Article Archive

Thursday, March 13, 2008

ORGILL’S SPRING MARKET PROVES POPULAR WITH PROSPECTS

Orgill Inc. kicked off 2008 with a record-setting sales performance at its Spring Dealer Market in Orlando, Fla. Despite the difficult economic climate throughout the country, retailers from all 50 states and around the world attended the Feb. 21-23 event.

“Although we were somewhat apprehensive going into the event, the 2008 Orgill Spring Market established a new high for sales and was close to our all-time attendance record. We were especially encouraged by the upbeat mood among our retail customers,” said Ron Beal, Orgill’s president and CEO.

According to Beal, both warehouse and drop-ship sales during the three-day event were up over last year. Beal also added that a record number of prospective new customers were on hand at the show as well as a large contingent of international visitors from both Canada and China.

“We are very pleased with the number of prospects on hand in Orlando from across the country and around the world,” Beal said. “We are also very happy to report that a majority of these prospects have signed on to become Orgill customers since the show ended.”

Some of the heaviest traffic on the show floor could be found in the Pallet Buy and Coupon Special areas where retailers could take advantage of special Market-only deals on merchandise.

“Our merchandising team worked closely with our vendors to provide attendees with a range of exciting deals at the Market and judging by the traffic and purchases generated from these two areas, we think our customers were more than pleased with what we had put together,” said Ken Post, Orgill’s senior vice president of marketing and merchandising.

Traffic was brisk in the Retail Concepts area on the show floor, where Orgill shined the spotlight on several new and enhanced programs. Among these were an expanded pneumatic tool and fastener assortment; a complete Maintenance Repair and Operations (MRO) display; an enhanced electrical assortment; complete sets for Pro Source and rental departments; and a new area featuring environmentally friendly green products.

“We wanted to put all these exciting new and enhanced programs front and center where retailers could see them as soon as they walked onto the show floor,” said Brett Hammers, vice president–marketing.

LOWE’S DELAYS NEW STORE OPENINGS AFTER SALES DECLINE

The slowdown in the economy and housing market has caused Lowe's Cos. to delay the opening of 20 new stores in Florida, California and other markets, according to a report in The Wall Street Journal.

Lowe's reported net earnings of $408 million for the quarter ended February 1, 2008, a 33.4 percent decline over the same period a year ago. Sales for the quarter declined 0.3 percent to just under $10.4 billion.

Comparable-store sales declined 7.6 percent for the fourth quarter and 5.1 percent for fiscal 2007. Net earnings declined 9.5 percent to $2.81 billion in fiscal 2007 while sales increased 2.9 percent to $48.3 billion.

"As we look to fiscal 2008, we know the next several quarters will be challenging on many fronts as industry sales are likely to remain soft," said Chairman and CEO Robert Niblock. The company expects comparable-store sales to decline 5 percent to 7 percent in the first quarter.

ACE HARDWARE BEGINS LOOKING FORWARD

During Ace Hardware’s Spring Convention in Dallas, President Ray Griffith and Chairman Tom Glenn both emphasized that the co-op is ready to put the accounting error behind it and move forward with retail growth and supply chain improvement initiatives.

“The last six months have been challenging,” admitted Griffith, who apologized for the embarrassment caused by the accounting error. “But this chapter is quickly coming to a close and many of you want to move forward, so let’s do that. Our successes are too great to let this deter us,” he said, noting that the company has already restored $70 million—or 40 percent—of the equity lost by the $152 million accounting error discovered last September.

“Ace can now move forward to addressing the other 800-pound gorilla in the room—that of a very fragile and challenging economy,” Griffith said. He reported that sales were down about 4.5 percent so far in 2008 compared to last year and the co-op is forecasting a 3 percent sales decline for the year. By keeping a handle on operating expenses, Ace should record bottom-line profits of about $85 million for 2007—its second most profitable year ever, according to Griffith.

Glenn, whose term as chairman expires in June, said it’s important for the co-op to improve its store model and work on profitability. “Ace retailers need to continue to own Ace—we will not become a public company,” he said. “But when the time is right, future boards have a duty to look at the structure of the company. We believe the co-op structure will work for the future, but is it optimal?”

Griffith said Ace hoped to finalize a new long-term financial agreement with a lender by the end of May. Ace has also announced it has hired its first chief financial officer, Dorvin Lively. Most recently, Lively served as executive vice president and chief financial officer for Maidenform Inc. From 2000 to 2004, he held the position of senior vice president and corporate controller at Toys ‘R’ Us.

Although Ace’s management was ready to move forward, it faces the prospect of a fragmented board. Considerable attention was given to touting the qualifications of the three retailers and one outside director who have been nominated by Ace for board positions. Four Ace members, who call themselves “Concerned Ace Owners,” are also seeking to be elected to board spots and the group convened an off-site meeting in Dallas during the show.

In proxy materials for the annual stockholders meeting (June 3) distributed to members, Ace’s board of directors stated they believe that the election of any Concerned Ace Owner (CAO) as a director is not in the best interest of the corporation. The board believes “that the CAO nominees would be a disruptive presence in the boardroom and would hinder the corporation’s efforts to enhance the success of Ace retailers generally.”

TRUE VALUE CONTINUES TO PAY DOWN DEBT

True Value Co. reported revenue of $2.04 million for the year ending December 29, 2007, a slight decrease of 0.5 percent or $9.4 million compared to $2.05 million for the same period in 2006. Comparable-store sales to core hardware stores were up 1.6 percent for the year.

The co-op posted earnings of $63.8 million, a decrease of 12.4 percent or $9.0 million versus $72.8 million one year ago. Excluding $9.9 million of unusual prior-year items, earnings were up 1.4 percent or $0.9 million in 2007. The co-op was able to increase its patronage dividend by $4.0 million for the year.

More importantly, the co-op reduced its total year-end debt by 11.8 percent to $127.4 million from $144.5 million a year ago. This was the company’s lowest year-end debt level since 1979. Member equity increased for the fourth year in a row, from $3.9 million in 2003 to $132.7 million in 2007.

“Despite the weak housing market, True Value retailers were able to deliver the products, service and inspiration necessary for U.S. homeowners to complete small home improvement projects as a way to increase their home values,” said President and CEO Lyle Heidemann. “We were particularly pleased with the strength of our retailers’ business in the last two months of the year. Our lawn and garden and seasonal businesses were up 40 percent in November and December compared to last year.”

For the quarter ending December 29, 2007, True Value reported revenue of $479.2 million, an increase of 4.5 percent or $20.7 million from $458.5 million for the same period in 2006. Earnings for the fourth quarter were down 8.5 percent to $16.1 million.

COLOGNE FAIR SHOWCASES GLOBAL PRODUCT TRENDS

The biennial International Hardware Fair/Practical World, held March 9-12 at the Koelnmesse in Cologne, Germany, featured 3,375 exhibitors from 61 countries showing off the latest product innovations to an estimated 70,000 attendees from 130 countries.

More than 50 U.S. home improvement manufacturers participated in the 24th annual AHMA/USA Pavilion program, organized by the American Hardware Manufacturers Association.

For the first time, the trade event was open to skilled tradespeople and DIY enthusiasts, who had access to Halls 6 and 7, where about 1,000 exhibitors displayed products related to builders’ and home improvement/DIY supplies. About 7,000 DIY visitors were in attendance.

Koelnmesse's new "Business Matchmaking" service enabled trade visitors to contact exhibitors and arrange meetings at the event beforehand, helping solidify the trade event as the place to make business connections and cement partnerships.

Among the product trends spotted on the show floor were efficiency, security and convenience, as well as expanded use of lithium-ion technology. In addition, fittings originally developed for home furnishings and kitchens are increasingly being used in offices. A further trend is the deliberate use of light as a design element. Consumer interest in saving energy was accommodated by new products as well as items featuring environmental compatibility and renewable natural materials.

Wednesday, Feb. 27, 2008

RETAILERS VISIT LAWMAKERS ON CAPITOL HILL

Retailer members of the North American Retail Hardware Association’s (NRHA) Legislative Committee visited with lawmakers and their staffs on Capitol Hill during the association’s annual Washington Fly-in, Feb. 13, 2008.

Meeting with Congressional delegations from their home states, retailers explained positions on the association’s top legislative issues. They focused on how current proposed legislation would affect their businesses.

At the top of their list of concerns is legislation currently moving through Congress that would reform the Consumer Product Safety Commission and give it more authority to mandate product standards and enforce recalls.

Of primary concern was language in the bills—one passed by the House and another moving quickly through the Senate—that could put retailers in the position of facing criminal liability for actions beyond their control. Other provisions of the bill would set standards for lead in children’s products and could lead to standards for a wider range of consumer products.

