John Caulfield, Contributing Editor
 vol. ix, #23 June 9, 2003

* Expo needs bugs worked out before Canadian debut * Rona share sale goes the distance * Lowe's plans 290 more stores and doubled installed sales by 2005 * Home Depot toughens wood certification requirements * Value of housing intentions drop in April * Kingfisher enjoys healthy 1Q profit increase

"A well-informed employee is the best salesperson a company can have." - Edwin J. Thomas (American realtor)
Toronto, ON - She's in charge of Expo now, because, among other things, she's a great operations person. But Annette Verschuren, president of Home Depot Canada, has also taught her U.S. counterparts a thing or two about marketing to women customers, a sensibility she's sure to apply to her management of Expo. But one thing she won't do is bring Expo to Canada anytime soon. "Expo will come to Canada," she told an audience at last week's annual convention of the Retail Council of Canada. "But there are a number of markets we need to develop in the U.S. for Expo." Expo, which has seen its expansion plans more than halved, from 200 stores to fewer than 100 in total, has some bugs to work out, according to Verchuren. One aspect of Home Depot's high-end décor format is Expo's strong focus on the woman shopper. But Verschuren and her Canadian team pioneered Home Depot's approach to "soft DIY," not just in Canada, but across North America, with the sale of linens, pillows, soft window treatments and wall coverings, most notably in two Toronto stores, Yorkdale and Leaside. Verschuren said her division, one of six in North America, had more leeway than its U.S. counterparts. "It was a bit of a lab for the entire chain," she noted. She foresees room for about eight Expo stores in Canada. But first, she says, she has more work to do expanding the traditional big box format. "We still need to develop the infrastructure of Home Depot here in Canada." Canada currently has 93 stores; by the end of the year, it will have at least 102. Verschuren believes the country can accommodate at least 120 big box Home Depot stores in total. With the development of smaller stores such as the one that opened in Lethbridge, AB on May 29 and in Kamloops on June 12, she sees room to enter other, smaller markets, as well, throughout Canada.
Boucherville, QC - Rona Inc. has enjoyed a successful selloff of additional shares under the company's over-allotment option in its latest sale of common shares. The sale has raised $149.7 million for Rona, which will go to Kingfisher plc to pay off Rona's acquisition of Kingfisher's Réno-Dépôt division, a deal that is expected to close by the end of August 2003. Another 3.4 million shares were sold by ITM Entreprises S.A., raising $57.2 million for the French co-op wholesaler. Rona is a member of ITM, which in turn still retains about 7% ownership in Rona. The over-allotment option enables brokers to increase the size of a share sale, based on demand. "This means there was a healthy demand for the stock," says James Durran, an analyst for National Bank Financial, adding that the stock was reasonably priced at the time of the offering. "It's done extremely well since the Réno-Dépôt announcement." The underwriting syndicate was comprised of BMO Nesbitt Burns Inc., National Bank Financial Inc., Scotia Capital Inc., RBC Dominion Securities Inc. and Desjardins Securities Inc.

Special Report - The unadorned "warehouse look" of the original Home Depot concept, so prized by company founders Bernie Marcus and Arthur Blank, has left the chain with a lot of tired, shopworn stores. In the face of mounting competition from Lowe's Cos., that philosophy is currently being revisited.

