LBMAO announces new location and name for 2008 show

LONDON, Ont. — The Lumber and Building Materials Association of Ontario announced at its latest show, held here this past weekend, that it will move the show to Toronto in 2008. And with the new location comes a new name.

Formerly called the Winter Buying Show, the newly minted Canadian Home Improvement Show will leave London after four years in existence, and move to the Toronto Congress Centre, near that city’s Pearson International Airport. The dates for the 2008 show are Feb. 8-9.

The LBMAO relies on its membership of building centre dealers from towns and cities across the province to provide the customer base for the show’s exhibitors. These dealers have typically been averse to attending an event in Toronto, but London is no longer proving either large enough or central enough as the show continues to grow. In a survey of both exhibitors and retailers over the past year, the association established that moving to the Toronto location is the best way to ensure maximum attendance from retailers across the province.

“Since the launch of the show in 2004, we have maintained our focus on strategic plan to build a true buying event for the industry and our members,” says Dave Campbell, president of the LBMAO. “We have enjoyed slow, steady growth and last year we saw our attendance increase by over 25%. The momentum continues to build, the show continues to grow and we are looking forward to a move to Toronto to continue the trend.”

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Environment, comfort top trends at Home Furniture

ST. JACOB’S, Ont. — Home Hardware continues to expand its focus on environmentally friendly products. Most recently, its Home Furniture banner introduced a line of furniture hand-crafted from reclaimed lumber. Called the Irish Coast Collection, the line includes bed frames, nightstands, dressers, mirrors, chests and wardrobes and was launched at a trends seminar held during Home Hardware’s Spring Dealer Market.

Other trends that will be reflected in the product mix of Home Furniture stores in 2007 are pieces designed for home theatre systems, storage solutions and items for the home office. The themes of comfort and environmentalism run across all categories.

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Lincoln Electric speeds into car show

TORONTO — The Lincoln Electric Company of Canada, which supplies the welding industry worldwide, launched its Hot Rod 1953 Chevy panel delivery truck at the recent Speedorama Custom Car Show in Toronto. The Hot Rod is equipped to demonstrate TIG, stick, MIG, and flux-cored welding as well as plasma cutting.

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Buying show reflects buoyant Western economy

SASKATOON — Attendance and purchases remained strong at the Prairie Showcase, the annual buying event for building supply dealers held here recently by the Western Retail Lumber Association. According to Gary Hamilton, executive director of the WRLA, attendance was up 12%, with exhibiting companies growing to 606 from 540 last year. More than 460 stores were represented, accounting for 1,200 dealer visitors at the show. Besides the Prairies, dealers came from British Columbia, Ontario, Nunavit, Yukon, the U.S., and Atlantic Canada. “We seem to be expanding our borders for attendance,” Hamilton says.

The show had room to expand this year as well, thanks to a 50,000-square-foot addition to the facility, Prairieland Park, enabling exhibitors to spread through two large halls, instead of the former four smaller ones, “The flow of traffic on the show floor was greatly improved,” says Hamilton.

The mood of the dealers was also positive, reflected in “a lot of quality buying going on. Everyone was writing orders,” says Hamilton. Fueled by the dynamic Western economy, dealers are already doing a lot of estimates in preparation for the busy spring season.

One of the highlights of the show, says Hamilton, was the recognition of Provan Wylie, outgoing president of Castle Building Centres Group, who received the 2006 industry achievement award. He received the award from Kevin Stricker of Fries Tallman Lumber, who is president of the WRLA.

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BMR growth in ’06 gets boost from Maritime expansion

LONGUEUIL, Que. — Sales by members of Le Groupe BMR enjoyed solid growth in 2006, and more of the same is expected this year. According to Gabriel Pollender, vice-president, commercialization, for the Quebec-based buying group and wholesale distributor, 2006 sales by its 150 member-dealers reached $1.12 billion, exceeding the billion-dollar mark achieved in 2005.

Although a couple of pockets of Quebec suffered a downturn in 2006, most dealers were up, accounting for the healthy increase in sales.

“Our dealers in the Maritimes increased their sales, using BMR’s flyers and promotional aids. Some of the dealers there got a 50% increase,” Pollender says. BMR has also been aggressively wooing dealers in Ontario. “We expect a lot from Ontario, where we now have seven members — and anticipate more soon.”

Pollender adds that BMR has reprised its presence at the LBMAO’s Winter Buying Show, which was held this past weekend in London, Ont. “We are pleased with the response we are getting from dealers who were invited to come visit us at this show.”

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Home Depot boosts customer service through hiring

ATLANTA — After a spate of layoffs and management shuffles, Home Depot is going on a hiring spree to make sure sales floors are well staffed for the spring selling season.

The company’s intention to hire 15,000 more employees for the upcoming spring season breaks down to adding about eight new full-time and part-time associates to each of its 1,870 stores in the United States.

This is a positive move for a company whose customer service has been roundly criticized of late. But the retail giant will hire considerably more people per store in certain markets than others, based on news reports from around the country. For example, it intends to add 2,300 associates to its 61 stores in the Washington D.C., area, or close to 38 per store. In Charleston, W.Va., the addition of 400 workers would come close to doubling the 450 employees who already work in its four stores there.

Other metro markets where Home Depot wants to beef up its store staffs include its homebase Atlanta (2,500 new hires planned), Los Angeles (2,400), Chicago (2,000), North Texas (1,300), Cleveland (1,000), Detroit (700), Birmingham, Ala. (600), and Orlando, Fla. (400). But even secondary markets are being fortified, such as Kansas City, Mo., where Home Depot has 15 stores and will add 600 employees, for an average of 40 per unit, two-thirds of which will be full timers.

It’s worth noting, too, that this recent hiring spree is not so out of the ordinary for Home Depot, which added 15,000 employees in 2006 and 20,000 in 2005. It also fills around 50,000 existing jobs that open up each year. Home Depot currently has around 355,000 employees working in its 2,147 stores in the U.S., Canada, Puerto Rico, the U.S. Virgin Islands and Mexico.

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Attendance will be up at National Hardware Show

ORLANDO — Pre-registration figures indicate that attendance at the National Hardware Show, Lawn & Garden World and the new Homewares Show will show a significant increase, especially from industry reps from the Eastern seaboard. Attendance from the Southeast is up 151%, from the Mid-Atlantic, up 42% and from New England, up 32%.

“These statistics reflect new and additional selling opportunities for manufacturers,” says Rob Cappiello, industry vice-president, National Hardware Show. “We also believe that the rebuilding of the Gulf States’ area has some impact on this increase. With more federal money being invested into this region, it stands to reason that homeowners will be looking for new products to repair, remodel, and redecorate their homes.”

For more information on the 2007 National Hardware Show in Orlando, visit www.nationalhardwareshow.com

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TSC wants 80 stores nationally by 2010

MARKHAM, Ont. — Historically, TSC Stores has been a niche regional player. But over the last five years, during which time there have been a couple of ownership changes, expansion plans have been ramped up. In fact, says Greg Hicks, COO of the London, Ont.-based chain of farm and hardware stores, the company wants to almost triple its store count within the next five years.

Hicks spoke last week to a group of vendors at a meeting hosted by the Canadian Hardware and Housewares Manufacturers Association. It had sales of $100 million in 2005, and currently has 31 stores all in Ontario, and eight more are planned for this year. So far, Arnprior, Leamington, and Kemptville are confirmed. But another four stores will be relocated and two will be refitted for grand re-openings. By 2010, TSC wants 80 stores in total.

“We’re going to be on an aggressive store expansion strategy over the next few years,” Hicks said. He added that the company’s strategy envisions upwards of 200-300 stores nationally, though he did not put a timeline on that number.

Driving that expansion is a belief in the viability of a market that is neither strictly farm nor urban: “The store is really for someone who enjoys the country lifestyle,” Hicks said. TSC’s strategy for exploiting that market is based on a number of points of differentiation, but two stand out. First is people — a “customer first” culture that focuses on service. “The company prides itself on offering an incredible customer experience,” said Hicks. Second is a product mix tailored for its core customer base of hobby farmers and small farms, and secondarily to larger farmers, commercial/industrial accounts, and contractors. Farm and country home improvement, working the land, and outdoor hobbies are the pillars of TSC’s merchandising mix. That means building expertise in farm, equine, animal health, and farm-related power equipment such as generators.

Hicks had some good news — and bad — for vendors. TSC wants to expand its range of products, but it also expects to consolidate its key suppliers. Areas that are open to growth include power tools, seasonal, including small sports vehicles (ATVs), and even some LBM products, including dimensional lumber, railroad ties, and fenceposts.

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Home Hardware launches home design software

ST. JACOBS, Ont. — Home Hardware has launched a new renovation planning software package called HomeWorks, and is about to give it a big promotional push.

