remain open at least until the end of this year.Camco Inc. reported earnings of $5.5 million for the year ended December 31, 1999, compared with $9.0 million in 1998. Total net sales grew from $565.3 million in 1998 to $638.3 million in 1999. iSolve.com, a new online business-to-business marketplace of new and used surplus inventory, underutilized assets and excess capacity, has announced a strategic alliance with Liquidation World, a Canadian liquidator of consumer goods which has 85 retail outlets across Canada and the U.S. iSolve.com will launch its website during the first quarter of 2000.CANADIAN STOCK WATCH
CANADIAN HARDWARE & HOUSEWARES MANUFACTURERS ASSOCIATION
* * * * * * *Time to build the sales team? Looking for agents or new lines? Want to announce new products or services? See our "Page Three Marketplace" at the bottom of this issue. Hardlines Classifieds get results fast. They cost only $16 per line for two weeks. Call Beverly at 416-489-3396, ext. 2, for more details. -- Michael This week in Hardlines:CASHWAY TAKEOVER WILL GIVE RONA GREATER PIECE OF ONTARIO MARKETRONA Inc. confirmed its purchase of Cashway Building Centres last week in a deal worth around $50 million. The move constitutes "a major step forward and a realization of RONA's expansion strategy," claims RONA chairman Henri Drouin. The deal adds Cashway's 61 stores and 1999 sales of $322 million to RONA's network of 424 stores, for combined estimated sales of $1.8 billion. Sales in Ontario will represent about $922 million, or 14% of that province's $7 billion hardware/home improvement market. RONA already has 33% of the Québec market.The Cashway stores will be renamed "RONA Cashway." Over the next five years, the company intends to convert them to dealer-owned status.The deal will be financed with current cash reserves and bank debt, says Drouin. All shares of Cashway, as well as shares belonging to Russel Metals Inc., and Cashway chairman and CEO Craig Graham, have moved into RONA's hands. Rick Blickstead, former head of Holt Renfrew, has been hired as president and COO of RONA's newly formed retail division to oversee its big box expansion plans. Cashway president and COO Jim Pybus becomes president of RONA Cashway, reporting directly to RONA president and CEO Robert Dutton. The Cashway buying team will remain intact, as will Cashway's distribution facilities in Port Hope, Ont.Besides the takeover, RONA has announced four new locations for its large-surface stores in Ontario: Brampton, Mississauga, Kingston and a second store in the Ottawa area. (A proposed site in Cambridge has been nixed.) All four stores are expected to open before year's end. They will likely be a hybrid of the L'éntrepôt (warehouse) stores and RONA's mini-big box Rénovateur Régional outlets. While the regional stores are typically about 65,000 sq.ft., the latest ones to go up in Québec have been closer to 95,000 sq.ft. These are expected to become the footprint for Ontario expansion.* * * * * * *HOWDEN PLANS AGGRESSIVE RATIONALIZATION OF BANNERSSodisco-Howden Group used the 100th birthday of its Howden division as a springboard to introduce a new look for its PRO banner and to accelerate its online presence.The new logo ties in with Sodisco-Howden's efforts to reduce the number of its banners from five, creating a network of 750 PRO dealers across the country. "We will be the largest group of independently owned hardware stores in Canada," said Tony Molluso, president and CEO of Sodisco-Howden Group, distinguishing between independents and co-op dealers. In Québec alone, where only 30 PRO stores exist, 250 dealers will be affected, all sporting new exterior signage by July of this year. About 55 home centres in nine provinces, operating under the Do-it center sign, are not expected to switch at this time. "We will maintain our Do-it banner as long as our dealers want it. We will upgrade it and support it," Molluso said.A print and television campaign worth upwards of $3 million will kick off the new program for consumers and run throughout the year 2000. The bilingual campaign, which will air nationally during the NHL playoffs and on TSN, will feature 30-second spots that promote the PRO store as a neighbourhood destination. Molluso anticipates heightened dealer interest as a result of the strengthening of the PRO banner. By the end of 2001, he predicts, 75-100 new dealers will have signed on to take advantage of enhancements such as 1,500-plus more private label products.Molluso simultaneously announced the creation of an electronic catalogue that will give dealers access to 76,000 SKUs online. Retailers who order from the catalogue will get their delivery within 24 to 72 hours. * * * * * * *HARDWARE SHOW HOSTS BUILDING MATERIALS FOR FIRST TIMEExhibitors had hoped for more retailers and retailers had expected more show specials, but otherwise the response to this year's Canadian Hardware and Building Materials Show was largely favourable. The show, held February 6-8, was the first to incorporate the Lumber & Building Materials Association of Ontario's Canadian Home Centre Show, which had traditionally run in November in Toronto. More than 700 companies filled 1,500 booths at the National Trade Centre in Toronto, attracting an estimated 20,000 delegates.Building materials dealers in particular were happy to see an increased showing of LBM products. "The show is improving each year," said Peter Turkstra, vice-president of Turkstra Lumber in Hamilton, Ont. "Next year, I'm going to ask my store managers to come, because it's worth the day. They should see the new products.""This is actually a perfect show," said Barrie Sali, chairman of Tim-BR-Marts in Vancouver. "We don't need Chicago with this show." He noted that the