John Caulfield, Contributing Editor
 vol. ix, #34 September 8, 2003

* Rona CEO announces completion of Réno-Dépôt deal at Conference * Paint dealers' show moves in 2004 * Home Depot will open in Manhattan * NAFTA puts pressure on U.S. * Rona unveils latest twist on its Building Centre format * TruServ announces new line of credit * Home Depot buys roofing installer

"The finest eloquence is that which gets things done." — David Lloyd George
MISSISSAUGA, ON What didn't happen at last week's Hardlines Conference Series - Rona announced the Competition Bureau's approval of the Réno-Dépôt purchase just 90 minutes after the news broke. Joe Galli Jr., head of Newell Rubbermaid, made a rare and dynamic public appearance, explaining the value of strong brands in a global economy. The editors of Hardlines unveiled the latest statistics on the size of the industry and the head of one buying group sang some incredible blues during the event's gala dinner (who knew!). But watching Rona CEO Robert Dutton interrupt his presentation, and offer to sell an excess Réno-Dépôt store to the president of Home Depot Canada, was worth the price of admission. The Hardlines Conference Series featured a full program of seminars, breakout sessions and networking events last Wednesday and Thursday. Dutton, making his first-ever presentation to a wide audience in English Canada, closed the conference. The timing was perfect. As he stepped off the plane in Toronto to join us, his cell phone rang, bringing him the news that the much-anticipated approval by the Canadian Competition Bureau of Rona's purchase of Réno-Dépôt had come through. When he walked into the room half an hour later with Claude Bernier, executive vice-president of Rona's traditional stores, and Pat Bennett, senior operations director for traditional stores, by his side, he was beaming with happiness. Dutton announced the news publicly a few minutes into his presentation, which brought a round of applause from the audience. He explained that the only condition put on the deal was that Rona must, after buying the chain, turn around and sell off the Réno-Dépôt store in Sherbrooke, QC. "Does anybody want to buy a store in Sherbrooke?" he asked jokingly, not realizing his biggest competitor was in the room. Annette Verschuren put her hand up gamely and asked, "How much do you want for it?" Dutton explained the price tag: $11 million, including inventory. "You'll have to do better than that," Verchuren quipped. She then had to dash out to catch a plane to Atlanta. Then the realization dawned: "Wait, was that Annette, was that Ms Verschuren?" he asked. I wanted very much to meet her!" But that was just one of many surprises during the two-day conference event, which drew more than retailers, vendors, agents, analysts and media. Michael McLarney, editor and publisher of Hardlines, reported that the industry grew by almost 9% in 2002, and now comprises almost one-tenth of all retailing in Canada. Big box stores now account for more than one-fifth of that market, he pointed out, though it is no longer gobbling market share as rapidly as in the past. And at the industry's first-ever Gala Dinner, during a set of rocking blues music, the singer from the Cameo Blues Band invited volunteers to come up and sing. Tom Smith, president and CEO of AWARD, the Dartmouth, NS-based buying group in Atlantic Canada, rose to the challenge, singing a jaw-dropping rendition of "Summertime." Next year's Hardlines Conference series will be held September 8-9, 2004.
MISSISSAUGA, ON The latest forecasts on the performance of Canada's housing markets remain positive, says one economist. Peter Norman, vice-president of Clayton Research, said renovation spending may slow slightly, but it will remain above average economic growth. He was speaking at last week's Retail Strategies Symposium, part of the Hardlines Conference Series. Norman predicted that there's still plenty of opportunity for growth, given the aging of Canada's housing stock. Renovation spending on houses up to a decade old averages $1,000 per year, he said. That amount quadruples, however, once houses get between 11 and 20 years old. He pointed out that the houses built during the boom of the late 1980s are now entering the "renovation cycle." Resales reached 420,000 units in 2002, meaning roughly 50,000 more existing homes were sold last year than the average of the last few years before that, and well ahead of the 380,000 units sold in 2001, he said. Renovation spending, which was lacklustre between 1991 and 1996, began a strong growth cycle in the latter half of the decade, peaking at a recent high of $30 billion, and becoming a key driver of home improvement spending in Canada. Norman predicted growth of 4% next year, keeping it ahead of general economic growth. Demographic factors include the formation of more households, as young adults decide to move from parents homes (It's about bloody time! - Editor), encouraged by a good economy. Norman countered the conventional wisdom that the housing market will crash when baby boomers retire and downsize. It's just not a valid theory, he said, because the younger set is currently forming households. (We'll provide more coverage of the amazing presentations at our Hardlines Conference Series in next week's edition. Michael)
CHICAGO, IL TruServ Corp. continues to whittle away at its financial burden with the closing of a new four-year, US$275 million revolving-credit facility agreement. The co-op retail distributor initially borrowed US$158 million against the new line of credit, which was used to retire debt. The credit line was arranged through a syndicate of seven lenders, headed by Fleet Capital Corp. TruServ had sales of US$2.2 billion to approximately 6,300 independent retailer locations worldwide in 2002, even as that performance was overshadowed by the company's debt load. However, for the first six months of 2003, TruServ was able to reduce its debt by US$209 million to US$208 million, and show a profit of US$20.8 million. "We're working on the refinancing to reduce interest expense, which was US$63 million in 2002," TruServ president and CEO Pamela Forbes Lieberman told Hardlines in an earlier interview. "But by 2003 we expect it to be US$18 million. Our goal is to get the financing behind us so we can focus on helping our members grow and on helping our retail sales grow," she added. The added financial stability has been reinforcing dealer confidence, as well. Forbes Lieberman says member retention has been increasing. "We really strive for zero attrition, and we've signed on about 124 new members since January 1."