Using a photograph of one’s own home or room — or stock images — the user can highlight areas of the home, such as roof, walls or trim, then add products and colours available from Home Hardware suppliers. Both homeowners and contractors can digitally visualize their interior and exterior construction and design products before starting the job. HomeWorks retails for $24.97, and includes a $25 gift card offer.

The package was introduced without much fanfare at the end of last year, but Home Hardware dedicated its front page of Saturday’s flyer to the software. A new TV commercial has been launched today and will run through to December 2007, while a web demo will be ready to go live in a few weeks.

The new package is already attracting consumer attention, says Andrew Pantelides, national product manager, lumber & building materials, for Home Hardware, who also oversaw the development and implementation of HomeWorks. “Without any media exposure we are averaging approximately 800 registrants per week on our website,” he says.

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Royal Woodworking celebrates anniversary with new facility

AURORA, Ont. — Royal Woodworking, which manufactures mouldings and millwork, celebrated its 30th anniversary in December, and at the same time hosted an open house in the company’s new facility in nearby Bradford. The new 70,000-square-foot warehouse is being used for raw material storage, manufacturing and storage of finished products.

Hosting the event were owners Frank, Donna and Rick Gerrits.

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Lowe’s is Mexico-bound

MONTERREY, Mexico — Lowe’s will expand into Mexico, and expects to open between three and five stores in Monterrey in 2009.

The company said it would invest between $18 million and $20 million per store on that expansion, which is expected to create 800 new jobs. It has already opened an office in Monterrey, headed up by Francisco Fernandez, who will run Lowe’s operations in that country. Fernandez joined Lowe’s five years ago, and has 16 years of retailing experience, including seven with Total Home, the Mexican chain that was purchased by Home Depot in 2001.

Lowe’s did not disclose its longer-range expansion plans for Mexico, where the Central Bank estimates that the country’s growth rate in 2007 would be between 3.5% and 3.6%, depending on how well the U.S. economy does. However, Robert Niblock, its chairman and CEO, said in a prepared statement that his company has been looking at moving its operations beyond U.S. borders for several years. “With homeownership rates in the market growing at a rapid pace, we see Monterrey as a tremendous opportunity to offer Lowe’s products and services to homeowners and commercial customers in a superior shopping environment with customer service that is recognized as among the best in retail.”

Lowe’s first step internationally was into Canada, where it set up offices last spring. The first Lowe’s store in Canada is expected to open in October.

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New Home Depot chairman could receive nearly $9M this year

ATLANTA — Frank Blake, Home Depot’s new chairman and CEO, will be paid a base salary of $975,000. However, his total compensation for 2007 could hit $8.9 million, based on a formula tied to the company’s performance.

For example, he could earn up to $5 million more depending on how well Home Depot’s stock performs. In a filing with the Securities and Exchange Commission dated Jan. 23, Home Depot stated that Blake’s bonus would equal 200% of his base salary if the company hit predetermined performance targets. Through a long-term incentive program, Blake could also earn 100% of his base salary. He will also receive $2.5 million in what the company is calling “performance shares” of stock whose value is tied to shareholder return and will be paid out at the end of a three-year period.

Blake will also receive $2.5 million worth of vested options that will vest only after the Company’s stock price has increased 25% over the grant date price for at least 30 consecutive trading days.

The company also disclosed the 2007 compensation formulas for Joe DeAngelo, its COO; and for Carol Tome, its CFO and executive vice-president. Their base salaries will be $875,000, and any further compensation is also linked to the company’s stock performance.

These performance formulas are the company’s response to criticisms about the compensation package it paid for CEO Bob Nardelli, which wasn’t moored to Home Depot’s stock price or shareholder return.

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Stock cuts 1,500 more jobs

RALEIGH, N.C. — Stock Building Supply, the largest pro dealer in North America, is reducing its staff by 1,500 more associates in response the persistent downturn in homebuyer demand that is affecting its builder customers.

Stock’s parent, U.K.-based Wolseley plc, also announced that it was laying off 500 jobs at Ferguson Enterprises, the Virginia-based plumbing distributor.

In a statement posted on its web site, Wolseley reported that, for the five months ended Dec. 31, 2006, lumber and structural panel prices — which account for 45% of Stock’s annual revenue — were off 22% and 35%, respectively, as housing starts fell by 22%. Stock’s same-store sales during that period were off 9%, and its operating income was down 40%, after accounting for a one-time charge of $11 million related to closing 22 of its branches and laying off 3,500 employees.

Overall, Wolseley’s pretax income was off 14% during that five-month period.

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CanWel tightens reins on hardware division following vp’s departure

VANCOUVER — Yet another former CanWel, Hardware Division team member has left the company to join, er, a radio supply company. Cygnal Technologies Corp. announced last week that it had hired Jack Van Kessel as president and general manager of its White Radio business. Van Kessel, who had been vice-president at CanWel, Hardware Division, joins some familiar faces: Cygnal’s president and CEO is Jos Wintermans, former head of Sodisco-Howden Group, who left the company when it was taken over by CanWel Distribution and renamed CanWel, Hardware Division. Wintermans took James Shannon, his CFO, with him to the new company.

At CanWel’s hardware division, Van Kessel was responsible for a 600-employee business that supplied 40,000 products to an independent dealer network and generated nearly $200 million of revenues annually. Before that, he was a vice-president of Brewers Retail Inc., running first its retail operations and then its logistics division.

“We worked well together at Sodisco-Howden, so it made sense to bring him on,” says Wintermans.

At CanWel, Van Kessel’s departure encouraged CEO Tom Donaldson to shift the operations of the hardware division more closely with those of its LBM distribution business. Both divisions are now under the direction of Robert Downs, vice-president and general manager of CanWel Distribution.

Although the two companies are operationally closer together, they still go to market in different ways, says Donaldson. “There may be some opportunity for overlap at the senior executive level, such as with the buying groups, but they are quite distinct at the dealer level,” he says.

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TruServ’s new corporate structure supported by new systems

WINNIPEG — TruServ Canada began the year with a new plan for growth, a new corporate structure, and a new company-wide computer system. In order to strengthen the company’s long-term financial position and to attract new business relationships, TruServ moved from a cooperative to a corporate structure as of Dec. 31, 2006. A week later, it flipped the switch on a new enterprise resource planning system.

“Our board of directors is dedicated to the growth and success of the company,” says Bill Morrison, TruServ’s president and CEO. “Part of our strategic plan was to introduce a new ERP system to help us maintain and enhance business processes.”

Microsoft Dynamics AX, formally known as Axapta, officially went live on Jan. 8 in the offices and distribution centres of TruServ Canada.

“We are thrilled with the success of the implementation. The extensive planning process and detailed testing have facilitated a smooth transition to the new system,” says Morrison. “We’re definitely open for business!” (He really does talk in exclamation points). However, he admits that implementation of the new system was held up by about six months. Cautioned by the experiences of companies such as Loblaw, whose supply chain woes made an impact on its annual results, TruServ waited to go live, “to get it right,” Morrison says.

The new system will also put TruServ in a better position to manage its alliance with CanWel, Hardware Division. (Called PRO Retail Services, the alliance puts the direction of CanWel, Hardware Division’s bannered PRO retail customers under TruServ’s management. CanWel continues to supply those customers as a pure wholesaler.)

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Quebec dealers’ association celebrates publications’ 50th anniversary

LONGUEUIL, Que. — This year will mark the 50th anniversary of Quart de Rond magazine, published by The Building Materials Retailers’ Association of Quebec (ADMACQ). Donald O’ÄôHara, president, general manager and editor of the magazine, is delighted that the magazine has become the true reference of the industry. “Very few magazines are able to celebrate their golden jubilee, and I’Äôm extremely proud when I look at the road traveled in all these years. I would particularly like to thank all contributors, journalists, columnists, graphic artists, the previous editors of the magazine as well as all ADMACQ’s staff members, who have helped make Quart de Rond magazine what it is today, and what it will be tomorrow.”
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O’Hara also sends his thanks to all the members of the Association that have always given their support to make the magazine a success. “For the last fifty years, our goal has been to offer the best available source of information to our members. This contest is our way of thanking them.”
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In collaboration with its partners, les centres de formation en transport routier de St-Jˆ©rˆ¥me et de Charlesbourg (CFTR et CFTC), Maia Home Products Inc., RDTS / RDTM and AFA Forest Products inc., ADMACQ is hosting a contest. Eight gift certificates, each worth $500, will be given away one for every issue of the magazine. The vouchers are for a weekend for two in a Quebec resort for either a golf, ski or relaxation package. Only retailer members of ADMACQ are eligible for the draws. Winners’Äô names will be announced in the pages of Quart de Rond magazine.
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O’Hara adds that a special section called “50 ans de Quart de Rond” will be inserted in each of this year’s issues; the reader will find excerpts of articles and humorous events that were published in the magazine since the first issue. For more info, click here.

