vol. viii, #29 July 22, 2002

* Irly fills gap in B.C.'s wholesale supply * Construction expected to slow next year * Allroc sees growth with U.S. members * Non-residential construction slips in 2Q * Sodisco-Howden CFO departs * West Fraser's 2Q profits down slightly

"Discretion will protect you and understanding will guard you. Wisdom will save you from the ways of wicked men, from men whose words are perverse." - Proverbs (2:11-12).


Surrey, BC - While its member sales remain steady, the greatest growth by Irly Distributors has been to its non-member customers. Irly's wholesale division has grown quietly over the past several years, to the point that Irly now ships to 82 accounts in British Columbia. In 1997, it had only 16 such customers. The growth has not just been organic. Irly is devoting more energy to cultivating this business, to the point of adding a dedicated sales person on the road, complementing the efforts of the existing team. While buying groups that do their own warehousing are more common in Québec, the practice is almost non-existent elsewhere in the country. That makes Irly unique. From a 185,000-sq.ft. warehouse, it ships most of its product to its 56 member stores, which operate under the name Irly Building Centres. Stuart Joule, executive vice-president and general manager of the group, says Irly's local 24-hour delivery service has appeal for a growing number of dealers, including those with other affiliations. "They're doing it very simply for convenience. We're pricing very aggressively and we're convenient," he says. "Shipping from the east can take four to five days." Back orders can end up taking weeks to refill. "When a retailer has an empty shelf, he wants it filled," Joule adds, noting that Irly's fill rate is running at more than 96% this month. By shortening lead times for replenishment of high-moving items, Irly has established itself as a handy alternative. The most popular products shipped are hardware, paint and adhesives. They also ship "bits and pieces of lumber. We've seen an opportunity as wholesale activity of our competitors in the province has centralized back to Ontario," he says.
Calgary, AB - With its focus on "non-retail," Allroc Building Products Ltd. is enjoying growth of its membership, half of which is gypsum supply dealers. However, the privately owned buying group is looking for a mix of both GSD and traditional building centres. The focus, says Bob Hancock, vice-president of purchasing, sales and marketing, is on gypsum and related products, both to GSD and traditional building centre customers. In fact, about half the group's 95 members are building centres, often with a strong commercial orientation. Allroc recently added two stores in the West, one in Grande Prairie, AB and in the U.S., in Bloomington, MN. That's the eighth Allroc member south of the border. Six of those stores are part of Winroc Corp., Allroc's wholesale arm, and in a nice bit of vertical integration, one of the group's largest members. Ron Kent, operations manager, Allroc East, says the U.S. expansion is important to the group. "It's a trend in the U.S. Buying groups are growing there. They're not as widespread in the U.S. as they are here. They've operated more as associations in the past. They haven't really maximized their buying power." Kent says buying groups serve the industry much more effectively in Canada than in the U.S. The smaller size of the Canadian market has made pool buying more necessary. Allroc is also adding stores in the East. Two of them were recently signed in Northern Ontario, Cochrane and New Liskeard, putting the total number of Allroc members in that province past 20. In Atlantic Canada, a couple of key accounts are expected to be signed in the coming months.
Ottawa - Construction in Canada in 2002 will grow by 3.2% this year, led by a strong residential market, says the latest study from the Canadian Construction Association. The residential market is showing signs of losing the momentum it has had for the past two years, but non-residential construction is expected to enjoy fairly stable growth from both public and private sector sources. Growth in 2003 is expected to reach 1.6%, followed by 1.3% in 2004. Because of Voisey's Bay, Argentia, and White Rose, Newfoundland and Labrador will experience the strongest construction growth of all provinces. Rising interest rates, coupled with reluctance by the private sector to invest in capital structures, will contribute to the slowdown in coming years.
Canadian Tire 33.15 18.50 30.75
Canfor 11.70 8.08 10.55
Emco 12.77 3.71 11.00
Goodfellow 13.99 8.00 12.75
Home Depot 52.60 28.00 28.81
Hudson's Bay 20.10 12.50 13.29
Lowe's Cos. 49.99 24.99 35.86
Sears Canada 25.10 12.50 21.24
Sodisco-Howden 2.20 0.75 1.31
Taiga Forest 13.50 7.49 13.35
West Fraser 44.42 26.13 40.00
TruServ Canada Cooperative Inc. has created a new logo that incorporates a stylized Canadian maple leaf in place of a five-pointed star. The new look reflects the 100% Canadian ownership of the Winnipeg-based co-op since it repatriated ownership from TruServ Corp. in Chicago in October 2001. West Fraser Timber reported 2Q earnings of $71 million on sales of $420 million, compared with earnings of $78 million on sales of $416 million in 2Q 2000. The earnings for the quarter include a reversal of duties of $17 million related to the softwood lumber trade dispute. However, earnings for the first half of 2002 were $98 million on sales of $800 million, up from $74 million on sales of $791 million in the first half of 2001. The company showed a loss on discontinued operations for the sale of its Revy division, but still has some real estate to sell off. Total revenues for Sears Canada in its second quarter ended June 29 were $1.593 billion, a 0.5% increase over $1.585 billion last year. Merchandise sales increased 0.7%, but same-store sales fell 3.0%. Earnings reached $24.8 million, compared with $8.8 million last year. On sales of more than $900 million, Shoppers Drug Mart made $40.9 million during the three-month period ended June 15, more than double the $17.6 million of a year earlier. For the year ended May 31, The Jean Coutu Group had sales of $3.6 billion, compared with $2.9 billion for the same period last year, an increase of 22.6%. Net earnings reached $139.9 million.
Robert Harritt, executive vice-president and CFO of Sodisco-Howden Group Inc., has left the company and a search is under way for his replacement. This latest move reportedly marks the end of the restructuring process that began under CEO Jos Wintermans, who took the helm just over a year ago. (514-286-8986) Bill Mair has joined the Imperial Manufacturing Group as product manager - venting categories. Mair was previously national sales manager - retail division with Kanalflakt Inc. He reports to Richard Lépine, executive vice-president, sales & marketing. (506-523-9117) Fred Archer is no longer with Balmer Studios, the retail division of the Balmer Group of companies, where he had served as president. (He can be reached at 416-458-9629)
Businesses and governments spent nearly $6.3 billion on non-residential construction in the second quarter, down 1.7% from the first, says Statistics Canada. While government spending was up, investment by the business sector declined sharply. Wholesalers sold $34.5 billion worth of goods and services in May, a drop of 1.2% from the previous month, says Stats Canada. However, May's decline follows six months of consecutive growth. Both the hardware, metals and plumbing and heating category and lumber and the building materials category were down 1.3%. However, these categories were up year over year (2.6% and 6.8% respectively).  
"We're not a co-op. We're a buying group in which the member is not responsible for anyone else's credit. Allroc is responsible for that credit. And because we're responsible for the credit, we're pretty tough on the members as far as creditworthiness goes." - Ron Kent, operations manager, Allroc East, on the unique selling proposition of Allroc Building Products to new members.
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