Another priority is a proposal to repeal LIFO (last in first out) inventory accounting was included in the Tax Reduction & Reform Act, which was introduced in the House late last year. Should repeal be enacted, it could impose a costly tax liability on retailers because it would force untaxed LIFO reserves to become taxable income.

Retailers spoke of their frustration with the interchange fees charged by credit card companies and their inability to negotiate changes. In their view, fees are too high and credit card companies can change them at any time. They also object to credit card companies’ practice of levying interchange fees on a total sale, including the sales tax.

Other issues included relief from the federal estate tax through an estate tax exemption that would protect business assets, action to address continually rising health care costs and legislation to allow states to require online and catalog retailers to collect sales taxes on merchandise regardless of where the retailer is located.

BOSTWICK-BRAUN PRESIDENT CANNING RETIRING

Bostwick-Braun President Elaine Canning has announced that she will be retiring from the company effective March 26, 2008.

Canning joined Bostwick-Braun in July of 1986 as assistant treasurer and controller after working for seven years at Arthur Young & Co. in public accounting. She graduated from the University of Toledo with a bachelor of administration degree in accounting. She received her CPA certificate in 1981.

In 1987, Canning was named vice president of finance and that same year joined the company’s board of directors. She was elected to executive vice president in 1995 and president in 2003.

“I have been truly blessed to have had the opportunity to work with our wonderful employee-owners, customers and board members, but find I am ready to refocus my interests and begin the next chapter of my life,” Canning commented. “The future looks very promising for Bostwick-Braun and I wish only the best for everyone and look forward to seeing the company thrive for another 152 years.”

Chairman and CEO Bill Bollin said, “We’ll miss Elaine’s contributions to the success of our organization greatly and wish her all the best in the years ahead.”

The company is preparing for a smooth transition. CFO Brenda Smith will be taking on oversight of human resources, while the Ashley, Ind., distribution center, transportation and information services will report to Bollin. Senior Vice President Chris Beach will oversee the purchasing and sales departments, with Glenn Crawford responsible for dealer sales and Greg Kisov for industrial sales.

ORGILL ANNOUNCES PLAN TO EXPAND DISTRIBUTION NETWORK

Orgill Inc. has received approval from its board of directors to construct two new distribution facilities.

This expansion to Orgill’s distribution network will include the addition of a new distribution center in the Pacific Northwest and the construction of a mid-America supercenter in the Midwestern United States.

The mid-America supercenter will measure more than 1 million square feet and will service Orgill’s customers throughout the region. In addition to serving customers in this geographic area, this supercenter will also act as Orgill’s system-wide import flow-through center.

This new Midwestern facility will take the place of Orgill’s Vandalia, Ill., distribution center, which was constructed in 1974.

“Construction of this mid-America supercenter will offer a great deal of efficiency to our distribution network,” said Byrne Whitehead, Orgill’s senior vice president and general manager of operations, finance and administration. “Not only will it provide us with a consolidated location to process our growing import business but it will also give us the capacity to accommodate our growth with customers throughout the Midwestern United States.”

The Pacific Northwest facility will help support Orgill’s growth in that area of the country and will service retailers from throughout the region into Alaska and abroad.

“In addition to serving our customers in the Pacific Northwest, this new facility will also improve our export operations by providing us with greater efficiency and more options when shipping to Asia,” Whitehead added.

Orgill is currently in the process of selecting the precise locations for the two facilities. Whitehead anticipates that these selections will be finalized by fall 2008 and construction on the facilities will begin shortly after.

These two new facilities will complement Orgill’s current distribution network, which includes locations in Memphis, Tenn.; Inwood, W.Va.; Tifton, Ga.; Hurricane, Utah; and Kilgore, Texas.

HOME DEPOT REPORTS FIRST YEAR-END SALES DECLINE

For the first time in company history, The Home Depot reported an annual sales decline. Sales for fiscal 2007 were $77.3 billion, 2.1 percent below fiscal 2006. Excluding the 53rd week, sales for fiscal 2007 decreased by 3.5 percent from fiscal 2006. Comparable-store sales for the year declined 6.7 percent.

For fiscal 2007, consolidated earnings per diluted share decreased 15.1 percent to $2.37 on consolidated net earnings of $4.4 billion, compared to consolidated earnings per diluted share of $2.79 on net earnings of $5.8 billion in fiscal 2006. Excluding the 53rd week, consolidated earnings per share declined by 16.5 percent.

Earnings per diluted share from continuing operations in fiscal 2007 were $2.27, compared to $2.55 per diluted share in fiscal 2006, a decline of 11.0 percent. Excluding the 53rd week, earnings per share from continuing operations declined by 12.5 percent.

"This was a difficult year financially, but I believe the progress we made on our key priorities set the foundation for the long-term health of our company," said Frank Blake, chairman and CEO. "We see the home improvement market in 2008 as challenging, but we are going to continue to focus on our five priorities and build on the progress we made in 2007," Blake said.

Home Depot reported fiscal 2007 fourth quarter consolidated net earnings of $671 million, or $0.40 per diluted share, compared with $925 million, or $0.46 per diluted share, in the same period in fiscal 2006. Sales for the fourth quarter totaled $17.7 billion, a 1.5 percent increase from the fourth quarter of fiscal 2006.

The fourth quarter of 2007 consisted of 14 weeks compared with 13 weeks for the prior year. The 14th week added approximately $1.1 billion in sales for the quarter and the year. Excluding the 14th week, fourth quarter sales declined by 4.7 percent compared to the fourth quarter of 2006. Comparable-store sales for the quarter declined 8.3 percent. The additional week had no impact on comparable sales performance for the quarter or the year.
For 2008, the company is projecting a total sales decline of 4-5 percent, with negative comp-store sales in the mid to high single-digit range. In addition, continuing operations earnings per share is forecast to decline 19-24 percent for the year. Home Depot is planning to open 55 new stores during 2008.

ACE ANNOUNCES RESTATED FINANCIAL RESULTS FOR 2004–2006

Ace Hardware Corp. reported that it has successfully restated its previously issued financial statements for the fiscal years ended 2006, 2005 and 2004. The restatement was primarily the result of the discovery of an inventory accounting error, which the company announced last September.
The restatement includes the correction of the inventory accounting error, which reduced 2006, 2005 and 2004 net earnings by $18.9 million, $19.3 million and $33.5 million, respectively. Additionally, the company also recorded other out-of-period adjustments and reclassifications in the restatement of its financial statements. Measures are being taken to restore the company’s equity, which include the establishment of variance allocation accounts for Ace’s stockholders, its independent store owners.

“We anticipate having Ace’s equity restored to previously reported levels within the next two years,” said Ace President and CEO Ray Griffith. “The fact that we identified the discrepancy, conducted a full, third-party investigation that found no fraud, no missing money and no missing inventory, and have issued audited restated financials within a six-month time frame is a testament to our resolve for fixing the issue and moving the company forward.”

A summary of the impact of the restatement on net income and equity for 2006, 2005 and 2004 follows:

Net Income
	As Previously Reported	Restatement Adjustment	As Restated
2006	$107,420	$(12,889)	$94,531
2005	$100,419	$(20,934)	$79,485
2004	$101,947	$(36,976)	$64,971
Equity
2006	$319,873	$(145,828)	$174,045
2005	$314,910	$(132,939)	$181,971
2004	$302,970	$(112,005)	$190,965

Financial results for fiscal year 2007 will be released separately in the second quarter of 2008.

“Ace is financially sound and growing,” added Griffith. “We’re now ready to move forward, build the strength of the Ace brand and continue to provide our 4,600 stores with the highest levels of support and retail strategies to better serve their customers.”

Thursday, Feb. 14, 2008

HOME HARDWARE PREDICTS STRONG GROWTH FOR 2008

Home Hardware Stores Ltd. saw growth in 2007 from both existing dealers and the 21 stores that joined its network during the year.

The company posted retail sales of $4.8 billion in 2007—up from $4.6 billion in 2006—and is on track to continue its growth in 2008. “We’ve seen some solid growth over the past two years and that’s because Home dealers are making the most of the innovative programs available to help them to strengthen their businesses,” said Paul Straus, vice president and CEO, in a prepared statement.

Initiatives include the Build a Better Home Store program, a partnership with the Aeroplan loyalty program and a new cross-docking facility in Jiaxing, China, which allows the company to better direct containers to its three Canadian distribution centers.

HOME DEPOT LAYS OFF 10 PERCENT OF HEADQUARTERS STAFF

The Home Depot, which has seen sales negatively impacted by the slumping home-building market, announced at the end of January that it was laying off about 500 employees at its corporate headquarters. The figure represents about 10 percent of the company’s work force in Atlanta, where it is the city’s fifth-largest employer.

