Castle names new vice-president

MISSISSAUGA, Ont.–Castle Building Centres Group has completed its search for a new executive within its ranks. Ken Jenkins has been named vice-president, effective Monday, March 27, 2006.

Jenkins was formerly at CGC, most recently in charge of the development, negotiation and management of that supplier’s national customer buying programs. He will report to Provan Wylie, president of Castle, in a role that is being considered a succession position to the president’s job. Jenkins will work alongside Wylie over the coming months as the incumbent prepares for retirement.

In a prepared release to members last week, Wylie pointed out that Jenkins’ appointment “was the unanimous choice and has the full support of the board of directors.”

In his new role, Jenkins will be responsible for the leadership and direction of marketing and growth. This will include the responsibility for specific objectives to market products to Castle members to grow their existing businesses, as well as growth through the acquisition of new members.

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Dealers pick up Castle’s new look

MISSISSAUGA, Ont.–A new store design and image program for Castle dealers is quickly evolving past the prototype stage, as dealers line up to adopt the new look for their own operations.

The program, which extends to everything from retail footprint, colour scheme, displays and signage to building design and yard layout, was first installed in the Castle outlet in Windsor, Ont. But that store is larger than the average Castle outlet (at 24,000 sq.ft.). Now, a second store is close to completion, this one in Sturgeon Falls, Ont. The 8,500-sq.ft. store is more typical of the buying group’s membership, and gives them a clear template for their own stores.

The program was developed by Burlington Merchandising Group, a store design and branding team that includes ex-RONA vice-president Rob Wilbrink and Phil Dwyer, former director of operations for RONA Cashway. The program aims to provide a cohesive look to the Castle brand, while enabling individual member stores to retain those features of their operations that suit them to their respective markets. BMF is also doing work outside the home improvement industry, including developing new Nike departments inside 10 SportChek stores across Canada.

The Sturgeon Falls Castle store will have a grand opening in May, and other stores will follow in rapid succession, says Wilbrink. A ground-up store in Morinville, Alta. will open later this week, followed by a number of new and existing stores that will all begin re-merchandising by the fall.

“We have close to 50 stores that have signed on to the program and I’m sure that as the dealers see what we’ve done in Sturgeon Falls, more will want to sign on,” he adds.

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TIM-BR MART’s consolidation creates $2 billion buying machine

CALGARY–Consolidation over the past year within the ranks of Canada’s LBM buying groups has put one group firmly on top. TIM-BR MARTS Ltd. has managed to combine the operations of three other groups–TIM-BR MART Ontario, AWARD in Atlantic Canada, and a relatively new group for gypsum supply dealers called The Signature Group–within the past two years. The result is a behemoth that now represents close to $2 billion in building materials sales annually.

But TIM-BR MART has not stopped there. It has also forged deals with other groups, including a supply agreement with CanWel, Hardware Division. Another alliance, with rival buying group ILDC, finds it negotiating alongside a competing organization. Nevertheless, both sides consider the new group, Independent Hardware Dealers Association, to be nothing less than a play to strengthen the independents as they compete against the likes of Home Depot and RONA.

As a result, TIM-BR MART’s director of purchasing for hardware and building materials, Randy Martin, believes the industry needs to understand the weight of TIM-BR MART’s presence in the industry and the ins and outs of its partnership under IHDA. That’s why Martin will speak at the upcoming Meet the Buyers Seminar being held in Toronto by HARDLINES.

“Given the way TIM-BR MART has evolved over the past several months, we believe it’s important that we are present at this Meet the Buyers to explain how we go to market,” says Martin. He adds that vendors need to recognize the power of the independent in home improvement retailing. “The combined sales of TIM-BR MART dealers this year should reach $1.7 billion,” he says, to underline his point.

The date of the HARDLINES Meet the Buyers Seminar in Toronto is April 3, 2005. For more info, click here or contact Isabel Bisong at the World Headquarters: isabel@hardlines.ca.

