John Caulfield, Contributing Editor
vol. xi, #30, July 25, 2005

IN THIS ISSUE: • RONA: another good reason for Olympic sponsorship • Home Hardware: another store design package gains ground • Home Depot: another acquisition • U.S. housing market: another bubble waiting to burst? • Lowe’s: another DC expansion • Power tools: another healthy year of growth * * * * * *

“Ideas shape the course of history.” John Maynard KeynesMignon McLaughlin (U.S. writer and humorist)
PETERBOROUGH, Ont. A new look for Home Hardware dealers is materializing at a new store in this town in Central Ontario. The concept, called “Build a Better Home Store,” was designed for Home by Watt International. It’s getting a full promotional push, complete with a “hard hat tour” today, that provides a sneak preview of the innovations the new look will bring when the store opens its doors on Aug. 4, 2005.Terry Jenkins, himself a former area rep for Home Hardware, has partnered with co-owners Steve Hynane, Harry Morrison, Jim Adams and Bill Gillam in this ground-up store that will bear the name Chemong Home Hardware Building Centre. Only the second store so far to adopt the new look (Magnetic Hill Home Hardware Building Centre in Moncton, N.B. was the first store in Canada to feature the new Build A Better Home Store concept), Chemong Home Hardware Building Centre features a 25,000-sq.ft. retail store and 25,000-sq.ft. LBM warehouse, complete with paved lumberyard, making it the largest real estate project Home Hardware has ever undertaken. The store, which is designed to cater to both contractors and DIYers, will feature Home’s enhanced kitchenwares department, Home Expressions, which includes products from home décor, housewares, kitchen and bath, lighting and storage solutions categories, all designed to enhance the home. The new store will also feature a full-sized house built and displayed inside the store. Customers can walk through this “ideas house” to check out product demos and learn about different construction methods and techniques. The ideas house will feature door and window displays, siding and roofing materials, and will showcase five different kitchen displays. And taking a page from the big box book, there’s even a Coffee Time coffee shop right inside the store. The comprehensive store package, the first for Home Hardware since 1996, was developed as more than just a décor package. The outside of the store has been brightened up, as greys are replaced by blacks and reds, and the entrance more clearly marked by bold signage overhead. Inside, the store will be warmed up with softer colours, such as sandstone coloured tiles on the floor, and cleaner colours on the walls, to replace the existing reds and whites. Other amenities include department signs, banner kits that hang from the ceiling, and even curved edges on much of the fixturing, all aimed at appealing more strongly to the female shopper.
BOUCHERVILLE, Que. RONA inc. has invested big in its sponsorship of everything from reality shows to Canadian sports. It’s part of the company’s effort to affirm its brand as a leading Canadian-owned retailer. As “official home improvement retailer” for the Canadian Football League, RONA has secured a two-year multi-million dollar deal that includes all nine clubs during the pre-season and regular season. The most visible exposure for Rona will be on the team uniforms. All CFL players from the nine member clubs will wear a Rona jersey patch during every CFL game in the pre-season and regular season. But the jewel in RONA’s promotional crown is its involvement in the 2010 Olympic and Paralympic Winter Games. The eight-year partnership comprises sponsorship rights for the Canadian Olympic Team for the Torino in 2006, Beijing in 2008, Vancouver in 2010 and 2012 Olympic Games, recently announced for London, England. “Number one, we are a sports-minded company,” says Michael Brossard, senior vice-president, marketing and development for RONA. That proclivity has its upside, he adds. “When you’re in a stadium, you’re surrounded by DIYers.” But the privilege didn’t come cheap. Rona bid aggressively to get the sponsorship from Home Depot, in a deal valued at $68 million. However, Brossard says it was worth it, not only for the exposure it gives RONA, reinforcing its position as an all-Canadian company, but for the message it sends to RONA’s own dealers and staff across the country. After growing aggressively, largely through acquisition, over the past five years, RONA represents a disparate workforce that includes Cashway, Lansing Buildall and Revy. Brossard sees the Olympic sponsorship as a unifying force – something every member of the RONA team can be proud of. “This is really going to be the glue that links our company together,” he notes.
ATLANTA — Home Depot added to its supply network for commercial accounts this week by agreeing to acquire National Waterworks, the largest distributor in the United States of products used to build, repair and maintain water and wastewater transmission systems. The deal firmly secures Home Depot’s position in an $11 billion market, of which National Waterworks controls 14%. The products it distributes include pipes, fittings, valves, meters, fire hydrants, as well as service and repair components.In a prepared statement, Depot said that Waco, Tex.-based National Waterworks has more than 130 branches in 36 states, which sell directly to municipalities and contractors. For the fiscal year ended December 31, 2004, the company had net sales of $1.5 billion. National is principally owned by JPMorgan Partners and Thomas H. Lee Partners L.P., which bought the company three years ago. Terms of the acquisition were not disclosed. Home Depot will operate National Waterworks through its Home Depot Supply division, to which it recently added through acquisitions on both sides of the border. In the U.S. it bought Utility Supply of America – USABlueBook – is a national catalogue distributor of maintenance, repair and operations supplies to the water and wastewater treatment industry. In addition, just two weeks ago, it announced the purchase of Brafasco, an industrial supplier of fasteners to the manufacturing and construction markets, which has 21 branches in Southern Ontario and three in the United States.
