John Caulfield, Contributing Editor
 vol. x, #21, May 24, 2004

IN THIS ISSUE: • Home Depot, Lowe's reports strong results • Rona results reflect Réno-Dépôt acquisition • Garden Ridge backs away from crafts • More headaches for new home buyers • BMR head says hardware sells • Tembec garners environmental awards • U.S., Canada draw nearer to renegotiating softwood dispute

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"Being powerful is like being a lady. If you have to tell people you are, you ain't." —Jesse Carr (American union boss, 1976)
ATLANTA AND MOORESVILLE, N.C. — The home improvement industry's two largest retailers, Home Depot and Lowe's, reported soaring first quarter sales and earnings. Officials from each company also emphasized their belief that a moderate rise in interest rates would not have a negative impact on their business, at least through this year. Fears about interest rate hikes had been eroding the two companies' stock prices in recent weeks.
  Home Depot Lowe's
Sales (in $bil.) $17.55 $8.68
% chg. 16.2 22.0
Net income (in $mil.) $1,098 $455
% chg. 21.1% 8.1%
Same-store (% chg.) 7.7% 9.9%
Store openings (net) 33 28
The earnings of both retailers were affected by a reclassification of payments to vendor service organizations For Lowe's, that $205 million expense shaved $126 million off of the bottom line for the three months ended April 30. For Home Depot, the $280 million increase in store operating expenses reduced its quarterly earnings by $78 million. Lowe's enjoyed strong sales activity in outdoor power equipment, appliances (where Lowe's share of the U.S. market at the end of the quarter increased to 14.5% in units), kitchens, and installed sales, which grew nearly 40% in the quarter. The company's gross margins rose nearly 2 percentage points, to 33.1%, and its average ticket increased around 8.5%. Lowe's also reported a modest increase in inventory turnover, to 4.46 turns. Home Depot storeHome Depot's average ticket rose 7.4% to $55.11 per customer, a company record. "We saw increases in every category," said John Costello, the retailer's executive vice-president, merchandising and marketing. The company noted that 35% of all transactions now go through self-checkout machines that, at the end of the quarter, were in 822 of Home Depot's 1,740 stores. Home Depot reported a 42% increase in its At-Home Services installed sales business. Both companies expressed confidence about their future business prospects. Lowe's plans to open 19 stores in the second quarter — on its way to 140 new stores this year — and is projecting a 19% sales gain for the year, with its same-store sales projected to rise between 6% and 7%. Home Depot raised its projections for sales growth to between 10% and 12%, and its projections for earnings per share to between 10% and 14%. It also committed to spend another $1 billion this year on improving the physical appearance of its stores. Home Depot went on an acquisition binge just days before its financials were released, buying the Home Mart chain in Mexico and White Cap Construction in California.
BOUCHERVILLE, Que. — Thanks in large part to the acquisition of Réno-Dépôt, Rona Inc.'s first-quarter sales were up 40.6% and profit almost doubled. The retail distributor's earnings climbed to $11.2 million, a 94.7% increase from $5.8 million in the first quarter of 2003.Consolidated net sales reached $657.1 million, up from $467.5 million a year ago, mainly due to the consolidation of the business of Réno-Dépôt, which was bought by Rona in August 2003. Excluding the Réno-Dépôt contribution, sales were up 6.4%. The company expects synergies from the acquisition to save up to $35 million over the year. Consolidated net sales consist of sales through Rona's distribution centers, along with retail sales from its corporate stores and its share of retail sales from its investment in other, dealer-owned outlets. Overall sales at retail through all outlets were up 72.3% to $440.7 million in the first quarter. Same-store sales were up 7.4%. By comparison, Home Depot's same-store sales chain-wide were up 7.7%. Company president and CEO Robert Dutton reiterated his company's intention to double its share of the market by 2007, through both dealer conversions and continued acquisitions. However, he admits, there is little opportunity left in the country for major acquisitions of the scale of Rona's takeover of Réno-Dépôt, Revelstoke and Cashway, which enabled the company to double its market share between 1999 and 2003. At the end of 2003, Rona currently accounted for 12.2% of the $31.7 billion Canadian retail home improvement industry.
