| SHAREHOLDERS CHALLENGE NARDELLI AT HOME DEPOT'S AGM |
DALLAS — Shareholders gave Home Depot officials an earful last week, complaining about what they insist are nagging customer service problems in its stores. During the company's annual shareholders' meeting here, Home Depot's chairman and CEO Bob Nardelli found himself on the defensive over the effectiveness of many of his programs. They have been put in place to improve the general appearance, merchandise display and quality of help in the stores, which now number 1,740. Prominent among those programs has been the installation of clearer aisle and directional signage, and ongoing associate training. However, some shareholders griped that they still can't find what they are looking for, and pointed out that employees remain somewhat short of product knowledge.
The value of the company's stock was also an issue, as shareholders pointed out that Home Depot's stock price under Nardelli's tenure had fallen 13%, even though its earnings during that period had increased by nearly $11 billion.
During the meeting, Home Depot announced that its board had authorized the repurchase of another $1 billion worth of the company's common stock. Over the past 21/2 years, Home Depot has repurchased $5.4 billion shares.
The issue that drew wide press attention to this meeting, though, was the status of board member Ken Langone, who is embroiled in the lawsuit filed against him and New York Stock Exchange chairman Dick Grasso by New York's Attorney General Eliot Spitzer. (Langone headed the compensation committed that okayed Grasso's $187.5 million pay package.) At Home Depot's meeting, Langone was re-elected to another one-year term to the company's board of directors. Grasso, who also sat on the board, did not stand for re-election. |
| RONA AND RÉNO-DÉPÔT BUYING TEAMS ARE MERGED |
 BOUCHERVILLE, Que. — In another major step to absorb the operations of its Réno-Dépôt acquisition, the division's Montreal buying team has been reorganized into the buying offices of its parent, Rona Inc., here on the south shore. Réno-Dépôt's Montreal office will remain open, and continue to house human resources and operations.But with them have come elements of Réno-Dépôt's own organizational system, which empowers the lead buyers as merchants who take charge of all aspects of a product's listing and promotion, rather than simply buying product and negotiating price. Under the Rona system, product promos and advertising programs ended up in the hands of a merchandising committee, separate from the buying function.
The decision to use the best practices from the Réno-Dépôt side was made several months ago, as part of the mandate of a committee struck to examine ways to bring the two companies together effectively. Rona acquired Réno-Dépôt from parent company Kingfisher Plc in the U.K. last September. Implementation of the reorganization is taking place now, says Sylvain Morissette, director of communications for Rona, as emphasis at this time of year is on selling, not buying.
"We saw the Réno-Dépôt system as an opportunity," he says. "It will create new possibilities to reach new products and have more impact with those products at the store level."
Under the new arrangement, all buyers and merchants will work together under Normand Dumont, who has been named executive vice-president for merchandising and buying for both Rona and Réno-Dépôt. Marc Dufresne, formerly vice-president purchasing and logistics, will remain in charge of operations and logistics, as executive vice-president for distribution. Other changes include the appointment of Jean Lamarche as hardware merchant, and Joseph Piro as merchant for electrical. (We'll get a more complete list of buyers for next issue — Michael) |
| LOWE'S SHOWCASES THREE BRANDS |
| MOORESVILLE, N.C. — Lowe's Cos., the industry's second-largest dealer, has agreed to become the official national retailer for Therma-Tru fiberglass entry doors. Lowe's has also established stronger ties with two other suppliers — Casablanca Fans and Pergo flooring — as part of its ongoing effort to strengthen its roster of proprietary brands.Therma-Tru, which is part of Fortune Brands (whose other brands include Master Lock, Waterloo, Moen, and Aristokraft), touts itself as the best-selling line of fiberglass entry doors in the U.S. Through Lowe's, it will sell its full line of affordable smooth and wood-grained doors.
Casablanca will sell more than 30 fan designs exclusively through Lowe's, at starting price points under $400. Lowe's now stocks these products in more than 700 of its stores, and also offers them via special order in all of its stores.
Pergo is adding to its existing lines in Lowe's stores two new Signature collections, called American Cottage (with 13 color choices) and Casual Living (with 14 design options). |
| HOME DEPOT CANADA WILL MAINTAIN PACE, INCLUDING NEXT URBAN STORE |
| TORONTO — Ending 2003 with double-digit increases that reflect some of the strongest performance in the company, Home Depot Canada remains on track to open more than a dozen stores this year. The next one will be in Cambridge, Ont. in June.However, the planned opening garnering the most attention lately is the urban store (first announced in Hardlines, March 30/2004 — Editor), that will go into Gerrard Square in Toronto's east end. The site is currently occupied by a Sears store, which comprises 100,000 sq.ft. over two floors and is served by a multi-level parking garage.
