John Caulfield, Contributing Editor
vol. x, #42, October 18, 2004

IN THIS ISSUE: • Home Hardware gets serious about Quebec • TruServ U.S. will set up Asian sourcing • Lanoga is on the acquisition trail • AHMA, NHS not expected to reconcile • Home Depot expands at-home services • Wal-Mart goes head-to-head with union • Universal gains more direct-build business

* * * * * * NOTE: Dollar amounts are stated in the currency of the country from which the story originates. — Michael McLarney, Editor & Publisher * * * * * *
"It's a good deed to forget a poor joke." — Brendan Bracken(British politician, 1901-1958)
ST. JACOBS, Ont. — The incursion of Rona inc. into English-speaking Canada has put its expansion course right in the path of its long-time ally, Home Hardware Stores Ltd. In fact, both companies share membership (along with Do it Best Corp.) in a hardware buying group called Alliance International LLC. And while the Alliance remains intact, a long-standing "gentleman's agreement" between Rona and Home has been swept aside by the expansion efforts of both companies.That includes Home's renewed interest in Quebec, where Rona is the market leader. While Home has fewer than 70 members there today, that's up appreciably from the 46 stores there just five years ago, and 24 a decade ago. During that time, Home has added two dealer development reps in Quebec, and today those reps are supported by Home's entire recruitment group, working specifically on bringing in new stores in Quebec. "We're starting to get some interest from Quebec dealers, and we had many prospects at our fall dealer market," says Paul Straus, vice-president and CEO of Home Hardware. Does he anticipate a magic number for Home Hardware there? "We'll take as many as we can get," says Straus, "but we have no real target."
CHICAGO — TruServ Corp. is on the lookout for Asian sourcing offices of its own. In an exclusive interview with Hardlines, TruServ president and CEO Pamela Forbes Lieberman said the dealer-owned co-op is joining the ranks of other leading retailers by looking for new sources of supply. "Our logistics team, led Jim Haining, senior vice-president distribution, logistics and manufacturing, is working on setting up offices in Asia, and co-ordinating that with the merchandising team, so we can meet their needs, and we can do all the appropriate quality testing, as well as reduce the logistics costs of moving the goods to the U.S."Haining's team includes Jim Richardson, formerly with Home Depot, who is in charge of global sourcing. Offices will be set up in both Hong Kong and Shanghai, and though no timeline was offered, Lieberman says "it's in the works." The move to more direct Asian sourcing ties in with TruServ's efforts to increase its range of private-label products. "We will be growing our private label to complement the national brands, and when we talk about our private label, it will be under both the True Value name itself and some of our other proprietary brands, such as Green Thumb in the lawn and garden area — or Master Plumber, Master Mechanic, Master Electrician — and we'll determine what's right for that part product category," says Lieberman. "We absolutely do see growth there, but we only want our name associated with quality products."
TORONTO — The recently announced addition of painting services to Home Depot Canada's line-up of at-home services (see Hardlines, August 30/04) is just one of the many ways the giant retailer is beefing up its range of services.Landscape design has been slowly rolling out, as well. "It started in Vancouver, and has been tested in Toronto, and we'll be national with it by next year," says Mike Clements, divisional installation manager for at-home services, which covers all installed sales and maintenance. For a $50 fee, a landscape designer will come to one's home and supply a plan for the yard or garden. The fee will be applied as a credit against any landscaping jobs done by the customer. Those jobs can be arranged through a variety of companies in Toronto that provide products and installation. The latest addition to Home Depot's roster of installed services is a "home handyman," available for small jobs and repairs around the home. This new program is being tested in 10 stores in Toronto, as well as the new urban-concept Park Royal store in Vancouver. Advertising for the service hit the airwaves earlier this month, but timing for a national rollout has not yet been released.
