John Caulfield, Contributing Editor
 vol. x, #9 March 1, 2004

IN THIS ISSUE: * Home Depot and Lowe's: the numbers in '03 * Who are the top 10 in America? * Rona ends year with strong earnings, sales * Lowe's, Menard's go big with latest stores * Taiga hits $1 billion mark, evaluates challenges * Matreco Hardware starts shipping

* * * * * * NOTE: Dollar amounts are stated in the currency of the country from which the story originates. — Michael McLarney, Editor & Publisher * * * * * *
"I don't care what is written about me as long as it isn't true." — Katharine Hepburn (American film star)
Home DepotATLANTA & MOORESVIILE, N.C. — The rivalry between Home Depot and Lowe's may be raging, but both retailers continue to thrive in a U.S. market whose economic heart beats to the rhythm of home building and remodeling activities.Lowe'sThe companies, which rank first and second in sales among home improvement dealers worldwide, scored big gains in revenue and profit in fiscal 2003:
Visit Home Depot vs. '02 Lowe's vs. '02
Sales ($bil.) 64.82 11.2% 30.84 18.1%
Net income ($bil.) 4.30 17.5% 1.88 27.6%
Same-store growth 3.8% Visit 6.7% Visit
Net stores opened 175 11.4% 84 11.5%*
Employee 300,000 Visit 121,000 Visit
(* includes sell off by Lowe's of 26 Contractor Yards) In its fourth quarter alone, Lowe's reported a 27.6% jump in earnings, to $407 million, on sales of $7.25 billion that rose 20.1% over the same period in 2002. Depot's fourth-quarter net income grew 38.6% to $951 million, on sales of $15.1 billion, which represented a 14.5% increase. More importantly, Home Depot's same-store sales in the fourth quarter — 7.6% — bested Lowe's same-store gain — 7.3% — for the first time in several quarters. Home Depot, which ended its fiscal year with 1,707 stores (including 102 in Canada), plans to open 175 more units in 2004, most of them in the second half of the year. Lowe's is sticking to its plans to open 140 stores this year and 150 in 2005, despite carrying a significantly heavier debt-to-equity burden than Home Depot's. Lowe's strategy seems focused on reaching a level of critical mass in as many markets as possible, with an emphasis on major markets that gives Home Depot a run for its money. Home Depot has spent $10 billion over the last three years — and will spend probably as least another $5 billion over the next three — remodeling and renovating its stores to recapture customers who may have been turned off by erosion in its stores' appearance and customer service. The recent sell off of its Contractor Yard division to Strober indicates a stronger focus on the traditional big box format — and the DIY customer. Home Depot now goes to market with no fewer than six store formats, and even its warehouse home centers come in different sizes that range from 66,000 to 130,000 sq.ft. Those stores now target a broader range of customers, especially homeowners who are looking for professional installation and remodeling help: last year, installed sales grew by 40% to $3 billion in products and labor, and the company projects that the installation of HVAC systems alone will exceed $250 million in 2004. Home Depot's strategy, abetted by its investment in technology and associate training, revolves around increasing its stores' foot traffic and getting shoppers to spend more money in its stores. Last year, the company's average ticket rose to $51.50 per customer, the highest in its 25-year history.
BOUCHERVILLE, Que. — Canada's number-two home improvement retailer saw sales and profits increase in 2003, a year that saw Rona Inc. make the biggest acquisition in its history.Consolidated sales, the total of wholesale sales through distribution, combined with the sales at retail by its corporately owned stores and its share in franchised stores, climbed 16.2% to 2.71 billion, from $2.33 billion in 2002. Retail sales through all stores were up 26.7% to $1.76 billion; while much of that growth was due to the addition of Réno-Dépôt, the 20-outlet chain of big boxes it bought in early September, retail sales were up 10.9% not including Réno-Dépôt. Same-store sales for the year were up 3.7%. Rona's net earnings for the year were $77.9 million, an increase of 80.8%; earnings jumped 31.3% year over year, the thirteenth consecutive year of annual increases. The company ended the year on a strong note as well: consolidated net sales for the fourth quarter reached $790.7 million, up 46.4% from the same month a year earlier. Combined sales from all stores were up 73.9% in 4Q. Excluding sales from Réno-Dépôt, sales were up 7.6% and same-store sales were up 4.9%. On the distribution side, sales through the warehouse were up 7.9% for the year and 21.2% in the fourth quarter. Distribution sales amounted to $953.7 million for the year, an increase of 0.8%. The weak rise here was due largely to lower LBM orders by dealers in the second quarter of 2003, when prices were running high. Rona says it already realized $10 million in operations savings through synergies derived from the Réno-Dépôt purchase. By the end of this year, another $25 million in savings will be realized, for a total saving of $35 million, which will be recurring in years ahead.
SPECIAL REPORT — The growth of America's leading home improvement retailers continues to reaffirm the growing consolidation among a handful of key players. With the U.S. economy showing positive signs of an upturn, home improvement retailing managed to maintain growth of almost 6% in 2003 and the industry now amounts to about $375 billion in sales. Like Canada and other countries that have experienced consolidation in recent years, a disproportionate amount of the market rests in the hands of a few large companies, most notably Home Depot, followed by its rival, Lowe's Cos. These two retailers dominate the DIY scene in the U.S. Home Depot has almost 1,700 stores and sales approaching $65 billion. Lowe's, with sales of $30.8 billion generated by approximately 1,000 stores, is aggressively opening stores alongside Home Depot in major centres such as New York, Atlanta and Chicago. Together, these two companies account for one-quarter of the U.S. retail home improvement industry. The number-three retailer is Menard's, a privately owned chain of 187 stores located in nine Mid-Western states. Considered the incumbent in these areas, Menard's is bracing as more and more competitive big boxes begin opening up in its markets. Meanwhile, the independents have remained strong, collectively increasing sales. Ace's net income last year increased 22.7% to $100.7 million on wholesale sales of $3.16 billion — up 4.3% over 2002, while its sales at retail top the $13-billion mark.  
