| “Each of us must do the things that matter... you were once as young and scared as me.” — Tom Rush (from “Child's Song”) |
| CONSOLIDATION KEEPS RETAIL SALES IN HANDS OF A FEW |
| TORONTO, May 4, 2005 – Canadians continue to invest in their homes at a record rate, and just four organizations are reaping exactly half of that retail spending. According to a new report in Hardlines Quarterly Report, Home Depot Canada, Rona inc., Home Hardware Stores Ltd., and Canadian Tire Corp. grew at a healthy clip last year. And even though housing starts are beginning to stabilize in 2005, these retail giants – and the retail home improvement sector in general – can be counted on for vigorous growth in the year ahead, despite what Wall St. and Bay St., despite negative signals from Wall St. and Bay St. ”The rate of investment by Canadians on repair and renovation now exceeds the value of spending on new home construction, a phenomenon that is being felt at the cash register, where $1 out of every $10 spent at retail goes toward fixing, renovating or otherwise enhancing the home,” says Michael McLarney, Editor and Publisher of Hardlines Quarterly Report.
“That puts retail giants such as Home Depot, Rona and Canadian Tire in a favorable position for long-term growth, especially as consolidation finds almost half the industry in the hands of these four," he continues.
“Canada’s Top Four” appears in the latest issue of Hardlines Quarterly Report, the sister publication to Hardlines. Call us for info on how to subscribe! |
| RONA TEAMS WITH 2010 OLYMPICS, ADDS LOCAL INITIATIVES |
| MONTREAL & VANCOUVER – Rona will replace Home Depot as official retail home improvement sponsor for the Olympics. The games will be held in 2010 in Vancouver. The eight-year partnership provides Rona with sponsorship rights for the 2010 Olympic and Paralympic Winter Games, including sponsorship rights for the Canadian Olympic Team for the Torino 2006, Beijing 2008, Vancouver 2010 and 2012 Olympic Games.
Rona bid aggressively to get the sponsorship from Home Depot, in a deal valued at $68 million. Besides providing support for a distinctly Canadian event, to complement its all Canadian marketing efforts, the sponsorship is expected to give Rona a big lift in awareness in Western Canada. “It’s important to establish us in the West, where we are really focusing on our growth,” says Sylvain Morissette, spokesperson for Rona. “But it’s an exciting announcement for our entire organization nationally, and for our employees,” he continues.
The Rona deal includes a $7 million investment in additional initiatives to support sports at the community level. These include the Rona Youth Aspiration program and the Own the Podium program. The company has also committed to an aggressive marketing and communications program to help promote awareness of the Olympic Games across Canada. |
| HOME HARDWARE BROADENS HOME ENHANCEMENT OFFERINGS |
ST. JACOBS, ON – One of the major resets of Home Hardware’s newest store design program affects the kitchen and housewares department. Formerly called the Gourmet Shop, the department’s offerings have been expanded, in an effort to broaden its appeal to the distaff shopper, and renamed “Home Expressions.”It’s all part of a brand new look for Home Hardware Stores that was unveiled at its spring market last month. The program, which includes everything from exterior signage to interior layout and endcap displays, was developed for Home Hardware by Watt International.
A comprehensive store package was last done in 1996, with ameliorations made over the years. According to Bill Ferguson, dealer support manager for Home Hardware Stores, the latest changes are designed, in part, to broaden the appeal of Home Hardware stores to women.
 Home Expressions is among a number of departments and service areas that have been repositioned. Others include paint & decorating and customer service. To better serve Home’s contractor and heavy DIY customers, specialty departments, such as the Builder Centre and Home Design Projects department, have been enhanced to make it easier for customers to get the advice, ideas and products to tackle successfully complete projects.
“To maintain its position as one of Canada’s leading retailers, Home Hardware needed to further strengthen its brand and re-create the Home shopping experience,” said Peter Heywood, Vice President of Brand Strategy, Watt International. “Through our strategic design expertise, we have helped them build on their already strong, consistent brand to deliver results and keep customers coming back time and time again.”
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| CANADIAN TIRE WANTS INNOVATIVE VENDORS |
TORONTO – Tom Carter knows Canadian Tire. As category manager for bath shop and home décor, it’s his job to help merchandise the company’s newly expanded décor division. But as for the products themselves, he admits frankly – and humorously, “I don’t anything about these things. And that’s where you come in,” he told a room full of vendors at the recent Hardlines Meet the Buyers breakfast seminar in Toronto. With at least 50% market share in 83 product categories it represents, Canadian Tire has a mandate to be “first to market with new and innovative products,” he said. Any vendor with something unique to offer will be of interest to Carter and his fellow buyers. But coming in to see a Canadian Tire buyer requires much more, including knowledge of how this unique retailer operates. Unlike many other hardlines companies, everyday low pricing is not part of Canadian Tire’s strategy. “We are a high-low retailer, absolutely,” he affirms. Vendors must be able to get behind the Tire’s promotional approach to selling, one, Carter said, that is very powerful indeed. In fact, he admits he was “shocked” by the kind of volumes that can be generated through a flyer blowout. “We can sell as much product in one week as would normally be sold in a year.”