But that's just one of the challenges being faced by Home Depot as it prepares to enter its second quarter century of existence, says a new study in the latest issue of our sister publication, Hardlines Quarterly Report. Home Depot stores can generate tremendous volumes, but the traffic in the stores has taken its toll. Lowe's, on the other hand, has a much newer base of stores. Home Depot has committed US$250 million this year alone to make its stores brighter - and enhance their appeal to female shoppers. To find out how Home Depot is reinventing itself on both sides of the border, see the latest issue of HQR. If you're not a subscriber to this incredible newsletter of industry analysis and research, contact Nancy Wright here at the World Headquarters for more information.
New York - Officials of Lowe's Home Improvement Warehouse told analysts and investors last week to expect a more aggressive marketing push from the company in the early summer. During their session at Sanford C. Bernstein's "Strategic Decisions Conference" here, Bob Tillman, chairman and CEO of Lowe's, and CFO Robert Hull, reiterated many of the points they made several days earlier during Lowe's annual shareholders' meeting: that the company's soft same-store sales in the first quarter were attributable to bad weather; that Lowe's is still on track to open 130 stores this year and 140 stores next year; that 25% of its expansion will be in smaller markets of between 15,000 and 35,000 households with a 94,000-sq.ft. store, compared to Lowe's 116,000-sq.ft. unit for major markets, where 65% of its expansion will take place this year and next. However, the officials provided more details about some of the company's programs. This summer, the company plans to roll out chainwide an installed sales program that it is currently testing in 128 stores, and which took Lowe's 18 months to develop. Lowe's expects to double its installed sales to US$2.2 billion by 2005. Lowe's is projecting a 25% increase this year in special order sales, to US$2.5 billion. The retailer is currently offering 500,000 special order items. Lowe's also projects that, in the "near future," special order sales could account for between 15% and 20% of its total sales. (Currently 43% of its special-order dollar volume is transacted electronically; Lowe's expects that to rise to 100% in two years.) In its larger stores, Lowe's is stocking US$5.5 million in inventory at cost, vs. US$3.5 million in its smaller prototype. Tillman said that he felt that Lowe's inventory position was solid going into the summer, and pointed to the support provided by the company's distribution centre network, into which Lowe's has invested US$500 million over the past several years. In the second quarter, Lowe's will step up its advertising as well as its "credit marketing." However, the trend by dealers to offer "no payment, no interest" deals on larger purchases is having an impact on pricing and profitability in general. Hull said Lowe's has estimated that these kinds of promotions "can take 10 gross margin points" out of a sale. During their presentation, Tillman couldn't resist taking pot shots at competitors. He mocked Sears' recent decision to lower its prices on appliances by stating sarcastically, "I thought Sears always had everyday low prices." And he speculated that Home Depot could not accelerate its store-remodeling program while, at the same time, work on improving its same-store sales. He believes the "only advantage" Home Depot has over Lowe's right now is "convenience, because they have more stores than we do." "The issue for us," said Tillman, "is that I need 200 more stores in California and another 100 in Florida."
Washington, DC - Home Depot has committed US$1 million over the next three years as a corporate sponsor of a new alliance of government and private industry to promote responsible forest management practices and to reduce illegal harvesting in countries that receive aid from the U.S. The Sustainable Forest Products Global Alliance is the product of an agreement signed last week by the World Wildlife Fund, the U.S. Agency of International Development (which provides humanitarian and economic assistance worldwide), and Metafore, the name that the Certified Forest Products Council now goes by. The Global Alliance intends to channel US$7.6 million into programs that promote responsible forest management and certified wood products. "To satisfy our corporate commitment to forest conservation, Home Depot depends on a reliable supply of wood products from responsibly managed forests. That's why supporting the Global Alliance makes so much sense for us," says Ron Jarvis, the retailer's vice-president lumber merchandising, in a statement released by the World Wildlife Fund. According to Jarvis, Andersen Window will soon join this group as its second corporate sponsor. The group's formation comes on the heels of an announcement by the European Union that its member countries would only accept lumber from nations that had signed onto its Forest Law Enforcement, Governance and Trade agreement and could certify that their lumber had been cut legally. In environmental parlance, this means using responsible forest management practices. The E.U. said it was targeting wood products coming from Asia, South America, Central Africa and Russia. In addition, Lanoga Corp., Dallas-based home builder Centex Homes, and International Paper last month declared that they would stop buying lumber from Indonesia, where illegal cutting is rampant. WWF quoted World Bank statistics claiming that illegal harvesting is costing developing countries more than US$5 billion annually in taxes and other revenues.
Canadian Tire 36.54 26.80 35.40
Canfor 11.70 6.83 7.70
Costco 41.35 27.00 35.30
Goodfellow 13.99 9.75 10.50
Home Depot 41.20 20.10 32.86
Hudson's Bay 14.75 5.87 9.97
Lowe's Cos. 48.54 32.50 43.96
Rona Inc. 19.40 11.75 18.80
Sears Canada 25.00 13.60 18.00
Sodisco-Howden 1.90 1.06 1.69
Taiga Forest 7.30 5.85 7.30
Wal-Mart 58.88 43.72 53.82
West Fraser 39.46 26.27 30.35
