| BMR HOSTS GRAND OPENING OF NEW DISTRIBUTION CENTRE |
 LONGUEUIL, QC — Le Groupe BMR Inc. has thrown its hat squarely into the hardware distribution ring with the inauguration of its newly expanded warehouse here. Almost 1,000 people were on hand yesterday for the grand opening of the new facility, which represents a $5 million investment by the co-op wholesale buying group to expand its existing LBM distribution centre. About 65,000 sq.ft. have been added, for a total of 120,000 sq.ft. This new warehouse already carries almost 15,000 SKUs of hardware, and supports an existing LBM facility in St-Augustin-de-Desmaures, near Quebec City.
 Formed in 1967, BMR now serves 123 building centres in Quebec, eastern Ontario and northern New Brunswick. According to the group's president, Yves Gagnon, the move to add hardware to its traditional mix of lumber and building materials began in 1997 with an initial investment of $3.2 million. "We decided to go as an integrated group, with one distribution centre providing both building materials and hardware for all our members," he says.
BMR has been aggressive in its effort to establish itself as a player in hardlines distribution in Canada, a move that has raised many eyebrows in the industry, especially given the consolidation that has occurred at the wholesale level in recent years. BMR is part of the umbrella buying group Matreco, and Gagnon admits he has been talking with both Don Nash, president of Tim-BR Mart Ontario (Homecare) and Tom Smith at AWARD in Atlantic Canada about supplying the hardware supply needs of dealers outside the BMR ranks.
Though he won't comment on the possible opportunities with other Matreco members, Gagnon is excited about the expansion strategy. "I think this will be a great opportunity for BMR, especially with what's going on in the marketplace."
BMR's growth, with its expansion into hardware, has been significant. It's gone from billing $150 million through the group in 1997 to $287 million in 2002. Gagnon says the group is up 35% already this year, and expects BMR's billings to reach $400 million this year. During the same time, the group's head office staff count has grown from 42 to 168.
Part of that growth, he admits, has come from the acquisition of Montreal-area chain Matco Ravary earlier this year, which has added about $66 million in sales through six stores.
In 2002, annual sales by Matreco Members exceeded $2.5 billion from coast to coast, an increase of about 15% over 2001. |
| COMPETITION BUREAU APPROVES RÉNO-DÉPÔT BUYOUT BY RONA |
| BOUCHERVILLE, QC — With approval by the Federal Competition Bureau, received last Thursday, Rona Inc. completed its acquisition of Réno-Dépôt last week from British-based parent, Kingfisher plc. With combined sales now of almost $3.7 billion, Rona is the number-two home improvement retailer in Canada, right behind Home Depot Canada.
The third-largest player is Home Hardware Stores Ltd. With almost 1,000 stores across the country, total combined sales by all its dealers in 2002 reached 3.48 billion. According to a new Hardlines report, the top four retailers in the sector account for more than 45% of the business in Canada. |
| GALLI BUILDING NEWELL RUBBERMAID ON ITS STRONG BRANDS |
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MISSISSAUGA, ON — On September 1 Newell Rubbermaidannounced its quarterly net income had fallen year-over-year from US$88.6 million to US$73.8 million.
 Two days later, the news didn't seem to affect the performance of Newell's CEO, Joseph Galli Jr., as he headlined the Hardlines Marketing Conference. Galli enthusiastically described the growth strategy of the company that has, over the last century, grown from a humble manufacturer of curtain rods into a huge multi-national company whose high-profile brands include Burnes picture frames, Irwin, Calphalon, Sharpie pens and its most high-profile acquisition, Rubbermaid.
Perhaps it was the fact that the sales of Calphalon products, Sharpie pens and Irwin hand tools were up 22%, 22% and 10% respectively – pushing overall sales up 4.3% in the quarter to US$1.97 billion that prompted Galli, who honed his skills at Amazon.com and Black & Decker, to speak so assuredly of the company's future success.
Newell's growth has been built on the 200 acquisitions the company has made in the last 20 years. This growth, said Galli, has engendered a new global culture that reaches across the organization.
"There's been a geographic change," Galli told the crowd. "We used to be a U.S. company with outlets, and executives in their twilight years would be rewarded with the management of a foreign office. Now we have strong teams in each location."
Suggesting that regarding products as commodities is an obsolete mindset, Galli said that Newell Rubbermaid is moving forward by creating new business models and investing in the development of interesting "gotta-have" consumer brands.
Developing more useful products and compelling sales promotion means the company won't have to chase the price point, said Galli. Higher prices haven't hurt the company's Sharpie pen line, sales of which have risen 20% this year over last.
"For some items, it's not strategic to go with the lowest price," said Galli. "People remember what they paid for a pen for about five minutes, but they remember the performance of the product for a long time."
While Galli may choose not to chase the price point, he does want to have products produced in the cheapest possible market. Currently, Newell Rubbermaid has manufacturing plants in China, Mexico and Eastern Europe.