“We have been pretty clear that we are operating in a tough business environment,” Depot spokesman Ron DeFeo told The Atlanta Journal-Constitution. “We see that continuing in 2008.”

Earlier in January, Home Depot closed three call centers, which led to about 950 employees being laid off. The company employs a total of about 350,000 workers.

EMERY-WATERHOUSE DEALERS SHOW POSITIVE OUTLOOK

Emery-Waterhouse, a Portland, Maine distributor, attributes a 13 percent increase in sales at Marketplace 2008 to innovative customers and growth-oriented programs. The 2008 Emery-Waterhouse Marketplace took place January 18-20 in Providence, R.I.

“Customers were very engaged as they sought out opportunities that will translate into growth,” remarked Steve Frawley, president and CEO. “Our results were strong as we exceeded our expectations for the event as well as sales figures from last year’s show. We have a resilient and innovative group of independent retail customers that are growing despite the economic challenges in the housing industry.”

The event was highlighted by the introduction of Emery’s Retail Concept Center showcasing some of Emery’s unique and customized programs and solutions to capture prevalent trends in the industry including green building trends, organic gardening and category solutions, which is Emery’s contractor-based retail solution in power tools and accessories.

Industry experts including John Wagner, LBM Journal’s green editor, Paul Tukey from Safelawns.org, and Mike Guertin, contributing editor at Fine Home Building, were on hand to conduct training sessions and speak with customers.

BOSTWICK-BRAUN HONORS TOP EMPLOYEES

The Bostwick-Braun Company held its annual Employee-Owner’s Celebration on January 26 at Maumee Bay State Park in Oregon, Ohio. President Elaine Canning recognized nine employees with Innovator Awards for suggesting ideas that have been implemented by the company.

One of the Innovator Award winners was EDI Coordinator/Programmer Carol Wagner, who was also named Employee of the Year for 2007. She started her career with Bostwick-Braun in 1986 as a computer operator.

As the Employee of the Year, Wagner is the recipient of the H.L. Thompson Jr. Memorial Award, named after Bostwick-Braun’s late chairman emeritus. Wagner gets a one-year term on the Bostwick-Braun board of directors and also received a travel voucher, spending money and an engraved clock.

Other employees receiving Innovator Awards were: George Gatts, Mike Dastoli, Michelle Stahl, Michele Barron, Paul DesRosiers, Damian Nicholson, Gary Lewis, Kevin Bentoske and Matt Skyzniecki.

John Lull was named Dealer Sales Rep of the Year for the second time in three years. Lull, who joined the company in 1991, services accounts in and around the Detroit area. William Garrison was named 2007 Driver of the Year.

Wednesday, Jan. 30, 2008

NRF FORECASTS 3.5 PERCENT GROWTH IN RETAIL SALES FOR 2008

The National Retail Federation (NRF) just released its 2008 economic forecast, predicting that retail industry sales (which exclude automobiles, gas stations, and restaurants) will increase 3.5 percent from last year.

According to its quarterly Retail Sales Outlook report, NRF expects the slow pace in sales growth to continue before picking up in the second half of the year.

“Consumers will be under financial stress from high energy costs, the fallout from the housing slump, and sluggish employment and income growth,” said NRF Chief Economist Rosalind Wells. “Shoppers will seek to pay down debt, spend more in line with income growth and approach discretionary purchases with more restraint.”

While the outlook is somewhat reserved, Wells expects sluggish first half sales to eventually give way to stronger sales in the third and fourth quarters. NRF expects industry sales to increase 3.2 percent in the first half of the year followed by a 3.8 percent increase in the second half as economic conditions improve.

“Retailers will once again be forced to market to more practical consumers, many of whom will be looking to trade down,” said Wells. “Even areas of past high growth like luxury goods and online shopping will feel the pressure. In 2008, the challenges will be formidable for everyone.”

SEARS UNVEILS NEW ORGANIZATIONAL STRUCTURE

Sears Holdings Corp. announced it is implementing an organizational structure and operating model designed to simplify the way its business lines are managed and create greater autonomy and focus for the business unit management teams.

The new structure is built on five types of business units that enable each organization to focus on their core categories and capabilities: operating businesses, support, brands, online and real estate. The operating business units will consist of the company's current lines of business such as home appliances, electronics and apparel. The support units will include the functions that provide operational and administrative support to the operating businesses including marketing, store operations, customer strategy and finance. The brand units will be responsible for growing the value of Sears Holdings brand portfolio. The real estate business unit and an online business unit will focus on increasing the sales productivity of the company's physical and virtual real estate.

Each business unit will have a designated leader and an advisory group comprised of senior Sears Holdings executives who will provide direction and oversee the business unit's performance. The leadership of each unit will have a separate, internal profit and loss statement to allow greater focus on managing the profitability of the unit, and rapid decision making to capitalize on opportunities and mitigate risks.

"We are convinced that our businesses can operate more efficiently and effectively and we continue to look for ways to make that happen," said Sears Holdings Chairman Edward Lampert. "By creating smaller focused teams that are clearly responsible for their units, we increase autonomy and accountability, create greater ownership and enable faster, better
decisions. Our board of directors, our senior leadership team and I believe this will make Sears Holdings a more responsive and competitive company in the future."

Lampert added: "At the time of the merger, a centrally managed structure was essential to control costs and focus on integrating the two companies. Now, it's time to empower individual businesses and teams to focus on the customer experience and performance. Stronger business units will be better able to support each other, build a stronger company, and be more attractive to partners and talent. We are not doing this overnight; this is a phased transition to enable our business units and their key partners to learn how to leverage the new model."

In related news, Sears announced that Aylwin Lewis will step down Feb. 2 as president and chief executive and be succeeded on an interim basis by W. Bruce Johnson, executive vice president of supply chain and operations. Lewis also will step down from Sears' board. The company, which saw its stock decline 39 percent in 2007, said it will immediately launch a formal search to identify a permanent CEO.

DO IT BEST UPGRADES WEB SITE FOR SHOPPERS

Launched in 1999, the Do it Best Corp. consumer web site, www.doitbest.com, recently underwent a “remodel” to stay in front of changing consumer shopping preferences. The new web site boasts a more neutral color palette, less “clutter,” more functionality and more effective promotion of products and services.

“We made the changes to help our member-owned stores meet the needs of their customers,” said Rob Schmelz, e-commerce manager for Do it Best Corp. “Ship-to-Store, for example, is a service we’ve provided for years and now we’ve made it easier for consumers to find and use it on our web site.” He says they’re already seeing a significant increase in customers using that service.

With the Ship-to-Store option, customers can choose to have their online order shipped to their local store, ensuring safe delivery of their product, while taking advantage of no shipping and handling fees. This option also allows customers to receive non-shippable items such as patio sets or other large merchandise. Ship-to-Store brings the consumer into a specific location where store personnel can create relationships with new customers and answer any questions they might have about their product, and it also gives the store the opportunity to sell additional products.

“The customers also benefit from having access to 65,000 items online,” said Schmelz, “giving members the opportunity to expand their product offering.”

Various aspects of that improved navigation include:
* More robust “search” function: Customers will notice the more specific results for “search” requests. Now, an online shopper or browser can select whether results will be displayed by brand or price with quicker results.

* “Recently viewed” items: Another new function is the display of up to 16 recently viewed items to help the consumer return to an item of interest easily.

* Consumer product ratings: Helpful for consumers who want to hear from “real people” about how a product looked or worked and whether it might be right for their needs. Consumers will also be able to leave their own comments so others can read them. Consumers will also find a special area comprised entirely of top-rated products.

* Specialty shops: These areas allow the shopper to see related items or other products of interest all displayed together to help them plan their purchases.

* Map: Since many online shoppers will utilize the Ship-to-Store feature and will need to find a local store, there is an improved mapping display that uses MapQuest to find the closest store by city, state or zip code and will then provide the driving directions to the store.

Bill Zielke, vice president of marketing and international development for Do it Best, says the goal of the redesign is simple. “The winners in today’s marketplace are finding ways to reach customers through multiple channels. We want to offer our stores’ customers the easiest way to find and to buy the products they need, whatever and whenever. Our enhanced site does just that.”

LOWE’S NAMES NEW VP

Lowe’s Companies announced that Cedric Coco has joined the company as vice president of learning and organizational effectiveness. Coco has more than a decade of experience in learning and development and organization performance at Microsoft, KLA-Tencor and GE. He reports to Maureen Ausura, senior vice president of human resources.

In his new role, Coco will have responsibility for enterprise-wide organization effectiveness, talent development and learning strategies, which will play a critical role in preparing Lowe’s for continued expansion across North America. He will lead the company’s efforts to ensure Lowe’s has a pipeline of talent capable of achieving the company’s growth and expansion goals well into the future.

