John Caulfield, Contributing Editor
 vol. ix, #44 November 17, 2003

* TruServ's new boss comes over from HBC * Rona CEO outlines fate of Réno-Dépôt stores * Forest certification agencies duke it out * Canadian Tire's same-store sales up 3.9% in 3Q * Wickes battles losses to effect turnaround * Underwriters Labs and CSA establish unified electrical standard * Home Depot buys up window installer * Wal-Mart execs warn of not-so-white Christmas

We're starting to get a lot of inquiries here at the World Headquarters about the shows next year. Undoubtedly, Practical World, the Cologne International Hardware Fair/DIY'TEC, is a must-attend for North American vendors who want to find new product and packaging ideas – and, of course – new customers. Buyers go in droves to find new sources of supply and new strategic alliances.For more information, contact Barbara Hills, , 416.598.3343 or Beverly Allen here at Hardlines, For travel arrangements, contact Carol-Anne Itel at Trade Show Travel, 877.873.7469;
"Nobody ever forgets where he buried a hatchet." — Frank McKinney Hubbard (American humorist, 1868-1930)
MONTREAL — Four years ago, when Robert Dutton, president and CEO of Rona Inc., got up in front of his dealers at the retail distributor's show in Montreal, he outlined an aggressive plan for expansion that would see the company owning 15% of the Canadian market in five years. The claim met with everything from cheers to disbelief to cynicism. But now, Rona represents 12.5% of the market, according to the latest Hardlines Retail Report, available now... (that's enough of that — Editor) Standing last week in front of the same group, Dutton affirmed the pride he has in his team, for bringing Rona's growth plan closer to reality. "The Rona brand is solidly established in Ontario and Western Canada." Réno-DépôtHe gave some insights into the future of Rona's latest acquisition, Réno-Dépôt. The name is well known in Quebec, mainly in Montreal and Quebec City, and will continue to operate under this banner for the near term. The Building Box name, however, is much newer and much less well established in the Ontario market. Those stores will be converted within the next year to another banner, but he did not say concretely that they would become Rona Home & Garden stores, like Rona's other big box stores in English Canada. "The Building Box banner is not so well known, so our team is working on which banner to go with." The company has yet to determine if the Réno-Dépôt name will be phased out over the long term, or in fact repositioned as another banner for Rona, representing a more traditional, contractor-friendly big box format. He added that Rona expects to build an additional six big box stores over the next eight months. "They could be Réno-Dépôt, they could be Rona or they could be Building Box," he said. However, based on his previous comments that night, it's not likely to be the latter. In fact, the next three, in Edmonton, Regina and Kitchener-Waterloo, will all be Rona Home & Garden stores. "Five years ago, we were leaders in Quebec. Now, thanks to the strength of our team, we are leaders right across Canada," Dutton concluded.
TORONTO — Riding high on the recent launch of its newest retail format, Canadian Tire Corp. released healthy results for its third quarter last week. One of Canada's leading hard goods retailers, Canadian Tire had total retail sales in the third quarter of $1.93 billion, up 4.6% from $1.84 billion in 2002. Consolidated gross operating revenue for the quarter increased 7.3% to $1.56 billion compared to $1.46 billion in 2002. The company realized an increase in its consolidated net earnings of 13.9% to $56.6 million for the third quarter, from $49.6 million in 2002. Net earnings, excluding non-operating gains and losses, were up 11.7% to $55.4 million from $49.6 million. "Canadian Tire has delivered another strong quarter and we are pleased with our sales and earnings momentum heading into the all-important fourth quarter," said Wayne Sales, president and CEO of Canadian Tire, in a prepared release. "We are confident in our ability to meet our established objectives and targets for the year, as all of our businesses are performing well and we continue to make good progress in implementing our strategic agenda." Canadian Tire opened four new-format 20/20 stores recently, and plans to open 19 new stores in total by the end of this year. Consolidated gross operating revenues rose 8.9% to $4.65 billion from $4.27 billion last year. Net earnings increased 10.4% from $138.5 million to $153.0 million for the first nine months. Excluding non-operating gains and losses, net earnings were up 11.2% to $148.7 million from $133.6 million in 2002. For its retail operations in the Canadian Tire Retail division, third-quarter sales were up 3.7% to $1.6 billion from $1.5 billion in 2002. Same-store sales increased by 1.9% from the third quarter of 2002. Sales growth was led by strength in the automotive, housewares and lawn and garden categories.