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CanWel’s sales grow despite weak commodity market in ’05

VANCOUVER–CanWel Building Materials Income Fund reported its results for the three-month and full year periods ended December 31, 2005. For the fourth quarter, revenues increased by 61% to $205.5 million, from $128 million for the same period in 2004. Gross margin for the quarter was 12.3%, or $25.3 million, versus 9.0% or $11.5 million in 2004. (For year-over-year comparison purposes, fiscal 2005 results include the effect of the acquisition of Sodisco-Howden Group in February 2005.)

For the twelve-month period, revenues increased by 68% to $1.0 billion, compared with $598 million in 2004. During the period, the Fund’s percentage of sales of lumber and panel products increased by 8.5%, but decreased as a percentage of total sales from 63% to 41% in 2005. This sales increase was accomplished despite the average price of lumber decreasing approximately 13% and the average price of panel products decreasing approximately 25% in 2005. Specialty and hardware product sales also increased on a year-over-year basis to $593 million, representing a 167% increase.

“Despite the weak commodity environment in 2005, we managed to grow the top line, and fully integrate the Sodisco-Howden acquisition,” said Tom Donaldson, president and CEO of CanWel Building Material Income Fund. “We have completed all the necessary realignments and created an efficient, scalable infrastructure which will allow CanWel to better leverage its position as a leading national distributor of building materials.”

Gross margin for the year was 10.2% or $102.1 million versus 10.0% or $59.6 million in 2004. The lower than expected gross margins on lumber and panel products, increased one-time expenses associated with the trust reorganization, and costs associated with the Sodisco-Howden integration combined to reduce operating earnings to $18.1 million compared to $19.5 million in fiscal 2004.

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True Value asks what’s in a name?

CHICAGO–The dealer-owned buying group True Value Hardware is banking on a new slogan and branding program to re-position its members’ stores against big-box competition.

In what its CEO, Lyle Heidemann called “a new start,” True Value has launched a marketing campaign with the goal of raising its dealers’ profiles with DIYers, and getting them to shop in those stores more frequently. The campaign offers a national advertising program with a new tagline, “True Value: Start Right. Start Here,” that will support local marketing and promotional efforts.

“We’re trying to now not [just] survive but in essence put together a strategy for growth,” Heidemann told the Associated Press in an interview at True Value’s headquarters. “The biggest difference is that we’re focused on retail versus wholesale.” He went on to say that the company’s marketing will be geared toward winning home-repair and small-project customers away from larger retailers such as Home Depot and Lowe’s. To do that, the company will emphasize its members’ product assortment, convenience and lower prices.

Time will tell how True Value’s latest marketing program will differ from what’s already in place, but the co-op apparently will place considerably more emphasis on its private-label and proprietary products. In an address to members at the co-op’s recent buying show in Houston, its chief merchant Steve Mahurin (a former Home Depot exec), noted that the company continues to review all category lines with an eye toward reducing wholesale prices to its membership. In several cases, that’s meant bringing on imported lines that members can sell under the co-op’s brands.

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Home Depot to fund eco-wood registry

ATLANTA–The Home Depot Foundation, the philanthropic arm of Home Depot, has awarded the Forest Stewardship Council a two-year grant of $380,000 to develop a “global forestry registry” that would help companies selling wood products to find sources that are harvesting forests in a sustainable manner.

However, the announcement’s timing is somewhat vexed: a report has come out almost simultaneously uncovering practices by both Home Depot and Lowe’s to sell illegally harvested hardwood.

Nevertheless, since 1999, Home Depot has been striving to purchase wood products that come from suppliers practicing sustainable harvesting practices outlined by FSC. The weight that Home Depot threw behind this effort eventually prompted most of its major competitors to make changes in their own wood-purchasing policies.

“The global forestry industry has made tremendous strides during the past several years, and the development of this global registry clearly is the next step in ensuring socially responsible procurement,” said Ron Jarvis, Depot’s vp-merchandising, in a prepared statement.

However, the industry’s appetite for lumber isn’t always sated in environmentally friendly ways: a report published last week by the Environmental Investigation Agency and its partner in Indonesia, Telepak, accused Home Depot and several other dealers, including Lowe’s, of selling a wood flooring called merbau, harvested from rainforests in Indonesia’s Papua province, that is logged illegally and trafficked by criminal syndicates into the U.S.

Home Depot Canada discontinued selling the Indonesian merbau more than a year ago.

