John Caulfield, Contributing Editor
 vol. x, #1 January 5, 2004

IN THIS ISSUE: * Home Depot takes over instore duties; reps upset * Wickes extends deadline, looks for cash * AHMA sues Reed Exhibitions over hardware shows * Stanley names interim chair * Home Depot still has stab at historic downtown site * Georgia Pacific combines divisions * New hardware wholesaler begins shipping * Cologne Show: special networking event for Hardlines subscribers * Home Depot tries Expo hybrid * Special report: consumers optimistic for 2004

* * * * * * Beginning with this issue, Hardlines combines its U.S. and Canadian editions into one. This means more news for all our subscribers, and makes Hardlines your best single source for keeping track of home improvement retailing in North America — and worldwide! NOTE: Dollar amounts will be stated in the currency of the country from which the story originates. — Michael McLarney, Editor & Publisher * * * * * *
"The journey of a thousand miles begins with a single step." — Chinese proverb
ATLANTA, GA — Walk into any Home Depot store any day of the week and you'll find a small army of service reps who replenish and tidy shelving, and track inventory levels. These reps are typically hired by suppliers and act on their behalf. But a pilot program launched by Home Depot in November finds Home Depot doing the hiring — while the vendors continue to pay for the service. Home Depot initiated this test program for its stores' electrical department. The retailer retains the service reps and the vendors whose products are being detailed must pay a fee to defray costs. While manufacturers have griped about how this new program didn't provide anywhere near the same level of service as vendor-managed programs, they have little choice but to comply, and it's likely Home Depot will expand the practice to other departments. This backlash against vendor-controlled rep groups has been building for nearly two years, ever since Lowe's Cos. CEO Bob Tillman publicly bewailed the fact that his company was shelling out upwards of $250 million per year on in-store reps. At that time, he stated that Lowe's was committed to reducing the number of rep organizations servicing its stores' plumbing and electrical departments from 22 to two.
TORONTO — Retail grocery giant Loblaw Cos. has backed away from a deal to take over the historic Maple Leaf Gardens and convert it to a complex that includes a Loblaw's Superstore. Loblaw claims the costs of converting the historic 72-year-old building are too great. The Gardens will now turn to the other companies that had vied for the property, including Home Depot Canada. Annette Verschuren, president of Home Depot's Canadian division, in an earlier interview with Hardlines, made clear her disappointment over not securing it the site, but Loblaw made the better offer. Bob Hunter, a spokesperson for Maple Leaf Gardens, says Loblaw was not scared off by the demands of Toronto's Historical Board in converting the historic art deco structure. "The only parameters are retaining the four walls, and the roof is included in that," he notes. The building, built during the Great Depression, was the home to the Toronto Maple Leafs, and entertainment including that Rolling Stones concert in 1974... (never mind the idle rock 'n roll reminisces — Editor). The Gardens site would have been an ideal location for a first "urban" type Home Depot store in this city of 3.5 million. "I really wanted that site," Verschuren told Hardlines. Home Depot will open its first urban store later this year, but across the country in Vancouver. Another site has been secured in Calgary. Home Depot already has urban stores in Chicago and New York. The urban store opening in Vancouver will be 50,000 sq.ft. with another 17,000 sq.ft. on a mezzanine level. The store sacrifices some floor space typically devoted to LBM, relying on neighboring full sized stores to make commodity deliveries to customers. It's scheduled to open sometime in the latter half of the year. Home Depot erected 13 stores in Canada in 2003; another 14 are scheduled to open in 2004.