“Lowe’s is seeing strong growth and we have high expectations for our more than 210,000 employees across the company,” said Ausura. “Cedric’s diverse background and practical expertise aligns with our ongoing investments in developing our existing workforce and talent pipeline.”

Prior to joining Lowe’s, Coco was general manager of engineering excellence at Microsoft, where he was responsible for driving learning and development, engineering process strategies, engineering compliance efforts and performance support methodologies for the company’s global engineering and IT workforce.

Tuesday, Jan. 15, 2008

ACE CONCLUDES INVESTIGATION INTO ACCOUNTING ERROR

Although he said he is embarrassed by the findings, Ace Hardware Corp. President and CEO Ray Griffith is pleased that the independent investigation into the co-op’s accounting error has concluded with no evidence of fraud, missing money or missing inventory and that the co-op has been able to maintain day-to-day service to retailers.

The five-month investigation revealed that the amount of inventory reflected on the company’s general ledger exceeded the actual amount of inventory in the co-op’s perpetual inventory valuation system by $152 million, involving a period from 1995 through 2006.

Seventy-five percent of the overstatement happened from 2002 through 2006, so that’s why the company focused its investigation on that period. Ace’s lenders, who are the ones demanding equity be restored to the previous level of $320 million, were only seeking restated financials dating back to 2002, according to an Ace spokesman.

“I personally apologize for this situation. I never thought we’d be in this situation, but we’re making solid progress to put this behind us and we’ll be a better company for it,” Griffith said in an interview with Hardware Retailing.

Once it learned of the accounting error last August, Ace’s board of directors hired a law firm—Skadden, Arps, Slate, Meagher & Flom LLP—and a forensic accounting and internal audit firm, Protiviti, to investigate the extent and cause of the problem as well as identify corrective measures.

Skadden and Protiviti conducted interviews with 28 Ace associates and reviewed about 40 boxes of office files and 50,000 e-mails and electronic documents in reaching their conclusions, which were shared with Ace members in January.

The investigation revealed that the variance was primarily caused by an ongoing understatement of cost of sales in the general ledger, and consequently in the company’s financial statements, due to an incorrect relief of certain freight costs, price variances and vendor merchandise returns.

The review concluded that “lack of ownership and oversight of key processes contributed to the root causes of the variance between the perpetual and general ledger inventory valuations.” In addition, the investigation concluded there were weaknesses in controls and management oversight at various levels that contributed to the failure to detect the problem prior to August 2007.

Commenting on the report, Ace Chairman Tom Glenn stated, “There was clearly a failure of controls, processes and oversight that led to the error and the failure to detect the error earlier…A comprehensive remediation plan to correct those deficiencies has been developed and progress has already been made.”

The three-phase remediation plan involves short-term and long-term measures to reorganize the inventory accounting area, undergo permanent staffing and organizational changes with structured training, and adopt operational and procedural changes to ensure such mistakes do not happen again. The company’s internal audit unit will take on an expanded role and the search for a new CFO is underway.

Glenn noted that Ace was nearing completion of phase one and phase two should be completed by the end of the first quarter. “We realize that the confidence that has been lost will have to be earned back over time through hard work and results. We are totally committed to that effort,” he said.

The total cost of the investigation is about $10 million, according to Griffith, who said the co-op had implemented cost-cutting measures to recoup that expense including eliminating team members’ discretionary payout to their 401(k) plan for 2007 and reducing incentive payments to senior management.

Griffith said Ace expects to post profits of $85 million for 2007. He said the company’s audit firm, KPMG, anticipates being able to restate financials for the years 2002 through 2006 by the end of February and for the 2007 fiscal year by the end of April.

The accounting error was discovered as Ace was undergoing the process of preparing documentation to the SEC in anticipation of a switch to a for-profit status. Griffith said such a move has been tabled for now. “All our energy and focus has been on resolving this accounting issue. It (changing to for-profit) is lingering and will be considered at a future date,” he said.

Griffith added that senior managers were limited in the communication they could have with members during the investigation, but he and the Ace board will now be able to communicate more openly with dealers.

Ace has established an equity restoration plan that is based on each member’s proportionate share of warehouse dividend pool purchases from 2002 through 2006. Patronage dividends for 2007 and future years will be distributed 20 percent in cash and the remainder in Class C stock. The non-cash stock portion will first be applied against a dealer’s variance account. New shares will be issued after the variance account is satisfied.

Griffith said the majority of dealers will be able to satisfy their variance accounts by the end of 2008 and all stores will be restored within three years. He said members have already applied $10.5 million of C stock toward variance accounts.

He said most members were pleased with the restoration plan since it addressed three of their concerns: that the plan consider their cash flow, their time with the co-op and the fact the error occurred over time so it shouldn’t be paid back in one year.

Although he admits there are some Ace dealers who are not happy with the situation, Griffith said the co-op will work hard to restore trust. “The silent majority is ready to get back to the business of retail. 2008 will be devoted to improving the retail store model and supply channel initiatives,” he said.

HARDWARE SHOW ALIGNS MANAGEMENT TEAM

The National Hardware Show® has aligned its management team to focus efforts on the customer experience through new and enhanced programming; strengthening key partnerships and alliances and identifying and cultivating new retail visitor growth.

Dennis MacDonald, senior vice president, will continue to oversee the overall strategic brand development for the National Hardware Show while Dean Russo, senior vice president, joins the team with responsibility for the day-to-day business and financial operations. In addition, a new position has been created for Sonya Ruff Jarvis, who formerly served as marketing director.

In this new position, Ruff Jarvis will serve as executive director, event strategy. She will be cultivating a network of industry experts, opinion leaders, associations and key retail channel relationships to more actively engage them in the show and to create customized programming and show content unique to their needs. With this insight, she will also continue to develop the educational program.

“With this management alignment, the National Hardware Show will better serve the needs of its customers through relevant, customized programming,” said Russo. “We are excited to present these in 2008 in Las Vegas.”

Plans for the 63rd National Hardware Show, featuring Lawn & Garden World, Homewares and New Product World, are well underway as the event returns to Las Vegas May 6-8. The show was more than 80 percent sold out at press time.

The combined events will offer home improvement retailers of all sizes a comprehensive preview of the entire retail home enhancement marketplace, including special product areas focused on green products, new product inventions and a comprehensive presentation of the global marketplace.

FORMER HARDWARE RETAILER CHARGED WITH 46 COUNTS OF FRAUD

The District Attorney’s Office in Suffolk County (Mass.) has charged a former hardware store owner with 46 counts of fraud. Erik Joseph, 51, who until a couple of months ago owned Seaport Hardware in South Boston, allegedly used his store to gather customers’ credit card numbers and bill them for hundreds of thousands of dollars in fraudulent transactions.

Joseph was indicted on 23 counts of larceny over $250 by scheme and 23 counts of fraudulent use of a credit card. The total losses charged in the current indictments amount to $290,894.

The investigation remains open, according to District Attorney Daniel Conley, because the amount of evidence was so overwhelming that the sitting grand jury only had time to hear testimony regarding American Express transactions—Visa, MasterCard and debit transactions will be heard by another grand jury. Authorities decided to charge him now once they learned he had sold his store and was closing legitimate bank accounts.

Evidence suggests that Joseph began the scam in 2001 and continued it for the next six years. Prosecutors believe he set up dozens of shell businesses, each with its own credit card merchant number, bank account routing number and mailing address; using the credit card numbers of his hardware store’s customers, he would then key in transactions that billed unsuspecting cardholders for multiple sales that were just under $200.

At the beginning of the scheme, Conley said, Joseph would wait four to six months before billing the victims; in 2006 and 2007, the time delay disappeared and accounts were being maxed out within days of the cardholders’ visits to Seaport Hardware. Once the credit card company had transferred funds to the bank account linked to the transaction, Joseph would drain the account and leave the victims unable to reclaim the money, according to prosecutors.

Prosecutors have developed evidence that Joseph transferred these funds from the shell businesses to more than 40 separate bank accounts he held at various Boston banks.

Because many of the victims were frequent customers at Joseph’s store, some were victimized two or three times—some when he allegedly used account numbers from two different credit cards belonging to the same customer.

ACE HARDWARE FINED $850,000 FOR AIR QUALITY VIOLATIONS

In what it calls its largest consumer product settlement ever, California’s Air Resources Board (ARB) has fined Ace Hardware $850,000 for selling windshield washer fluid in stores throughout the state that failed to meet the state’s air emissions requirements.

From 2003 to 2007, Ace Hardware reportedly sold about 25,000 one-gallon containers of washer fluid with higher volatile organic compound content in areas throughout the state where it was not allowed, resulting in more than 20 tons of excess emissions. Ace Hardware was cited previously by ARB in 2005 for selling wiper fluid, resulting in a $40,000 settlement.