Details of Sears's exit from the site were only confirmed last week, when Sears Canada announced it will close the store, a discount Value Centre, on June 5, clearing the way for Home Depot to move in. Another urban store will open in West Vancouver's Park Royal shopping center by October of this year. |
| REGIONAL PAINT DEALERS MERGE |
| PORTLAND, Ore. — Two leading West Coast paint store retailers, Rodda Paint and Cloverdale Paint, have signed an agreement in principal to merge their operations.The 72-year-old Rodda, based here, operates a manufacturing plant in Portland that supplies 41 stores in five Western states in the U.S. The 71-year-old Cloverdale, based in Surrey, B.C., has four plants in Canada and 65 stores throughout Western Canada and Washington State. The combined operations of the two companies represent 1,000 employees and an estimated US$150 million in annual sales.
The merged company will operate under the Rodda name in the U.S. and continue under the Cloverdale banner in Canada. However, Rodda's architectural paint for residential application will be sold in Canada, and Cloverdale's industrial/commercial products will be sold through Rodda's stores in the U.S.
Each company was family owned before the merger. Under the new arrangement, they will be managed independently and maintain two boards, but will have common ownership. Pending financial and environmental assessments by both sides, the merger will be transacted as a transfer of private stock, with Cloverdale holding the majority share in the deal. Specific terms were not disclosed. |
| HUDSON'S BAY LAUNCHES OFF-PRICE FORMAT |
| TORONTO — The Bay, Hudson's Bay Co.'s 99-outlet department store chain, will introduce a new department in selected stores this summer to carry off-price designer merchandise. The in-store shops will be known as Designer Depot and offer a broad range of fashions and accessories, along with private-label merchandise, all at up to 70% reductions.As everything from dollar stores to off-price remainder outlets become the rage on both sides of the border, the Designer Depot concept is the latest step in Hbc's strategy to own more of this market. The shops will be approximately 3,000 to 7,500 sq.ft. and will feature branded signage and display racks as well as a marketing program to support consumer awareness in those markets.
The first Designer Depots will be located in Bay stores in Toronto (Eglinton and Woodbine); Brampton (Shoppers World); Calgary (downtown); and Montreal (downtown). Up to 15 more Designer Depots will open within Bay stores in the next nine months. The company says it will launch a stand-alone Designer Depot location before the end of 2004. |
| METRO AND TESCO LATEST TO TARGET CHINA |
| LONDON — Two major European retailers are intent on growing their presence in China. Tesco, the U.K.'s largest retailer, joins the likes of German retail giant Metro in plans to expand its operations in what is amounting to the hottest consumer market in the world.Asia is considered a prime market for Tesco, with China topping the list, where the economy grew by 9% in 2003, as the population of 1.3 billion becomes more and more consumer-minded. Tesco is reportedly in talks to acquire 50% of the 25-outlet Hymall hypermarket chain in China, owned by Ting Hsin of Taiwan.
Metro, the world's fifth largest retailer, plans to open 10 more stores in China this year, and another 40 within five years. Its 20th store there opened in Dalian last week.
These companies are not alone: many European retailers, faced with tepid economic conditions at home, are counting on China for growth. Ikea plans to open eight more stores in China over the next five years. One of Europe's largest home improvement retailers, OBI, wants to double the number of stores in China this year to 19, expanding to 24 stores by the end of 2005, with 100 by 2010. |
| HARDWARE STORE CHAIN TO SPONSOR NASCAR EVENT |
| STAFFORD SPRINGS, Conn. — Aubuchon Hardware, the Massachusetts-based hardware store dealer with 140 outlets in six Northeastern states, has signed on to be the title sponsor of a NASCAR racing event scheduled on June 18 here at Stafford Motor Speedway, only blocks from one of Aubuchon's stores.Mike Mattson, Aubuchon's advertising director, told Racing Media Magazine that his company felt it was "important" to expand its involvement with the Busch North series. For two years, Aubuchon has been the primary sponsor of a racing team, led by driver Andy Santerre, which competes in NASCAR's Busch North series. The event the retailer will sponsor is being called the 14th annual Aubuchon Hardware 150.
Aubuchon is but one of a myriad of dealers and suppliers that have thrown their support behind auto racing, whose audience demographics closely match that of their customers. Lowe's sponsors a motor speedway in Charlotte, N.C., as well as a team that races on the Nextel Cup circuit. Menard's has long been a team sponsor on the Indy circuit, and notable companies such as Home Depot, Sears, PPG and Glidden all sponsor teams. |
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| COMPANIES IN THE NEWS |
| LAS VEGAS — Lowe's chairman Bob Tillman told an audience of more than 5,000 people at the International Council of Shopping Centers' spring convention that his company "hasn't come close to storing half of America today." Tillman, who was the convention's keynote speaker, said that his company was working as far ahead as 2012 for its real estate strategies. According to the Las Vegas Sun, Tillman also hinted at Lowe's interest in anchoring malls. He told developers in the audience that they should think differently about which retailers they choose to anchor their projects, as shoppers visit Wal-Mart stores five times more frequently than they do a mall, in effect providing competition to the very malls they anchor.
