RONA posts strong 4Q profits

BOUCHERVILLE, Que.-RONA inc. managed to post strong results for both its sales and profits in the fourth quarter and for the year. Consolidated sales for Canada’s second-largest home improvement retailer and distributor grew by 9.1% in its fourth quarter to $1.02 billion, while profits were up 26.1% to $37.6 million, from $29.8 million last year. (Consolidated results refer to RONA’s combined performance of its distribution business, along with any retail operations owned in whole or part by the company.)

Retail sales for corporate and franchised stores, net of intersegment sales, advanced 13.2% to $739.3 million in the last quarter of 2005, as RONA’s same-store sales were actually down 2.7%.

For the full year, consolidated sales reached $4.07 billion, an increase of 10.5% over $3.68 billion in 2004. Excluding Totem’s contribution, consolidated sales advanced only 4.2%. RONA’s net earnings were $175.2 million, up 26.8% over $138.2 million in 2004. Operating income for the full year rose 19.9%.

Retail sales by corporate and franchised stores, net of intersegment sales, advanced 12.5% to $2.90 billion in 2005. However, same-store sales for the year were essentially flat, up 0.1%. While this follows spectacular same-store growth of 9.0% a year earlier, “To beat those numbers was quite a challenge,” admitted Sylvain Morissette, national director of corporate communications and public relations.

“While our same-store sales did plateau in fiscal 2005, this performance has to be carefully analyzed in the context of 2004, which was an exceptional year by any standard,” said RONA president and CEO Robert Dutton.

“In spite of the deflationary effect the price of building materials will have, we expect same-store sales to rebound in 2006 thanks to a number of important initiatives, including more than 100 major renovation projects at RONA stores across the country, a significant expansion at our key Boucherville distribution centre and the construction of an all-new trans-shipment centre to serve the Montreal region, close to 200 new entries in our very successful RONA private-label line, an increase of more than 10% in our advertising and promotion budget, plus enhancements to our already successful staff training programs,” he added.

Dutton expects RONA to benefit from an economic climate that will favor sector growth in our sector, and he is confident of the overall viability of the RONA business model. “The future for RONA looks better than ever in the year ahead, as far as I’m concerned.”

During 2005, RONA added 31 affiliate stores totaling $191 million in annual retail sales and 335,000 sq. ft. of retail space. Of those, 16 are in the West, eight are in Ontario, six are in Quebec, and one is in Nova Scotia.

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Acquisitions drive growth for Home Depot in’05

ATLANTA — Home Depot last week released details about its financial performance for fiscal 2005, which was impacted significantly by investments that are transforming the retailer’s business model and taking it into new, uncharted waters.

According to the report it filed with the U.S. Securities and Exchange Commission, Home Depot’s revenue for the 12 months ended Jan. 28, 2006 was $81.511 billion, representing an 11.5% increase over the same period a year ago. The company’s earnings for the year rose 16.7% to US$5.838 billion. Same-store sales were up 5.5%.

Home Depot used last year to fortify its position on several fronts, mostly through the acquisition of 21 companies for which it paid an aggregate $2.5 billion. Its boldest purchase was Hughes Supply, the $4 billion building materials distributor, which Depot plans to fold into its burgeoning business-to-business Home Depot Supply division once that deal is finalized.

The retailer’s stores’ average transaction rose 5.6% to a record $57.98 per customer, which looks even more impressive when one considers how aggressively Home Depot has been adding margin-boosting proprietary brands to its inventory. The company’s web site, which now offers more than 30,000 items, averages 3 million hits per week.

The company reported that its services business, which encompasses installed sales, rose 21.4%. The company did not release corresponding dollar amounts.

By the end of its fiscal year, Home Depot operated 2,042 stores in North America, and employed 345,000 associates. During the year, the company opened 179 stores, including five relocations, a pace that company president and CEO Bob Nardelli has stated will be scaled back to around 100 stores per year over the next five years, as the company refocuses on building its business with professional and commercial accounts.

Company officials are hoping that broadening its business into related home-improvement and construction sectors will have a positive effect on its stock price, which swung between $34 and $43 per share last year. Since 2002, the company has repurchased 277 million, or over 12%, of its outstanding shares and spent $9.7 billion. Its board of directors this week authorized the company to repurchase another $1 billion in stock, raising its limit to $12 billion.

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Independents confront challenges of retention, education

WINNIPEG-While the news has been on the country’s two largest home improvement retailers of late, more than half the industry is still in the hands of independents. And the challenges of those independents, in the face of mounting competition from the big players, remains remarkably consistent no matter where you go in Canada.

Those common issues have become the glue that holds together the industry associations that represent those independents across the country. Collectively, the BSDA of B.C., the Western Retail Lumber Association, the Lumber and Building Materials Association of Ontario, ADMACQ, and the Atlantic group, ABSDA, meet regularly under the Canadian Retail Building Supply Council.

“The key is education in the industry,” says Gary Hamilton, who is both head of the WRLA and standing chair of the CRBSC. “We’re trying to enhance the skill level and try to address the shortage of people entering the industry.” He admits that the industry has to do a better job making the sector appealing as a career option for young people.

In fact, the WRLA has begun attending career fairs in Winnipeg as a test, and its sister associations are watching with interest. Hamilton says he’s also in talks with community colleges across the West to raise awareness.

Hamilton’s counterpart in Atlantic Canada, Don Sherwood of the ABSDA, has been making efforts, as well, to increase the entry points for new workers in home improvement retail. But his latest program focused on the mature workforce-people who are semi-retired, currently part-time or out of work. A 24-week course is currently being held in conjunction with the Nova Scotia Community College in Dartmouth, N.S. The college is offering the training on safety, etc., while ABSDA can offer industry specific seminars on estimating, inventory management, and training. After a year to perfect the curriculum, Sherwood expects the program to be expanded to other community colleges in the Atlantic region. In addition, his fellow associations are interested, too. “We are encouraging a national program in the future, because we are going to share the curriculum,” Sherwood adds.

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New Canadian show begins overcoming industry concerns

TORONTO-A new hardware show being introduced to Canada has already booked one-quarter of its exhibition space. The show is a spin-off of the National Hardware Show in Las Vegas, and its owner, Reed Exhibitions, wants to present the new event in the positive light of the Las Vegas show, not the dim shadow of two failed Canadian Hardware Shows that preceded it. Hence the new name, National Hardware Show Canada, new dates (Oct. 17-18, 2006), at the Toronto Congress Centre, near Toronto’s international airport.

The show will have a large contingent of Asian manufacturers, from countries such as China, Thailand and India. But a strong contingent of American companies, many of them already involved with Reed through the Las Vegas show, will also exhibit. According to Rob Cappiello, vice-president of the National Hardware Show, Reed Exhibitions has sold 9,100 sq.ft. of space for the new show, making it already half the size of the former hardware show, H2X. That show, mounted by the German trade show organization Messe Frankfurt, was held one time only in February 2005. It, in turn, succeeded the Canadian Hardware Show, which expired just two years shy of its 100th birthday.

Cappiello has talked with many of Canada’s major retailers to secure the attendance of their buyers. He’s also invited HARDLINES to move its annual Conference to “co-locate” with NHS Canada. Our Conference will be held Oct. 16-17, 2006, overlapping for part of the day on the 17th with the show itself.

The industry’s awards for dealer excellence, the Outstanding Retailer Awards, will also move to the same time and place as the new show. Those awards, presented by Hardware Merchandising magazine, will spearhead the Industry Awards Gala on Tues. evening, Oct. 17. In addition, the North American Hardware Association is expected to participate with dealer education seminars.

For more information about the new show, go to www.nationalhardwareshowcanada.ca; for the HARDLINES Conference, click here.

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Retail giants eye China, but B&Q dominates

BEIJING-China’s largest DIY home improvement retailer, UK-based B&Q, intends to open more than 100 stores between now and 2010. The company already has 48 stores, including 13 purchased last year from rival DIY retailer, German-based OBI.

While B&Q’s results in the UK are soft due to a weak economy there, it remains the dominant DIY retailer in the Chinese market, where the company is also enjoying its fastest growth.

Meanwhile, the industry’s two largest players, Home Depot and Lowe’s, have yet to make a beachhead in China. Home Depot has established an international business office there, in addition to its buying offices, but has yet to make a purchase or open a store of its own, although, according to Shanghai Daily, it lost out to B&Q in an attempt to purchase the OBI stores in China. At the time, said Home Depot CEO Bob Nardelli, the value of the USD was not favorable for an international acquisition. The latest rumors have Home Depot in talks with Orient Home, a homegrown chain there, to purchase 49% of that chain.

Lowe’s, on the other hand, has made its first international move in Canada, where it intends to open up to 10 stores next year. Now, Lowe’s is rumored to be in talks with Kingfisher, the largest retail DIY company in Europe, and the parent company of B&Q.

While these North American companies continue to focus on domestic expansion, B&Q keeps looking for new ways to stay on top in China. It will begin selling heavy appliances there in an effort to draw more customers into its stores. Even if it can’t make any profit on the products at first, B&Q wants to offer the appliances, including washing machines, refrigerators, and air conditioners, in tandem with its home décor products for its Chinese customers.

