| IS AWARD DEVELOPING ITS OWN DISTRIBUTION? |
| DARTMOUTH, NS — Rumblings that yet another buying group may enter the distribution business are growing.
AWARD Wholesale and Retail Distributors Ltd. provides co-op buying of commodities for its 98 member stores in Atlantic Canada, and funnelled $206 million in purchases through its offices last year. Hardlines have been supplied traditionally by existing wholesalers such as Sodisco-Howden Group. But now AWARD, a member of the umbrella buying group Matreco, might go it alone.
In Quebec, where buying groups have more of a tradition of providing warehousing for commodity products, fellow Matreco member Groupe BMR has been expanding beyond just building materials into hardware distribution over the past 18 months. The growth of BMR's sales in this side of the business has not gone unnoticed by AWARD and its members.
Now there's talk of a distribution centre, to handle both cross-docking and direct shipments from vendors, to be up and running in Halifax by early next year, with BMR as preferred supplier. AWARD has reportedly signed up more than 50 of its dealers to invest $35,000 in the new venture. No officials from either AWARD or BMR were available for comment at press time, but more news is expected in the near future. |
| SODISCO-HOWDEN COUNTERS NEW DC THREAT IN ATLANTIC CANADA |
| MONTREAL — News that one of its best customers in Atlantic Canada may soon become its biggest competitor there has Sodisco-Howden Group rallying its troops and leveraging its strengths.
AWARD, the Dartmouth, NS-based buying group with almost 100 stores and $350 million in retail sales, is reported to be considering the creation of its own hardlines distribution facility in the Halifax area, a move that leaves Jos Wintermans, president and CEO of Sodisco-Howden, both puzzled and disappointed.
"What we've been doing is providing a full-line, proven distribution centre in Atlantic Canada that has worked for the dealers there for many years," he says.
AWARD's new warehouse would have to be underwritten by the dealers themselves, and Wintermans wonders why they'd take the risk. "They'll have to put up their own cash to support an unknown distribution choice – and a limited line supplier at that."
The initial investment by each dealer is reported to be at least $35,000, but according to Wintermans, those dealers could eventually be on the hook for as much as $100,000. "Think about how much in sales any dealer would have to make to cover that outlay."
Sodisco-Howden's sales team has been meeting privately with AWARD dealers to make a case for the status quo and Wintermans says response to these meetings has been positive. However, the company's own future has been put in question by the announcement in recent weeks that it hired an international finance company to chart strategies for its future, strategies that may involve continued acquisitions – or being put up for sale. |
| NEW PEAVEY GM WANTS TO ADD STORES |
RED DEER, AB — Since starting with Peavey Industries Ltd. on October 1, new general manager Gary Robb has been given a number of initiatives to drive sales. But a big one will be expansion of this 26-store hardware and farm chain.
 Formerly vice-president of purchasing for Cameron Ashley in Calgary, Robb was hired to run the company as its owner and president, Rick Anderson, prepares to cut back his day-to-day involvement. Robb sees lots of potential for growth of Peavey, which has 24 stores under the Peavey Mart banner in Alberta and Saskatchewan, plus one store each in British Columbia and Manitoba. He expects to add a couple of stores, "as the opportunities present themselves," which, he says, will likely be "sooner than later."
Robb sees a good fit for the Peavey format in other markets, especially urban and rural locations in western Saskatchewan and Manitoba. "It's an extremely well-run company with loyal and dedicated employees," he says. "My job will be to keep it well run – extremely well run." |
| CANADIAN TIRE STRIKES GAS STATION DEAL WITH IRVING OIL |
 TORONTO, ON & SAINT JOHN, NB —With an eye to the cross-merchandising opportunities for its stores and gas stations, Canadian Tire Petroleum has struck a deal with Irving Oil Ltd. whereby Canadian Tire will take over 16 Irving gas stations and change them over to the Canadian Tire name.
The deal, which will more than double Canadian Tire's gas bar presence in Atlantic Canada, involves Canadian Tire leasing stores in New Brunswick, Nova Scotia and Newfoundland and Labrador, while Irving continues supplying the gasoline. The two companies will split profits through a revenue sharing agreement.
"This agreement with Irving Oil represents a significant milestone in Canadian Tire Petroleum's expansion strategy, which includes partnering at existing sites of other gasoline retailers under the Canadian Tire banner, and building new incremental sites and car washes in other parts of the country," said Peter Kilty, vice-president, Canadian Tire Petroleum, in a prepared release.
