vol. ix, 11 March 17, 2003

* Cologne report: international show puts focus on décor * Rona will invest $60 million in marketing, rebranding * Lowe's head talks of paradigm shift * Home Depot eyes Manhattan * Ace reports 5.6% sales increase

"Unless you enter the tiger's den, you cannot take the cubs." Japanese proverb
Cologne, Germany — The world's largest hardware show attracted the world once again, even though it was an "off year." Practical World, the International Hardware Fair/DIY'TEC did not have the key power tool manufacturers present as exhibitors, namely Bosch and Black & Decker, so emphasis was on home décor and home improvements. Nonetheless, 3,718 companies from 59 countries were on hand as approximately 68,000 visitors walked the aisles of the 13 connected buildings filled by the show. As a result, everything from hand and power tools, cleaning and storage, brushes and brooms, paint and home furnishings were present alongside the kitchen, bath, locks and hardware vendors. Not only that, but power tool and power tool accessory companies managed to turn out in force, despite the absence of the big guys. Jepson, Paslode, Senco, Freud and Fein all had booths. A large part of the tools section of the show was filled with Asian exhibitors, all doing brisk business. Buyers from the U.S. and the U.K. were busy placing orders and picking up catalogues.

The show divides into three main sectors: tools, locks and fittings and building materials and DIY products. The tools halls that were dominated by Asian exhibitors features every kind of hardware product: everything from power tools and accessories, hand tools, locks and fittings, air tools and lawn and garden products.

