Buying groups report strong performance

NATIONAL REPORT – The growth and viability of the independent continues unabated as buying groups unanimously report strong results, both for 2005 and for the year to date.

Canada’s largest buying group, in terms of both number of dealers and estimated sales at retail, remains the 432 building centre members of Home Hardware Stores Ltd. According to Paul Straus, vice-president and CEO of Home Hardware, sales by the co-op wholesaler’s LBM dealers were up more than 10% in the first quarter. In addition, same-store sales were up 7.1%.

Nor is Home Hardware alone. At Sexton Group, the privately held buying group based in Winnipeg, Bob Mondy, vice-president and general manager, is delighted by the performance of his group’s dealers so far this year. And even though the group took a hit when it lost Lloydminster, Alta.-based Nelson Lumber Co. to TIM-BR Marts last year, it has made some inroads into recruitment on its own. “We’ve picked up some smaller accounts–and not so small accounts,” Mondy says. One of the major moves for Sexton at the end of 2005 was the addition of 35 building centre dealers that moved over from Allroc. Their sales, plus purchases worth about $20 million, will be reflected in Sexton’s 2006 results.

While the performance of Sexton’s members vary widely according to geography, Mondy says Alberta and British Columbia have been especially hot, with same-store sales ranging from 11.5%-17.5%. Other Western-based groups are similarly buoyant. John Physic is vice-president of Delroc Industries. He says that sales for his Langley, B.C.-based group were good in 2005, calling it “a very strong year”. He also expects the current year to be equally as strong. With a preponderance of members who are commercial dealers, Physic says they are benefiting from the explosive multiple-unit construction boom in the West.

TORBSA, a group of 48 contractor-oriented dealers located mainly in Central Ontario, enjoyed strong sales, but the market in 2005 did not really pick up until the second half of the year. Bob Holmes, general manager of TORBSA, says the commercial business was depressed for a long time. Even as new housing remained strong, single starts, the main driver for his dealers, were down.

“TORBSA had some good growth last year, and we look forward, tentatively, to 2006,” he says.

On the East Coast, TIM-BR Mart Atlantic, the division of TIM-BR Marts Ltd. formed by the addition of former members of AWARD at the end of last year, has had to cope, not only with an historically stable economy, but with transition issues of its own. The closing of AWARD, precipitated in part by the closing of its distribution business, ADL, ended up costing the members money. “We had some challenges that we faced, but the members, to their credit, lived up to their end,” says John Morrissey, vice-president of TIM-BR Mart Atlantic. He adds that last year, despite the upheaval, was a good year for his members.

“My goal for this year is to hit $150 million on the purchasing side.”

(For more data on Canada’s LBM buying groups, check out the latest issue of our sister publication, Hardlines Quarterly Report. For more info, click here

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Sears Canada and Amazon develop enhanced website

TORONTO – Sears Canada Inc. unveiled a newly re-designed website last week that’s built on the Amazon.com platform. With Amazon handling the “back office” on the combined project, shoppers now have a more comprehensive search capability, gift registries for all occasions, and even the option to “review” products.

“This great relationship with Amazon takes our Internet business to the next level,” said Dene Rogers, acting president, Sears Canada Inc. He was on hand last week, with a number of other Sears Canada execs and managers, to witness the official unveiling of the site at the company’s downtown headquarters.

Using the Amazon Enterprise Solutions group’s architecture, the site, at www.sears.ca, aims to increase online interactivity with an extensive merchandise selection. It also features all the user interfaces one finds when shopping Amazon.com for books or music. Products can be searched by price, popularity (i.e., bestsellers) new arrivals, etc. In addition to the new design and standard navigational toolbar, the website provides shoppers with a comprehensive comparison-shopping capability for major appliances. And just like the Amazon site, consumers can write their comments about the products they’ve purchased.

Taking the gift registry concept beyond bridal, an online “Wish List” feature enables shoppers to share their preferences with family and friends by emailing it to them.

Rogers expects the site to begin offering sale specials that are exclusive to online shoppers. “We’d like to get more people to use the Internet than are using it now, so we’d like to have specials that drive people to our site,” said Rogers.

Sears Canada’s website debuted online in 1996 and, by late 1998, the site received 500,000 visits. Today, sears.ca receives more than 30 million visits annually. Sears.ca offers more than 100,000 items and ships orders free to over 2,000 Sears outlet locations across Canada.

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Home Depot rejects demands by shareholders

ATLANTA – Home Depot has released the results of votes on proposals that were presented at its latest annual meeting. Some measures, such as the decision that all company directors be elected by a majority vote, were passed; other more contentious proposals were rejected.

For example, two measures voted down would have enabled shareholders to put limits on the amount of compensation awarded to company executives and restrict their retirement benefits. Another one demanded disclosure of employment diversity at its stores.

A bone of contention for many shareholders is the issue of corporate political donations. Home Depot chairman and CEO Bob Nardelli is a big supporter of Republican president George W. Bush, and Home Depot has donated generously to the Republican Party in recent years. Two moves, one opposing partisan political contributions and another regarding political non-partisanship, were both voted down.

Nardelli took a lot of flak last week for his behaviour at the company’s 2005 AGM. It lasted a mere 30 minutes, during which time Nardelli omitted to give a business overview or to accept questions from shareholders. To make matters worse, the board of directors didn’t even bother to show up.v

The company was bombarded by irate calls and emails after that. As a result, the company says it will return to its previous format for its 2007 annual meeting of shareholders. “Consistent with the way we run our company–in which we listen, learn and lead–we will return to our traditional format for next year’s annual shareholders’ meeting, which will include a business overview, the presentation of proposals, an opportunity for shareholder questions,” said Nardelli in a prepared release. And, he added, the board of directors will be there next time. “Home Depot has a long-standing commitment to the highest standards of corporate governance and transparency.”

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Lowe’s reports huge quarterly earnings boost

MOORESVILLE, N.C. – Lowe’s Cos. identified its installation services as one of the driving forces behind its significant gains in sales and profit for the three months ended May 3, 2006.

During that period, the company’s 1,258 stores produced net income of nearly $841 million. That’s an increase of 43.5% above the same period a year ago on sales of nearly $12 billion, which were up 20.3%. And while its stores’ average ticket rose 6.7% in the quarter to a record $70.74 per transaction, the company scaled back its projections for total revenue and same-store sales growth for the year because of rising fuel costs that are cutting into customers’ discretionary spending.

During the quarter, Lowe’s opened 24 stores, on its way to opening a total of 155 this year. And those stores increased their overall share of industry sales in appliances and outdoor power equipment, according to company officials. Bob Niblock, the company’s CEO, also pointed to the growth in installed sales, particularly bathrooms, as a positive factor in the company’s quarterly financial performance.

That performance, though, disappointed some analysts, especially the company’s same-store sales increase, which some company watchers expected to be in the 7% range. The investment community, in fact, has become a lot more vocal about its disgruntlement over the performance of companies in the home improvement sector, as evinced by the drop in Home Depot’s stock price in recent days.

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TSC ousts president, braces for further expansion

LONDON, Ont. – Five years after heading up the takeover of TSC Stores, Roy Carter is no longer its president and CEO. The company, a chain of 27 farm and hardware stores spread throughout Central and Southern Ontario, re-structured last August, when Birch Hill Equity Partners spearheaded an investment in TSC that turned over 75% of the company to outside hands. This financial infusion gave TSC the clout to step up expansion. At the end of last year, revenues had exceeded $100 million.

John Leitch, TSC’s vice-president of finance and CFO, has been asked to step in as interim president until a replacement is found. Carter will continue as a shareholder and sit on the TSC board.

“The board remains committed to the business and its growth prospects,” says Leitch. Already this year, two new stores have been added in Northwest London (Hyde Park) and in Orangeville, while two existing stores have been re-located and expanded. He expects another five stores to be added by year’s end, in Lindsay, Brockville, Smith’s Falls, and Cornwall.

Birch Hill Equity Partners is a private equity investor that focuses on mid-market companies. It manages $1.7 billion in capital.

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Buying groups remain strong vehicles for independents

SPECIAL REPORT – The retail home improvement industry enjoyed strong growth again in 2005, maintaining a hot streak that has typified most of the decade.

Building materials dealers, whose stores range from contractor-oriented lumberyards to building centres and DIY-driven home centres, account for approximately 45% of the industry’s sales overall last year. They were organized, for the most part, within about a dozen groups. However, consolidation has affected the buying groups in the past couple of years. In 2004, Tim-BR-Mart Ontario joined forces with TIM-BR Marts Ltd., its sister group in Western Canada. Then, effective December 2005, AWARD folded its remaining membership into Tim-BR-Marts, as well. In November 2005, Tim-BR-Marts managed to add The Signature Group’s GSD membership to its ranks.

In 2005, estimated total sales at retail by all the buying groups were up a healthy 5% over 2004.

(Our full report on the size and growth of Canada’s buying groups appears in the latest edition of our sister publication, Hardlines Quarterly Report, available now! – Editor)

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Taking back its big boxes not part of RONA’s plans

BOUCHERVILLE, Que. – Is RONA busy buying back ownership of big boxes owned by its members in Quebec?

Nah. At least, not according to Sylvain Morissette, spokesperson for the country’s second-largest home improvement retailer. Rumours began to circulate last month that RONA might have been consolidating its big box holdings in preparation for a possible takeover bid by Lowe’s Cos., which has established offices in Canada. However, says Morissette, that’s simply not the case.

The rumour was sparked when a RONA L’entrepot in the Montreal area was sold back to the parent company. But in that case, the dealer just wanted out. “It’s not rare to see someone who wants to sell all or part of their shares. RONA has the right of first refusal to buy the store,” says Morissette.

And, he adds, RONA will not necessarily hang on to the property. “We may sell it to another dealer.”

Rather than buying back existing member dealers, RONA is staying true to its plan to continue expanding through the expansion of existing dealers and through the acquisition of new dealers, especially pro-oriented yards. “We see the opportunity to buy more chains of 5-15 stores with annual revenues of $50-$150 million.”

The company will continue to build new stores of its own, as well. “We have three or four on the books for opening in the next two months, and 14 stores that are ready to begin construction,” says Morissette.

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Do it Best showcases new store design program at dealer market

FORT WAYNE, Ind. – Do it Best Corp. is re-energizing its store environments with a brand new look. At the dealer-owned co-op’s bi-annual buying market held here last week, the company launched the “Signature” Store Design Program for new construction and retrofits. The new look is aimed at taking the customer experience to a new level while reinforcing the quality-service orientation of Do it Best members.

Do it Best Corp. selected Design Forum, a retail design firm, to work on the project. The new design has an upbeat ambience and contemporary flair, enhanced by updated graphics, maximum-impact displays and an improved layout that provides a more accessible and focused shopping environment. The new look will cater to the changing customer demographic, including the growing numbers of women shoppers.

