John Caulfield, Contributing Editor
vol. xi, #38, October 10, 2005

IN THIS ISSUE: • Home Depot announces another urban store • Home Hardware’s furniture stores are hot • Canadian Tire wants downtown stores, bigger stores • NAFTA rules in favour of Canucks–again • Sears finds Orchard partner • Chase-Pitkin falls prey to big box competition • Home Depot goes pro with beefier power tools * * * * * *

“In matters of conscience, the law of the majority has no place.”—Mohandas Gandhi
TORONTO – Home Depot is trying out smaller stores up in Canada, as small as 60,000 sq.ft.–half the size of a traditional big box. And the company’s chief officer Robert Nardelli is watching the experiment closely. A so-called “urban” store at the Gerrard Square in Toronto’s east end is about 82,000 sq.ft. A store in Chatham, Ont., opened in the middle of last month–the first 60,000-sq.ft. outlet in Canada’s largest province.These smaller-sized stores are being built in cities across Canada. “What we needed was to find new formats that will work in different geographies, in different markets,” Nardelli told HARDLINES in an exclusive interview. Referring to Canadian division president – and president of the Expo division, Annette Verschuren, he added, “It’s very important for Annette to do these pilot projects.” So far, similar small-footprint outlets have been erected in the U.S., in Ada, Oklahoma and Brookhaven, Miss. Eight more are in the works for the rest of the year, Nardelli adds. He says that these formats can tap into a potential market worth $3-$5 billion. “But we have to find the space.” Home Depot Canada president Annette Verschuren revealed to HARDLINES that a site in Vancouver has been approved for development of another “urban” concept store. The site, on Cambie St., will share the parking lot with a Canadian Tire that just opened, a two-storey affair that is being touted as an “urban” concept by Canadian Tire. The new Home Depot, slated to open some time in 2008, will sit on four storeys, including two floors below of parking.
ST. JACOBS, Ont. – While diversity remains the secret weapon of the small hardware store, Home Hardware is having some of its greatest success with a banner that actually specializes more than most. Home Furniture, a specialty retail banner that sells, along with furniture, heavy appliances and home electronics, continues to gain ground. Seven stores have been added already this year, bringing the total to 63 – with two more in the works.The growth is coming mainly from existing independent furniture dealers who wish to take advantage of the buying power and programs available within a co-op structure. But, says Home’s Patti Uhrig, existing Home Hardware dealers, both hardware and building materials, are important targets. They are choosing to expand their existing operations with a “combo” store, that includes the addition of the Home Furniture banner, often with a separate entrance.
VANCOUVER – In a unanimous decision for Canada, the NAFTA panel on countervailing duties issued a decision on the U.S. Department of Commerce's fourth remand determination, overturning the Department’s decision.In August, Canadian softwood suppliers won a decision by the NAFTA Extraordinary Challenge Committee decision, which decided that Canadian supply was not being subsidized by the Canadian government. While the vote is often decided simply by which country has the most members on the panel, in the past four rulings, the independent NAFTA panels were comprised of a majority of Americans. The DOC has been ordered to comply with the remand by October 28, 2005, and return CD$5 billion in duties.