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Labor shortages hamper construction industry

SPECIAL REPORT–Shortages of skilled trades in developed countries are putting pressure on building and renovation activity. And it’s being felt in nations as far apart as the U.K. and Canada.

Efforts by DIY retailer B&Q to expand its range of installed services has it looking to Poland for manpower. B&Q, which is part of Kingfisher plc, is the U.K.’s largest DIY home improvement retailer. It already offers kitchen and bath installations, and has recently added painting and decorating to its service offerings. However, a shortage of experienced workers is making the program tough to execute. Therefore, it would like to bring in thousands of them from Poland–a move that has domestic trades up in arms.

In Canada, builders have opposed a proposed move by the federal government to crack down on illegal immigrants. According to the Toronto Star, workers, many of them illegal, from Portugal and other countries, are proving vital to the country’s burgeoning building industry.

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Lowe’s packaging requirements affirm commitment to Canadian expansion

COLOGNE, Germany–Vendors supplying the world’s second-largest home improvement retailer have the company’s commitment to international expansion and an extra hurdle to being fully compliant. Frank Loncar, President of International Sourcing for Lowe’s, revealed this, and other insights about the world’s second-largest retailer, at the Practical World Forum, held here recently during the International Hardware Fair/Practical World.

The Forum itself hosted a gathering of some of the world’s top retail executives to hear the latest on international growth strategies. Besides Lowe’s, other retailers represented on the podium included Easy Home Centres, the largest home improvement chain in South America, and Kingfisher, the world’s number-three player after Lowe’s.

Loncar revealed how Lowe’s structures its relationships with vendors to ensure the kind of performance that boosted the company’s sales by 18.6% last year to US$43.2 billion. He started off by stressing the importance of import business, which he expects to grow by 13-14% this year. Already, its contribution to total sales–26.7%–is double the company average. Imports from the Far East accounted for 9.25% of sales last year, and is expected to reach 10.24% in 2006.

“Roughly 45% of the products sold in Lowe’s are made outside of the country, even if the manufacturer is domestic,” Loncar said. So how do vendors fit in with that offshore scenario?

“The four components we expect from our key suppliers are innovation, differentiation [from other companies], simplifying the shopping experience, and creating value–what makes shopping at a Lowe’s store a compelling opportunity; what makes the customer want to drive past the big orange box to come to us.”

Loncar told HARDLINES that Lowe’s now insists on trilingual packaging, a move that reflects the company’s commitment to Canada by adding French to the existing English and Spanish.

Practical World Forum was put on by the European DIY Retail Association, the German DIY association BHB, and Koelnmesse.

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Crack the buying group Da Vinci Code at Meet the Buyers

WORLD HEADQUARTERS–Quiz: What do TruServ Canada; CanWel, Hardware Division; TIM-BR MART; ILDC; SpanCan; and IHDA have in common? If you are like a lot of vendors watching Canada’s key groups shift and consolidate, you want answers to build your sales. That’s why the alliance of TruServ Canada and CanWel, Hardware Division, called Pro Retail Services, will participate in the upcoming Meet the Buyers Seminars, with a full complement of buyers at both locations: Toronto and Montreal.

The Montreal Meet the Buyers Seminar is being held April 5, 2006 in association with Donald O’Hara of the Quebec building materials association, ADMACQ. This event is quickly gaining momentum as the lineup of buyers keeps growing. Claude Chalifour, senior director, merchandising, CanWel, Hardware Division, will present, and be joined by Leslie Cunningham, category manager, seasonal; Stephan Fradette, category manager, plumbing; and Louise Bergeron, category manager, electrical. Chalifour, Fradette, and Stephane Picard, category manager, hardware and fasteners, will also sit in on the Toronto session, on April 3. They will support Tony DiEmanuele, vice-president business development and growth for TruServ Canada.

BMR Le Groupe, which is aggressively expanding its reach in an effort to become a national buying group and wholesaler, will feature Dunc Wilson, director, who overseas hardware buying, presenting in Toronto. But he’ll be joined by Christian Nadeau, director, who is in charge of LBM purchases for the group. In Montreal, Nadeau will present and Wilson will sit in.