VERNON HILLS, IL — In an effort to reconcile its debt load, Wickes Inc. has once again extended its deadline to convert outstanding senior subordinated notes for cash and/or new notes. This time, the offer has been extended to January 9, 2004, about a month past the original deadline. The building materials supplier wants to get at least 90% compliance to the conversion; so far it has just over 50%. The offer gives noteholders a choice of converting their current investment for 50 cents on the dollar plus another 25 cents on the dollar in the form of a new convertible note offering, or for cash amounting to 65 cents on the dollar. Wickes is currently in discussions with Imagine Investments, a major investor, and its lending syndicate led by Merrill Lynch Capital, regarding financing for the exchange offer if the company is unable to convert the $20 million in notes prior to the expiration date. "It is imperative for holders of our senior subordinated notes to act promptly on our exchange offer," said Wickes' CFO James Hopwood. He adds that the company is trying to figure out how to complete the exchange even if the needed amount of notes are not converted, in order to pay other creditors, namely non-tendering note holders, as lenders are unwilling to make more funds available. If the exchange offer can in fact be completed as planned, Wickes intends to make the required cash payments to tendering holders with funds borrowed from its lenders on a senior secured basis. In the event that the company were eventually liquidated in a bankruptcy proceeding, the asset values remaining for senior subordinated notes would be less than the liquidation value of the company.
Halifax, NS — AWARD Distribution Ltd., the partner of Groupe BMR in Quebec, has begun receiving shipments from the BMR warehouse in Longueuil, QC under a new company, Quincaillerie Matreco Hardware (QMH). The first shipment rolled out the week of December 29, and ADL, in turn, will begin sending product to its dealers commencing February 2. BMR's trucks started delivering hardware to the other QMH partner, TIM-BR Mart Ontario, earlier in December, on a direct-ship basis only. The AWARD buying group established a distribution facility of its own to serve its members throughout Atlantic Canada. AWARD has 67 members with 98 stores, and so far 55 have signed on to invest in the new DC, at a cost of $35,000 per member. However, says Tom Smith, president of AWARD, these dealers represent the largest members and the largest stores, including Chester Dawe Ltd., an eight-store chain in Newfoundland with sales of approximately $70 million. Smith is optimistic about the future of QMH. His group's DC has been renovated "on time and under budget," he says. And nine trucks have arrived in Halifax, the beginnings of ADL's own fleet. "It's a lot of work, but it represents a new world for our dealers. "
NEW BRITAIN, CT — Stanley Works has named John Opie as the interim chairman of its board of directors, as it continues to search for a permanent replacement for John Trani, who officially retired as Stanley's chairman and CEO on December 31. Opie, a former vice-chairman with General Electric (Trani came from there, too), has been on Stanley's board since 2000. The company's operations will be managed for the time being by two executives: Joseph D'Angelo, executive vice-president of the company's tool group; and Stanley's CFO, James Loree. Stanley has been searching for Trani's replacement since he disclosed his intention to retire last May. The currently interim appointments were disclosed only days after Stanley announced that it paid about $165 million to acquired Blick plc, a British-based supplier of security, communications and time management systems for healthcare facilities, with annual sales of about $120 million. Early last month, Stanley also sold its entry door business, headquartered in Charlotte, NC, to Toronto-based Masonite International Corp. for an estimated $160 million. At the time, Trani said that the door business, which generates about $200 million in annual sales, didn't fit into Stanley's business strategy, which now focuses on tools and "security solutions."
SPECIAL REPORT — Canadian retailers appear to have fared somewhat better than their U.S. counterparts during the holidays. According to Anthony Stokan, partner of consulting firm Anthony Russell and Associates, a positive new mood swept the economy just in time for the year's peak shopping season. Stokan's firm conducted its third annual holiday survey for Yorkdale Shopping Centre, a major retail complex in Toronto, polling 250 female customers. More than one-third of respondents (36%) said they planned to spend more on gifts than in 2002. However, while spending is up, practicality is a key focus for the holidays, with a discerning eye for bargains and a preference for practical gifts over luxurious ones. Popular gifts included gift certificates and items for the home. Almost half of respondents (48%) indicated they would enhance the interiors of their homes in preparation for holiday entertaining with changes such as new paint, wallpaper, window treatments and furniture. When asked to estimate their holiday spending this season, on average, 35% claimed they intended to spend more than $1,000, up from 27% of respondents in the 2002 survey. Almost half said they would spend between $500 and $1,000 on gifts. Confidence in the economy for the New Year is strong, with 90% of those surveyed indicating that they are somewhat to very confident in Canada's economic prospects for 2004.
