vol. viii, #42 November 4, 2002

* Rona expansion plans include more acquisitions * Sodisco-Howden Group expects big things at first combined show * Home Depot enters Québec City * Réno-Dépôt signs new ad production provider * 3Q losses will result in cost-cutting at Canfor

"There are more fools among buyers than among sellers." - French proverb
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Mississauga, ON - The opening of Rona's 41st big box store came just days after the closing of Rona's initial stock offering on the Toronto Stock Exchange. So, while the 140,000-sq.ft. store had some many merchandising innovations that reflect Rona's "Next Generation," this week we'll focus on the company's growth plans. (More on the "Next Generation" in next week's edition of Hardlines - Editor)

Robert Dutton, president and CEO of Rona, was at the opening with a full entourage of Rona brass, including Pierre Dandoy, executive vice-president of big box stores, Claude Bernier, executive vice-president of traditional stores, Rob Wilbrink, vice-president operations and development for Ontario and Al Cheney, vice-president operations for Rona's Revy stores. While other companies are retreating from floating shares on the stock exchange, Rona's offering worked - and Dutton insists he's pleased with the results. "We can pay down $49 million in debt [the retirement of debentures currently in circulation] and now I have $100 million to support my development plans. That's enough to invest in a number of projects," he says. Those projects include investment in Western expansion, which is very important to Rona, says Dutton. The Western distribution centre will be expanded from 80,000 sq.ft. to 200,000 sq.ft. next year to support that expansion. Growth is also going to come from dealer recruitment, especially in the West, where Rona also has plans for ground up stores. But further acquisitions are important, says Dutton. The company will look for regional chains to buy and own corporately. It is also on the lookout for another wholesaler to buy, though Dutton declined to identify any prospects. The company is well poised for growth, Dutton points out. With three types of stores, traditional hardware and building centres, big boxes and specialty retail formats, including Botanix. Will there be any more big boxes announced by Rona this year? Not likely, but with IPO under their belts, Rona plans to step up their expansion in 2003.
Montréal, QC - With more than 3,000 attendees registered to attend, Sodisco-Howden Group's first-ever combined show was held this weekend. According to Jos Wintermans, president and CEO of Sodisco-Howden, the attendees represent more than 725 stores, as well as some 500 vendors. "This will be the biggest buying show in Canada," he says. "To me, it's the first symbolic and physical evidence of the new Sodisco-Howden Group." The show takes place only weeks after the announcement of Sodisco-Howden's takeover of Ace Hardware Canada. Ace dealers have been invited to attend, as well. Historically, Sodisco-Howden has mounted a show in Montréal for its Québec dealers and another show in Toronto for its dealers supplied by the Howden Division. Those shows have been combined into the Montréal event. Wintermans says the event was successful in attracting dealers from from across the country, where the event was presented in English and French. "It has much more clout," he says. To further consolidate its presence to its dealers, Sodisco-Howden will not exhibit at the Canadian Hardware and Building Materials Show in February. Through the '90s, Howden had actually stopped putting on a Howden show, and instead tied its spring buying activities to the CHS. While the first year managed to pull in a reasonable showing of Howden customers, within three years the involvement with the national show was pulled.
Québec City, QC - Home Depot Canada opened its first two stores here last Thursday, one in Lebourgneuf in the Northeast end of the city, and Sainte-Foy in the Southwest. Home Depot has competition from two Réno-Dépôt stores and one Rona big box in this market already. In addition, it is the turf of independents such as Canac-Marquis Grenier. Home Depot began its expansion into Québec in August 2000, after a non-compete clause between Home Depot and Réno-Dépôt eroded. "It's been a very aggressive expansion program," says Roger Plamondon, regional manager for Québec. "You can't be a national player without being in Québec and the population warrants that we have a certain number of stores there." Plamondon adds that the company has gone into the greater Québec City area with what it believes is the optimum number of stores. "We'll evaluate very carefully how the market is being covered. The market conditions will dictate, but two was the ideal number we calculated." A number of observers have questioned Home Depot's viability in this market, but Plamondon is confident of the move. "Historically, Québec City has shown a willingness to try new brands. So we're not that concerned from that standpoint, as long as we do the job we're supposed to do." He says features such as tool rentals, and an installed program will set Home Depot apart from the Québec-based big box competitors. With the addition of a store on the South Shore in Greenfield Park on December 5, Home Depot will have 12 stores in Québec province by the end of this year.
Don't miss Practical World 2003, the Cologne International Hardware Fair/DIY'Tec. The 2003 show is March 9-12. For show information, contact Barbara Hills at 416-598-3343 or email colognet@idirect.com. To book your flight and hotel, call Carol-Ann Itel at Trade Show Travel, 1-877-873-7469 or email tradeshowtravel@shaw.ca .
Canadian Tire 33.15 22.21 31.70
Canfor 11.70 6.83 7.48
Emco 12.77 5.60 10.91
Goodfellow 13.99 8.49 12.15
Home Depot 52.60 23.18 28.40
Hudson's Bay 15.55 5.87 7.25
Lowe's Cos. 49.99 32.50 42.10
Sears Canada 25.10 13.03 18.07
Sodisco-Howden 2.20 1.06 1.50
Taiga Forest 7.00 4.55 6.40
West Fraser 44.42 27.36 35.00
