John Caulfield, Contributing Editor
vol. x, #30, July 26, 2004

IN THIS ISSUE: • The lowdown on B&D's Pentair buyout • Sodisco-Howden strategy targets competitors • Rona re-invents Home Centre format • Home Depot announces first Manhattan store • IRLY begins recruiting in earnest • Home Depot's online sales are on fire

* * * * * * FINE PRINT — SUMMER SCHEDULE: There will be no Hardlines next week. Back on August 9. Meanwhile, check out our latest update on the U.S. market click here. — Michael * * * * * * NOTE: Dollar amounts are stated in the currency of the country from which the story originates. — Michael McLarney, Editor & Publisher * * * * * *
"Pay no attention to what the critics say; no statue has ever been put up to a critic." —Jean Sibelius
NEW YORK — Home Depot, which already operates 14 stores in the five boroughs of New York, will open its first store on the island of Manhattan, a 105,000-sq.ft. unit in the historic Flatiron district, on September 10. A second store, located in midtown Manhattan on the site that had long been Alexander's flagship store, is scheduled to open late this year.The two Manhattan stores, with a combined workforce of around 600 people, will represent the company's latest manifestations of Home Depot's multilevel "urban neighborhood" format, with product assortments that have been customized to city dwellers (that is, more hardlines, décor and everyday products, fewer building materials). Urban neighborhood outlets have been opened in two other New York boroughs, in New Jersey and Chicago. Home Depot's attempts to bring this concept to another city have been stalled, however, by community opposition. The retailer paid US$17 million to buy that plot in Vancouver's Kitsilano neighborhood, where it initially intended to a build 93,000-sq.ft., two-story home center, 190 units of residential housing, 5,000 sq.ft. in ancillary retail space, and a day-care center, all on a 101,000-sq.ft. parcel of land. But even after scaling back those plans to accommodate a smaller store, the city's council rejected Home Depot's proposal in early July. In fact, council went even further, by limiting construction in the neighborhood — and on that land — to 10,000 sq.ft., except for supermarkets and drug stores, which can be 30,000 sq.ft. A second urban neighborhood store slated to open in West Vancouver in September is still on schedule, says company spokesman Nick Cowling.
MONTREAL — A five-year plan to reassert the supremacy of hardlines distributor Sodisco-Howden Group includes increasing internal efficiencies and provide programs to ensure greater regular communication with dealer customers.But Sodisco-Howden also intends to keep beefing up its product categories to provide a wide range of specialty items, in addition to core products. "We want to go from offering 75% or more of what a dealer needs to a total service offering to customers," says Jos Wintermans, president and CEO of Sodisco-Howden. The move is seen as a way to head off the insurgence of specialty distributors, especially in tools, plumbing and electrical, he adds. Sodisco-Howden currently offers about 55,000 SKUs through its warehouses in Victoriaville, Que., London, Ont., and Langley, B.C. However, it faces competition. On some specialty lines and industrial products, a number of smaller distributors, such as Task Tools, Globe Electric and King Tool, cater to more specialized needs. From a regional standpoint, many distributors, such as Western Hardware in British Columbia or Union Hardware in the Greater Toronto Area, offer fill-in lines for geographically specific markets. Even as it seeks to beef up core assortments, Sodisco-Howden's strategy does not run contrary to an existing mandate to reduce the overall number of vendors. "There wil be fewer of them," says Wintermans. "But opportunity remains for existing suppliers."
TOWSON, Md. — In a move that could significantly bolster its market presence with professional customers, Black & Decker will pay $775 million in cash to acquire Pentair Inc.'s tools division.Pentair's brands include Porter Cable, the third-largest producer of portable electric tools in North America; and Delta, the leading producer of benchtop and stationary woodworking machinery in the world. The tools group also includes such well-known brands as DeVilbiss, the industry's second-largest producer of air compressor equipment; and Oldham Saw, which makes tool accessories. The acquisition, which includes Pentair's Canadian and European operations, is subject to regulatory approval by the U.S. Federal Trade Commission. The Canadian division is reportedly one of the top performing units of the company. Rationalization north of the border must contend with a number of facilities, consisting of a B&D facility in Brockville, Ont., its head offices in Richmond Hill, Ont., and the Pentair offices and warehouse in Guelph, Ont., which have more available space than B&D's current digs north of Toronto. In 2003, Pentair's Tool Group generated $82 million in operating income on $1.08 billion in sales. B&D's chairman Nolan Archibald said in a prepared statement that the acquisition will "expand our product lines where we have relatively low market share, including woodworking equipment, compressors, pressure washers and nailers. In addition, it will give us a stronger presence throughout our distribution network, particularly in the industrial/construction channel." Archibald emphasized as well how the addition of Porter Cable and Delta would bolster B&D's DeWalt professional tool assortment. Analysts estimate that this deal could double B&D's sales to professional customers. Last fall, B&D paid $275 million to buy Masco's Baldwin Hardware and Weiser Lock businesses. The tool giant is also in the final stages of a major restructuring effort that is moving around 75% of its production to three countries, Mexico, Czech Republic and China. Barbara Lucas, B&D's senior vp-public affairs, told Hardlines that Pentair manufactures its tools in the U.S., Germany and China, and that B&D would determine where its products would be produced after its acquisition is completed sometime this fall. It has been rumored for most of this year that Pentair was looking to sell its tool division, as it diversifies into other businesses. In February, Pentair purchased Wisconsin Energy Corp., and became a global force in water treatment and transportation. Pentair got into the tool business in 1981 when it acquired Porter-Cable's assets of struggling Rockwell International. It bought Delta Machinery three years later, DeVilbiss in 1999 and Oldham in 2002.