TORONTO – Even though 90% of Canadians reportedly live within a 15-minute drive of a Canadian Tire store, expansion remains a major thrust of the company. With sales in 2004 of $8.4 billion, the company is the country’s largest hardlines retailer, with 14.5 million sq. ft, of retail space. Yet it plans to add another 2 million sq. ft next year alone – including more inner-city locations, says Mark Foote, president of Canadian Tire Retail. He spoke recently at the 10th annual Hardlines Conference.Comprised of a number of divisions, including a credit card company larger than MasterCard in this country, Canadian Tire’s retail division, which consists of 457 Canadian Tire Retail stores and 68 PartSource outlets, accounts for 68% of the company’s overall revenue. Sales are growing at a rate of 6–6.5% a year, said Foote, and the strategies to ensure that growth continues include differentiating the stores with unique and exciting products. He told the audience about an initiative called ENE – exciting, new and exclusive. These products will be backed by aggressive sales promotions that link to the Canadian Tire catalogue. Foote said his company also wants to build more big stores. An outlet that opened last fall in Kingston, Ont., is generating exceptional returns, he pointed out. In addition, a new initiative in Vancouver is being tested that maximizes the high priced real estate right in that city by building a 68,000 sq. ft. store on three levels. There’s even a Best Buy electronics store on the lower level. This “urban” format will represent an area of growth for Canadian Tire, said Foote. A new store right downtown in Toronto is being planned at Bay and Dundas to open in the fall of 2006. Another store, at Lakeshore Rd. and Leslie, is scheduled to open in combination with a Mark’s Work Wearhouse in the spring of 2007. Foote admitted to the Conference delegates that the retailer even considered the old Maple Leaf Gardens site in downtown Toronto. It was “attractive but not feasible.”
ROCHESTER, N.Y. — One of the last remaining regional home improvement dealers in the U.S. is waving the white flag. Chase-Pitkin Home & Garden, the 14-store home center chain that can trace its roots back to 1857, will start closing all of its stores by the first quarter of 2006. Chase-Pitkin operates 10 stores in the Rochester market and four in the Syracuse, N.Y., area. Last year, the company ranked 51st in sales among home improvement dealers, according to Home Channel News. However, the dealer’s revenue in 2004, $200 million, was flat from the previous year. The store closings wouild affect 1,160 part-time and 507 full-time employees, according to Newsday. Wegmans Food Market, the supermarket chain that owns Chase-Pitkin, cited stiff competition from big-box dealers such as Home Depot and Lowe’s for its decision. Wegmans’ chairman Robert Wegman said that making the home improvement dealer competitive would require a massive and risky investment, and that closing the chain would allow the corporation to focus on its grocery business. As the grocery business is besieged by Wal-Mart, Wegmans will now have to fight big box competition on one retail front, instead of two. Chase-Pitkin began as Chase Brothers Nursery in 1857. The family that owned the company sold it to Bilt-Rite Wood Products in 1956, when it opened its first retail outlet. Hardlines were added three years later. Wegmans has owned Chase-Pitkin since 1974.
ATLANTA — In its ongoing effort to attract more pro customers, Home Depot this fall will begin offering cordless power tool combinations that feature more powerful and longer-lasting lithium-ion batteries. By mid-October, the dealer’s website will include Milwaukee Electric Tool’s V28, four-piece, cordless combo kit; and Makita USA’s 18-volt LXT, four-piece cordless combo kit, an 18-volt LXT cordless hammer driver-drill Kit and 18-volt LXT cordless impact driver kit. The products will be available in all of Home Depot’s stores in the U.S. about the same time. The lines will be available in Canadian stores by December.Jennifer King, a company spokesperson, told HARDLINES that the additions of the Milwaukee and Makita lines would not take shelf space from existing power tools that Home Depot currently sells. Tom Taylor, Depot’s executive vp-merchandising and marketing, said in a prepared statement that the Milwaukee line would be marketed to users seeking the most power from a cordless tool, and the Makita products will target those users who want 18-volt power from lighter models. The new program ties in with Taylor’s comments from another interview, where he explained Home Depot’s efforts to sharpen the look of the merchandising, with more upscale sets, leaving the traditional “warehouse” look behind. Lithium-ion batteries are said to last 40% longer than those that typically run 18-volt power tools. The new power tools and combo kits will be available for approximately $350-$750 in the U.S., and $399-$999 in Canada.