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Home Depot faces challenges to growth: new report

NEW YORK — In its first 25 years, Home Depot had the fastest growth of any retailer, including Wal-Mart. Its target for 2010 is $125 billion, up from its current $82 billion. But to meet that goal, the company will have to undertake aggressive retooling and international expansion, says a report by Retail Forward, a management consulting and research organization.

The report suggests that while Home Depot will continue to log solid overall sales, growth will moderate and product sales, once representing 92% of volume, will drop below 65%. Last year, they had already dropped to 83%, as the company’s focus turned increasingly to installed sales and services.

Home Depot must undertake more store modernization to improve the shopping experience for customers, says the report, and put more focus on new and upgraded products. A continued expansion of the “do-it-for-me” business (DIFM) will also be necessary, as will a renewed commitment to internet sales.

Two other challenges face the company — developing different formats to tap new markets and enhancing operational efficiency. It currently has five multi-level stores, including two in Manhattan and two in Canada, which focus more on local needs such as strong storage assortments.

Home Depot faces increased competition in both the U.S. and Canada from its biggest rival, Lowe’s, which is considered by industry observers and consumers as having more attractive and user-friendly stores. To compete successfully, Home Depot will have to improve its existing stores.

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Ace Hardware performs well against big box rivals in ’06

OAK BROOK, Ill. — Ace Hardware Corp. appears to have outperformed Home Depot and Lowe’s in 2006, based on preliminary figures used in an interview given by the company’s CEO, Ray Griffith.

According to the report, the company has just concluded its best sales year since 1998, with wholesale sales up 6.5% to $3.4 billion and a record bottom line exceeding $104 million. Its stores, about two-thirds of which are owned by independent dealers, racked up almost $12 billion in retail sales.

A focus on convenience and excellent customer service has enabled the 4,600-store chain to claim such a significant portion of the hardware market. In addition, old stores have been revamped, while new ones have a bigger footprint. As reported in Hardlines, it has also engaged in guerrilla marketing, such as the Dream Ace program, under which a potential store owner is sold a $1-million store for $1.

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Lowe’s ‘decks out’ its stores

MOOREVILLE, N.C. — Lowe’s appears to be moving more aggressively into the composite deck market.

In the first quarter of this year, its 1,325 stores throughout the U.S. will begin stocking selected decking and railing products supplied by Trex Co., the Winchester, Va.-based manufacturer. This purchasing agreement “represents an exciting new opportunity for Trex to expand our presence in the retail channel,” said that company’s chairman and CEO, Anthony Cavanna.

Upon the announcement of this agreement, Trex’s stock price enjoyed its single biggest gain in five months. Trex’s full line will be available at Lowe’s through special order.

Lowe’s has also extended by three years its exclusive agreement with Weyerhaeuser to offer that supplier’s full line of ChoiceDek brand composite decking. The line will be expanded in Lowe’s stores to include a broader color selection available through special order. ChoiceDek is made for Weyerhaueser by Advanced Environmental Recycling Technologies.

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Home Depot shake-up still in motion

ATLANTA — Home Depot has confirmed that Harvey Seegers, president of its Home Depot Direct business, has resigned “to pursue other interests.” Home Depot Direct oversees the retailer’s sales through catalogs and its website. John Campi, Depot’s senior vp-global sourcing and vendor management, has also left the company, and will be replaced by Brian Robbins.

Seegers’ replacement, Steve Skinner, will report directly to Craig Menear, the company’s senior vp-merchandise. Seegers had reported to Frank Blake, whom Home Depot recently promoted to chairman and CEO.

The management change aligns Home Depot Direct more closely with its merchandising department. Home Depot Direct, which company officials had projected would hit $1 billion in sales in 2006, has been in transition. Last fall, it stopped publication of two stand-alone catalogs that were just a year old.

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Changes at TIM-BR MARTS designed to build brand

CALGARY —Steve Stremecki’s appointment as vice-president, retail for TIM-BR MARTS (reported in last week’s edition – editor), is part of a complete re-engineering of the retail services division and a strong commitment to the TIM-BR MART brand, says Tom Urquhart, President of TIM-BR MARTS Ltd. As a result of the restructuring, the executive vice-president position formerly filled by Don Nash no longer exists.

“Steve Stremecki will assume some of Nash’s duties, but will also be responsible for growing the TIM-BR MART brand, overseeing corporate communications, as well as retail and trade advertising and marketing initiatives,” says Urquhart. Stremecki will lead an expanded retail services division that will include a Toronto-based national director of marketing, and additional support personnel in each region.

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Weyerhaeuser-Domtar merger cleared

MONTREAL — The proposed marriage of Montreal-based forest products supplier Domtar with Weyerhaeuser’s fine paper and related products division has gotten the thumbs up from Canada’s Competition Bureau, which said it wouldn’t oppose the merger valued at $3.3 billion.

Investors and analysts generally praised the merger as a positive step for the Canadian forest products industry, which they say needs to consolidate to sustain its competitiveness. “We’ve got to get our costs down and in order to do that you have to have the scale and some of the other synergies that come from these types of deals,” said Craig Campbell, an analyst with PriceWaterhouseCoopers.

In December, Domtar announced its intent to sell its 50% stake in Norampac to Cascades Inc. Norampac is Canada’s largest container board manufacturer. Its sale is expected to raise about $560 million and allow Domtar to reduce its debt by an estimated $185 million.

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Lowe’s beefs up infrastructure with two new DCs

MOORESVILLE, N.C. ― Lowe’s Cos. has announced the addition of two new distribution centers: an import center in Savannah, Ga., and a flatbed center in Port of Stockton, Calif.

For the latter, the Mooresville-based home-improvement retailer will retrofit two 120,000-square-foot buildings on 23 acres in the San Joaquin Valley. Initially, it will have 35 employees, and will receive rail and truck shipments of large building materials. Custom orders will then be loaded on flatbed trucks for delivery to more than 40 Lowe’s stores in northern California, Nevada and Oregon. Operations are slated to begin by June.

The company has also purchased Crossroads Distribution Center, a 491,000-square-foot building in Crossroads Business Park, from Atlanta-based developer Solution Property Group. Lowe’s is expected to use the facility to store imported items coming through the Port of Savannah from Asia before moving them on to the company’s regional distribution centers in Valdosta, Charlotte, N.C., and other locations.

The import center will employ from 10 to 50 workers, depending on the season, according to Lynn Pitts, senior vice-president of the Savannah Economic Development Authority, who reported the sale to the SEDA board Monday. The purchase price was $20 million.

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Home Depot faces challenges in international expansion

SPECIAL REPORT — Home Depot’s purchase of Home Way, an 11-unit chain started in China 1995, will accelerate its penetration in to the Chinese home improvement market. That market is now valued at nearly $50 billion and has been growing at a compounded annual rate of 20%.

While only about 10% of China’s population has the ability to buy the kinds of products the company sells, the country is poised for growth. China is generating 10 million new jobs and four million university graduates annually, creating a new generation of modern consumers. At the same time, 150 million rural residents are expected to move into the cities over the next few years, creating tremendous demand for housing and home improvement products.

Approximately 70% of home improvement spending in China goes to completing of interior space in new homes, a solid growth opportunity for Home Depot.

Expansion in China is an important area of growth for Home Depot, which has sought to grow internationally since entering Canada in 1994 and Mexico in 2001. But retailing in China is far different than home centre retailing in the U. S., Canada or Mexico, says Jim Inglis. Inglis, who served as vice-president of strategic development at Home Depot a decade ago, helped Home Way get underway in China.

Inglis points out that the home centre business in China focuses on furnishing new condos, which are “sprouting like mushrooms everywhere” and which require flooring, lighting, sanitary ware, kitchens and furniture, a very heavy percentage of which is sold on an installed basis. Virtually all middle-class consumers live in high-rise condos in its metro areas.

But the home centre business in China has no real garden business, says Inglis, and there is very little construction, repair or seasonal business in the Chinese cities where the affluent middle class live.

In addition to Home Way, which operates in northern China, and the U.K.-based B&Q, which has 58 stores, there are two other Chinese chains. One, the privately owned Orient Home, has 20 units. The other, Home Mart, is owned by the Shanghai government. Inglis suggests the Chinese market will require a great deal of investment for Home Depot to gain market share, and predicts a real battle between it and B&Q.

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Asian suppliers come to Europe for show in Cologne

COLOGNE, GERMANY ― More than 700 exhibitors from Asia and 9,000 visitors from around the world are expected to attend the Asia-Pacific Sourcing Show being held Mar. 4-6. Product groups represented will include hardware and DIY, garden and leisure, and décor and housewares.

Koelnmesse, which owns and organizes the show, offers exhibitors and visitors a broad range of services to make planning for the trade fair and a trip to Cologne as simple as possible. For example, various new booking options are available on the Koelnmesse website (www.koelnmesse.com) in order to help participants with their travel arrangements.