MISSISSAUGA, Ont. — A deal between the owner of the Canadian Hardware Show — the Canadian Retail Hardware Association — and the German trade fair organization Messe Frankfurt Inc. is closer to being inked as the CHRA continues drafting a roadmap for its future.The ailing Canadian event has been relaunched as the Hardware + Home Improvement Expo and Conference (H2X Canada). It will be relocated to the Toronto Congress Centre by the Toronto International Airport, moving it out of the National Trade Centre in the city's downtown. The date has been moved to February 20-22, 2005. The conference portion of H2X Canada will be held on February 19, expanding the show to a four-day event. CHRA president Bob Elliott has managed to bring back into the fold some of the organizations that had been with the show in the past. The Canadian Hardware & Housewares Manufacturers Association has given its support by scheduling its annual Gala in conjunction with the new event. A deal has been struck with the Paint and Decorating Retailers Association, Floor Coverings Institute of Ontario, and the Walls, Windows and Furnishings Association to host a simultaneous event under the same roof, called the Décor + Design Expo & Conference (D2X — Canada). A third component of the new hardware show will be the addition of a full-day conference component on February 19, 2005, turning the show into a four-day event. The conference program will be aimed primarily at retailers and their staff, but organizers hope to attract a broader audience, as well. Although the deal between CRHA and Messe Frankfurt has yet to be inked, details of how much equity the German trade fair giant will secure expect to be finalized over the next few weeks. "We're comfortable with the details of what will go into the contract," says Elliott. He would not disclose how much equity the giant German organization will secure in the new Canadian venture.
ST. JACOB'S, Ont. — Independent dealers are putting more and more emphasis on décor as a part of home improvement selling. Home Expressions, a new program from the dealer-owned co-op Home Hardware Stores Ltd., is designed to equip dealers to better upsell to more fashionable products.PatioHome Expressions is not a new section in the store, it's more a mindset — for both customers and dealers. The increase in the décor side is a natural fit for Home Hardware, says Bill Ferguson, Home's director, dealer support. "Home Hardware does have the s wide range of products to enhance one's home, so dealers are focusing more on project selling and upselling." For example, customers will buy wood heaters that cost $179 and spend $800 to $2,000 on a barbecue. "The Home Expressions program is conveying the end use ,the dream, to the consumer, while encouraging dealers, with their limited space, to tie in product presentations within their stores," says Ferguson. "You've got to give customers ideas for how to decorate their house."
NEW YORK — Forestry giant Tembec was honored here last week by the Rainforest Alliance, receiving an award as Corporate Sustainable Standard-Setter. Tembec president and CEO Frank Dottori received the first-ever Rainforest Alliance Lifetime Achievement Award for his leadership in setting the standard for sustainable forest management. Under Dottori, Tembec has managed initiatives such as Impact Zero and Forever Green, two management programs that minimize the environmental impact of the company's manufacturing and forestry activities.The integrated forest products company, with offices in the U.S., Canada and France, has sales of approximately $4 billion and 11,000 employees. It operates 50 pulp, paper and wood product operations around the world. Tembec also supports the Kyoto Protocol, and has reduced its greenhouse gas emissions by more than 25% since 1990. Most recently, the Forest Stewardship Council certified the Tembec-managed Gordon Cosens Forest, a five-million-acre region in Ontario, making it one of the largest FSC-certified forests in the world, and the first boreal forest to be certified in North America. The Rainforest Alliance SmartWood Program was initiated in 1989 to improve the effectiveness of sustainable forestry in conserving biodiversity and ensuring equitable treatment of local communities and workers, as well as creating financial incentives for businesses to employ responsible forestry practices. SmartWood has certified more than 1,000 operations and 32 million acres of forest worldwide.
