| COLOGNE REPORT 2: INTERNATIONAL PRODUCT WATCH |
| The plethora of professional products appearing at the world's most powerful show (enough cheap alliteration already! — Editor). To see our roundup of what's new at Practical World, the International Hardware Fair/DIY'TEC, plus incriminating pics from our Canada Night Reception, click here. — Michael |
| SODISCO-HOWDEN BOOSTS 4Q PROFITS,
SORTS OUT BANNER PROGRAMS |
| Montréal, QC — Sodisco-Howden Group has turned in strong results for fiscal 2002. Revenues for the year reached $482 million, up 20.6% over 2001, while net earnings swung from a loss of $6.0 million in 2001 to a profit of $2.4 million in 2002.
Thanks in large part to the acquisition last year of the hardware and LBM assets of Marchands Unis Inc., plus a successful buying show in Montréal in November and the strong performance of the home renovation market, Sodisco-Howden posted a profit of $2.2 million in the fourth quarter, compared with a loss of $5.7 million in 4Q 2001. Sales for the quarter were up more than 20% to $126 million.
During the quarter, the company formed a strategic alliance with Ace Hardware Corp. in the U.S., under which Sodisco-Howden agreed to purchase all of the outstanding common shares of Ace Hardware Canada for $12.7 million. At the time, Ace Hardware Canada was supplying hardware to 600 building centres across Canada, with 120 of them co-branded under the Ace banner. But the industry has questioned whether Sodisco-Howden will be able to hold on to the business of the Marchands Unis dealers and maintain service levels to Ace customers.
All shipments to Ace dealers are now coming out of Sodisco-Howden's London, ON warehouse, although Jos Wintermans, president and CEO of Sodisco-Howden, admits the transition has taken a little longer than expected and is still not completely smooth.
"A significant part of the Marchands Unis volume has stuck with us," says Wintermans. And, he adds, the increases in last year's results more than paid for the cost of the acquisition, which closed in February 2002 and cost the company $23 million. The positive impact on the bottom line was felt by the third quarter, when Sodisco-Howden got firmly back in the black after showing a loss of $1.0 million on sales of $235.0 million for the first six months of 2002.
The Ace program, along with Sodisco-Howden's other banners, is currently being subjected to a branding review. The flagship banner is Pro, with about 69 dealers under the Do-it centre name. But with the Marchands Unis acquisition came Bâtitout, Ferplus Quincaillerie and Jardirêve, all concentrated in Québec, Eastern Ontario and Acadian New Brunswick. For now, they will continue to operate under their current banners.
"We're drawing up our plans for the Ace banner now and polling our dealers. We're figuring out ways to make both banners, Pro and Ace, a good balance to offer to the dealers," says Wintermans. "But we want to provide people with real choices."
"We have now reached a critical mass in our markets across the country, which will allow us to be even more competitive, says Wintermans. "We believe we are well-positioned for increased profitability going forward. The last two quarters of 2002 demonstrate earnings momentum, generated from internal efficiencies and increased sales from our first strategic acquisition." |
| DIFFERENTIATION KEY TO SUCCESS, RETAIL LEADERS WARN |
Cologne, Germany — Recent surveys in both Europe and the U.S. reveal that consumer perceptions of competing home improvement retailers do not differ all that much. The challenge, then, is to create some point of differentiation.
 "It's important for retailers to define how they are playing in the DIY arena," said Michael Baumgardt of Bausthoffe mbH, He was speaking as part of a panel at the recent International Conference of the German home improvement retailers association, BHB. He referred to a recent study that revealed very little difference in customer perception among leading home improvement retailers such as OBI and Praktiker.
That need to stand out becomes even more urgent, Baumgardt added, given the number of other, non-traditional, players such as Ikea entering the hardware and home improvement business.
Ikea, it was noted, makes an impact on consumers even at an early age. Children have no trouble shopping in Ikea, said the panel's moderator, Rick Mulligan of radio station ZDF in Mainz. And with up to 60% of home improvement shopping being done by women, stores must reflect their needs — and get more women into the upper ranks of their management.