ST LOUIS, MO The Paint & Decorating Dealers Association has confirmed details of its own trade show and seminar series in Canada next year. The PDRA-Canada Decor Showcase will be held March 13-14, 2004 at the International Plaza Hotel in Toronto. The PDRA is going on its own following three years exhibiting in conjunction with the Canadian Hardware and Building Materials Show. The PDRA pulled out of CHS following this year's show, held last February. The new stand-alone event will feature about 150 exhibit booths, but a big part of the event is its educational program, which will include the latest in paint and painting techniques, interior accessories, computer technology, wallcoverings, decorative hardware and window coverings. Nick Cichielo, CEO of the PDRA, says his association with CHS was a positive one, but lacked the focus he was looking for. "We just felt that this format is what our customers and our members are looking for." Before joining up with CHS, the PDRA hosted their event in conjunction with the Walls Windows Furnishings Association. The WWFA has been offered booth space at the PDRA show, says Cichielo.
Hanover, ON The new Rona Building Centre in this small community in the heart of Southwestern Ontario's farm community is also the company's latest example of a store format that strives to attract both contractors and serious DIYers. The dealer-owned store, which had its grand opening this past weekend, features strong décor elements of Rona's Regional stores (their mini-big box format in Quebec), but maintains a strong back end, all within 10,000 sq.ft. "We had to develop a model at about 10,000 sq.ft., because we think it's really needed in the market," says Al Holton, a Rona dealer development manager who was integral to the development of the new store (shown here second from right; also l-r: Rona's Claude Bernier. Rona dealer-owner Harvey Harron, Pat Bennett, and Serge Vezina). The store squeezes about 18,000 SKUs into the new building, which features the high ceilings, bright modern lighting and high wall merchandising that typifies a big box. "We're better focused on who the consumer is, and we've got more fashion into the store," Holton points out. "We can't be order takers anymore," he says of the changing role of home improvement retailing. "We have to be an idea centre." The bright, DIY-oriented merchandising bears out his theory. But when he walks into the drive-through lumberyard, he points out the broad range of LBM. "We're still in the lumber business. We haven't forgotten our roots.
NEW YORK After evaluating several properties, Home Depot has decided that its first store in Manhattan will open next summer in the borough's Flatiron District on the south side of 23rd Street, between Fifth and Sixth Avenues. It will have a second entrance on 22nd Street. The 108,000-sq.ft. outlet, with two floors and a mezzanine, will be considerably larger - by 20,000 square feet - than Home Depot's other "urban neighborhood" outlets. Since that format was launched in April 2002, the company has opened urban stores in Brooklyn and Staten Island, N.Y., and in Chicago. "You'll see a lineage to those [stores] in the Manhattan store, but one that flows back to our warehouse stores," says John Simley, a Home Depot spokesman, who stresses that the Manhattan unit would not resemble the Chicago outlet (shown here), in the toney Lincoln Park district. Home Depot chose this site in Manhattan, over several others it evaluated, because of its "favourable economics," as well as its location, Simley adds. "It was a very complex deal, but this is a great site, near a Bed, Bath & Beyond and a Best Buy. Plus, it's a grocery destination, so it has very high traffic potential." Home Depot opened its first warehouse store in New York in 1994, and currently has 75 units in four of New York's five boroughs. It employs more than 18,000 there, and has targeted the city for further expansion in the next few years, partly to counter Lowe's plans to enter and expand in this metro market.
Canadian Tire 37.29 26.80 35.40
Canfor 10.85 6.83 10.31
Costco 39.02 27.00 32.20
Goodfellow 12.50 9.75 11.45
Home Depot 34.99 20.10 32.76
Hudson's Bay 10.50 5.87 8.90
Lowe's Cos. 55.90 33.37 54.50
Rona Inc. 21.25 11.75 21.50
Sears Canada 20.00 13.60 18.47
Sodisco-Howden 2.60 1.15 2.55
Taiga Forest 8.10 5.85 7.80
Wal-Mart 60.20 46.25 58.89
West Fraser 39.05 26.27 35.08
MISSISSAUGA, ON Castle Building Centres Group has added the following new dealers to membership: Donahue Plumbing & Hardware, Blackville, NB; East-Glo Electric Ltd., Glovertown, NF; Kativik Ltd., Rankin Inlet, Nunavut; Keethanow Lumber and Furniture, La Ronge, SK; Masstown Pro Hardware, Masstown, NS; and National Building Supplies, Sutton West, ON. Castle, a national group with dealers in every province, has 250 members and combined retail sales of about $900 million. TAMPA, FL Home Depot will acquire Installed Products USA and Installed Products of California Inc. That company, collectively known as IPUSA, is one of the largest installers of replacement roofing in the United States. IPUSA has been a proprietary contractor for Home Depot since 1997. In Canada, a Toronto-based company called Installed Roofing Services manages a network of 50 companies that sells and installs roofing, siding, soffits and fascia for Home Depot's Canadian division. BENTONVILLE, AK Labour charges against Wal-Mart Stores have been dismissed by the National Labor Relations Board in a case filed against the retailer in a Lake Elsinore, CA case. In a union vote in April 2001, union leaders filed multiple charges against Wal-Mart and blocked the election. ALPHARETTA, GA Despite record sales in the second quarter that were fueled in part by an acquisition of a power tools company, Newell Rubbermaid Inc.'s profit in the period slid nearly 17%. The company also revised its full-year earnings outlook, reflecting lower sales expectations in its picture frames business, reductions in retailer inventory and greater price competition on its cheaper product lines. For the quarter ended June 30, Newell Rubbermaid's net income fell to US$73.8 million, compared with US$88.6 million a year earlier. Sales at Newell Rubbermaid, Burnes picture frames and Parker pens increased 4.3% in the quarter to $1.97 billion from $1.89 billion. BOISE, ID Boise, the wood products supplier, has decided to "eliminate completely" its purchase of wood products from endangered forests as they are mapped out and defined by major conservation and environmental groups. Boise stated that, effective in 2004, it would no longer harvest trees from old-growth forests in the U.S. It also said it would work with government and conservation groups to identify endangered forests in the U.S., Canada, Indonesia and Chile.

