|TRUSERV LIFTS MORATORIUM ON STOCK REDEMPTIONS
|CHICAGO — TruServ Corp. announced that it's going to lift a moratorium on dealers' stock redemptions tomorrow, effectively putting the company's major financial woes behind it.The July 6 date for the moratorium was originally a conditional one, but thanks to what the company refers to as "improving financial conditions," TruServ's board of directors voted to resume redemptions to dealer shareholders, concluding that the capital of the corporation is no longer impaired. Since March 2000, TruServ had suspended the redemption of all stock investments of shareholders who chose to leave the dealer-owned co-op following significant financial losses in 1999.
For ex-dealers wishing to cash out, the stock investments will be redeemed on the basis of 25% in cash, with the remainder being released on a deferred stock redemption basis, with the first instalment payable in cash in December 2004. As of May 29, 2004, the deferred stock redemption liability totaled $36 million, of which approximately $8 million is payable in cash and the remainder is payable in the form of the instalment note.
During the period since March 1999, no stock was issued to new members joining the co-op, either. However, earlier in the year, TruServ resumed issuing stock to new members, as well. The resumption of stock issuance to new members followed the Securities and Exchange Commission's declaration, effective April 30, that TruServ could once again issue its class A stock to new members.
TruServ's wholesale sales in 2003 reached $2 billion, while sales at retail by all its 6,100 independent members topped an estimated $11 billion.
|LANOGA IN LINE TO ACQUIRE 27 MORE WICKES LUMBERS
|REDMOND, Wash. — Lanoga Corp. is one of three building material distributors that are leading candidates to acquire 50 of 57 remaining Wickes Lumber yards and component facilities throughout the United States, the last vestiges of what was once one of the largest pro dealer chains in the country.Wickes' creditors have retained investment banker Houlihan Lokey Howard & Zukin to manage the sale of that pro dealer's 57 remaining yards and component plants. Through a bidding process, the creditors have granted "stalking horse" or proprietary status to three companies — Lanoga; Avenel, N.J.-based Bradco Supply; and Broken Arrow, Okla.-based Hope Lumber & Supply — to purchase all but a handful of those units.
Paul Hylbert, Lanoga's president and CEO, told Hardlines that his company — which in early 2003 acquired from Wickes 31 yards and four component plants in Wisconsin and Michigan — has agreed to purchase another 27 Wickes yards and component plants in Illinois, Michigan, Indiana, Ohio and Kentucky. Hylbert said that Bradco is the lead bidder for 12 sites in the Northeastern U.S., and that Hope will purchase another 11 yards in the southern U.S. and in Colorado. Smaller companies are expected to bid on the remaining seven Wickes properties.
The sales are subject to bankruptcy court approval and to an auction, where other interested parties can bid for these properties. If all goes as planned, the bidding process will conclude in late July.
Hylbert pointed out that the liquidation of the 59 yards and plants is expected to fetch at least $129 million, which compares favorably to their aggregate $121 million book value. "That only goes to show that Wickes' problems were never its locations," said Hylbert, "but the focus of their management."
Lanoga is the 10th-largest home improvement retailer/distributor in the U.S. based on its sales in 2003. Bradco ranked 16th, and Hope 21st, on Home Channel News' Top 500 listing for that year.
|AS BIG BOXES DOWNSIZE, CANADIAN TIRE THINKS BIG
|TORONTO — As big boxes attempt to infill existing markets and penetrate new, smaller ones, they're using smaller stores to match the markets. While the move is a deliberate one in Canada, it's being mirrored, to a lesser degree, in the U.S. as well. And Home Depot is not alone: its biggest rival, Lowe's Cos., is also trying out the smaller sized stores.Even Rona Inc., one of Canada's top three home improvement retailers, which is already well entrenched in a variety of store sizes and formats, has developed new programs for traditional sized stores. These formats, under the Rona Home Centre and Rona Building Centre banners, are being developed along with Rona's own big box Home & Garden stores.
Lowe's has made a big commitment to smaller concept stores, and up to 40% of the 140 new store openings this year are expected to be smaller sized outlets.
But one retailer is bucking the trend. Canadian Tire Corp. has had some initial, positive results with large stores, and the latest 90,000-sq.ft. outlet in Kingston has been a dramatic success, says Mark Foote, president of Canadian Tire Retail. The stores represent the company's newest retail format, 20/20, which reduces storage space in favor of more retail space, with added emphasis on products that appeal to the entire family, including women.
In an exclusive interview with Hardlines, Foote revealed his enthusiasm for the larger formats. In fact, he added, another store, weighing in at more than 100,000 sq.ft., is currently being developed. "The bigger stores are definitely working for us," he says.