Company Retail sales % chg. stores
Home Depot $64.8 billion 11 1,707
Lowe's Cos. $30.8 billion 15 925
Ace Hardware Corp. $13.0 billion N/A 5,027
TruServ Corp. $10.5 billion N/A 6,200
Do-it Best Corp. $9.0 billion N/A 4,500
Menard's 6.5 billion 6.6 187
Sherwin-Williams 3.5 billion 5.1 2,688*
Stock Building Supply 2.77 billion* (7.8) 222
84 Lumber 2.5 billion 15 453
Builders FirstSource 1.75 billion 10 73
*stores in the U.S., Canada and Mexico. Sherwin-Williams also operates about 60 stories in other countries, whose sales are not included in its total revenue. *Stock's numbers are for the fiscal year ended July 31, 2003.
SPECIAL REPORT — Home Depot, for once, may not be setting a trend. The industry's largest dealer is expanding with various-sized store formats, some as small as 80,000 sq.ft. But its rivals continue to break into new markets with gargantuan warehouse outlets. Last week, Menard's opened a 225,000-sq.ft. store, which includes a drive-through lumberyard and a 25,000-sq.ft. covered seasonal area, in Lima, Ohio. For the past year, Menard's has been growing almost exclusively using this format, which provides considerably more space to lawn and garden products and broader inventory depth in most categories. Lowe's is planning to open a 162,000-sq.ft. store, that would anchor a 362,000-sq.ft. retail development, in Kent, Wash., which is scheduled to open in Spring 2005, according to the Puget Sound Business Journal. Typically, Lowe's total square footage includes lawn and garden departments that range from 22,000-30,000 sq.ft. It remains to be seen, though, just how many super-sized warehouses of this type are in Lowe's future. Last year, the retailer's stores averaged 114,286 sq.ft. Next year, the company intends to open 140 stores and increase its total square footage by 14%, which would mean that the average size of its new stores in 2004 would be 108,800 square feet. In addition, Lowe's officials have stated that a 95,000-sq.ft. format will play a big role in its future growth.
VANCOUVER, B.C. — Even as Taiga Forest Products, the Western-based lumber and building materials wholesaler, ends up the year by cracking the one-billion-dollar mark for the first time, it faces a number of challenges to continued growth — and the softwood lumber dispute with the U.S. is at the top of the list. Quota still hangs like a pall over the Canadian lumber industry, as both the U.S. and Canada appear to be no closer to realizing a substantive resolution to the differences that separate both countries. The Canadian method of leasing government-owned land to forestry companies, and charging a "stumpage fee," has been a continual sticking point for less efficient suppliers in the U.S. attempting to compete with the sheer volume of available softwood lumber from Canada. However, says Jim Bradshaw, vice-president building products for Taiga, neither side is benefiting under the standoff, as U.S. home builders — and homeowners — feel the impact of duties placed on Canadian softwood when they get to the cash register. "We believe the hurt has been felt on both sides of the border and its time to resolve it," he says. Another challenge, says Bradshaw, is the move to more direct selling, as mills try to bypass distributors such as Taiga and sell directly to the likes of Home Depot and other big customers. However, customers are inclined to turn to distributors to get value-added in the form of special packaging, proper lifts of product, correct stamping, etc. "They recognize that the best way to do that is through private distribution," he says. In fact, he adds, the quality demanded by the big boxes is often coming from smaller, specialized mills that really rely on distribution to get their product to the retail customer.
Matreco truckHALIFAX, N.S. — With a core of six or seven key categories, AWARD Distribution Ltd. has begun shipping to its dealers, only weeks after members of Tim-BR Mart Ontario began receiving hardlines from its new hardware supplier, Groupe BMR in Longueuil, Que. Although BMR is a fellow regional buying group, it has established distribution facilities of its own, including newly expanded hardware warehouse. The groups have long been associated under the umbrella organization, Matreco. Now, not satisfied with selling only to its own members, BMR has turned to fellow members of Matreco as an alternative source of hardlines supply. Together, three of the four Matreco members (the fourth is Tim-BR-Marts Ltd. in Vancouver) have established a new hardware company, Quincaillerie Matreco Hardware, or QMH. But rather than just have BMR ship directly to its own members, AWARD has in turn opened a warehouse of its own in nearby Bedford, under the name AWARD Distribution Ltd., or ADL. The new entity required an investment of $35,000 from more than 50 of its members, and was open for business early this year. Beginning with between 6,000 and 7,000 core SKUs, sources say the warehouse expects to buy $5 million on hardware from the BMR warehouse, $9 million through direct ship, and another $4 million in hardlines shipped direct to the ADL warehouse. According to Don Nash, president of Tim-BR Mart Ontario, more than 100 of his dealers have signed on — and invested — in the new distribution entity or QMH. But unlike his counterpart in Atlantic Canada, Nash is in no hurry to build a facility of his own. Rather, he's chosen to take a wait-and-see approach, even though the potential volume is greater than ADL's. Nash expects BMR to be able to take over the $40 million in hardware purchases currently made by Tim-BR Mart Ontario's dealers from other sources. And, he adds, that volume has the potential to double within the next 3-5 years. "We've got sufficient funding to build the warehouse whenever we choose," says Nash. "But we're happy to work through the BMR warehouse."