The fastest way for visitors to gain admission to the halls is to register and order their admission tickets in advance via the Internet. Admission tickets will be sent out immediately by e-mail, and will allow participants to ride the buses and trams in Cologne and the surrounding region for free.

Cologne-Bonn Airport has become a hub for several no-frills airlines in recent years, enabling visitors to inexpensively combine their trip to Cologne with additional business meetings in other European countries.

For more information, call Hardlines at 416-489-3396 or visit www.asia-pacificsourcing.com.

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Home Depot’s Nardelli resigns

ATLANTA — Only days after its board of directors expressed support for the company’s management, Home Depot accepted the resignation of its chairman and chief executive officer Robert Nardelli, effective January 2.

The industry’s largest home improvement retailer stated that Nardelli had “mutually agreed” with Home Depot’s board to step down from the company he joined six years ago. However, his departure had all of the earmarks of a company looking to separate itself from an executive whose management style and exorbitant compensation had become negative lightning rods attracting persistent questions about the integrity of its corporate governance.

While Nardelli’s salary and compensation during his reign have been a source of much controversy, his package on exiting the company is no less so. His total compensation on leaving the company totaled $210 million.

Replacing Nardelli in both positions is Frank Blake, Home Depot’s executive vp and vice-chairman, who has been with the company since 2002. Carol Tome, the retailer’s executive vp and CFO, will now oversee mergers and acquisitions (which could become a hot department, given Home Depot’s recent move into China), credit services and other strategies. Joe DeAngelo, executive vp of the chain’s HD Supply business unit, was named to the new position of chief operating officer, which involves him more on the retail side of Home Depot’s business.

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Backgrounder: Nardelli’s legacy

SPECIAL REPORT — Robert Nardelli, 58, exiting chairman and CEO of Home Depot, leaves behind a legacy distinguished by bold acquisitions that firmly position the company beyond retail and into the professional side of the business. The most prominent moves were Home Depot’s purchases of distributors Hughes Supply, National Waterworks and White Cap; and the pro dealer Cox Lumber. In Canada, the company built its pro business with acquisitions that included Litemore, a major commercial lighting supplier, and Brafasco, a chain in Ontario that distributes commercial fasteners and hardware.

But Nardelli’s legacy is marred by his failure to improve the company’s previously vaunted customer service, which is widely recognized as well below the standards of the 1980s and early 1990s. Nardelli allocated billions of dollars to upgrade both the appearance of Home Depot’s aging stores and their merchandise assortments, but he tried to reduce expenses by cutting back employees’ work hours and shifting the company’s personnel more to inexperienced and inadequately trained part-time help. The resulting impact on service levels was often nothing short of disastrous.

Nardelli’s imperious management style, which concentrated power into his office, didn’t help matters, either. With the exception of Annette Verschuren, who is president of Home Depot Canada and Home Depot in China, every officer who was with the company when Nardelli joined Home Depot has since resigned, retired or been let go. His style was on full display at the company’s shareholders’ meeting last year, when Nardelli enraged investors by refusing to take questions from the floor or to provide any plan for improving the value of the company’s stock price. His subsequent apology for that ill-advised performance did little to assuage shareholders, some of whom have been calling for an independent board to evaluate the company’s operational strategies.

While earnings remained healthy, the company’s stock price and earnings performance have remained lackluster under Nardelli’s watch. Nevertheless, Home Depot made Nardelli one of America’s highest-paid CEOs. He received $123.7 million in compensation (and between $225 million and $245 million, when stock options are factored in), since taking over as CEO in December 2000, $38 million in 2005 alone. Over that period, the company’s stock has fallen in value by just under 9%, on a split-adjusted basis.

Outcries over Nardelli’s compensation aren’t likely to subside after Home Depot revealed that, subject to its contractual obligations, Nardelli would receive a severance package totaling $210 million. However, within hours of the news breaking that Nardelli was leaving the company, Depot’s stock price jumped 2.7%.

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Stremecki takes over TIM-BR MARTS’ retail division

Calgary — At Tim-BR MARTS Ltd., the giant buying group for independent building supply dealers, Steve Stremecki has moved into the role of vice-president, retail, effective Jan. 1, 2007.

Stremecki has been with TIM-BR MARTS since December 2004, serving as director of business development until November 2005, when he was appointed vice-president of the group’s growing commercial division. Prior to joining TIM-BR MARTS, Stremecki was U.S. operations manager for Sexton Group, a competing group based in Winnipeg. From 1984 until he joined Sexton in 2003, he was with BPB Westroc in a variety of positions, culminating in the role of vice-president of marketing for North America.

“In his new role as vice-president, retail, Steve will be responsible for all TIM-BR MART retail brand, marketing, and advertising initiatives and activities,” said Tim Urquhart, president and general manager of Tim-BR MARTS in a prepared release. “Over the coming weeks we will be announcing additions to Steve’s team, as well as who will be taking over responsibility of the Commercial Division.”

The re-org comes on the heels of the recently announced departure of Don Nash, formerly executive vice-president of TIM-BR MARTS, who left the company at the end of 2006. Nash, who headed up the Ontario buying group Homecare Building Centres until it merged with TIM-BR MARTS, was in charge of marketing programs for the group, based in Mississauga, Ont.

TIM-BR MARTS Ltd. now represents more than 600 member locations across Canada and over $2 billion in annual purchases.

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Watch for a “fight”, says BMR CEO

LONGUEUIL, Que. — Le Groupe BMR inc. is playing a lone-wolf role these days, lacking any affiliation with other groups.

But it wasn’t always that way. Only two years ago, BMR was part of a four-way alliance under the umbrella group Matreco, making it part of the largest collective in the country. Within Matreco, BMR was even serving as a hardware supplier for two other members: Ontario’s Homecare Building Centres, and AWARD in Atlantic Canada. Through a newly formed company, Quincaillerie Matreco Hardware (QMH), BMR’s own hardware distribution business was supplying directly to Ontario dealers and to AWARD members through a warehouse in the Halifax area.

TIM-BR MARTS Ltd. in Calgary was the only member not included in QMH, and given the logistical challenges of supplying the West, that worked fine for BMR. The remaining business would have provided enough volume to make QMH viable, says Yves Gagnon, president and CEO of BMR. However, things started to go wrong from the start.

For starters, he says, the other QMH members continued to source some hardware on their own, which went against the agreement to make QMH the key hardware supplier. As a result, QMH purchases never got above about 20% of dealer volumes, with dealers cherry picking the QMH catalogue. “I was fairly upset about that,” Gagnon recalls.

In addition, AWARD decided to open its own distribution centre, without the volume levels to support it. The 50,000-square-foot DC was filled with about 4,000 fastest-moving SKUs, while remaining stock was shipped directly to dealers from BMR’s warehouse on a cost-plus basis. AWARD’s president at the time, Tom Smith, ended up losing his job over the failure of that venture.

All the while this was going on, Don Nash, then head of Homecare in Ontario, was negotiating with TIM-BR MARTS to merge the two groups. “We couldn’t supply the West adequately and TIM-BR MARTS was tied to the Sodisco-Howden Group (Now CanWel, Hardware Division). Feeling abandoned, Gagnon then decided to start looking beyond his home province to recruit members in earnest.

As TIM-BR MARTS leads the way with buying group consolidation, will BMR find more partners of its own in the future? “At this moment, we are alone, but you never know,” says Gagnon, smiling. He points out that the BMR’s format, a group that is largely owned by only a few of its members, and has its own integrated hardware and LBM distribution, does not constitute an easy fit for other, more traditional groups, even though talks have taken place with those groups in the past.

He expects consolidation — and competition — to increase among the groups. “There’s going to be a big fight,” he says. And as the big guys fight it out, he believes there’s room for BMR to help dealers operate effectively in their own markets. “BMR offers a beautiful future,” says Gagnon, for dealers, as an alternative to larger groups such as Home Hardware and RONA.

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Ace Hardware to give away a store

OAK BROOK, Ill. — The dealer-owned buying group Ace Hardware Corp. is giving new meaning to the phrase giving away the store. This month, the co-op will be accepting entries for a contest whose grand prize is an Ace Hardware store valued at $1 million.

To compete in the Dream Ace contest, as it is called, applicants must demonstrate “a combination of business and sales expertise, entrepreneurial spirit and home improvement knowledge, as well as a true commitment to helpfulness,” according to a prepared statement by the company.  Ace’s online entry form includes an entrepreneurial–suitability test and three essay questions. The co-op will select finalists from each state through a series of interviews, presentations and other “skill-based tests” that will be conducted in New York and Chicago. Ace members will then choose the grand prize winner, who will be announced at Ace’s convention in Las Vegas on March 15.

The store itself will be located in Houston “or an alternate site” at the co-op’s discretion. Its grand opening will be on June 30 and July 1. The value of the prize includes its inventory, fixtures, décor and technology. Ace officials will also provide the winner and staff with extensive training.