“The Signature Store Design Program works on a number of different levels to improve store performance,” said Bill Zielke, vice-president of marketing and international development. “It delivers on the consumer’s increased demand for style and convenience and offers members the opportunity to highlight their local brand, product expertise and service reputation.”

The interior of these new-look stores will feature inspirational photos and a neutral-toned color palette, contributing to a warm, contemporary feel. Special “how to” graphics educate shoppers and reinforce the project expertise of the store’s staff. New fixture elements, called “authority towers,” allow dealers to call attention to their most important product categories. Fashioned from corrugated metal, the fixtures are from 9-12 feet high, depending on ceiling height, and are designed to display informational graphics.

To further accommodate the needs of individual dealers, the program incorporates three separate branding strategies: Do it Center (fully-branded stores with a level of consistency across all locations; Do it Best (co-branded, with more flexibility for the member-store); and member-branded stores (trades mainly on the equity of the individual member’s name and offers the maximum flexibility).

“We developed the new store design program as a flexible kit of parts that can be adapted to the specific member needs, accommodating different store layouts and specific marketplaces,” Zielke said. “It is not a cookie-cutter design.”

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Kingfisher profits tumble in first quarter

LONDON – Kingfisher plc, the home improvement retail giant with businesses in Europe and Asia, reported a 45.3% decline in net income, to £68.4 million (US$128.1 million) for the three months ended April 29. The company’s profit was dragged down primarily by its businesses in the United Kingdom, whose income for the quarter plummeted by 70.3% to £21.9 million.

During the quarter, Kingfisher’s sales rose 4.1% to £2.02 billion, propelled in part by strong showings of its stores in Asia (whose quarterly sales were up 90.1% to £84 million) and its European stores outside of France and England (up 32.4% to £206 million). However, its U.K. sales fell 5.5% to £1.03 billion, and profits for stores in France were flat despite enjoying a 7.6% sales increase.

Gerry Murphy, Kingfisher’s CEO, blamed cold weather during the quarter for the poor results in the U.K., where, he said, business “continued to be very tough.” Looking at the bright side, though, he said that Kingfisher’s B&Q home centers (which generate 92% of Kingfisher’s U.K. sales) made “further progress” in their program to improve customer service and product assortment. In a prepared statement, the company said that “Service Squads” – teams of customer service employees – are now in 200 of B&Q’s 322 stores.

Kingfisher continues to lose money in Asia, where it reported a quarterly loss of £7.7 million. But the company still looks at the China market in particular – where it ended the quarter with 49 stores there, of the 71 it operates throughout Asia – as still being in the developmental stage.

Kingfisher ended the quarter with 663 stores in 11 countries. It also owns a 21% stake in Germany-based Hornbach, with 120 warehouse home centers. Hornbach recently reported that its sales for the fiscal year ended February 28, 2006, increased 6.7% to 2.23 billion euros (US$2.83 billion), but its profits plunged 42.4% to 24.9 million euros (US$31.65 million).

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SPECIAL REPORT: inside Home Depot’s new convenience-store format

NASHVILLE – Four Home Depot locations surrounding Nashville now have “convenience” stores in their parking lots. Part of CEO Bob Nardelli’s latest diversification effort, the new retail concept is selling gasoline and a limited selection of packaged and ready-to-eat food items, including hot dogs, sausages, and sandwiches.

Convenience stores in the United States represent a substantial business on their own, racking up gasoline sales, plus selling a thousand or more other items ranging from newspapers and magazines to hot coffee, cold soft drinks, health and beauty aid sundries, candy, miscellaneous sundries, and more.

By contrast, Home Depot’s test stores are much more limited in their merchandise offering, relying on snacks, candy, some food items and hot and cold drinks for the retailer’s regular DIY and trade customers to consume immediately back on the job site.

The stores are handsomely designed inside and out, with bright, dramatic graphics, wide, angled aisles and an uncluttered appearance. Those angled aisles lead to a back-of-the-store checkout, encouraging full exposure to its impulse inventory of candy, snacks, etc. The angled aisles and low fixtures also discourage shoplifting because store personnel can keep the entire small sales floor under surveillance.

Inside, the stores feature the very latest in coffee, cappuccino and cold drink dispensing machines, which give the impression that refreshments here will be closer in quality to Starbucks than simply “coffee”.

Gas prices shave a penny off prices charged by nearby stations, but holders of Home Depot credit cards could save an extra three cents a gallon by using that card, a technique also used by other parking lot stations.

These convenience stores are just one more example of the diversification efforts Nardelli is introducing into Home Depot. When he took over five years ago, he quickly realized the company was nearing saturation of its conventional store format. Opening more stores in existing markets will only cannibalize sales in existing stores, and there are few, if any, major markets untouched by Agent Orange. The c-store concept provides a low-cost way of leveraging more sales from existing locations. The biggest expense is likely the building itself and the dispensing equipment. Staffing costs are minimal, as only one or two people are needed to handle the sales flow. Occupancy costs would be non-existent, since the stations occupy unused space in the existing parking lots.

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Lowe’s, Home Depot join roster of Hardlines Conference

WORLD HEADQUARTERS, TORONTO – A new date and new location will provide the backdrop for the country’s major gathering for retail home improvement leaders this year. The HARDLINES Conference will feature representatives from two of the sector’s top retailers–along with one of the country’s leading distributors.

The Conference, being held Oct. 16-17, 2006, will feature Doug Robinson, president of the newly formed Lowe’s Cos. Canada, and Home Depot’s number-two person in this country, Roger Plamondon, vice-president of Canada East. Also on the roster: Tom Donaldson, president and CEO of CanWel Distribution, and brand guru Ted Matthews of Instinct Brand Equity Coaches.

One of the most popular features of the Conference each year–and a lively counterpoint to the trends and analysis that will be presented–is a presentation by a successful independent. This year, Christine Hand, of Handyman Home Hardware in Conception Bay, Nfld., will appear. Additional speakers will be announced in the coming weeks.

This year’s Conference, our 11th, is moving to the Toronto Congress Centre, Oct. 16-17. It’s expected to attract more than 250 retail and vendor executives from Canada and the U.S. for a lively program of education, information, and networking. The Conference will be co-located with the new National Hardware Show Canada, which runs Oct. 17-18. It will also be home for the Annual Industry Awards Gala, featuring Hardware Merchandising’s Outstanding Retailer Awards and our very own Newsmaker of the Year Awards.

For more information about the HARDLINES Conference, click here. For more info about the National Hardware Show Canada, click here.

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Home Depot reports 22% quarterly sales gain

ATLANTA – Home Depot generated US$21.5 billion in revenue during the three months ended May 1, a 13.1% increase over the same period a year ago. The company’s net income for the quarter rose 19% to $US1.48 billion.

“This acquisition gives us the opportunity to offer our services to The Home Depot’s large contractor customer base,” said Louise Kelly, CEO of EnerBank, which is chartered in Utah and had loan assets of $76 million at the end of 2005. The company employs 37 people and its management will stay on to run the business for Home Depot.

The company’s financial performance incorporated Hughes Supply, the huge distribution company Home Depot acquired in the first quarter of 2006. Hughes Supply has been folded into the retailer’s Home Depot Supply division, which reported a 224.5% increase in sales, to US$2.1 billion, and a 432% rise in earnings, to US$149 million. Home Depot projects that its Home Depot Supply division will generate $12 billion in revenue this fiscal year.

During the quarter, the company increased its average customer transaction by 4.3% to $60.75. (The company has stopped disclosing quarterly same-store sales, a new policy that has both analysts and ink-stained wretches fairly flummoxed–Editor.) The company’s market share in the hotly contested retail appliance arena rose to 9.9%. And its stores’ “retail services” business, which is essentially its installed sales program, grew by 8.5% to US$844 million.

The company added 23 new stores in the quarter (including four in Canada), raising its total to 2,051 units. After the quarter ended, the retailer continued its recent acquisition spree by purchasing Home Decorators Collection, an online and catalog retailer of home d´cor products; and Cox Lumber, a Florida-based pro dealer with 28 locations and nearly $400 million in annual revenue. Depot is merging Cox’s operations with those of Williams Brothers, the Georgia-based pro dealer it acquired last year.

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Las Vegas show highlights product trends

LAS VEGAS – Hot weather and innovative products were all found at the 61st annual National Hardware Show, held May 9-11 at the Las Vegas Convention Center. This was the show’s third appearance in this city, following its departure from Chicago (and an acrimonious split with its partner there, the American Hardware Manufacturers Association).

In Las Vegas, however, the show’s fortunes have improved each year, and this year was no exception, with 3,280 manufacturers–including international companies–showcasing their new products for the lawn and garden, hardware and tools, paint and home d´cor, housewares, and plumbing and electrical sectors. The show filled more than 767,000 square feet of exhibit space. Final attendance figures were not yet available as of press time.

This year also marked the show’s second co-location with both the Las Vegas Gourmet Housewares Show and Paint and Decorative Retailers show and conference. The combined event showcased a number of new-product trends:

Lawn & Garden: Gardens, terraces, patios, and other outdoor areas continue to be hot as consumers look for ways to extend their living spaces. Shoppers are looking for top-of-the-line grills, outdoor furniture with weather-resistant fabrics, fireplaces, decorative pillows and rugs, and accessories such as artwork and statuary–once considered more suited to the great indoors.

High-End Products: According to the International Housewares Association, total U.S. consumer expenditures on housewares in 2004 reached $65.2 billion. There is a continued push toward smarter and more versatile products in core appliance and housewares categories, a trend driven by the continuing demand for convenience and functionality.

Women: Women are buying more homes and are more responsible for basic repairs. According to the HARDLINES Women in Home Improvement Study, women are involved, either individually or with a partner, in more than 80% of the decision making for home improvement product purchases. In 2005, single women snapped up one of every five homes sold, according to the National Association of Realtors. Women also account for about one-quarter of power tool and accessory purchases in the United States.

Smart Home Technology: Today, high-tech “smart” products have led to increased consumer interest in technologies that not only enable more efficient home improvements, but also add new conveniences to the home. Many homebuilders have been incorporating “smart home” technology into their homes in recent years.

Energy Efficiency: The typical U.S. household was expected to pay $892 to heat the house last winter, up $107 from 2005, according to the U.S. Department of Energy. Energy costs send consumers scrambling for building products that will improve personal comfort and lower utility bills. Consumer demand for products that lower utility bills is increasing the popularity of green building.

Second Homes: Vacation and investment-home sales both set records in 2005, with the combined total of second home sales accounting for four out of 10 residential transactions, according to the National Association of Realtors.

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Castle’s Wylie: independents will survive a downturn that threatens majors

MISSISSAUGA, Ont. – Today’s independent has to deal with a broad range of customers, and specializing in one type can be a strategy for success. Or not. The contractor customer remains the mainstay of many of the building centre dealers within the Castle Building Centres Group. And according to Pro Wylie, president of Castle, that’s a strategy that works well–and keeps the big boxes at bay.