Despite the brisk business being conducted in some parts of the show, some exhibitors remarked that the show's traffic seemed lighter than last year's, hardly surprising considering the very poor state of Germany's economy. But more than half of the attendees were from outside the U.S., including a contingent from Canada. While the Canadian government was unable to secure a group stand for exhibitors, a number of companies struck out on their own. Long-time attendee SPG was present, while RCR was back at the show after a nine-year absence. Mibro exhibited for the first time, showing just three specialty items. Representatives of Canadian Tire, CanWel, TruServ Corp. and the American Hardware Manufacturers Association joined exhibitors and other guests from around the world at the fourth annual Canada Night Reception, hosted by Hardlines and sponsored by Practical World. (More Canada Night pics and coverage of new products at Practical World will be appear in next week's edition — Michael) Recent news that the National Hardware Show, held in Chicago every year in August, will relocate to Las Vegas in April 2004 has deepened industry concern about the health of trade shows in general. Meanwhile, a rival hardware show, inaugurated by the AHMA, will resurrect the Chicago location a month earlier. Hans Kampen of Practical World expressed his concern about the fate of the National Hardware Show, despite possible benefits for his show. "I believe the split will strengthen our position as a worldwide leader. But it's harmful to the sector overall," he said. The next Practical World will be March 14-17, 2004.
Cologne, Germany — Although it remains number two in the world after Home Depot, Lowe's has enjoyed tremendous profitability and a surge in its share price in the past year. Bob Tillman, president and CEO of Lowe's, outlined the mindset that will ensure the retailer does not rest on its laurels. Tillman spoke last week at the first Practical World Conference, an international symposium mounted one day before the show, attracting some 350 delegates. When Lowe's first began developing big box stores, it swung its retail mix in favour of women shoppers on one hand, and commercial tradespeople rather than large home builders, on the other. Today, with US$26.5 billion in sales through 828 stores, Lowe's is a strong runner up to Home Depot, with share prices that have risen steadily over the past year, even as Home Depot's have dropped about 50% during 2002. Tillman told the audience that his company "will change the paradigm of retailing by making one store the location to buy everything they need, by offering digital images of every product available." It already tracks the purchases electronically of every one of its 50 million customers annually, and can work up a distinct customer profile for them. Efforts to grow the business will remain squarely in the U.S. - for now. Lowe's and Home Depot combined still hold only 20% of the U.S. market. Out of 17 core categories, Lowe's and Home Depot are leaders in only four of them. Nor is Canada on the radar for any kind of expansion in the foreseeable future. "Since we can build 150 stores in the next five years, why should we be in Canada? Tillman queried. "Canada's not going anywhere," he added wryly.
Boucherville, QC — Rona Inc. will launch the biggest marketing campaign of its history, combining television, radio, Internet and print advertising, circulars, in-store banners, targetted sponsorships and public relations. The Canada-wide bilingual initiative, which will cost more than $60 million, is designed to consolidate the company's positioning after the acquisitions and rebranding of the Revy, Revelstoke and Lansing banners in Ontario and Western Canada. The "Rona - The How-To People" campaigns kick off today, and will include the rollout of seven commercials over 24 weeks. In Québec, where Rona is already well known, the company is launching a campaign that highlights the consumer with the slogan, "Vous voulez. Vous pouvez." (You can. If you want to.) The rebranding of all of its 39 Revy and Revelstoke stores in the West is already under way. On March 5, all stores' names began being changed to Rona, bringing the number of Rona-branded stores across Canada to 525. They include 10 Revy Home and Garden Warehouses in British Columbia, Alberta and Manitoba, which will become Rona Home and Garden Warehouses. Fourteen Revy Home Centres in B.C. will become Rona Home Centres, while 13 Revelstoke Home Centres in B.C., Alberta and Saskatchewan will become Rona Home Centres. Two Revelstoke Home Centres in Calgary and Edmonton, AB will become Rona Building Centres, a new banner for contractors and tradesmen. The name changes reflect the company's plans for growth in Western Canada. It has already announced its intention to build five to eight new big box stores within the next 18 months. Rona will support the name change with a new advertising program. The company has earmarked $30 million to build a new distribution centre in Calgary and hire 2,500 full- and part-time seasonal workers to boost its staffing for the summer. All 41 big box Rona stores across Canada held job fairs last week as the company expands its business and brand in Western Canada. "The distribution centre will serve our customers better, help increase our incredible selection of products, and present new opportunities for local and regional suppliers and independent merchants who are interested in joining the Rona banner," says Rona president and CEO Robert Dutton.
Canadian Tire 33.65 26.80 29.50
Canfor 11.70 6.83 9.05
Costco 43.05 27.00 29.59
Emco 16.90 8.05 16.49
Goodfellow 13.99 9.88 10.75
Home Depot 50.46 20.10 22.99
Hudson's Bay 15.55 5.87 8.32
Lowe's Cos. 49.99 32.50 39.05
Rona Inc. 14.75 11.75 14.00
Sears Canada 25.10 14.03 14.10
Sodisco-Howden 2.18 1.06 1.42
Taiga Forest 7.00 5.75 6.80
Wal-Mart 63.94 43.72 49.36
West Fraser 40.38 26.27 39.05