COLOGNE, GERMANY — Koelnmesse is expecting over 3,500 suppliers from almost 60 countries to its next International Hardware Fair/ Practical World, which will be held here March 14-17, 2004. This year's event will reflect some changes, and anticipate others that will be rolled out in the following year's show. The show will be organized under three themes, virtually three shows in one. The sectors are Tools, along with Security, Locks and Fittings and finally, the building materials component, Home Improvement/DIY. The fair will cover a total exhibition area of 255,000 square meters, comprising nearly the entire Cologne exhibition grounds. North Americans joining the show, either as vendors or buyers, will have a number of opportunities to gather and network with potential customers and suppliers. The fourth annual Canada Night Reception, hosted by Hardlines and sponsored by the show, will be open to all North Americans — and all faithful Hardlines subscribers. The Reception will be held March 14, adjacent to the Fair grounds themselves. (We'll provide more info on this exciting event in the weeks to come — Michael)
ATLANTA — Georgia Pacific has combined its industrial wood products group with its structural panels and lumber units. That move, effective January 1, creates a new wood products division within the company.Over the past few years, G-P's lumber and building materials manufacturing and distribution have been in constant states of flux. Last September, the company announced that it was considering several strategic options, including a possible sell off of its 63-branch, $3.8 billion wholesale building materials division. In 2001, the company took a $93 million charge against earnings to cover the cost of closing several building products plants in response to weak market conditions. Building materials manufacturing accounted for 22% of G-P's total sales in 2002 and 38.9% of its total operating income that year. Prior to its decision to combine several of the division's business units, it had been broken down into five segments: structural panels: In 2002, G-P was North America's largest producer of structural panels. This unit's 20 plants produced 8.7 billion sq.ft. of panels, which represented nearly 20% of the market's panel capacity that year; industrial woods: In 2002, G-P was the largest producer of industrial wood panels and the fourth-largest producer of hardwood plywood in North America. This unit produced 1.4 billion square feet of panels that year, or 17% of the market share. It also produced 35% of the particleboard substrate flooring made in North America. Lumber: G-P is the fourth-largest producer of lumber in North America. This unit's 33 mills had the capacity to produce 2.5 billion board feet annually, or 4% of North America's lumber production. The division's two other business units, gypsum products and chemicals, will be kept separate from the wood products group. The new wood products unit will led by executive vp Ronnie Paul. Elliott Savage, president of the industrial wood products, will become senior vp of wood product sales reporting to Paul.
We're starting to get a lot of inquiries here at the World Headquarters about the shows this year. Undoubtedly, Practical World 2004, the Cologne International Hardware Fair/DIY'TEC, is a must-attend for North American vendors who want to find new product and packaging ideas and, of course new customers. Buyers go in droves to find new sources of supply and new strategic alliances.For more information in Canada, contact Barbara Hills, , 416.598.3343, or Beverly Allen here at Hardlines, In the US, contact Mette Petersen, , (773) 326-9920. For travel arrangements, contact Carol-Anne Itel at Trade Show Travel, 877.873.7469;
Canadian Tire 42.60 27.85 39.65
Canfor 11.68 7.60 11.22
Costco 39.02 27.00 36.32
Goodfellow 14.75 9.75 14.50
Home Depot 37.89 20.10 35.02
Hudson's Bay 12.97 7.75 11.38
Lowe's Cos. 60.42 33.37 53.90
Rona Inc. 31.20 11.75 31.08
Sears Canada 21.50 13.60 16.06
Sodisco-Howden 3.35 1.30 2.90
Taiga Forest 8.10 6.28 7.40
Wal-Mart 60.20 46.25 52.30