REDMOND, Wash. — Recent news that Builders FirstSource, one of the top pro dealers in the U.S., was up for sale has prompted speculation about who might be a buyer for the 84-unit chain. It also highlights the rapid rate of consolidation occurring among contractor and builder-oriented operations.One of the key consolidators has been Lanoga Corp., which has purchased 15 companies over the past three years. Since 2002, the company has grown from $1.3 billion to anticipated sales in 2004 of $2.7 billion. The availability of Builders FirstSource is the latest one to catch Lanoga's attention, observes Paul Hylbert, president and CEO of Lanoga. "We're always looking for acquisitions, he told Hardlines. He expects growth to come organically, accounting for "high single-digit growth," as well as continued acquisitions. "We'll continue to plan and grow and try and be consolidators, rather than sit on the sidelines," Hylbert adds. His enthusiasm for growth reflects his company's confidence in the industry, and in the market factors driving it. "We see the rest of the year continuing to be good, and we see next year's level as being strong, as well, though not as strong as this year."
CHICAGO & NORWALK, Ct. — The announcement two weeks ago that the AHMA Hardware Show has been cancelled raised questions about the direction of the show's owner, the American Hardware Manufacturers Association, and its former partner in the National Hardware Show, Reed Exhibitions.The AHMA split last year from Reed to form its own show, leaving Reed to move NHS from Chicago to Las Vegas. One of the points of contention was where to hold the show: Reed wanted for years to move the show to reverse the falling attendance; AHMA wished to maintain its ties with the Windy City. Another was the allegation by AHMA that Reed accepted extraordinary payments from the services company that handled setting up the show and booths. Tim Farrell, president and CEO of the AHMA, referred to insufficient attendance in Chicago, and to the allegations of mismanagement by Reed, which have resulted in AHMA filing a lawsuit, as reasons for ending the AHMA's show: "most importantly, the best interests of our members and our industry, also, the decline of the Hardware Show for the past several years because of the alleged improper management practices of Reed and the evolutionary changes of our industry." However, in the end, the National Hardware Show enjoyed renewed success when Reed finally did move it to Las Vegas in spring 2004. Meanwhile, AHMA's own show, which remained in Chicago, could not muster enough exhibitors to carry it into a second year, says Farrell. "We made some changes, including relocating the show to Las Vegas," says Rob Cappiello, president of the NHS for Reed Exhibitions, "and the response has been very, very positive from the industry." Despite the lawsuit, does Farrell foresee any reconciliation with Reed? "We're very open to affiliations with organizations that create value for our members and our industry," he says. "We're not open to affiliations with organizations that, as we allege in our lawsuit against Reed, destroy value for our members and our industry." Cappiello does not express concern over the merits of the lawsuit, saying it's "without merit." In fact, he says his organization remains open to any future affiliations. "Our door is always open, if the AHMA wants to talk to us," he says.
GRAND RAPIDS, Mich. — Universal Forest Products, the building materials distributor based here, reported that its earnings through the first nine months of 2004 were up 18% to $39.9 million, on sales of $1.92 billion that rose 32.8%. The percentage gains in its latest quarter were almost identical.Interestingly, however, Universal's sales from retailers such as Home Depot and Lowe's have represented a significantly smaller percentage of its total revenue in 2004 than for the same period a year ago. The company reported that its retail/DIY sector accounted for 42% of its sales through nine months, compared to 50% in 2003. On the other hand, its supply to site-build home construction rose to 25% of its sales, versus 20% in the first nine months of 2003. In a prepared statement, Universal's CEO Bill Currie explained that his company's DIY sales were soft due to increases in lumber costs, which may be prompting homeowners to delay improvement projects; the hurricanes that halted improvement projects in Florida and the Southeastern United States; and the higher cost of treated wood due to industry changes in the treating compounds, which may be affecting consumers' purchasing decisions.
WASHINGTON — The power and influence of Home Depot now extends to the U.S. Tax Code.A massive tax bill that the United States Senate passed last week provides $137 billion of tax relief on virtually every industry in corporate America. In its evaluation of that bill, the New York Times reported that it new legislation includes the elimination of $44 million in tariffs that will directly assist Chinese ceiling fan companies. The Times referred to this as "The Home Depot provision," in that Senator Zell Miller (D-Ga.) argued for the tariff reduction, claiming that the tariff wasn't needed because no ceiling fans are made in the U.S. anymore. Miller contended that retailers such as Home Depot — which sells nearly half of all ceiling fans bought in the U.S., and whose Hampton Bay line is the best-selling ceiling fan brand in the world — needed to charge higher prices to defray the impact of the tariff. Nearly all of the fans that Home Depot sells are made in China, and the timing of this legislation coincides with the retailer's recent announcement of its plans to expand into that country.