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North American exporters learn of DIY opportunities at UK show

INTERNATIONAL REPORT-While much of Western Europe’s economy remains somewhat soft, consumers in Eastern and Central Europe are anxious to upgrade their homes and apartments, creating opportunities for manufacturers of DIY products.

That was the cheering message relayed to members of the Worldwide DIY Council by leading retailers and wholesalers from the United Kingdom, France, Italy and Russia at the group’s annual meeting held recently in London.

The meeting was held in conjunction with the 12th annual DIY & Garden Show. That event played host to more than 200 exhibiting companies. They, in turn, attracted 2,600 visitors, including not only the range of the UK’s home improvement retailers, but a lot of non-traditional retailers such as Tesco, Argos, and Marks & Spencer.

At the AGM of the Worldwide DIY Council, its membership of exporting companies from the U.S. and Canada learned about market opportunities in Europe. Those opportunities vary by country, depending on income and home ownership levels, but the desire for increased standards of living is universal, speakers said. In some countries, culture may not encourage “do it yourself”, but rather prefer to have work done by others. Still, home centers are benefiting by providing the products and home improvement inspiration via in-store displays, advertising and product exposure.

In the United Kingdom, high home ownership means that the amount spent on DIY products is three times higher than that spent by renters in DIY shops. And with 85% of homes at least 20 years old, said Colin Petty, publisher of DIY Week, there is a constant need of repair, not just refurbishment.

Kingfisher, UK’s largest and the 3rd largest home center chain in the world and the one most active internationally, sees China as a tremendous growth opportunity, according to Ted Leavitt, international brand director. Turkey, Poland, and Taiwan also are fast-growing.

In Western Europe, DIY consumers are now being classified into five groups, based on pioneering research conducted by the Federation of European DIY Associations (FEDIYMA.) Each participates in DIY activities to varying degrees and has different expectations from the retailers selling to them. Active DIYers seek quality products and are constantly making home improvements, while “Smeasers”, the least active segment, tackle only small jobs and are extremely price-oriented when buying.

Russia, with a population in excess of 144 million, may represent the most important future European market, according to Peter Partma, head of Castorama Russia, a division of Kingfisher. He says Russia is a $10.5 billion market now and expects 10-12% growth rate annually for the next decade as consumers make up for the past, when decorating and home improvement simply wasn’t being done. Half of the projects are do-it-yourself and the other half are by hired help. He expects his company to be a billion-dollar retailer there in a few years.

What that means for American and Canadian companies, speakers concluded, is that they must be aware of the needs of multi-national retailers and be prepared to serve them with innovative, easy-to-use products, helpful instructions and multi-lingual packaging.

(For more information about the Worldwide DIY Council and these speakers, contact Tom Delph at tdelph@indy.net . For more info about the 2007 DIY & Garden Show in London, contact Paul Grinsell, p.grinsell@hgluk.com)

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Home Depot Canada holds conference for installer partners

TORONTO-Home Depot has affirmed its commitment to the installed side of its business with a training and education forum that attracted 1,000 contractors and installers from across Canada last week. The two-day event, held at the Congress Centre Feb. 16-17, featured presentations by everyone from Annette Verschuren, the president of Home Depot Canada, to the company’s celebrity contractor spokesperson, Mike Holmes. It was also the launching pad for a new home installation showcase featuring 40 vendors whose products are part of the installed services offered by Home Depot. “It’s a trade show for our installers,” said Jeff Kinnaird, vice-president Canada West for Home Depot Canada. “It speaks to the growth of this business.”

Besides presentations by Home Depot execs, the event included training seminars and demonstrations by service providers and vendors. “This really puts us in touch with our end customer,” said Jacqueline Burlock, national sales manager for the retail division of Broan-Nutone Canada Inc. “I’m glad Home Depot is getting behind their installed sales program in this way.”

For Mike Clements, who heads up installed sales for Home Depot Canada, the installed business is still in its infancy-and loaded with potential. Both north and south of the border, the installed piece is growing at a 35% rate annually-nine times the growth of the rest of the company, said Clements. But a key part of the equation is the buy-in of the installers. “The big thing for us,” said Clements, “is to show these guys our commitment to them and to the business.”

For Home Depot, the relationship with the contractors they recruit to install Home Depot’s products is seen as a partnership, with the retailer doing the marketing and training, and providing innovative products. “All they’ve got to do is deliver the quality,” said Clements.

He also offered an important insight into Home Depot’s strategy to stay ahead of other retailers that may vie for the installed sales business. “How we’re going to dominate the business is by sewing up the network.” Home Depot intends to establish relationships with all the best, most reliable contractors in each market it serves. “Then Lowe’s and RONA-they can’t get into it.”

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RONA secures key Atlantic dealer

ST. JOHN’S, Nfld.-RONA Inc., Canada’s number-two home improvement retailer, has finally brought Chester Dawe into its fold. Chester Dawe is a privately owned chain of eight stores, plus a truss plant, that serves St. John’s and its environs, selling largely to the contractor and builder trades. The transaction, subject to usual conditions and regulatory approvals, is expected to close at the end of this month.

Chester Dawe was founded in 1945. It has been managed since 1992 by Philip Budden, who orchestrated the takeover of the company in 2001 as major shareholder of a consortium of Atlantic investors. With sales in 2005 of approximately¬Ý$80 million, the company was also the largest member of the Atlantic buying group, AWARD. When that group chose to merge with sister group TIM-BR MART Ltd., Budden remained independent. During that time, he was aggressively wooed by RONA, which identified Chester Dawe as pivotal to its expansion in Atlantic Canada.

Budden was well known for his fierce independence and his pride in Chester Dawe as a true success story in Newfoundland. But despite all, he finally relented and accepted an offer that will help finance the company’s efforts to increase its position as a major supplier to new housing construction in the province.

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TruServ begins missionary work on Pro Services

WINNIPEG-The recent alliance between CanWel and TruServ Canada to manage CanWel’s bannered dealer customers has begun the job of reaching out to the dealers themselves.

Pro Retail Services is the name of the division of TruServ that is creating, marketing’Äìand communicating’Äìa set of programs for CanWel’s Pro dealers across the country. A “road show” finds TruServ management talking with dealers about the new arrangement between CanWel and TruServ, and what it means for independents flying the Pro banner. That team includes Terry Derraugh, vice-president marketing and merchandising and warehousing for TruServ Canada, plus Tony DiEmanuele, vice-president., vice-president of business development and growth, and Dave Leonzio, TruServ’s national growth manager.

The tour initially targeted 177 Pro stores in New Brunswick, Quebec, and Ontario. The dealers got the lowdown on the buying and operations that will be handled by TruServ.

According to DiEmanuele, dealer response was strong for the Pro banner services now being offered. “It was a good start and a very good response that shows people are very passionate about the brand, and want us to help them build the brand,” he said.

The road show will move to the rest of Atlantic Canada in the coming weeks, followed by British Columbia.

CanWel acquired the Pro banner when it purchased hardlines wholesaler Sodisco-Howden Group at the end of 2004. However, the Pro program landed CanWel with a retailer base that competes directly with some of its own key LBM customers, namely RONA and Home Hardware. It also conflicted with CanWel’s stated mandate to function strictly as a distributor. The partnership with TruServ Canada effectively puts management of the Pro banner into the hands of a third party. CanWel continues to supply hardware to the Pro dealers through the Sodisco-Howden division, now renamed CanWel, Hardware Division.

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Bell Canada acquires ProfitMaster

WINNIPEG-Bell Canada, through its wholly owned subsidiary, Bell Business Solutions, has acquired one of the industry’s leading retail services companies. ProfitMaster, based here, is a software developer providing information management solutions, including Enterprise Resource Planning (ERP), to the Canadian hardware and building supply industry.

This acquisition expands Bell’s information technology offerings and gives it access to a greater range of small and medium-sized businesses. ProfitMaster will allow Bell to offer more end-use services, beyond just connectivity.

ProfitMaster will report into the ERP division of Bell Business Solutions; however, it will operate as a separate business unit.

“With this acquisition, Bell will build on the best that ProfitMaster has to offer, while ensuring we are able to maintain and enhance our flexibility in dealing with customers, which is critical for success in this market,” said Robert Courteau, president, Small Medium Business Group, Bell Canada, in a prepared release.

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Vendors get chance to meet Canada’s top buyers

TORONTO-The increased consolidation of home improvement retailers has made those remaining players even bigger-and for some, more impenetrable-than ever before. That’s why vendors trying to get the attention of the industry’s top home improvement buyers will want a seat at the next HARDLINES Meet the Buyers Seminars.

Now in its fifth year, the events offer both new and existing vendors the opportunity to learn how best to develop their pitch-and their programs-to get the attention of buyers. And they’ll hear it from the buyers themselves.

Meet the Buyers will be held in Toronto on April 3, 2006, at the Prince Hotel. The event will be held again in Montreal on April 5 at the Queen Elizabeth hotel, in association with the Quebec association of building supply dealers, ADMACQ. Both events will feature senior merchants from Home Depot Canada, RONA inc., Le Groupe BMR, and TruServ Canada/CanWel, Hardware Division.

For more information about our Meet the Buyers Seminars, including names of participating buyers, click here.