West Fraser 39.05 29.25 37.60
SPECIAL REPORT — Retailers have always had a love-hate relationship with vendors' service reps. On one hand, they have become essential for relieving store employees of such chores as shelf replenishment and housekeeping. Reps help dealers minimize stock outs and, in the case of warehouse home centers, keep shelf pricing current. But these service reps work for suppliers and their responsibilities and allegiances aren't always in sync with the dealers whose stores they roam. The antipathy towards service reps is hardly a new phenomenon. Builders Square, the now-defunct warehouse home improvement dealer, caused a stir in the 1980s when it started pushing service reps out of its stores. But when Wal-Mart made similar moves and began questioning the value of reps in general, it became clear to vendors and dealers alike that their relationships were entering a new era. One factor that may have caused this sea change could be the propensity of large dealers to season their inventory mixes with proprietary and private labelled merchandise, much of it imported. Dealers need to hire their own service reps to maintain departments that feature these products, which in some cases makes redundant what vendors' service reps are doing in their stores. That dealers want more control over this maintenance, and its costs, isn't surprising.
SPECIAL REPORT — The shift by large-format retailers away from third-party, in-store product maintenance isn't always confined to retailers. In 2001, Newell Rubbermaid, in an effort to reduce its overall operating costs by 5% per year, launched the "Phoenix" program, in which the company hired about 500 recent college graduates to handle in-store setups, product demonstrations, event marketing, and on-shelf merchandising. In its annual report, Newell Rubbermaid said this initiative "allows the company to enhance product placement and minimize stock outages and... maximize shelf space potential," with those retailers Newell has identified as its most important partners, specifically Home Depot and Lowe's. These college grads, in essence, replaced the rep organizations that Newell had been using to service its retail accounts. The Phoenix program is still in place, according to Newell's latest documentation. In fact, the company attributed the increase in its SG&A costs through the first nine months of 2003 partly to "investments" it made in its Phoenix and Strategic Partners programs. Whether Phoenix has had any meaningful impact on Newell's profitability, however, is hard to gauge because the company is still struggling. Through nine months, it took a $166 million restructuring charge against pre-tax income, so it's still in the process of trying to reduce costs.
CHICAGO — The American Hardware Manufacturers Association has filed a lawsuit against Reed Elsevier Inc., which owns and operates the National Hardware Show being held this year in Las Vegas. According to the Chicago Tribune, the AHMA alleges that Reed defrauded it and damaged its reputation with trade show exhibitors. Both companies were once partners in mounting the show in Chicago, but went their separate ways following the show in August 2003. With NHS moving to Las Vegas, the AHMA is mounting its own show — and staying in Chicago. The two sides have been competing for credibility — and exhibitors — within the industry ever since. The suit, which accuses Reed of hiding revenues during their partnership and now overstating exhibitor interest in its Las Vegas show, seeks $10 million in damages. BREA, CA — Home Depot has added a number of elements from its Expo store format to a couple of traditional stores in Southern California. In place of warehouse style racking, the front of the stores are dominated by showrooms for kitchen and bathroom, carpet and rugs, etc. Commodity items and hardware are relegated to the back. While the company denies the emergence of a new format, Home Depot has been searching for ways to make its upscale Expo concept more viable, and this may become one answer. ATLANTA — Lowe's will build its first store within the Atlanta city limits. The 116,000-sq.ft. outlet will be in the Edgewood Retail District on Moreland Avenue near DeKalb Avenue. The store is slated to open in 3Q 2004. Lowe's already has 23 stores in the greater Atlanta area. STOCKHOLM, Sweden — Assa Abloy has received regulatory approval to acquire Nemef BV in the Netherlands and Corbin Srl in Italy from Black & Decker. The previously announced deal is expected to close tomorrow and is valued at 66 million euros.