Also at this year’s Meet the Buyers Seminar in Toronto: Eric Cantin, Merchandiser for Paint, RONA inc.; and Gino Digioacchino, Director of Merchandising Hardlines, Home Depot. In Montreal, Roger Plamondon, vice-president, Canada East, Home Depot Canada (shown here); and RONA’s Eric Cantin.

To sign up for Meet the Buyers, contact Isabel here at the World Headquarters: 416-489-3396, or Isabel@hardlines.ca.

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Lowe’s to extend its distribution network

HENDERSON, Colo.–Lowe’s Cos. plans to spend between $10 million and $15 million to retrofit a former Transportation Management Services distribution facility that the retailer plans to use as a distribution center of its own serving more than 45 stores it operates in the western U.S.

The Mooresville, N.C.–based retailer has started retrofitting the 200,000-sq.ft. facility, which is on 19 acres, and expects to start shipping products from it to its stores by July. According to a prepared statement, the flatbed center will receive rail and truck shipments of lumber and building materials that will be quickly loaded onto flatbed trucks for shipment to stores in Colorado, Wyoming, South Dakota, Utah, Idaho, Montana and New Mexico. The Colorado DC will represent Lowe’s 14th flatbed facility in the U.S.

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Sears Holdings off marginally in 2005

HOFFMAN ESTATES, Ill.–The combination of Sears and Kmart has yet to ignite sparks on the balance sheet of Sears Holdings, the corporation formed by that merger, which occurred a year ago and now includes 2,300 full-line and 1,100 specialty stores in the U.S., and 370 full-line department stores in Canada.

In its fourth quarter, profits more than doubled to $648 million. Other results were more mixed: revenue dropped to $16.1 billion in the quarter, from $16.8 billion a year earlier. Same-store sales dropped by 12% at Sears stores, and were up only 0.9% at Kmart stores even though that marked the first increase in same-store sales in four years.

In a pro-forma statement that aggregates the two companies’ financial reports for the last two years, Sears Holdings said that its revenue for the year ended Jan. 28, 2006 fell by 3% to $54.26 billion. The company’s combined net income for the year was down 10.7% to $789 million.

As of Jan. 28, the corporation had $31 billion in assets and $12 billion in equity. Its total debt, excluding capital lease obligations, was $3.2 billion, and its inventory was valued at $9.1 billion, down slightly from $9.3 billion in the same period a year ago.

The company also cut back on its capital expenditures, which totaled $546 million in fiscal 2005, from $1.1 billion for the two companies in 2004. But in December, Sears Holding agreed to acquire the remaining 46% in Sears Canada it didn’t own already. Its takeover bid started in February 2006.

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New study pegs size of lumber wholesale industry

There are 5,500 lumber wholesalers in the United States that, in 2005, generated a combined US$65 billion in revenue, according to a new quarterly report on that industry sector that’s recently been made available by Research and Markets, a Dublin, Ireland-based company that touts itself as the world’s largest market research source.

The 10-page report, which is being sold for 138 euros (US$167.70; CD$193.26), notes that the industry’s 60 largest wholesalers led by the 63-branch Georgia-Pacific with annual sales exceeding $100 million, control about half the market. The report also notes that about 900 of these companies generate more than $10 million in sales per year.

Lumber wholesalers of all sizes have benefited mightily from the growth in new-home construction, which hit another record level in the U.S. last year.

More information about the report is available at http://www.researchandmarkets.com/reports/c34418.

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New halls, new products, new exhibitors at Cologne hardware show

COLOGNE, Germany–A one-year hiatus for the International Hardware Fair, aka Practical World, appears not to have lessened the momentum of the event. In fact, a number of the 3,500 exhibitors report that the year off has only increased the desire of buyers to come back to the 2006 show, which ran March 5 – 8. Those buyers, and other visitors to this year’s event, were expected to number about 70,000.

The makeup of the exhibitors changed somewhat, however. While core categories of hardware, hand tools, and DIY building materials were still present in abundance, the bath category appeared smaller, and lawn and garden were virtually non-existent. A large variety of new categories, which reflect the wider range of products being sold in the hardware and home improvement channel, were there instead. These include furniture, both ready-to-assemble and finished, plus organization and storage products, office products, and accessories for the home electronics market.