Many dealers, including Home Hardware Stores Ltd. and TIM-BR MARTS Ltd., are adopting more retail friendly formats to expand their sales to pros while adding a more DIY-friendly mix, but Wylie is not convinced it’s the best strategy for many of his members. He warns about becoming too “front-end oriented”, which can send a mixed message to one’s existing pro customers. Taking a page from the book of a very successful U.S. pro dealer, 84 Lumber, he calls their stores “down and dirty”, yet the chain of 500-plus stores continues to flourish.

Castle itself has introduced a store enhancement program for its members, developed by Burlington Merchandising Group. Several dealers have so far have adopted the program, which features new layouts and a full branding program that includes signage, colours, and even uniforms for staff.

Meanwhile, says Wylie, the attempts of the big retailers, namely Home Depot and RONA, to cultivate the pro business makes sense, “because that’s where all the money is.” But, he adds, the cost for a company like RONA will come too high. Besides spending money on new companies, it must fend off new competition in the Canadian market. “It’s not going to be strong enough to take on Home Depot and Lowe’s both,” he says. “A downturn in the economy will result in a collapse of RONA.” He expects RONA to eventually retreat back into its home province of Quebec.

Wylie remains confident about the fate of his own members, however. “But the independents are going to be there. They’re stronger and more alive than ever.”

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Investor challenges Home Depot’s compensation policies

ATLANTA – Home Depot’s board of directors authorized the company to repurchase another $2 billion worth of its outstanding common stock last week. That authorization came only days after Depot’s stock price dipped by more than 7% following the release of the retailer’s quarterly financial performance. Those results showed strong sales and earnings gains, but also weakness in certain categories’Äîespecially flooring’Äîthat some investors apparently interpreted as Home Depot’s vulnerability to a housing market where new-home construction activity has been slowing in recent months.

With this authorization, Home Depot is cleared to repurchase up to $14 billion worth of its shares. Since 2002 and through April 30, 2006, the company repurchased nearly 291 million shares and has returned more than $10.3 billion of cash to shareholders.

But that hasn’t mollified some institutional investors. Calpers, the giant pension fund that owns 10 million Home Depot shares, has contacted other investors by letter, urging them to approve a measure that would require Home Depot to get investor approval of its executive pay plan. “We have lost money on the inability of the company to align its interests with share owners,” said Charles Valdes, chairman of Calpers’ investment committee. Home Depot has stated that investor approval of this proposal would hamper the company’s ability to recruit and hire executive talent.

Last year, Home Depot’s top five executives received salaries, stock and other compensatory payouts totaling more than $51 million. Bob Nardelli, its chairman and CEO, alone received $2.2 million in salary, a $7 million bonus and $14.7 million worth of restricted stock.

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RONA reports strong 1st quarter, continues to look to acquisition for growth

MONTREAL – RONA reported a 1Q profit increase of 15% at the company’s annual general meeting last week, with sales of $16.4-million, compared with $14.2-million a year ago. Sales revenue jumped about 13% to $798.8-million. CEO Robert Dutton said that the results are a good for 2006, adding that the firm is ahead of schedule on plans to meet annual retail sales of $7-billion by 2007.

Increases were fuelled in part by RONA’s recent spate of acquisitions, including Chester Dawe Ltd. in Newfoundland, the Quebec-based Materiaux Coupal Inc., Curtis Lumber Co. in British Columbia, and the Alberta-based Totem Building Supplies.

The company may continue to expand into Western Canada, where a surging gas and oil industry is fuelling record construction sales, according to Dutton. But RONA may also consider expansion into the United States when it can claim 20% of the Canadian market (currently, it holds 15% of the market in Canada.)

During the quarter, RONA brought 17 new affiliates into its store networks, with almost $100-million in annual retail sales. RONA has put aside $200-million to build 20 new stores this year and has plans to build another 20 in 2007. About half of those 40 stores will be big-box format.

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Home Depot purchases home-improvement lender

ATLANTA – Home Depot has given contractors and remodelers one more reason to shop its stores. The retail giant has agreed to acquire the EnerBank USA subsidiary of CMS Energy, which provides loans for a wide variety of home improvement projects. In discussing the acquisition, Frank Blake, Home Depot’s executive vp-business, development and corporate operations, said that because EnerBank specializes in offering loans through contractor referrals, it could provide an important service to smaller contractors that shop Depot’s stores.

“This acquisition gives us the opportunity to offer our services to The Home Depot’s large contractor customer base,” said Louise Kelly, CEO of EnerBank, which is chartered in Utah and had loan assets of $76 million at the end of 2005. The company employs 37 people and its management will stay on to run the business for Home Depot.

The acquisition is subject to regulatory approval.

This deal represents the second move into financing that Home Depot has made this year. In January, the retailer partnered with IndyMac Bank to launch a nationwide program that offers contractors up to $2 million in bridge loans, with terms for up to 18 months, and the option to earn a 5% discount on building materials purchased from Home Depot for the project contractors took the loan for.

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National Hardware Show attracts quality numbers

LAS VEGAS-This year’s National Hardware Show proved once again that the industry is willing to come to this burgeoning desert city to check out the latest products in retail home improvement. Buyers came from all over the world and badges included company names from countries as diverse as Mexico and Argentina to Australia and Poland.

The show, which began on Tuesday, May 9, was widely considered busy the first day, with steady traffic during the late morning of the second day. Typically of most trade shows, the final day was considerably slower. While final attendance numbers weren’t available as of press time, both quantity and buying clout of attendees were higher, says Robert Cappiello, president of the National Hardware Show for Reed Exhibitions, the company that owns the show.

“We’re getting higher steady traffic’Äì-and higher quality,” he said. He pointed out the attendance of buyers from many majors: “Ace had eight last year, they had close to 30 this year. Do it Best sent two or three people last year [the show conflicted with Do it Best’s own show]. This year the entire team came, including Bob Taylor, CEO of Do it Best. Wal-Mart pre-registered at least 30 buyers. A lot of high-level people are coming from the top retailers,” he added.

Canadian buyers were there in force, as well. Senior merchants from CanWel, Hardware Division, TruServ Canada, BMR The Group, Home Depot Canada, and many more were represented.

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New look, new programs for PRO Hardware

Montreal – About 200 PRO dealers across Canada have approved a new banner initiative designed with TruServ Canada that includes a revamped flyer program, renovation and re-merchandising programs; and dealer incentive special events.

“We are very excited about the response and passion from the PRO dealer-owners,” says Lionel Gagnon, national growth manager for Truserv Canada, who attended meetings in eastern Canada. “In Quebec alone, there are 29 stores signed up to enhance their PRO store by renovating and implementing many of the best practices we introduced. We have another 27 on our list to visit and plan for the fourth quarter. We also are prepared to announce another two new PRO stores for this market one which is in Ste-Anne-de-Beaupré and the other store is in Carleton in the next few months.”

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Furniture, live goods help Home Hardware regain share

ST. JACOBS, Ont. – Providing dealers with products and programs to create furniture and décor destination stores is a major platform in Home Hardware’s plans to build sales and expand its network. The growth of the Home Furniture format indicates that the strategy is working.

Throughout the Home Hardware network, lumber dealers are warming to the idea of building sales through an expanded furniture offering, according to Patty Uhrig, dealer development facilitator for Home Hardware. “Sales of furniture and appliances are running 35% higher this year than last,” she says. The company has also added four more furniture stores already this year and expects to add a total of at least 12 by the end of 2006.

Enjoying particular success is the emerging “combo store” format, which includes a mix of home décor and interior design hardware and home goods, including appliances, mattresses and home décor accessories including lamps, throws, pillows and area rugs with traditional lumber and building materials.

The new format, examples of which can be found in Moncton in eastern Canada and in St. Thomas in central Canada , are becoming increasing popular with consumers, says Bruce Hammer, operations manager for the Home Furniture division. “They offer a total home solution,” explains Hammer, “because they are places where homeowners can get what they need to build, supply and furnish their homes.”

Home Hardware also continues to carve out space in the garden category, with an expanding line by celebrity gardener Mark Cullen. Introduced last year, Mark’s Choice consists of higher-end garden tools with an emphasis on ecologically sound products.

Increased focus on home and garden categories will enable Home Hardware to stand up to growing encroachment by other retail channels, according to Bill Ferguson, director of dealer support for Home Hardware. “We’re beginning to steal back the business that went to the grocery stores,” he says.

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Kingfisher shares brand strategy at NHS

LAS VEGAS РKingfisher, the largest home improvement retailer in Europe, has developed its own range of private label products. Details of the line were explained at a Hardlines seminar held last week at the National Hardware Show. Kingfisher, which has 650 stores worldwide, generated £8.0 billion (US$13.8 billion) in sales in fiscal 2005. Its store banners include B&Q, Castorama, Screwfix and Casto Depot.

According to Ted Leavitt, national brand director for Kingfisher, 22% of the company’s sales come from what he calls “own brand” products. Although that number falls far short of other industries, namely grocery, which typically sells more than half its products under private label, it far exceeds the level of private label generated by Home Depot (around 15%) or RONA (about 12%).

It’s important, said Leavitt, to distinguish between a label and a brand. While a label is a name on a package, a brand, he said, carries with it a set of values and a promise of performance for consumers. That promise must be maintained across all the products carrying the brand.

For example, one of Kingfisher’s tried and true brands is “Colours”, a range of décor items and accessories. “Colours is about accessible, achievable style transformation,” said Leavitt. Another is “MacAllister,” a mid-price range of power tools, which gives Kingfisher the key private-label advantage and Leavitt described as “a margin performer.”

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New study tracks home buyer and renovation patterns

LAS VEGAS – The Home Improvement Research Institute (HIRI), has announced findings from a study of America’s housing industry. Conducted in March of this year, the study examined the home improvement planning and purchasing project behaviour of approximately 600 recent purchasers of new homes and 600 purchasers of existing homes.

The findings suggest that buyers of new and existing homes have a disproportionately large impact on the home improvement market. “Clearly, those that do the best job of serving this market will be very successful,’ said Fred Miller, managing director of HIRI.

Motivation for recent homebuyers includes the desire to move from rental to ownership, or to upgrade, but the number of families downsizing is also growing. In 2006, 22% of respondents said they purchased homes because they wanted to own and live in their own house (down from 27% in 2004), while 16% felt their current home was too small (down from 19% in 2004).

The recently moved are big spenders; homeowners that have lived in their home for less than two years spend an average of US$2,300 yearly on their home, while those there for between three and five years spend an average of US$2,000 annually. Those who have lived in their homes more than ten years spend an average of US$1,700 each year.

The average cost for home projects is US$2,576, with “house appeal” being sited as the primary motivation. Sixty-six percent of new homeowners do at least one project right away, while 57% plan to do at least one project in the next two years. Landscaping is top with buyers of new homes followed by deck/patio work, while kitchen, bath and landscaping are key areas for improvement by buyers of existing homes.

