John Caulfield, Contributing Editor
vol. xi, #26, June 27, 2005

IN THIS ISSUE: • Another U.S. dealer sniffs around Canada • Home dealer grows with furniture sales • IRLY warehouse goes high-tech • 20/20 hindsight: Canadian Tire’s newest program • Will Home Depot buy Chinese chain? • German Praktiker chain may go on block * * * * * *

“A bashful beggar has an empty purse.” Hungarian proverb
EIGHTY FOUR, PA – 84 Lumber, the second-largest pro dealer in the United States, has confirmed that it has begun the process for an eventual move into Canada, which could occur as early as 2007. Company spokesman Jeff Nobers said that 84 has already looked into the legal requirements to establish a business in Canada, although the dealer has not done any investigation into possible sites yet, or any demographic analysis. However, he said, “the intent is to do this,” and quoted senior-level officials at 84 to add that the time frame before the company either builds its first stores or acquires a company could be “two to three years.” In 2004, 84 Lumber generated US$3.46 billion in sales from 463 stores. Those stores average 20,000 sq.ft. of inside selling space on several acres of land. Earlier this year, company officials revealed plans to open a minimum of 52 stores in 2005, which will include 84’s 500th unit. Nobers said that, over the next few years, the company intends to open between 150 and 175 stores, the majority of which will be in the Western U.S. “Once we reach that point where we have some critical mass in the west, Canada will be another way for us to grow.” 84 Lumber is looking north at a time when another major American-based retailer, Lowe’s, has disclosed that it will open as many as 10 stores in Toronto by 2007.
MONCTON, N.B. – Alvin Leger didn’t look to building materials or hardware when he wanted to expand his retail business. With a Home Hardware Building Centre already in the Moncton neighbourhood of Elmwood, and a second store in Dieppe, Leger, who owns the business with his wife Rachel, wanted to add a new dimension to their third store, which was going up in a former bowling alley in Magnetic Hill. Alvin and Rachel opted for a Home Furniture store, which was installed right inside the new Building Centre. The grand opening for the furniture business was held on June 9, as construction of a new LBM warehouse delayed that side of the operation. (The warehouse was filled this past weekend and the building supply business is fully functional as of today.) About 12,000 sq.ft. of the 40,000-sq.ft. store have been devoted to the Home Furniture business, and even though both operations share a common entrance, once inside, the two stores offer a distinct retail environment. “I tried to keep it separate from the building supplies,” says Leger. “It’s a different shopping experience. The Home Furniture creates for us a shopping destination.” He adds that people will drive a considerable distance to shop the Furniture store, so that business has to deliver an atmosphere of quality at a reasonable price. A Home Furniture store’s typical product mix includes major appliances and home electronics. According to Bill Ferguson, dealer support manager for Home Hardware in St. Jacobs, Ont., more and more Home dealers are adopting the Home Furniture program, driving the dealer-owned co-op’s organic growth through its existing dealers. “The biggest growth for Home is coming from within the dealer ranks themselves,” says Ferguson. “They see the synergy between building a house, and decorating a house, and filling it with furniture and appliances.” Leger says he’s seen a real improvement in Home’s management of the Furniture program. It’s expanded its catalogue, pursued a quality offering, and backed it all up with effective marketing, he says.
TORONTO – Mark Foote, president of Canadian Tire Retail, says the company’s current 20/20 concept will get re-evaluated – and possibly reinvented – again in another five or six years. Speaking at the recent annual convention of the Retail Council of Canada held here, he pointed out how the 20/20 concept, introduced in the fall of 2004, has marked a “successful renewal” of Canadian Tire’s merchandising, one that depended on three things: clarity of strategy, a belief that “the store is everything,” and a recognition of the fact that “renewal is a process.”That renewal takes money, he admitted, but the payoff is evident. “Eighty-five% of our sales come out of stores that are 12 years old or less.” And the 20/20 stores themselves are turning in 19% better results than traditional stores. The next evolution for the stores will be around 2010, he notes, “when the current 20/20 stores can be evaluated and evolved.” Foote expects these efforts to drive the retail division from its sales of $6.5 billion to more than $8 billion in a few short years.
