John Caulfield, Contributing Editor
vol. xi, #42, November 07, 2005

IN THIS ISSUE: • CanWel cuts banner deal with TruServ Canada • Verschuren replaced as EXPO head • House manufacturers form buying group • Home Depot openings include smaller stores • Hudson’s Bay cuts jobs • Stock acquisition gives it presence in Chicago area • IRLY names new buyer • Ace makes the list • Wal-Mart expands Japanese presence * * * * * *

“The more I see of man, the more I like dogs.” —Mme de Stael (1766-1817)
WINNIPEG–TruServ Canada Cooperative Inc. and CanWel Building Materials Income Fund have announced a strategic alliance, ending months of speculation about the fate of the Ace and Pro banners in Canada.Under the terms of the alliance, TruServ Canada will provide brand support, advertising, marketing services, product development, and vendor relationships. The independent dealer will benefit from stronger buying power, increased advertising support, dedicated retail specialists and services and enhanced import opportunities. Under TruServ president and CEO Bill Morrison, the Pro Hardware and Ace Hardware brands join the True Value hardware, V&S department stores, V&S Options, Country Depot and Pet Junction retail brands. Until now, the Ace and Pro banner programs were owned and operated in Canada by Sodisco-Howden Group, the national publicly held hardlines distributor. when it was acquired by CanWel at the end of last year, the banners came with the deal. However, CanWel quickly announced its intention at the time to dispose of the banners, for two main reasons. The first is that CanWel wishes to consolidate at the distribution level, and focus solely on shipping product. Second, CanWel’s support of the Ace and Pro banners, even at arm’s length through Sodisco-Howden, was seen to put them in direct competition with existing CanWel customers, especially RONA and Home Hardware Stores Ltd. TruServ may prove to be a good fit. Whilst the Ace and Pro banners ostensibly compete with TruServ’s own True Value banner, they do not compete directly in many markets. The Sodisco-Howden banners are most prevalent in Quebec and Atlantic Canada, while True Value is strong in the West. Ultimately, the new deal puts TruServ in an even stronger position than before to support the independent dealer, with more than 1,400 retail locations involved in the combined partnership. In addition, TruServ’s warehouse carries a different range of products than Sodisco-Howden, reflecting its product mixes for other TruServ banners, mainly V&S Variety and Country Depot. And while it isn’t a consideration in the short term, the opportunity for general merchandise, farm and feed, and pet supplies in existing Ace and Pro stores exists for TruServ. Conversely, TruServ’s LBM dealers could benefit from the products available from CanWel. “After a detailed review, we believe that TruServ Canada is the best choice to build the Pro and Ace banners and provide the independent retailer with a proven platform in which to enhance their businesses,” said Amar Doman, chairman of CanWel, in a prepared release. “Both organizations are dedicated to the long-term success of the truly independent retailer in Canada. The alliance allows each company to focus on their core competencies.”
ATLANTA–Home Depot has put Bruce Merino in charge of its EXPO Design Center division. Formerly western division vice-president, Merino replaces Annette Verschuren, who was charged with overseeing the troubled division along with her duties as president of the Home Depot Canada division.While serving double duty, Verschuren divided her time equally between Toronto and Atlanta. Her position at EXPO made sense, given the innovations in selling softlines and home accessories that originated in recent years under Verschuren in test stores in Canada. Those innovations are being rolled out across the chain now. However, under Verschuren’s regime, the troubled EXPO chain, which was once slated to reach 100 or more locations, was downsized dramatically from 50-plus stores. Fifteen were closed and another five were converted to traditional Home Depot stores, leaving about 30 EXPO stores now. The store closings, which were announced in May 2005, came with a price tag. In its six-month consolidated statement, Home Depot reported $80 million in impairment charges in the SG&A expense related to the disposition of EXPO real estate. Additional charges included a cost of $24 million to sell off and dispose of inventory, and $8 million for lease obligations. Verschuren can now focus more closely on the Canadian division. While historically the strongest performer of all six Home Depot divisions, it faces growing competition as RONA steps up its big box expansion plans and the market braces for the arrival of Home Depot’s biggest competitor, Lowe’s, which has announced its entry into Canada with up to 10 stores in 2007.
TORONTO–Hudson's Bay Co. is cutting approximately 825 management and administrative positions from across the company, and the realignment of the company’s senior leadership. The changes include the appointment of Marc Chouinard, currently the president of the Hbc's Merchandising Group, to the new role of COO for Hbc. “We have simplified our operations and we are harvesting the benefits of completing the integration of all remaining Hbc functions,” said Hbc CEO George Heller in a prepared release. “With the transition to a single company operation completed and tested, we are now positioned to scale back our infrastructure without impeding our growth plans.” The cuts are expected to save the company $40-$45 million annually.For the past five years, Hbc has been pursuing a growth strategy based on a single company view of the marketplace, supported by increasingly more integrated and efficient operations, including combining buying teams across the Bay, Zellers and Home Outfitters. Hbc will assume a pre-tax restructuring charge of approximately $28 million in the third quarter of this year, reflecting severance and costs associated with the transition. There will be an additional pre-tax charge of approximately $7.5 million to earnings in the third quarter related to severance provisions beyond the restructuring charge. Changes to the senior management team include moving Marc Chouinard, currently president of Hbc's Merchandising Group, to new role of COO for Hbc. This position will give him responsibility for merchandising, marketing and store operations. Thomas Haig will assume a new role as executive vice-president assigned to the office of the CEO. Michael Rousseau, currently executive vice-president and CFO, will head up the company's credit and loyalty operations.