Home Depot Canada opened its sixth location in the Edmonton market on June 5 with a site in Sherwood Park. Features include an 8,000-sq.ft. décor department in the centre of the of the 93,000-sq.ft. store that features décor, flooring and kitchens, says a report in the Sherwood Park News. London, UK - Kingfisher plc has reported a healthy bump in performance for the first quarter, with overall profit up 34%. Same-store sales increased by 4.1% in 1Q, with profits up 34.4% to £154 million, an 18% underlying increase. The retailer's B&Q home improvement chain had a healthy 13% increase in sales, with profit jumping 16.7%. Good early spring weather in the U.K. helped the results by generating strong seasonal sales. Profit was up 3.6% at its Castorama France division on sales of 19.0%. Castorama is in the process of being integrated into Kingfisher's operation. Same-store sales at Kingfisher's Brico Depot chain were up 17.6%. Total sales from the home improvement division grew 17%. Growth was strong in Italy and China, while the company is in the process of selling off its Canadian Réno-Dépôt division to Rona. Grand Ledge, MI - A new distribution centre here is the first for Lowe's in the Upper Midwest. The flatbed distribution centre cost US$13 million and sits on 40 acres. It will start shipping products in bulk that lie flat, including lumber, pipes, gutters and fence material, to 62 stores in Michigan, Indiana, Ohio, Illinois and Iowa by early July. St. Louis, MO - Now that Emerson has stopped making benchtop and stationary tools under the Ridgid name at its Paris, TN manufacturing plant, production of the Home Depot proprietary line is being moved offshore to Asia, says Brian Sponsler, vice-president sales and marketing for Emerson. Hong Kong-based Techtronics Inc., which makes Ryobi, Dirt Devil and Homelite branded products, has been asked by Home Depot to help Emerson with this transition, specifically in the areas of logistics and distribution, says David Imre, a spokesman for TTI. Troy, MI - Sears Roebuck is feeling the pinch in its appliance department from the likes of Home Depot and Lowe's. So it's expanding its assortments and getting into more low-end models. The high-end ones are selling like hotcakes, but Sears has suffered 20 consecutive months of falling same-store sales. Appliances are the retailer's biggest revenue generators, but the big boxes are devoting more and more space to white goods and Lowe's is the number-two heavy appliance seller in the U.S., after Sears. Issaquah, WA - Costco Wholesale Corp. reported net sales of US$3.20 billion for May, an increase of 9% from US$2.95 billion in the same period a year earlier. For the first 39 weeks of its 2003 fiscal year ended June 1, 2003, the company reported net sales of US$30.67 billion, a 9% increase from US$28.15 billion. Same-store sales for May increased 4%, and year to date they were up 5%. Fort Wayne, IN - Do it Best Corp. has received a Half Century Business Award from the state of Indiana in recognition of the co-op wholesaler's 58 years in business and its commitment to community service. Do-it Best and its employees focus support on a number of education and youth programs in Indiana, including United Way and Big Brothers and Big Sisters.
Annette Verschuren, president of Home Depot Canada and president of Expo Design Centers, has been elected chairperson of the Retail Council of Canada for the 2003-2004 term. Despite charges against his company, Invemed Associates, of overcharging clients, Kenneth Langone has been re-elected to the Home Depot board of directors. The man who provided initial financing to Bernie Marcus and Arthur Blank when they formed Home Depot in 1978, Langone also helped current Home Depot CEO Bob Nardelli get his job. Langone also sits on the board of directors of Nardelli's former company, General Electric.
The value of investment in the housing sector reached $12.1 billion in the first quarter, up 15.9% from the first quarter of 2002, says Stats Canada. Of the three components of residential construction investment (new housing, renovations and acquisition costs), increased expenditures on new housing accounted for much of the gain. The housing sector continues to be blessed by low mortgage rates, a healthy job market and a relatively limited supply of existing housing. In the first quarter, investment in new housing reached $6.3 billion, up 23.3% from the first quarter of 2002. The biggest growth was in single-family homes, which were up 25.4% to $4.3 billion. Apartment investment grew almost as dramatically, by 22.7% to $1.2 billion. Investment in renovations was up 8.3% from the first quarter of 2002, reaching $4.7 billion. Acquisition costs rose 14.1% to $1.0 billion. The value of building permits issued in Canada in April were up a bit, though residential intentions for new housing dropped 6.8% and the value of non-residential permits increased 14.8%. According to Stats Canada, municipalities issued $3.7 billion in building permits in April, an increase of only 0.5%. Housing permits fell 6.8% to $2.3 billion, while intentions in the non-residential sector increased 14.8% to $1.4 billion. However, during the first four months of the year, the value of building permits reached nearly $15.6 billion, up 4.6% from the same period of 2002. Employment dipped by 13,000 in May, the second consecutive monthly decline, says Stats Canada. A jump in the number of people entering the labour market in search of work pushed the unemployment rate up 0.3 percentage points to 7.8%. Private spending on new housing in the U.S. reached a value of US$325.6 billion seasonally adjusted in April, dipping 0.5% below March's rate of US$327.3 billion, says the U.S. Commerce Department. But it was still up 9.2% over April 2002. Public construction of housing and redevelopment was up 4.8% over March, and up 17.2% over April 2002.
That really cool $100 rebate and price reduction on Pentair tools from Porter Cable Delta we wrote about last week actually resulted in a whopping 20-time increase in average monthly sales. Your math-challenged Editor dropped a zero somewhere. My apologies for any confusion over that one! -- Michael
Home Depot Canada won an Excellence in Retailing Award last week from the Retail Council of Canada. The Retail Resources Protection Award in the Large Retail category went to Home Depot for its new returns policy. In 2001, the big box retailer made the decision to change its "no-hassle" returns policy to eliminate fraudulent returns by thieves. The initiative reduced external theft, while other controls now allow the company to better identify and monitor internal theft. The new policy has reportedly improved cash flow and added significantly to the bottom line.

