| GET THE LOWDOWN ON HOME DEPOT: A SPECIAL REPORT |
| Everything you need to know about the state of Home Depot today.
· Is the company on the cusp of big growth - or big disappointment?
· What kind of growth and market share has Home Depot achieved in Canada?
· What new concepts is Home Depot trying out?
· How are vendors meeting the challenge of greater consolidation?
· How does Home Depot measure up against its toughest competitor, Lowe's?
· What are Home Depot's plans for Canada? What retail concepts will work here?
· What strategies does Home Depot have to beat the competition?
Falling share prices, falling morale, falling profits. Can the new management at Home Depot turn the tide? Of course it can. Find out how in the latest issue of Hardlines Quarterly Report — click here. |
| RONA'S SALES GAIN IN FIRST QUARTER |
Boucherville, QC — Bad weather early in the year resulted in lower-than-expected sales for Rona Inc. in its first quarter. However, consolidated net income, that is, sales through its distribution centre and retail sales through its corporate retail holdings, climbed 52.0% to $5.8 million. The increase was attributed to internal growth and increased operating efficiencies. In addition, Rona's share price has increased 20% and the company launched a second share offering last week. For the first quarter, net sales were up 5.3% to $467.5 million, while operating income (EBITDA) rose 10.3% to $21.3 million.
Same-store sales were up 3.1% for the first quarter. "Even though the quarter was marred by poor weather and low lumber prices, our earnings per share met expectations and increased 20%," said Rona president and CEO Robert Dutton in a prepared statement. "In terms of internal growth, recruitment and acquisitions, our development is right on schedule. And we're making sure we maintain the financial stability we need to  pursue our plans for expansion."
Retail sales for all corporate and franchised stores grew 6.8% to $255.8 million during the first quarter of 2003. The increase was helped by the opening of new big box stores in Gloucester, ON in May 2002 and Mississauga, ON in October 2002. The planned opening of a new big box in Kingston, ON (see pic) is the first of 5-8 such stores planned for the year ahead. |
| PIERCEYS OPENS FIFTH STORE |
|
Dartmouth, NS — Pierceys, a privately held chain of four building centres in Nova Scotia, held the grand opening for its fifth store this past weekend. Located in Elmsdale, 20 minutes north of Halifax/Dartmouth on Highway 102, the 28,000-sq.ft. outlet had a soft opening exactly one month ago, with a grand opening celebration this past Saturday.
 This marks the first new store for Pierceys since August 1998, when it opened an outlet in Tantallon.
Pierceys president Peter Korecki says the company's sales increased more than 10% in 2002. He admits that bad weather has made for a tough start to 2003, but is certain enough about the year ahead to plan further store openings. In fact, he doesn't expect to wait long before announcing store number six. "We have plans for a couple of potential locations that we're looking at," he says, although he intends to grow one store at a time. These, he adds, could either be acquisitions or greenfields startups. |
| NEW SUPPLY CHAIN TOOLS WILL TRACK HOME HARDWARE'S
DIRECT SHIPS |
St. Jacobs, ON — Home Hardware Stores is currently implementing a central database to better track product sales that don't go through Home's warehouse. Called HomeBase, the supply chain management system will also support enhanced merchandising and promotions management.
 One aspect of the program that has Terry Davis, vice-president, information and technology for Home Hardware, excited is the ability to track vendor-direct shipments. "In the past," he says, "it has gone direct from the supplier to the store and we just don't know about it." The HomeBase program will provide better data on sales flow and volumes. The improvements are expected to help manage inventories for Home's LBM side, which grew considerably with the addition of more than 100 former Beaver Lumber stores when that company was purchased by Home in 1999. Home Hardware now counts more than 400 building centres and home centres in its ranks.
In fact, says Davis, the change reflects a "Beaver mindset" whereby Beaver dealers were partners in their stores with Beaver's parent, Molson Cos. Molson, he says, wanted to know in detail what was going on with each partnership. Home Hardware has historically left such details to its own dealers, who are independents within the Home Hardware co-op. Home Hardware, Davis notes, was always more concerned with the warehouse in the past.
With more details on who's ordering what, Davis hopes to be able to get a better handle on inventory requirements and start shipping more LBM through the warehouse, thereby cutting down on the number of vendor-direct sales. By consolidating those purchases through head office, Home will be able to cut better deals on behalf of the members, he says. "It will bring more consistency to our negotiations."