SURREY, B.C. – IRLY Distributors Ltd. has entered into an agreement with Q.Data Inc. for the supply of Symbol Barcoding and Wireless infrastructure equipment at IRLY’s distribution centre here. The handheld computer equipment is being integrated with the existing Warehouse Management software, with the goal of being able to render all warehouse functions, such as receiving, putaway and picking orders, completely paperless. By utilizing scanning of UPC barcodes on products in each step, IRLY hopes to achieve greater inventory accuracy, efficiency and – most importantly – extremely accurate order shipments to dealer members who operate under the IRLY Building Center banner, and to non-affiliated retail customers through IRLY’s Western Hardware business. The pilot program started June 1 and a complete rollout should be completed by this fall.
TORONTO – Wal-Mart, Home Depot, and now Lowe’s. The threat faced by the independent in Canada is a serious one, yet those independents continue to endure. How they’re doing it will be just one of the topics presented at this year’s Hardlines Conference Series and Awards Gala, September 12-13, 2005. To celebrate our 10th anniversary, we are lining up the most amazing Hardlines Conference Series ever. Once again, you can count on a gathering of top retail experts from around the world to join us September 12-13, 2005 at the swank Hilton Suites Hotel, Markham, Ont. Speakers will include the evp of the world’s largest home improvement chain, plus the man who brought DIY big boxes to Canada in the first place, the head of Canada’s largest hardlines retailer, and one of the smartest independent building centre dealers in the country.If you want to hear a truly amazing retail mind at work, don’t miss Bill Morrison, President and CEO of TruServ Canada, as he offers his amazing insights into the realities facing independents today. With a career that includes Foot Locker and Home Outfitters, Morrison is well suited to offer a thoughtful understanding of the demands of today’s consumer – and how best to meet those demands to build your business. From the other end of the DIY spectrum, delegates at this year’s conference will get a rare bird’s eye view of the industry. As the number-two guy at the number-one home improvement retailer, John Costello, Executive Vice-President of Merchandising and Marketing for Home Depot will join us from Home Depot’s headquarters in Atlanta to make a rare appearance in Canada. Other speakers include Stephen Bebis, President and CEO of Golf Town. But he’s best remembered in this industry as the man who brought the home improvement big box to Canada. He founded Aikenhead’s on behalf of Molson more than a decade ago. It was taken over in turn by Home Depot. Your customers, colleagues and competitors will all be at this year’s Hardlines Conference Series and Awards Gala, September 12-13. Don’t miss it. For more info, <click here> or contact Isabel Bisong here at the World Headquarters:; 416-489-3396.
DUSSELDORF, Germany – Retail giant Metro has disclosed that it is considering ways to sell its ownership of Praktiker, its 339-unit home improvement chain. The company, which is the world’s third-largest retailer in revenue, said that it might offer Praktiker for sale to the public through stock, or attempt to sell the chain outright. Dr. Hans-Joachim Korber, Metro’s CEO, explained in a prepared statement that Praktiker is now “excellently positioned for further growth, either within Metro Group or on a stand-alone basis.” Praktiker has recently undergone a corporate and operational restructuring that, last year, helped double its operating income to the equivalent of US$74.1 million on sales of US$3.6 billion. Praktiker operates stores in nine countries, and generated more than one-fifth of its sales from Eastern Europe, which reportedly is an area of growth concentration for Metro. Praktiker’s core market in Germany, though, has suffered through a prolonged period of stagnant job growth and competitive over-saturation within the retail home improvement sector.