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Expansion costs tap into Ace’s 2005 profits

OAK BROOK, Ill.-Ace Hardware Corp. plans to build this year, literally and figuratively, on the growth it achieved in 2005, when the buying group wholesale sales to its 4,600 dealer-members increased 5.4% to US$3.466 billion.

Last year, Ace members added 1.7 million sq.ft. of retail space, which translated into 131 new stores. In fact, Ace attributed a slight decline in its net income in 2005, by 1.5% to $100.4 million, partly to investments it made in helping its dealers defray some of their expansion costs. Company spokesperson Paula Erickson told HARDLINES that Ace members are projected to add 2.2 million sq.ft., or the equivalent of 160 to 170 stores, in 2006.

Ray Griffith, Ace CEO and president, was not available to be interviewed at press time. But in a prepared statement, Griffith said that the co-op’s investment in its dealers’ new stores, coupled with investments in retail technology and brand marketing, are resonating with home improvement shoppers and dealers alike. Erickson noted that about 2,200 dealers met all of Ace’s brand initiative standards in 2005, for which they received an extra 1% rebate on their purchases, a payout that equaled US$16.9 million. She said that the payout this year could be between US$18 million and US$20 million.

Ace also paid out a record $185.4 million in patronage and upfront dividend, based on their dealers’ purchases, in 2005.

In his statement, Griffith ticked off some of the co-op’s other accomplishments during the period, including the establishment of a 788,000-sq.ft. distribution center in Moxee, Wash., and a strategic supply alliance with Benjamin Moore Paint, which will start offering its product to Ace dealers this year.

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Sales up 5.1% for Canadian Tire stores at year-end

TORONTO–-Canadian Tire Corp. enjoyed strong results across most divisions in 2005, as net earnings jumped 13.3% to $330.1 million from $291.5 million in 2004. Fourth-quarter net earnings totaled $118.2 million, up 17.7% from $100.4 million.

Sales for Canadian Tire’s retail division, CTR, enjoyed 7.1% fourth-quarter retail sales growth, from $1.93 billion to $2.07 billion. Same-store sales increased a healthy 5.4%, led by strong sales in the car care and accessories, tools, home repair and maintenance, and auto custom categories. For the year, CTR’s 2005 retail sales grew 5.1% to $6.86 billion, from $6.52 billion in 2004.

The retail division’s fourth-quarter pre-tax earnings climbed 11.5% to $86.9 million from $78.0 million in the comparable 2004 period. The improvement in earnings largely reflects, among other things, higher shipments in the quarter, which were up 7.8% over the previous year, and higher vendor rebates. Canadian Tire also benefited from its global sourcing initiatives, which were expanded last year through the addition of a new sourcing office in Hong Kong.

CTR opened 17 new Concept 20/20 stores and retrofitted an additional 11 stores to the same format during 2005, bringing its total number of Concept 20/20 stores to 53. The CTR network now totals 462 stores with total retail space of 14.9 million sq.ft.

In the year ahead, Canadian Tire Retail plans to accelerate the rollout of its Concept 20/20 store format, with up to 80 new, replacement or retrofit projects on the books that will add about 1.5 million sq.ft. of retail space.

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LBM shows remain the place for deals

SASKATOON & LONDON, Ont.–-In the dead of Canadian winter, dealers are least likely to be pricing out major renovation or building jobs, which makes this time ideal for leaving the store and doing a little shopping themselves.

Leading off the show season is the Prairie Showcase and Convention, held Jan. 19-21 in Saskatoon by the Western Retail Lumber Association. Now in its 13th year, many suppliers consider it the number-one buying show in the country. This year’s attendance, by dealers from across the Prairies, was up 10% over last year. The numbers were boosted by an additional 100 dealers from 85 stores in British Columbia, thanks to a cross promotion with WRLA’s sister association in B.C., the BSDA.

However, another strong buying show is coming up in March, in Moncton, N.B. The 2006 Atlantic Building Materials Show has been extant much longer than the one in the West, and is facing the challenges of a consolidating marketplace. Nevertheless, it remains an important buying show that manages to draw dealers from throughout Atlantic Canada, including a very strong contingent from Newfoundland. It also attracts exhibitors from across the country, who are familiar with the value of the show. The Atlantic Building Supply Dealers Association runs this one from March 23-25.

In between these shows is a relative newcomer, the Winter Buying Show, held two weekends ago by the Lumber and Building Materials Dealers Association of Ontario. In only its third year, this show’s star is still on the ascendancy, as it gains more critical mass each year, including double the pre-registration of last year’s event. However, because its dealer base is drawn from Ontario, most of these dealers, especially in central and southern parts of the province, have the benefit of easier access to the vendor base, which is largely located here. As a result, the show does not provide as unique a buying opportunity for the dealers. Nevertheless, this new show is fast becoming regarded as a must-attend for the LBM community in the province.

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RONA’s latest deal marks serious play for contractor customer

BOUCHERVILLE, Que.—RONA’s purchase of a 51% interest in Matériaux Coupal Inc., a major independent home improvement dealer in the Greater Montreal area marks an aggressive bid by Canada’s number-two home improvement retailer to expand its pro business.

Matériaux Coupal is a family owned operation that serves mainly pro and contractor customers through nine stores, plus a number of businesses, including two truss plants, that focus strictly on trade customers. It had retail sales of close to $125 million last year.

By investing in a majority, but not all, of Coupal’s business, RONA will keep existing staff and management, and its corresponding expertise in pro sales, within the Coupal ranks. In this regard, the deal is similar to RONA’s acquisition, just over a year ago, of Totem Building Supplies. That company is also very strong on contractor sales.

RONA expects to build its pro sales even more and promises more such deals to emerge in coming months. “We want to continue to invest in companies, not only on the retail side, but on the pro side,” says Sylvain Morrisette, RONA’s national director, corporate communications and public relations.

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Hardlines Conference will move to same time, place as new hardware show

WORLD HEADQUARTERS, Toronto—Canada has a new show. The National Hardware Show Canada is owned by Reed Exhibitions, the same organization that mounts the successful National Hardware Show in Las Vegas. It will take place Oct. 17-18, 2006, at the Toronto Congress Centre, near Toronto’s International Airport.

The new show is not expected to compete directly with the regional association LBM shows. Rather than focusing on just building materials, NHS Canada will be a hardware/home improvement/paint & décor/lawn & garden/outdoor living show, dedicated to the broader idea of “Home Enhancement”.

Here at HARDLINES, we’ve been invited to hold our incredible Annual HARDLINES Conference during the same time. We have moved the date and location of the Conference so that those delegates who also wish to attend the new National Hardware Show, which follows right on from our event, can easily do so.

The new dates of the combined Conference and Show are Oct. 16-17, 2006, which overlap with the Show’s on Oct. 17 and 18. Not only that, but the one and only Outstanding Retailer Awards are coming too. Those prestigious awards, presented by Hardware Merchandising magazine, first joined with the Hardlines Conference two years ago.

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Sears begins takeover play for Canadian subsidiary

HOFFMAN ESTATES, Ill.–-Sears Holdings Corp. made its takeover bid for its Canadian arm official last week. The company mailed an offer to acquire all outstanding common shares of Sears Canada Inc. Sears Holdings already hold about 53.8% of the shares of its wholly owned subsidiary. The offer price was CD$16.86 per share in cash. The offer is open for acceptance until March 17.

“Our offer represents full and fair value for Sears Canada,” said Alan Lacy, vice-chairman of Sears Holdings in a prepared release. Even here, however, his comments on Sears Canada’s mediocre performance were pointed. “We firmly believe that our offer provides the best alternative for all Sears Canada shareholders and that Sears Canada’s current market price reflects unrealistic market expectations for a higher bid,” he said.

Only by taking over 100% of Sears Canada will the parent be able to help its Canadian division compete effectively against large U.S. and Canadian retail competitors, said the release.

Following the takeover, Sears Holdings will resist converting Sears Canada to an income trust, a popular gambit among Canadian companies of late. In this case, however, it could have negative tax consequences to Sears Holdings. Therefore, Sears Holdings says it will not approve such a conversion.

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RONA buys majority share of major Quebec independent

BOUCHERVILLE, Que.–RONA inc. has acquired a 51% interest in Matériaux Coupal Inc., a major independent home improvement dealer in the Greater Montreal area. Coupal is a family owned operation that serves mainly the pro and contractor customers. Its nine stores comprise a total retail sales area of about 53,000 sq.ft. and 1.6 million sq.ft. of outdoor storage area, with a staff of more than 540. In 2005, Coupal posted retail sales of close to $125 million in 2005.

The company also operates two “Truss Experts” factories, which manufacture roof trusses, joists and prefabricated walls. One, formerly known as Chevrons Rivard, is located in Granby and the other, formerly Toitures Deslongchamps, is located in St-Lin-des-Laurentides. Coupal also operates an interior finishing factory in Granby. Together the factories total some 60,000 square feet.

By investing in a majority, but not all, of Coupal’s business, RONA regards the deal as something of a joint venture. “It’s a complimentary business to ours,” says Sylvain Morrisette, RONA’s national director, corporate communications and public relations. He believes the deal will reinforce the strengths of both RONA and Coupal.

“We think it’s the best way to continue,” Morissette adds. “These people have the expertise in that market and we want to continue to count on that expertise and their support.”