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TORONTO–Just one month after making a deal to sell off its credit card business for big bucks, Sears Canada Inc., the country’s number-three department store chain, announced its intention to fire 1,200 workers. Sears’ credit card deal is worth $3.4 billion (US$2.9 billion), but that won’t prevent the wholly owned subsidiary of Sears, Roebuck and Co. from cutting 3% of its 40,000 workers. The cuts will be made at the administrative and in-store management and support level. No sales people will be let go, says the company.PENTICTON, B.C.–RONA Inc. opened a new RONA Home Centre last week in Penticton, the first in Western Canada to be developed with an independent dealer. The 52,000 square-foot facility represents a $17 million investment and 90 jobs. The store is being operated in partnership with Rick Mielke. Mielke is a colourful 35-year veteran of the industry. His past experience includes owning a big Home Hardware building centre in Penticton, and operating an ostrich farm. He is currently chairperson of the Building Supply Dealers Association of British Columbia. TORONTO–Hudson’s Bay Co. is entering a process to consider strategic alternatives for its credit card business. In plain English, that means the retailer is trying to dump the division and cash in the way Sears Canada did last month. Hbc’s Financial Services division manages one of the largest private-label retail card portfolios in Canada, with $1.2 billion in card receivables representing approximately 3.1 million active accounts. In a prepared release, George Heller, president and CEO of Hbc, said, “The market conditions are such that we believe there is the potential for the company to realize immediate value for our credit business, while maintaining a significant ongoing stream of income from the partnership we would establish with the ultimate buyer.” CHICAGO–Sears Holdings Corp. has found an investor for its chain of Orchard Supply Hardware Stores. A private equity fund has bought a 19.9% for US$58.7 million in cash. According to Reuters, the fund, Ares Management LLC, has a three-year option to buy an additional 30.2% for US$126.8 million. Sears has been trying to figure out what to do with the 84-store chain of hardware and garden stores in California, looking either to sell or spin it off to focus on its core Sears and Kmart businesses. Sears, Roebuck and Co., the Sears subsidiary of which Orchard is a part, would get a US$450 million dividend from the deal, which is expected to close in the fourth quarter. LONGUEUIL, Que.–Sico Inc. has acquired, through its wholly owned subsidiary, Bétonel Ltée, all shares of Mills Paint Sales Ltd., an architectural paint manufacturer, whose head office and plant are located in the Vancouver. Founded in 1930, Mills Paint operates a chain of eleven specialty paint stores across British Columbia and Alberta, selling mainly under the Mills Paint and Richcraft names. It employs 50 people and had sales of about $9 million in 2004. ISSAQUAH, Wash. – For the year ended August 28, 2005, Costco Wholesale Corp. reported net sales were US$51.86 billion, an increase of 10% from $47.15 billion during the prior year. Same-store sales increased 7% over the comparable 52-week period. Net income for the year increased to US$1.06 billion, from US$882.4 million. The company also reported net sales of US$5.14 billion for the month of September, up 13% from US$4.53 billion.  
As the company keeps growing in Canada, Hitachi has promoted Colin Smyth to the role of senior manager, national sales & marketing at Hitachi. In addition, Bradfield Craig has been named manager, marketing and communications. At Sears, Roebuck and Co., Steve Titus has been promoted to vice-president and general manager, Sears Dealer Stores, effective immediately. In his new position, Titus is responsible for all strategic development, marketing, merchandising, finance, talent management, performance management, real estate, sales operations and relationship management of 818 independently owned and operated Sears stores. He reports to Mike McCarthy, senior vice-president of retail operations for Sears, Roebuck and Co. A Sears veteran since 1971, Titus served most recently as director, retail outlet stores. He replaces Penny Katsaros, who is leaving Sears to pursue other opportunities.
According to a report from Royal LePage Real Estate Services, real estate prices continue to soar in just about every part of Canada. The greatest increases are being realized in Victoria, while New Brunswick enjoyed double-digit increases, as well. The average price of a standard bungalow was up 7.4% from a year earlier, at $265,405. The national average price of a standard two-storey home was up 6.7% at $324,066.
Construction spending in August was $1,108.5 billion, up 0.4% from July, and up 6.1% from August 2004, reports the Commerce Department. Total non-residential construction spending was $487 billion, up 0.7% from July, and up 6.6% from August 2004.

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