Home is developing HomeBase with Retek, a company that specializes in retail software and services. The program fits in with one of the co-op wholesaler's mandates over the next five years to bring "excellence" to its supply chain operations. The design phase of HomeBase was completed early in April; it will be rolled out over the next 36 months. |
| RETAIL SALES UP 5.8% FOR CANADIAN TIRE IN FIRST QUARTER |
| Toronto, ON - Canadian Tire Corp. reported consolidated net earnings of $32.0 million for the first quarter, an increase of 5.8% over $30.3 million in 2002. Excluding non-operating gains and losses, net earnings were up 15.5% to $31.0 million, compared with $26.8 million in the same quarter of 2002.
In Canadian Tire's retail division, sales climbed 5.8% to $1.05 billion, compared with $988.9 million in 2002. Same-store sales increased 4.3%. CTC profited from the inclement weather throughout much of the country with strong sales in its seasonal products, as well as automotive hard parts, accessories and tires. During the quarter, CTR opened three new-format stores and introduced the Kitchen Place merchandising concept into 13 more stores. The company will roll out the first of 19 planned "20/20" concept stores in late Fall 2003 in an unspecified location. These stores will put increased emphasis on seasonal, including camping, patio furniture and garden, as well as tools, sports clothing and equipment rentals. The expansion will bring the total number of Canadian Tire stores to 470 by 2005.
Gross revenue for Canadian Tire's retail division during the first quarter reached $865.0 million, down 2.1% from $883.8 million a year earlier. The decline in revenue was due to a 2.3% reduction in product shipments, the result of a planned change in supply chain processes to flow seasonal product shipments closer to consumer demand (Hell's bells, I don't know what that means, either! — Michael).
Earnings before taxes and minority interest were $24.1 million, an increase of 8.0% from $22.3 million in the first quarter of 2002. |
| LANOGA HAS AGGRESSIVE EXPANSION TARGETS |
| Redmond, WA — With the possible exception of Rona Inc., there isn't a more acquisition-minded dealer in North America right now than Lanoga. Since January 1, 2001, when the company named Paul Hylbert its president and CEO, Lanoga has made seven acquisitions, including the purchase of 31 Wickes Lumber outlets in the Midwest and, on May 7, the 10-unit Dixieline Lumber, Lanoga's first foray into California.
The 268-unit company had been racing to expand the reach of its four divisions: Lumbermens in the Northwest, Spenard Building Supplies in Alaska, United Building Centers in the Midwest and Home Lumber in the West. Dixeline, with sales last year of US$230 million, will be the basis for the company's fifth division.
Lanoga reported revenue of US$1.451 billion in 2002, 8% higher than 2001 sales. Hylbert projects that his company is on track to crack the US$2 billion barrier this year. He also views a recent slowdown in acquisition activity by two other large pro dealers - Stock Building Supply and Builders FirstSource - as another window of opportunity for his company. "We're not competing with other bids so much these days." |
|
COMPANY |
52-WEEK HIGH |
52-WEEK LOW |
CLOSE FRIDAY |
| Canadian Tire |
35.45 |
26.80 |
34.69 |
| Canfor |
11.70 |
6.83 |
8.23 |
| Costco |
41.86 |
27.00 |
35.52 |
| Goodfellow |
13.99 |
9.88 |
10.30 |
| Home Depot |
49.50 |
20.10 |
29.19 |
| Hudson's Bay |
14.95 |
5.87 |
9.95 |
| Lowe's Cos. |
49.99 |
32.50 |
44.30 |
| Rona Inc. |
17.70 |
11.75 |
17.26 |
| Sears Canada |
25.10 |
13.60 |
16.20 |
| Sodisco-Howden |
1.88 |
1.06 |
1.65 |
| Taiga Forest |
7.00 |
5.85 |
6.90 |
| Wal-Mart |
59.30 |
43.72 |
52.92 |
| West Fraser |
39.46 |
26.27 |
31.00 |
|
|
|
| COMPANIES IN THE NEWS |
| Boucherville, QC — Rona Inc. has entered into an underwriting agreement to offer 11,183,572 common shares on the Toronto Stock Exchange. Of those shares, 7,770,000 will be issued from treasury, while a secondary share offering, based on strong demand, will be sold by ITM Entreprises S.A., a French-based company that owns about 20% of Rona. The share price has been set at $16.75, for a total value of $187.32 million, of which $130.15 million represents the offering by Rona and $57.17 million represents ITM's secondary offering. The offering is scheduled to close on May 21.