DIY is the most common way projects are done. But there are some key behavioural shifts there, with an overall growth in the use of pros to ensure a good project outcome.

Men lead in initiating projects for a home being sold, while women dropped to second place in this scenario. Women still lead in initiating projects for the current home, but have shifted more to joint initiation. Women also lead in initiating planning for future projects (now, there’s a surprise!’ÄîEd).

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Lowe’s Canadian operations are up and running

TORONTO – The new team that represents the first international expansion effort by Lowe’s Cos. has set up offices in the north end of Toronto. Move-in date was May 1, but the division went operational three days later with headquarters at 5160 Yonge St., just north of Sheppard Ave.

The president of Lowe’s Cos. Canada is Doug Robinson, and vice-president of merchandising is Ben Mauceri.

The world’s second-largest home improvement retailer will enter Canada with up to 10 stores in 2007, beginning in the Greater Toronto Area. The new merchandising team, built up over recent months, comprises a who’s who of top Canadian buyers. They have been drawn from the ranks of companies such as Wal-Mart and Canadian Tire, while some have worked in the past for Home Depot Canada. (For a more complete list of Lowe’s merchants, see our April 3, 2006 edition’ÄìEditor).

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RONA targets pros with new-concept Réno-Dépôt

BOUCHERVILLE, Que. – RONA has developed a new way to beef up its retail appeal to contractors and pros. Lately it has been aggressively buying up existing retailers that cater to contractors (most recently Matériaux Coupal in the Montreal area and Curtis Lumber in Burnaby, B.C.). But one such chain is already in the RONA fold. Réno-Dépôt, acquired by RONA in April 2003, has 14 big boxes in the Montreal and Quebec City areas that cater better to pros than probably any big boxes in the world.

Now RONA has turned its sights on Réno-Dépôt – a banner that is so profitable and well respected that it became the first RONA acquisition to keep its own name–to create a smaller-format big box that is aimed at heavy DIYers and contractors. The first of these 78,000-square-foot stores broke ground in Rimouski, east of Montreal, last week. Because of their smaller size, RONA expects to increase the Réno-Dépôt franchise in medium-sized markets throughout the province, with up to six of them in total over the next three to five years.

“We’re delighted to re-energize the Réno-Dépôt banner by launching a new phase in its development,” said Robert Dutton, president and CEO of RONA. “Réno-Dépôt is a very high-value brand in Quebec, particularly among construction and home renovation professionals and do-it-yourselfers.”

Besides shrinking the retail footprint, RONA will make the new Réno-Dépôts faster and more practical to shop, thanks to a larger number of open areas, more user-friendly placement of products, a re-engineered lighting design, and a new signage system that incorporates pictograms to enhance readability. In addition, a number of displays will be overhauled, particularly in the kitchen, paint, flooring, and lighting departments, all of which will be grouped together in a new area of the store.

The investment in new stores will not be at the expense of the existing Réno-Dépôt outlets. These will benefit from another $10 million investment over the next five years to refurbish them with the features of the new Réno-Dépôt store concept.

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Why Lowe’s Canada doesn’t have any Home Depot buyers

TORONTO – The arrival of Lowe’s Cos. to Canada involved creating an entirely new management and merchandising team here. That team represents some of the most seasoned buyers in the country, including people that were lured away from Wal-Mart and Canadian Tire Corp. However, no buyers or executives from Home Depot Canada found their way to the new Lowe’s offices.

According to Gino Digioacchino, newly appointed vice-president, merchandising for Home Depot Canada, the answer for that is easy: the two companies represent “two different cultures.” Home Depot, he says, is more entrepreneurial, while “Lowe’s is more process oriented.”

The entrepreneurial bent reflects a move by Home Depot to get its stores more locally focused, both in terms of services and the products on the shelves. “Each merchant runs their business,” says Digioacchino.

However, he says, the Lowe’s way, although more “top-down” in his eyes, has to be admired. He should know; he studied Lowe’s carefully during a two-year stint as director of strategic implementation for stores, before coming back here to run Home Depot’s Canadian merchandising team.

Lowe’s researches its markets carefully, and can deliver “lightning speed execution–they’re the best,” says Digioacchino.

However, besides different cultures, it is safe to say that Home Depot spent months preparing for Lowe’s arrival in Canada, including making sure their people were well taken care of and insulated against the attractions of working for a newcomer.

(For more on the latest direction of Home Depot Canada’s merchandising team, check out our exclusive interview with Gino Digioacchino in the next issue of our sister publication, Hardlines Quarterly Report, due out in a matter of weeks. – Michael)

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Home Hardware starts tracking direct purchases

ST. JACOBS, Ont. – After more than two years of development, Home Hardware Stores Ltd. has implemented a process that enables it to track purchases by its members that don’t go through the Home Hardware warehouse. The program, called HomeBase, lets Home Hardware track item unit sales. Before this, the only record head office would receive of a direct purchase by one of its building supply dealers was in the form of the total value of the purchase.

“Now we have the ability to track all our vendors’ direct programs at the unit level,” says Terry Davis, Home Hardware’s vice-president information technology and strategic planning. It’s part, he says, of a “master plan for category management. Whether product is sourced directly or through our distribution centre, it’s all the same to us now.”

The new program gives every product that arrives on a direct ship basis into its member dealers’ stores a SKU number of its own, which will allow the company to begin tracking sales history for those products in a more exacting manner. “It lets us begin category management in earnest,” says Davis.

For the dealers, implementation is rather simple. A store version of the HomeBase software has been developed, which must be added as an upgrade to dealers’ existing POS systems. Home has created versions that are compatible with its own Prism system, and with its two leading retail systems suppliers, Silk Dimensions and Profitmaster. “The stores just have to take their own product numbers and match them to the new Home Hardware number,” Davis says.

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Home Depot buys another pro dealer

TAMPA BAY, Fla. – In its efforts to increase its pro contractor business, Home Depot has purchased yet another independent home improvement company. Cox Lumber Co. is a chain of 28 stores throughout Florida with sales of $396 million last year. Under the new deal, it will become a wholly owned subsidiary of Suwanee, Ga.,-based Williams Brothers Lumber, which Home Depot bought earlier this year.

These acquisitions are part of Home Depot’s effort to increase its sales–and credibility–among the pro and contractor market. The company has historically built its store network on a “greenfields” basis, building its big box stores from the ground up. It’s growth by acquisition has been, until recently, confined to its wholesale business, such as the purchase of Hughes Supply last month. And only a two weeks ago, it announced the purchase of a major online and catalogue company, Home Collections.

But North America’s pro market is highly fragmented, with a large number of medium-sized companies open to consolidation–a fact that has not gone unnoticed by larger companies on both sides of the border. In the U.S., Stock and Strober/Lanoga have been aggressively buying up companies, while RONA inc. in Canada has already added CD$100 million in retail sales this year through acquisitions alone–most of them contractor-oriented yards.

Cox Lumber has, in addition to its 28 stores, 11 truss plants and 15 door plants in Florida. Like Williams Brothers Lumber, Cox will become part of the Home Depot Supply business, and retain its own name to better identify with the local markets the stores serve..

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Supply chain woes dog Loblaw in 1Q

TORONTO – While its sales were up slightly, profits for Loblaw Cos. dipped in its first quarter by 1.9%. However, after adjustments, that profit actually declined by 19.4%.

The company is still recovering from challenges that began in 2005 as it attempted to revamp its systems, supply chain and general merchandise and drugstore areas. Loblaw is focusing on improving the in-stock position of general merchandise at the store level.

Sales for the first quarter of 2006 increased by 1.4%, or $87 million, to $6.1 billion. Same-store sales during the quarter declined by 2.5%, adversely affected by the timing of Easter, which occurred three weeks later in 2006, resulting in a shift in holiday sales into the second quarter.

The giant supermarket retailer’s energies and resources were so consumed last year with the challenges of relocating buying offices and consolidating its distribution channels that service to the food business was adversely affected. But, says the company, service levels have returned to normal as improvements continue to be made in the performance of the general merchandise supply chain.

Loblaw has made some important hires to manage the general merchandise division, most notably Mark Foote, who was lured away from Canadian Tire Corp. to become evp of merchandising for the general merchandise division. Working with people like Louise Drouin, vice-president of hardlines and softlines, he has inherited a distribution system that was moving to a national platform, even as a new third-party owned and operated warehouse and distribution centre was created for Eastern Canada. That DC handles general merchandise and certain drugstore products.

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True Value announces 1Q earnings growth as revenue dips

CHICAGO – True Value Company had a profitable first quarter, reporting net margin for the period of $12.8 million, an increase of $10.2 million over $2.6 million a year earlier. (Net margin included $5.6 million left over from a reserve previously established for an arbitration award that was settled with its former accountants last year.) Excluding the gain, True Value’s profit was still a healthy $7.2 million.

However, the dealer-owned co-op hardware wholesaler posted revenue of $496.6 million for the quarter, a decrease of 1.4% or $7.0 million from $503.6 million for the same period a year ago.

True Value dealers felt the impact of the unseasonably warm winter, especially in the Northern parts of the U.S., on their seasonal sales. “Mild weather in January was the primary driver of the revenue decline in the quarter,” said Lyle Heidemann, president and CEO of True Value Company. The impact included a decline in same-store sales of 2.8%.

The member-owned wholesale hardware co-operative, with approximately 5,800 independent retailer locations worldwide, posted sales of $2.0 billion in 2005.

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Canadian Tire CEO announces his departure

TORONTO – Wayne Sales has stepped down as President and CEO of Canadian Tire Corp., more than a year before his contract expires in June, 2007. Canada’s largest hardlines retailer has installed Tom Gauld, past president of Canadian Tire Financial Services, to replace him.

Sales will remain with Canadian Tire for the term of his contract to help with the transition. The departure comes only weeks after Sales’s right hand man, Mark Foote, left his role as president of Canadian Tire Retail to join Loblaw Cos.

The board of directors put in place a process for CEO succession in 2005 prompted by the June, 2007 expiry date of Sales’s contract. During the process, Sales confirmed that he was highly unlikely to consider an extension to his current contract. The board had to accelerate the succession process, resulting in the appointment of Gauld. However, he had to be lured out of retirement to do it.

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Home Hardware’s new store design catches on with dealers

ST. JACOBS, Ont. – The latest dealer market for Home Hardware dealers was as much a showcase for the dealer-owned wholesaler’s latest store program as it was for the latest products to put on the shelves of those stores.

The concept, unveiled at the same show last year (and first reviewed in vol. xi, #17, April 25, 2005–Editor), is gaining momentum among Home’s hardware and building materials dealers alike. A promotional slogan, “Ride the Home Wave,” is being used to brand the new program and create excitement around it to attract more dealers to sign on. “It’s a recruitment tool, but it’s also a message to dealers to get onside with this new store program,” said Bill Ferguson, director, dealer support for Home Hardware Stores Ltd.