SPECIAL REPORT Last week, the U.S. Commerce Department announced that single-family home starts fell by 2.5% in June, to an annualized rate of 1.667 million units. Some shrugged this off as a temporary interval while builders sold off of their backlogs, which rose to a 26-year high in June. But the dip provided more evidence for those industry watchers who say the housing boom, which has lasted for more than a decade, is finally subsiding.The National Association of Realtors estimates that home sales will increase 2.8% to 6.97 million units in 2005. But this sector continues to send out confusing, even contradictory signals. Newsday reported last week that, while the median price of a home on Long Island, N.Y., rose by 13% to $429,000 in June, the number of unsold homes on the island increased 22% to 19,120 units. Nationwide, prices rose, on average, 12.5% during the year ended March 2005, according to an index calculated by the Office of Federal Housing Enterprise Oversight. The Federal Deposit Insurance Corp. found that, over the past three years, 55 markets had inflation-adjusted price appreciation of 30% or more. And prices are still rising in many markets, especially in California, where fewer than one in nine households could afford a median priced home – the price tag of which exceeded $522,000 in June. NAR said recently that home prices would probably rise 9.4% this year, the fastest pace in a quarter century. The group said it expects the median price of an existing home to rise to $202,600 this year from $185,200 in 2004. Most economists and analysts see a “bubblish” market, in which prices are especially volatile where development is constrained by zoning or environmental laws. Prices in some markets are being pumped up artificially by speculators “flipping” homes for profit within a few months of their purchase. But Mark Vitner, senior economist for Wachovia’s Economics Group, explains that the housing boom is almost always a function of larger market fundamentals. He notes that over the past two decades, the U.S. population increased by 57 million people, three-quarters of whom reside in the 15 states under the greatest price appreciation pressure. Vitner also notes that “there’s absolutely no supply out there,” and estimates that of the 440,000 homes on the market nationwide in April 2005, 22.7% hadn’t been completed and 20% hadn’t been started. Builders say they are already see a leveling off of price appreciation in overheated markets like San Diego, where home prices in May rose by 7.5%, the first time in six years that market’s prices increased by only single digits. Other industry watchers also think some markets — like Miami, where an estimated 18,565 condominiums will be added this year alone — have finally gotten too far ahead of reasonable demand expectations. Of greater concern has been FDIC’s finding that, in 38 of 50 states, income growth hasn’t kept pace with home price escalation. Consequently, buyers are turning in greater numbers to mortgage instruments that require little or no down payments and are far more flexible in their equity terms and payout schedules. Adjustable-rate mortgages accounted for 46% of new mortgages and 37% of applications last year, vs. 29% and 19%, respectively, in 2003.
CLEVELAND — The worldwide demand for power tools is projected to increase annually by 5% through 2009, according to estimates by The Freedonia Group, a market research firm based here. That growth would bring worldwide shipments to $29 billion, and the growth rate would represent a considerable improvement over the 1999-2004 period.Freedonia views China as providing the greatest potential for tool makers. The Chinese market quadrupled its purchases of power tools between 1994 and 2004, during which it surpassed the shipments sent to Germany or Japan. Freedonia estimates that tool shipments to China will surpass those sent to the United States by 2010. Cordless electric tool shipments are expected to grow, on average, by 8.7% annually through 2009, and gains in consumer demand should slightly outpace those of professional users.
NEW BRITAIN, Conn. — Stanley Works has made a cash offer to purchase Paris, France-based Facom Tools, a leading supplier of industrial hand tools in Europe, from its parent Fimalac for 410 million euros (US$494 million). Fimalac, in turn, has granted Stanley exclusivity to complete this deal through April 30, 2006. Fimalac’s board agreed that this deal would allow it to concentrate its efforts on the development of its ratings business, the American-based firm Fitch Ratings, and on the measurement of corporate risk, Algorithmics, while securing Facom’s long-term position. Under the terms of the proposed transaction, Thierry Paternot, Facom’s director general, would stay to lead the new combined European Stanley business, with support from Mark Osmolski, currently Stanley Europe’s COO, and two senior management teams that will provide leadership and expertise across Europe.
See the countdown in Noted below for the Conference Early Bird Special and Hardlines vacation dates. Hardlines Conference Series, Sept. 12-13; Outstanding Retailer Awards at the Hardlines Gala Dinner Sept. 12
