John Caulfield, Contributing Editor
vol. xi, #43, November 14, 2005

IN THIS ISSUE: • Home Hardware nets Western stores • RONA profits up on Totem acquisition • BMR recruits AWARD dealers • Canadian Tire profits rise in third quarter • Ace Hardware 3Q results * * * * * *

“The best way to get on in the world is to make other people believe it's to their best advantage to help you.” —Jean le Bruyère (French writer, 1645-96)
ST. JACOBS, Ont.Home Hardware Stores Ltd. has made significant inroads in Western Canada with the recruitment of nine stores owned by C.A. Fischer Lumber Co. Ltd. The move is actually part of a larger expansion initiative that includes a brand new store in Edmonton and a hardware dealer in Richmond, B.C. The Fischer stores are located in Cold Lake, Linden, Slave Lake and Westlock, Alta.; and Burns Lake, Grand Forks, and Mackenzie, B.C. Eight of them have been converted to either the Home Hardware Building Centre or Home Hardware Home banner, while one more will be turned into a Home Furniture store effective Dec. 1, 2005. Northland Home Hardware Building Centre is a ground-up operation owned by Jerry Dolynchuk, an existing dealer who was formerly an independent. Home Hardware’s first location in Edmonton, it will have its grand opening Nov. 17. The 23,000-sq.ft. store is also the first Home Hardware store in Alberta to feature Home’s new “Build a Better Home Store” concept, which was unveiled at the co-op wholesaler’s dealer market back in April. Home Hardware, which is Canada's largest hardware and building materials co-operative, and the third largest home improvement retailer in the country, will expand its retail network this year with additional annual retail sales of $24.5 million and 126,000 sq.ft. of added retail space. The dealer-owned co-operative, which has more than 1,000 locations and retail sales of $4.2 billion, recently added eight stores in Alberta. To support the growth in Western Canada, Home Hardware is busy expanding its distribution centre in Wetaskiwin, Alta., at a cost of $10.1 million. The project, which is scheduled for completion next year, will add 212,000 sq.ft., bringing the facility to more than 750,000 sq.ft. The facility services 318 stores throughout Western Canada.
TORONTO–Third-quarter profit was up 21.7% at Canadian Tire, thanks in large part to the performance of its apparel chain, Mark’s Work Wearhouse, as net earnings reached $84.4 million. Excluding non-operating gains and losses, net earnings were $83.3 million, an increase of 26.2% compared to $66.2 million last year.Sales by Canadian Tire Retail were up 3.9% in the quarter, compared with the same period in 2004, as sales for the division grew to $1.68 billion, from $1.62 billion in the same period last year. Same-store sales were up by 2.2%, driven, says the company, by strong customer response to CTR’s retail marketing programs and by the success of the Concept 20/20 program. In addition, sales of tools, kitchen and home appliances, outdoor recreation, backyard living and auto power sports categories were especially strong during the quarter.CTR opened one new-format Concept 20/20 store during the quarter and a total of 10 Concept 20/20 stores to date in 2005. At the end of the quarter, there were 459 stores in the CTR network, including 35 Concept 20/20 stores and nine combination Canadian Tire-Mark's Work Wearhouse stores.
QUEBEC CITY–Dealer recruitment at Le Groupe BMR was well behind last year’s growth, until last week’s dealer show, that is. At that event, some 20 dealers from AWARD in Atlantic Canada, representing 15 stores, were present. By the end of the show, 11 of the AWARD dealers had signed with BMR. They include some key members, such as Tom King of Sherwood TIM-BR Mart in Charlottetown, and Peter Miller, who is himself a former president of AWARD.The AWARD members who were on hand were part of a group of 53 dealers who have had to make a decision about their affiliation following the merger of AWARD with Calgary-based Tim-BR-Marts Ltd. The merger goes into effect Jan. 1, 2006. More than 30 of the dealers have already signed with Tim-BR-Marts, following a similar move a year earlier by TIM-BR MART Ontario (all three groups belonged to the umbrella buying group, Matreco). But BMR, with its own hardlines distribution–a unique scenario for Canadian buying groups–presents an appealing model to dealers like King and Miller, who have historically relied on outside distributors such as Sodisco-Howden Group. Says King, “It’s a personal decision. You have to do what’s best for your business.”The purchase of BMR’s key competitor on the hardlines distribution side, Sodisco-Howden, by CanWel, and its ensuing alliance with TruServ Canada, decreases the number of options for independents –and increases the appeal of his group, says Yves Gagnon, president of BMR. “It’s a big opportunity for BMR. We have 17 Sodisco-Howden dealers at this show,” he adds, to underline his point. Gagnon has bigger plans for next year. “We’re very happy because, even though we didn’t get any new members this year, our strategy in 2005 was to take care of our new dealers. But we’ll have more next year.” And BMR is looking farther afield than ever before to find them. Besides signing Brian Hermiston, himself ex- of AWARD, to service the new members down east, the group has recruited Paul Peterson, formerly of TIM-BR MART Ontario, to develop the dealer base in Ontario. “We expect BMR to go east and west, and north and south,” says Gagnon. West, for now, means as far as, and including, Toronto. Does south mean the U.S.? “We’re looking south, but not tomorrow,” he says, indicating that U.S. expansion is a definite opportunity, but one that will have to wait. “Our goal is to get 20 dealers by this time next year,” he says. “Maybe some more from AWARD, some from RONA, and some from other groups.”