In a statement, Ace Hardware noted it has long had in place a restriction in its computerized ordering system that is designed to prevent Ace retailers in certain California counties from purchasing windshield wiper fluid that contains volatile organic compounds (VOCs) in excess of California-mandated standards.

The statement added, “Unfortunately, an error in this system enabled a relatively small number of Ace retailers in these California counties to inadvertently purchase these products from Ace. Last year, Ace Hardware worked with all affected retailers to pull the products from these retailers’ store shelves and corrected the error in Ace’s computerized ordering system.”

NOMINATIONS OPEN FOR YOUNG RETAILER OF YEAR PROGRAM

There is still plenty of time to submit a nomination for the Young Retailer of the Year program. Established in 1997 by the North American Retail Hardware Association (NRHA), the annual program recognizes the achievements of outstanding hardware retailers 35 years of age and younger.

Owners, managers, supervisors, sales associates and other management personnel can be nominated for this award, which is judged based on career advancement, professional accomplishments, goals for the future, education and community involvement.

The program is sponsored by 3M, Cooper Hand Tools, Scotts Co. and the American Hardware Manufacturers Association. Honorees will be special guests at a July banquet in their honor during NRHA’s 2008 Convention in Monterey, Calif.

For more information on putting together your 2008 nomination form, call (800) 772-4424 or go to www.nrha.org.

Tuesday, Jan. 8, 2008

NRHA CANADA FORGES ALLIANCE WITH CANADIAN BUILDING SUPPLY ASSOCIATIONS

The North American Retail Hardware Association Canada is pleased to announce an agreement with Canada’s regional building supply associations to offer NRHA Canada’s product knowledge training to their members across the country.

Five associations—the Building Supply Industry Association of British Columbia, the Western Retail Lumber Association, the Lumber and Building Materials Association of Ontario, L’association des détaillants de matériaux du Québec and the Atlantic Building Supply Dealers Association—are represented collectively under the Canadian Retail Building Supply Council (CRBSC). The CRBSC will now make NRHA Canada’s product knowledge training available to all its respective members as part of those associations’ range of existing programs. CRBSC members can get the NRHA Canada training program at a 10 percent discount off the regular rate.

“Our associations have an important mandate to offer training to our members, such as Forklift Operation, Estimating, Yard Foreman, Plumbing and Electrical and Health and Safety. The product knowledge training from NRHA Canada makes an excellent addition to our existing programs,” said Gary Hamilton, executive director of the WRLA, and current chair of the CRBSC.

“We are pleased to make this important training available to CRBSC members,” said Michael McLarney, managing director of NRHA Canada, and president of Hardlines Inc., which manages NRHA Canada. “Product knowledge is what sets the independent apart from their larger competitors.” Plans are under way to translate the program into French, as well.

NRHA Canada’s online retail product knowledge training programs were taken over by Hardlines Inc. one year ago, and membership now includes some of the industry’s leading retail groups, such as Home Hardware Stores Ltd., IRLY Distributors, Federated Co-operatives, and Ottawa-based Preston Hardware. Any members interested in the training programs are invited to contact NRHA Canada directly.

The centrepiece of NRHA Canada’s programs is the Basic Training Course in Hardware Retailing. It contains everything hardware and home improvement retailers need to train employees to improve their skills, including interactive modules that cover product knowledge, selling tips and merchandising techniques. The course also includes testing and grading functions to ensure employees retain this information. All training programs have been customized for Canadian dealers. For more information about NRHA Canada, contact McLarney at 416-489-3396 or mike@hardlines.ca.

FORMER PASHA DIRECTOR TISDALE PASSES AWAY

J. Wayne Tisdale, long-time managing director of the Pennsylvania & Atlantic Seaboard Hardware Association (PASHA), died December 30, 2007 in Mechanicsburg, Pa. He was 88.

He retired after 34 years as managing director of PASHA and previously was executive secretary of the Arkansas Retail Hardware Association for eight years.

Tisdale was a native of Arkansas and a graduate of Louisiana State University. He was a charter member and director of the Pennsylvania Society of Association Executives; a past president of the Rotary Club of Colonial Park and a Paul Harris Fellow; a volunteer counselor for SCORE ( Service Corps of Retired Executives) the counseling arm of the U.S. Small Business Administration.

He was also a member of the Steelton Moose, The West Shore Elks Club, The Hershey Italian Lodge, The Harrisburg Organ Society and an Honorary Kentucky Colonel.

In addition, he was president of J. Wayne Tisdale & Associates, business management consultants; a professional public speaker, a member of the National Speakers Association and a member of the Business Speakers Network.

Surviving are a daughter, Jennifer Greene and her husband, James of Harrisburg, Pa.; a son who owns a hardware store, Ed Tisdale and his wife, Nancy of Cape Coral, Fla.; six granddaughters; 10 great grandchildren and long-time companion, Marjorie McClain. Memorial donations can be made to the American Cancer Society, 3211 North Front, Suite 100, Harrisburg, PA 17110.

BOSTWICK-BRAUN PROMOTES BEACH TO SENIOR VP

Bostwick-Braun has announced that former VP of Industrial Supply, Chris Beach, has been promoted to senior vice president of marketing and chief marketing officer. Beach will oversee the company’s sales divisions and merchandising department.

Beach started his career with Bostwick-Braun’s Industrial Supply Division in 1989. He received his bachelor’s degree in business administration from the University of Toledo. After managing a successful sales territory in Detroit for several years, he was promoted in 1999 to field sales manager for the Industrial Supply Division.

One year later, Beach was promoted to his latest position of vice president of Bostwick-Braun Industrial Supply.

Also, Scott Wolfrum has been promoted to director of distribution for the company’s Ashley, Ind., distribution center. He replaces John Gilbert, who retired after 30 years of service.

MAKING A CASE FOR AMERICA CAMPAIGN SUPPORTS SMALL TOWNS

Concerned about the livelihoods of downtown merchants and jobs going overseas, W.R. Case & Sons Cutlery Company decided to take action. They created “Making a Case for America,” an awareness campaign aimed at supporting and paying tribute to small-town retailers, small-town values and the spirit of all things “Made in America.” The cause hit close to home with country music superstars Brooks & Dunn, who have joined forces with Case to help spread the word.

In towns all across the country, small business owners are struggling to survive, and the effect extends well beyond individual business owners. “Local companies build small towns and keeps them alive by bringing jobs and opportunities to the communities they call home. We hope this program helps build interest in these communities and maybe save some of the manufacturing jobs within them,” said Case President and CEO Tom Arrowsmith.

“Making a Case for America is about focusing attention and pledging support for local products manufactured in small-town U.S.A. It’s also about giving back to the local, independent retail stores that were once the centerpiece of downtown America. We need to ensure that the independent retailer not only survives, but thrives in today’s difficult economy,” said Eddie Jessup, Case’s vice president of sales and marketing.

Kix Brooks and Ronnie Dunn share in the belief that America’s downtowns are critical to the country’s future landscape. Kix Brooks recalled his grandfather having Case knives around his general store, which he operated in a town of only 600 people in northern Louisiana. He feels Case has held true to its own small town roots. “You still feel this (Case) is a family business, where generations of pride are passed down from one to another. It’s something that’s been going on for a long time and it’s something that Case knives have shared with America.”

“Middle America, to an extent, is drying up,” explained Ronnie Dunn. “To be able to go find that (Case knife) in a hardware store in a small town in middle-America…is an important aspect. It represents a lot. That’s what I want to be associated with…something that’s around for a long time…that represents America.”

Throughout its history, W.R. Case & Sons has done much to support small business owners and small towns directly. Case knives are still crafted by hand using local talent. The knives they manufacture are sold through an exclusive network of small, independent dealers, many of whom are situated in rural communities across the country.

“The majority of our consumers also live in small-town America and rely on our knives for work, recreation and utility,” said Arrowsmith. “Our customers believe that these towns and communities maintain their own unique identities…where people know their neighbors; can walk to stores, parks and schools; and where families look out for each other. Small towns bring people together, and we’re going to do our part to keep that tradition alive for hard-working Americans.”

The “Making a Case For America” campaign was kicked off at the House-Hasson Hardware dealer market, held Jan. 4-6 in Nashville, Tenn. Case plans to launch new product offerings in support of the Making a Case for America campaign beginning in the latter half of 2008.

Jessup said that the campaign will include the development of a grant program that every participating retailer can apply for, making funds available to put computers in schools and restore important local buildings in small towns across the country. “We want to support the communities that support independent retailers,” he said.