TORONTO In its second quarter, Sears Canada Inc. had total revenues of $1.52 billion, up 2.3% from $1.49 billion for the same period in 2004. Revenues for 2005 include those of the buying group Cantrex Group Inc., since its acquisition by Sears Canada in late April, 2005. Net earnings for the quarter, including non-comparable items, were $10.9 million, up from $4.6 million in the same period last year. Total revenues for the 26-week period ended July 2, 2005 were $2.84 billion, compared with $2.82 billion for the same period last year, an increase of 0.9%.MOORESVILLE, N.C. Lowe’s Cos. has announced it will expand its distribution center in Statesville, N.C., adding another 50 jobs to the 800-strong workforce there. The expansion will add 324,000 sq.ft. to the 1.15 million-sq.ft. facility, and it’s expected to be completed by spring 2006. One of 11 regional DCs, it supplies products to 140 Lowe’s stores in the Carolinas, Tennessee, Virginia, Alabama, Mississippi, Missouri and Virginia. LONDON Troubled DIY chain B&Q, the subject of bid rumours, is looking at scores of job cuts across its 28,000 workforce. New CEO Ian Cheshire, who has been in the post for only seven weeks, is conducting a thorough review of the business. The slow housing market in the U.K. has adversely affected the retailer, forcing it to stall expansion of its big box stores. In addition, parent company Kingfisher has become the subject of further takeover rumours, this time by Wolseley, an U.K. -based company which owns industrial distributors worldwide, as well as Stock Building Supply in the U.S. ST. PAUL, Minn. & MERIDEN, Conn. 3M Co. has received regulatory approvals to proceed with the acquisition of CUNO Inc. The cash transaction is valued at $72 dollars per share. CUNO is a maker of filtration products for the separation, clarification, and purification of fluids and gasses. Its proprietary products include uses in the healthcare, industrial, and drinking water markets. CUNO operates manufacturing facilities in the United States, Brazil, Mexico, France, Japan, Australia and China, and has sales offices throughout the world. LAS VEGAS For the first time next year, the National Hardware Show will be at one location within the Las Vegas Convention Center. There, the show will fill three halls with nearly two million sq.ft. of total space. Early space registration is already underway for 2006, and more than 358,200 sq.ft. of exhibit space has been booked. For 2006, each of the three halls will be dedicated to specific product categories, providing expanded registration space, more meeting areas and more room on the show floors. The line-up for each hall is: South Hall – Lawn & Garden World; Central Hall – hardware, tools, paint, décor, and the Global Hardware Expo; North Hall – plumbing, electrical, HVAC, housewares and the Las Vegas Gourmet Housewares Show. The show will be held May 9-12, 2006. MONTREAL METRO Inc., a leading Quebec supermarket chain, has reached a definitive agreement with The Great Atlantic & Pacific Tea Co. Inc. and its subsidiary, A&P Luxembourg S.à.r.l., to acquire all common shares of A&P Canada. The deal is worth $1.7 billion, consisting of $1.2 billion in cash and $500 million in the form of treasury class A subordinate shares of METRO. A&P Canada operates 236 food stores throughout Ontario under the A&P, Dominion, Food Basics, The Barn and Ultra Food & Drug banners, with annual sales of $4.4 billion and more than 32,000 employees. Upon completion, METRO will have a network of 579 food stores, including 283 outlets in Ontario with annual sales approaching $11 billion. BENTONVILLE, Ark. Wal-Mart is setting up its own bank – in Utah. Other retailers, such as Target in the U.S. and Canadian Tire in Canada have already done this, giving them breaks on their ability to provide customer credit cards. In the U.S., these so-called industrial banks, which are only allowed in Utah and a few other states, will allow the company to also process credit-card transactions instead of turning them over to a third party. BRENTWOOD, Tenn. Tractor Supply Co. saw net sales increase in its second quarter by 16.6% to $613.2 million, up from $525.9 million. Same-store sales increased 5.9% versus last year’s 10.0% gain. Net income for the quarter increased 15.3% to $35.8 million, compared with $31.0 million for the comparable quarter in 2004. Tractor Supply opened 19 new stores and relocated two others during the quarter.
Sherwin-Williams Co. has named retired Ace Hardware president and CEO David Hodnik to its board, expanding the number of directors to 11. Hodnik, 57, also was elected to the board's audit committee. His appointment boosts the number of Sherwin-Williams' independent directors to 10. Kmart, now a wholly-owned subsidiary of Sears Holdings Corp., has promoted Peter Whitsett to the role of senior vice-president and Kmart merchandising officer. In his new position, Whitsett oversees all merchandise categories for Kmart stores and reports directly to Aylwin Lewis, president of Sears Holdings and CEO of Kmart and Sears Retail. Whitsett was formerly senior vice-president and general merchandise manager for Kmart’s hardlines, food and consumables, drug store and pharmacy merchandise divisions.
Hardware and lawn and garden products were among the categories that saw a drop in May, as sales by major department stores fell 0.3%, reports Statistics Canada. May’s drop was the first decline in sales at large retailers this year. The sharpest decline was in the sales of clothing, footwear and accessories, which were off 2.4%. Wholesale sales rose for the fourth consecutive month in May, edging up 0.2%, says Stats Canada. Most of the growth was attributable to increased demand for “other products,” but the increase was partly dampened by lower wholesale sales of building materials, which were down by 3.0%. In constant dollars, wholesale sales rose 0.2% in May.
Housing starts in June reached 2.004 million, unchanged from May but up 9.7% from June 2004, says the Commerce Department. Building permits were 2.111 million, up 2.4% from May and up 4.8% from one year ago.
Hardlines will not be published next week, August 2, Aug. 8 or Aug. 22. We’ll be busy at the World Headquarters, however, getting ready for the Hardlines Conference and Awards Gala, which takes place Sept. 12-13. Don’t forget the Early Bird Special expires July 29 – sign up now! Click here or contact Isabel Bisong, — Michael