The Worldwide DIY Council has elected its new officers and directors for the coming year: Betty Perez-Koukounaras, H. D. Hudson Manufacturing, Chicago, has been elected chair... Jim Ness, Meter-Man Inc., Winnebago, MN, is now vice-chair... New directors are Dale Fortenberry Jr., AccuSharp International, Marble Falls, TX; and Sandra Pierce, Mr. Longarm Inc., Greenwood, MO... Ian Wallace of Better Living Products, retiring chair, becomes ex officio director for the coming year... Tom Delph continues as executive secretary.

Tracy Fellows has been named vice-president consumer marketing and advertising for Canadian Tire Retail. Formerly director of advertising, Fellows replaces Eymbert Vaandering, who has left the company. Sylvain Toutant, who left the helm of Réno-Dépôt Inc. just four months ago to head up Les Boutiques San Francisco Inc., has resigned as president, CEO and a director of the insolvent apparel retailer. He had been president and CEO of Réno-Dépôt until it was sold to Rona Inc. Les Boutiques San Francisco filed for court protection from creditors on December 17.

Home sales fell 2.4% to 1.082 million seasonally adjusted in the third quarter, according to the Commerce Department. The economy overall was buoyant, with real gross domestic product up at an annual rate of 8.2% in the third quarter of 2003. That's the best advance in 20 years, says the Commerce Department, and follows a 3.1% growth rate in the previous quarter. However, GDP is expected to grow in the fourth quarter by about 4%, half the rate of 3Q. For the third quarter, consumer spending reached a rate of 6.9%, the best showing since the third quarter of 1986.


Retail sales were up only 0.2% to $26.4 billion in October as consumer spending remained weak in several sectors, says Statistics Canada. Lower gasoline prices made an impact, while retailers of big ticket items such as automotive, household furniture and appliances, as well as general merchandisers, clothing stores and drug stores, posted essentially flat sales. Cumulative retail sales for the first ten months of 2003 were up 3.5%, a much weaker performance than the 6.4% growth observed in the same period of 2002.

Wholesale sales remained essentially unchanged in October, down only 0.1%, during which time wholesalers sold $36.6 billion worth of goods and services, says Statistics Canada. This followed a strong 6.4% rebound in wholesale sales in September. Compared with the same period in 2002, wholesale sales have increased 3.1% during the first ten months of 2003.The largest gains were in the computer and electronic equipment sector (+3.4%), while lumber and building materials were down 3.7%.

"It's not a price war out there any more. It's a service war." — Robert Dutton, president and CEO of Rona Inc., Canada's number-two home improvement retailer. He's just one of the retail leaders giving their take on the challenges in the year ahead. Read it in the upcoming issue of our sister publication, Hardlines Quarterly Report.


• Cologne International Hardware Fair/DIY'Tec, March 14-17 (including the Amazing Hardlines Canada Night Reception, kindly sponsored by Koelnmesse);

• Our mind-blowing Meet the Buyers Seminar on April 28; • International Hardware Trends, two seminars by Hardlines at the National Hardware Show in Las Vegas, May 10-13; • The Hardlines Conference Series, September 8-9, including the Hardlines Gala Dinner on the evening of September 8.

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NATIONAL ACCOUNTS MANAGER As a major North American manufacturer of tools and equipment, Porter-Cable/Delta is committed to quality in the products and services it provides. Contribute your talents as: NATIONAL ACCOUNTS MANAGER A hands-on and innovative professional who interacts at all levels, you'll prepare product proposals, price quotations, and promotional offerings for assigned accounts. You will plan, budget, and organize promotional advertising, shows, training, and demonstrations, and forecast sales volumes. Customer focused and a superb communicator, you have 5 years' related experience, a Business/Economics degree, and a valid driver's license. Ideally, you have a supervisory background, product and technical expertise, and knowledge of AS/400 applications and PC's. Bilingualism (French & English) and a willingness to travel 4-7 days per month are required. We thank all applicants in advance and advise that only those invited for an interview will be contacted. Please send your resume to: Human Resources, Porter-Cable / Delta, P.O. Box 848, Guelph, Ontario N1H 6M7 Fax (519) 836-9303;


SALES & MARKETING REPRESENTATIVE, EASTERN ONTARIO/WEST QUEBEC Wood specialty Products - Flooring Division Goodfellow Inc., a leading Canadian Wholesale Distributor / Manufacturer CANDIDATES SHOULD BE: -Sales and marketing oriented; -Self motivated and require little supervision -Well organized and disciplined -Willing to transfer to other Canadian Divisions -Preferably bilingual (French / English) but not a prime requirement BENEFITS include Salary and profit sharing; Full company program (medical/dental/pension) Our company offers very good opportunities for advancement and promotion. Please send resume to: Branch Manager, Goodfellow Inc, Ottawa; Email: or fax at: (613) 244-0488

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