SAINT JOHN, N.B.–A new LBM buying group has appeared on the scene, but the members are not dealers. Rather, the Building Materials Buying Cooperative (BMBC) comprises four of Canada’s largest modular home manufacturers.The members of this new elite group are four of the country’s largest manufacturers: Winalta Inc., Spruce Grove, Alta.; Guildcrest Building Corp., Morewood, Ont.; Les Industries Ste-Anne de la Rochelle Inc. (Alouette Homes), Ste-Anne de la Rochelle, Que.; and Kent Homes, Bouctouche, N.B. The co-operative comprises a select group of members, drawn from geographically diverse areas to ensure a largely non-competitive situation. The members can negotiate with suppliers on larger volumes–and better pricing–and buyers for each product category are drawn from the membership. The group follows the model of ILDC, a co-op buying group for LBM dealers, of which Kent Building Supplies is a major member. In fact, the seed for the new group was germinated out of Kent’s sister company, Kent Homes, when Jim Jordan at Kent Homes (whose background includes a stint at Kent Building Supplies) contacted other modular home builders across the country back in the summer. “Jim was the catalyst for the whole thing,” says Bob Egan, vice-president of operations for Guildcrest Homes. Bradley Berneche, President, Alouette Homes, sees an upside for both the members and their respective customers. “We look forward to working with our existing suppliers of goods and services, as well as new ones … to provide to our customers a level of quality and service second to none.” Buying duties are being divided as follows: Bradley Berneche, president of Alouette Homes, will handle roofing; Guildcrest’s John Dalgleish will negotiate drywall; siding and insulation will be handled by Randy Bennett at Winalta; and Réal Maillett of Kent will deal on fasteners. Kent’s Jordan will oversee major distribution, including lumber. The inaugural buying meetings will be held Nov. 29-30 in Toronto. “We are very excited with the creation of this new buying group, and look forward in establishing strong and healthy relationships with the supplier base,” adds Charles Cormier, vice-president, Kent Homes.
TORONTO–Home Depot Canada will expand its store base rapidly over the next 11 weeks, adding one million sq.ft. of retail space and an estimated 1,300 new jobs to the Canadian economy by Jan. 2006. With nine stores opened already this year, the company has to open another 11 before the end of its fiscal year (Jan. 2006) to meet its previously stated target of 20 stores. Five of the openings will be of stores that are smaller than the norm, weighing in at only 80,000 sq.ft., as the retailer experiments with smaller footprints in smaller markets. The company has also been investing in its existing network of stores. It undertook its first-ever re-location in this country last Thursday, when a store in the Southwest section of London, Ont. had a grand opening, replacing an older store in the same part of the city. The remaining openings for this year are: Calgary (SE), Nov. 2005, 102,000 sq. ft.; Granby, Que., Nov. 2005, 95,000 sq. ft.; Winnipeg, (SW), Nov. 2005, 95,000 sq. ft.; Guelph, Ont., Nov. 2005, 80,000 sq. ft.; Victoriaville, Que., Dec. 2005, 80,000 sq. ft.; St. Albert, Alta., Dec. 2005, 80,000 sq. ft.; Sherbrooke, Que., Dec. 2005, 95,000 sq. ft.; Saint John, N.B., Jan. 2006, 95,000 sq. ft.; Victoria, B.C. (Saanich), Jan. 2006, 80,000 sq. ft.; Calgary, (Beacon Hill), Jan. 2006; 102,000 sq. ft.; Milton, Ont., Jan. 2006, 80,000 sq. ft.
ELGIN, Ill.–Wolseley plc has stated that its Stock Building Supply division, which is the largest pro dealer chain in the United States, has acquired Seigle’s, the 40th-largest home improvement dealer, and one that in recent years has expanded its business with builders and remodelers through fabrication and installed sales.The Raleigh, N.C.-based Stock paid the equivalent of $118.6 million for 124-year-old Seigle’s, based here, which according to its website operates four lumberyards, three showrooms, three manufacturing facilities, five distribution centers, one contractor selection center and one Outlet Clearance Center, all in Illinois. In the year ended Dec. 31, 2004, Seigle’s generated $257.8 million in sales and had gross assets of $104.5 million (including real estate in Chicago and its western suburbs), according to Wolseley. About 94% of Seigle’s revenue comes from pro customers, and this deal includes Michael Nicolas Carpentry, a large local framer Seigle’s purchased in 2003 that provides turnkey installation for new-home construction.