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HELP WANTED NATIONAL SALES MANAGER Kempston is a leading Canadian supplier of Router Bits and Saw Blades. Responsibilities: • Represent Kempston in sales presentations to a large customer base in North America, travel required. • Establish US sales networks. Work with existing sales agents in Canada to manage and direct their sales activities. • Budget sales by customer and SKU annually and complete weekly customer activity/ progress reports. • Organize and attend trade shows.

Qualifications: • Minimum 2 years experience in tool/hardware. • US experience is necessary. • Demonstrated ability and drive to grow sales in the Power Tool Accessory market. • Excellent communication (written and oral) and presentation skills. • Computer-literate; Excel, Word, Outlook and PowerPoint. Email resumes to (07.25_08.29)  

**********************************************************************************   PRODUCT MANAGER McKenzie Seeds, Canada’s leading supplier of packaged seeds and related gardening products, is seeking a Product Manger to join our dynamic team in our head office, located in Brandon, Manitoba. The Product Manager will provide valuable oversight and expertise to ensure positive business results for specific product areas. This position will analyze market information and recommend initiatives to senior management for approval. Specific responsibilities include management of the development of new products that compliment our existing products, managing existing products for maximum profit and efficiency, analyzing market/product trends, costing, pricing, developing marketing material and display formats, maintain inventory control and participate in team decisions. The successful candidate will have marketing experience in a retail environment with knowledge of margins/shelf impact/creative design. The successful candidate will also have a Bachelor’s Degree in Business Administration or related discipline, or equivalent experience. Demonstrated experience with analysis of market/products is required as is strong communication and interpersonal skills. Excellent project management skills and the ability to work with tight turnaround times; the ability to make effective decisions with multiple priorities and strong negotiation skills are critical to this position. Strong computer-based skills with an understanding of current technological tools including Microsoft office are required. The successful candidate must have the ability to travel to serve local and national clients at their sites Experience with industry software is considered an asset, as is interest in horticulture. McKenzie Seeds offers a competitive salary and exceptional benefits package. If you are interested in contributing to the continued growth of a progressive national company, please forward your resume, including 3 references, in confidence to: Kathy Johnson, by Friday, August 5, 2005 (07.18_08.02)


SALES OPPORTUNITIES Exchange-A-Blade Ltd., is a leading Canadian distributor and manufacturer of power tools accessories with sales agents and independent distributors throughout North America. Exchange-A-Blade is looking for candidates in Ontario who have several years of sales experience in the hardware or building materials industry, who are customer relationship focused and who are well organized. Opportunities include a salary and commission based sales representative package or business investment opportunities for individuals interested in investing in their own distributorship. For further information, please see our web site at Interested candidates should send a resume and covering letter to Andy Moncrieff, Regional Sales Manager, by fax to 519-679-4917 or by email to (07.11_07.25)

********************************************************************************** SALES AGENT: MARITIMES AND NEWFOUNDLAND

Kempston Canada Limited, a leading Canadian supplier of Router Bits and Saw Blades is looking for an established sales agency to expand our market share in the Maritime Provinces including Newfoundland. Only agents with successful experience and contacts in the Power Tool and Accessories markets need apply. If your company has the above experience and the ability to pioneer a high quality, competitively priced product please e-mail resumes to: (07.11_07.25) **********************************************************************************


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