PRINCE ALBERT, Sask. — An updated version of its Home Centre and Renovateur concepts will mark the next step in Rona's $200 million investment in Western Canada. A ground-up store utilizing elements of Rona's big box format will open here in September.Rona Inc., one of Canada's top three home improvement retailers, is already well entrenched in a variety of store sizes and formats, and has cross-pollinated ideas and techniques across these formats many times in the past. A program for traditional sized stores under the Rona Home Centre banner, for stores around 25,000 sq.ft. in size, along with a more contractor-oriented format called Rona Building Centre, were developed last year, and both featured boutique elements developed in Rona's own big box stores. RONANow the Home Centre format is being updated with a "next generation" concept that features a larger footprint — the Prince Albert store is 52,000 sq.ft. — and even more big box elements. Those elements are drawn mainly from Rona's Regional stores, which are typically 65,000-90,000 sq.ft. in size. However, the store will feature additional boutiques, including flooring and a new moulding ideas center that will be up toward the front of the store, along with other décor departments, rather than at the back with building materials. "Now it will be really an easy way to shop and finalize decoration projects," says Rona's communications director, Sylvain Morissette. He notes that this larger Home Centre format will be integral to Rona's expansion plans, suitable for other centers like Prince Albert, which is the third-largest city in Saskatchewan and a destination for a number of communities in the northern part of the province. "That size of store enables us to fulfill at least 100 cities in Canada," Morissette says. Fort McMurray, Alta., will be the next location for the next generation Home Centre, with one or two more likely to be announced before year's end.
SURREY, B.C. — The announcement that Irly Distributors has added a new member marks the first strike to recover its numbers after losing dealers to Rona Inc.Big Horn Building Centres Ltd. becomes the 51st independent member of Irly, a buying group which owns its own LBM and hardware distribution center. Although it added another dealer a year ago — in Black Creek, B.C., on Vancouver Island — Big Horn is the first dealer to come aboard since Irly voted against joining with Rona earlier this spring. During that time, three dealers left Irly and joined Rona on their own. Big Horn was formerly a Sexton member, but made the switch to Irly when new owners came on board. With distribution in place, and an entire division selling hardlines outside the group under the Western Hardware division, Garry Anderson, the new general manager of the group, along with Brad Dixon, who is in charge of dealer development, wants Irly members to get more involved in existing programs, while recruiting new members. The group is well positioned as a regional supplier, says Anderson, thanks to its own distribution center right in Surrey, which carries an extensive line of hardware and building supplies.
Be sure and sign up for the Hardlines Conference Series, September 8-9, 2004. — Michael.
Sears Roebuck & Co. has named Catherine David as general manager of the Great Indoors division. She'll be in charge of merchandising, marketing and operations for the big box home decorating and remodeling stores ... David replaces Jeff Jones, who was promoted to executive vice-president of Sears' merchandising operations in April.Larry Johnston, chairman of the board, CEO and president of Albertson's Inc., and Labe Jackson Jr., chairman and CEO of Clear Creek Properties, have been named to the board of directors of Home Depot. This brings the number of directors on The Home Depot board to 12.
Housing starts in June were 1.802 million seasonally adjusted, according to the Commerce Department. That's down 8.5% from May and down 2.6% from June 2003, at 1.85 million. Single-family starts in June reached 1.49 million, down 9.5% from May's rate of 1.65 million.Building permits were 1.92 million seasonally adjusted, down 8.2% from May, at 2.10 million, but up 2.8% over June 2003, according to the Commerce Department.
