John Caulfield, Contributing Editor
vol. x, #45, November 8, 2004

IN THIS ISSUE: • TruServ's Lieberman resigns unexpectedly • Sodisco-Howden begins defining its banners • Masco's big box sales slip • TruServ Canada moves rural format West • Kingfisher steps up Eastern European expansion

* * * * * * NOTE: Dollar amounts are stated in the currency of the country from which the story originates. — Michael McLarney, Editor & Publisher * * * * * *
"Every morning, I get up and look through the Forbes list of the richest people in America. If I'm not there, I go to work." — Robert Orben (American humorist, 1927-)
CHICAGO — Pamela Forbes Lieberman has resigned as president and CEO of TruServ Corp., the industry's third-largest dealer-owned buying group. The company's board of directors requested her resignation.In a prepared statement that appeared on TruServ's web site November 2, the company said Thomas Hanemann, 64, a board member and the former president of the AutoZone chain, would step in as interim CEO, and that TruServ's chairman, Brian Ableidinger, would oversee the transition with the goal of choosing a new chief executive by early 2005. "Now is the right time for new leadership with greater operational experience necessary to implement the company's strategic plan and take advantage of the opportunities to grow sales, add members and become more competitive," said Ableidinger in the prepared statement. The company did not provide any further explanation of this move. Lieberman's resignation came only one day after the co-op reported a slight decline, to $474.5 million, in its wholesale sales for the quarter ended October 2, during which TruServ incurred an earnings loss of $9.8 million, compared with a $14.3 million gain for the same quarter in 2003. Through the first nine months of its fiscal year, TruServ's revenue was up 3% to $1.55 billion, and its earnings — which the co-op refers to as its net margin — was $32.4 million, versus $11 million for the same period a year ago. In that period, the co-op reduced its debt by $25.1 million, and lifted a moratorium on its members cashing out of their stock ownership, which had been a source of intense contention within the buying group's dealer ranks. The 50-year-old Lieberman joined TruServ in March 12, 2001 as its senior vp-finance. That July, she was promoted to chief financial officer and chief operating officer, and became the co-op's president and CEO November 16, 2001. In recent interviews, Lieberman gave no hint that she was either thinking of leaving the company, or that her job was in jeopardy. "I am extremely proud of our team's accomplishments in turning around TruServ, restoring it to sustainable profitability and cash flows and greatly reducing the outstanding debt," she said in a prepared statement. "I deeply regret leaving the co-op and I have nothing but good wishes for its continued success," Forbes Lieberman said. TruServ, which will change its name officially to True Value Co. as of January 1, 2005, has nearly 6,200 dealer-members whose stores draw merchandise from the co-op's 12 distribution centers.
SPECIAL REPORT — A strong background in operations and retailing is what TruServ Corp. will be looking for in candidates for the chief executive position that opened within the buying group following the forced resignation of Pamela Forbes Lieberman."We want someone who has 'been there, done that,' and can make our members more successful at retail," said Brian Ableidinger, the co-op's chairman, who is overseeing a CEO search that is expected to extend into 2005. In an interview with HARDLINES, Ableidinger and Tom Hanemann, a board member who will serve as interim CEO during the search period, emphasized in the strongest possible terms that Lieberman's departure should not be seen as evidence of more corporate turmoil, but as a "logical transition" within a beleaguered buying group that had righted itself financially, and now was moving forward with a strategy to increase revenue, add members and improve its overall competitiveness. Lieberman's financial expertise, they explained, had been critical to re-establishing TruServ's credibility among members, suppliers and creditors, which had been shaken by accounting improprieties and a crushing debt burden. Both executives praised Lieberman's efforts to streamline the company and stabilize its balance sheet. "We are celebrating what Pamela has accomplished," said Hanemann. However, TruServ's board determined that Lieberman did not have the appropriate "skill sets" to lead the co-op into its next stage, even though Ableidinger said board members were generally in agreement with the strategic plan Lieberman and her management team had devised over the past six months. "It became evident" he said, that TruServ needed someone with a broader vision "who could execute that plan." He added that Lieberman would assist in the transition "for a short time." The co-op has hired a search firm, which Ableidinger did not identify. It was unclear whether that search will consider current senior-level managers. But Hanemann was quick to note that "there's no other shoe to drop," and that the co-op's existing management team "is committed to the success of the co-op. I don't anticipate anyone else leaving."