To find out more about the “Making a Case for America” campaign, visit www.caseforamerica.com.

Monday, Dec. 17, 2007

ACE HARDWARE UNVEILS PLAN TO RESTORE EQUITY

Ace Hardware Corp. President and CEO Ray Griffith says the co-op has completed its investigation of the accounting error that led to a $152 million shortfall, pointing out that the review has concluded with no evidence of missing inventory, missing money or fraud.

That doesn’t mean there won’t be some short-term pain for dealers, as the company seeks to restore its net worth to $320 million, the figure reflected on the co-op’s balance sheet at the end of 2006. “Our lenders have committed money based on this equity level and, when restored, our financial position will ensure us competitive terms and rates,” Griffith stated in a December 14 letter to members.

Ace’s board of directors and management team have settled on an equity restoration plan that is based on each member’s proportionate share of warehouse dividend pool purchases from 2002 through 2006.

Patronage dividends for 2007 and future years will be distributed 20 percent in cash and the remainder in Class C stock. The non-cash stock portion will first be applied against a dealer’s variance account. New shares will be issued after the variance account is satisfied.

Griffith noted that many stores will be able to satisfy their variance accounts with distributions for 2007 and 2008, with complete restoration for all but a few stores estimated to take place with distributions for 2009. New stores opened in 2007 will have no restoration obligation.

Once the company’s equity has been fully restored to $320 million from its current level of $168 million, Ace’s board is expected to consider adopting a new patronage dividend plan.

Griffith pointed out that Ace’s corporate staff will be sharing in the pain, with no discretionary payout to team members’ 401(k) plan for 2007—an amount that totals nearly $10 million. In addition, incentive payments to senior management will be adversely impacted.

Shortly before the equity restoration plan was announced, a group of four Ace Hardware members declared the formation of an owner’s slate of candidates for the board, hoping to provide an independent voice to the co-op’s board of directors.

The Ace board’s nominating committee traditionally nominates one candidate for each open board seat. The election will take place at Ace’s annual stockholders’ meeting, scheduled for June 3, 2008.

The four independent member candidates include: Charlie Huff, CJs HomeCenter in Omaha, Neb.; Larry Perry, Woodstock Home & Hardware in Woodstock, Vt.; Patrick Smith, Dunn Hardware in Lyndhurst, Ohio; and Brian Odell, Arlington Ace Hardware in Kensington, Calif.

“The cornerstone of our candidacy is open dialogue with owners before, and after, major decisions are made,” the group stated in a letter that was circulated to Ace dealers. Specifically, they are concerned about Ace’s previously announced plan to transition from a cooperative to a corporation as well as how the co-op’s $152 million accounting shortfall would be reconciled.

In related news, Ace announced the resignation of Ron Knutson, vice president-finance, who has decided to pursue other interests. A search for a new chief financial officer is underway.

WILSON JOINS NRHA CANADA AS RETAIL ADVISOR

The expansion of the North American Retail Hardware Association in Canada has received an important boost with the appointment of Bill Wilson as retail advisor for NRHA Canada.

Wilson has had a long and active career in Canada’s home improvement industry. Best known for his role as vice president and general manager of the Sodisco-Howden Group, he also spent many years there as vice president-merchandising. Most recently, he was at London, Ontario-based TSC Stores in the role of vice president-merchandise, with responsibility for distribution, merchandising and the purchasing department. Wilson will be able to offer his expertise to the development of NRHA Canada’s training programs.

“Mr. Wilson is a well-respected veteran of the home improvement industry,” said Michael McLarney, managing director of NRHA Canada. “He understands retail—and he recognizes the value of product knowledge training for dealers. This combination of skills and insights makes him a perfect addition to the NRHA Canada team. We are proud to have him on board.”

Since that organization’s operations were taken over by Hardlines Inc. earlier this year, NRHA Canada’s online retail product knowledge training programs have been drawing interest from many of the industry’s leading retail groups. Most recently, IRLY Distributors, based in Surrey, B.C., has made the training available to its 43 member dealers, joining the ranks of existing NRHA Canada members Home Hardware Stores Ltd. in St. Jacobs, Ont.; Federated Co-operatives based in Saskatoon, and Ottawa-based Preston Hardware.

The centerpiece of NRHA Canada’s programs is the Basic Training Course in Hardware Retailing. It contains everything hardware and home improvement retailers need to train employees to improve their skills, including interactive modules that cover product knowledge, selling tips and merchandising techniques. The course also includes testing and grading functions to ensure employees retain this information. All training programs have been customized for Canadian dealers and the Lumber & Building Materials Training module will be available as part of NRHA Canada membership early in 2008.

When Hardlines assumed the operations of NRHA Canada in April 2007, it created a mandate to deliver product knowledge training to every independent retailer in the country. For more information about NRHA Canada, contact McLarney at (416) 489-3396; or mike@hardlines.ca.

ORGILL INC. MAKES FORBES’ LIST

For the first time ever, Orgill Inc. was included on Forbes magazine’s list of America’s Largest Privately Held Companies.

The list appeared in the November 26, 2007, issue of Forbes magazine and includes other well-known privately held companies such as Chrysler, Hilton Hotels and Ernst & Young. To make the list, companies had to have restricted or private ownership and all the companies on the 2007 list had annual revenues in excess of $1 billion.

“Being named on Forbes’ list is truly an honor for us, but more importantly it is a testament to the success our customers have experienced,” says Ron Beal, Orgill’s president and CEO. “The kind of sustained growth Orgill has experienced over the last decade is only possible because of the continued support our customers have given us and the success they have found in their individual markets.”

Inclusion on the list marks yet another milestone for Orgill, which passed the $1 billion mark in sales for the first time in 2006. With five (soon to be six) domestic distribution centers and two export consolidation facilities, Orgill distributes hardware and home improvement products to hardware, home improvement and building material retailers of all types and sizes.

LOWE’S OPENS FIRST CANADIAN STORES

Lowe's opened its first three Canadian stores on December 10, marking the home improvement retailer's first international expansion. The stores opened in the Toronto suburbs of South Brampton, Brantford and Hamilton. Three additional stores are slated to open February 1, and a seventh is planned to open shortly after. Lowe's has more than 15 additional Canadian sites in the pipeline in various stages of development.

"Today is about delivering on the promise we've made to Canadian customers since we announced our decision to bring Lowe's passion for customer service to Canada," said Don Stallings, president, Lowe's Canada, during the grand opening ceremonies. "Lowe's is ready to meet the unique home improvement needs of Canadians with our everyday low prices, products and services. Every customer presents a new opportunity to deliver on that promise."

Stores in East Gwillimbury, North Brampton and Toronto are slated to open February 1, followed by one in Maple. Lowe's announced in 2005 its intentions to open its first stores in the Greater Toronto Area, with as many as 100 stores in Canada over time.

The company opened its Canadian headquarters in Toronto in 2006 and now has more than 700 Canadian employees in the office and its stores. The Lowe's Charitable and Educational Foundation recently announced a $500,000 contribution to the YMCA of Greater Toronto for Camp Pine Crest as well as local Toronto-area projects. In addition, employees have already volunteered on home renovation projects with the Home Ownership Affordability Partnership (HOAP) in Hamilton and participated in a groundbreaking ceremony for the "Lowe's Loop" fitness trail in Brantford's Fordview Park. Work on the trail will begin in the spring.

"Lowe's has a long and proud history of giving something back to the communities we serve," added Stallings. "Our focus is on education, safe and affordable housing and community improvement projects for places that bring people together. It's a commitment we take seriously, and all of us at Lowe's Canada look forward to serving the community and truly becoming a part of it."

NEW I-9 FORM REQUIRED BY DECEMBER 26

The Department of Homeland Security’s U.S. Citizenship & Immigration Services (USCIS) has released a revised version of the I-9 Form (the Employment Eligibility Verification Form) which employers must use beginning Dec. 26, 2007. They will face fines if they use the old I-9 Form after that date.

The new version of the I-9 Form reflects a shortened list of acceptable personal identification and employment eligibility verification documents that was authorized more than a decade ago. However, USCIS did not release new forms until Nov. 7.

The new list of documents that are acceptable for verifying employees’ identity and employment eligibility include a U.S. passport (unexpired or expired), a Permanent Resident Card (Form I-551), an unexpired foreign passport with a temporary I-551 stamp, an unexpired Employment Authorization Document with a photo (Form I-766, I-688, I-688A or I-688B) and an unexpired foreign passport with an unexpired Arrival-Departure Record (Form I-94) in certain cases.

Documents that are no longer acceptable include a Certificate of U.S. Citizenship (Form N-560 or N-570), a Certificate of Naturalization (Form N-550 or N-570), an Alien Registration Receipt Card (Form I-151), an unexpired Reentry Permit (Form I-327) and an unexpired Refugee Travel Document (Form I-571).