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| CANADIAN TIRE SIGNS AGREEMENT WITH DEALERS |
| TORONTO — Canadian Tire Corp. has forged an agreement in principle with its dealers that paves the way for renewal of their master franchise agreement, which expires in June 2004.
Canadian Tire's 440 associate dealers own and operate their retail businesses. Their agreement with Canadian Tire requires them, among other things, to purchase merchandise primarily from Canadian Tire and participate in retail and marketing programs driven by head office. These obligations, as well as formulas for financial incentives, are all spelled out in the dealer contract.
The success of the negotiations are considered critical to keeping the dealer organization onside with Canadian Tire's latest expansion plans. They involve some aggressive, and imaginative, enhancements to Canadian Tire's "next generation" program, begun in 1994. More than 300 of the company's 440 associate dealers have upgraded their operations under next gen, but the latest incarnation, called 20/20, is being rolled out in October following months of testing in a handful of stores in Eastern Ontario.
The new agreement, which goes to contract in June 2004, will be effective July 1, 2004 and stay in effect for 10 years, although the financial terms will be reviewed at the end of five years. The drafting of the definitive contract is expected to be complete before the end of 2003. |
| AWARD STRENGTHENS TIES TO TIM-BR MART BRAND |
| DARTMOUTH, NS — Call the AWARD buying group offices is these days and you'll hear the phone answered as AWARD and Tim-BR Mart. The latter name, a brand developed with fellow Matreco member Tim-BR-Marts Ltd. in Vancouver, has become the brand for a growing number of Matreco dealers coast to coast.
"We've been working to energize our members over the past two years to support the brand," says AWARD president Tom Smith. Already, 34 of his 97 member stores have converted their stores to the Tim-BR Mart store signage program, and another 30 are identifying their businesses with the name in-store and in their own advertising efforts.
The program, says Smith, has been developed with all the Matreco partners, although Le Groupe BMR in Quebec maintains its own BMR brand in that province. AWARD members are being encouraged to make the change in large part through the efforts of John Morrissey, the group's vice-president of merchandising and advertising. "We believe there's a huge opportunity for the Tim-BR Mart brand in Atlantic Canada," Smith adds. |
| LOWE'S CONTINUES FOCUS ON SMALLER STORES |
 NEW YORK — Lowe's will open 25 of its smaller 94,000-sq.ft. stores by the end of this fiscal year, estimating that between 500 and 600 markets could support that format. According to the chairman and CEO of Lowe's, Robert Tillman, the company, which plans to open a total of 130 stores in 2003 and 140 in 2004, expects the smaller stores would never represent up to 25% of Lowe's total expansion in any given year going into the future.
Tillman was speaking recently at Goldman Sachs' 10th Annual Global Conference here.
Lowe's CFO, Robert Hull, responded to questions about Lowe's merchandising strategy by saying that he expected gross margins to increase "by lowering acquisition costs." Tillman added that Lowe's has not seen any "degradation" in prices, despite the fact that more of its stores are going head-to-head with rival Home Depot.
He was particularly pleased with Lowe's performance in home decor and outdoor living. "We see phenomenal opportunities in the millwork category" he said. But unlike other big boxes that he referred to as "skimmers" — i.e., in a lot of product categories, but not deep in any — Lowe's has focused on expanding its mix in such categories as appliances, fashion lighting and paint. |
| INDUSTRY STOCK WATCH |
|
COMPANY |
52-WEEK HIGH |
52-WEEK LOW |
CLOSE FRIDAY |
| Canadian Tire |
42.00 |
35.00 |
39.50 |
| Canfor |
10.85 |
6.83 |
10.61 |
| Costco |
39.02 |
27.00 |
31.39 |
| Goodfellow |
12.50 |
9.75 |
11.50 |
| Home Depot |
34.99 |
20.10 |
31.59 |
| Hudson's Bay |
10.50 |
5.87 |
9.10 |
| Lowe's Cos. |
55.90 |
33.37 |
51.45 |
| Rona Inc. |
22.10 |
11.75 |
21.52 |
| Sears Canada |
20.00 |
13.60 |
17.85 |
| Sodisco-Howden |
2.90 |
1.15 |
2.84 |
| Taiga Forest |
8.10 |
5.85 |
7.75 |
| Wal-Mart |
60.20 |
46.25 |
57.48 |
| West Fraser |
39.05 |
26.27 |
35.54 |
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| COMPANIES IN THE NEWS |
| MONTREAL — With 12 stores in Quebec so far, centred around Montreal, Quebec City and Gatineau, Home Depot Canada is now eyeing communities in more outlying regions. According to a story in the Gazette, it wants to open stores in the Eastern Townships, the Saguenay area and Rimouski over next three years. According to Roger Plamondon, Home Depot's main man in Quebec, this market could support 20-25 Home Depot stores in total.