Once again, the large power tool makers refused to join the event, as they did elsewhere. “Yes,” admits Hans Kampen, product manager for Practical World, “the big names, like Bosch, Black & Decker, and Metabo, did not show, but nor have they shown up at any of the large fairs around the world.” Nevertheless, says Kampen, the Hardware Fair remains an important showcase for “small and medium-sized companies that can make contacts to do business.” Names such as Freud, Rockwell, Femi, and Workx were there, along with a broad range of power tool accessories companies.

Koelnmesse, the trade fair organization that owns both the Hardware Fair and the exhibition grounds themselves, has been busy over the past 13 months refurbishing the facility. Formerly 14 massive halls nestled along the east bank of the Rhine, directly across the river from downtown Cologne, a number of the buildings have been sold off and replaced by 11 even larger halls, with higher ceilings and more open sight lines.

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The Asian factor at Cologne

COLOGNE, Germany–If the mix of products at this year’s Practical World more varied than ever before, so was the international nature of the exhibitors themselves. Countries represented include Spain, Denmark, Poland, Sweden, Great Britain, and the U.S. As with the show two years ago, the largest contingent came from the Far East, with more than 600 companies from China and more than 500 from Taiwan represented.

Vendors in the 2004 show were rankled by the prevalence of companies from this part of the world, so to assuage European and North American companies, the Asians were grouped in two halls of their own this year.

Nevertheless, the firms remained popular with buyers, agents and other vendors, all looking for low-cost sourcing. And while the extravagant booths of giant companies such as Black & Decker and Bosch were conspicuous by their absence, Asian companies that supply the product for many of these giant brands all lined up in more modest stands.

Take Angie Chen, Manager, from Gen-Year Industrial Co., Ltd. She and a colleague were minding a mere 10-ft. booth. Yet her company, which has factories in China, Taiwan, and Malaysia, already supplies private label to the likes of Lowe’s and Home Depot in North America, and Praxis in the Netherlands, among others.

With three factories and some 4,000 employees, Chen believes her company’s success depends on offering the lowest price and the best quality possible. Western companies seem to agree; while HARDLINES was interviewing Chen, a North American representative from a major U.S. tool company came by to inquire about private label.

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Home shows are big for Home Depot’s Canadian installed business

TORONTO–When Home Depot recently hosted an education forum for 1,000 installers from across Canada, the centerpiece of the event was a showcase of home installation products featuring 40 vendors whose products are part of the installed services offered by Home Depot.

According to Mike Clements, Manager of At Home services for Home Depot Canada, the home show phenomenon is much more popular in Canada than it is in the U.S. That’s why Home Depot is making these venues an integral part of their strategy to promote installed services to homeowners.

The installed services showcase features booths and boutiques of everything from hot tubs and millwork to windows and doors. Right after the education forum for the installers was held, the showcase was torn down, loaded into containers, and shipped to Vancouver, for a home show in that city. Other cities on the tour this spring include Montreal, Calgary, and Winnipeg.

“In the U.S., consumers don’t go out to home shows,” said Clements, “but it’s different here. These shows are where Canadians get trends, ideas, and fashion updates.”

Home Depot Canada’s marketing efforts to the installers and contractors themselves is also paying off. The retailer’s network of installers now extends from coast to coast. “We’re attracting the best contractors,” said Clements. “They’re coming to us, whereas we used to have to go out and get them.”

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Attendance up at LBMAO Winter Buying Show

MISSISSAUGA–Attendance at the Lumber and Building Materials Association of Ontario (LBMAO) Winter Buying Show in February grew over 25% from the previous two years.

With the show falling on Friday and Saturday, there was more action on the floor, for both retailers and exhibitors, and orders increased by more than 35%. “The amount of orders placed this year validates our reputation as the buying show in Ontario,” said Dave Campbell, President of the LBMAO.

Retailers were enticed with $20,000 given away in cash draws. Dealers from Northern and Eastern Ontario were brought in on hospitality buses.

“The initial feedback on our buses has been nothing but positive,” said Greg Drouillard, Chair of the LBMAO. “Our continuing goal is to keep the wishes of our Northern and Eastern retailers in mind and do all that we can to ensure their trip to London is a beneficial one.”