Canadian Tire 44.40 27.85 43.80
Canfor 13.50 7.60 13.49
Costco 39.50 27.00 38.86
Goodfellow 16.00 9.75 15.74
Home Depot 37.89 21.51 36.31
Hudson's Bay 14.15 7.75 13.04
Lowe's Cos. 60.42 35.45 56.00
Rona Inc. 35.00 13.20 30.25
Sears Canada 21.50 13.60 17.75
Sodisco-Howden 3.35 1.30 2.99
Taiga Forest 8.75 6.31 8.75
Wal-Mart 60.20 46.50 59.56
West Fraser 40.50 29.25 39.75
VANCOUVER, B.C. — International Forest Products Co. has made a bid to acquire four coastal mills and one manufacturing plant owned by Doman Industries. The sell off would become part of Doman's effort to dig itself out of bankruptcy protection. The deal includes some timberlands and forest tenures equalling about 2.7 million cubic metres of timber. In return, Interfor would pay $280 million in cash, which would be used to repay debt to secured creditors. The deal would allow for Doman to hold on to the balance of its existing wood products business and pulp operations.LONDON, UK — British retail giant Marks & Spencer has opened its first store devoted to homeware and furniture. Called Lifestore, the outlet in Gateshead is the first of 20 potential sites that M&S has identified for the concept, which reflects a new thrust into growing home décor and furniture area. The U.K. home décor market is reportedly worth around £20 billion a year, of which M&S has less than 2%. BOUCHERVILLE, Que. — Rona Inc. has announced it will close two Rona Cashway stores, as they now overlap with Building Box stores acquired by Rona when it bought up the Réno-Dépôt chain from Kingfisher in September 2003. The stores in question, both corporately owned, are in Windsor, Ont. and Cambridge, Ont. Rona expects the business from these stores to be transferred to the nearby big boxes. NORWALK, Conn. — The 2004 National Hardware Show has reported that 2,054 exhibitors have signed up for this year's show in Las Vegas. The show has grown to about 451,500 sq.ft. of exhibit space at the Sands Convention Center and the adjacent Venetian Ballroom. In addition, more than 12,000 retailers and buyers have pre-registered to attend. The show will be held May 10-12. Click here for more info.
Claude Dauphinais, formerly head merchant for hand and power tools at Rona Inc., has left the company. No replacement has been named yet. (514-599-5100)Michael Drury has been appointed national sales manager for Hitachi. He was previously with Acklands Grainger as district sales manager. (905-564-9477)
Even though it's been on a high note, consumer confidence appears to be faltering. According to the Conference Board, the consumer confidence index fell from 96.4 in January to 87.3 in February. The index had been rising steadily, from 76.8 in September to the 96.4 high in January.Real gross domestic product grew at an annual rate of 4.1% in the fourth quarter of 2003, according to the Commerce Department. This follows a growth rate of 8.2% in the third quarter of 2003.
Retailers had a tough time in December in Canada, as lower demand for motor vehicles, and poor sales in general merchandise and clothing stores caused retail sales to drop 1.2%, reports Statistics Canada. And while sales for the year were up 3.1% for the year, as retailers sold a total of $316 billion worth of goods and services in 2003, this increase was about half the 6.0% growth rate in 2002 — and was the weakest annual gain since 1995.Wholesale sales increased to $36.9 billion in December, largely thanks to a boost from the automotive sector, reports Statistics Canada. Total sales in December reached their highest level ever, slightly exceeding the last peak reached in January 2003. For the year, however, sales were up only 3.6%, well below the increase in 2002. For 2003, the growth in constant prices was 6.2%, a higher rate than in 2002 (+5.5%).
Home Depot, Canadian Tire, Home Hardware and more! Hardlines will host its third annual Meet the Buyers Breakfast Seminar, April 28, 2004. For more details, call Bev Allen at 416-489-3396 or
OTTAWA — Canada's robust building industry resulted in a record investment level in residential construction in 2003 says Statistics Canada. Investment reached $61.4 billion, up 11.5% from the previous record of $55.1 billion set in 2002.All three components of residential construction investment, new housing, renovations and acquisition costs, saw growth, fuelled by an increase in demand, tight rental and resale markets in some parts of the country, and an increase in the average value of housing. The biggest component of residential investment is new home construction, which rose 11.3% to $31.4 billion, thanks largely to big spending on new single family dwellings. This level grew 8.4% to $20.9 billion in 2003, while multiple housing construction —apartments and condos — was up 27.3% to $5.6 billion. The renovation sector remained strong, as well, in line with a trend among dealers to rely as much on repairs and renos as on new housing. Renovations were up 11.5% to $24.6 billion from 2002, accounting for 40% of the total value of residential construction investment. Acquisition costs rose 12.1% to $5.4 billion. Although the latest report from CMHC shows that 2004 has gotten off to a slightly slower start, it follows a record year of activity: 2003 was the busiest for starts since 1988. January's starts reached 195,000 seasonally adjusted, down 11.4% from 219,400 starts in December, with the biggest drop coming from multiples, which were down 15.4% seasonally adjusted. Single starts were down 7.9%. However, 2004 is forecast to remain strong, with overall housing starts expected to decrease by 6.6% overall, while resales are expected to fall off from last year's record high by 5.6%.