BOUCHERVILLE, Que. –RONA inc., Canada’s number-two home improvement retailer, reported strong results for its third quarter, including a 10.6% increase in consolidated sales (sales through its distribution centres, plus retail sales through its corporate stores and its share of franchised sales), which climbed to $112 billion. Much of the growth was driven by RONA’s acquisition of Totem Building Supplies, whose results were consolidated with RONA’s in the second quarter. Despite sharp decreases in lumber prices, organic growth advanced 1.8% thanks to the expansion of RONA’s network of corporate, franchised and affiliated stores. For the year to date, RONA had consolidated sales of $3.05 billion, up 10.9%.Retail sales for all corporate and franchised stores advanced 14.7% to $830.5 million in the third quarter. Organic growth was 2.4%, fuelled by the contribution of a number of corporate store openings. Same-store sales advanced approximately 1.2% including Totem, and 0.6% without it. Same-store sales suffered the negative impact of major renovations carried out simultaneously in six RONA Home & Garden stores in Ontario that were converted from The Building Box.
Vancouver–Following the announcement of a strategic alliance with TruServ Canada to service CanWel’s Ace and Pro dealers, CanWel further consolidated its Sodisco-Howden acquisition by renaming it CanWel Hardware. Sodisco-Howden was purchased by CanWel Building Materials in December, 2004. While the legal name, Sodisco-Howden Group Inc., won't change immediately, the wholly owned subsidiary will now market under the CanWel brand with its sister company, CanWel Distribution. Both CanWel Distribution and the newly named CanWel Hardware are divisions of CanWel Building Materials.Sodisco-Howden’s new name coincides with its new affiliation. With TruServ Canada, the hardware wholesaler will have a new negotiating partner. According to Tom Donaldson, president and CEO of both CanWel Building Materials and Sodisco-Howden/CanWel Hardware, CanWel Hardware and TruServ will leverage their combined purchasing power, sitting together at the buying table with key vendors, acting as a sort of buying group of two.Key suppliers from both sides will be sifted through, and the vendor base will be streamlined, says Donaldson. In fact, many vendors are bracing for meetings in Montreal this week, as they present their case to the new CanWel/TruServ coalition.
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.