The new forms carry a revision date of June 5, 2007. This date – (Rev. 06/05/07)N – is printed on the lower right corner of the form.

The new I-9 Form and the Handbook for Employers: Instructions for Completing the Form I-9 are available online at www.uscis.gov.

Wednesday, Dec. 12, 2007

FOUR ACE MEMBERS TO CHALLENGE FOR BOARD SEATS

A group of four Ace Hardware members are hoping to provide an independent voice to the co-op’s board of directors, declaring the formation of an owner’s slate of candidates for the board.

Ace is drawing closer to receiving a final report on the investigation into the accounting error and hopes to announce a reconciliation plan soon, perhaps by the end of December. President and CEO Ray Griffith stated that remediation will include a short-, medium- and long-term approach as well as a Sarbanes-type compliancy to ensure the problem does not occur again.

Griffith added that the investigation has concluded with no evidence of missing inventory, missing money or fraud. The equity restoration plan was to be presented to lenders and the audit firm, KPMG, in mid-December

In related news, Ace announced the resignation of Ron Knutson, vice president-finance, who has decided to pursue other interests. A search for a new chief financial officer is underway.

Monday, Dec. 3, 2007

TRUE VALUE ANNOUNCES THIRD QUARTER RESULTS

True Value Company reported revenue of $478.5 million for the quarter ending September 29, 2007, a decrease of 3.9 percent or $19.4 million from $497.9 million for the same period a year ago. The co-op posted a quarterly net margin of $12.0 million, a decrease of 34.4 percent or $6.3 million versus $18.3 million one year ago.

The quarterly decline in revenue included the positive impact of 1.6 percent growth in wholesale warehouse shipments to True Value retailers, offset by declines related to the timing of True Value’s annual Fall Market. The market occurred during the third quarter in 2006, but was held in the fourth quarter in 2007. Revenue from the Fall Market includes profits from goods shipped directly from vendors to retailers and revenue associated with hosting the market. The revenue and profit from market activities benefited the third quarter in 2006 and will benefit the fourth quarter in 2007. Third quarter profit levels were in line with the company’s plan.

“New product assortments and more robust offerings helped drive strong growth in our seasonal and lawn and garden departments this quarter,” said President and CEO Lyle Heidemann.

For the nine months ending September 29, 2007, True Value also reported revenue of $1.56 billion, a decrease of 1.9 percent or $30.1 million from $1.59 billion for the same period a year ago. The 2007 year-to-date net margin was $47.7 million, down 13.6 percent or $7.5 million from $55.2 million one year ago. The prior year’s net margin included a $6.3 million one-time benefit from partial reversals of previously established reserves for two legal matters. Excluding last year’s nonrecurring gain, year-to-date net margin was down 2.5 percent, entirely driven by the timing of Fall Market.

Monday, Dec. 3, 2007

LOWE’S SET TO OPEN FIRST CANADIAN STORES

Lowe's Companies Inc. announced that its subsidiary, Lowe's Companies Canada, was preparing to open its first three stores in Canada the week of Dec. 10, 2007. The first of six stores expected to open during fiscal 2007 will be in Brantford, Hamilton and Brampton.

A Toronto store is slated to open in late January. Lowe's has 18 additional sites in the pipeline, with Western Canada expected to be the next target for expansion.

The company’s entry into Canada has been slowed by challenges in getting the right product and packaging for the Canadian market. About one-third of the products stocked in the warehouse stores will be sourced from Canadian vendors, according to company officials. It faces an entrenched competitor in Home Depot, which already operates 157 stores in Canada.
"Lowe's Toronto management team has been working hard for nearly two years to open the first of many stores we plan for Canada," said Don Stallings, president, Lowe's of Canada. "These first openings illustrate our steadfast focus on delivering an outstanding shopping experience, including the best prices, products and service to our new Canadian customers."

In 2005, Lowe's announced its intentions to open six to 10 stores in the Greater Toronto Area in fiscal 2007, with as many as 100 stores in Canada over time. The company opened its Toronto office in 2006 and has more than 100 employees in the office.

Lowe's currently operates more than 1,425 stores in 49 U.S. states, and the company has also announced plans to enter the Mexican market with three stores in Monterrey.

Monday, Dec. 3, 2007

MANUFACTURING EXEC PETERSEN PASSES AWAY

Well-known industrialist and philanthropist Allen D. Petersen, of Barrington Hills, Ill., and Edgewood, Fla., died peacefully on October 28, 2007, at his home in Barrington Hills. He was 66.

Petersen was born in DeWitt, Neb., in 1941, the grandson of Danish immigrant William Petersen, who invented and patented the Vise-Grip® locking pliers.

Petersen graduated from Colorado College and attended Northwestern University's Kellogg Graduate School of Management. He served as a first lieutenant in the U.S. Army, stationed in Vietnam. In 1966, he returned to DeWitt and joined Petersen Manufacturing Company, makers of the Vise-Grip®, as assistant sales manager, rising to the position of co-chief executive officer and co-chairman.

In 1985, Petersen founded American Tool Companies Inc. (ATC), and, through a leveraged buyout, purchased his family’s interests in Petersen Manufacturing. Serving as chairman and chief executive officer of ATC, which was headquartered in Lincoln, Neb., and subsequently in Hoffman Estates, Ill., Petersen, through aggressive and innovative acquisitions, built the company into the largest privately held hand tool and power tool accessory company in the world.

Beginning in the late 1980s and through the rest of his life, Petersen held board positions with private and public companies in the health care, distribution and financial services industries. In 2002, he sold his controlling interest in ATC to Newell. That year, he co-founded Chicago-based Draupnir, LLC, a private holding and operating company with interests in a variety of manufacturing, sales and marketing companies, including Petersen Brands, a company that was named for him. At the time of his death, Petersen served as Draupnir's chairman.

Petersen was not only a leader of industry, but also a noted philanthropist. In 1997, he established The Lifeboat Foundation, an organization dedicated to assisting young people who have encountered obstacles and adversity in achieving their dream of a college education. In addition, he was a longtime supporter of many cultural institutions in Nebraska, Illinois and Florida.

Even with his tremendous business success, Petersen never forgot his roots. “He worked hard, remained humble and kept his word. He was a man of strong principles, who was loyal and compassionate to his friends and colleagues,” said Jeremy Hobbs, Draupnir president. “He strived to bring out the best in people, and he savored his role as a mentor and leader.
“I am honored to have been Allen's friend and business partner for more than a decade,” Hobbs added. “Draupnir and its family of companies will remain true to his guiding principles as we continue to grow and develop our businesses.”

Survivors include a sister, Ane Shields of Missoula, Mont., and brother, Richard Petersen Jr., of Rockwall, Texas, and other extended family. A "Celebration of Life" was held for Allen D. Petersen on November 2 in the Grand Ballroom of the Ritz-Carlton Hotel in Chicago.

In lieu of flowers, contributions can be made to the Allen D. Petersen Memorial Scholarship Fund and sent to Draupnir, LLC, at 515 N. State Street, Suite 2650, Chicago, IL 60610, Attn: Jeremy Hobbs.

Monday, Dec. 3, 2007

84 LUMBER OPENS FOUR NEW LOCATIONS

84 Lumber Company held a grand opening for the company’s new Redmond, Ore., store on November 27.

The store includes a 3,300-square-foot showroom, 3,300-square-foot office space, 81,000-square-foot storage facility and 31,900 square feet of exterior storage sheds on the 9.6 acre property.

“We are excited to have the opportunity to provide the Redmond area builders with an unmatched level of customer service that is the backbone of 84 Lumber,” said 84 Lumber President Maggie Hardy Magerko.

84 Lumber also held grand openings for two other stores on November 27 in West Jordan, Utah, and Pearl River, La., and a component manufacturing facility in West Jordan.

84 Lumber operates one additional store in Oregon in Forest Grove. 84 Lumber now operates more than 425 locations nationwide.

Thursday, Nov. 15, 2007

TRUE VALUE UNVEILS NEW STORE FORMAT

During its Fall Market in Atlanta, True Value Company unveiled a new retail format designed to provide customers with a one-stop-shop for all the products, expert advice and inspiration they need to complete their small home-improvement projects. Destination True Value incorporates best practices in retail, merchandising and store decor, resulting in a design package that attempts to meet the needs of DIY enthusiasts.

The new retail format was set up as a complete store right on the market floor, and more than 5,000 people representing nearly 2,000 stores toured it during the market.

To provide a consistent and compelling retail experience, stores will be able to offer customers a broad product selection in core hardware categories and include inspiration centers to pique interest in future projects. True Value’s flexible program enables independent retailers to adapt the layout and custom-select merchandise assortments that are best suited for their local market and customer needs.