MONTREAL — At its biggest show yet, Rona Inc. used the Palais de Congrès to showcase 400 vendors — 150 more than last year — in 600 booths, and host some 3,000 dealers, employees and their families from across the country. There was a big emphasis on certain areas, namely seasonal, which was double last year's size, plus a big push on the private-label offerings, which have grown since last year by more than 15% to about 1,500 SKUs. Buyers are looking for more integration of product lines, as well. For example, patterns found in a series of glassware are replicated on the surface pattern of a patio table. The biggest cohesive push was toward a decorating mindset in presentation of products. "We believe décor overall is more and more a trend driven thing," said Marc Dufresne, executive vice-president of merchandising for Rona. By example, he said, "Even millwork is a décor element. It's not just a millwork product." The new millwork presentation was perhaps one of the most dramatic at the show, a large display with overhead in-use photocards atop a range of actual mouldings in suggested applications on the wall. Below were a series of labelled drawers, inside which were more ideas, complete with pictures and profile diagrams of the moulding style. Much like Ikea, customers can then note the number of the moulding, then go to the stack of moulding nearby to complete their selection. Here, as in other cases, Rona has relied on suppliers to bring them ideas. The millwork section was developed with Roland Boulanger. Ambiance PlatesOther innovations included an expanded Ambiance program, Rona's "store-within-a-store" concept that showcases décor accessories — everything from window coverings and linens to plateware and candles.
SAN FRANCISCO — The war of words is escalating between environmental groups and the wood products industry over which forest management standard will protect forests in North America. The Rainforest Action Network here has launched a new attack campaign against the Sustainable Forestry Initiative, the forest management and certification program developed a decade ago by the American Forest & Paper Association. Michael Brune, RAN's executive director, told Hardlines that his organization's campaign is a response to the aggressive marketing effort by the industry over the past several months to promote SFI through media outlets such as Forbes magazine, the Wall Street Journal and National Public Radio. "SFI's advertising doesn't reflect what's happening on the ground," says Brune, citing what he sees as a failure of SFI's standards to protect forests' ecosystems, limit clear cutting or protect old-growth forests. In a prepared statement, Brune called SFI a "phony green label," which on RAN's website is shown — without a hint of irony — being cut down by a chainsaw. Michael Klein, a spokesman for AF&PA, countered that RAN has long been against commercial logging (something RAN officials don't dispute, for the most part, especially in national forests). He insisted that RAN's claim that the industry dictated the standards used under SFI protocols was inaccurate. In July 2000, AF&PA placed SFI under an independent 15-person Sustainable Forestry Board, which in 2002 was granted non-profit status. That the battle between competing certification and forest management schemes is heating up again was evinced by Montreal-based Domtar's announcement last week that it has agreed, in concert with the World Wildlife Fund Canada, to certify all of its forests and mills to Forest Stewardship Council standards, subject to the successful completion of two pilot projects. FSC's standards are the only ones that RAN supports. However, there are only 21 million acres of forests in North America certified under FSC, compared to 136 milion enrolled in SFI's program, according to its Web site. SFI also makes note of the fact that, since its inception in 1995, forest companies subscribing to its standards have planted more than 4.6 million trees. Brune says his group's goal has always been to reach some level of agreement with industry about certifying forest management practices. "And I think SFI will continue to make incremental improvements. But we're still a ways away from each other."
Toronto, ON — CSA International, a leading provider of product testing and certification services, has struck an agreement with its U.S. counterpart, Underwriters Laboratories, whereby UL will accept the CSA mark on electrical components. In the past, a component used in an electrical device seeking UL certification would not be accepted by the U.S. organization. Grant CarterHowever, CSA has been accepting the UL mark on components for many years, says Grant Carter, CSA's vice-president of marketing and communications. Now UL will accept the CSA mark on components. For example, a switch for an electric drill that's already been approved under CSA would not have been accepted by UL, when that switch turned up in a power tool seeking approval by the U.S. body. Carter called the accord "a very important win for producers of components and end-products covered under the agreement." It's also an important step in enabling CSA to establish its credentials as a truly North American standards organization. "All we've asked for as a company is a fair shot at the market." However, he adds, it's not comprehensive, covering about 30%-40% of the components market. "The agreement won't address the needs of all our electrical manufacturers, but I expect it to be expanded in time." CSA, although it has its roots in Canada, now has more offices in the U.S., and its second-largest office is in Cleveland.
VERNON HILLS, IL — To hear Jim O'Grady, Wickes Inc.'s CEO, tell it, his company is on the right track toward achieving its stated goals of increasing sales and controlling expenses. In the quarter ended September 27, the retailer reduced its selling and general administrative costs, as a portion of sales, to 18.3% from 21%. In that quarter, same-store sales rose 5.9%, and jumped by 12% in September alone. However, after a year during which it has sold off 38 of its yards and four component plants, Wickes continues to lose money. In its most recent quarter, the company reported a net loss of US$3.3 million, compared with a US$2.2 million loss in the third quarter of 2002. Through the first nine months of its fiscal year, Wickes has lost US$48.4 million, compared to a US$362,000 loss in that same period last year. Now down to 52 yards, Wickes generated US$372.7 million in revenue through nine months, a 17% decline from the nine-month totals in 2002.