At Home Depot, the challenge is to reinvent the stock big box footprint to widen its market penetration. In Canada, Home Depot's key competitor is Rona, which has mastered operating stores in a variety of formats, from local hardware stores to full-sized big boxes. In the U.S., Home Depot's attempts to grow its contractor business find it toe-to-toe with a number of strong building center chains, which drive a lot of product out of relatively few square feet of retail space.
"The move to smaller stores is not as aggressive in the U.S., but the company is using smaller stores for fill-in markets," says Nick Cowling, PR manager at Home Depot's Canadian division. " They'll put them in where they already have a heavy concentration of stores or where there is less population. For example, Home Depot's been trying to get a store into Martha's Vineyard, and if it's going to happen, they'd have to put in smaller store," says Cowling.
Home Depot in Canada has also begun building smaller versions of the chain's traditional store, including a 70,000-sq.ft. one in Grande Prairie, Alta., the retailer's smallest store to date. The previously announced inner city location at Toronto's Gerrard Square will be an 'urban" format, the second such store for Canada.
|SEARS WILL GROW 10% WITH KMART, WAL-MART ACQUISITIONS
|HOFFMAN ESTATES, Ill. — In a store expansion move that rivals its acquisition of Orchard Supply Hardware in the mid 1990s, Sears will pay $620 million in cash to acquire 54 former Kmarts, in a deal that includes their real estate and store fixtures. Sears has also negotiated to take over seven former Wal-Mart stores, for which it will make lease payments to that retail giant."These transactions will jump-start our strategy to grow the Sears brand off-mall, increase our points of distribution, and acquire well-located real estate at a fair value in key markets for Sears," said chairman and CEO Alan Lacy. "The acquisitions will allow us to quickly open more stores and significantly boost our off-mall retail presence in priority markets that have synergies with our existing mall-based stores."
Sears' spokesman Ted McDougal told Hardlines that this is the first time "in close to a generation" that his company is planning to expand at such an accelerated pace. "We've been stuck at 870 [full-line department] stores for more than two decades, but next year alone we'll open 70 stores and increase our footprint 10%. That's really unprecedented for us."
The retailer will take possession of four of the stores it is acquiring this year, 55 next year, and two in 2006. Three of the four Kmarts it brings on board this year will be converted to the company's Sears Grand format, which includes apparel, home appliances, home electronics, home improvement and home fashions, plus consumables and transactional items, including a pharmacy in certain locations. Sears expects to open a total of seven Grand outlets in 2004, and between 12 and 14 in 2005.
North of the border, Sears Canada Inc. is developing an off-mall strategy of its own. These outlets will be specialty stores that focus on home décor and accessories. Six locations have been announced so far, all in Southern Ontario. Sears Canada plans to open 30 new-format stores by the end of 2005, located primarily in power centers and high-traffic strip malls.
|HOME HARDWARE LAUNCHES ONLINE CATALOGUE
|ST. JACOBS, Ont. — Home Hardware Stores Ltd. has entered the fray of online ordering with the introduction of a fully-interactive online catalogue. The online service offers access to 5,000 items currently available in Home Hardware's print catalogue, plus an additional 50,000 items available through member retailers' stores on special order."We're always looking for new ways to connect with our customers," said Bruce Shuh, director of marketing at Home Hardware Stores. "With the launch of our online catalogue, customers not only have a helpful Home Hardware dealer around the corner, they also have 24-hour access to Home Hardware's warehouse full of home improvement products."
The website offers catalogues in both English and French.
|HUDSON' BAY LEADS WAY ON ETHICAL SOURCING
|NEW YORK — I remember sitting at the AGM of Hudson's Bay Co. a couple of years ago when a shareholder challenged HBC president and CEO George Heller. She wanted reassurance that the products the company, which has more than 500 stores under the Bay, Zellers and Home Outfitters banners, was sourcing from Third World countries were not benefiting from abusive labor conditions.Heller was way ahead of her.
He already had a committee in place to develop and ensure protocols, and last week he shared some of the progress Hbc has made. Speaking at the United Nations Global Compact Leaders Summit here, Heller shared the results of his successful effort to engage international retail executives on the issue of ethical sourcing. He urged the 400-plus executives attending the summit to seek solutions to social issues within their industries through involvement in the Global Compact.
"After two years of work, the global retail community is on the verge of coming together to make substantial improvements in the programs that monitor compliance to labor and human rights in our supply chains," Heller told the group.
The challenge was to engage companies at the CEO level. In the retail sector, Hbc leveraged its profile in the international retail community and the reputation of the UN, to engage other retail CEOs. This led to a dialogue on the need for an aligned industry approach to enhance the practices of individual companies through cooperation and information sharing.