Founded in 1924, Irving Oil currently supplies more than 800 branded locations in Atlantic Canada, Quebec and New England. |
| GREAT INDOORS RETOOLING AFFECTS SEARS' 3Q RESULTS |
| HOFFMAN ESTATES, IL —Adversely affected by the restructuring of its Great Indoors home décor business, Sears, Roebuck and Co. reported a drop in earnings in its third quarter, from US$189 million to US$147 million. Sales increased slightly, by 1.1% to $7.3 billion, while same-store sales at U.S. stores rose 1.2%.
The largest department store chain in the U.S., it recorded an after-tax charge of US$89 million to restructure its home decorating chain, closing three Great Indoors stores and upgrading others in the process. |
| EUROPEAN SUPPLIERS CONFRONT RETAIL DIFFERENTIATION |
| BRUSSELS —Manufacturers find themselves challenged by demands made by ever-larger customers, and by a lack of alternative outlets as buying concentration continues. They also are being challenged by retailing's interest in private brands as a way to differentiate stores and to improve margins.
The threat of watching their own brands become mere commodities was just one of the issues confronting members of the French, German, UK and Belgium DIY manufacturer associations who gathered here recently under their umbrella organization, Fediyma.
Retailers face similar challenges. Can they grow organically or must all of their growth come from acquisitions? Will the high costs of technology and the resulting increases in efficiency further separate the market into the bigs and the littles, into the haves and have-nots?
Smaller retailers are banding together into buying groups and cooperatives, especially in countries such as Spain, which are being "invaded" by large retail chains. Spain, in particular, now has dozens of cooperatives and buying groups to serve its nearly 10,000 smaller independent hardware stores and DIY units.
Jim Lowe, corporate development director of the UK's Focus Wickes group, said competition is forcing the development of "destination stores and destination category specialists." He added that retailers will further divide the market into "light" and "heavy" formats, the light ones concentrating on décor, gardening and lighter DIY tasks, while the heavy market will be towards major building and remodeling activities. Focus stores serve the lighter markets; Wickes the heavy markets, he explained.
He expects that retailers who now focus on décor will further broaden their merchandise lines to include furniture and other home furnishings, which will affect traditional distribution channels of those products.
Further explanations of retailing's segmentation came from speakers focusing on technology trends. While much of the technology is focusing on reducing retail operational costs, some of it will affect manufacturers' operating methods as well as their own costs, such as RFID.
Electronic kiosks and self-checkout are the two most widely deployed emerging technologies worldwide, speakers pointed out. Kiosks are being used by such firms as Boots, Target, Williams-Sonoma and Crate & Barrel, while firms like Ahold, Tesco, Sainsbury, Metro and the UK's Safeway have all been trying personal shopping devices. |
| LOWE'S WANTS TO EXPAND ITS MARKETING REACH |
| WILKESBORO, NC —In an attempt to increase its market penetration with a broader consumer base, Lowe's Cos. is reportedly looking to hire a multicultural advertising agency.
AdWeek reported that Lowe's, which spent an estimated US$265 million on advertising in 2002 according to Nielsen Monitor-Plus, a tracking service, requested proposals from ad agencies that, the magazine said, were due October 10. The search is being handled by Lockman Brooks Marketing Services in Charlotte, NC.
Like virtually every other retailer, Lowe's is looking to tap into the burgeoning ethnic communities that are growing across the U.S. at a rapid pace. Dealers are particularly covetous of Hispanics, who now account for nearly 14% of the U.S. population and are expected to account for 25% by 2050. |
| REMODELING ACTIVITY CONTINUES TO RISE |
| CAMBRIDGE, MA —Despite the volatility of the U.S. economy, homeowners are increasing their expenditures to remodel their homes.
In the third quarter, homeowners were remodeling their houses at an annualized rate of US$125.2 billion, 6.6% higher than annualized expenditures in the third quarter of 2002, according to the Joint Center for Housing Studies at Harvard University, in its quarterly "Remodeling Activity Index." That annualized expenditure represents about 60% of the total amount spent on home improvement annually by Americans.
Kermit Baker, who heads up the Center's Remodeling Futures Program, explained that favorably low interest rates in the U.S. continue to drive home sales. "With spending levels accelerating, the prospects are improving for remodeling in the coming year." |
| INDUSTRY STOCK WATCH |
|
COMPANY |
52-WEEK HIGH |
52-WEEK LOW |
CLOSE FRIDAY |
| Canadian Tire |
38.25 |
27.85 |
37.80 |
| Canfor |
10.95 |
7.09 |
9.30 |
| Costco |
39.02 |
27.00 |
33.31 |
| Goodfellow |
12.24 |
9.75 |
11.75 |
| Home Depot |
36.64 |
20.10 |
36.15 |
| Hudson's Bay |
10.50 |
5.97 |
10.20 |
| Lowe's Cos. |
58.94 |
33.37 |
57.45 |
| Rona Inc. |
23.75 |
11.75 |
23.00 |
| Sears Canada |
20.00 |
13.60 |
19.67 |
| Sodisco-Howden |
3.35 |
1.15 |
2.91 |
| Taiga Forest |
8.10 |
6.00 |
7.55 |
| Wal-Mart |
60.20 |
46.25 |
58.84 |
| West Fraser |
39.05 |
28.22 |
32.90 |
|
|
| COMPANIES IN THE NEWS |
ATLANTA, GA — Third-quarter profits for Georgia-Pacific Corp. reached US$189 million, up from US$66 million a year earlier. Net sales reached US$5.3 billion, compared with US$6.2 billion in 3Q 2002. For the first nine months of 2003, income before accounting change was US$195 million, compared with income before accounting change of US$44 million for the same period a year ago. Net sales for the first nine months of 2003 were US$14.9 billion, compared with US$18.2 billion in 2002.