Oak Brook, IL — Ace Hardware Corp. reported that wholesale hardlines sales for the first quarter ended March 29, were US$722.4 million, up 2.9% from US$702.2 million in the same period last year. Net earnings were US$14.3 million, a 73% jump from US$8.3 million in the first quarter of 2002.
Fort Wayne, IN — Do-it Best's current level of expansion activity is most marked in departments such as information technology, which has been bursting at the seams. As a result, the co-op is taking 100,000 sq.ft. of warehouse space in its corporate headquarters here and creating larger and more modern office facilities. And by the end of 2003, the co-op should complete the expansion of its smallest distribution centre, in Waco, TX, by 25% to more than 500,000 sq.ft.
Toronto, ON — Home Depot's 11 stores and Canadian Tire's 19 outlets in the Greater Toronto Area were open on Victoria Day as part of an initiative, called "Toronto: You Belong Here," to boost business in the city following the SARS epidemic scare of recent weeks. Retailers across the city, including Sears and the Eaton Centre, kept their doors open in support of the effort.
Chicago, IL — Gardening continues to grow in popularity, with four out of five U.S. households involved in some kind of lawn and garden activity last year. In fact, they spent an average of US$466 pottering around last year, says the National Gardening Association.
Berlin, Germany — Metro AG is focusing on technologies aimed at boosting store efficiency, providing better sales tracking and speeding up checkout lines. By replacing bar codes with RF (radio frequency) systems at POS, this German supermarket retailer is working with Intel on a test store in Rheinberg, near the Dutch border. |
| MARKET INDICATORS |
| Housing starts in Canada are expected to reach 205,500 units this year, according to CMHC's second quarter National Housing Outlook report. Starts will stay above the 200,000 mark due to continued employment and income growth throughout this year. Housing starts are expected to dip to approximately 193,000 units in 2004 as mortgage rates continue to creep up. Sales of existing houses will dip as well, due to rising mortgage rates and higher house prices. Average resale price growth is expected to slow to 5.3% this year and 4.9% in 2004.
The New Housing Price Index rose 0.1% in March from February, says Statistics Canada. The index of contractors' selling prices increased 4.8% over March 2002, down slightly after three consecutive months of annual increases of 5.1%. Of the 21 urban centres surveyed, 12 registered monthly increases, led by Saskatoon, SK (+1.3%), London, ON (+1.1%), Hamilton, ON (+0.8%) and Winnipeg, MB (+0.8%).
The Composite Price Index for non-residential building construction in the first quarter was up 1.0% from the fourth quarter of 2002, and up 2.7% from the first quarter of 2002, says Statistics Canada. This marks the highest year-to-year increase since the second quarter of 2001.
Following an increase in consumer spending in March of 2.3%, U.S. retail sales fell 0.1% in April. Despite poor weather in parts of the country and a slowing economy, retail sales, not including a 5.9% drop in gasoline sales, were up 0.4%, but excluding automobiles, sales slumped 0.9%, the biggest monthly drop since the Sept. 11, 2001.
|
| NOTED… |
| Six of Canada's top business speakers & authors have generously donated their time - and expenses - to share their wisdom at a one-day special seminar in support of Laura's Hope, which is devoted to raising money to research a cure fo Huntington' Disease (www.LaurasHope.com). Called "Lessons in Leadership," the seminar will deliver strategies and tools to help managers maintain and accelerate their success momentum in these turbulent times. Topics include Future Trends, Leadership in Organizations, Personal Leadership, and Market Leadership. Speakers include: Jim Clemmer, author of "Firing on All Cylinders," "The VIP Strategy," "Pathways to Performance," etc.); and Peter Urs Bender, who currently has two best-selling business books ("Leadership from Within" and "Gutfeeling"). It costs less than $300. I'm definitely going. To sign up, click here.
— Michael |
|
John Caulfield, Contributing Editor
vol. ix, 20 May 20, 2003
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