“Dealers understand that customers today have raised their expectations to another notch.” Ferguson adds that retail–along with other sectors, such as travel and leisure–is getting more sophisticated in every sector, “and we’re competing with all those expectations. But it’s not just about creating a warmer experience, but backing it up with service and knowledge. We’ve got so many great tools to compete effectively.”

Among the new wrinkles being previewed at the latest show is an in-store digital POP network. A giant flat-screen TV hangs above short-term displays, such as seasonal, and broadcasts product information messages. “As people enter our stores, we try to create an impact through value, unique and topical products. This digital POP helps define that message in-store,” said Ferguson.

Last year, 84 dealers took on the new concept store program. “We had expected only 50,” Ferguson noted. So far this year, more than 83 have signed on to upgrade their stores, with additional dealers expressing interest following the latest market.

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Canada and U.S. resolve long-standing softwood dispute

WASHINGTON & OTTAWA – The U.S. and Canadian governments have hammered out a tentative agreement to end the longstanding softwood lumber dispute between the two countries. Under the agreement, the U.S. will stop charging duties of about 10% on Canadian softwood that enters the country. (Countervailing duties were lifted earlier in the year.) Over the past several years, the U.S. government has collected about $5 billion from Canadian suppliers, of which $4 billion will be returned.

The failure to return the full amount, despite Canada winning repeated NAFTA rulings handed down by the World Trade Organization, has been a sore point for many on the Canadian side, but the seven-year deal is seen as a positive step that will save thousands of jobs for Canadian mill workers after more than three decades of dispute.

Under the new deal, there will be quotas on Canadian imports, but if the price per thousand board feet falls below $355, the various producing regions in Canada must either pay a sliding export tax to the Canadian government or face a regional quota.

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Home Depot expands direct marketing with online acquisition

ATLANTA – Home Depot continues to add businesses that leverage its non-traditional channels. The home improvement retailer has signed a definitive agreement to acquire Home Decorators Collection, which sells home décor products through catalogues and online.

Home Decorators Collection’s product categories range from bath, window treatments and furniture to home décor, lighting, floorcovering and outdoor living. Its catalogues reach 3.3 million customers, representing the industry’s third-largest in-house buyer file.

The terms of this acquisition were not disclosed.

The company, founded in 1991, also has seven retail outlets in Missouri, Kansas, Oklahoma and Illinois; and a large distribution center in St. Louis, according to its web site.

Home Depot estimates that the direct home décor market in the U.S. is an $18 billion business that’s growing at a 20% annual clip. Under its Home Depot Direct division, the retail giant already taps into that market through various specialty catalogues such as 10 Crescent Lane and Pace Trading Company. It intends to fold Home Decorators Collection into that same division, a move that will nearly double the size of Home Depot Direct and add 65,000 items from 185 global sources. According to Paula Smith, a Home Depot spokesperson, with the addition of Home Decorators Collection, Home Depot Direct will be able to draw from a total of 1,000 global sources to offer more than 100,000 SKUs through its online and catalogue channels. However, the company has no immediate plans to makes changes in either Home Decorators Collections’ stores or its distribution center.

Home Decorators Collection’s president and founder, Gil Kemp, is staying on to run the business. (He will report to Harvey Seegers, president of Home Depot Direct.) Grant Williams, chairman of Knight’s Direct, a private holding company with which Kemp joined forces in 1991 to form Home Decorators Collection, will also stay on in an advisory capacity through the remainder of this year.

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RONA buys major B.C. independent

BURNABY, B.C. – RONA inc. continues its efforts to consolidate the Canuck home improvement market with the purchase of Curtis Lumber, a major independent in British Columbia’s Lower Mainland. This will add to RONA’s ever-growing pro dealer portfolio and add almost $80 million in retail sales to its retail network.

Founded in the late 1940s, Curtis Lumber has been controlled by Brian Kask Sr. since 1963. It now comprises six retail outlets in British Columbia: four in Burnaby, one in Langley, and one in Pender Harbour (Sunshine Coast). It also has its own truss plant. The store network comprises more than 150 staff working in approximately 50,000 square feet of combined retail and warehouse space plus 12 acres of outdoor storage.

RONA is counting on this latest acquisition to bolster its reach to the contractor and pro market in British Columbia’s prosperous and densely populated Lower Mainland. While RONA remains strong in the traditional DIY markets, Curtis’s heavy contractor and commercial business will increase RONA’s reach in these markets and add needed expertise in the form of Curtis’s existing sales and management teams. Kask’s son, Brian Jr., will stay on as senior director of sales and purchasing, while his daughter Debbie will continue on as office manager.

The transaction, financed by RONA’s existing credit facilities and subject to the usual conditions and approvals, is expected to close by the end of June 2006.

Rona currently has 39 stores in British Columbia–four big boxes and 35 building centres under the RONA Building Centre and RONA Home Centre banners. RONA estimates it now controls between 10% and 11% of the province’s market.

According to RONA president and CEO Robert Dutton, the Curtis deal is just the latest in a string of acquisitions that are intended to increase the company’s sales by $2 billion by the end of 2007 through the construction of new stores, the recruitment of affiliate dealer-owners, the acquisition of new points of sale, and the overall improvement of company’s operations.

RONA’s acquisition of Curtis Lumber follows two other acquisitions since the beginning of the year. RONA recently acquired Matériaux Coupal, a nine-store chain in the Greater Montreal Area. The company also acquired a chain of eight Chester Dawe stores in Newfoundland and Labrador. These three transactions have allowed RONA to add more than $285 million in retail sales.

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Home Hardware signs multi-year partnership with Blue Jays

ST. JACOBS, Ont. – Home Hardware Stores Ltd. Toronto Blue Jays have forged a three-year deal giving Home Hardware the role of the team’s official home improvement retailer.

The two organizations, which have worked together for more than a decade, signed a one-year deal in 2005 to make Home Hardware the team’s exclusive home improvement retail partner. The new agreement extends that relationship for three years. It also makes Home’s own brand of Beauti-Tone paint the Blue Jays’ official paint brand.

Home Hardware and the Blue Jays will continue to leverage the partnership through in-stadium, media, television and radio, and retail promotional opportunities. Home Hardware and Beauti-Tone logos are featured throughout the Rogers Centre, where the Blue Jays games are played, and Home Hardware owns title sponsorship of the “World’s Fastest Grounds Crew”.

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U.S. homebuilders report downturn in orders

DALLAS – The air seems to be finally leaking out of the U.S. housing market’s remarkable growth, as two of the industry’s biggest builders reported declines in their orders during the most recent quarter.

Centex, the industry’s fourth-largest builder, reported that new orders were off by 11% during the three months ended March 31, compared to the same period a year ago. More noteworthy, however, was the $28 million charge against earnings that Centex took to cover the forfeiture of deposits it had made to option property and other pre-acquisition costs. The builder said that it took the land write-down to “align [its] land position to current market conditions” in markets such as Washington D.C. and Sacramento, Calif.

Centex’s homebuilding operations saw its sales increase 29% to $3.98 billion, and that business unit’s operating income rose 15% to $601 million.

Pulte Homes, the industry’s 2nd-largest builder, saw its profit rise 20% in the quarter, to $262.6 million, on sales of $2.96 billion, which were up 18%. Its closings increased 7% to 8,602 homes. However, new orders were off 4% to 10,725 homes.

Other large production builders that reported declines in new orders for the quarter, including Beazer Homes USA, down 17% in dollars; Standard Pacific Homes, whose orders in the first quarter were off 1% in dollars and 8% in units; and Meritage Homes, which was down 6% in dollars and 2% in units.

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Home Depot Canada launches annual eco promotion

TORONTO–Home Depot Canada has launched its sixth annual eco-focused recycling rebate program, in conjunction with the Clean Air Foundation. Called “Mow Down Pollution”, the program invites homeowners to bring in older, high-polluting mowers and trimmers and buy more energy efficient, lower-emission models.

Canadians who bring in their old lawn mowers to any The Home Depot store across the country between April 20 and April 30 will receive an instant rebate of $10-$100 toward the purchase of a cleaner alternative. In addition, they can be assured the old product will be recycled safely by the Clean Air Foundation. Vendors participating in the promotion include Black & Decker, Gardena, Murray, and Great States.

“Using a typical gas-powered mower in one season produces as much air pollution as a car driven 550 kilometres,” said Ersilia Serafini, executive director of the Clean Air Foundation. “Canadians can take a big step toward reducing greenhouse gases and improving local air quality by recycling their old, gas-guzzling mowers and trimmers in favour of cleaner alternatives.”

Through the program, The Home Depot and the Clean Air Foundation hope to retire more than 6,000 two-stroke mowers and trimmers–which is equivalent to a reduction of 288,000 kilograms of greenhouse gases per year, according to Environment Canada.

Clean Air Foundation staff and volunteers will be on site at Home Depot stores during the promotion to provide customers with tips on how to incorporate Eco-Options products into their lawn and garden care.

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Loblaw will beef up private label hard goods under new evp

BRAMPTON, Ont.–The hiring of ex-Canadian Tire Retail president Mark Foote as executive vice-president, General Merchandise, underscores the grocery giant’s commitment to expand its non-food offerings. Foote, who officially takes the helm today, spent the past decade heading up Canadian Tire’s expansion. One of his objectives will be to build one of the world’s most famous–and trusted–private labels on non-food items, with a team of about 150 people in the general merchandise division.

Already, President’s Choice Home appears on more than 1,000 products at Loblaw. “We will continue to expand both our apparel and general merchandise lines” under this brand, said Geoff Wilson, vice-president, investor relations and public affairs for Loblaw.

Although he wouldn’t specify which areas the company may continue to expand into, he did admit there’s lots of room to leverage President’s Choice, “with everyday home care products, such as outdoor and patio furniture, seasonal, some limited home electronics and additional apparel. “We have an opportunity to expand the depth we’re in.”

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Star opens third outlet amidst Alberta housing boom

EDMONTON–In the midst of Canada’s hottest economy, Star Building Materials, a major Western building supply company, has opened its second operation in Alberta, serving contractors and builders in this city.

The store, which was installed Jan. 1 of this year, celebrated a grand opening last Friday for some 500 customers and local media at the new location, 2920’Äì101 St. The event included a supplier trade show.

Star Building Materials was founded in Winnipeg in 1956 as a truss and component manufacturing plant. It asserted its dominance in the contractor market there in the late ’90s with two key acquisitions. One was the assets of Dominion Lumber, which was in receivership at the time. The other was Star’s biggest competitor, Kilcona Lumber. That site was turned over to a new truss facility and a sales office to serve contractors was added. Star moved into Alberta at the beginning of 2005 when it opened a truss plant and retail outlet in Calgary.