Coupal was founded in 1914 in Henryville, 65 km south of Montreal, by Orpha Coupal. It is currently controlled by the Doucet family, the main shareholder, and François Doucet was president of Coupal. It was formerly a member of the Independent Lumber Dealers Cooperative, a small group of large home improvement retailers whose collective sales exceed… ILDC members have been targets for RONA in the past; Totem Building Supplies was its most recent–and most notorious–acquisition from that group. RONA wouldn’t disclose how much it paid for its 51% of the Coupal business, but it did pay $100 million for Totem, which, in terms of sales volume and points of sale, is about twice the size of Coupal.

The deal, subject to the usual conditions and approvals, is expected to close in by the end of June. RONA expects the transaction to have an immediate positive impact on net earnings.

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Home Hardware adds dealers in GTA

St. Jacobs, Ont.–Home Hardware Stores Ltd., Canada’s largest hardware, lumber and building materials and furniture co-operative, has beefed up its presence in the Greater Toronto Area with the addition of two new dealers.

The first is right in mid-town Toronto, minutes from Highway 401. Michael and Tony Rumolo, Dealer-owners of Dickson Home Hardware, a long-time Pro dealer, have recently changed banners to join Home Hardware. The 10,000 square foot hardware store offers a traditional assortment of hardware and home improvement products, as well as a wide range of barbecues and barbecue accessories.

In Markham, Murray Wicks, Dealer-owner of Markham Home Hardware, has converted to the Home Hardware banner as well. Located at 5762 Highway 7, the store offers a traditional selection of hardware and home improvement products in a 9,000 square foot store. Wicks also offers a wide selection of barbecues and barbecue accessories.

Although Home Hardware is Canada’s number-three home improvement retailer, with more than 1,000 stores, its strength has been in secondary and rural market. But like the rest of the industry, it has watched as both Home Depot and RONA have set their sights on more urban locations, typically better suited to the smaller formats offered by independents such as Home Hardware. However, the co-op retailer is not always well represented in the big cities. It has only nine stores in Vancouver, for example, and the two new additions to the Greater Toronto Area bring the total in that market to only 26.

Despite having 115 stores in Alberta already, Home had to secure a foothold in Edmonton by opening a ground-up store. Northland Home Hardware Building Centre opened in October 2005. That 60,000-sq.ft. operation features a 14,000-sq.ft. mezzanine-level showroom, as well as a 23,000-sq.ft. drive-through lumber yard.

Home Hardware is focused on growing its retail space through expanding existing locations and adding new stores and members. The company added 39 new dealers in 2005. Another 42 stores were renovated and re-merchandised.

“We’re happy to welcome these dealers to the Home Hardware family,” said Paul Straus, vice-president and CEO of Home Hardware Stores. “We’re committed to the success of independent dealers all across Canada, ensuring they can offer their communities great selection, value and service.”

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Venerable Canadian retailer faces bankruptcy

BARACHOIS, Que.–Hudson’s Bay move over. Another Canadian retail landmark is under siege: Robin Jones & Whitman has closed its general store here, a 96-year fixture in Quebec’s Gaspé region that sold everything from building materials and hardware to groceries. The venerable company has five other stores, but they’ll be shuttered if the firm doesn’t find financial aid to pay back its creditors by Feb. 19.

The store here has been in business since 1909, and was the only one in the $10-million chain that sells lumber. The sign out front betrays the company’s maritime roots: “Poissonnerie meubles”–fish and furniture.

But Robin Jones & Whitman is much older. The Robin Company began in 1766 when Charles Robin, who emigrated from England’s island of Jersey, established a fish plant in Arichat on Cape Breton Island. (Only Hudson’s Bay Co., founded in 1670, is older.) Lawrence Legros, the current owner of Robin Jones & Whitman, is a direct descendant of the stores’ founders.

Today, however, unable to keep up in the face of mill closures and the collapse of the cod fishery, the retailer is under court protection from creditors, mainly the Bank of Montreal and the Business Development Bank.

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U.S. lumber industry challenges NAFTA

WASHINGTON–A group of American-based lumber suppliers has taken its opposition to Canadian imports to a new level by challenging the constitutionality of how U.S.-Canada trade disputes are settled.

The Coalition for Fair Lumber Imports, the group that has been led by Georgia-Pacific and other giant lumber suppliers, filed court papers here that allege its members are being deprived of due process under the North American Free Trade Agreement, or NAFTA, which has panels that include Canadians who are involved in deciding issues under U.S. law that affect American companies.

This is the latest salvo in an ongoing battle being waged by U.S. lumber suppliers, which have long claimed that Canada subsidizes its lumber industry, which the Canadian industry has disputed.

The Coalition is appealing a decision by the U.S. Commerce Department to effectively drop countervailing duties on Canadian lumber shipments. On Nov. 22, Commerce said it would comply with an earlier NAFTA panel ruling by effectively dropping countervailing duties on Canadian softwood lumber imports, which are currently around 16 percent. But the U.S. government also said it would continue to collect the countervailing duties as long as the litigation between the two countries continued.

Since May 2002, when duties were first imposed, Canadian producers have lost more than $5 billion Canadian in revenue.

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RONA launches program to provide funding to Olympic athletes

MONTREAL–RONA has pledged a multi-million dollar commitment to support Canadian athletes who hope to compete in the Beijing 2008 Olympic Summer Games or the Vancouver 2010 Olympic Winter Games. A five-year funding program worth a minimum of $4 million will help prospective Olympians.

The program also features an in-store fund-raising that could provide up to $2 million in additional funds for the athletes over the five-year period. According to RONA, the program, coined “Growing with Our Athletes”, is one of the most ambitious corporate support initiatives ever undertaken with the Canadian Olympic movement. RONA will sponsor 100 young athletes as chosen by the Canadian Olympic Committee, in consultation with its member National Sport Federations, as strong prospects for the 2008 or 2010 Olympic Games. These athletes, chosen from across the country, will receive financial support from RONA to help them offset living, training and competition expenses.

“RONA is deeply committed to the Olympic movement and the advancement of our Canadian athletes on a world level,” said RONA president and CEO Robert Dutton in a prepared release.

RONA will complement its funding with a matching program that assigns a neighborhood store with each athlete. Local customers can provide direct financial support to that athlete by purchasing a special “RONA Renovation Kit”–an Olympic carrying case that includes contains a RONA Vancouver 2010 tape measure, pen, and three renovation planning guides. The kit will also contain an Olympic notepad, courtesy of another retail sponsor, Hudson’s Bay Corp.

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Tractor Supply reports healthy year-end

BRENTWOOD, Tenn.–Tractor Supply Co. reported fourth-quarter net sales of $597.9 million, a 31.1% increase from $456.0 million a year earlier. The company, which claims to be the largest retail farm and ranch store chain in the U.S., enjoyed a same-store sales increase of 10.0%, with the biggest improvement in agricultural, seasonal, livestock and pet products, and clothing, and the greatest strength in the southern stores. During the quarter, net income rose by 40.4% to $30.9 million, compared to $22.0 million for the comparable quarter in 2004.

For the fiscal year, net sales increased 18.9% to $2,068.0 million and same-store sales increased 5.7%, vs. 2004’s 9.9% gain. Fiscal 2005 included an additional week compared to last year, which accounted for approximately 1.8% of the sales increase. Net income for fiscal 2005 increased 33.7% to $85.7 million, from $64.1 million.

During fiscal 2005, Tractor Supply opened 65 new stores, acquired an additional 16 stores through the purchase of Del’s Farm Supply, relocated 18 stores and closed one store. In the prior year, the Company opened 53 new stores, relocated 20 stores and closed one store.

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Canada will get new hardware show

TORONTO-The company behind the National Hardware Show, Reed Exhibitions, will attempt to replicate its success with that show, which flourished after moving to Las Vegas almost three years ago, by starting a new hardware show for Canada.

The show, which will remain here in North America’s fifth-largest city, has been named the National Hardware Show Canada. It will be branded as a regional extension of NHS, with Reed promoting the new Canadian show to every delegate that registers for Las Vegas, and with every vendor that exhibits. Rob Cappiello, president of the National Hardware Show at Reed, believes there’s room for a show that unites buyers with vendors in Central Canada and the Northeastern and Midwestern U.S.

NHS Canada’s strength will be in allying with existing events. In fact, about half the show in the first year will be taken by a lawn and garden show owned by Landscape Ontario, called Garden Expo/Florist Expo. Reed has agreed to co-locate the new hardware show with this event at the Toronto Congress Centre near the city’s airport, Oct. 17-18, 2006.

Also joining the new show will be our very own Hardlines Conference. That event will be moved from its usual September time slot to co-locate with the new show Oct. 16-17, creating one monster three-day event from Oct. 16-18.

The creation of this new show comes less than two years after the demise of the Canadian Hardware Show, which ran for almost a century before the association that owned it, the Canadian Retail Hardware Association, went under in 2003. Only a year later, a giant German trade show company, Messe Frankfurt, tried to revive the show virtually unchanged, and failed. However, Reed succeeded in bringing NHS back to life after it all but expired in Chicago. The show was moved to Las Vegas, co-located with other events, and enhanced with a strong conference program.