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Canadian Tire adopts new merchandising software

SAN BRUNO, Calif. — Soft Solutions has been selected by Canadian Tire Retail to provide software support for strategic merchandising and marketing activities. Soft Solutions is a provider of web-based retail merchandise management and decision support software.

Soft Solutions will provide Canadian Tire Retail’s 1,100-plus general merchandise hardware stores and car washes with a range of service advantages, including fully-integrated merchandise and marketing tools and a strong MDM platform to support its business. The Soft Solutions Suite covers Canadian Tire Retail’s merchandising requirements for PIM, pricing, ad planning and promotions, vendor deals management, and markdown management on the new MDM platform.

Soft Solutions has an 18-year track record with a large base of customers in Europe, including Carrefour, Auchan, Kingfisher, and Galeries Lafayette. It claims that its system conforms to the latest industry and technology standards, including GS1, and is compatible with multiple databases and industry application server packages.

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RONA CEO expects growth unhindered by slowdown

MONTREAL—Even as the first signs of a slight economic slowdown appear in the Canadian economy, including a fall off this year in housing starts, RONA inc. expects to continue growing at a rapid rate, says the company’s president and CEO.

Robert Dutton, speaking to more than 900 dealers and staff at the group’s recent dealer market in Montreal, said, “Conditions do seem right for us to continue our growth.” Despite suggestions of a slowdown, Dutton assured the group that RONA is well-positioned to weather any storm. “At RONA, it is not the economic conditions that affect us. We decide where we want to go.” With $450 million in debentures and more than half a million dollars in unused credit, he said the company is able to finance that expansion.

Most recently, the group has added 19 new affiliate stores to the RONA network, adding nearly $102 million to overall annual retail sales. Ten of the 19 new affiliates are in Ontario, three in Nova Scotia, two in Saskatchewan, one in British Columbia, one in Alberta, one in Manitoba and one in Quebec.

With the addition of these stores, RONA has recruited 35 dealers in 2006, for total additional retail sales space of 305,000 square feet and some $197 million in additional retail sales. In 2004, RONA recruited 25 affiliate stores, representing retail sales of $105 million. In 2005, 31 affiliate stores joined, for an additional $191 million in retail sales.

The recruitment campaign is part of the company’s 7-07 program, which aims to add  $2 billion to RONA’s annual retail sales in two years, bringing the network to $7 billion by the end of 2007. “We’re expecting $400 million of those additional sales to come from newly recruited affiliates,” said Claude Bernier executive vice-president of proximity and specialized stores, “and so far we’re right on target to achieve our goal.”

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Don Nash to leave TIM-BR MARTS

MISSISSAUGA, Ont.—Don Nash, long-time president of TIM-BR MART Ontario and most recently executive vice-president of TIM-BR MARTS Ltd., is leaving the company effective the end of 2006.

Nash, who spent 25 years with the Ontario buying group Homecare Building Centres, was instrumental in converting his dealers to the TIM-BR MART banner, and became a vp when the group officially merged with Calgary based TIM-BR MARTS Ltd. two years ago.

In what turns out to be a timely move, Nash has also been named to receive this year’s Industry Achievement Award from the Lumber and Building Materials Association of Ontario.

Looking back over his tenure at Homecare and TIM-BR MARTS, Nash is proud of his accomplishments, which include Homecare’s sponsorship of the Toronto Blue Jays, the adoption of the Air Miles reward program, and the establishment of the commercial and industrial division, C.I.D. But he is especially gratified by the success of the TIM-BR MART merger. “My goal was to get the Homecare members transitioned to TIM-BR MART and that has happened,” he says. “The transition has been good for the dealers, as they can enjoy lower costs, higher rebates, and they have the opportunity to build the national brand.”

Nash, who was in charge of recruitment and dealer programs for the group, intends to look for further opportunities within the industry. He expects his position at TIM-BR MART to be filled next by someone in a marketing role.

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Quebec’s first Home Depot Urban store on track

PTE-CLAIRE, Que.­— Home Depot’s first “urban” style store will is getting through planning and zoning issue, but is on track to open early in 2008. The store will be located in an existing retail mall/power centre.

According to Home Depot spokesperson Nick Cowling, some refitting is needed to the site, but when it’s finished the store will be exceed 70,000 square feet. Because of its urban location, where real estate costs are typically at a premium, this store, like its predecessors, will be on two levels. Home Depot has urban stores in Chicago and New York, while the prototype urban store in Canada is in the Park Royal power centre in West Vancouver.

Meanwhile, Home Depot continues to open traditional stores, though smaller than in the past. The latest, which opened earlier in December in Collingwood, Ont., is only 80,000 square feet in size, but more suitable for this small tourist community.

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Home Depot extends credit-card benefits

ATLANTA — Holders of Mastercards bearing Home Depot’s name will soon be eligible to redeem gifts and other rewards from the ThankYou Network, a free rewards program where members earn points for using participating credit cards to shop, bank or book travel. The products and gifts that are redeemable, according to its website, include electronics, toys, trips, sporting goods, jewelry and home living items such as appliances.

This move essentially extends Depot’s strategic alliance with Citigroup, the credit card provider that offers and manages the ThankYou program. In this latest agreement, Home Depot Rewards card members can continue to earn two points for every dollar spent at one of the retailer’s home centers or Expo Design Center locations. And now, they’ll be able to earn one ThankYou Point per dollar spent on all other purchases made with their card in the US.

In addition, card members earn bonus points with their first purchase equivalent to a US$25 gift card reward. The transition to the ThankYou Network will be made in the spring of 2007.

News of this agreement was first reported on wisemarketer.com’s site.

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European retail group adds Italy and Spain to ranks

BERLIN — EDRA, the European DIY Retailers Association continues to grow. The association, an umbrella organization representing retail associations in countries throughout Western Europe, is adding Spain and Italy’s associations to its ranks. EDRA, which originated five years ago when the German and French associations joined forces, now comprises retail associations in 14 countries.

The group’s head general secretary is John Herbert, who is also head of the German group, BHB. Herbert’s background includes running Knauber, at the time one of Germany’s most innovative home improvement retailers — in fact, a prototype Canadian Home Depot store that opened last month just west of Toronto features innovations that were developed more than a decade ago by this regional chain. He then moved to California as vice-president of Home Depot’s Expo Design Centers, before returning to Germany to head up the German group.

As front man for Europe’s DIY, hardware and home improvement retailers, he has become an important spokesperson for that retail sector in a consolidated European Union. “EDRA provides major networking among nations and offers a strong voice against EU legislation,” he told Hardlines.

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Stock acquires Phoenix-based framer

PHOENIX — Stock Building Supply, the Raleigh, N.C.-based pro dealer, gave itself an early Christmas present by acquiring Tondo Verde Construction, a framing company based here, as well as Tondo’s Precision Forest Products four-acre yard.

Terms of the purchase were not disclosed. Tondo, a five-year-old company with 172 employees, generated $37 million in sales in 2005.

This acquisition follows on the heels of Stock’s purchase of the pro dealer Kempsville Building Materials in November. All told, Stock operates 322 locations in 34 states, making it the industry’s largest pro dealer.

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Home Depot resists attempts to alter board

ATLANTA—Home Depot has received notice from Relational Investors, LLC, an investment firm, that Relational intends to submit a proposal at Home Depot’s next annual meeting. The proposal will request that the board of directors appoint a special committee of independent directors to evaluate the strategic direction of Home Depot, assess the performance of management, and consider strategic alternatives.

Relational calls this proposal part of an “advocacy program” and it plans to solicit proxies to have its proposal adopted. Relational says it may nominate one or more directors for election at the 2007 annual meeting to further its cause. In addition, Relational is seeking a meeting with Home Depot CEO Bob Nardelli and members of the board.

Meanwhile, Home Depot insists it has done a strategic review of its own and sees no need for further evaluation. It will therefore oppose Relational’s resolution and proxy solicitation.

According to a release from Home Depot, the company’s board of directors unanimously supports the management team and its current plan “to continue enhancing value for all shareholders through the execution of its current strategy”. That plan includes, most recently, the issuing of $5 billion in debt and a $3 billion accelerated share repurchase program.

In fact, concerns that Home Depot is gradually moving to be taken private are being sparked by the aggressive rate of its share repurchases. This year alone, it has repurchased $6.7 billion of stock, representing 173 million shares. Home Depot has purchased more than 450 million outstanding shares since 2002, or roughly 19% of shares.

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Verschuren to head up Home Depot’s China division

TORONTO—The woman who led Home Depot’s initial international expansion has been recruited to take the helm of the giant retailer’s operations in China. Annette Verschuren, president of Home Depot Canada, and at one time head of Home Depot’s Expo Design Centers division, will retain her current role in Canada, but now divide her time between Toronto and the Far East.

Home Depot set up offices in Asia more than two years ago, but has yet to open even one store there. Company president and CEO Bob Nardelli has told this reporter in the past that expansion there has depended on finding the right partner, and no such partner, to date, has been found.