FORT WAYNE, Ind. — The international hardware buying group Alliance LLC will lose one of its three members, namely Rona Inc., as of December 31. The group, an organization unique in North America for its international scope, also comprises Home Hardware Stores Ltd., of St. Jacobs, Ont., and Do it Best Corp., which provides space for the Alliance in its offices here in Fort Wayne.The group, which for years had two non-competing members in Canada and one in the United States, consolidates buying decisions for 12 core hardlines categories, with a committee of buyers from each of the dealer-owned co-op distributors. They work with Greg Thomas, executive director of the Alliance, who is quick to note that the group will continue, regardless of its smaller size. "The Alliance will continue on with Do it Best and Home Hardware as partners," says Thomas. "We always planned to have our 2005 strategy meetings in November. So they'll be held this week and the following week." He adds that he's "positive" about the move, saying, "It was a mutual parting of the ways, as far as the Alliance partners were concerned." He also expects Rona to be replaced in time. "We're going to explore the possibility of new members in the future, though we haven't put a time frame on that." Any new members could come from either the United States or Canada, or both. The exact reasons for the break-up were not disclosed, nor would Rona comment. But an examination of the changes Rona has undergone in recent years will provide some clues. When the group was formed, each member wholesaler was dealer-owned — and non-competing. Now not only does Rona have a strong presence outside its home province of Quebec — competing head to head with Home Hardware — but it is now a public company, and the former dealer owners have become stock holders.
MONTREAL — With a quarter of healthy profit growth, despite only a moderate increase in revenues, Sodisco-Howden president and CEO Jos Wintermans is optimistic about the company — and its dealer customers.Service levels are up, he notes, adding that the national hardware distributor's fill rates have exceeded 95% for more than a year. Dealers are responding to that service, "and now they're talking about how they can give us even more business." Sodisco-Howden's third-quarter revenues totalled $129.8 million, up 3.6% from the same quarter in 2003, thanks in large part to the the expansion of its Servimat LBM distribution into Atlantic Canada last spring. The company has also regained sales momentum in its high margin hardware warehouse segment in the Ontario market, which had been eroded by the defection of one of its key customers, TIM-BR Mart Ontario, to join a competing hardlines distribution network, Quincaillerie Matreco Hardware. Despite that erosion, which held sales back, Sodisco-Howden was able to increase its net earnings for the third quarter by 23% to $2.9 million. "We're revamping our core categories. For example, we just relaunched electrical, and now we're rapidly redesigning our other categories [plumbing, paint and hardware]. The reaction," says Wintermans, "has been great." Wintermans says he is expanding assortments in these categories to make it easier for his customers to buy everything they need from Sodisco-Howden. Dealers who want specialty items in these departments often have to rely on specialty distributors. To that end, the buying team has been expanded, with three additional category managers and another four support staff added over the past year. "We will offer a full program in these categories, so they won't have to order from anyone else," Wintermans says. "But it only works if we have everything the dealers need."
MONTREAL — At its fall dealer show last week, executives from Sodisco-Howden introduced plans for a number of programs to better define — and promote — this national hardware distributor's two banners, Ace and Pro.One of the initiatives introduced at the Sodisco-Howden's fall market was a revamping of the advertising program. Flyers will get a new look, with both Pro and Ace programs using a 10x21-inch long format, with full colour super white newsprint. Even the product shots themselves will be more stylish, showing products in use or in association with other items to help sell them better. The catalogue has been changed as well. Instead of one giant catalogue for customers that is sent out in spring, it will be replaced by eight "mini-catalogues", which will be sent out throughout the year. The two Sodisco-Howden banners will also get some heavy TV advertising, beginning early in 2005. The Ace program will mirror Ace in the U.S., to capitalize on the heavy ad spill over from ads from Ace in the U.S. Even product specials will run parallel to Ace's flyers in the U.S. (Sodisco-Howden, which bought up Ace Hardware Canada in November 2003, licenses the use of the Ace brand in Canada). The programs for each banner will become part of a process of defining a distinction between the two. Pro will become the project oriented, while Ace will be more DIY customer. "The challenge for the Ace banner is to get volumes up and to develop private label products," says Normand Cyr, vice-president marketing for Sodisco-Howden. "Our goal will be to increase the number of SKUs in private label to emphasize the Ace brand in the stores."