TORONTO — Sears Canada's third-quarter earnings hit $12.1 million, up from $10.2 million a year earlier. However, total sales dipped 3.2% to $1.43 billion, down from $1.48 billion. Same-store sales increased 1.3%.
ATLANTA, GA — Home Depot has updated its website, making it easier for people to order products online. The redesign is also expected to improve Home Depot's multi-channel marketing efforts. The new site features an expanded "know-how" section that shows step-by-step instructions and tips for completing home improvement projects, along with do-it-yourself articles.
EIGHTY-FOUR, PA — 84 Lumber Co. has been named Pro Dealer of the Year for 2003 at the most recent Pro Dealer Conference in the U.S. The Conference was sponsored by Home Channel News. In April of 2002 the company set a record by opening 20 new stores in one day, and will add another 20 stores this year, bringing the total to 453 stores in 34 states.  The company is shooting for 20 more openings in 2004, says 84 Lumber's president, Maggie Hardy Magerko. 84 Lumber reported sales of US$2.2 billion in 2002 and expects to surpass US$2.5 billion this year.
VANCOUVER, BC — For its third quarter, West Fraser Timber Co. reported earnings of $3 million on sales of $382 million. That's down from earnings of $4 million on sales of $428 million in the third quarter of 2002. For the first nine months of 2003, earnings were $9 million on sales of $1.15 billion, a big drop from earnings of $102 million on sales of $1.23 billion for the same period a year earlier. The reduction in earnings was attributed mainly to a strengthening Canadian dollar, a strike at its Kitimat, BC mill and continuing duties on the sale of softwood lumber to the U.S.
TORONTO — Sears Canada Inc. re-opened its store at Yorkdale Shopping Centre in Toronto with a brighter interior, wider aisles, clear sightlines and colour-coded departments, all designed to help customers navigate the store more quickly and easily. Customer service centres have also been placed in highly visible locations and situated next to fitting rooms. The store also features a Sears Craftsman hardware department. The retailer also opened a Sears Home store last week in Boisbriand, QC. The 34,774-sq.ft. store specializes in furniture, accessories and major appliances. This is the 44th Sears Home Store in Canada.
VANCOUVER, BC — Prima Developments Ltd., through its wholly-owned subsidiary, Envirocoat Technologies, will begin distributing its coating products through two independently-owned Ace Hardware outlets in Lake Havasu, AZ and Yucaipa, CA. They are part of a chain of five Ace stores under one owner, and Prima hopes eventually to get its Envirocoat exterior paint and roof coating products into Ace's warehouse. In Canada, Prima has a distribution deal with ICI Glidden. |
| PEOPLE ON THE MOVE |
|
Frank Greco has been appointed general manager of Roofmart, Eastern Canada. He was formerly at Canroof. (905-453-7870)
At Royal International Corp., Heather Janisse has been appointed sales manager, responsible for a number of Canadian and U.S. customers. She was formerly with Canadian In-Store, a division of Grant Brother Sales. (905-844-8268) … John Demaiter has been made a national service manager, responsible for all box stores nationwide. He was previously a national account manager. (905-309-5252) |
| MARKET INDICATORS |
| U.S. retail sales were down 0.2% overall to US$320.58 billion from August to September, says the U.S. Commerce Department. However, the rate of retail sales was up 7.4% year over year. Building materials and lawn and garden suppliers showed strong gains, with an 11.2% year-over-year increase. Excluding the slumping auto sector, however, sales actually rose a modest 0.3% from August to September.
House construction in the U.S. rose 3.4% from August to September, says the Commerce Department. That's the second-highest rate since 1986, fuelled this time by low mortgage rates and pent up demand. Builders started work on 1.888 million homes seasonally adjusted last month, up from 1.826 million starts in August. |
|
John Caulfield, Contributing Editor
vol. ix, #40 October 20, 2003
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