To meet the demands of this kind of selling formula, potential vendors must come to the table with market intelligence – lots of it – plus appropriate packaging, and the ability to deliver into Canadian Tire’s central distribution centre in Brampton, ON on an efficient basis.
 Canadian Tire’s newest store format, called Concept 20/20, offers an updated store layout and expands a number of product categories. One that is getting a big push is Carter’s own bath and décor department. Here, under a newly renamed program called “Bathscapes,” changes have been made to include more high-end products, and even more everyday items, such as towels.
Carter’s department is currently supplied by 25 main vendors, and he wants to reduce that. In the face of consolidation, even existing vendors who want to be part of the growth of Canadian Tire must be able to add value and offer innovation in a product offering. And that product must be offered within a complete selling package. “Offer not just product, but a program,” he advised. |
| HOME DEPOT INCREASES PLANS FOR SMALLER STORES |
| TORONTO – Home Depot Canada will open 20 stores in 2005, up from 19 previously announced. The increase includes at least three 60,000-sq.ft. stores, which are considered a key part of Home Depot's strategy to expand into smaller Canadian markets.“These ‘60,000s’ will put us in many more communities,” says Nick Cowling, a spokesperson for Home Depot Canada. The smaller stores, which typically cut back on LBM offerings to save space and reduce overhead, will go into Spruce Grove, Alta., near Edmonton, in July; Chatham, Ont., by the end of Home Depot’s third quarter (that puts it before Christmas); and in Squamish, B.C., during the fourth quarter, which ends March 31, 2006.
He expects the current rate of growth, which will include more 60,000-sq.ft. outlets, to “continue in the years to come.”
The next openings in Canada will be regular 113,000-sq.ft. outlet in Vaudreuil, QC and a 95,000-sq.ft. store in Woodstock, ON, both in July.
Home Depot, typically unrivalled in its expansion in Canada, appears to be paying more attention than ever to the store opening numbers. Its newest – and only serious – rival is Rona inc., which doubled its planned store expansion for 2005 late last year. It plans five-10 big box openings, and another five-10 traditional building centre openings, in 2005. |
| LOBLAW'S 1Q GROWTH COUNTS ON GENERAL MERCHANDISE |
| TORONTO – Grocery giant Loblaw Cos. reported a 7.9% sales increase in the first quarter, even as profits tumbled due to costs related to restructuring. Sales hit $447 million in 1Q, while same-store sales were up 2.4%. But watch out: as it expands its product range to ward off Wal-Mart’s expansion into grocery, Loblaw expects continued growth from product sales that historically came from hardware stores. Costs incurred in the first quarter include the effect of the re-organization of its supply chain network, which will include the replacement of a number of smaller distribution centres over the next several years with a modernized, more central network of DCs. In addition, there were costs associated with the establishment of a new national head office, which will open in Brampton, ON in the third quarter. As Loblaw pursues its strategy to increase its presence in general merchandise, the relocation of those operations from Calgary to the new Brampton office will take place through the summer of 2005. |
| B&Q BUYS STORES IN CHINA |
| LONDON – While observers speculate that Kingfisher’s DIY division B&Q, is on the selling block, the really important news from last week is that B&Q managed to increase significantly its presence in China. B&Q bought up all of German DIY retailer OBI’s stores in China. The acquisitions add 14 outlets to B&Q’s 22 in China, reinforcing its presence in that burgeoning sector.By adding to B&Q’s asset base, Kingfisher may be attempting to ward off a hostile takeover gesture by Home Depot, or even Lowe’s, both of which Kingfisher CEO Gerry Murphy has admitted to meeting with recently. Kingfisher issued a stock warning last week, sending the stock into a skid – and fueling takeover rumors. But the weakness of the U.S. dollar in relation to the euro is inflating the price of B&Q, making for a less attractive takeover target by a U.S. company, at least for now.
Meanwhile, Home Depot, which is already including China when it itemizes its international presence, has yet to build a single store there.