MISSISSAUGA, ON — Réno-Dépôt will keep its own name, at least for a while, following its takeover by Rona Inc. The announcement of Réno-Dépôt's fate was clarified during a presentation by Rona president and CEO Robert Dutton at the Hardlines Marketing Conference last week. Réno-Dépôt's Building Box stores in Southern Ontario will be switched to Rona Home and Garden, however. No decision has been made, however, on whether the stores will be developed as a separate, more traditional big box banner.
TORONTO & WATERLOO, QC — Canadian Tire has signed a deal to take on Canadian-made bicycles and accessories from Raleigh Canada. The line will be introduced to Canadian Tire stores across the country starting next spring. As part of the agreement, all bikes will be manufactured at the company's facilities in Waterloo, QC.
MONTREAL — One of Canada's fast-growing suppliers has announced it's up for sale. MAAX has grown rapidly through the past decade with acquisition after acquisition. Now it's looking to get acquired itself. The bath products manufacturer employs 3,800 people in 26 facilities around the world across Canada, the U.S. and Europe. The company had sales of $616.9 million for its last fiscal year ended February, 2003.
HOFFMAN ESTATES, IL — Sears will open its first Sears Grand store next month in Salt Lake City. That new format is a 150,000-sq.ft. freestanding outlet whose product mix will include deeper assortments in home fashions and home maintenance than found in the past, including Sears' first nursery department. Also: more products to generate "transactional sales," including music CDs and nonperishable goods.
NATIONAL REPORT — A weak supply of plywood is driving up prices. While it's good news for building supply dealers, who see margins climb accordingly, builders and wholesalers alike are scrambling to get product. Low mortgage interest rates south of the border, coupled with fires in the West, a rainy summer and a big government purchase slated for the middle east, have affected prices.
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| PEOPLE ON THE MOVE |
| Sylvain Toutant, formerly president and CEO of Réno-Dépôt Inc., has been appointed by Boutiques San Francisco Inc. to serve as president and CEO. He replaces company founder Paul Delage Roberge, who will stay on as chairman. The Montreal-based company owns Les Ailes de la Mode, and the San Francisco and Bikini Village banners.
Nicole Grenkow has left the Sexton Group to join ProfitMaster Canada as marketing manager, effective today. (204-889-5320)
Michel Perron has been elected to the position of chairman of the Canadian Retail Hardware Association for 2003/2004 term. He is the owner of Quincaillerie St-Sacrement and Quincaillerie St-Jean Baptiste, both in Québec City. Prior to working in the hardware industry, Perron owned and operated a restaurant in Quebéc City. He has been involved in the CRHA board for the past seven years. (905-821-3470)
Dave Covin has been appointed to the role of regional manager for Ontario at Emco BP. He was formerly national manager, retail services. (905-206-1628)
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| MARKET INDICATORS |
| The New Housing Price Index rose 0.3% from June to July. Year over year, prices were up 4.7% from July 2002. The increase in contractors' selling prices for new homes reflects a continued strong demand for new housing. Twelve of the 21 urban centres registered monthly increases. In Hamilton and Victoria, indexes rose 1.1%, while increases were observed in Kitchener-Waterloo (+0.7%), Regina (+0.6%) and Toronto (+0.5%), as higher prices for labour and building materials, such as plywood and drywall, pushed prices up in these areas.
The rate of new home construction increased in August, to 233,900 units seasonally adjusted, from 223,500 in July, reports CMHC. Year-to-date, actual starts have exceeded last year's level by 4.7%. Urban multiple starts were up 16.2% to 105,500 units in August, compared with 90,800 units in July. However, year-to-date actual urban multiple starts increased 16.1%. Urban single starts fell 4.2% in August to 98,800 units, reversing most of the previous month's gains. Canada-wide, year-to-date actual urban single starts are down 3.6% over last year. Rural starts in August were estimated at 29,600 units seasonally adjusted.
U.S. retail and food services sales for August were $319.2 billion, up .6% from July and up 5.4% from August 2002, says the Census Bureau of the Department of Commerce. Total sales for the June through August period were up 5.3% from the same period a year ago. Retail trade sales were up 0.5% from July and were 5.1% above last year.
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| NOTED… |
| Hardlines is truly international! We've gone live as the daily news link for the 2004 National Hardware Show in Las Vegas. Check out the site:
www.04nationalhardwareshow.com for more info! |
| OVERHEARD |
| "People are always talking about Rona versus Home Depot, but this battle of the big boxes is just a skirmish in a much, much broader war. It's a war to win over consumers — in numbers and loyalty. It's a war to give more to the consumer, so that the consumer will in turn buy more when he — and more and more, she — visits a home renovation store." — Robert Dutton, president and CEO, Rona Inc., speaking at the recent Hardlines Marketing Conference in Toronto.
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John Caulfield, Contributing Editor
vol. ix, #35 September 15 , 2003
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