A recent U.S. survey of female preferences for big boxes surprised many by revealing that both Home Depot and Lowe's scored about the same, adding weight to Baumgardt's argument.
He urged the audience to pay more attention to the customer, and less on the competition. "We have to figure out ways to create consumer demand, not just satisfy it," he pointed out. Needs can be created through product innovation. Then deliver the focus on the customer to the store shelves. "Make it easier for customers to shop - reduce SKU complexity and increase the range of attractiveness." |
| PAINT BUYING GROUP ADDS LINES, MEMBERS |
Brampton, ON — Since its inception two years ago, Para ProSource has grown to 350 members, as the country's only buying group for painting and decorating accessories to specialty stores. The assortments available have even grown into private label products, says Doug Munro, general manager, who created the buying group for Para Paints.  "ProSource now offers a full line of products," says Munro, formerly head of purchasing at Homecare Building Centres and a former buyer at True Value. "Along with some private label products, it helps dealers differentiate themselves from the box stores and helps them compete with the box stores."
Para sales reps across the country also represent the ProSource program. So far, it's very strong in Ontario, with growing representation in Québec and the Maritimes. Western Canada is growing, as well, says Munro.
Some of the lines include higher ticket items like vinyl shutters, flooring and window blinds. "Our dealers could be losing that business to the big boxes because the boxes could offer dating through 'don't buy a cent' events."
To combat that, the latest addition to the program is a ProSource credit card, which helps dealers manage credit and receivables for both professional and DIY customers. The credit card allows DIY customers to purchase at a ProSource store and get up to six months interest free. It's also a very low cost card for dealers to carry, says Munro.
"We've been able to negotiate pricing for the dealers. Now we've been able to negotiate credit terms for that dealer's customer that will allow the ProSource member to compete head on with the box stores." |
|
COMPANY |
52-WEEK HIGH |
52-WEEK LOW |
CLOSE (FRIDAY) |
| Canadian Tire |
33.65 |
26.80 |
29.90 |
| Canfor |
11.70 |
6.83 |
8.80 |
| Costco |
43.05 |
27.00 |
30.43 |
| Emco |
16.90 |
8.05 |
16.55 |
| Goodfellow |
13.99 |
9.88 |
10.40 |
| Home Depot |
50.46 |
20.10 |
24.63 |
| Hudson's Bay |
15.40 |
5.87 |
8.24 |
| Lowe's Cos. |
49.99 |
32.50 |
40.95 |
| Rona Inc. |
14.75 |
11.75 |
13.90 |
| Sears Canada |
25.10 |
13.60 |
14.81 |
| Sodisco-Howden |
2.07 |
1.06 |
1.41 |
| Taiga Forest |
7.00 |
5.75 |
6.75 |
| Wal-Mart |
62.30 |
43.72 |
53.13 |
| West Fraser |
40.38 |
26.27 |
36.00 |
|
|
|
| COMPANIES IN THE NEWS |
| Moncton, NB — Kent opened on Sunday yesterday, breaking from its traditional strong stance against Sunday openings. The store was open officially only as an "Irving affiliate day," but since one in three people in New Brunswick work for an Irving company, the parking lot was jammed. Kent plans to open every Sunday once Home Depot opens its first store here on April 24.
Atlanta, GA — A new report expects Home Depot's results to sag during its first quarter, as sales growth slows and margins get squeezed. Barbara Allen of Natexis Bleichroeder says Home Depot's per-share earnings for the quarter could decline nearly 18%, from 36 cents to 30 cents. Home Depot is also investing heavily to upgrade existing stores, which will further cut into profits, she says. Home Depot expects 1Q earnings to increase 9-12%.
Okotoks, AB — A new Canadian Tire store opened here yesterday. Rick Siddon is the associate dealer of the 90,000-sq.ft. outlet, which carries 30,000 SKUs and cost $6.3 million to erect. It features Canadian Tire's "Next Generation" concept, including store-within-a-store specialty boutiques for housewares, hardware and tools, home maintenance and repair, home décor, lawn and garden, automotive, leisure and sporting goods. The store also has a 7,000-sq.ft. garden centre.