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CANADIAN PATENT CONFIRMED FOR THE DRICORE® SUBFLOOR SYSTEM The Canadian Intellectual Office of Industry Canada confirmed that, effective May 13, 2003, the DRIcore Division of Longlac Wood Industries has been awarded a patent for its free-floating sub-floor panel. The DRIcore subfloor system is designed as the first step to a successful finished basement. Since Dricore panels are raised off the porous concrete floor on polyethylene cleats it works to mitigate the transfer of cold and dampness and helps prevent the formation of mold and mildew. The result is a subfloor that installs faster and performs better than conventional subfloors and provides a comfortable, durable platform for most finished floors. For more information visit or call 1 866-976-6374. 

ANNOUNCING THE DRICORE SALES & MARKETING TEAM Sam Mowat, General Manager, Sales & Marketing, Longlac Wood Industries is pleased to announce the reorganization of the sales and marketing team at the DRIcore Division to better service its customers. Dave Murray, Director of Marketing, brings to Dricore his versatile marketing experience with Canadian manufacturers of home improvement products, most notably, Premdor Inc. (now Masonite International). Grant Cowx, Sales Manager - North America joins DRIcore after sales and marketing assignments at Scott Paper Ltd and Duracell Canada Inc. Kim Laurienzo, Trade Services Marketing Manager, provides DRIcore with her proven skills in trade marketing in the retail box store environment after her tenure at Bailey Metal Products Limited. Gilles Quirion, Sales Representative, brings his enthusiastic energy to DRIcore as one of the original sales team when Longlac Wood Industries established the DRIcore Division in Mississauga in 1999. For more information call Sam Mowat at 888-566-4522, ext 224 ********************************************************************************** REPS/AGENTS WANTED G. A. I. M. Engineering Inc. This Illinois based recycling firm manufactures both the "TOTASAK" and the "HANDLR". These products are ergonomically designed to hold grocery and retail bags. Each product is made from recycled polymers and can ease the pain of carrying those many bags, making it the one trip wonder! Typical end-users include grocery and hardware chains. G. A. I. M. is seeking retailers, wholesalers, distributors and sales agencies in Canada to market the "TOTASAK" and the "HANDLR". These unique items are ideal for private label and in-store promotions. You can learn more by visiting '' or contacting Jeffrey Johnson at the State of Illinois Canada Office in Toronto at (416) 695-9888 or ''.  


GREENHOUSE-IN-A-BAG Illinois manufacturer of portable greenhouses seeks landscape distributors and mail order houses to market their product in Canada. Greenhouse-in-a-Bag™ is made of ½" PVC pipe and fittings with an 8 mil UV-inhibited polyethylene greenhouse film. To learn more, visit ''. Dave and Carol Williams, the owners of Greenhouse-in-a-Bag™, will be in the Toronto vicinity the week of June 23rd, 2003. If you would like to meet with them, please contact Maria A. Arbulu, State of Illinois Canada Office, One Eva Road, Suite 301, Toronto, Ontario M9C 4Z5, T. (416) 695-9888, F. (416) 695-9891, Email: ********************************************************************************** SERVICES OFFERED RETAIL IS DETAIL. Let Noral Instore, a national service company, handle your service requirements in Canada. Noral serves some of America's leading manufacturers, managing their lines for Canada's top hardware retailers, big boxes and mass merchandisers. Contact Al Vanderveen at 519-439-6800, ext. 201, to find out how Noral can boost your sales in Canada. ********************************************************************************** SELL YOUR COMPANY - OR BUY ONE - WITH HARDLINES CLASSIFIEDS! DO YOUR EXECUTIVE SEARCH, FIND NEW LINES OR GET NEW REPS IN THE HARDLINES MARKETPLACE. ONLY $2.50 PER WORD FOR THREE WEEKS IN THE CLASSIFIEDS. TO PLACE YOUR AD, CALL PHYLLIS NOWELL AT 416-489-3396 OR EMAIL:
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