John Caulfield, Contributing Editor
 vol. ix, #33 September 2 , 2003

· Rona revamps buying, merchandising teams · Home Depot Canada has one of its best quarters ever · Canada claims softwood victory under latest WTO ruling · Home improvement industry grows at record rate in 2002 · Retailers, home builders oppose Alaskan logging · Sears pulls back on Great Indoors

"A brand is what people think of you." - Father Rodney Hudge (Trinity Church)
BOUCHERVILLE, QC Recent cuts at Rona's head office reflect a consolidation of its buying and merchandising departments to make them more responsive to both vendors and retail customers. A total of about 10 full-time and 10 part-time people were let go. The result is a combined merchandising team that focuses on both the traditional and big box stores, rather than two separate teams like before. In addition, the buying team will focus more on working with the vendors, focusing on negotiating pricing and buying product and leave some of the advertising and promotional issues to the restructured merchandising team. Normand Dumont is vice-president merchandising for the expanded merchandising team, which will handle all promotional and advertising concerns, including product promotion for the flyer programs. Marc Dufresne's responsibilities as executive vice-president of purchasing and logistics expands, with all purchasing directors now reporting directly to him. He also takes over the duties once overseen by Pierre Charron, formerly vice-president of purchasing for hardware, who was among those who left the fold.
TORONTO Just back from a visit to the new store in Orangeville, ON, Annette Verschuren, president of Home Depot Canada, and president of the EXPO division of Home Depot, is enthusiastic about the store's first month of operation. "We're 40% ahead of plan," she says. "It's fantastic." Nor is it having an impact on the Home Depot store in the neighboring community of Brampton, she's quick to add. The idea of cannibalization new stores stealing market share back from existing stores, as well as from competitors, is a common pattern in the expansion of many chains. In fact, McDonald's franchisees in the Northeast U.S. actually filed a lawsuit against the corporation more than a decade ago, citing overstoring having a negative impact on their own businesses. It's also an issue for Home Depot in the U.S., where CEO Robert Nardelli is investing actively in upgrading older stores as new ones keep being built. But in Canada, Home Depot's penetration is not as great overall, leaving it more room to expand, not just in new markets, but backfilling existing markets. A new store opened in Edmonton early in June, and locations are on the books for both Toronto and Vancouver. In the meantime, smaller stores have proved viable in towns like Kelowna, BC, Owen Sound and Bracebridge, ON, and Moncton, NB. While stores continue to be updated on an ongoing basis, Verschuren points out that the chain is not that old in Canada. The first stores, six Aikenhead's outlets purchased from the Molson Cos. in 1994, don't match the vintage of Home Depot's first stores in the U.S., built more than a decade and half earlier. Nardelli spent US$1.7 billion on capital improvements to his stores during the first six months of the year. According to a new study by our sister publication, Hardlines Quarterly Report, the growth of home improvement big boxes in Canada has flattened in the past two years. But Verschuren insists her company is not finding any slowdown. "Home Depot Canada is doing extraordinarily well, year to date. We've had one of our best quarters ever," Verschuren says of the second quarter, when the parent reported 10.5% sales growth to US$17.99 billion. And while same-store sales increased only 2.2%, it marked a swing from same-store declines in the two previous quarters. Home Depot's revenue increased 8.3% to US$33.09 billion and its earnings jumped 8.2% to US$2.21 billion. Verchuren says the Canadian division is once again outperforming the company overall.

VANCOUVER The panel reviewing the U.S. Department of Commerce's softwood lumber countervailing duty determination within the World Trade Organization has ruled the U.S.'s so-called "cross border" methodology violates U.S. obligations under the WTO agreements. The methodology has been used by the Commerce Department as the basis for setting its 18.79% countervailing duty on Canadian softwood lumber imports.

"The U.S. Department of Commerce itself has said in earlier lumber cases that cross-border comparisons are inherently arbitrary and capricious and the reasons for that conclusion are still valid," says John Allan, president of the BC Lumber Trade Council in a prepared statement.

This latest ruling in Canada's favour victory follows a NAFTA panel decision earlier this month that also ruled the Department of Commerce's cross-border methodology illegal.