BRENTWOOD, Tenn. — At Tractor Supply Co., net sales for the third quarter increased 18.0% to $426.4 million from $361.2 million last year. Same-store sales increased 10.1% versus last year's 13.7% gain. Higher selling prices for steel, feed, and petroleum-based products contributed 3.4% of the same-store sales increase. However, third-quarter profit fell to $8.0 million, from $12.1 million in the same period last year.MISSISSAUGA, Ont. — Wal-Mart Canada has got a unionized store on its hands, in Jonquiere, Que., and the company has sent a letter to staff at the store, advising them of corporate concerns that hint at a possible store closure. The Jonquiere store received certification with the United Food and Commercial Workers union several weeks ago, but Wal-Mart claims not to have heard from the union during that time. In a release sent out last Friday, Wal-Mart claimed that the "Jonquiere store is not meeting its business plan, and the company is concerned about the economic viability of the store." Wal-Mart Canada," the release continues, "believes the unresolved labour situation at the Jonquiere store is proving detrimental to improving the performance of the store." COLOGNE, Germany — Koelnmesse, the giant trade fair organization based here, is beefing up its show in Shanghai, Practical World Asia, with the addition of a major lawn and garden component. The show is being held this week from October 19-21 in association with the China International Hardware Show, in which Koelnmesse became an equity partner this year. Beginning in 2005, a new "World of Gardening" segment will join "World of Tools," "World of Security, Locks and Fittings," and "World of Home Improvement/DIY." Koelnmesse has been organizing Practical World Asia since 2003. MONTREAL — MAAX Corp. had 2Q net sales of US$136.1 million, compared with US$127.4 million in the second quarter of the previous fiscal year. Excluding the impact of the fluctuation in the U.S. dollar in relation to the Canadian dollar and certain non-recurring items, consolidated net sales were up 10.5% over the second quarter of last year. For the first half of fiscal 2004, net sales grew 17.2% to US$272.3 million.
Tim Middleton has joined News Marketing Canada as Group Sales Manager, merchandising, nationally for all retail segments, with a special focus on growing the hardlines side. Most recently, Middleton was National Sales Manager at Dole Foods. News Marketing Canada is a merchandising and media promotional company based in Mississauga, Ont. (905-602-6397) At the Canadian Hardware and Housewares Manufacturers Association, Steve Johns has been appointed communications manager. Johns has more than 14 years of service with the Lumber and Building Materials Association of Ontario, during which time he served as member services manager, and then as president and included amongst his duties were member communications, membership retention and recruitment, program and service development and delivery. Over the past two years, Mr. Johns has provided consulting services to a specialty software firm, and has served as Vice President-Business Development for a prominent Toronto based organizational performance management and leadership development firm. (416-282-0022)North Safety Products has announced a new line-up of general managers in the U.S., Canada, China and Europe. Reporting to Sid Ellis, president of North Safety Products, Industrial Division are John Kime, vice-president and general manager, United States ... Vern Metcalfe, vice-president and general manager, Canada ... Leon Klapwijk, managing director Europe ... Ed Wenz, vice-president IT and general manager of the newly formed Asia Division ... Jackee Shepherd has been promoted to vice-president operations, North America. These senior executive appointments will be responsible for sales and marketing in each region. North Safety Products is a worldwide manufacturer of occupational health and safety products.
Retail sales for September were $341.3 billion, up 1.5% from August — the biggest increase six months — and up 7.7% from September 2003, says the Commerce Department. Excluding automobiles, retail sales were $260.9 billion, up 0.6% from August and up 7.8% from one year ago. The August to September percent change was a revised -0.2%.
New housing prices remained strong in August, increasing by 6.0% compared with the same month last year, according to Statistics Canada. This rate of change, the same level as July's increase, was down slightly from the 6.2% annual increase recorded in June, which was the biggest 12-month gain since February 1990.
Hardlines Sibling wins National Golf TournamentIt's no secret that Hardlines is seriously golf-challenged. But none other than my kid brother, Dan McLarney, won the Canadian International Pairs Tournament recently. He and his partner will head off to Wales early in the new year to represent Canada at the Worldwide Tournament. — Michael

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