OTTAWA Canada is claiming a victory in the latest round declaration in its battle over softwood lumber tariffs imposed by the U.S. A NAFTA panel consisting of three Americans and two Canadians has ruled unanimously that the U.S. has yet to prove that Canadian softwood exports threaten the American lumber industry. The panel has given the U.S. industry 100 days to provide concrete proof of the claim.

The latest ruling beefs up the Canadian position even more positively than a previous ruling by the International Trade Commission. The NAFTA panel said it found that the ITC did not adhere to its own rules, and ignored evidence that questioned whether American lumber producers were threatened by Canadian imports.
Residential construction across Canada continued to surge in the second quarter, with the total value of investment in the housing sector climbing to $16.0 billion, 10% higher than the $14.5 billion invested in the second quarter of 2002, according to Statistics Canada. Major increases in the three components of residential construction investment (new housing, renovations and acquisition costs) were responsible for this strong showing. Since the start of 2003, investment in the housing sector has reached $27.9 billion, up 12.1% from the total for the first six months of 2002. This is a record level for the period from January to June. Investment in new housing construction reached $7.8 billion in the second quarter, up 8.4% from the second quarter of 2002, says Statistics Canada. The greatest contribution to this growth came from increased investment in the construction of single family homes (+6.0% to $5.3 billion), primarily the result of a substantial rise in the average value of this type of unit. Investment in the construction of new apartments was also up sharply (+21.2% to $1.4 billion). This growth is related to a marked increase in the number of housing starts for apartments. Employment has declined for the fourth time in the last five months, according to Statistics Canada. Employment has increased in 2003, by only 0.3%, compared to growth of 2.6% during the first eight months of 2002. In August, the unemployment rate increased 0.2 percentage points to 8.0%, a rate not seen since December 2001. Despite expectations that employment in the U.S. would continue to expand, 93,000 jobs were lost in August, says Labor Department. The unemployment rate declined to 6.1% from 6.2% in July. The economic recovery in the United States is now in its 22nd month, without reversing constant job losses, but economists said that was apparently because of a surge in the number of people who, having lost jobs, listed themselves as self-employed rather than unemployed.
We're looking at the evaluation sheets, and I have to agree with you. The Hardlines Conference Series was the best ever. But I also have to agree that our incredible research findings on the growth of the industry, presented during the Retail Strategies Symposium, deserved more time and preparation, because the report those statistics are drawn from offer a comprehensive and compelling insight into the trends in home improvement retailing today. A condensed version was available to all RSS delegates, and the full report is available for sale to everyone. To order your copy of the full report, contact Phyllis Nowell, Sales Manager of Hardlines: 416-489-3396; . 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: for more info!

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HELP WANTED U.S. BUILDING PRODUCTS TRADE MISSION Toronto, Ontario - September 23-24, 2003 Montreal, Quebec - September 25-26, 2003 Don't miss the opportunity to meet with U.S. manufacturers of building products, construction materials and technologies in Toronto and Montreal. For additional information visit:, or contact: (In Toronto); Ph: (416) 595-5412, ext. 223 or (In Montreal); Ph: (514) 398-0673, ext. 2262  


ONTARIO REGIONAL MANAGER National Merchandising Company is looking for an Ontario based Regional Manager to execute in-store merchandising programs at various hardware retailers. Must be able to schedule and manage staff to high service levels. Compensation includes: base salary, bonus plan, car plan and benefit package. If you have a proven track record and enjoy working in the team environment, forward your resume to, P.O. Box 511 in subject; or fax to 416-489-6154 in confidence.

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