The 2007 show will run Feb. 2 – 3 in the Progress Building at the Western Fair Grounds in London, Ontario.

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Ainsworth reports net declines for 2005

VANCOUVER, B.C.–Ainsworth Lumber, the largest supplier of concrete-forming panels in North America, saw its net income fall by 12.5% to $153.2 million for the fiscal year ended Dec. 31, 2005. The company’s revenue during that period grew by 37.2% to $1.25 billion.

In its financial statement, Ainsworth said that its average selling price of OSB during 2005 was 10.2% lower than in 2004, while the volume of OSB shipped in 2005’Äîwhen it produced 3.2 billion square feet’Äîincreased by 58.5%. Ainsworth became the fourth-largest OSB supplier in North America following its acquisition, in 2004, of three plants from Potlatch. Company officials told HARDLINES that Ainsworth plans to open another OSB mill in Alberta in March 2007.

Last week, the company disclosed that it had been named in a lawsuit, filed in U.S. District Court in Pennsylvania. The suit alleges the supplier violated antitrust laws in the United States in an agreement to fix prices and reduce its supply of oriented strandboard from June 1, 2002. The company denies the allegations.

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Broadband home improvement channel launched in U.S.

ORLANDO, Fla.–A video-on-demand broadband network for home improvement programming and information will be available to subscribers this fall.

MultiChannel Ventures, which produces and distributes video programming, has developed two broadcasting networks’Äîone called the Real Estate Channel, the other the Home Improvement Channel’Äîfor what’s known as Internet Protocol Television. A recent study by the research firm PriceWaterhouseCoopers projected that IPTV’s subscriber base would expand from 1.3 million this year to 38 million in 2010.

The two networks would allow subscribers to search for content on demand in both business sectors by subject categories or geography. Some of that content will look like traditional TV programming, with some produced by service providers and retailers. Each network is expected to have interactive features, and its programming could be received by anyone with an Internet-enabled communications device.

“With the explosive growth of broadband over the last three years, the ability to stream high-quality full-screen video content to consumers with Internet Protocol Television or IPTV is now becoming a reality,” said Michael Gerrity, MultiChannel Ventures’ chairman.

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Home furnishing, building material sales expected to grow in ’06

Fourth-quarter retail growth in 2005 slowed to 5.4%, down from 7% in the previous two quarters, according to a new report by Kubas Consultants. The report notes that while the retail sales trend is moving downward, sales in home furnishings, are expected to do well this year. Building materials, garden equipment and supply sales are projected to grow by 8.4% this year. For more information, visit www.kubas.com.

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Events will add to buzz at Las Vegas hardware show

International Forum will unite international delegates: Once again this year, HARDLINES will host the International Conference segment of NHS’s conference series, in association with Presidents Council. A representative from one of the leading retail organizations will share his or her insights into the future of the retail home improvement industry. What are the retail trends, economic influences and consumer preferences driving this industry into the next decade? Whether you are trying to grow your business internationally or just sharpen your operations locally, you’ll want to be part of this important international forum. Wednesday, May 10, 3:00-3:45 p.m.

International Reception: The International Forum will be followed by a HARDLINES International Reception, where you’ll have a chance to rub shoulders with some of the world’s top international retailers and suppliers. Wednesday, May 10, 3:45-4:30 p.m.

Women and DIY: What do women want-and where do they go to shop for it? Beverly Allen, Vice-President Sales & Marketing for HARDLINES, will present findings from a survey conducted by ACNielsen on our behalf. For anyone who missed this important presentation at last year’s HARDLINES Conference, this is your chance to gain insight into the most important customer segment in today’s home enhancement industry. Thursday, May 11, 10:00 a.m.

For more info or to register, click here.

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Lowe’s reports strong growth in ’05

MOORESVILLE, N.C. – Lowe’s Cos., the industry’s second-largest retailer, reported a 27.3% increase in net income, to US$2.771 billion, for the fiscal year ended Feb. 3, 2006. During that 12-month period, Lowe’s revenue rose 18.6% to US$43.243 billion. Sales from stores opened a year or more increased 6.1%, the third consecutive year that the company’s same-store performance was 6% or better.