The newly combined Canadian event will cover 200,000 sq.ft. of floor space, half devoted to Garden Expo/Florist Expo, and the other half to the hardware/home improvement exhibitors. Show organizers expect approximately 1,000 exhibitors.

(For more information about the show, email inquiry@hardware.reedexpo.com. For info about the Hardlines Conference, call us at 416-489-3396.)

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Home Depot to test gas stations

NASHVILLE-As part of its latest effort to diversify its operations, Home Depot is about to test the first of four gas convenience stores in this market. The store, called Home Depot Fuel, is scheduled to open in Brentwood, Tenn., on Feb. 1. The other stores will open by June.

Frank Blake, Depot’s executive vp-business development and operations, told Cox News Service that the company expects these stores to generate between $5 million and $7 million annually. If the test succeeds, Depot intends to roll out 300 of them in the next five years, with the goal of generating $1.5 billion in annual revenue by 2010.

By opening gas convenience stores, Depot would be joining other big box dealers, including Wal-Mart, Costco and the supermarket chain Kroger, that have diversified into those types of outlets. Cox quotes statistics from Energy Analysts International, which found that 3,580 supermarkets, discount retailers and warehouse clubs captured nearly 8% of total fuel sales in 2005. By 2008, that 8% market share is projected to almost double to nearly 15.5%.

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Why RONA won’t go to the U.S. – at least, for now

BOUCHERVILLE, Que.-RONA inc., Canada’s second-largest home improvement retailer, is keen to recruit, or outright purchase, new dealers, but it won’t likely look south of the border in the near future.

“We know each state and have proven we know how to integrate, so we could do something in the U.S. if the time came,” said Claude Bernier, RONA’s executive vice-president of traditional stores. He spoke recently at a presentation by RONA execs. Even if his company did make a move, it would likely be in markets close to the Canadian border.

RONA’s president and CEO, Robert Dutton, echoed Bernier’s comments. “We have no plans for now,” he said. The reason, Dutton added, was a simple one: “We have enough to do in Canada. We’ve been flooded with prospective dealers and offers to sell from companies across Canada. Some,” he added cryptically, “would surprise you.”

RONA has made significant inroads, with the recruitment of new dealers to one of its Home Centre, Building Centre, Hardware or specialty banners. The signing of a three-store operation on Vancouver Island, Duncan Pacific, was reached in November of last year. But RONA’s acquisitions have been the newsmakers in recent years. The purchase of Alberta’s largest home improvement retailer, Totem Building Supplies, which closed in the second quarter of 2005, made a significant impact, not only on RONA’s sales last year, but on its profitability, as well. RONA plans to open 15-20 new stores in 2006-almost double the number of openings last year.

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Luxury consumers continue on a spending spree in 2005

STEVENS, Pa.’ÄîCustomers are still spending on luxury items, but more dollars are going to luxury experiences than products, says one expert.

Pam Danziger, president of Unity Marketing, says luxury consumers kept spending in 2005. In fact, the average amount spent by an affluent household on luxuries, including luxuries for the home, personal luxuries, automobiles and luxury experiences, rose 3.8% to $52,588 last year, from $50,640 in 2004. But their spending continues to shift towards the experiential, while they are spending about the same or slightly less in traditional luxury goods categories.

Danziger’s figures are drawn from her company’s latest luxury spending survey.

The average luxury consumer household actually spent 4.6% less on home luxuries in 2005 as 2004-$19,990 compared with $20,948 in 2004. Personal luxury spending, including apparel, fashion accessories, jewelry and watches, wine and spirits, pet luxuries and pens and desk accessories, rose 5.6% to $10,007 in 2005.

Spending on luxury experiences, however, such as travel, dining, entertainment, spas and beauty services, and home services, nearly doubled, from an average of $11,632 in 2004 to $22,746 in 2005.

For luxury goods marketers and retailers, says Danziger, the challenges are daunting. Luxury consumers are spending more, in many cases lots more, on life-changing experiences, while their need for luxury goods is waning. However, there may be some good news in there for retailers that are beefing up their at-home services.

Danziger attributes much of the spending shift to the rising age of baby boomers, who make up 57% of all households with incomes of $100,000 or more. As more and more of them turn 60, they have already acquired the material trappings of luxury. Buying another mink coat, diamond necklace or designer handbag just doesn’t have the same appeal. Instead, they are looking for new experiences and this will tip the entire luxury business to the experiential simply because of the generation’s size.

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Tembec will sell off its OSB division

MONTREAL-Tembec Inc., the integrated forest products company, is selling off its oriented-strand board business in Saint-Georges-de-Champlain, Que. to Jolina Capital Inc. for $98 million, $88 million of which will be payable on closing and the balance payable in the form of a $10 million interest-bearing note. Jolina is a company controlled by Emanuele (Lino) Saputo, a major Tembec shareholder.

The deal, subject to customary closing conditions, is expected to close before the end of March 2006. The sale comes on the heels of Tembec’s announced first-quarter results, in which the company’s consolidated sales fell from $888.8 million to $809.8 million. Tembec suffered a net 1Q loss of $74.9 million, deepened over a loss of $0.7 million.

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U.S. home sales continue to slide

WASHINGTON-America’s housing market continues to show signs of weakening. The National Association of Realtors reported that sales of existing homes fell 5.7% in December, compared to the previous month, to a seasonally adjusted annual rate of 6.6 million units. That was the third straight monthly decline.

However, 2005 was still a banner year for sales. NAR reported that existing home and condo sales for the year hit 7.072 million units, up 4.2% over 2004 and representing the fifth consecutive year of gains. The realtors reported that the median price for an existing house sold in 2005 rose to $208,700, up 12.7% from 2004. That was the biggest annual increase since a 14.4% rise in 1979. In addition, December’s new home construction was up almost 2% over December 2004.

“The bloom is definitely off the housing rose. Housing peaked last summer and has been weakening ever since,” Mark Zandi, chief economist at Moody’s Economy.com, told the Washington Times. Other analysts are predicting that existing home sales will fall this year anywhere from 3-10%. For example, analysts at Goldman Sachs estimated that the housing slowdown will begin to be a drag on economic growth by mid-year and by early 2007 will be trimming growth by around 1.5 percentage points.

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Home Depot’s growth will focus on wholesale, services side

NEW YORK-In a presentation yesterday to investors and analysts, Home Depot unveiled its growth targets for 2010. Over the next five years, the company expects to open up to 500 more stores. But it also plans to become America’s largest diversified wholesale distributor and become number one in services. It also intends to increase dramatically.

The news, delivered by Home Depot CEO Bob Nardelli, underscores what Hardlines has identified in recent months: increasing maturation of the big box home improvement market has Home Depot turning to other channels to maintain growth. The openings, at fewer than 100 per year, are considerably less than the rate of openings Home Depot has maintained in recent years-usually 175-200. In fact, during Nardelli’s first five years with Home Depot, 941 stores were opened. (At the peak of its growth curve in the early ’90s, the world’s number-two retailer was opening a new store every 36 hours.)

So scaling back its anticipated openings makes sense. No surprise then, that the emphasis is turning to Home Depot’s wholesale business, including its commercial and industrial side. That, plus at-home services and its direct-to-consumer channels, will provide the most dynamic growth over the next five years. Nardelli said this strategy would enable the company to maintain growth of 9-12% annually, continuing the strong growth of the past five years, which totaled 76% from the time he took over the company.

“Over the next five years, The Home Depot expects to maintain and grow its leadership position in home improvement retail worldwide,” said Nardelli. “At the same time, we expect to become the nation’s largest diversified wholesale distributor, become number one in services and will dramatically increase our direct-to-consumer channels. Our 2006 initiatives demonstrate that we are well on our way to accomplishing our 2010 goals.”

The increasing do-it-for-me trend continues to drive double-digit growth in Home Depot’s services business. By 2010, the company expects that 5-6% of its sales will come from services, considered a $110 billion market opportunity.

Home Depot is also banking on its “direct-to-consumer channels”, namely its online initiatives. Leading the charge is homedepot.com, but its high-end Expo concept, which is losing ground as a retail entity, is gaining momentum through two specialty high-end sites, 10 Crescent Lane, which focuses on furnishings and décor items, and Paces Trading Company, (PacesTrading.com), a specialty site focused on high-end lighting products for more affluent consumers. These enterprises are generating impressive results, says Home Depot. The online business attracts much larger average transactions than in-store, as shoppers can enjoy low- or no-cost delivery on large items such as snow blowers. Online sales doubled last year, and more than three million shoppers visited the company’s online properties each week company wide. Home Depot believes that its direct-to-consumer division has the potential to grow into a billion-dollar business by 2010.

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RONA’s installed services will expand in West

BOUCHERVILLE, Que.-Installed services, though lagging behind its major competitor, Home Depot Canada, will continue to be important for RONA in 2006. The program is running in its stores in Ontario and through its big box stores, and about 35 traditional stores, in Western Canada. Watch for the installed side to be rolled out to traditional stores in Western Canada over the next two months, however.

RONA has been gearing up for a widespread installed sales program for some time, but the news that Home Depot is banking on wholesale and at-home services as a key part of its growth strategy (see lead story, this issue-MM), makes RONA’s timing all the more apt. In Quebec, installed sales will be up and running between March and July, beginning with doors and windows, then flooring, and finally kitchens. This business represents about 0.5% of RONA’s sales, compared with Home Depot, which generates about 6% of sales from installation services.