With the increase in China’s economic strength has come a burgeoning middle class, one that western-based retailers are eager to educate to the ways of consumerism, including DIY. However, Home Depot is behind many of its European counterparts in developing markets in Asia. Kingfisher plc, Europe’s biggest home improvement retailer, and number-three worldwide, is well established in Asia. It has 50 stores in China, 20 in Taiwan, and two in South Korea.

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Home Hardware expects new software
to revolutionize reno planning

ST. JACOBS, Ont.—Home Hardware Stores Ltd. has launched home improvement planning software called HomeWorks. The package was developed for Home Hardware by RenoWorks Software Inc., a provider of digital home imaging software for new home construction and existing home renovations.

By taking a stock image or a photograph of one’s own home or room, the HomeWorks software can begin adding products and colours supplied by Home Hardware’s own suppliers. Both homeowners and contractors can digitally visualize their interior and exterior construction and design products before starting the job.

A consumer can take photos of their own home and modify them to preview the look of Beauti-Tone Paint colours, as well as actual flooring, siding, roofing, windows, doors and hardware available from Home Hardware. Home approached 33 key suppliers, including Alexandria Moulding, All-Weather Windows, BP, and Gentek, who participated by including more than 2,500 products and catalogue information on the software CD. .

The beauty of HomeWorks is the ability of a consumer to see how a project will look when it’s finished. “Like when buying clothes, you can try it on before you buy it,” said Andrew Pantelides, national product manager, lumber & building materials, for Home Hardware. He led a presentation last week to demonstrate the new package.

HomeWorks is recommended by the Canadian Home Builders Association and contains links to housing information provided by Canadian Mortgage and Housing Corp.

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Home Depot admits to extensive option backdating

ATLANTA—Home Depot will move $200 million in retained earnings into the “paid-in capital” line of its balance sheet, following an internal investigation that uncovered extensive backdating of stock options to the benefit of its senior-level managers.

In a release, the company stated that backdating had been “routinely” done, and estimates that as much as $200 million in expenses related to that practice had not been recorded in its financial statements between 1981 and 2000.

Those practices continue to be investigated by the U.S Securities and Exchange Commission and the U.S. Attorney for the Southern District of New York. Home Depot’s investigation did not turn up an “intentional wrongdoing,” according to the company. And some of the specific details about the backdating — for example, how many employees, past or present, were involved — could not be determined because of insufficient paperwork. But the investigation’s findings found the practice to be far more prevalent than the company initially thought when it claimed previously that it had uncovered only five instances of backdating and $10 million in unrecorded expenses.

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U.S. home builders await recovery before resuming expansion

NEW YORK—Large production builders continue to believe that the housing slump in the United States could begin to subside possibly as early as mid 2007. However, seven of the industry’s leading public builders told an audience of analysts and investors last week that they had stopped buying land — or even thinking about expansion — until they get a clearer picture of how the market is changing.

Senior-level officials from Toll Brothers, Lennar, Standard Pacific Homes, Beazer Homes, Meritage Homes, Hovnanian Enterprises and Technical Olympic each made presentations to more than 200 attendees at the 10th annual Homebuilding Industry Conference, conducted by the New York Society of Securities Analysts. All of these companies reported dramatic declines in orders and sharp increases in their cancellation rates. In response to this downturn in buyer demand, they have reduced their staffs — in Beazer’s case, by 25% — and operating expenses, and have cut back on their production and home closing estimates for the next 12 months.

As the housing industry searches for equilibrium, these executives say this downturn has been different from past slumps because it’s not being driven by larger economic forces such as rampant inflation. Rather, speculators, who are mostly out of the market now, have helped drive prices up exorbitantly. In virtually every case, these builders have been cutting those house prices in recent months.

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Atis buys door and window maker in Western Canada

MONTREAL—Atis Group, through its Allied Windows business unit in British Columbia, has acquired Bestway, a Calgary-based manufacturer of vinyl windows and steel doors. This is Atis’s eighth acquisition in the past 27 months.

Atis Group, formerly known as Focus Doors and Windows, sells under the Allied, Bestway, Laflamme, and Melco brands. With this latest acquisition, it now has nine factories, employs close to 1,600 people, and boasts revenues of close to $200 million.

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Asia Pacific Sourcing replaces Practical World next year

COLOGNE, Germany—Next year is the off-year for the International Hardware Fair/Practical World, the giant hardware and DIY show. That show went bi-annual two years ago in the face of flagging support from brand-name vendors such as Bosch and Black & Decker.

In these off years, the show will be supplanted by a new show, Asia-Pacific Sourcing. Now in its second year, the next Asia-Pacific Sourcing will take place March 4-6, 2007, filling almost 35,000 square meters of space at Koelnmesse. The organizers expect to attract around 700 exhibitors from Asia, up from 546 firms from nine Asian countries in 2005. Approximately 9,000 international visitors are expected to attend.

The show’s exhibitors represented a more diverse range of product lines than at Practical World. (Hardlines was the only North American publication in attendance when Asia Pacific Sourcing kicked off in 2005.) Product groups will include Hardware and DIY (tools, locks and fittings, do-it-yourself materials, ironmongery, fastening technology), Garden and Leisure (garden furniture, garden equipment, barbecues, camping articles, sports goods and toys, leisure items), and Ambience (glass, porcelain, ceramics and table decorations, lighting, gift items). For more information: click here.

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New study: retail gift card use soars

OTTAWA—Canadians are turning more than ever to retail gift cards to fill their gift-giving needs. According to a new study by Statistics Canada, eight out of 10 large retailers offered gift cards for their customers, a huge increase from only two years before.

During the 2003 Christmas holiday season, only 53% of large retailers had made the cards available. Just two years later, this proportion had ballooned to 82%. The study, published in Stats Canada’s Analysis in Brief series, examined the growing popularity of the cards among Canada’s largest food, clothing, home furnishings, electronics, sporting goods, and general merchandise retailers. Together, these retailers represent about 35% of total annual retail sales, after excluding recreational and motor vehicle dealers.

Looking at all retailers, not just the large ones, 55% of total December 2005 sales came from stores offering gift cards. Leading the pack were general merchandisers, where stores accounting for 94% of that group’s sales had gift cards.

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Home Depot gets serious about decorating

MISSISSAUGA, Ont.—Home Depot is getting serious about décor and home enhancement products, as a new store just west of Toronto will attest to. The store features a beefed up seasonal department that represents a wide range of Christmas decorations, but also features furniture and fireplaces suited to the season. “Home Depot is positioning itself in core Christmas,” said Gino Digioacchino, Home Depot’s vice-president merchandising, during a recent walk through the store with Hardlines.

Gift cards are featured prominently on an end cap as soon as you enter the sales floor. The cards come in a range of designs and looks. “The gift card is becoming a really popular item,” said Digioacchino, “and it’s being tested in 10 stores across Canada during Christmas.” (Home Depot is on a hot track: Wal-Mart has reported that its gift card sales are up 30% this holiday season vs. last year’s.)

The appliance department typically fills 880 square feet of the sales floor. At this new store, that has been expanded to 3,000 square feet. According to Karol Allen, who was recently promoted to director of merchandising – softlines, the product range is not only bigger it’s better in many cases, with more upscale offerings, including feature-oriented product lines and avant garde colours such as burgundy.

(A full tour of the new Home Depot will be featured in the next issue of our sister publication, Hardlines Quarterly Report, along with a closer look at the new Réno-Dépôt from RONA, and the new Wal-Mart Supercentre. — Michael)

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Lowe’s buyers welcome new vendors

MARKHAM, Ont.—Lowe’s affirmed its commitment to the Canadian market, and to Canadian vendors, when it met with a group of them recently in a series of one-on-one meetings. The “open to buy day”, organized by Hardlines, was a chance for the Lowe’s Canada buying team to connect with some new faces — and reconnect with some familiar ones.

The new team has been meeting with vendors since early in the summer, especially with those already listed with Lowe’s in the U.S. But Canada’s newest arrival to the retail home improvement scene was looking for a way to connect quickly and effectively with a range of potential new suppliers.

Hardlines was approached to make the connection, resulting in an “Open to Buy Day” that drew companies from across the country to meet Lowe’s buyers and merchandise directors. When Hardlines spoke with the buyers such as Bernie Snider at day’s end, they all reported finding a number of new vendors whom they intend to invite back for a second meeting.

(Hardlines will host its sixth annual “Meet the Buyers Seminars” next spring. Vendors will learn the secrets of doing business with Canada’s leading home enhancement retailers from the buyers themselves! A limited number of one-on-one buyer meetings will also be available at these events. Mark your calendar now: Toronto March 27, 2007; and Montreal March 29, 2007. — Michael)

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BMR CEO recalls growing pains

QUEBEC CITY—As BMR the group poises to celebrate its 40th anniversary next year, the company’s president and CEO, Yves Gagnon, need look back no further than two years ago for a turning point in BMR’s history.