MISSISSAUGA, Ont.–G-P Canada has formalized a distribution agreement with AFA Forest Products to facilitate the LTL (less-than-truckload) shipments of DensShield Tile Backer to the retail and LBM sectors from Quebec to British Columbia. “The timing of this agreement comes on the heels of natural disasters in the Gulf Coast and Florida, which have tightened the supply of all building materials,” said Tony DiGiovanni, regional manager of G-P Canada, noting that cement-based tile backer manufacturing has been among the hardest hit in North America. OAK BROOK, Ill.–Ace Hardware Corp. had wholesale hardlines sales for the third quarter ended Sept. 30 of $855.2 million, 5.4% greater than sales of $811.2 million for the third quarter 2004. Net earnings for the third quarter were $29.9 million, down $3.3 million compared to third quarter 2004; however, in line with expectations due to increased investments in retail growth and technology initiatives. Sales for the first nine months of 2005 totaled $2.6 billion, an increase of 3.9% for the same period in 2004. Nine-month net earnings in 2005 were $78.0 million, versus $86.7 million in 2004. LONDON–B&Q Asia, the home improvement chain owned by the U.K.'s largest DIY retail organization, Kingfisher Plc, has begun construction of its first store in Hong Kong. The 120,000 sq.ft. store is slated to open in 2007 and achieve sales of £25-£30 million in its first full year of operations, representing 5-8% of the home improvement market there. TORONTO-Loblaw Cos., the giant grocery chain that has been aggressively adding home décor to its mix, has been re-organizing its head office, buying teams, and general merchandise assortments, all of which managed to keep 3Q same-store sales flat. Nevertheless, sales for the third quarter increased 6.4% to $8.7 billion, from $8.1 billion in the third quarter of 2004. Same-store sales growth was flat during the quarter and up approximately 0.5% year-to-date. Sales and same-store sales were adversely affected by supply chain disruptions during the quarter, with the general merchandise and health and beauty care departments experiencing the greatest impact. CLIFTON, N.J.–A private investment firm will acquire Linens ’n Things for US$1.3 billion. The number-two home goods chain behind Bed, Bath & Beyond, Linens ’n Things will become part of a new company owned by Apollo Management LP. The deal, which will take the company private, is not expected to alter plans to open up to 30 more stores next year. PORTLAND, Ore.–Zephyr Media Group and Atomic Direct have formed a strategic alliance to offer DRTV clients a complete set of strategic, creative, production, media buying and campaign services. As part of this alliance, Zephyr Media has opened an office here and hired 10-year DRTV media veteran Noelle Hubler as senior media buyer. Through this alliance, Zephyr and Atomic will combine forces to deliver a full range of brand DRTV agency services for brand and retail clients including Drill Doctor, Farberware and Newell/Rubbermaid. The Portland office joins existing offices in Chicago, New York, and Washington D.C. MINNEAPOLIS–Waters Instruments will change the company name to Zareba Systems Inc. The change was effective Nov. 1, at which time the company's stock began trading under the new symbol “ZRBA” on the NASDAQ Stock Market. During the last few years, the company has sold two divisions, Waters Network Systems and Waters Technical Systems, and acquired North Central Plastics and Rutland Electric Fencing Co. The company also moved its Waters Medical Systems into a subsidiary to focus primarily in electronic perimeter fencing through its Zareba Systems division. PRESQUE ISLE, Maine–Lowe's has revealed it will build its first store in the northern part of this state, adding to the two already there in Auburn and Brunswick, and another two, in North Windham and Portland, already under construction. Presque Isle is a short distance from the Canadian border, where Lowe's plans to expand within two years in its first-ever international expansion move. HERNDON, Va.–Lafarge North America Inc., a leading supplier of construction materials in the U.S. and Canada, had third-quarter 2005 net income of $172.1 million, compared with net income of $165.6 million in the third quarter 2004. The results for the third quarter 2004 include $2.3 million related to litigation expenses from a legal settlement. Operating income for the quarter was $278.5 million, up 5% to $12.3 million, reflecting higher prices in all product lines and continued strong performance in the gypsum segment. The strengthening of the Canadian dollar contributed $11 million to operating income during the quarter. Increased energy prices negatively affected operating income by $19.4 million during the quarter. Consolidated net sales during the quarter were $1.4 billion, up 12%.
At Bakor, Larry Karasiuk, president, has decided to retire after a career of nearly 24 years with Bakor and its predecessor companies. The move is effective Dec. 31, 2005. The company is in the process of selecting a replacement for Karasiuk and new leadership will be announced shortly. Morris Feldman, who worked for 34 years as a general manager in Toronto for a decorative and builders’ hardware importer, has spent the past two years as a consultant. His consulting services are now available for product development and marketing of decorative and builders’ hardware to retail customers and new construction distributors in the U.S. and Canada. (416-315-4441;
Housing starts slumped to 206,700 units in October, down 10% from 229,600 units seasonally adjusted in September, but still well above the benchmark 200,000 mark, says CMHC. The seasonally adjusted annual rate of urban starts fell 11.4% to 177,100 units in October, with multiple starts down 14.6% to 88,300 units, and single starts down 7.9% to 88,800 units in October compared with September. Rural starts in October were estimated at a seasonally adjusted annual rate of 29,600 units. Year to date, actual urban starts were down 5.7%, as single starts fell by 10.8% and multiple starts declined by 0.3%.
Doug Robinson, president of Lowe's Canada, will talk to members of the Canadian Hardware and Housewares Manufacturers Association on Dec. 8 at the Sheraton Toronto Parkway North. Members only can go to the CHHMA website to sign up.. Otherwise, phone 416-282-0022 for more info.

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