BENTONVILLE, AK — Wal-Mart officials put a damper on the notion that the U.S. economy was in a steady turnaround when they expressed caution about Christmas sales growth, and gave as their reasoning continued consumer worries about unemployment. The world's largest retailer, which employs more than 1.7% of the U.S. workforce, expects its fourth-quarter profits to be slightly below analysts' projections, as they were in the third quarter, when the company's net income rose 13% to US$2.03 billion and revenue increased by the same amount to US$62.5 billion. Same-store sales for its stores in the U.S. were up 6.1% in the quarter. Lee Scott, Wal-Mart's CEO, said that while consumers continue to spend, "I don't see the strength many of you in the investment community appear to see. We're seeing cautious customers … timing their expenditures around the receipt of their paycheck, indicating liquidity issues." He noted that there's still a lot of concern among consumers about unemployment rates, despite third-quarter indicators of significant shrinkage in jobless claims.
Canadian Tire 42.60 27.85 38.51
Canfor 10.95 7.20 8.65
Costco 39.02 27.00 34.16
Goodfellow 13.00 9.75 12.99
Home Depot 37.89 20.10 36.19
Hudson's Bay 12.97 6.41 11.31
Lowe's Cos. 60.42 33.37 58.63
Rona Inc. 25.74 11.75 25.55
Sears Canada 21.50 13.60 20.12
Sodisco-Howden 3.35 1.15 2.95
Taiga Forest 8.10 6.00 7.45
Wal-Mart 60.20 46.25 55.00
West Fraser 39.05 29.25 32.50
BOUCHERVILLE, QC — Rona Inc. has announced its next big box Rona Home & Garden openings. Construction has begun in Regina for its first big box in Saskatchewan, while another, slated for Kitchener-Waterloo, is the 16th such store in Ontario. Both are scheduled to open in summer 2004. Rona's 63rd big box will open in February 2004 in Edmonton. Rona intends to build six big boxes over the next eight months, though they may not all be under the Home & Garden banner. THUNDER BAY, ON — Bob Nardelli, chairman, president and CEO of Home Depot in Atlanta, made a rare visit to Canada last Thursday to join Annette Verschuren, president of both Home Depot Canada and EXPO Design Centers in the U.S. for the opening of the Canadian division's 100th store in this city in Northern Ontario. OAK BROOK, IL — For the third quarter ended September 27, Ace Hardware Corp. had wholesale hardlines sales of US$768.8 million, up 3.4% from sales of US$743.3 million for the same period in 2002. 3Q net earnings were up 3.0% to US$33.0 million, compared with US$32.0 million a year ago. Sales for the nine-month period were US$2.323 billion, an increase of 1.9% over sales of $2.279 a year earlier, while net earnings for the nine-month period were up nearly 11% to US$81.8 million, from US$73.8 million. ATLANTA — Home Depot continues to buy up companies that provide installation services to its customers. The giant retailer has announced the signing of a definitive agreement to purchase RMA Home Services, which has been installing replacement windows and siding for the chain since 1998. RMA is the third-largest installer in the US$7.9 billion window and siding replacement market. The deal is expected to close next month. Terms were not disclosed. DALLAS, TX & CASHIERS, NC — In its third acquisition announcement in a month, Builders FirstSource has signed a letter of intent to buy Bond Builders Supply Inc. of Cashiers, NC. Builders FirstSource already has a store in Brevard, NC, about an hour and a half away. Terms of the acquisition were not disclosed, but the deal is expected to close before the end of the year. MONTREAL — Domtar Inc. and World Wildlife Fund Canada have signed an agreement on forest stewardship that commits both organizations to work together to ensure the long-term conservation of forests in Canada. The agreement involves Domtar agreeing to certify all of its forests and mills to the standards of the Forest Stewardship Council, subject to the successful completion of two pilot projects. BENTONVILLE, AK — Wal-Mart reported third-quarter net income of US$2.03 billion, up from US$1.8 billion a year earlier. The results in the year-earlier period included earnings of US$17 million from discontinued operations. Sales rose 13% to US$62.48 billion from US$55.24 billion a year earlier, as U.S. same-store sales rose 6.1%. The Wal-Mart division's sales were up 13% to US$42.39 billion. Sales at Sam's Club increased 11% to US$8.61 billion and international sales grew 16% to US$11.49 billion. ATLANTA — Home Depot released its first-ever holiday catalogue. Entitled "Holiday Inspirations," the 68-page tome, featuring more than 250 holiday gift items, is being sent out to five million Home Depot customers as part of an expanded multi-channel marketing initiative designed to enhance Home Depot's appeal as a holiday shopping destination (so where's our copy? — Editor) MONTREAL — Tembec's consolidated gross sales for the fiscal year ended September 27 were $3.3 billion, down 1.3% from the prior year. Net earnings climbed to $11.4 million, after a net loss of $116.2 million in fiscal 2002. For its fourth quarter, Tembec had gross sales of $838.6 million, down from $877.1 million in the same period last year. The company narrowed its 4Q net loss to $51.5 million, from $77.2 million $70.5 million in the previous quarter. CORTE MADERA, CA — Restoration Hardware had third-quarter sales of US$95.8 million, an increase of 6% from $90.8 million in the third quarter a year ago. Same-store sales were up 3%. Net sales for the Direct-to-Customer division, which includes catalogue and Internet sales, increased 46% on top of a 66% increase last year. Same-store sales for the quarter increased 3%, on top of a 15% increase in last year's third quarter. LONDON, UK — Kingfisher plc, Europe's leading home improvement retailer, saw third-quarter sales from its home improvement businesses grow 13.3%. Same-store sales were up 3.6%.