With annual sales of about $70 million, it eventually fell into the cross-hairs of Independent Lumber Dealers Association and joined that buying group 2003.

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Sexton vice-president resigns following ill health

WINNIPEG–Mark Henderson, who was hired only six months ago as vice-president at Sexton Group Ltd., handed in his resignation last Thursday. Henderson had suffered from health problems, which surfaced during the group’s annual meeting in Hawaii a few weeks ago. He had not been back to work since.

Henderson was hired in October 2005 to a newly created position of vice-president. The new role reflected the growing need among buying groups to protect–and grow–their purchasing volumes through membership. Henderson, who reported to Bob Mondy, vice-president and general manager of the Sexton Group, was charged with the development and implementation of a membership growth strategy for the organization. He also participated in all key supplier negotiations.

The new role also reflected Sexton’s need to establish a succession plan for Mondy himself as he nears retirement. As a result, the search for Henderson’s replacement got under way almost immediately, with a recruiter in place and Sexton management tendering input from its members.

Henderson began his career in home improvement in 1967 with his family’s business, Winnipeg-based G. Henderson Distributors. He took over leadership of that company in 1985. In the late 1990s, Henderson Distributors was sold to Jeld-Wen, and Mark Henderson became CEO and chairman of the board of Jeld-Wen of Canada. He held that role until 2003.

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Weyerhaeuser combines structural framing operations

FEDERAL WAY, Wash.–In an effort to provide builders and dealers with a “unified” solution for structural framing products and services, Weyerhaeuser Co. has consolidated five of its operating companies into a single business unit.

That unit, called iLevel by Weyerhaeuser, encompasses the manufacturer’s Trus-Joist and Structurwood brands of engineered wood products, as well as its plywood, lumber and distribution divisions. Combined, these accounted for more than one-third of Weyerhaeuser’s $22.6 billion revenue in 2005.

Kurt Liebich, iLevel’s vp-marketing, said in a prepared statement that the reason Weyerhaeuser is consolidating these businesses is to “simplify the business of home construction” by integrating products with distribution and technology, and providing a higher level of field support. By doing so, Weyerhaeuser is claiming that its customers will save time by reducing waste and callbacks. Design changes can be made more easily, and delivery will become more reliable.

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Big box bosses earn big bucks in ’05

ATLANTA–Bob Nardelli, CEO of Home Depot, got paid $9.16 million in salary, stock options and bonuses in 2005, an increase of 18% over the previous year. His salary alone was $2.16 million, up from $2 million the previous year, while his bonus went from $5.75 to $7 million last year.

Nardelli’s counterpart at rival big box retailer Lowe’s, Robert Niblock, received salary and bonuses of $3.4 million. While paltry compared to Nardelli’s package, Niblock’s income was up 41%. The increase was based on earnings growth at Lowe’s.

After adding in grants of 375,000 deferred shares and 590,000 stock options, Nardelli’s total compensation in 2005, when finally cashed out, would be worth $37.9 million.

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U.S. lawn and garden sector continues to consolidate

NATIONAL REPORT–As large retailers and buying groups capture a larger share of sales in the outdoor living sector, it was, perhaps, inevitable that supplier consolidation would follow.

Last week, Commerce Corp., which touts itself as the largest private distributor of lawn and garden products in the U.S., expanded its network by acquiring, for an undisclosed amount, J. Mollema & Sons, Inc. The East Paris, Mich.-based wholesaler distributes to retail outlets, professional growers and turf companies. The company also provides lawn-care services, which will now also fall under Commerce’s operational umbrella. The 95-year-old J. Mollema has 74 employees and a 100,000-square-foot distribution center. It also has retail locations called Lawn and Garden and Nature. J. Mollema will continue to operate under its own name as a subsidiary of Commerce.

Baltimore-based Commerce, which operates in 23 states and distributes from a 750,000-square-foot facility that includes a 10,000-square-foot showroom, stated that this acquisition puts it in a better position to service customers in Chicago and throughout the Midwest.

A few days earlier, three suppliers of natural and organic lawn care products’ÄîA2 Organic, Benick Brands and Western Organics’Äîcompleted their merger. The combined company is now called Gro-Well Brands, based in Glastonbury, Conn. Gro-Well Brands has distribution agreements with many of the country’s leading retailers, including Home Depot, Lowe’s, Menards, Target, and Wal-Mart, as well as several prominent regional dealers.

Gro-Well’s products include organic fertilizers, pest control, repellants, specialty turf care amendments, lawn and garden soils, potting mixes, mulches, bird seed products, ice melting products, and indoor and outdoor home decor accessories.

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Mark Foote hoofs it over to Loblaw

BRAMPTON, Ont.–Mark Foote, the highly respected president of Canadian Tire’s Retail business unit, has moved over to join Loblaw Cos. Ltd. There, he has assumed the role of executive vice-president, general merchandise, effective April 24. At Canadian Tire, company veteran Mike Arnett has replaced Foote as head of the retail division (see “People on the move“). Foote spent 27 years at Canadian Tire, the last 15 of them running Canadian Tire Retail, reporting to Canadian Tire CEO Wayne Sales.

Loblaw has been actively beefing up its general merchandise side, with increased inventory in everything from kitchenwares and patio furniture to hardware and even clothing. But the supermarket giant has had its challenges along the way. The entire general merchandise buying team was relocated from Calgary through last summer and fall, and centralized at the company’s new headquarters here in Brampton, northwest of Toronto.

According to Geoff Wilson, vice-president, investor relations and public affairs, Foote will be a valuable addition to the team; he’ll focus on its core retail operations and the pursuit of growth opportunities in its general merchandise business. He will be responsible for all procurement and merchandising activities in the General Merchandise, Health and Beauty, and gasoline bar businesses, reporting to Loblaw president John Lederer.

“We’re a food and grocery company first and foremost, but we see tremendous opportunities in general merchandise,” said Wilson. He adds that Loblaw’s forays into hard goods began with its Superstore in Winnipeg in 1978. In the past couple of years the program has been expanded into Ontario with its Great Canadian Superstores there.

Despite that progress, Wilson is enthused by the addition of Foote. “We’ve made great inroads taking it national, but we realize that Mark will be a tremendous asset.”

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U.S. and Canadian vendors learn tips from top buyers

TORONTO–An array of top retail buyers gathered recently to tell vendors from Canada and the U.S. how to do business with Canada’s leading home improvement companies. The group of almost 100 manufacturers took part in the one-day event, held here and in Montreal, in association with the Quebec dealers’ association, ADMACQ, as part of this year’s Hardlines Meet the Buyers Seminars. The Toronto event also featured a series of one-on-one meetings between the buyers and a group of U.S. manufacturers who were part of a special delegation organized by the U.S. Commercial Service.

Tony DiEmanuele, vice-president development and growth for TruServ Canada, started off by explaining the importance of the independent in a market that is too often overshadowed by large-format retail chains. In a partnership with CanWel, Hardware Division called PRO Retail Services, DiEmanuele’s group represents 1,400 dealers. Most of them are in rural markets that are, at least for now, immune to the incursion of big boxes, which creates opportunities for imaginative vendors. In Montreal, Claude Chalifour, head senior director, merchandising for CanWel, Hardware Division and PRO Retail Services, made a similar presentation to Quebec vendors.

The regional wholesaler and buying group BMR was keen to connect with a broader range of suppliers as it moves to become a national organization. In Toronto, Dunc Wilson, director of hardware, talked about BMR’s hardware and LBM distribution network, which sells only to its 151 BMR dealers. These dealers had traditionally been confined to Quebec, but the group now has 12 dealers in the Maritimes and four in Ontario. Christian Nadeau, director of imports, represented BMR in Montreal.

Home Depot was well represented in both Toronto (Andra Matusevics, at that time merchant for kitchen and bath) and in Montreal (Roger Plamondon, vice-president Canada East). They outlined the trends Home Depot is following to stay close to the consumer, and the resulting changes at the shelf level (see last week’s issue).

Eric Cantin, paint merchandiser for RONA inc., talked in both cities about his company’s aggressive expansion of its private label products, and the company’s switch to a two-year line review.

TIM-BR MARTS Ltd., one of Canada’s largest buying groups, joined the Meet the Buyers Seminar in Toronto. Randy Martin, director of purchasing, outlined the size and scope of his group (415 dealer locations across Canada following the merger of three other buying groups over the past two years, with projected purchasing power this year of $1.68 billion).

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New Castle exec won’t have consolidation on his plate

MISSISSAUGA, Ont. – Pro Wylie calls him a “breath of fresh air.” The president of Castle Building Centres Group is excited about the appointment of Ken Jenkins as vice-president at the member-owned buying group. “I have no concerns about our direction or how we’ll get there,” says Wylie.

Jenkins, who was formerly with CGC, takes the number-two position at Castle after an extensive search that drew a lot of attention, as it is part of a succession strategy to fill the president’s job when Wylie himself retires. For the next 12 months, Jenkins will work alongside Wylie, and at the end of April 2007 Wylie will step down.

The original search process attracted 116 applications, says Wylie, representing input from all the Castle dealers. “I wanted to be sure every shareholder of Castle, no matter which province they were from, had a chance to put forward their favourite ’Äòson’,” he added.

Castle’s head-hunter, Caldwell Partners, winnowed that number down to 16. More culling brought the list to six, then three. These candidates were turned over to the Castle board for evaluation and final selection. Wylie notes that the commitment has been made to Jenkins; his hire does not involve any trial or probationary period.

Much hay has been made of consolidation among buying groups in recent months. Does Wylie expect the c-word to be part of Jenkins’ mandate? “As far as Castle is concerned, we are not involved with any other group nor do we have it on the horizon to join or be joined by any other group,” he says emphatically. “If you think one organization can provide all the goods and services, serve all the needs of 700-800 dealers, it ain’t going to happen. You’d better give your head a shake.”

As other groups increase their size, Wylie is content to stay focused on the needs of his own members. “We don’t mind at all being number two or number three. But we do have one ambition: to be the best at what we do–to increase the growth and profitability of our dealers. And that’s not going to change.”

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RONA adds $95 million in retail sales in first quarter

BOUCHERVILLE, Que. – RONA Inc. has recruited 17 new affiliate stores to its network since the beginning of 2006, adding an additional $94.8 million to its total annual retail sales.

That number puts RONA at the halfway mark in its recruitment goal of $200 million for 2006.

Of those new dealers, one is a 2,500-sq.ft. hardware store in Manitoba; in Ontario, four building centres and one hardware store have joined. The greatest activity was in RONA’s home province of Quebec. There, a total of 11 stores have been added. They include a chain of three building centres, plus one other dealer, in Quebec City, and a garden centre in Rimouski that has become a Botanix. An existing RONA dealer bought two more stores in Trois-Riviˆ®res. Together, they represent additional retail sales space of some 110,000 sq.ft.