TORONTO After three years of record growth, the hardware/home improvement industry in Canada has reached $30 billion in sales at retail. That makes it about 10% of Canadian retail overall, says a new report from Hardlines. The 2003 Hardlines Retail Industry Report is an exclusive report on the size and trends in the industry. Highlights from the report will be presented at the Hardlines Retail Strategies Symposium, on September 3. The hardware and home improvement industry swelled by 8.5% from 2001 to 2002, making it one of the hot retail sectors in the country. Sales by all hardware and building centre retailers, as well as sales of renovation and repair and seasonal products by department stores, club stores and Canadian Tire, are also included in the profile. The greatest growth came from the big box stores. This category killer retail format, led by Home Depot Canada and RONA Inc., now accounts for more than one-fifth of the industry - from only 157 stores at the end of 2002. It's important to note that the big box rivalry in Canada has quickly shrunk to two major players, plus one strong regional. Home Depot Canada had almost $4 billion in sales in sales from its 89 outlets, while RONA generated an estimated 1.3 billion from its 41 big box format stores. At the end of September, its acquisition of another big box chain, Réno-Dépôt Inc., is expected to close, adding 20 stores and $847 million in sales and making Rona the number-two home improvement retailer in the country. The big box playing field mirrors the situation in the U.S., where Home Depot dominates, with US$58.2 billion in sales, but Lowe's makes for an aggressive competitor, even though it has approximately half the stores and half the sales of its rival. Menard's, a strong independent big box chain, is situated mainly in the U.S. Midwest, similar to the only other big box company in Canada, Kent, which has seven large-format stores in Atlantic Canada and is owned in turn by privately held Irving Cos. Independents are faring well, still accounting for more than half the industry's sales overall. However, market share of the independents has shrunk somewhat over the past two years, even as overall sales continue to grow - often at record rates. The 2003 Hardlines Retail Industry Report, a special report in PowerPoint format that takes an in-depth look at the Canadian hardware/home improvement industry, will be released at the Hardlines Retail Strategies Symposium on Wednesday.
WILKESBORO, NC A new survey has found that men and women view themselves as equals when it comes to home improvement projects. A poll of 1,000 people, conducted recently for Lowe's Cos. by Ipsos Public Affairs, found that 82% of men and 83% of women agreed that both sexes have equal abilities when it comes to learning about home improvement. Melissa Birdsong, Lowe's director of trend forecasting, read these findings as evidence that men and women "prefer to collaborate on projects and learn new skills together." Nearly three quarters of those polled said that women didn't require female-only demonstration clinics. Another 65% said that it didn't matter whether they received do-it-yourself instruction and advice from a man or a woman. This last finding indicates that women are being taken far more seriously as legitimate DIYers by store personnel. The survey found that 62% of the women polled consider themselves to be between an intermediate and an expert do-it-yourselfer. Most own basic hand tools plus a few power tools, and one in five women owns an extensive collection of hand and power tools. There are still differences that separate the sexes on the home improvement front, however. For example, a majority of those polled said they considered exterior projects to be male oriented.
SPECIAL REPORT Opposition to the Bush administration's plan to more than double the logging activity in Alaska's Tongass National Forest grew last week after three large wood users sent a letter to the Department of Agriculture stating that there was no need to use "virgin" wood for the production of lumber or paper products. The signatories were KB Homes, the fifth-largest homebuilder in the United States, which has had a longstanding working relationship with the National Resource Defense Council, an advocacy group that has taken the Bush administration to task for its environmental policies; Hayward Lumber, an eight-yard, US$115 million pro dealer in California whose owner, Bill Hayward, is one of the industry's most vocal environmental advocates; and Staples, the office-supply dealer with more than 1,500 stores in 10 countries and US$12 billion in annual sales. Tongass National Forest, North America's only temperate rain forest, is larger than West Virginia and has 17 million acres of forest. The issue at hand is whether more roads should be built to gain access to what U.S. Forest Service documents show could be up to 870 million board feet of wood, enough lumber to build more than 43,000 houses.
Canadian Tire 37.29 26.80 35.00
Canfor 10.85 6.83 10.25
Costco 39.02 27.00 32.25
Goodfellow 12.50 9.75 11.25
Home Depot 34.99 20.10 32.16
Hudson's Bay 10.50 5.87 8.89
Lowe's Cos. 54.88 33.37 54.86
Rona Inc. 20.00 11.75 19.78
Sears Canada 20.00 13.60 18.65
Sodisco-Howden 2.54 1.15 2.40
Taiga Forest 8.10 5.85 7.80
Wal-Mart 59.48 46.25 59.17
West Fraser 39.05 26.27 34.50
STOUFFVILLE, ON Schell Lumber in this town has agreed to purchase the retail operations of the Stouffville Co-operative. The Co-op will continue to service the marketplace with agro products and petroleum. Under Schell, which is a Homecare dealer, the retail business will be converted to Country Depot, a banner that was bought by TruServ Canada as part of its takeover of Growmark's retail business back in January of this year. Country Depot focuses on the hobby farmer and rural resident, with lawn and garden, pet products, work wear, farm supplies and hardware. LONDON, ON TSC Stores has taken over a former Growmark store, and will relocate it as the 22nd TSC store, which is scheduled to open December 1, 2003. The store comes with a UPI gas bar. TORONTO Canadian interior designer Brian Gluckstein has joined the Hudson's Bay Co. line of brands for home. GlucksteinHome will be introduced exclusively at Bay stores across Canada for Spring 2004, offering an expanded range of merchandise and price points. NEW YORK Restoration Hardware has reported a smaller second-quarter loss, bolstered by improving sales at stores open at least a year and cost cutting. The company, which operates about 100 stores in 31 states, said it lost US$2.8 million in 2Q, compared with a loss of US$3.8 million a year earlier. Same-store sales rose 9.9%. Total sales climbed 13% to $96 million. HOFFMAN ESTATES, IL Sears Roebuck disclosed that it would take a charge against third-quarter earnings that could range between US$75 million and US$100 million to cover costs related to its decision to close three of its 21 Great Indoors home décor outlets. The retailer also intends to convert another Great Indoors to an outlet format. At one time, Sears had planned to open 150 Great Indoors by 2007. DALLAS U.S. Home Systems here has agreed to sell, furnish and install (SFI) kitchen cabinet refacing and laminate countertops in four states for Home Depot. This one-year pilot program will be offered in 229 Home Depots and seven Expo Design Centers in Washington, Oregon, California and Colorado. In Canada, Toronto-based Installed Roofing Services manages a network of 50 companies that sells and installs roofing, siding, soffits and fascia for Home Depot's Canadian division. DETROIT Kmart Corp. narrowed its second-quarter loss to US$5 million, from US$293 million a year earlier. Sales fell 21.3 % to US$5.65 billion, from US$7.18 billion. Same-store sales declined 5.4%. Kmart lessened its losses by cutting its selling, general and administrative expenses by 20%. AMSTERDAM Hafin, a leading European manufacturer of garden furniture, has signed a letter of intent to take over the activities of a Belgian competitor, Lawn Comfort, a move that is expected to strengthen Hafin's position in the French, Spanish and German markets. The deal will close October 1, 2003. Hafin will add the upscale Lawn Comfort brand to its own Flair range.
New home construction remained strong in July as housing starts climbed to 223,500 units seasonally adjusted from 205,900 in June. Urban multiple starts continued to be a strong driver, increasing 9.5% to 90,800 units seasonally adjusted from 82,900 in June. Urban single starts climbed 4.7%, although year-to-date single starts remain down, at 3.4% below the first seven months of last year. Year-over-year retail sales growth by large retailers in June of clothing, footwear and accessories, and hardware, lawn and garden products and services all declined, according to Statistics Canada. The strongest year-over-year gain for the group of large retailers was seen in health and personal care products, while the remaining commodity groups posted weak increases. SARS, mad-cow disease, a rising loonie and weaker growth caused the Canadian economyto decline at an annual rate of 0.3% during the second quarter, according to a new report by Statistics Canada. This marks the first time the economy has contracted on a quarterly basis since the third quarter of 2001, when the world was feeling the aftershock of 9/11.
Hardlines is the official news provider for 2004 National Hardware Show in Las Vegas! Check out our daily news link: every single morning! Michael