That was the year that the privately owned buying group’s hardware distribution centre in Longueuil, Que., was destroyed by a fire. And it was the beginning of a year-long struggle to get the company back on its feet quickly.

“In Longueuil, where we live, there are about half a million people. I think about one million people came to watch that fire,” recalls Gagnon. He can smile about it now, but at the time the devastation posed a huge challenge for the company and for him personally. Admitting BMR had no contingency plan, that evening of the fire, from midnight until 3 a.m., he and his team hammered one out. Somehow, the company’s computers and data were saved and BMR’s suppliers jumped in, shipping product direct as much as possible while temporary quarters were found.

Now, says Gagnon, the company, like a razed forest, has come back stronger and healthier than before. That strength is being translated into stronger merchandise programs, increased imports and private label, and aggressive expansion plans. That expansion is coming from within its own ranks of 160-plus home improvement dealers, mainly in Quebec, as they expand and add stores of their own. Last year those dealers topped $1 billion in sales collectively, many of whom were recognized at a private reception earlier this month in Quebec City for investing in their businesses. One invested more than $1 million in refurbishing his store; another financed expansion to the tune of $5.5 million.

But another important part of BMR’s expansion is now dealer recruitment, something that is taking the group outside of its traditional trading area in the province of Quebec. The group announced the signing of 32 dealers over the past 12 months, including four from Ontario.

“We are growing by about $100 million per year only,” says Gagnon. “But we only want quality dealers. We aren’t going to make a deal just to make a deal.”

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Home Depot joins forces with design firm to develop products

ATLANTA — Home Depot is about to launch a new brand of home safety products called Home Hero. The development of that brand is the result of a new partnership with Arnell Group Innovation Lab. That partnership, known internally as “Orange Works,” is working with specific vendors to develop proprietary products for Home Depot’s stores. One of the goals of this alliance is to get products into the market faster.

Orange Works has a mission to “get closer to consumers’ needs and wants, and [create] innovative products that will embody high levels of functionality, next-generation technology, consumer appeal, style and design,” according to a prepared statement. In its first brand venture, Orange Works cooperated with Kidde, the home safety manufacturer, and the products to be launched include an ergonomically designed fire extinguisher.

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U.S. acquisition will make West Fraser number-two producer

VANCOUVER—West Fraser Timber Co. Ltd. has entered into an agreement to acquire 13 sawmills from International Paper, marking a significant expansion of West Fraser’s presence in the United States. The 13 mills, which are located in North and South Carolina, Georgia, Florida, Alabama, Arkansas and Texas, employ approximately 2,200 people and have a combined annual production capacity of 1.8 billion board feet of lumber.

The deal is valued at approximately US$325 million, subject to some conditions, including U.S. regulatory approvals and customary conditions, and is expected to close in the first quarter of 2007.

West Fraser currently owns two sawmills in the U.S. located in Huttig, Arkansas and Joyce, Louisiana which employ approximately 400 people and have a combined annual production capacity of 420 million board feet. All of the mills produce lumber from southern yellow pine, used extensively in treated wood and strength applications such as treated decks, trusses and joists. Orchard lumber, produced by the company’s western Canadian sawmills, is used in house framing.

Upon completion of the transaction, West Fraser will be the second largest lumber producer in North America with combined Canadian and U.S. production capacity of approximately 6.2 billion board feet.

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National Hardware Show showcases “sneak preview”

NEW YORK—In a trendy loft space in downtown Manhattan, the organizers of the National Hardware Show hosted a preview last week of some of the products and innovations it aims to offer on a much larger scale in Orlando, Fla., May 8-10, 2007.

The event offered a venue for more than a dozen vendors to showcase a range of products from both the U.S. and Canada, including “JacPac”, a compact pneumatic driver system from Supplierpipeline (demonstrated here by Supplierpipeline’s director of sales, Marianne Thompson).

The event also provided the opportunity for the Hardlines team to solidify its commitment to co-locate our Hardlines Conference with Reed’s new National hardware Show Canada, which will be held Oct. 15-17, 2007. Hardlines’s own Beverly Allen (centre) is shown (l-r) with: Sonya Ruff-Jarvis, Rob Cappiello and David Tobin of Reed Exhibitions. Michael McLarney (not shown) was likely at the buffet table.

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Loblaw sees slight improvement in general merchandise

TORONTO—At Loblaw Cos., Canada’s largest food retailer, efforts to get its general merchandise lines on track have gone slowly, according to the company’s latest financial results.

Overall sales for the third quarter increased 4.6%, up by $400 million to $9.0 billion. Besides an increase in its core grocery business, Loblaw saw increases reflected in a number of other categories, including general merchandise and pharmacy.

Nevertheless, the company admits that, “Since the beginning of 2005 and throughout 2006, the financial performance of Loblaw Cos. Ltd. has been uncharacteristically poor.” In addition, its supply chain remains beleaguered, as distribution service levels for general merchandise have yet to reach satisfactory levels.

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RONA unveils growth plans at latest market

MONTREAL—RONA inc. has a plan. It even has a name for the plan: 7-07. What it means, as outlined by company executives at the RONA dealer market held here last week, is that Canada’s number-two home improvement retailer continues to vie seriously for the number-one spot held for years by Home Depot Canada.

But in order to become a $7 billion company by the end of 2007, RONA has to pursue growth on four main fronts. It is pursuing organic growth, to the tune of $200 million, while new stores will account for an additional $700 million. Recruitment will ring up another $400 million in annual sales.

But the other big growth area remains acquisitions. RONA expects to add $700 million in sales by the end of 2007 by buying up other retailers. All those acquisitions are expected to occur within Canada.

The company is not restricting its growth to retail channels. According to Claude Guévin, executive vice-president and CFO of RONA, the ICI (institutional-commercial-industrial) market is worth upwards of $100 billion. Not only that, but it offers better margins and resists the cyclical nature of retail.

RONA’s aging customer, meanwhile, means more opportunity for installed sales. Guévin referred to a study showing that the percentage of Canadians who view themselves to be DIYers has actually increased since 2002, from 63% to 69% in 2006. However, growing home categories include gardening and decorating, leaving room for professional help on more hardcore renovation projects. “Installation is an important service and we have to work on it to continue to grow organically,” he said.

(More on the RONA show in the next incredible issue! —Editor)

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New look Home Depot enhances décor departments

MISSISSAUGA, Ont.—Lowe’s may be coming to town, but Home Depot Canada is not sitting idly by. A new store, only the second relocation of an existing outlet in this country, is 10,000 square feet larger than Home Depot’s traditional 135,000-square-foot size, and a departure from the retailer’s most recent efforts to build stores of 94,000 and 60,000 square feet.

The most dramatic enhancements of Home Depot’s existing merchandising are in soft DIY. All its décor categories have been moved into the centre of the store, which now features lowered sightlines that offer a clear view to the bath department toward the back of the store.

One of Home Depot’s catalogue acquisitions has materialized as a department in this new store. Home Decorators, an online catalogue business acquired last year, has four stores of its own. Home Depot Canada merchants visited those stores and studied the company’s product lines. The result is a store-within-a-store bearing the name “Home Decorators Collection”. It features everything from furniture and rugs to lights and accessories.

(More on this new Home Depot store in our next blazing issue! —Michael)

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Lowe’s reports 3Q profit rise

MOORESVILLE, N.C.—Lowe’s Cos. has reported net earnings of $716 million for the quarter ended Nov. 3, 2006, a 10.8% increase over the same period a year ago. For the nine-month period, net earnings grew by 20.3% to $2.49 billion.

Sales for the quarter increased 5.8% to $11.2 billion, up from $10.6 billion in the third quarter of 2005. For the nine months ended November 3, 2006, sales increased 12.6% to $36.5 billion. Same-store sales, however, declined 4.0%. Year to date, same-store sales increased 1.7%.

According to Robert Niblock, chairman, president and CEO of Lowe’s, the retailer is starting to feel the effects of the slowdown in the housing market in parts of the U.S. In addition, price deflation in some key commodities and a lack of hurricanes all affected year-over-year performance. “Despite these challenges, we continue to gain market share in key product categories,” Niblock said in a release.

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Cologne Hardware Fair will open doors to pros, DIYers in ’08

COLOGNE, GERMANY—Starting in 2008, the giant International Hardware Fair/Practical World will open its doors to skilled trades and do-it-yourselfers. However, admittance will be restricted to halls six and nine — the Builders’ and Home Improvement/DIY Supplies section. The rest of the exhibition centre — 14 halls in total — will, as in the past, be open exclusively to trade visitors and buyers from the industry.

The next International Hardware Fair/Practical World will be held here March 9-12, 2008.