OAK BROOK, Ill. – Ace Hardware debuted on the charts at number four. The Franchise Times rankings of the top franchise operations in the world has the hardware co-operative following only McDonald’s, 7-Eleven and Carlson Wagonlit Travel. The sixth annual compilation by the magazine, based on worldwide sales of the 200 leading franchise chains, ranked Ace fourth based on its $13 billion in annual retail sales. Ace is the only hardware/home improvement retailer on the list.
The Amazing 2005 Retail Report:
HOW BIG IS THE INDUSTRY? HOW MANY HARDWARE STORES ARE THERE? WHY HAVE BIG BOXES LOST MARKET SHARE? WHICH PROVINCE ACCOUNTS FOR MORE THAN ONE-THIRD OF THE MARKET? It's all in the latest Home Improvement Retail Report. In handy PowerPoint format. CLICK HERE or call or email Isabel Bisong, ; 416.489.3396 to order this report.
TORONTO–The board of directors of the Hudson’s Bay Co. met last week to consider the takeover bid from U.S. investor Jerry Zucker’s Intertech Inc., which holds almost 18.8% of Hbc stock already. However, a shareholders’ rights plan has been triggered by the offer, and by the board’s appointment of BMO Nesbitt Burns Inc. and Goldman Sachs & Co. as financial advisors. As a result of the Shareholder Rights Plan being triggered by Intertech, the board has deferred the separation time of such rights under the Plan. Interestingly, the board has not actually received a formal offer from Intertech. ISSAQUAH, Wash.–Costco Wholesale Corp. had net sales of $4.26 billion for the four weeks ended October 30, 2005, an increase of 12% from $3.79 billion in the same four-week period of the prior fiscal year. For the first 9-weeks of its fiscal year ended October 30, 2005, the Company reported net sales of $9.40 billion, an increase of 13% from $8.32 billion during the similar 9-week period of the prior fiscal year. Same-store sales for the both the four-week and nine-week period were a healthy 10%. BENTONVILLE, Ark.–Wal-Mart Stores, reported net sales for October of $23.26 billion, up 10.5% from the same month a year earlier. Year to date, sales reached $223.69 billion, an increase of 10.2%. Same-store sales for the company were up 4.3% for October; and up 3.6% year-to-date. SANTIAGO, Chile– Falabella, the giant department store and supermarket retailer that owns the home improvement chain Sodimac, had an increase in net profit for the first nine months of the year $195 million, up 27% from the same period last year. The increase was attributable to expansion, acquisitions (including the purchase of Sodimac) and an increase in consumer spending. Revenue for the nine-month period was up 21% from a year earlier. TOKYO–Wal-Mart has increased its investment in the Japanese retailer Seiyu, giving it controlling 53.56% share and providing much-needed capital for the 404-unit chain. It will also install a senior vice-president from its international division as CEO of Seiyu. Ed Kolodzieski, formerly senior vp and COO of Wal-Mart’s international division, takes the helm of Seiyu effective Dec. 15, 2006. Seiyu expects to lose the equivalent of $117.4 million this year, which would be nearly double the loss estimate company officials made last summer. Through nine months, the company’s sales and earnings continued to decline. The company’s net income per employee is the fifth worst among 135 retailers tracked by the Topix-Retail Trade Index, according to Bloomberg Data. TOWSON, Md.–Black & Decker enjoyed net earnings from continuing operations for the third quarter of 2005 of $140.3 million, versus $111.3 million in the third quarter of 2004. Diluted earnings per share from continuing operations increased 28%, marking the fourteenth consecutive quarter of growth at or above 18%. Sales from continuing operations increased 23% for the quarter to a record $1.58 billion. Sales of existing businesses increased 6%. The Porter-Cable and Delta Tools Group acquisition contributed 17% to sales for the quarter, while sales in the Power Tools and Accessories segment increased 31% for the quarter, including 6% from existing businesses. Sales in the Hardware and Home Improvement segment increased 1% for the quarter. TAYLOR, Mich.–Masco Corp, the home improvement products conglomerate, reported a 27% decline in its net income for the quarter ended Sept. 30, to $262 million, on revenue of $3.36 billion that was up 5.9% over the same period a year ago. Through nine months, the company’s revenue rose 7% to $9.68 billion, but profit was off 2.7% to $767 million.
John Schaefer has joined IRLY in sales and purchasing in building materials. He has been in the building supply business for 25 years, with experience in managing, marketing and purchasing. He was most recently general manager of Bowen Building Centre, and has also held positions with Hollyburn Lumber in commodity sales and purchasing, and wholesale and contractor sales with Dicks Lumber. (604-596-1551) Marianne Thompson has left Colonial Elegance where she was national sales director for almost nine years. She has joined Supplier Pipeline as director of sales. (519-579-6584)
The latest issue of Hardware Merchandising magazine features some great coverage of our Hardlines Conference. Held back in September, the Conference played host to Hardware Merchandising’s auspicious Outstanding Retailer Awards, and those winners are featured in the report. But you can also read up on the Hardlines Newsmaker of the Year winners, plus extensive coverage of the Conference itself, just in case you actually missed it. (Oh, shame on you!–Editor.)

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