****HARDLINES MARKETPLACE**** Dont' miss the products and services on the Hardlines web Marketplace: And check out Hardlines Classifieds on the web:

HELP WANTED 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.

********************************************************************************** SERVICES OFFERED

RETAIL IS DETAIL. Let Noral Instore, a national service company, handle your service requirements in Canada. Noral serves some of America's leading manufacturers, managing their lines for Canada's top hardware retailers, big boxes and mass merchandisers. Contact Al Vanderveen at 519-439-6800, ext. 201, to find out how Noral can boost your sales in Canada. ********************************************************************************** SELL YOUR COMPANY - OR BUY ONE - WITH HARDLINES CLASSIFIEDS! DO YOUR EXECUTIVE SEARCH, FIND NEW LINES OR GET NEW REPS IN THE HARDLINES MARKETPLACE. ONLY $2.50 PER WORD FOR THREE WEEKS IN THE CLASSIFIEDS. TO PLACE YOUR AD, CALL PHYLLIS NOWELL AT 416-489-3396 OR EMAIL:
Hardlines is published weekly (except monthly in December and August) by McLARNEYCOM 542 Mount Pleasant Rd., Suite 302, Toronto, Ontario, Canada M4S 2M7 © 2003 by Michael McLarney. HARDLINES™ the electronic newsletter Phone: 416.489.3396; Fax: 416.489.6154 Michael McLarney, Editor & Publisher: Beverly Allen, Marketing Manager: Nancy Wright, Circulation Manager: Phyllis Nowell, Sales Manager: ______________________________________________ THE HARDLINES "FAIR PLAY" POLICY: Reproduction in whole or in part is very uncool and strictly forbidden and really and truly against the law. So please, play fair! Call for information on multiple subscriptions or a site license for your company. We do want as many people as possible to read Hardlines each week - but let us handle your internal routing from this end! ______________________________________________ Subscription: $219+$15.33 GST = $234.33 per year (GST #13987 0398 RT). Secondary subscriptions at the same office are only $34 + $2.38 GST = $36.38. Ask about our reduced rate for branch offices. You can pay online by VISA at our secure website or send us money. Please make cheque payable to McLarneyCom.