Réno-Dépôt has launched a new ad production system, using the Engage for Retailers promotion and advertising software. The system will be used to streamline production of Réno-Dépôt's French and English advertising and promotional campaigns across its 20 stores throughout Quebec and Ontario. Canfor suffered a third-quarter net loss of $11.8 million, versus net income of $19.6 million a year earlier. The third-quarter losses reflect lumber export duty charges of $35.8 million after tax (compared to $17.2 million for the prior quarter and $11.5 million for the corresponding period in 2001). While year-to-date net income increased to $69.5 million, net sales fell $27.8 million, due largely to lower lumber prices and lower pulp shipments. The company is feeling the crunch of softwood lumber duties from the U.S. Canfor plans drastic cost-cutting measures, which will include laying off about 300. Domtar Inc. had net earnings of $59 million on net sales of $1.4 billion during the third quarter of 2002. During that period, the company formed a new forest products group, which combines both timber and lumber operations. GSW Building Products has named RDTM to handle its sales in Québec and RDTS for store service, effective November 1, 2002. Both companies are led by Robert Di Tomasso. Emco Ltd. had net earnings for the third quarter of 2002 of $14.1 million, compared with $8.2 million for the same period in 2001. Sales for the third quarter reached a record level of $383 million, increasing 6% over the comparable period last year. Sales for the quarter for distribution were 9% higher than 2001. Sales in the third quarter by Doman Industries were $175.6 million, compared with $174.1 million in the third quarter of 2001. Sales in the first nine months of 2002 were $465.5 million, down from $608.8 million. MAC Call Center was recently appointed to handle consumer help lines in Canada for appliance manufacturer Hamilton Beach Proctor Silex. In July, it added to its client roster. Its customer roster includes Porter Cable Delta, GSW/Canadian Tire, Masonite, Unilever and Bridgestone Firestone. Sico Inc. posted a 47.8% increase in net earnings in its third quarter, to $4.2 million. That's up from $2.8 million in the same period last year. Sales were up17.8% to $66.6 million. These results contributed to a 49.9% increase in net earning for the first nine months to $12.0 million. Sales grew by 14.1% to $204.6 million. Tembec has reopened its value added centre in Cranbrook, BC, which was temporarily closed a year ago as a result of the U.S. imposed penalties on softwood lumber. Retooling to facilitate alternative processes and products made the reopening possible. Slocan showed continued losses in the third quarter, to $1.8 million, an improvement from the net loss of $2.1 million in 3Q 2001. After including income taxes and the unrealized loss on U.S.$ denominated debt, however, the net loss was $12.3 million, compared with a net loss of $8.0 million. A class action suit against paint manufacturers has ended in a mistrial. The judge in a case in Rhode Island that tried to hold paint manufacturers responsible for the health hazards of lead-based paint ended in a mistrial when the jury became deadlocked trying to decide whether lead-based paint, which the federal government banned in 1978, posed an immediate or potential public hazard. The judge has to decide whether there will be a new trial. West Jordan, a community in Utah, will the site of a new-style Sears store. The 200,000-sq.ft. store is scheduled to open by October 2003. It will be twice the size of the largest existing Sears stores, will mark a change in traditional Sears retailing formula. It will incorporate centralized checkout, fewer store divisions and, for the first time in 40 years, a toy department.
Gary Hamilton has been appointed executive director of the Western Retail Lumbermens Association, effective December 2, 2002. He will be working with the Judy Huston, the retiring executive director, for three months before stepping into the role fully on March 1, 2003. Hamilton was formerly with TruServ Canada Co-operative, where he had positions as a manager and buyer. Before that he was in management positions at Sears Canada in both Winnipeg and Toronto. (204-957-1077) At the Canadian Retail Hardware Association, which owns and operates the Canadian Hardware & Building Materials Show, Maura Bella has been named as director of CHS. Bella is a 22-year employee of the CRHA, who most recently held the position of director of administration. In her new role, she will oversee all activities of CHS, including the implementation of strategy, sales, on-site activities, promotions and finance. She replaces Joe Edwards, show manager, who is currently on indefinite medical leave. (905-821-3470) David (Jesse) Jessop has joined Zellers as regional vice-president for its stores in Western Canada. Jessop comes over from Home Depot Canada, where he spent 10 years in a variety of positions. He was most recently regional operations manager for Home Depot in Eastern Canada. (905-792-4400)  
Canada's gross domestic product levelled off in August, after a strong showing in July, says Stats Canada. Economic activity edged up only 0.1%, the 11th consecutive monthly increase. Consumer demand for housing led to higher output for the residential construction industry, construction-feeder industries in the manufacturing sector, the real estate agent and brokerage industry and the legal services industry. It also managed to offset significant declines in the agricultural, mining and utility sectors. Low rental vacancy rates and strong demand for commercial spaces helped keep the construction industry healthy in 2000, says Stats Canada. Total revenues rose 12.3% to $121.0 billion from 1999. Residential construction was up 12.2% and non-residential construction was up 10.6%.  
If you are doing budget planning, developing next year's marketing plan, pitching a new client who needs hard data, a foreign head office that needs the definitive Canadian snapshot, in need of competitive intelligence, call Nancy Wright, 416-489-3396, to find out more!
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