SHANGHAI – Home Depot Inc., which has buying offices in China but no stores yet, is reportedly in talks with Orient Group Inc. to invest in that company’s DIY division, Orient Home, which has 27 outlets in China. A deal could be finalized by the end of this month. According to Reuters, Orient Home did confirm they are “in discussions” with Home Depot, but wouldn’t provide any more details. ST. JACOBS, Ont. – More than 550 Home Hardware Dealers, staff, suppliers and friends gathered last week at four courses for the Home Hardware Annual Charity Golf Tournament in support of the Hospice of Waterloo Region. The tournament, which featured a silent auction and prizes donated by Home Hardware and its suppliers, was expected to raise more than $20,000. Over the past ten years, the Home Hardware Annual Charity Golf Tournament has raised more than $220,000 for various local charities. PALATINE, Ill. – Sears Essentials, a new convenience format from Sears, with some Kmart DNA thrown in, has been the fate of some two dozen Kmart stores since April, with plans for a total of 400 of the 1,500 Kmarts to make the switch by 2007. Sears Essentials is part of the company’s “off-mall” strategy, this one to showcase leading Sears and Kmart brands such as Kenmore appliances, Craftsman tools, and Land’s End clothing. JOHANNESBURG, South Africa – Mica South Africa, the retail home improvement business of Super Group, has formed a supply deal with Ace Hardware Corp., based in Oak Brook, Ill. Ace, which is now in 70 countries, has recently made a similar deal with Mitre 10, a leading dealer-owned co-op in New Zealand. DALLAS – Builders FirstSource Inc. has completed its IPO, raising US$196 million. The shares were priced at US$16, and actually opened at US$16.52 and the number of shares was increased from 11.25 million. UBS Securities and Deutsche Bank Securities Inc. managed the sale of the offering. The IPO drew the attention of Wall Street based on the continued hot real estate market in the U.S. to which Builders FirstSource supplies products and services. DENVER, Col. – Johns Manville has entered the next phase of the expansion of its formaldehyde-free fiberglass insulation capacity with the production of a new loose-fill line at its Canadian manufacturing plant in Innisfail, Alta. Construction has begun and the new line will be operational in early 2006. This new line, when combined with recent technology investments across JM facilities, will increase North American loose-fill capacity by 50%, or by up to 200 million pounds. The expansion supports the accelerating demand for JM’s Formaldehyde-free insulation products. The capacity increase coincides with tougher requirements by Environment Canada for thermal insulation that carries the “EcoLogo” mark. MARYSVILLE, Ohio — Scotts Miracle Gro, North America’s largest supplier of lawn care products, last week cut its senior-level management team by 15%. The move – which included directors and executive vice-presidents – is expected to eventually save the company US$7.5 million annually. Scotts also plans to offer early-retirement packages to between 120 and 150 employees, and hinted that further layoffs could be in the offing. NEWTON, Iowa – Maytag Corp. has received a preliminary non-binding proposal from Bain Capital Partners LLC, Blackstone Capital Partners IV L.P. and Haier America Trading, L.L.C. to acquire all outstanding shares of Maytag for US$16 per share cash, even though it has already agreed to a takeover offer by another investor group. On May 19, 2005, Maytag agreed to be acquired by an investor group led by Ripplewood Holdings LLC for $14 per share cash. According to the preliminary non-binding proposal, completion of due diligence is expected to take 6-8 weeks, and the Bain proposal is conditional and may not necessarily result in a definitive agreement.
Craig Neeser has been named to head up Weyerhaeuser Canada. He assumes the role of CEO effective July 18. In his new role, he will report directly to Steven R. Rogel, chairman, president and CEO. Neeser, who joined Weyerhaeuser in 1999 when the company was acquired MacMillan Bloedel, will chair the company’s Canadian Leadership Team and focus on enhancing strategic stakeholder relationships in Canada … Neeser replaces Sandy McDade, who has joined the Weyerhaeuser head office in Federal Way, Wash., as senior vice-president, industrial wood products and international business groups. In his new role, McDade will report directly to Richard E. Hanson, executive vice-president and COO. He will be responsible for Weyerhaeuser Asia, Weyerhaeuser Forestlands International and European Wood Products, Northwest Hardwoods and Composites … McDade succeeds William R. Corbin, who will retire at year’s end. Corbin joined Weyerhaeuser in 1992 as executive vice-president, Wood Products, eventually moving up to a position as executive vice-president, Wood Products, before assuming his current role in 2004.James Lopez has been named to replace Frank Dottori as president and CEO of Tembec, the Montreal-based forest products company. The move becomes effective upon Dottori’s retirement, after 32 years, on January 26, 2006. Lopez is currently executive vice-president and president of the Tembec Forest Products Group. During his 16 years with the company, he has been accountable for a number of Tembec's business units and has been an integral part of Tembec’s growth strategy.
Retail sales reached a record $30.86 billion in April, up 1.5% over the previous month, reports Stats Canada. Compared with the same period last year, that’s up 8.2% over April 2004. Sales of hardware, home improvement and garden products were especially hot, rising 4.5%.
Online retail sales in the U.S. are expected to grow by 23% this year, cracking the $100 billion mark for the first time and garnering a bigger share of shopping dollars – despite Internet security threats. According to a study by Forrester Research Inc. on behalf of the National Retail Federation, online sales in 2005, excluding travel, are expected to reach US$109.6 billion, up from US$89 billion in 2004 and US$71.8 billion in 2003. Although they are growing at a faster rate than retail overall, online sales only accounted for 4.6% of retail sales in 2004, although that is expected to grow to 5.5% in 2005, says the study. Retailers responding to the survey reported that the web influenced 20% of sales in stores. Even if sales are not completed online, customers are using retailer websites to gather product information and make price comparisons.

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