ROANOKE, Tex. — Within the month, Home Depot expects to be shipping product to stores in Texas and Louisiana from a 450,000-sq.ft. regional distribution center here that is being set up to handle imported merchandise. The facility, located at Alliance Airport here, includes a six-acre parking lot for 130 trailers, and could be expanded further, as Home Depot also has an option to lease another 287,000 sq.ft. in a nearby building. The retailer has stated publicly that it imports product from more than 500 factories in more than 40 countries. At the end of 2003 the company had 10 import DCs in North America. The Roanoke facility should be fully operational by September.VANCOUVER — West Fraser Timber has signed a definitive agreement to acquire Weldwood of Canada from its parent, International Paper Co., creating the third largest lumber producer in North America. The deal will be worth $1.26 billion in cash, subject to certain closing adjustments. The company will own and manage manufacturing facilities in British Columbia and Alberta, as well as facilities in the Southern United States. The transaction has been approved by the boards of directors of West Fraser and International Paper and is expected to close in the fourth quarter. OAK BROOK, Ill. — Ace Hardware Corp., which has had its own private-label paint manufacturing since 1984, has produced 150 million gallons of paint over the past 20 years. With two manufacturing plants in the Chicago area, the Ace Paint division is the 12th largest paint manufacturer in the United States, with an annual production capacity of 20 million gallons. MONTREAL — Workers are attempting to organize at two Wal-Mart stores in Quebec. The United Food and Commercial Workers union submitted applications to the province's Labour Board for union accreditation at the store in Brossard, near Longueuil. Saguenay, north of Quebec City, was the first. Another store has made a similar application in Moose Jaw, Sask. MISSISSAUGA, Ont. — Door maker Masonite International Corp. had a second-quarter sales increase of 23.5%, to US$564.6 million from US$457 million. Net earnings increased 32% on a boost in sales, the company reports. It earned US$36.2 million in the three-month period ended June 30, up from earnings of $27.3 million a year earlier. ATLANTA — An overhaul of Home Depot's website last fall has helped boost online sales by double digits. According to com.Score Networks, Home Depot had 6.5 million visitors to its web site in May, a 58.5% increase over the same month a year ago. Last year, Home Depot hired Shelley Nandkeolyaras as its vp-interactive marketing and e-business, and completely revamped its site, including decreasing the number of items offered to 12,000 (from 50,000 when it launched its site in 2000 and 20,000 when it was made available nationally) and, more recently, adding a garden club and wedding and gift registry. VANCOUVER — West Fraser Timber Co. reported earnings of $67 million on sales of $607 million in the second quarter of 2004. That compares with a loss of $5 million on sales of $484 million in 2Q 2003. For the first half of 2004, earnings were $93 million on sales of $1.15 billion, up from $6 million on sales of $970 million for the same period a year earlier. MONTREAL — First-quarter net sales for bath products maker Maax reached US$136.1 million, up 7.6% from US$126.5 million in the first quarter of the previous fiscal year. This growth of 7.6% is due to an 11.2% increase in net sales of bathroom products, although it was partially offset by a 8.5% decrease in net sales of spas, after Maax decided to pull these products from home improvement centers in the United States. HOFFMAN ESTATES, Ill. — Sears, Roebuck and Co. had weaker quarterly profit due to poor spring clothing sales. It earned $53 million in the second quarter, compared with $309 million during the same period a year earlier. TORONTO — Sears Canada Inc. had 2Q revenues of $1.49 billion, up 1.3% from $1.47 billion for the same period last year. Net earnings for the quarter, excluding non-comparable items were $11.8 million, compared with $19.1 million. Net earnings, including non-comparable items, were $6.7 million, versus $13.0 million. Same-store sales increased 1.4%. Sales were particularly weak in air conditioners, patio furniture, outdoor grills and seasonal apparel, but stronger in major appliances, furniture and mattresses, electronics, and bed and bath. Total revenues for the 26-week period were $2.82 billion, up 2.5% from $2.75 billion. Same-store sales year-to-date increased 4.3%. TOWSON, Md. — Black & Decker Corp. made big gains in its second quarter, with earnings rising by 61% and sales increasing 19%. Net income rose to $121.6 million from $75.7 million. Sales rose to $1.3 billion. VANCOUVER — Canfor Corp. reported net income of $143.6 million for the second quarter of 2004, up from $32.0 million in the first quarter and a net loss of $1.1 million in the second quarter of 2003. Net income was $175.6 million year-to-date, compared with $39.1 million in the same period in 2003. DUNCAN, B.C. — Doman Industries managed to narrow its losses in its second quarter, to a net loss of $23.5 million, compared with $39.2 million in the preceding quarter. However, it still marks a swing from net earnings of $19.5 million in the second quarter of 2003. The net loss for the first half of 2004 was $62.7 million, from a profit of $75.1 million in 2003. Contributing to the net loss for the first half of 2004 was an unrealized foreign exchange loss of $25.1 million on U.S. dollar debt. Financial restructuring costs for the six-month period totalled $8.3 million. MONTREAL — Tembec Inc. posted a third-quarter loss, thanks to a weak Canadian dollar, more than offsetting higher profits from lumber and wood pulp. It lost $12.5 million, compared with a profit of $70.5 million in the year earlier period. Revenues rose to $1.03 billion from $808.9 million.
Sales by Canada's large retailers were up slightly in May, advancing 0.1% over April, to a seasonally adjusted $7.65 billion, according to Statistics Canada. Hardware, lawn and garden products saw the sharpest decline in May, with sales dropping 4.7%. May was also a cool and damp month across much of the country, which may have had an impact on seasonal sales. Lawn and garden product sales fell 7.0%, while hardware and home renovation product sales declined 2.2%.Wholesale sales rose 0.3% to $37.4 billion in May, a slight increase over April, with strong increases in food products and computers and other electronic equipment. May's increase followed a rise of 1.0% in April and 5.2% in March. Excluding the automotive sector, sales grew 0.8% in May.

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