Other possible bidders for B&Q include Kohlberg Kravis Roberts and a private equity firm, Permira, which has invested in other companies in this industry before, including the DIY chain Homebase. |
| TWO-THIRDS OF AMERICANS INVESTED IN HOME IMPROVEMENT |
| NEW YORK – A new survey of consumer shopping patterns found a sizable increase in the number of households nationwide that are engaging in home improvement, particularly interior projects. The number of households that purchased merchandise for at least one home improvement project in 2004 was 18% higher than in 2001, according to a study released this week by New York-based Scarborough Research, a joint partnership between the publishing giant VNU and Arbitron. Scarborough tracks the shopping, media and lifestyle patterns of more than 200,000 Americans in 75 markets, and covers 1,700 categories and brands. Minneapolis is the top U.S. market for home improvements, where 74% of homeowners having conducted home improvement projects during the past year. Five markets in New York and four in Florida finished among the top 30 home improvement markets.
Scarborough’s survey found that nearly two-thirds of all American households had invested in a home improvement project last year, with interior projects leading the charge: the number of households that spent money to improve the interior of their homes – through such activities as painting, wallpapering, carpeting, bathroom remodeling, etc. – was up 30% over 2001. “We see more homeowners taking on involved and expensive projects, such as remodeling,” said Bob Cohen, Scarborough’s president and CEO. “Additionally, the focus on interiors can be attributed, in part, to the insecurity of today's world. People are taking refuge in their homes more than ever, and
keeping one's sanctuary fresh and new – even by taking on simple, inexpensive projects – adds to the feelings of peace and warmth people get from their home.” |
|
 WHAT'S ON AT NHS:
A VISITOR'S GUIDE |
SPECIAL REPORT – The biggest industry show in North America is only a week away. The 60th edition of the National Hardware Show takes place in Las Vegas, May 17-19, and in only its second year at its new location, the show is sold out. More than 3,100 vendors will be on hand, filling 680,000 sq.ft. in both the Sands Convention Center and Las Vegas Convention Center. Hardlines will be front and centre at this year’s show with the educational and networking events you’ve come to expect from Hardlines! Here are some things you should put on your networking calendar in Las Vegas…We start off with “What's Hot in Lawn & Garden,” Tuesday, May 17 at the Sands Convention Center. Time: 2-2:45 p.m. Come learn more about the factors driving lawn and garden sales in the U.S., in North America and around the world. Featuring: Panelists are Bruce Butterfield of the National Gardening Association, Friedericke van Sandt of Planto, a specialty manufacturer in Germany, and Rob Lunan, manager of garden and gift lines at Lee Valley Tools. John Caulfield, contributing editor of Hardlines, will moderate the panel.
The Canadian Hardware and Housewares Manufacturers Association will host its annual Maple Leaf Night/Soirée Feuille d'érable on Tuesday, May 17, at the Curve Night Club-Aladdin Resort & Casino. Time: 5:30-8:00 p.m. More than 100 vendors are already signed up to rub shoulders with Canadian Tire, Fedco, Home Hardware, House of Tools, BMR, Sears, TruServ, TSC, Zellers, and more. For more info, contact: CHHMA, 416-282-0022.
Hardlines, in conjunction with the Presidents Council, present "Global Retailers: Best Practices from Around the World," Wednesday, May 18 at the Las Vegas Convention Center. Time: 3-4:30 p.m. Featuring: a world-class retail panel: John Herbert, general manager of the European association of DIY retailers; Robert Collins, Director of International Sales and Retail Development, Ace Hardware Corp.; Harald Lux, head of Emil Lux in Germany; Jim Lowe, director of strategic research for one of the leading home improvement retailers in England, Focus DIY. Michael McLarney, Editor & Publisher of Hardlines, will serve as moderator.
Hardlines, in partnership with the National Hardware Show, presents an International Reception at the Las Vegas Convention Centre (immediately following the "Global Retailers" panel). Time: 4:30-5:30 p.m. Want to connect with buyers from the U.S., South America and overseas? This will be the absolute best place in Las Vegas to do it! For more info, click here.
If you want to meet some top international buyers one-on-one, you should definitely sign up for “International Buying Day,” organized by the Presidents Council, on Monday, May 16, the day before the show starts officially. The Buying Day is designed to provide an efficient forum for suppliers who want to expand their market share. Because of the individual appointment format, the Buying Day is limited to 40 suppliers, who will have individual meetings with the following participating retailers: B&Q - U.K.; Focus DIY – U.K.; Globus – Germany; Homebase – U.K.; Komeri – Japan; and Sodimac – Chile. Cost is US$2,000 per vendor. click here to receive more details. |
| COMPANIES IN THE NEWS |
| BOUCHERVILLE, Que. – Rona inc. is in the midst of completing the expansion of its headquarters here, with the addition of 70,000 sq.ft. of office space. This effectively doubles the size of Rona's offices and meeting areas, and will accommodate the relocation of people from the offices of its Réno-Dépôt division in downtown Montreal. That relocation began this weekend, and is expected to finish by mid- to late July, after which the Montreal offices will be closed down. TORONTO – Home Depot blew out a mid-week mini-catalogue promotion to its pro
customers last week. The offer included rental of any tiller, aerator or de-thatcher for a fourth day between Tuesday and Thursday, to receive 50% off the rental price. In addition, waste disposal bins, which have been available in the Ontario market for over a year, are now being offering across the country. The signature-orange bins are provided by a third-party service provider, in sizes ranging from four to 14 cubic yards.