The company’s 37% increase in fourth-quarter profit, to US$695 million, was its highest gain in three years. For the full year, the company’s gross margins, as a percentage of sales, rose to 35.14% from 34.96% in 2004.

Company officials pointed to three areas – installed sales, special orders and its business with commercial accounts – as the company’s primary sales drivers last year. Installed sales alone increased by 22% to US$2.6 billion. In addition, Lowe’s opened 63 stores in 2005, bringing its total for the fiscal year to 1,234 units in 49 states, and 140.1 million sq.ft. in retail space, representing a 13.2% increase over fiscal 2004.

Lowe’s expects to sustain its growth in 2006, when it projects that it will open 155 stores that add another 12% in retail square footage to its portfolio. The company expects its sales to increase by between 13 and 14%, and same-store sales to grow by 5 to 7%.

Source: company reports

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RONA plans big investment in acquisitions, recruitment in 2006

BOUCHERVILLE, Que.’Äì-RONA inc. has aggressive expansion plans for the coming years, and store construction, affiliate recruitment and acquisitions all figure into the mix. The anticipated result, says RONA CEO Robert Dutton, is sales growth by all dealers in the RONA network in excess of $7 billion by the end of 2007. Retail sales in 2005 reached $5 billion.

RONA plans to invest $310 million to build almost 20 stores in 2006 and plans the same number in 2007, bringing the total number of corporate and franchised stores to over 200 by the end of 2007. Half of these stores will be big boxes, while the others will be either “proximity” or specialized stores, i.e., RONA Home Centres or RONA Building Centres. Already this year, 14 stores are under development, mainly in Ontario and Western Canada, nine of them big boxes. In all, RONA plans to add more than two million sq.ft. of retail space within two years.

It also plans to invest in existing stores. Following the renovation of 117 stores last year, $40 million will be invested in 122 corporate sites, in keeping with a strategy to renovate approximately 20% of its network each year. Installations will get a lot of attention this year, with the service being added to almost all RONA big-box and proximity stores. Initially, services will be restricted to kitchens, doors, windows and floors.

Canada remains highly fragmented, says Dutton, with 6,000 independent dealers and “dozens of quality businesses” that may be ripe for acquisition. These may include not just traditional home improvement retailers, but related specialty retailers and distributors. RONA wants to increase its dealer base here by $400 million in retail sales over the next two years. In 2005, RONA increased its retail sales by $300 million through acquisitions, of which Totem Building Supplies in Alberta accounted for $250 million. Already, this year, RONA has announced the acquisition of two chains, Matˆ©riaux Coupal and Chester Dawe, which will boost retail sales by another $205 million.

RONA will also invest $35 million in its distribution system in 2006, with the addition of 250,000 sq.ft. to the Boucherville warehouse, bringing its total size of to 900,000 sq.ft. A 380,000 sq.ft. cross-docking facility is being built in Terrebonne, in the Montreal area, to handle containers of imported products.

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Declining housing starts weaken construction industry profits

OTTAWA’Äì-Strong non-residential and engineering construction in 2006 will offset a long-anticipated decline in housing starts to maintain industry profits this year, according to the Conference Board’s Canadian Industrial Outlook: Canada’s Construction Industry’ÄìWinter 2006.

“Housing starts appear to have peaked in the second quarter of 2005,” said Louis Theriault, director, Industrial Outlook. “Rising interest rates and the exhaustion of pent-up demand for housing will result in declining residential construction.

The good news over the short term, Theriault added, is that lower vacancy rates and rising commercial and public spending-along with solid employment growth-are bolstering non-residential construction. “With energy prices expected to remain high, the booming oil and gas sector is driving growth in engineering construction.”

Industry profits rose 55% in 2005 to a record $2 billion. Profits are expected to again surpass $2 billion in 2006, but both material and labor costs are on the rise. As a result, costs are forecast to increase faster than revenues this year and next. Profit levels will weaken in 2007 and will range between $1.4 billion and $2 billion annually through 2010.

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Atlantic show “raises the bar”

MONCTON, N.B.’Äì-Confronted with growing entrenchment of dealer services and buying within the ranks of retail co-ops and buying groups, the Atlantic Building Materials Show remains the best venue for buying in Atlantic Canada. However, that role does not come without its challenges. According to Don Sherwood, president of the Atlantic Building Supply Dealers Association, which owns and operate the show, a number of steps have been taken this year “to help raise the bar.”