****HARDLINES MARKETPLACE**** Don't miss the products and services on the Hardlines web Marketplace: And check out Hardlines Classifieds on the web: HELP WANTED

SENIOR MANAGEMENT OPPORTUNITIES TruServ Canada, a 100% Canadian-owned cooperative, has two exciting employment opportunities available! We provide hardware and general merchandise product and support programs for approximately 675 True Value Hardware, Country Depot and V&S Department stores across Canada.
  1. Regional Manager, Sales, Operations & Member Relations (East) — Responsibilities include: maximizing Corporate and Member growth, profitability and market share within the region through existing Member stores; leading and managing the District Managers to achieve store growth, retail, wholesale and profit objectives — this includes directing, training and leading the Member to participate and execute the essential retail programs for the specific banner; managing the existing base of stores through the District Manager, and through store visits, by working closely with the District Managers, including travelling with them and developing their skill sets. This position is based in our Kitchener office.
  2. National Growth Manager, True Value / V&S — Responsibilities include: Creating a professional business development and recruitment process coordinating all aspects of prospecting; researching and enhancing the True Value / V&S retail brands for future market development inclusive of marketing/advertising/communications, building décor, and small to large prototype models — this includes the conceptual development of prototype stores (by size); implementing an Active Brand Management process that targets prototypical markets and enhances brand equity. This position is based in our Winnipeg office.

Please visit our web site for more details on these two positions, including qualifications required. Interested candidates may submit a resume via email: or confidential fax: (204) 453-9414. ********************************************************************************** RETAIL ACCOUNTS EXECUTIVE

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A strong understanding of the retail market is a must, along with at least 3 years experience with large retail national accounts, specifically in the hardware wholesalers and warehouse home centers. Preference given to candidates with:

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