In 2004, RONA recruited 25 affiliate stores for additional retail sales of $105 million, and 31 affiliate stores in 2005 for additional retail sales of $191 million.

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Southwire expands reach with Cable Tech purchase

CARROLLTON, Ga. – Earlier this month, Southwire Co., the wire and cable provider based here, completed the acquisition of Cable Tech, a major Canadian cable manufacturer, from its parent company, Gentek. The deal will mean the end of the Cable Tech name, as the business becomes Southwire Canada, a subsidiary of the U.S. parent.

The acquisition of Cable Tech’s assets includes a plant in Stouffville, Ont., which makes wire and cable products for residential and commercial markets. The facility also is devoted heavily to supplying the OEM market, especially automotive. This part of the business will be evaluated to determine if it’s viable, says Eric Schmidt, vice-president sales and marketing for Southwire in Canada and Mexico.

Schmidt, himself a Canadian who was at one time a divisional merchandise manager for Home Depot Canada in its early years, He adds that privately held Southwire is already widely distributed in Canada, and the Canadian manufacturing facility will remain intact.

“It’s very important that Southwire continues to get closer to its customers in Canada and remain sensitive to their regional needs,” says Schmidt.

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Home Depot plans fewer stores, more acquisitions in 2006

MARKHAM, Ont.–Home Depot welcomed spring with the announcement of its growth plans in Canada for the coming year. Canada’s largest home improvement retailer will open 18 stores this year, and focus further expansion efforts on additional acquisitions to add to its Home Depot Supply division in an effort to increase its business with pros and contractors.

Home Depot is responding to a number of trends as it develops new store formats and new product lines. These include a growing population, and the aging of a key demographic–baby boomers. In addition, the children of boomers are building families and owning homes of their own. People are getting more pressed for time, increasing opportunities to cater to a do-it-for-me market with installed sales, as well.

A lot of product lines are being expanded to cater to the aging customer. These include areas such as safety, with grab bars and shower seats; and pastimes such as gardening with kneelers and even motorized wheelbarrows. The female customer, which accounts for more than 50% of all home improvement spending and more than 80% of the decision-making when it comes to home improvement projects (according to a study by HARDLINES in conjunction with ACNielsen), represents a powerful segment that needs to be served, not just through product assortment, but in terms of store layout and services.

But the company is also preparing for the arrival in Canada of its biggest competitor, Lowe’s Cos., which has announced it will open up to 10 stores here in 2007. Although Home Depot is actually opening two fewer stores this year than it did last year, its track record remains strong compared to the rest of the company. Home Depot worldwide will open about half as many stores over the next five years as it has in the past five, as it focuses on its wholesale supply business and online sales.

The Canadian store openings, which reflect a $450 million investment and the addition of 1.6 million sq.ft. of retail space, will include nine in Ontario (where Lowe’s intends to make its debut), four in British Columbia.

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RONA makes inroads in West, Quebec

BOUCHERVILLE, Que.–An acquisition and a brand new store marks the latest steps in RONA’s expansion. Last week the company received necessary regulatory approvals to complete the purchase of a 51% interest in Matériaux Coupal Inc., one of Quebec’s leading home improvement retailers. Coupal had 2005 sales of almost $125 million, 80% of that going to pros and contractors, a market that RONA is keen to expand into.

Coupal operates nine stores, representing approximately 53,000 sq.ft. of retail space, and employs about 540 staff. The company also operates two Truss Experts factories, which manufacture roof trusses, joists and pre-fabricated walls, and an interior finishing factory. Coupal’s managers and staff will continue at the stores under the new ownership arrangement.

While building its pro business in one province, RONA also added to its traditional retail business last week in another. A RONA proximity store opened in Spruce Grove, Alta. At about half the size and half the staff of a regular big box RONA outlet, the proximity store, aka the neighborhood store, is RONA’s version of a smaller big box that will fit into smaller, and typically more urban, markets. It houses about 25,000 SKUs within 52,000 sq.ft. of space, which includes a 29,210-sq.ft. sales area and 7,845-sq.ft. inside lumberyard. The exterior lumberyard covers nearly 2.5 acres.

“The new RONA proximity store concept, our neighborhood store as we call it, brings greater selection, service, and of course, our practical renovation expertise to help customers create wonderful living environments,” said RONA president and CEO Robert Dutton, who was on hand for the opening.

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Canadian Tire expands housewares department with Debbie Travis line

TORONTO–Canadian Tire has enhanced its decor accessories department, with a limited rollout that includes expanded lines of Debbie Travis branded accessories.

Travis, a décor and renovation celebrity whose face is familiar both on TV and in print, first signed with Canadian Tire last spring. At that time, the company launched the partnership with the Debbie Travis paint line. The DIY design angle of Debbie Travis products is based on choosing one of four “moods”– Dramatic, Nostalgic, Calm or Cheerful–and then realizing that mood through colours and patterns.

For spring 2006, Canadian Tire has unveiled a number of new lines bearing the Debbie Travis name and “mood” approach to decorating. They are: lighting, a collection of table and floor lamps; window coverings and decorative hardware; floor coverings, mainly a series of decorative rugs; decorative accessories such as picture frames, clocks, mirrors, vases, and scented candles; bathroom accessories; laundry, which includes scented baskets and canvas bags; and tabletop products, including plateware, cutlery, bowls, etc.

These new lines will be featured prominently in a refurbished décor and accessories department that Canadian Tire is rolling out in 80 stores to start. The enhanced department is closer to the front of the store, and features décor accessories as well as kitchenwares and housewares. The department was launched this past weekend in Canadian Tire’s store in Pembroke, Ont. It will become part of the retailer’s 20/20 store upgrade program, and be included in all new and renovated stores in the future.

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Home Depot’s Canadian buying team gets extreme makeover

TORONTO–Well, now we know why Gino DiGioacchino had to opt out of our HARDLINES Meet the Buyers Seminar last week (he was very ably replaced by Andra Matusevics. More on Meet the Buyers next week’ÄìMM). He got a promotion, one that’s keeping him very busy indeed. He’s now in charge of Home Depot Canada’s merchandising team as Merchandising Vice-President. He was formerly Director of Merchandising, Hardlines.

As Merchandising Vice-President, DiGioacchino takes over from Glenn Bingley, who has “accepted” the position of Regional Merchandising Manager for Canada West. He’ll remain based in Vancouver.

In a letter to vendors that went out last week, DiGioacchino said, “I want to ensure [the vendors] our team is prepared for the aggressive growth that our Division continues to experience.” That meant a wholesale shakeup of the buying team, including the creation of a new position within the Canadian office.

John DeFranco, formerly merchant for some seasonal products, including barbecues and outdoor power, has been appointed Divisional Merchandising Director, Hardlines. He will work closely with Karol Hurrell, who is divisional merchandise director, Soft Lines, and with DiGioacchino.

A number of promotions were made, as well, to a newly created position of Senior Merchant. These positions will report directly to the DMDs and will provide leadership for their specific departments. On the hardlines side, Ian Cleghorn, formerly merchant for electrical, has been named Senior Merchant, Seasonal; and Colin Ayers has moved from lumber merchant to the position of Senior Merchant, Lumber and Building Materials. A Senior Merchant for Hardware has yet to be named, but is expected soon.

On the softlines side, Andra Matusevics, formerly merchant for kitchen and bath, has accepted the position of Senior Merchant, Flooring and Organization. Shawn Ettinger has been promoted to Senior Merchant, Kitchen, Bath and Appliances.

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Independent dealer finds good ideas at Cologne Fair

COLOGNE, Germany–Almost 75,000 trade visitors from 140 countries worldwide attended the recent International Hardware Fair’ÄìPractical World trade show. The four-day event provided business opportunities for executives and buyers from the world’s leading home improvement companies. But opportunities abounded even for independents traveling from as far away as Western Canada.

Just ask Hugh Schneider. The owner of Schneider’s Building Supplies in Leduc, Alta., used the show as a way to tie in some personal travel via London before flying into Cologne. “We looked at this show for a couple of years and talked about it,” said Schneider. The results were positive for his business, which does a lot of retail, but also has strong sales to the agro market with specialized storage buildings for agricultural and light commercial applications.

Although many of the building products he saw are not distributed in North America, Schneider took away some ideas that he will present to his own suppliers. “We found a good manufacturer of overhead doors from Italy. It was very interesting,” he continued. He said innovative products enhance his company’s position as a specialty supplier, and they provide better margins. “We don’t want to keep our head in the sand about new ideas.”

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Proposals must be persuasive says CHHMA speaker

MARKHAM, Ont.–A series of breakout sessions and presentations from industry and economic experts marked a two-day conference held recently in conjunction with the annual general meeting of the Canadian Hardware and Housewares Manufacturers Association. Content was aimed at helping the vendor members of the association understand their market better, and enhance their business skills.

Speakers include Don Drummond, senior vice-president and chief economist for TD Bank, whose annual input at the conference provides insights into the direction of the country’s economy. Another presenter was Michael Sloopka, a negotiating expert who gave some valuable tips on how to make a proposal that really sells. (Don’t tell me’Äìhe was on right before dinner was served–Editor).

Sloopka started by challenging everyone to identify their product or service’s own selling features and benefits. After all, if you aren’t crystal clear about them, how will you communicate them to your prospective customer? But even that isn’t enough, because in the end, customers don’t want F&B, they want solutions to their own problems, results that can give them lower prices or better systems.

For example, Sloopka said your opening line or first PowerPoint slide should identify how the prospect will make money with you. That takes persuasion–something a proposal should be, above all. “Writing an effective proposal,” he pointed out, “is the difference between informing and persuading.”

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84 Lumber culls “underperforming” stores

EIGHTY-FOUR, Pa.–84 Lumber, the pro dealer chain that has been among the industry’s most aggressive expansion companies in recent years, will close 67 of its 521 locations. The stores to be closed are in mostly rural and slower-growth areas in 19 states, and were deemed “underperforming” by company officials. A dozen of those stores are in its home state, as well as 13 in Ohio, seven in Tennessee, five in New York, four in West Virginia, three each in Kentucky, Michigan and Indiana; and two in Georgia. The closures will affect around 600 employees nationwide.

84 Lumber has set as its goal to increase revenue’Äîwhich last year was a shade under US$4 billion’Äîto US$10 billion by 2009. To that end, the company intends to open 125 stores over the next four years in faster-growing areas in 20 states, where it will also add 1,000 salespeople. Its plans include 50 store openings this year, and at least 42 in 2007. The company is reportedly reviewing 20 sites for openings in 2008.

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Lowe’s in Canada: who’s on the team?

TORONTO–Lowe’s is coming to Canada. Okay, you’ve heard that already, but after announcing their arrival, the company retrenched to build its Canadian team and scope out store sites. Unfortunately, Lowe’s has kept so low-key (Lowe’s-key?–Editor) about its plans that many in the industry began to wonder whether the world’s second-largest home improvement retailer is, in fact, coming to Canada after all.