The show, being held March 23-25 in Moncton, should offer more ways to help dealers be successful besides show specials, says Sherwood. Technology is one front that the show is expanding this year. Communications technologies, such as cell phones that can double as walkie-talkies, have great potential in lumber yards and fleets. “It’s really ideal for dealers’ trucks, because there’s no cost for using walkie-talkies,” Sherwood points out. “But dealers need to know about it.”

One idea that has proved successful in years past will get reprised at the upcoming show. Retail buyers will be able to walk the show before the doors open, giving them the opportunity to meet with vendors in a private, one-on-one scenario. The show, says Sherwood, will also be a showcase for the various banners and buying groups as they vie for new members.

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Lanoga to acquire Wolohan Lumber

WINONA, Minn.-The need for a broader capital source to provide services to an increasingly demanding builder customer was the primary motivation behind the decision of officials at Wolohan Lumber to sell their company to Lanoga Corp.

The Redmond, Wash.-based Lanoga proposed last week to acquire Saginaw, Mich.- Wolohan Lumber, a 42-year-old company that operates 18 locations in three Midwestern states. The deal, which should be completed by the end of this month, will combine Wolohan with Lanoga’s United Building Centers division, based here. The result will be a 200-location operation that is expected to add $140 million in annual sales to UBC this year and give it a stronger foothold in Michigan, Indiana, and Ohio. The terms of the agreement were not disclosed.

In a prepared statement, Paul Hylbert, Lanoga’s CEO, welcomed Wolohan’s team of 400 employees to his company. In an interview with HARDLINES, Wolohan’s president and CEO, Jim Wolohan, and COO John Sieggreen, said they wouldn’t be involved in the daily operation of their company after the acquisition is completed, but would serve as consultants for an unspecified period of time.

In that interview, Wolohan said his company, while profitable, needed a better-financed partner “to take our enterprise to the next level. When you look at how the industry is moving forward, things are accelerating rapidly, and we’d need to make a commitment in capital to [expand] value-added services and technology. There are things that a multi-billion-dollar company like Lanoga can do that a company like Wolohan Lumber can’t.”

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Spending will stay strong in Quebec

MONTREAL’Äì- Retail sales in both Quebec and Canada showed significant growth in 2005 for the tenth consecutive year. According to the latest annual study by the Retail Council of Quebec, retail sales in the province increased by 6.2%, to $83.1 billion. In Canada, sales increased by 6.3%, to $368.7 billion.

Low interest rates, relatively stable inflation, and job creation kept consumer confidence up, says the report, especially in sectors such as home furnishings (15%), furniture (5.9 %), and home improvement (11.9%). That growth is closely linked to the vitality of the construction sector, new construction starts, and residential real estate in Quebec in 2005.

Quebec households saw their personal disposable income grow from $21,631 in 2004 to $22,261 in 2005. The disposable income of Canadians was $24,067 in 2005. The gap in disposable income between Quebec and Canada was ’Äì7.5%.

The Canadian and Quebec economies will continue to grow in 2006 and consumers should see an increase in their personal disposable income. Job creation is also expected to grow, but at a slower rate. While a slight decline in the unemployment rate is anticipated, inflation should remain stable.

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Barbecues top list of luxury home enhancement expenditures

STEVENS, Pa.-Luxury consumers are investing in their homes in unprecedented numbers, says a new report. According to Pam Danziger of Unity Marketing, about two-thirds of luxury consumers were involved in major home redecorating or remodeling projects in the past year and even more, 69%, have plans for major home work in the coming year.

When it comes to the luxury appointments in their homes, the most popular indoor luxury is a fireplace, either wood or gas-burning, a feature in 65% of affluent consumers’ homes. Fireplaces are followed by home offices (64%) and whirlpool baths, indoor spas and/or steam rooms (34%).

Outdoors, luxury barbeque grills are the top luxury home appointments, owned by some 70% of luxury consumers, followed by patio and outdoor lighting (49%) and luxury patio and lawn furniture (38%).

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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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