Bill Morrison, has joined TruServ Canada Cooperative Inc. as president and CEO. Morrison, whose cv includes Footlocker Canada and HDS Retail, was most recently general manager of Home Outfitters, the home décor division of Hudson's Bay Corp. He replaces Leo Charrière, who left the dealer-owned co-op earlier this year to join the North West Co. Morrison will oversee the growth of Winnipeg-based TruServ's banners, True Value Hardware, V&S Department Stores, V&S Options, and Country Depot. (205-453-9511)

David Giguere has been moved over from the Réno-Dépôt team at Rona to become vice-president of strategy and development. He was formerly vice-president of marketing at Réno-Dépôt. In this newly created position, Giguere will elaborate and refine the big box and traditional formats at Rona for the future. ... James Jones, formerly general merchandising manager for Réno-Dépôt's Building Box stores in Ontario, is now vice-president of operations for Rona's big box stores in Ontario, comprising the Rona Home & Garden banner and the newly acquired Building Box stores ... Luc Nantel, formerly vice-president merchandising for Réno-Dépôt, is now vice-president merchandising for Rona and Réno-Dépôt. His duties include overseeing the harmonization of the Rona and Réno-Dépôt product lines, which together represent 180,000 SKUs. (514-599-5100) Kingfisher plc has announced a number of changes to its executive team: Bill Whiting will retire from the board in February 2005 and from his current position as CEO of B&Q at the end of the current fiscal year, January 31, 2004 to take up a part-time executive role reporting to Gerry Murphy, Group CEO ... Whiting will be succeeded as CEO of B&Q by Rob Cissell, who is being promoted from his current position as B&Q's managing director, commercial ... Helen Weir will resign as group finance director. She will also step down from the board at the end of this financial year ... Duncan Tatton-Brown, currently finance director of B&Q, will join the board as group finance director. He joined B&Q in 2001 ... George Adams, currently group commercial director is being promoted to the new post of CEO, commercial reporting directly to Gerry Murphy.
Housing starts rose from 232,000 units in September to 237,200 seasonally adjusted in October, pushing starts to their highest level in 12 years, says CMHC. Year-to-date actual starts have exceeded last year's level by 7.4%. Urban single starts in October increased 0.3% to 100,900 units seasonally adjusted, from 100,600 units in September. Canada-wide, year-to-date actual urban single starts are 3.8% lower compared to the same period in 2002. Urban multiple starts rose 5.7% to 110,400 units seasonally adjusted in October from 104,400 units in September. Nationally, year-to-date actual urban multiple starts increased 22.9% over last year. The New Housing Price Index rose 0.5% in September, unchanged from August's monthly increase. On a 12-month basis, the index of contractors' selling prices rose 5.1%. The composite price index for non-residential construction in the third quarter was up 0.6% from the second quarter and 3.3% from the third quarter of 2002. The year-to-year percentage changes for each of the last three quarters were the highest measured since an increase of 3.7% in the second quarter of 2001.
Hockey commentator and NHL personality Don Cherry will be guest speaker at the Canadian Hardware & Building Materials Show on Monday morning, February 2, 2004 at the National Trade Centre in Toronto. The presence of the star of "Coach's Corner" will be sponsored by Home Hardware Stores.
"We're going after the gift business in a big way." — John Costello, executive vice-president of merchandising and marketing for Home Depot in Atlanta, on the release of the retailer's first-ever Christmas catalogue.

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