Worry not (or keep worrying, depending on whether you are a vendor or retailer). Lowe’s is busy working behind the scenes to sort a range of issues related to setting up in a foreign country.

First, Lowe’s is preparing to move into offices of its own just south of the corner of Yonge St. and Finch Ave. in Toronto’s north end. That move will take place by the middle or end of May.

The executive and buying teams are almost finalized. Doug Robinson leads the team, as president of Lowe’s Canada. Although an American, Robinson had experience in Canada as the former president of Beaver Lumber, before that company was sold to Home Hardware Stores Ltd. in 1999. Joining him from Lowe’s in the U.S. is Ben Mauceri, vice-president of merchandising. In addition, Catherine Townsend is vice-president of human resources. She worked about four years ago for Home Depot Canada. Lowe’s Canada’s vice-president of supply chain is Lauri Digulla, who was formerly at Hbc, with experience consulting on both sides of the border. Alan Huggins is vice-president of operations, also from Lowe’s U.S. A director of marketing is still to be named.

From what HARDLINES can determine, most of the merchandising team has been hired, as well. Lowe’s is harvesting the bullpens of both Canadian Tire and Wal-Mart for buyers, reportedly offering anywhere from 20-40% more than the buyers were currently being paid. However, so far, no current Home Depot Canada buyers have been lured away.

The line-up includes three directors of merchandising, under whom a number of merchants will report. Peter Bowes has joined as director of merchandising for hardware, in charge of power tools, hardware, outdoor power, appliances, and home environment. Bowes has a wide range of experience on the vendor side, most recently with Freud Canada, but also with Delta Porter-Cable and Karcher, among others. He has three merchants reporting to him. They are: Bob Vaillaincourt, who left his position as category manager for hand tools at Canadian Tire to act as Lowe’s buyer for hand tools, and Rob Reesey, who also defected from Canadian Tire, reporting to Bowes in the hardware department. Al Challis is another former Canadian Tire and Home Depot buyer, is also in the hardware department under Bowes.

Bob Sherwood, a former Beaver buyer, is now director of merchandising in charge of building materials. Buyers identified so far: Ron Krochuck, who was once a merchant at Home Depot Canada, has signed on as lumber merchant. Bernie Snider has been lured away from Wal-Mart Canada as building materials merchant. Snider had only recently taken over hand tools at Wal-Mart, having worked before that as their automotive merchant. His background includes Ace Hardware Canada and Beaver Lumber. (Stephanie Greene, his MA at Wal-Mart, is covering for him for the next three weeks or so until a replacement is named.)

Cliff Pike has been lured away from Canadian Tire to join Lowe’s as director of merchandising for lawn and garden/seasonal. Reporting to him is Jim Webb, who reportedly came over from White Rose. The other two people reporting to Pike are also from Canadian Tire: John Thager and Michelle Ritchie. The latter was formerly associate category manager for back-to-school and home office at Canadian Tire.

A fourth director, whom Hardlines has yet to identify, will be director of merchandising for decor.

Most of the new team headed down to Lowe’s head office in Mooresville, N.C., yesterday for up to five weeks of training.

Lowe’s will enter Canada with up to 10 stores in 2007, beginning in the Greater Toronto Area. Exactly where those stores will be remains shrouded in mystery, but locations being cited–though still unconfirmed–include Toronto, near Home Depot’s Castlefield store (being stalled by the city), a site closed in Hamilton on Barton St., and Molson Park Dr. in Barrie, across the street from a Rona Home & Garden. Other metro markets are expected to follow, with the eventual entry into rural markets, as well. Robinson at Lowe’s Canada expects there’s room for as many as 100 Lowe’s stores in this country.

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SpanCan and ILDCA settle into hardlines partnership with TIM-BR MARTS

AJAX, Ont.–An alliance between two of Canada’s biggest buying groups has successfully weathered its first months of existence, and is reportedly “doing quite well”. Late last year, Independent Lumber Dealers Cooperative (ILDC) formed a hardlines buying alliance with TIM-BR MARTS Ltd., calling it Independent Hardware Dealers Alliance (IHDA). IHDA, in turn, partners with PRO Retail Sales–itself an alliance between CanWel, Hardware Division and TruServ Canada–to manage ILDC’s hardware buying function within the group called SpanCan.

Have all the bugs been worked out? “Like any new alliance, it takes time and work,” says Andrew Battagliotti, general manager of ILDC and president of SpanCan. “It’s like a marriage,” he adds with a smile.

ILDC negotiates its hardware purchases through SpanCan, sitting alongside its distributor of choice, CanWel, Hardware Division, working in conjunction with TruServ Canada under PRO Retail Services. But even with these latest additions, the original buying group stays intact. “SpanCan remains unchanged, operating as it has over the past six years, but now it is larger with two new partners,” Battagliotti says.

The two partners have the same mandate as in the past in that SpanCan (ILDC and PRO Retail Services) negotiates warehouse shipments for ILDC members, with CanWel serving, essentially, as the distributor of choice for those ILDC members, while IHDA (TIM-BR MARTS and ILDC) was formed to negotiate hardlines direct shipments for members of both groups.

The end result for vendors is that they now effectively sit across the table from four partners: ILDC, TIM-BR MARTS, CanWel, Hardware Division, and TruServ, giving those partners a wider range of options. “Dealers now have the choice of going through distribution or going direct–whatever is most beneficial for them,” says Battagliotti.

(For more background IHDA and SpanCan, see vol. xi, no. 44, Nov. 21/05 –Editor.)

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Home Depot Canada launches online “flyer” specials

TORONTO–Home Depot Canada has introduced a new e-commerce initiative that offers consumers one limited-quantity product at an extremely low price every day. Called Hammer Drop, the site launched at 8 a.m. today, selling a Ridgid 14.4 volt drill, regularly priced at $249, for $99.

Pat Wilkinson, director of marketing for Home Depot Canada, said in a release that the program is designed to meet consumer demand for a wide variety of home decor and renovation products, lighting and tools at attractive prices, adding that the number of products being offered at the reduced price will not be published, in order to encourage visitors to log on every morning.

The move fits with Home Depot Canada’s plans to use new media to connect with customers, a strategy articulated by Tom Taylor, executive vice-president of merchandising and marketing, at the HARDLINES Conference last September.

It also reflects growing consumer acceptance of on-line marketing and shopping. According to eMarketer, which produces and publishes market research information about the Internet, online shopping is growing at a rate of 20% annually, and has become a significant influence in the retail home improvement industry. In 2005, sales on homedepot.ca grew by 500% over 2004, helping to establish the site as one of the fastest-growing websites in Canada.

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BMR’s Ontario presence grows

LONGUEUIL, Que.–BMR the Group, the Quebec buying group and wholesale distributor of hardware and building materials, has been active in its efforts to grow membership beyond its provincial borders. Those efforts include a previously announced signing of 12 dealers from the Maritimes, plus inroads into Ontario.

According to Dunc Wilson, director of hardware for BMR, the latest signing to the BMR banner is a former TIM-BR MART member in Central Ontario, Drummond Building Materials in Marmora. That dealer is currently converting the store to become Drummond Building Materials and Renovations, adopting the name being used by BMR members in anglophone markets. Drummond is the fourth BMR dealer signed in Canada’s largest province; the others are in Ottawa, Hawkesbury, and Curry Hill (along the Quebec border near Alexandria).

The group was formerly partnered with AWARD in Atlantic Canada, TIM-BR MART Ontario (formerly Homecare), and TIM-BR MARTS Ltd. in the West within the umbrella buying group Matreco. Each member respected the others’ regional boundaries, but the Matreco partnership has deteriorated since three of its members have merged, leaving BMR on its own–and free to expand its geographic reach.

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Orders remain strong at Atlantic Building Materials Show

MONCTON, N.B.–Atlantic Canada’s key buying event for building materials dealers was held last weekend, and despite grumblings about softer attendance figures, both attendance and buying activity remained high. The first day began quietly. Some few exhibitors expressed frustration with the small turnout but remained optimistic about Friday and Saturday.

Nor were they to be disappointed. Friday and Saturday were certainly busier. In fact, despite perceptions, attendance at this year’s show was up from 1,200 last year to more than 1,300 this year. However, said Don Sherwood, president of the Atlantic Building Supply Dealers Association, which owns and operates the show, the event ran for 2Ôø‡ days, instead of two last year. Those extended hours spread the crowds enough to make the show appear less busy than it was, he said.

“Our membership is 292 dealers and we had 255–or 87%–registered to attend,” he said, up from 243 members last year. They included key retailers, such as Kent, Chester Dawe and Notre Dame Agencies. Sherwood says he will request the ABSDA board to consider returning to a two-day event for next year.

Distributors and retail groups, including RONA inc., TruServ Canada, BMR the Group, Guardian Building Products, and CanWel, all enjoyed a steady flow of traffic to their booths.

For most exhibitors, however, the show was still worthwhile because they had face-to-face contact with their existing clients.

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What’s in store for Hudson’s Bay?

TORONTO–Canada’s oldest retailer is now in the hands of Jerry Zucker, the South Carolina investor whose holding company took over Hbc last month. But Zucker, now CEO of Hbc, insists the company, which was established in 1670 and currently has 550 stores and five banners, will remain intact. In the face of rumors that he would sell off stores, he said that Hbc’s new management team is, in fact, pursuing a strategy to revitalize and improve the company’s current real estate portfolio in the coming year.

“I purchased this company based on its fundamental value, part of which resides in the strong national franchise of stores we operate from coast to coast,” said Zucker in a prepared release. “I am truly excited about this company’s opportunities and we intend to grow Hbc’s five formats by improving our portfolio, not through mass closures. That’s just not in the cards and anyone speculating that it is, is not informed on my vision for Hbc. He added that a number of stores that had previously been targeted for closing are instead being revitalized and re-branded.

A number of revitalizations, expansions and improvements are on the books for the year ahead. The Zellers mass merchant chain will open new replacement locations in Brandon, Man.; Saskatoon; Welland, Ont.; and Boisbriand and Joliette, Que. Billed as prototypes for the Zellers store of the future, they will be significantly larger than the existing locations. Another store, in Oakville, Ont., is currently being expanded and other openings are planned.

Home Outfitters, the chain of home furnishings and accessories stores, will open three more outlets stores in Canada this year, two in Ontario and one in Quebec. Designer Depot, Hbc’s new chain of specialty off-price stores, will continue to expand into Western Canada with openings in Calgary and Edmonton. This will give Hbc a total of four Designer Depot locations in Western Canada, in addition to five stores in Ontario. Additional expansions are planned for Fields, Hbc’s chain of small general merchandise locations. Hbc increased the number of Fields from 103 to 118 in 2005 and intends to add units in 2006 depending on the availability of suitable sites.

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