Duncan, BC — Sales for Doman Industries for the year ended December 31, 2002 were $634.9 million, compared with $770.0 million in 2001. The company had a net loss before capital asset write-downs of $96.7 million and after asset write-downs of $164.1 million, compared with a net loss before asset write-downs in 2001 of $143.6 million and after write-downs of $412.9 million. Sales in the fourth quarter of 2002 were $169.4 million, up from $161.2 million. Under bankruptcy protection, Doman has a plan to reduce its long-term debt from US$673 million to US$273 million.
Montréal, QC — Sodisco-Howden Group has completed an agreement to sell the shares and assets of Charles Bedard, a retail operation in Québec City, for book value back to Charles Bedard. This transaction should close on March 31, 2003. The Company acquired this retail operation as part of its acquisition of Marchands Unis earlier last year.
Oak Brook, Ill. — Ace Hardware Corp. has designated April 14 as the first day when its customers will be able to order products online via the co-op's Web site. It will offer 40,000 of its 65,000 SKUs online through an e-commerce initiative that will be fully integrated into www.acehardware.com, the co-op's informational site.
Boucherville, QC — The newest Ikea store in Québec, and the largest, opened last week on Montréal's south shore. Expected to attract up to 19,000 visitors on its first day of business, the store represents a $60 million investment and the creation of 350 new jobs. It has 1,562 parking spaces, 28 checkout lanes within a 172,000-sq.ft. retail area. The overall size of the store, with warehouse, is 312,000 sq.ft. Sales in the first year are forecasted at $75 million.
Mississauga, ON — Drummond Metal Products has moved to: 5720 Ambler Drive, Mississauga, ON L4W 2B1; phone: 905-625-7919; customerservice@drummondmetal.com. The toll-free number remains the same: 1-800-265-2977.
Hoffman Estates, IL — Sears in the U.S. wants to put its US$30 billion credit card business up for sale, which helped boost its share price 18% last week. Such a sale could be worth as much as $7 billion to Sears, which wants to pay off debt and focus on its retail business. It also announced it plans further job cuts as it attempts to restructure.
Providence, RI — The state of Rhode Island intends to pursue another trial against the lead paint industry. A judge presiding over the original case had declined to come to a resolution to the first case, which ended in a mistrial. The state claimed the paint is a public health threat, arguing that 35,000 Rhode Island children have been poisoned since 1993, even though lead paint was banned in 1978. |
| PEOPLE ON THE MOVE |
| Patrick Williams is re-locating to Toronto as national accounts manager for J&R Home Products. He has spent the past year expanding J&R's business in the Alberta marketplace. Prior to joining J&R, ran his own sales agency. (604-525-8333) |
| MARKET INDICATORS |
| Retail sales climbed 0.7% in January to $26.0 billion following essentially unchanged sales in December (+0.1%) and a 0.5% decline in November. Excluding sales by motor and recreational vehicle dealers, retail sales increased 1.5% in January. In 2002, retailers posted their second largest annual sales gain in five years The Consumer Price Index increased 4.6% from February 2002 to February 2003. Energy prices, and especially gasoline prices, were the main factor behind the rise. This is the highest increase in inflation since 1991. |
| NOTED… |
| Women are appearing more and more in hardware stores and building centres, and one reason is they are doing it themselves. According to the National Association of Home Realtors, female ownership of homes in the U.S. increased 53% to 930,000 in 2001 from 606,000 in 1989. And they're buying everything from condos to co-ops and single-family houses. |
| OVERHEARD… |
 "The only way you can differentiate yourself in the 21st century is with service. If the only thing you can offer is price, you're dated. You're history. Go ahead and write your tombstone."
— Robert Tillman, chairman and CEO of Lowe's Cos., speaking at the recent BHB Conference in Cologne, Germany. |
|
vol. ix, 13 March 31, 2003
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