Sylvain Morissette, spokesperson for RONA, says the network will be built locally. “As for the Installation program, we will use small local vendors depending on the area, and also we look for larger install companies to look after larger regions.”

CLARIFICATION: RONA’s neighbourhood, or proximity, stores will play an important role in the company’s expansion plans. These stores feature some big box features, but squeezed into 40-50,000 sq.ft. RONA’s urban store in Richmond, B.C., reflects some of the neighborhood store’s elements, although, at 75,000 sq.ft., it’s closer in size to a traditional big box. Those neighbourhood stores will open this year in Alberta, in Spruce Grove (40,000 sq.ft.) and Leduc (52,000 sq.ft.). In Manitoba, a neighborhood store (50,000 sq.ft.) in Winkler will open Jan. 27, 2006.

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Technology drives innovation buyers seek

SPECIAL REPORT-Advances in lithium ion (Li-Ion) batteries-which provide better energy-per-weight ratios than conventional rechargeables-are fuelling competition among manufacturers who want to capture the lucrative professional and high-end consumer market for cordless tools.

Milwaukee has been touting the benefits of Li-Ion batteries in its 28-volt cordless tools for about a year. Now it’s adding four new tools to the line-up: a rotary hammer, right-angle drill, job-site radio, and metal cutting saw, all of which will be introduced to the Canadian market in the second quarter of this year.

Milwaukee will be up against DeWalt’s new line of 36-volt cordless tools, which was unveiled last week in Markham, Ont., and is also expected to hit Canada later this year. DeWalt partnered with A123Systems to develop a new generation of lithium ion batteries, which, it says, will increase productivity and efficiency on the job-site. The new line will include a hammer drill, reciprocating saw, circular saw, impact wrench, rotary hammer, jigsaw, flashlight, and combo kits.

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TruServ will treat Pro banner differently

WINNIPEG-The re-organization of CanWel’s Sodisco-Howden acquisition has meant some recent changes, including renaming that business as CanWel, Hardware Division. The hardlines distributor’s designated banner program, Pro, has also undergone some changes, being managed now by TruServ Canada within a new alliance between TruServ and CanWel.

Pro joins TruServ’s existing stable of dealer programs, which includes its fast-growing Country Depot banner, plus V&S Variety, a junior department store/general store format. But it’s also in with TruServ’s flagship, True Value, which competes directly, in format if not geographically, against Pro. “We recognize the distinctness of the banners and the need to focus on brands,” says Bill Morrison, president and CEO of TruServ Canada. “The Pro brand needs a focus,” he says, which will be the objective of TruServ’s merchandising team, headed by Terry Derraugh, vice-president merchandising.

And even though Pro and TruServ have product mixes and target customers in common, Morrison says the two brands are distinct, and those distinctions must be recognized. Here, Morrison has taken a page from the book of grocery giant Loblaw’s, which managed a number of banners, including Supercentre and Loblaw’s. “Loblaw’s challenge-different stores attuned to different demographic segments of the market-resulted in the need for different programs and different brand support.”

Ace dealers, who have been hanging in throughout the changes, are getting the attention they deserve, Morrison adds. “We start with the customer and spent the last several weeks listening and seeking to understand where those dealers want to take the business.”

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Builders show breaks attendance records

Orlando, Fla.-The International Builder Show solidified its ranking as one of the nation’s largest trade shows last week, when the four-day event drew 105,263 attendees, a 3.3% increase over 2005, and a record total for this convention.

According to data released by the National Association of Home Builders, which sponsors the show, this year’s event also cracked records for net exhibit space sold (967,000 sq.ft.), and total space used (1.5 million sq.ft.). The Orlando/Orange County Convention & Visitors Bureau estimated the economic benefits to the community from the show would top $122 million.

This was also the most people the Orange County Convention Center has ever drawn for a trade show, which was a double-edged sword because this facility did not have anywhere near enough parking to accommodate both this show and another event for surfing equipment that was occurring simultaneously in another hall.

Several exhibitors said that traffic on the floor during the first morning of the show was unexpectedly light. But as the convention progressed, most booths and aisles were jammed with builders, distributors, dealers, manufacturers and other industry officials. Several manufactures-including Kohler, Whirlpool, and Andersen Window-took gargantuan booths that tested attendees’ tolerance for sound and commotion.

Several dealers turned their exhibit space into showcases for their suppliers’ products: both Lowe’s and Home Depot had enormous exhibits swarming with visitors, in which a wide range of preferred vendors made presentations about their products at different times during the day. This was the second year that Ace Hardware’s LBM division allowed vendors to show product in its booth. Amy Pellerito, who runs this division for Ace, said exhibiting at IBS “is all about the brand, to tell people that we have a network of over 800 lumber dealers.” She noted that Ace’s percentage increase in sales in 2005 was its highest since 1999, and she attributed that partly to the co-op’s re-entry into commodities distribution.

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Home Depot buys Hughes Supply

ATLANTA – In its boldest move yet into industrial/commercial distribution, Home Depot, the world’s largest home improvement dealer, has agreed to purchase Hughes Supply, an Orlando, Fla.-based wholesaler of diversified construction, repair and maintenance products, for $46.50 per share and the assumption of $285 million in debt. This deal would translate into $3.47 billion, and represents a 21% premium over the trading price of Hughes’ stock.

Hughes Supply, which was founded in 1928, is the largest distributor of these products in North America. The company employs 9,600 people, and distributes 350,000 products to more than 100,000 customers from 500-plus branches in 40 states and in Canada. Its product categories include water and sewer, which accounted for 26.2% of its $4,066.2 billion in revenue through the first nine months of its fiscal year in 2005. Other categories include plumbing/HVAC (21.1%), utilities (16.4%), maintenance and repair (9.1%), electrical (8.9%), and building materials (5.5%). In August, Hughes Supply acquired TVESCO, which distributes transmission and electrical commercial products.

Home Depot will fold Hughes Supply into its Home Depot Supply division, which services business-to-business customers such as homebuilders, contractors, municipalities and maintenance organizations. In a prepared statement, Depot estimated, with the addition of Hughes, sales from this division would approach $12 billion. (This acquisition essentially doubles the size of Home Depot Supply, which includes companies such as White Cap and Maintenance Warehouse) The dealer estimates that the market this division serves represents a $410 billion industry.

Depot indicated that Hughes Supply’s management team, led by its president and CEO Tom Morgan, would stay on to run the company. However, it is likely that some changes are in the offing for Hughes Supply, which on October 31 hired two financial advisors to help it explore “strategic alternatives.” Through the first nine months of 2005, Hughes’ net income was only $118.9 million, or 2.9% of revenue.

The retailer said it would fund this acquisition, the largest in its 27-year history, through cash on hand and with access to debt-capital markets through its $4 billion shelf registration.

Days before this deal was announced, Home Depot disclosed that it had acquired Chem-Dry, a carpet and upholstery cleaning service provider, for an undisclosed sum. Chem-Dry, based in Logan, Utah, has about 4,000 franchises, including 2,500 in the U.S. It is being folded into Depot’s At-Home Services division (see “Companies in the news”).

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CanWel, hardware division announces details of TruServ Alliance

VANCOUVER-The alliance between hardware wholesaler CanWel Hardware and co-op retail organization TruServ Canada has resulted in some reorganization of its management teams. Tom Donaldson, president of CanWel Building Materials Income Trust, parent of the CanWel, Hardware division (formerly Sodisco-Howden Group), announced details of the reorganization last week.

“Consistent with our objective for CanWel, Hardware Division to focus on our core strength of distribution,” said Donaldson in a prepared statement, “a new organization called PRO Retail Services will implement best practices in banner management, advertising and merchandising under the direction of TruServ.” PRO Retail Services will operate from CanWel’s Montreal office under Terry Derraugh, TruServ’s vice-president of merchandising.

The alliance was created in November 2005 to parcel out the operations bundled up in CanWel’s acquisition of the former Sodisco-Howden Group. That group’s dealer base will continue to be supplied by CanWel, Hardware Division, under the aegis of Jack Van Kessel, vice-president and general manager. Activities related to distribution, including pricing and rebates, will remain under CanWel. Claude St. Louis and his pricing team will now report to Van Kessel; the rebate group will now report to Marc Fortin, director of finance. According to Van Kessel, no changes will take place with the buying teams, who will oversee replenishment from their offices in London, Ont., and Victoriaville, Que. “They stay intact within the CanWel, Hardware Division structure.”

However, negotiations with vendors will be turned over to Derraugh at TruServ, who now has CanWel, Hardware Division’s merchandising people reporting to him. They include Claude Chalifour, director of merchandising, and his team, including the marketing administrative support person, Marianne Scott.

“Essentially, they continue to do what they’ve always been doing, which is to negotiate the best deals on behalf of CanWel, Hardware Division,” says Van Kessel. “The only thing that’s different is that we’ve relinquished those management duties to TruServ, because that’s what they do best.”