TAYLOR, Mich. — Masco Corp., one of North America's leading suppliers of home improvement products, reported a 12.4% increase in revenue, to US$3.173 billion, for the three months ended Sept. 30. Through nine months, the company's sales were up 15.9% to US$9.04 billion.The company's quarterly net income jumped 13% to $359 million, and by 10.4% to $788 million through nine months. Masco officials attributed its gains to three factors: the introduction of new products, gains in market share, and a strong home-buying and home improvement environment. However, Keith Hughes, an analyst with SunTrust Robinson Humphrey, told Reuters that Masco's quarterly sales growth of 6% with key retailers — including Home Depot and Wal-Mart — were lower than some observers had expected. A year earlier, those same sales were up 8%. During the quarter, the company continued in its efforts to dispose of certain European assets. The sale of companies in Germany and Spain generated proceeds of $191 million and a pre-tax net gain of $108 million. Through nine months, Masco's sales of cabinets and related products were up 15% to $2.432 billion; plumbing product sales rose 16% to $2.299 billion; sales from the company's Masco Contractor Services division, which provides turnkey installation services for major home builders, increased 16% to $2.053 billion; its sale of decorative architectural products grew by 21% to $1.254 billion; and merchandise that Masco classifies as "other specialty products" increased by 16% to $1.002 billion.
WINNIPEG — TruServ Canada has begun rolling out its unique Country Depot store format outside of Ontario. The first such store in Western Canada will open in Okotoks, Alta., later this winter. In addition, another eight or nine Country Depots are planned for Ontario in 2005.BOUCHERVILLE, Que. — In a move designed to reduce its debt, Rona Inc. has sold nine properties in Quebec and Ontario, most of them the sites of big box stores, and will lease them back. The leaseback transaction was done with H&R Real Estate Investment Trust, which is acquiring the properties for $102.8 million and leasing them back to RONA. All proceeds from the sale of the properties will be used to reduce debt. BURNABY, B.C. — Taiga Forest Products Ltd. had sales for the three months ended September 30 of $383.5 million, up 25% from $306.2 million in the same quarter last year. Earnings for the three months were $5.5 million, compared with $4.4 million last year. For the six month period, Taiga's sales were $767.9 million, up 36% from $564.6 million for the same period last year. Earnings for the six month period this year were $11.3 million, compared with $5.0 million or $0.63 per share last year. HOFFMAN ESTATES, Ill. — Sears, Roebuck and Co. reported domestic store revenues of $1.90 billion for October, up 0.1% from the same month in 2003. Same-store sales were up 1.9%. The company had good results from sales of appliances, as well as the home electronics business. Sales year-to-date are down 3.4%, and year-to-date same-store sales fell 2.1%. BENTONVILLE, Ark. — Wal-Mart Storesreported net sales for October of $21.04 billion, up 10.4% from $19.07 billion in the same month a year earlier. Sales year-to-date were $203.0 billion, an increase of 11.4%. The Wal-Mart Division's sales for the four-week period were $13.92 billion, up 9.4% over sales of $12.72 billion. Sam's Club sales for the month were $2.82 billion, up 6.8%. The International Division's October sales were $4.311 billion, up 16.2%. LONDON — Kingfisher intends to bolster its presence in Eastern Europe, says DIY Week. Europe's largest home improvement retailer has plans to increase the number of its Castorama stores from 21 to 60 by 2009. Poland alone will become the target for up to 100 stores. French DIY retailer Leroy Merlin has 11 stores of its own in Poland, and intends to open two more. BENTONVILLE, Ark. — Like many American retailers, Wal-Mart is running behind many European companies in its efforts to expand into China. But count on it to make up for lost time. It will have a total 43 there by year's end, and plans another 10 for next year. France's Carrefour SA and Germany's Metro AG are already up against the likes of local firms such as Beijing Wangfujing Group and Wumart Stores, but next month, foreign retailers will get greater access to China's $240 billion retail market, thanks to the lifting of geographic and joint venture requirements.
Monty Gibson has been appointed territory manager responsible for Ontario at Johns Manville Canada. He was formerly a sales representative with CGC. (905-331-0199)Dave Pestill has joined Silk Dimensions Systems Inc. (formerly Dimensions Retail Systems) as national sales manager. He has a 19 years of experience in sales, including 12 years in management in high-tech industries in Southern Ontario. Pestill reports to Judy Palmer, POS goddess and vice-president marketing and sales. (800-731-9026)
Spending on new construction was virtually flat in September, with a slight lift in non-residential building, as the first decrease in housing construction outlays since early 2003 offset a slight gain in non-residential building activity, reports the Commerce Department. Construction put in place in September ran at a $1.014 trillion annual rate, $136 million lower than in August.
Housing starts in Canada will reach 226,800 units this year as favourable economic factors carry starts to a 17-year high, according to Canada Mortgage and Housing Corporation's latest Housing Outlook report.
"People say they want good service, then they shop at Wal-Mart." — Bill Morrison, president and CEO of TruServ Canada, giving lie to the truism that people will pay a premium for service. The important things, in fact, are great value, good assortment of merchandise and a no-hassle return policy. He was speaking recently at a breakfast seminar hosted by the Canadian Hardware and Housewares Manufacturers Association.

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