Mutual loses members to Spancan

OAKVILLE, Ont. — The sudden departure of a major member of hardware buying group Mutual Hardware Inc. has taken that group by surprise as much as it has the industry. Federated Co-operatives Ltd., the Saskatoon-based co-op wholesaler that has about 100 hardware/home improvement stores in its network that generate an estimated $470 million at retail, made the decision last week. The group is leaving to join the industry's other hardware buying group, Spancan, but will remain part of Mutual until the end of this year. The departure will be effective Jan. 1, 2008. Mutual is in now in a position to pursue new members in Western Canada, where FCL has stores from British Columbia to Manitoba. With it out of Mutual, says Dave Nisbet, president of Mutual, "There are opportunities out there that this opens up that we weren't able to go with before, because of conflicts."

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Home Depot convenience format may run out of gas

ATLANTA — Home Depot's plan to develop a gas station/convenience format, which began under former CEO Bob Nardelli, is now in question, according to a report in  Convenience Store Petroleum Daily News. With the departure last week of Jim Stoddart, who was hired by Nardelli to oversee outside sales opportunities, the plan to get 300 Home Depot Fuel locations in place by 2010 may be on hold. The first Home Depot Fuel location opened in September 2006. Currently, there are four sites — three near Nashville and one near Atlanta. Two additional locations are under construction, Home Depot spokesperson Tony Wilbert, told CSP Daily News. While Wilbert insists the change in leadership won't have an impact on the initiative, he says the company is "re-evaluating the concept to make sure it fits with our strategy of growing sales in our core big-box stores. While the Fuel locations are doing reasonably well, we need to make sure they are driving traffic into the Home Depot stores themselves." Re-examining the convenience store concept fits with CEO Frank Blake's mandate to spur growth through a "back to basics" approach to product mix and customer service.

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Tough housing market affects Lowe's results

MOORESVILLE, N.C. —  Lowe's chairman and CEO Robert A. Niblock cited a difficult housing market, steep declines in lumber prices, and poor weather for a 12.1% drop in first quarter earnings, to $739 million. This confluence of factors created what Niblock described in a prepared statement as "a challenging sales environment in the first quarter. "Those anticipated factors were compounded by mixed weather during the quarter," he said.  "Mild temperatures and solid sales in March were more than offset by record cold and wet weather across much of the U.S. during the first two weeks of April. While the weather improved in the second half of the month, the drag created by the first two weeks substantially contributed to our sales shortfall to plan." Sales, however, rose 2.1% to $12.2 billion, up from $11.9 billion in the first quarter of 2006, and Niblock remains confident that performance will improve as the year progresses. During the last quarter, Lowe's opened 15 new stores. In the remainder of the year, it expects to open 150 to 160 stores, which will amount to total square footage growth of about 11%. Sales are expected to increase approximately 7%. Same-store sales are expected to decline 1-2%, while operating margin is expected to decline 70-80 basis points.

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Canadian Tire to introduce chip cards

TORONTO — Canadian Tire will be part of an industry-wide initiative to introduce Canadian consumers to chip cards, which the giant retailer will begin testing next year in five stores in Kitchener-Waterloo area. It hopes to have them in place in all of its stores by the end of 2008. The pilot program will test the cards, as well as the chip-reading terminals or "readers", and the network that processes chip card transactions. The chip card works by securely storing encrypted information, such as a cardholder's account number and Personal Identification Number (PIN). Customers verify a transaction by keying in their PIN instead of a signing a receipt. Chip card transactions are quicker and more secure because information is stored directly on the card, and does not need to be retrieved over the network from the cardholder's financial institution. For the consumer, the experience is akin to using a debit card. "Chip card technology is really the next wave in providing our customers with enhanced payment security when they shop at Canadian Tire," Marco Marrone, president, Canadian Tire Financial Services, said in a prepared statement. "While we continue to invest in the integrity of the current system, we're setting up software, point-of-sale systems and retail processes that will test and deliver this innovative new service to Canadians."

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Masonite posts loss, faces protests over plant closure

MISSISSAUGA, Ont  — Masonite International Inc. is the latest LBM giant to turn in a poor performance in the first quarter of the year. The company has posted a first-quarter net loss of US$3 million, as sales declined 5% from a year earlier to $569.4 million. The drop came mainly from a weak showing in the North American market, where sales fell 12% to $411.7 million. Overseas sales, mostly from Western Europe, rose 19% to $157.7 million. For the same period, the company's pre-tax operating profit rose 18.5% to $73.5 million, and it reduced its net debt by $22.5 million to $1.95 billion. Meanwhile, the United Steelworkers (USW) ended an occupation of the Masonite International plant here, after the company agreed to negotiate a closure agreement connected to its decision to shift production to its U.S. facilities. The move will see the Mississauga plant close on August 10 of this year. The action was part of a province-wide demonstration by labour groups to protest against job losses in the manufacturing industry. Formerly Premdor, Masonite has 80 plants in 18 countries. It was taken over by U.S. leveraged-buyout firm Kohlberg Kravis Roberts in 2005.

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Castle dealer program gaining wide acceptance

MISSISSAUGA, Ont. —  A new bundle of services for Castle dealers, including health and medical insurance, group RRSPs, vehicle purchases, and succession model options, has now been accepted by almost half of its members. According to Castle president Ken Jenkins, the Castle Care program, which was introduced last year, really began to pick up steam over the last six months. Jenkins estimates that about 40% of the group's 265 members have now bought into the program. The new program leverages the same buying synergies that the group has always applied to LBM material, says Jenkins. "We're simply buying these items in volume, and members benefit in the same way they benefit from buying product in volume," he explains. An added benefit for dealers is that they in turn can offer aspects of the program to the independent contractors with whom they deal. That, says Jenkins, not only "helps the dealer retain and recruit quality employees, but means they can also administer it to their contractor base." The succession-planning model also has broad appeal, suggests Jenkins, for independent dealers who want to create a business handover plan and explore financing options. "Succession planning only becomes an issue for those who don't plan for it. The ones who do plan are able to maximize wealth around their business," he says. Although industry watchers will be closely monitoring Castle's dealer numbers over the coming year, Jenkins is not anxious. "The objective is not necessarily numbers; it's on bringing the right independents into the network," he says. "We have 17 new members in last year. But we have probably turned down more new members than we accepted. We want to get the right people."

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New Zealand company buys Formica

CINCINNATI — Formica Corp. has been acquired by Fletcher Building Ltd., an Auckland-based construction company, for $700 million (with additional deferred payments of up to $50 million) from private equity investors Cerberus Capital Management, L.P. and Oaktree Capital Management. Fletcher, whose businesses operate at more than 300 sites in New Zealand, Australia, North and South America and the South Pacific, has annual revenues of $4 billion. The company has five operating units: laminates and panels, building products, steel, infrastructure and distribution. It is involved in housing developments, commercial construction sites, manufacturing plants, and quarries. Since 2004, the company has made several acquisitions in the LBM and manufacturing sectors. According to Frank Riddick, president and CEO of Formica, the latest represents growth opportunities for both companies. "Fletcher is ideally aligned with this objective, due to its broad-based building material and construction business and experience in the laminate and decorative surface market. The combination of Formica and Fletcher Building's Laminex businesses will create the largest global manufacturer of decorative surfaces and high-pressure laminates in the world," said Riddick in a prepared statement. Formica, based here, has more than 3,800 employees in 14 manufacturing and 33 distribution facilities spread across Asia, Europe, and North America. The transaction will be subject to regulatory approvals and is expected to close in early July.

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