Heller offered some concrete results at the Summit. "Independently, major retailers around the world have adopted almost identical auditing programs to verify that suppliers are complying with virtually common codes of conduct that are based on ILO principles," he said. These have resulted in a proliferation of third party compliance auditing firms, which audit complaints from manufacturers.
"Three objectives are at the core of our initiative: a common vendor code of conduct; a common standard for auditing on which we can rely; and, a common, accurate data base we can share," Heller added. He has been speaking personally with more than 70 other CEOs from around the world to ensure the initiatives move forward.
Now, the industry is only months away from realizing two programs: a North American program led by the National Retail Federation in Washington, and a European program led by the Business Social Compliance Initiative, based in Brussels.
|COMPANIES IN THE NEWS
|NEW YORK — In amidst the medical, health services and high-tech companies on this year's Fortune 100 list of fastest growing small companies, Waters Instruments has made the cut at the number 78 spot. The Zareba Systems division makes electric fencing for animal controls.
TORONTO — Canadian Tire Financial Services and BMO Bank of Montreal have partnered to launch a credit card for business customers. The new card, called Canadian Tire Commercial Link MasterCard, is designed for businesses that require a credit card to pay for their purchases. It will be available everywhere MasterCard is accepted, including Canadian Tire stores and gas bars. The new commercial card will replace the current Canadian Tire Business Class Commercial Card as of July 28, 2004. More than 50,000 people are active Canadian Tire business customers.
SHERBROOKE, Que. — Touch Industries moved into a new headquarters and distribution center here recently. The company invested $2.5 million in the 25,000-sq.ft. building in Sherbrooke's industrial park.
KITCHENER, Ont. — Rona Inc. opened its 64th big-box store last week, a $20 million-plus investment that will operate under the Rona Home & Garden banner. The store features 120,000 sq.ft. of retail space, including a 4,000-sq.ft. greenhouse and 31,000-sq.ft. garden center. A Home Depot will open in Kitchener at the end of August.
|PEOPLE ON THE MOVE
|Bill Kushlick has left Weiser Lock Canada, based in Vancouver, where he held the position of president. Weiser was bought by Black & Decker late last year. (He can be reached at 604-315-6056)At Do it Best Corp., Jay Brown joins the buying co-op as vice-president of hardware products, effective July 6. With more than 20 years of retail home improvement experience, Brown served most recently as senior general manager, consumer brands for Valspar Corp. ... Michael Zadylak has been promoted to the position of global sourcing specialist in Do it Best's import purchasing area. Zadylak joined the company in October 1996 as an assistant retail product manager, and served most recently as the co-op's hand tool product manager. He reports to Steve Markley, Do it Best's import/export merchandise manager ... Dustin Kaehr has joined Do it Best as retail program development coordinator in the company's marketing department. He comes over from Berne Apparel, where he was marketing manager.
|U.S. MARKET INDICATORS:
|May construction was valued at $988.5 billion, up 0.3% from April and up year-over-year 9.7% from May 2003. Residential construction was $539.9 billion, up 0.8% from April and up 15.3% from one year ago.Consumer confidence rose surged to a 22-month high in June as the Conference Board's consumer confidence index rose to 101.9, up from 93.1 in May. Strong consumer confidence is seen as a key factor in the economic recovery.
|NETWORKING EVENTS BIG DRAW AT CONFERENCE
|TORONTO — For the first time in its nine-year history, the Hardlines Conference Series will play host to Canada's most prestigious retailer awards. The Outstanding Retail Awards, developed and presented by the industry publication Hardware Merchandising, will be presented during a special ORA luncheon on the first day of the the Hardlines Conference Series, September 8, 2004.The ORA luncheon exemplifies just one of the many ways the two-day conference event will provide valuable networking time for executives, buyers and managers in North America's retail home improvement industry. The full conference runs September 8-9, 2004 at the Renaissance Airport Hotel in Toronto.
In recent years, more and more retail groups are choosing to use the Conference as a site for tying in meetings of their own, as more than 200 managers and senior executives from both the retail and vendor sides of the industry gather to hear the latest industry intelligence, plus attend sessions by some of the top home improvement executives from around the world.
The networking time takes on a greater dimension with the inclusion, for the second year running, of a Gala Reception and Dinner on the evening of September 8. Commitments for tables at the Gala have come in from the likes of Home Depot, Rona, Sodisco-Howden Group and TSC Stores, guaranteeing that it will be a first-class forum for networking. In addition, comedian Red Green will be featured at the Gala, courtesy of 3M Canada.
(If you want more information on setting up meetings during the Conference, give us a call. We'll provide special rates on rooms — and the coffee's on us. Call 416-489-3396 for more info.—Michael)