Schenectady, N.Y. — Stock Building Supply has acquired Bellevue Builders Supply Inc. Bellevue operates seven retail branches, a distribution yard, truss manufacturing center, kitchen warehouse, and a door-stair/countertop/wall panel manufacturing center. The acquisition brings Stock's operations to more than 232 locations in 26 states.
CASTLEGAR, B.C. — Arrow Building Supplies Ltd. is the latest independent dealer in Western Canada to sign with Rona Inc. Arrow, formerly a member of Irly Distributors, has three stores in the interior of British Columbia, and estimated sales of $8 million.
The American Red Cross awarded Lowe's as its Philanthropist of the Year during its National Awards Winners ceremony on May 26. Since 1999, Lowe's has donated more than $6 million to the Red Cross, and this year launched a public service campaign calling on Americans to "Pledge to Prepare" for all types of emergencies.
FAIRVIEW, Alta. — Castle Building Centres Group has added a new member in Western Canada, Burkholder Building Supply. The store is owned by Henry Hamm, who also owns Woodland Castle Building Centre in Grande Prairie, Alta. Castle, which has some 260 dealers across the country, now has more than 50 yards in Western Canada, more than double the number of three years ago.
TORONTO — Canadian Tire Corp. is the latest hardlines retailer to look at setting up Asian buying offices. As sourcing becomes increasingly globalized, Canadian Tire is looking to the Far East. According to Canadian Tire Retail's president, Mark Foote, as competencies of Asian factories increase and their product quality gets better, they are becoming better positioned to add value and drive innovation. In addition, rising costs of both raw materials and finished goods deflation, along with increased competition, has Canadian Tire exploring both new offices — and new partnerships — in the Pacific Rim.
CALGARY, Alta — Rona Inc., the Canadian home improvement distributor and retailer, officially opened its first distribution center in Western Canada last Thursday. The facility is 320,000 sq.ft. in size, with capacity to expand to 420,000 sq.ft. Stocking approximately 25,000 SKUs, it supplies 51 stores, including 11 big boxes west of the Lakehead. The opening is part of an aggressive Western expansion strategy that includes a $200 million investment over the next two and a half years.
ISSAQUAH, Wash. — Profits at Costco Wholesale Corp., the largest wholesale club operator in the country, jumped 29% in its third quarter, as net sales increased 14% to $10.67 billion from $9.34 billion, and membership fees climbed 13% to $224.5 million from $198.1 million. Same-store sales rose 11%. |
| PEOPLE ON THE MOVE |
| Wal-Mart Canada CEO Mario Pilozzi will be inducted into the Canadian Retail Hall of Fame this June at the Retail Council of Canada's retail conference, Store 2004, at the Toronto Congress Centre June 7-8, 2004.Randall W. Luecke has been appointed to the newly-created position of president, CSA International. In this new role, Luecke will focus on business development in North America, Europe and Asia. A 10-year veteran of CSA, he was most recently vice-president, certification, CSA International. He will be stationed mainly in CSA International's Cleveland, Ohio offices, but maintain an office in Toronto. He reports to Rob M. Griffin, president and CEO, CSA Group |
| U.S. MARKET INDICATORS: |
| Residential home sales fell in April, says the Commerce Department. They reached a seasonally adjusted annual rate of 1.97 million, down 2.1% from March. This follows March's healthy increase of 6.1%. Rising mortgage interest rates are being blamed for the slowdown, although longer-term prospects for the housing market remain healthy. By region, housing construction rose in the Midwest by 4.5%; in the South it was up by 1.2%; and in the Northeast by 0.6%. But in the West, housing starts plunged by 13.7% to a pace of 447,000.Real gross domestic product grew at an annual rate of 4.4% in the first quarter of 2004, following a rate of growth of 4.1% in the fourth quarter of 2003. Corporate profits increased $14.4 billion, or 1.2%, from the previous quarter, and were 31.6% higher than the same month one year ago.
Although March was strong, April saw a sharp drop in orders to factories for big-ticket durable goods. According to the U.S. Commerce Department, durable goods orders dropped by 2.9% last month, marking the biggest decline since September 2002. April's slackening in demand for big-ticket goods came after sizable gains in February and March, where orders went up by 3.9% and a strong 5.7%, respectively. |
| CANADIAN MARKET INDICATORS |
| Retail sales in Canada inched up 1.2% in March to a record high of $27.4 billion, after increasing 2.6% in February and 1.7% in January, reports Statistics Canada. For the first quarter of the year, retail was up a healthy 3.0% over the last quarter of 2003. |
| HARDLINES PARTNERS WITH ONLINE RECRUITER |
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John Caulfield, Contributing Editor
vol. x, #22, May 31, 2004
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