TORONTO – “Imagine This Sold,” Canada's first eBay drop-off store franchise, is the latest in a new retail phenomenon - companies that provide support services to expedite eBay's online auction activities. Imagine This Sold provides a drop-off point for customers unfamiliar, or uncomfortable, with undertaking the online auction process themselves. Customers merely drop off products at a local outlet, and collect their money when the items are sold online. Imagine This Sold provides a one-stop-service to appraise, write ad copy, professionally photograph, post on eBay, ship and arrange payment for items for sale. The company is implementing an aggressive franchise
expansion campaign to add local eBay drop-off stores to their existing flagship retail location in uptown Toronto. A second Imagine This Sold store has already opened in Dartmouth, NS and stores will open in Barrie, ON and Calgary over the next three months.
JONQUIÈRE, Que. – A Wal-Mart store that was successfully organized by the United Food and Commercial Workers Union was quickly pronounced unprofitable and then scheduled to close down on May 6. But the store was actually closed down a week earlier. The store, which received union accreditation last fall, was to close May 6. However, Wal-Mart workers will be paid a few additional weeks following the shutdown.
SEATTLE & TORONTO – Sears Canada Inc. and Amazon Services Inc., a subsidiary of Amazon.com Inc., will join forces to beef up Sears’ website, www.sears.ca. Under the multi-year agreement, Amazon Services will build a new Sears Canada branded-website using Amazon technology. Merchandising, marketing, fulfillment and customer service will all be offered, while functions such as Search, Navigation, Personalization, and Community features such as Customer Reviews will be key elements of the new site.
INDUSTRY, Calif. – Home Depot has negotiated a five-year, $13 million lease on a 650,000-sq.ft. distribution center being built here. The retailer is earmarking site for its burgeoning Home Depot Supply division, which services primarily commercial accounts. The Whittier (Calif.) Daily News, quoting sources from CB Richard Ellis, which brokered this deal, reports that Home Depot intends to consolidate two smaller DCs, in Fontana and Santa Fe Springs, into the Industry facility, which, when completed in December, will be the largest available commercial warehouse in the San Gabriel Valley.
MOORESVILLE, N.C. – Lowe’s Cos. may be looking for a new agency to handle its advertising. AdWeek quotes a representative from the retail giant’s current account manager, McCann Erickson, that Lowe’s has placed its account in review and has requested information from 14 agencies. Last year, Lowe’s gross advertising expenses rose 8.5% to $740 million, according to the company's 2004 10-k filing with the Securities and Exchange Commission. |
| PEOPLE ON THE MOVE |
| At Black & Decker, Laura Tremblay has been appointed account executive, Hardware and Home Improvement Industry Division (HHI)–Ontario. Tremblay began her career with Weiser Lock in 1999 as a direct service representative and was then promoted to regional manager in May 2003. In the fall of 2003, Black & Decker purchased Weiser Lock, and Tremblay joined the company’s Hardware and Home Improvement Division … Ken Burkimsher has joined B&D as account executive, HHI-Ontario. He was most recently district sales manager for Mul-T-Lock Canada Inc. Ken began his career as a project coordinator for Contract Hardware Specialists, as well as with ADH Contract Hardware. |
| MARKET INDICATORS |
| The total value of building permits issued by municipalities reached $5.27 billion in March, up 4.9% from February and the second-highest level on record. The value of non-residential permits reached a record-high in March, to $2.3 billion, driven by both private and public sector investment. However, the value of residential permits actually fell 12.2% from February, as builders took out $2.9 billion worth of permits in March. Declines occurred in both single- and multi-family components. For the first three months of 2005, the value of building permits totalled $14.7 billion, up 15.8% over the same period in 2004. While the residential sector contributed to this gain (+8.0%), it was largely the strength in the non-residential sector (+32.0%) that fuelled this growth. |
| U.S. MARKET INDICATORS |
| Construction spending in March 2005 was $1,051.8 billion, up 0.5% from February and up 8.0% from one year ago, reports the Commerce Department. Total non-residential construction was $459 billion, up 0.7% from last month and up 3.2% from March 2004. |
|
John Caulfield, Contributing Editor
vol. xi, #19, May 9, 2005
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(01/05)
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