Dealer development now falls under TruServ, as well, headed up by Tony DiEmanuele, vice-president, business development & growth. Bernard Pelissier, Sylvie Boisvert, Alain Di Vincenzo, Eric Lebrun and their respective teams will now report to DiEmanuele. TruServ’s own area DC in Kitchener, Ont., will continue to serve TruServ’s agricultural customers throughout Ontario that operate under the FS and Country Depot banners.

“TruServ’s core competencies are banner management, marketing, product selection and vendor selection. CanWel’s focus will continue on being the best distributor of LBM and hardware to Canada’s independent retailers,” says Donaldson.

CanWel, which converted to an income trust structure last year, is one of Canada’s largest national distributors in the building materials and related products sector, operating 17 distribution centers across Canada.

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RONA plans expansion on all fronts in ’06

BOUCHERVILLE, Que.-RONA inc., Canada’s number-two home improvement retailer, plans to open 15-20 new stores in 2006. This is almost double the number of stores it opened last year. Up to 15 of those stores will be big boxes, while at least five traditional building centers will be opened, as well. The emphasis of those traditional stores will be RONA’s new “neighborhood” concept, which takes a number of big box boutique concepts and fits them into 40-50,000 sq.ft. A store that opened last September in Richmond, B.C., was the first to implement many of these neighborhood concepts.

RONA also wants to add about $200 million to its retail sales through dealer recruitment this year, compared with $175 million that was added in 2005.

Big box stores are under way in Langford, B.C., Winnipeg, and Barrie, Ont. Other big box stores for Ontario will soon break ground in Whitby South, Bowmanville, Flamborough and London. In addition, a 50,000-sq.ft. “Neighborhood” store will begin construction soon in Collingwood, Ont.

Alberta will be the scene of openings in Spruce Grove and Winkler. RONA’s Totem division in Alberta will see construction begin soon of a new Totem Store soon in Okotoks, south of Calgary. In Manitoba, a traditional store will be erected in Winkler.

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Strober parent buys Lanoga

BOSTON-The number-three pro dealer in the U.S. is getting a new owner. Lanoga Corp. is being sold off by its parent, Laird Norton Co., to Fidelity Capital, the business development arm of Fidelity Investments. Fidelity Capital also owns the Strober Organization, the sixth largest professional building materials dealer in the U.S.

Under the new organization, Fred Marino, who heads up Strober, will become CEO of the combined operations, and share the title of vice-chair with Lanoga’s president and CEO, Paul Hylbert.

“This is a fabulous opportunity for both Lanoga and Strober,” said Marino in a prepared statement. “Lanoga’s operations are an excellent strategic fit with our current Strober holdings and will benefit the customers of both firms.”

The sale, which is subject to regulatory approvals, consists of Redmond, Wash.-based Lanoga’s 320-plus lumber and building product distribution, manufacturing and assembly centers throughout 24 Midwestern and Western states. These operate under several regional banners, reflecting Lanoga’s own efforts to consolidate the pro dealer business through acquisitions of its own. They include United Building Centers, Spenard Builders Supply, Home Lumber Co., Dixieline Lumber, and Lanoga’s latest purchase, F. E. Wheaton & Co. in the Boston area. Lanoga’s dominance west of the Mississippi is seen as a good fit geographically, with the Strober business, which has 91 locations in 15 states in the Northeast and Southeast. They operate under a number of brands, including Strober Building Supply, The Contractor Yard (bought from Lowe’s last year), and US Components.

The Lanoga purchase is being made through a newly created entity within Fidelity Capital, called Pro-Build Holdings Inc. Strober will move into this new division and, together with Lanoga, create one of America’s largest pro dealer groups, with more than 420 locations in 38 states, 14,000-plus employees, and projected 2006 revenues of nearly $5 billion. The transaction does not include Lanoga’s real estate, which will be spun out to become an ongoing business enterprise of Laird Norton.

Fidelity views the professional home improvement industry as a buoyant one, despite hints that the housing market in the U.S. may be showing signs of flagging. It is also a very quite fragmented industry, says Eileen Newman vice-president communications for Fidelity Capital. As a result, she anticipates further acquisitions by both Lanoga and Strober. “We think it’s an attractive industry. We want to continue making investments in it,” she says. “Pro-Build is a well-capitalized company and these two pro dealers have the financial clout to survive a downturn in the economy where smaller, less well-financed companies, couldn’t.”

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Kingfisher CEO will speak at conference during Cologne Fair

COLOGNE, Germany-Education and networking will play an important role in the upcoming International Hardware Fair/Practical World, March 5-7, 2006. The world’s largest hardware show will be joined this year by an executive conference of leading European and international retailers. The European DIY-Retail Association, in association with its German member association, the BHB, will host the Practical World Forum, beginning with a networking reception on March 6, followed by a morning program on the 7th.

The CEO of Europe’s largest DIY retailer will be keynote speaker at the Practical World Forum. Gerry Murphy of Kingfisher in the U.K. will speak about that company’s goal to be the best DIY retailer in the world. Also on the program: Murray Armstrong, president and general manager, Ace Hardware International; Frank Loncar, president of Global Sourcing with Lowe’s Cos.; and Horst Paulmann, chairman of Easy Home Centers, a major chain in South America.

For more info on Practical World, click here . For the Practical World Forum, click here . Or simply contact us here at Hardlines: 416-489-3396.

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Coop fédérée’s rural home improvement network garners strong growth

TROIS RIVIERES, Que.–In 2005, La Coop fédérée, through its hardware and home improvement banners, CO-OP and Unimat, saw sales grow by 8.% in spite of challenging conditions that typify the rural markets these stores operate in.

“We analyze our market conditions each year and compare them with those of other industry players,” says Claude Gingras, Coop’s general manager–Hardware Division. “We’re very proud to say that, in spite of the difference in context, we’ve performed better than other industry players.” Over the past seven years, in fact, the CO-OP and Unimat hardware network has grown by 71%.

While the Coop traditionally serviced only its own member CO-OP stores, a program introduced two years ago gives it the ability to sell to non-member retailers. Those retailers must operate under the Unimat banner, which is owned by Coop fédérée, and since the program’s inception, 10 stores have signed. Another one is expected to close early this year, with “several prospects” on the books, says Gingras.

One of the programs contributing to Coop fédérée’s growth is a boutiqued decoration centre, being installed right inside the traditional hardware store or building centre. A unique aspect of the program is that it includes a decorator on staff to provide expert service to customers. In fact, Gingras says, some boutiques are so successful that they keep three décor experts on staff. After two years, the boutique concept has been established in 12 stores. “That’s the new concept we have,” he says. “That’s our future.”

La Coop fédérée, with its network of affiliated cooperatives, is the fourth largest company in Quebec with total revenues of $5.1 billion and more than 14,000 employees.

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UFA’s ambitions not restricted to its home province

CALGARY–United Farmers of Alberta, the 35-store chain of farm and hardware stores, has rounded out its management team with the determined aim of growing the business, including a newly created position of vice-president of business development. (See also “People on the Move”–MM.)

According to Jimm Holland, who is in charge of marketing for UFA, the new team–along with a new, updated corporate logo–have been established to increase the business acumen and competitive strengths of the company. It also confronts one question: “What’s the evolution of the agri market in Canada–and how can UFA respond to that?” he asks rhetorically. The large commodity farmer dominates now, he points out, while the small acreage remains important–but with very different needs.

One way the company is responding is with innovations to its retail formula. UFA’s 35th store, erected last summer in Drayton Valley, Alta., weighs in at fewer than 6,000 sq.ft., considerably smaller than the standard UFA store, which can be up to 10,000 sq.ft. in size. It also has a smaller yard.

Holland says there’s room for more such stores. “I’m not sure how many, or how soon, but we’re testing this one to see how well the market responds to it.” Increasing the size of the chain is part of UFA’s growth strategy, and its mission statement does not restrict that growth solely to Alberta. Although there’s “nothing on the books now, we’re always looking at those opportunities,” he adds.

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Home Depot beefs up power equipment offering

ATLANTA — As it moves towards the spring selling season, Home Depot is expanding its assortment of outdoor power equipment by adding two well-known brands, one of which has long been featured in the stores of its main rival, Lowe’s.

Home Depot is introducing lawn tractors bearing the Cub Cadet and Toro brands. Cub Cadet will supply its Series 1000, RZT and Home Maintenance models, which range in price from $1,699 to $2,999. Toro will offer several lawn tractor models, including its TimeCutter Z zero-turn-radius mower. The Toro mowers will range from $1,299 to $2,599. By carrying the Toro TimeCutter Z and the Cub Cadet RZT, Home Depot will offer customers the two best-selling residential zero-turn-radius mowers on the market. And by stocking Cub Cadet, Home Depot is taking direct aim at Lowe’s, which has showcased Cub Cadet as its step-up brand for many years.

In a prepared statement, Home Depot said that these additions will supplement its existing line of lawn tractors by John Deere, whose L100 series sells for between $1,799 and $2,599. However, a spokesperson for Home Depot, Connie Bryant, says that Deere’s product would have to yield some shelf space to the other two tractor brands.