Oliver P. Kuhrt, Executive vice-president of Koelnmesse, outlined this new approach at the German retail trade organization BHB’s DIY Centre Conference in Berlin. “We are pointing the way to the future with this new strategy,” he said. “The DIY industry will get direct feedback from the private do-it-yourselfers regarding new products, and the trade can make good use of the various trends in selecting its product line-up. Nevertheless, the focus on specialists and trade visitors that characterizes the largest part of the fair will be unaffected.”

The show, which is now held every other year, will be replaced again next year by Asia Pacific Sourcing, which features Asian exhibitors offering a wide range of hardlines products.

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U.S. housing slump takes toll on pro dealers

NATIONAL REPORT—Pro dealers that supply builders and contractors with materials and labor are feeling the weight of a housing slump that shows little signs of abating. Last week, the U.S. Commerce Department reported that housing starts in October fell to their lowest annualized level in six years. The only region of the country that did not see a drop-off was the Northeast, which is being sustained by condominium construction.

In response to this market softness, some of America’s largest dealers have been closing stores and laying off employees. The biggest shocker came from Stock Building Supply, which revealed last week that it has laid off about one-eighth of its workforce, or around 2,000 people, since June.

The housing slump is affecting companies large and small. Builders FirstSource reduced its staff by 8%, or around 500 people, in its most recent financial quarter. And Boise, Idaho-based Franklin Building Supply told the Idaho Business Review that it had 100 fewer workers since September through layoffs and attrition, which represented nearly 30% of its workforce.

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Lowe’s introduces furnishings in catalogue

MOOREVILLE, N.C.—Lowe’s Cos. recently mailed its first product catalogue, which features a new line of furnishings called Home Accents. As yet, the line is not carried in its stores year-round.

Multichannel Merchant magazine reports that the current 48-page catalogue offers holiday buying tips. The magazine adds that Home Accents includes six product styles: country living, traditional, contemporary, eclectic, casual, and cozy. Its selection includes a $1,000 crystal chandelier, $198 accent rugs, and $58 footstools.

Lowe’s own catalogue launch comes just weeks after rival Home Depot announced that it was discontinuing two of its high-end catalogues, 10 Crescent Land and Paces Trading Co. Another catalogue business, Home Decorators, has become the inspiration for a new department by that name in a test store near Toronto (see Home Depot story above—Editor).

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BMR announces new sales levels, new logo, new dealers

QUEBEC CITY—BMR the Group, the Longueuil-based wholesale buying group, had its most successful dealer show ever this past weekend. The group is readying for its 40th anniversary in 2007, complete with a new logo that will appear in its promotional materials and even on its private-label packaging — and a new raft of dealer members.

Sales at this latest show, which focused mainly on hardware, seasonal and import items for BMR’s 161 member dealers, are expected to reach close to $40 million, the result of an initiative that was built only nine years ago — and rebuilt just last year. In 1996, the group decided to expand its offering beyond lumber and building materials, and take hardware distribution “in-house”, as well. A year later, a hardware distribution centre was up and running. The business grew steadily, as members bought in to the new supply model. In addition, BMR began evangelizing the merits of the retail hardware business for its dealer members. Then, in July 2005, the hardware DC in Longueuil, Que. went up in flames. The company is once again shipping up to 24,000 hardware SKUs from its new distribution centre. Another 11,000 SKUs are available via direct shipment.

Now, the group is expanding not only assortments but its geographic reach. Last year also marked the end of its relationship with the TIM-BR MARTS buying group. With it went the gentlemen’s agreement to confine their businesses within their own geographic areas. BMR began recruiting dealers in the Maritimes, where it now has 20 members, and in Ontario, where its ranks have grown to seven.

At the show here, fully 32 new members were announced, all additions over the past 12 months. Of them, five are in the Maritimes and four are within Ontario. The most significant of these is, perhaps, a dealer in Windsor, Ont., formerly a signature Castle dealer.

According to Gabriel Pollender, vice-president of marketing for BMR, the group hopes to reach 200 members within three years.  “In fact, we could reach that goal next year, if we accepted everyone who called us,” he noted.

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Slowdown makes some Atlantic dealers cut prices

MONCTON—Dealers in Atlantic Canada are coming to the end of the year that followed the year to beat all years. “It’s going to be tough to follow 2005,” says Don Sherwood, president of the Atlantic Building Supply Dealers Association. “However, overall, everything is fine here.”

He does point out, however, that the first signs of a slowdown have made some dealers wary. Poor weather in September did not help sales in the third quarter, either. The result: some dealers are trying to “buy the market”, he says. “They’re sensitive to losing market share and no dealer wants to give up market.”

Even Kent, with 29 stores throughout Atlantic Canada, is reportedly lowering prices in some areas, especially on some commodities, and other dealers have to follow the prices downward. “”Once you see the market drop,” says one industry observer, “the big players will drop their prices — and they have deep pockets.”

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Depressed lumber prices dampen CanWel results

VANCOUVER—Lower prices industry wide for lumber affected third-quarter results for CanWel Building Materials Income Fund, even as year-to-date profits showed an increase. For the period ended Sept. 30, CanWel reported sales of $243.3 million, down from $265.4 million in the same period in 2005. Downward price pressure on lumber and panel products during the third quarter was cited as the main culprit.

Net earnings were $4.4 million, compared to $5.3 million. For the quarter, CanWel reported gross margin of $24.2 million or 10.0% of sales, versus $27.1 million or 10.2% of sales in 2005.

For the nine-month period, CanWel reported sales of $719.2 million, down from $791.8 million in 2005. Net earnings, however, reached $12.1 million, up from $7.7 million during the same period in 2005.

“Given the depressed pricing environment for lumber and panel products, we are pleased with our ability to post these financial results,” said Tom Donaldson, president and CEO of CanWel. A number of deals made during the quarter are expected to broaden CanWel’s portfolio and limit the negative effects of soft lumber pricing. These include the acquisition of five treating plants across Canada, plus a new distribution deal with one of South America’s largest forestry companies. CanWel has been appointed national distributor of Arauco Plywood Products. Arauco has some of the world’s largest plantation holdings and output of kraft pulp, lumber, and panel production, thanks to extensive forest resources and industrial facilities in Chile, Argentina, and Brazil. Arauco panel products will be marketed in Canada under the AraucoPly brand.

Like other income trusts in Canada, CanWel is faced with new federal finance laws which will limit the tax exemptions previously available to trusts. The new laws will treat trusts more along the lines of regular corporations.

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US slump takes toll on home improvement stocks

NEW YORK — Investors are taking out their nervousness about the ongoing softness in buyer demand for housing, and how that relates to spending on home improvement products, on some retailers more than others.

The industry’s two home improvement giants, Home Depot and Lowe’s, seemed to be tracking each other. Lowe’s, saw its stock price dip to $26.15 per share in late August, and its high for this six-month period was just under $32 (it closed Wednesday at $30.40). Home Depot hit its nadir in mid-July — $32.85 per share — but has actually been recovering nicely since them. Although it reported a 3.1% decline in net income for the third quarter, through nine months ended Oct. 30, Home Depot’s sales rose 13.8% to $70.6 billion. Same-store sales for the latest quarter fell, however, by 5.1%. Net income for nine months grew by only 6.2% to $4.55 billion.

Bob Nardelli, Home Depot’s chairman, specifically blamed his company’s results on the weakness in the housing market (although it should be noted that its Home Depot Supply segment, which caters to residential and commercial professional contractors and builders, enjoyed a 222% gain in nine-month revenue, to $9.12 billion, and a 228.5% increase in operating income, to $657 million.) In the third quarter, the company’s inventory levels rose by 13.9% over the same period a year ago. Nardelli expects the slowdown in the housing market, and its negative impact on Home Depot’s financial growth, to continue through the fourth quarter of 2007.

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Duct tape gets fashionable

TORONTO—Okay, there are probably bigger news stories out there, but not many as fun and kooky as this. Henkel hosted a fashion show recently in the trendy Yorkville area of Toronto, featuring designs using nothing but duct tape.

The event was called “Stuck at Prom”, to tie in with the time of year in which students dress formally for their school proms. Henkel, which markets the product under the “Duck Tape” brand, awarded scholarships for the best student designs.

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Sears Canada shareholders reject takeover bid

TORONTO—Sears Canada Inc. shareholders have rejected a takeover bid by parent company Sears Holdings Corp. Well, sort of. The vote, held last week, required at least a two-thirds majority to vote in favor of the takeover. In fact, the vote received 81.32% approval.

While that was enough to satisfy Canadian corporate laws, securities regulations in the provinces of Ontario and Quebec require further two-thirds approval by minority shareholders. That vote, which excluded 7.5 million shares owned by Vornado Realty, an affiliate of Sears Holdings, failed. The Sears offer amounted to C$18 a share, or C$892 million.

The Court of Appeal for Ontario has further denied Sears Holdings’ motion to appeal the decision of the Divisional Court dismissing its appeal from the decision of the OSC.

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