HOUSTON — Garden Ridge will now give over more space in its mammoth outlets to home decorating merchandise. The 36-unit specialty dealer, which is currently operating under bankruptcy protection, intends to bring in more furniture and bedding products, while reducing its crafts inventory.The company's new senior vice-president and general manager, Steve Higgins, told the Houston Chronicle that he wanted to make his company "the Home Depot of home décor," which will probably come as something of a surprise to Home Depot, which has aggressively been adding home décor items to its own stores over the past several years. Since filing Chapter 11 in February, the company has closed eight stores and negotiated a new $70 million line of credit. Its stores, which average more than 130,000 sq.ft. each, at one time were seen as being in the vanguard of a home décor trend that home improvement dealers began embracing in the mid 1990s. Its stores currently stock a range of decorative merchandise, including artificial flowers, picture frames, kitchen and bath accessories and housewares. Changes to the stores will begin this fall and be completed by year's end.
CHICAGO & LAS VEGAS — Big homebuilders in the U.S. are relentlessly constructing homes as fast as they can to meet strong demand — but they seem to be having problems controlling the quality of their product. That is turning out to be good news for home improvement dealers and remodelers.Criterium Engineers, whose 70 offices in North America conduct 25,000 home inspections annually, has found that a "sizable" number of those homes have product and installation flaws. CBS MarketWatch reports that Criterium's study of its own records found that one-quarter of the new homes it inspected had deficiencies in the proper installation of windows, doors and roofing alone. The study also found that at least 14% of new homes had problems with their siding, framing adequacy, ventilation, mechanical equipment (e.g., water heaters or HVAC), or foundations. Criterium's findings seem to be confirmed, if indirectly, by the Home Improvement Research Institute, whose own recent survey of new home buyers found that, on average they spent $3,100 to improve their houses within one year of purchasing them. In fact, buyers of older homes spent an average of $2,000, while those who bought new homes spent an average of $5,000. Those findings, which HIRI revealed during the National Hardware Show in Las Vegas last week, showed that, while a lot of that spending goes towards landscaping and outdoor living, windows, kitchens, bathrooms and living rooms were also upgraded during this period. HIRI's survey also found that 52% of recent home buyers had completed one or more home improvements within the first year of purchasing their home.
BENTONVILLE, Ark. — Wal-Mart is finally getting its electronic product codes launched. In a limited test of EPCs, cases and pallets of 21 products are being RFID-tagged from eight suppliers, and then shipped to a distribution center in Northern Texas to serve seven Supercenters in the area. Next month, Wal-Mart will bring together its top 100 suppliers to begin rolling out the program in earnest. Within days, the next 200 largest suppliers will be introduced to the new technology. CHICAGO — Ace Hardware has made a deal to use a new software platform for its customer relationship management (CRM) systems. The adoption of technology by Teradata, a division of NCR, will begin this month and be completed by the third quarter of 2004. Ace already uses Teradata systems to drive its customer loyalty program, the Helpful Hardware Club. LONDON — A specialty tools show has been added alongside the DIY & Garden Show held each year in January. Totally Tools will take place at Earls Court 2 January 16-18, 2005, in response to a stated desire by the hand and power tool companies to have a show of their own, says show organizer Christopher Leonard-Morgan. The DIY & Garden Show is in its 11th year, attracting visitors from more than 30 countries. TORONTO — After receiving approval last year to enter the banking business, Canadian Tire's financial services division enjoyed an increase in its first-quarter pre-tax profits of 6%, reaching $25.8 million. The increase came both from the conversion of customers from Canadian Tire store credit cards to Canadian Tire MasterCard accounts, and from an increase in customer transactions billed to the card. But the company is years away from getting average balances on Canadian Tire MasterCard accounts up to the industry average of about $1,800, says the company. The average current level is $1,350.
Germain Voyer has moved over from Westroc to join Roland Boulanger as general manager. (819-358-4188)
Housing starts fell in April by 2.1%, says the Commerce Department. However, the value of building permits inched up, a positive indicator for the months ahead, as builders anticipated steady demand from historically low mortgage interest rates. Housing starts reached a seasonally adjusted rate of 1.969 million units last month, down 2.1% from 2.011 million in March. Building permits, a sign of builder confidence, climbed to 1.999 million units in April, up 1.2% from the previous month.