Home Depot’s supply relationship with Deere might also be changing because of the manufacturer’s own growth objectives. Deere’s chairman and CEO, Robert Lane, projected recently that his company’s commercial and consumer equipment division, whose sales were off 4% in 2005, would grow between 10% and 12% in 2006, thanks to new product introductions and a return to more normal weather patterns, as well as a full year of sales from the division’s recent landscapes-business acquisition. Lane also said Deere wants to expand its presence in the mass-retail market.

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Lowe’s in Canada: organic growth, opportunites for Canuck vendors

MARKHAM, Ont.–According to Doug Robinson, president of Lowe’s Canada, he’s not looking to buy RONA or anybody else in or order to enter Canada.

“We think the Lowe’s environment will serve [customers] here,” said Robinson at a recent breakfast seminar hosted by the CHHMA. But the stores have to follow carefully the established Lowe’s model. “We are a very deliberate company. We are a very process oriented company. We can afford to grow deliberately. So we will follow the organic path,” he said, by building new stores–not by acquisition. “Acquisitions present their own challenges,” he added, referring, no doubt, to Lowe’s acquisition in the U.S. many years ago of Orchard Supply Hardware.

Lowe’s has begun building its Canadian merchandising team, which will work closely with Lowe’s head office in Mooresville, N.C., to tailor assortments that suit the new market. Line reviews will begin this spring, and, said Robinson, he expects Canada will present reverse opportunities for vendors here. “But we haven’t been able to quantify that yet.” He says he needs to complete that first round of line reviews before he can assess those opportunities.

The world’s second-largest home improvement retailer will enter Canada with up to 10 stores in 2007, beginning in the Greater Toronto Area. Other metro markets are expected to follow, with the eventual entry into rural markets, as well, for as many as 100 Lowe’s stores in this country.

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Weyerhaeuser makes Canadian closures, layoffs

FEDERAL WAY, Wash.–A rash of closures and layoffs in Canada reflect the company’s attempts to consolidate its business North America-wide. But it does not indicate a lessened commitment to the Canadian market, says a Weyerhaeuser spokesperson.

The cuts in Canada, including more than 60 positions, mainly in sales and marketing across the country, are just part of an ongoing trend that began last year with staff reductions and closures in the U.S., reflecting an effort to “look at our competitiveness and our ability to serve our customers,” says Cathy Carlson, a spokesperson for Weyerhaeuser. And although no distribution centers have closed yet, “this may change over time,” she adds.

Meanwhile, Weyerhaeuser will focus on its core brands, including Trus Joist engineered wood, and its OSB line under the Structurwood name, while reportedly dropping other lines such as flooring.

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LP disposes of vinyl siding business

MONTREAL–Louisiana-Pacific continues to peel off segments of its operations. Its most recent divestiture found the Portland, Ore.-based LP agreeing to sell its vinyl siding business to the KP Building Products division of Kaycan, based here. That division includes two plants: in Acton, Ont., and Holly Springs, Miss.

Milton, Ont.-based KP makes and distributes vinyl and aluminum siding, trim coil and gutters. In September 2004, Kaycan expanded this business when it bought Plastmo Ltd., which makes vinyl rain gutter and windows systems. Kaycan’s president, Lionel Dubrofsky, stated that his company’s goal is to become a “one-stop” supplier for vinyl and aluminum products.

To improve its financial performance (the company’s sales and earnings through the first nine months of 2005 were off 9%) and focus its business on making and distributing oriented strand board, LP in recent years has been divesting itself of assets that included forests, lumber mills, and other manufacturing facilities. It had already classified its vinyl siding operations as “discontinued” in its third-quarter financial statement.

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Wolseley announces plans for North American HQ

NEWPORT NEWS, Va.–Wolseley plc, the British-based building products supplier, has been enticed by tax incentives and grants from the state of Virginia to build a 220,000-sq.ft. North American headquarters in Newport News.

Wolseley’s North America division, created in early 2005, includes Raleigh, N.C.-based Stock Building Supply and Ferguson Enterprises (also based in Newport News), respectively the largest pro dealer and plumbing distributor in the United States. It also consists of Wolseley Canada (formerly the plumbing distributor Westburne). These companies will continue to operate out of their current offices. In recent months, Wolseley has aggressively restarted its acquisition campaign in North America.

Construction on the new headquarters– whose costs news reports peg at between $30 million and $33 million–should begin this spring with the expansion of one of Ferguson’s headquarters buildings near Newport News’ airport. That first phase should be completed by mid-2007, and would eventually bring 400 jobs to the area. The company has stated as well that it plans to add three more buildings to this complex over the next 10-15 years.

Several news reports indicated that Wolseley chose Newport News over Raleigh, N.C., after the state of Virginia outbid North Carolina by coming up with an incentives package that included $4 million in grants. Newport News is kicking in $1.25 million in grants as well.

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Lowe’s builds Canadian buying team

MARKHAM, Ont.-Plans for Lowe’s Cos., the world’s number-two home improvement retailer, to set up in Canada are finally taking shape, and Doug Robinson, president of Lowe’s Canada, shared some details with members of the Canadian Hardware and Housewares Manufacturers Association at a recent breakfast meeting.

Lowe’s has set up temporary Canadian offices in this community, just north of Toronto, operating under the name Lowe’s Companies Canada, ULC. The area is familiar territory for Robinson. The former offices of Beaver Lumber were right down the street. Robinson headed up Beaver Lumber before it was sold to Home Hardware Stores late in 1999.

At the breakfast, he reaffirmed Lowe’s previously announced intention to open 6-10 stores in 2007, all in the Greater Toronto Area. And he did say the new stores will have their own infrastructure, rather than being supplied by any U.S. distribution centers. A merchandising team specific to Canada is being set up now, which will work closely with the merchants in Lowe’s head offices in Mooresville, N.C. The new merchandising team, which will include merchandise directors, merchandisers, and support staff, will be ready for line reviews by spring 2006.

Catherine Townshend, who has joined Lowe’s Canada as vice-president of human resources, is overseeing the hiring process. Townshend was formerly at Home Depot Canada in the same role, until about 1999. (You may remember her as Catherine Shah-MM)

The most valuable insights Robinson offered had to do with Lowe’s brand strategy. The company stands firmly behind national brands, eschewing proprietary brands that have become the mainstay of retailers such as Home Depot and Sears. “Brands are like good friends,” he said. “We want to build the Lowe’s brand by showcasing national brands.”

That brand emphasis reflects another initiative at Lowe’s: to move up-market. A program called “Up the continuum” de-emphasizes entry price points-without abandoning them-while moving to increase the overall quality of the products for customers, thereby “offering something that will last longer, perform better and give them more satisfaction,” Robinson said.

Finally, Robinson mentioned that Lowe’s will stock its shelves in Canada with fully bilingual packaging, even though the initial stores will be in the Toronto area only.

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Lowe’s, other retailers get flak for “holiday” trees

PARKER, Col.-Lowe’s was singled out recently for selling “holiday” trees that looked remarkably like, well, Christmas trees. In fact, the company evidently didn’t even try to fool its Hispanic customers, as the sign here clearly reveals. (The Spanish wording still uses the term “Christmas.”) It was a no-win situation for the world’s second-largest home improvement retailer, which quickly replaced the signs after overwhelming pressure from-mainly Christian-customers.

Other retailers have been hit with the same criticism. Both Target and Walgreen Co. have promoted a generic “holiday” shopping theme in their catalogs and promotions. Target has since revised its message, while Walgreen promises to avoid the same mistake next year.

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Home Depot makes Canadian acquisition

TORONTO-Home Depot Canada bought up another industrial supplier last week. Sesco Light is privately owned, 80-year-old supplier to industrial and commercial contractors. The deal closed Dec. 6.

Sesco will become part of Home Depot Supply Canada, a division which includes two previous acquisitions, Litemor and Brafasco. The division is headed up by Ron Turk, president of HDSC.

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U.S. backs off on softwood duties

VANCOUVER-The U.S. Department of Commerce, after a second round of reviews, has determined new rates for countervailing and anti-dumping on Canadian softwood lumber exports to the U.S. The new combined rates of 10.81% are significantly lower than the previous 20.15% levels, and will save Canadian lumber producers millions of dollars. British Columbia producers alone are expected to save approximately US$250 million a year in duties. The new rates come into effect before the end of December.

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Sears tests electronics boutique

TORONTO-Sears Canada Inc. has opened a unique boutique concept in its department store in St-Jerome, north of Montreal. The new Dumoulin Electronics boutique carries a range of computers, TVs, home theatre systems, telephones, digital cameras, etc. The boutique is staffed by Dumoulin representatives, lending a level of expertise to the department.

Dumoulin is part of Groupe Dumoulin Electronic Inc., a Quebec-based retailer with 137 corporate and franchise locations, operating under the Dumoulin and Audiotronic banners, from coast to coast. Dumoulin is also a member of Cantrex Group Inc., a buying group for independents that was acquired by Sears in April, 2005.

“This pilot store-within-a-store project is an example of the benefits that Cantrex members can enjoy, to help their business grow by being associated with Sears Canada,” said Alain Masse, president and general manager, Cantrex Group Inc., in a prepared release. “It maximizes the shopping experience for Sears customers and provides additional revenue for Dumoulin.” If the experiment is successful, Dumoulin boutique locations will be installed at additional Sears locations. The Dumoulin specialty could even be added to the Sears catalogue and Sears online within the coming year.

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