addition of the LBM, as well as the timing of the event, make it well suited for building supply dealers to attend in addition to regional shows such as the WRLA's Prairie Showcase.One of his members, Don Neufeld of J+H in Saskatoon, agrees. Accompanied by store manager Jonathon Pauls, he was on the lookout for hardware, especially décor products and specialty hardware. However, despite the addition of the more LBM exhibitors, Neufeld and other out-of-province delegates often found those booths staffed mainly by Ontario reps.For exhibitors, the show drew more LBM dealers than before, but not as many as some had hoped for from the combined show. "It's a little light," said Terry Davis, vice-president of information services and dealer development for Home Hardware Stores. "But," he added, "it provides great exposure and we got to see most of the players." Indeed, buyers were present in force. Revy, for example, had "all but one of our buyers at this show," said head buyer Larry Jarvis, and Federated Co-operatives of Saskatoon brought eight people. Even Menard's from the U.S. reportedly flew in a full contingent of buyers to the show.In addition, a number of groups organized dealer meetings around the show. Castle and Homecare both hosted events for their members, while I.L.D.C. held vendor meetings in Toronto during the week prior to the show. * * * * * * *REVY ANNOUNCES NEW STORES ON THE HEELS OF PARENT'S STRONGER YEAR ENDBacked by stronger earnings by its parent, Revy is accelerating its expansion in the Greater Toronto Area. West Fraser Timber Co. Ltd. reported that sales increased 15% in fiscal 1999, with net earnings for the year of $147 million on sales of $2.204 billion, compared with 1998 net earnings of $6 million on sales of $1.863 billion.With two warehouse stores (Mississauga/Erin Mills and Woodbridge) open in Toronto by the end of 1999, Revy's retail sales increased to $788 million on operating earnings of $37 million. This included a charge before tax of $7.6 million in the fourth quarter in connection with the announced closure of a big box in Surrey and two Revelstoke building centres in the Vancouver market this year. Toronto-area expansion will continue with the of stores at the city's former Stockyards in mid-April, the Golden Mile in Scarborough in June, and Mississauga Square One this fall. These will be followed by London (Spring 2001), then new 168,000-sq.ft. locations in Kitchener, Oshawa, Newmarket and Etobicoke. According to a report in The Toronto Star, Revy/Lansing president John Kitchen will not rule out selling the company to a competitor such as Réno-Dépôt.COMPANIES IN THE NEWSCameron Ashley Building Products Inc., already subject to an executive management takeover bid for US$15.10 per share last month, has had two more offers come in only one day apart. An unsolicited proposal from Guardian Industries for US$17 per share emerged last Friday, hot on the heels of another offer by one of Cameron Ashley's major shareholders, Barry Segal of Bradco Supply, an LBM distributor with 50 outlets in 12 U.S. states. Segal offered US$16.25 per share for up to 60% of CA stock. Guardian, however, says it has the cash available to make the deal, which could be worth upwards of US$1.5 billion. According to CA president Wally Muratori, the overture is "a serious offer, not a proposal," and not considered hostile. It is currently being reviewed by CA's board.The Lumber and Building Materials Association of Ontario has struck a deal with iLumber.com Corp. whereby iLumber's LumberSurplus.com unit will provide LBMAO members with an online surplus auction market for buying and selling excess inventory and closeouts. Check it out at www.LumberSurplus.com. Québec building materials retailer Matco Ravary Inc. achieved sales of $58.2 million for the fiscal year ended October 31, 1999, compared with $49.8 million in 1998, a 17 % increase. EBITDA rose 19.3 % to $3.7 million. Earnings before income taxes grew by 34.5% to reach $2.7 million, compared with $2.0 million for the previous fiscal year. Posted net earnings reached $1.6 million, up 28.9 % over $1.2 million in 1998. Home Depot Inc. intends to be the number one or number two retailer of appliances in the U.S. Stoves, ovens, refrigerators and dishwashers will be available in all of its stores by this summer. The roll-out will be backed by national advertising support. A test in about 50 stores has involved GE and Whirlpool appliances, but Depot stopped ordering from the latter company and is now negotiating with other suppliers, as well.Lowe's Cos. broke ground February 10 on a US$80 million regional distribution centre in Perris, Calif. The 1.25 million-sq.ft. facility will employ more than 600 and supply approximately 100 new stores Lowe's plans to open in California, Nevada and Arizona in the next three to four years. It is being built on a 112-acre site and is expected to open March 1, 2001. Sears Canada will take over the former K-Mart site on 99th Street in Grand Prairie, Alta., in April and plans to open by early fall. The new location has triple the space of its current Prairie Mall location, which will remain open at least until the end of this year.Camco Inc. reported earnings of $5.5 million for the year ended December 31, 1999, compared with $9.0 million in 1998. Total net sales grew from $565.3 million in 1998 to $638.3 million in 1999. iSolve.com, a new online business-to-business marketplace of new and used surplus inventory, underutilized assets and excess capacity, has announced a strategic alliance with Liquidation World, a Canadian liquidator of consumer goods which has 85 retail outlets across Canada and the U.S. iSolve.com will launch its website during the first quarter of 2000.CANADIAN STOCK WATCH