On March 19, 2003 the Women's Consumer Products Network will host a breakfast workshop at The Boulevard Club. The event will be open to men. Guest speakers are Dr. Susan Black and Sonya Kunkel of Catalyst Canada. Registration opens at 7:30 a.m. Program runs 8:30-10:00 a.m. Contact Janet Oh, WCPN events chair, for more details: 416-208-0688.
Toronto, ON — Responding to U.S. retailers pushing into its hard-goods business, Canadian Tire is expanding its store presence and raising its profile at the gas pumps. With 212 gas bars currently in operation, the company plans eventually to furnish nearly all of its 454 stores with petroleum units to increase gas sales, and is designing an expanded format for its gas bars. Oak Brook, IL — Ace Hardware Corp. has reported a 3.6% increase in consolidated wholesale hardline sales for the year ended December 28, 2002. Sales were US$3.029 billion, compared with US$2.924 billion in 2001. Sales to retailers in the U.S. were up 5.6% compared to last year. Net profits increased 12.3% to US$82.1 million from US$73.1 million the year earlier. The company took a hit on its sale of the Canadian division to Sodisco-Howden Group, in the form of non-patronage operating losses from Ace Canada Ltd. and the loss on the sale of the Canadian business to Sodisco-Howden. New York, NY — Home Depot is considering two locations to Manhattan - making it their first ever sites there. According to a report in last week's New York Post, the retailer has plans to start erecting smaller, "Neighborhood Urban" stores, one off Fifth Avenue in the Flatiron District, and the other at one entrance to the lower level of the Bloomberg tower, now under construction by Vornado Realty Trust. Duncan, BC, — Doman Industries' latest plan to gain credit protection has been turned down. Doman's draft Plan of Compromise or Arrangement, submitted recently to the Supreme Court of British Columbia in connection with proceedings under the Companies Creditors Arrangement Act, was not approved for distribution to creditors, based upon objections from some of Doman's shareholders. The company intends to revise its Draft Plan based upon the Court's directions and re submit it to the Court within the next few weeks. Doman expects that a revised Plan will be approved by the Court for presentation to its creditors for their approval some time in April. Atlanta, GA — Home Depot Inc. says it expects to meet its sales target for 2003. Despite the prospect of a U.S. war against Iraq, the company remains on track to achieve top line sales growth of 9-12%. Home Depot posted a 2% decline in 4Q sales as same-sales fell 6%. Task Tools & Abrasives is relocating to a larger facility. On April one, the company will move into a 70,000-sq.ft. facility at: 6800 Dennett Place, Delta, BC V4G 1N4. New phone: 604-946-3100; email remains the same: tasktool@task-tools.com. Washington, DC — The top CEO at Maytag Corp. got a bonus last year of US$800,000. The bonus matched the salary of Ralph F. Hake, chairman and CEO of Maytag, in his first full year with the appliance maker, according to a regulatory filing. Hake, who joined in June 2001, was paid a salary of US$409,821 and a bonus of US$300,000 for his first six months. Montréal, QC — Domtar has sold the assets of its Sault Ste. Marie, ON hardwood sawmill to Boniferro Mill Works Inc. of Sault Ste Marie. Domtar has also entered into a five-year agreement with Boniferro to supply chip for its pulp and paper manufacturing operations, thereby providing the startup company with some initial business. Domtar has also leased back various buildings and equipment to let 51 staff continue to dry and dress softwood lumber for other Domtar mills. Toronto, ON — Retail Council of Canada will relocate on March 28, 2003 to 1255 Bay Street, Suite 800, Toronto ON M5R 2A9. Phone and fax remain the same.
The seasonally adjusted annual rate of housing starts in Canada in February was 246,400 units, 34.5% higher than the January 2003 rate, reports Canada Mortgage and Housing Corp. The seasonally adjusted annual rate of urban single starts increased 6.4% to 104,100 units in February from 97,800 units in January. Urban multiple starts increased 89.3% to an annual rate of 120,600 units in February from 63,700 units in January. Rural starts in February were estimated at an annual rate of 21,700 units. The CMHC forecast for total housing starts in 2003 remains at 205,500. Canada's economy churned out 55,000 new jobs in February-handily beating expectations-as last year's torrid pace of job creation resumed following a January pause. But according to Stats Canada, the country's jobless rate remained at 7.4% in February, unchanged from the previous month, as an increase in labour force participation matched the increase in new jobs. Canada's red-hot housing market again defied expectations in January, helping fuel another record month for building permits in this country, despite expectations that plans for future activity would cool in the new year, says Stats Canada. Builders took out $4.3 billion in permits during the month, surpassing the previous monthly record set last October. The January figure is also up 12.3% from December's levels, far surpassing the increase forecast by most economists. The soaring housing sector was the backbone of Canada's economic growth last year, with investment in residential construction soaring more than 20% from the previous year's levels, says Stats Canada. For the year, investment totalled $57.2 billion, up what the government agency described as a "remarkable" 20.9% from 2001. Gains were seen across all three components of residential construction, namely new housing, renovations and acquisition costs, which covers things like sales tax, land development charges and record-processing fees for mortgage insurance. Merchandise trade surplus rose to $4.9 billion in January, from $4.1 billion the prior month. The increase was fuelled by the continued rise in energy shipments, aerospace exports and an unexpected drop in imports. This follows recent data showing that job creation and the housing market aren't slowing from last year's robust pace of expansion.

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