The Consumer Price Index rose 1.6% in April, reports Statistics Canada, as Canadians paid more for goods and services than they did in April last year. The index rose by 0.7% in March. The gap in the increases between March and April was the result of the double impact of energy price movements both this year and last year.
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MARKHAM, Ont. — Quincaillerie Matreco Hardware is ramping up its shipments, with full truckloads now delivering products to Ontario dealers. That's just one of the indications of the growth of Canada's newest hardlines wholesaler, according to QMH's president, Yves Gagnon. He spoke recently at a breakfast seminar hosted by the Canadian Hardware and Housewares Manufacturers Association.Gagnon is also president of QMH's sister organization, Le Groupe BMR, whose warehouse in Longueuil supplies QMH customers — namely TIM-BR Mart dealers in Ontario and AWARD members in Atlantic Canada. AWARD has even gone so far as to install a warehouse of its own under the name AWARD Distribution Ltd. Gagnon informed a room full of vendors that BMR has grown its own hardware sales to its own members, located mainly in Quebec, from $9.1 million in 1997 to $80 million today. While he invited vendors to be part of that growth, he added that private label will play an increasing role in the company's assortments, and so will offshore buying. "You have to face the reality," he said. "We're doing a lot of imports with direct shipments."
WASHINGTON & OTTAWA — Although the U.S. federal election might get in the way, talks between the U.S. and Canada inched closer to resuming talks with Washington over the softwood lumber dispute. But the issue of U.S. duties imposed on Canadian imports of lumber may take another year to resolve.Canadian Federal Trade Minister Jim Peterson met with provincial ministers last week, resolving to contact his U.S. counterpart to present some key conditions for returning to the table. The provinces have all been working to make their forest policies more open and market-based. New Brunswick already has a market-based system, which has exempted it from much of the costly dispute, which penalizes the Canadian industry billions of dollars annually and effects the cost and availability of raw materials for the U.S. housing market. But in exchange, Canada wants to keep the arbitration process in the hands of an independent binational panel.

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We are seeking a Senior Sales Executive to develop Western Canada. This challenging senior position requires a seasoned sales executive with proven relationship-building skills, a high degree of integrity, professionalism and the ability to work autonomously. The ideal candidate must have a strong sales background and a proven track record in the hardware merchandising, building materials industry, combined with the knowledge of POS and integrated accounting software. Our ideal candidate:
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  • Willing to travel 40% of the time (B.C., Alberta, Saskatchewan and Manitoba)
  • Able to work independently and under pressure
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  • Has a university degree with 5 to 10 years professional work related experience

Attractive base salary, commission and over quota achievement bonus, expense account and comprehensive company benefits package. This position is located in Calgary; hiring will be conducted through the Montreal head office. Send resume, relevant accomplishments and salary history by fax to 514.331.2112 to the attention of Yvon C. Beaudet or email

********************************************************************************** TIM-BR-MART OntarioMARKETING MANAGER You are a senior marketing professional with many years of retail and contractor experience. As a team player, you possess strong communication, managerial and interpersonal skills. Strong organizational skills are required for overseeing the budget and critical execution paths. You are a very motivated, 'hands-on' individual who will be responsible for developing and executing various marketing programs, including print, radio, television and web media. You will also work with a team of on-site Merchandisers to ensure our stores are properly branded and merchandised. Experience in setting up trade and consumer shows and special events would be an asset. TIM-BR Mart is the national retail brand for hundreds of building centres across Canada. This management position is dedicated to ensuring that our stores in Ontario project a strong retail image at store level. Your goal is to strengthen the TIM-BR Mart brand in the marketplace. We offer a competitive compensation package and a pleasant working environment near the airport. We thank all applicants for their interest; however, only those selected for an interview will be contacted. Please submit your resume, in strictest confidence, to the Executive Assistant at or by mail to 6470 Viscount Road, Mississauga, Ontario, L4V 1H3.
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