“As a co-op we are no longer just a distributor of goods. We don’t just concentrate on selling goods to retailers. We want to help them, in turn, sell these goods to the consumer. That requires us to continually refine retail programs and services,” said President and CEO Lyle Heidemann.

“Destination True Value was designed by retailers, for retailers, with the customer in mind. Our intention is to help sustain and grow our retailers’ sales now and into the future,” he added. “Elements of this new format are adaptable for all True Value stores, regardless of size or location, providing the blueprint to help make every True Value the best hardware store in town.”

About 50 percent of True Value customers are women, and while Destination True Value was created to appeal to female customers, it was also designed to feel like a traditional hardware store to the male shopper. Incorporating consumer insights and current successful retail strategies, the format strives to deliver a more relevant, less intimidating shopping experience.

“From the first point of entry, Destination True Value features an earth-toned color palette, enhanced overall lighting and project inspiration centers to create an ambiance of friendliness and warmth uniquely found in a neighborhood hardware store,” said Carol Wentworth, vice president of marketing. “This format will help customers easily find all the items and receive the local advice they need to complete a project, but also be inspired to tackle their next home improvement endeavor.”

Core departments—hardware, power tools, lawn and garden, paint, plumbing and electrical—are called out using textured backdrops, specialty flooring and shelf-level signage that help customers navigate the store and select which product is most appropriate for their needs. Inspiration centers for lawn and garden, paint and a decorative hardware alley give the format a female-friendly feel.

Recognizing that no two True Value stores are exactly alike, co-op officials say they are committed to helping retailers attract and maintain new customers, grow their sales and maximize every square foot of existing store space to enhance profitability. “Last spring we drew a line in the sand and said, ‘this is the new True Value’ and the unveiling of the Destination True Value store is not just another program, it is highlighting a new era for this company,” Heidemann said.

Over the next three years, True Value’s goal is to add more than 1.5 million square feet of retail space and $225 million in retail sales—a 154 percent increase over the past three years—and to incorporate various elements of Destination True Value into more than 1,000 retail locations across the country by 2010.

NATIONAL HARDWARE SHOW CANADA MEETS NEEDS OF GROWING CANADIAN MARKET

The 2007 National Hardware Show Canada®, held Oct. 16-17 at the Toronto Congress Centre, attracted 3,000 industry professionals and more than 200 leading hardware supplier and manufacturer companies exhibiting from around the globe.

Co-located with the 16th Annual Hardlines Conference and Garden Expo and Florist Expo, the National Hardware Show Canada provided a fall buying counterpart to the spring National Hardware Show® in Las Vegas.

“We are pleased to have so much support from the Canadian DIY and home enhancement marketplace,” said Dennis MacDonald, senior vice president, Reed Exhibitions Americas. “The feedback we get enables us to keep improving the event year upon year. We will continue to elicit feedback from the industry so that we can offer the best new products, retail trends and merchandising opportunities to the marketplace."

Among the improvements for the 2007 event included an “Open-to-Buy” day, hosted by Castle Building Centres, where a panel of three executives conducted one-on-one meetings with more than 35 exhibiting vendors followed by a reception; and the “Outstanding Retailer Awards.” High-volume retailers such as Home Hardware and BMR took exhibit space in addition to sending their buyer teams to seek out the latest products for next year. More than 100 new products in numerous categories were also on display in the New Product World®, a main attraction on the show floor.

Another highlight for attendees was the opportunity to also attend the annual, two-day Hardlines Conference. The conference featured a number of leading speakers, including Jim Thompson, vice president-merchandising for Wal-Mart Canada; Ron Beal, president and CEO of Orgill; and Robert Dutton, CEO of RONA, one of Canada’s largest home improvement retailers.

Breakout sessions on in-store branding, how to use technology to compete against multi-format stores and building sales through staff training were also featured, offering tools to help independents compete in today’s consolidated market.

“Warehouse stores will disappear in the not-too-distant future," predicted RONA's president and CEO Robert Dutton during his presentation at the Hardlines Conference.

But as a major operator of large stores, RONA itself will not be compromised by this predicted market shift, Dutton went on to say, explaining that he was referring to warehouse stores and not big boxes. "A store is a concept, not a size," said Dutton.

According to Dutton, only traditionally merchandised warehouse layouts are endangered. Smaller, more sophisticated big-box concepts (such as the ones RONA started developing about 10 years ago) will outperform them, Dutton said, citing RONA's own proximity store concept—a mini big box of about 50,000 square feet.

CALIFORNIA WILDFIRES FORCE SOME RETAILERS TO EVACUATE STORES

Retailers are often affected by the same natural disasters that strike their customers, and the recent rash of wildfires in Southern California was no exception. A number of stores were forced to close for a few days when their communities were threatened by the spreading fires, and Fox
Lumber in downtown Green Valley Lake, Calif., was destroyed.

A series of 16 wildfires swept through the region in late October, with two being attributed to arson. The fires, which were fueled by a combination of drought and fierce winds, killed 10 people, forced half a million people from their homes, burned more than 500,000 acres and destroyed about 2,000 homes, according to news reports. Insurance losses are expected to exceed $1 billion, making them the most destructive wildfires in 25 years.

Joe DeRoest, owner of Joe’s Hardware in Fallbrook, Calif. (halfway between San Diego and Los Angeles), was under mandatory evacuation along with the rest of the town when fire threatened the area. He was forced to close his store on Monday, Oct. 22 and was not able to reopen until Friday morning, Oct. 26, when the evacuation ended.

Agua Fria Hardware and Garden in Blue Jay, Calif., was on standby power from its backup generator on Monday, Oct. 22, as power was out in the area from the fire. The area was already on voluntary evacuation, but that was changed to a mandatory evacuation by 8:30 a.m., which lasted until Sunday, Oct. 28. The store was then able to reopen the following morning.

Chuck Carter, owner of Agua Fria, notes that the store was lucky to have had little damage, as it is only a quarter mile from where 200 homes were destroyed. “We have a gift shop that sells apple cider, and all that exploded in the heat from not being refrigerated in the power outage,” he says. “We also lost a few thousand dollars of plants in the nursery.”

DeRoest says his main suppliers, Ace Hardware and Orgill Inc., were both on top of the store’s situation. “We had a freight truck waiting from Orgill that couldn’t get delivered until Friday,” he says. He also received an emergency shipment on Saturday to help meet the specific demands of customers following the fires.

Many of DeRoest’s employees also had to evacuate their homes. Luckily, none of them permanently lost their homes, but there were a few close calls, he says. “One of our employees lives in an (area) that really took a hit in the fire,” he adds. “But his was one of the 40 or 50 homes spared.” Unfortunately, that neighborhood will be uninhabitable for a few months, and the employee is renting a residence until he can return home.

None of the Agua Fria employees’ homes were affected by the fire, but Carter had some damage on his residential property. Fortunately, a fire helicopter put it out before his home was damaged.

In the wake of the fires, both Agua Fria and Joe’s Hardware saw an increase in cleanup products, such as shovels, wheelbarrows, trashcans and trash bags. Dust masks and air filters for central air units have also been popular. DeRoest had a run on air-quality products such as respirators and face masks to help people breathe in the ash-filled area of their damaged properties and neighborhoods. To help meet the demand, he drove out to an industrial supplier in the area to get more products for his customers.

“You hate to ever wish for business during a tragedy, but we are here for whatever they may need,” DeRoest says. “My heart goes out to the people who lost their homes and are trying to rebuild their lives. We intend to do our best to serve them.”

PRO & DA DISTRIBUTORS HOLD PLANNING CONFERENCE WITH VENDORS

Distributors representing the Charlotte-based Distribution America (DA) and Denver-based PRO Group met with manufacturers November 7-9 at the Executive Planning Conference (EPC) in Marco Island, Fla., with nearly 3,500 one-on-one meetings taking place.

New products and promotional programs were common themes at the jointly sponsored event, which drew about 500 home improvement industry executives. Thirty-two independent distributor companies were represented at the event, along with 150 key manufacturers.

Steve Synnott, president and COO for PRO Group, said the conference provides an ideal forum for addressing strategic planning, major marketing initiatives, financial performance and new product launches. “PRO Group's goal at each EPC is to forge long-term partnerships that position the distributors’ retailer customers to more effectively compete with big-box stores,” according to Synnott.

DA President Dave Christmas said his members have been offered more promotional buying opportunities than ever before.

Allen Winn, vice president of merchandising for DA member House-Hasson Hardware, said his buying team met prior to the conference to establish an agenda for the meetings and develop a business plan for the conference. "We would love to see more vendors participate," Winn said. "The vendors at the EPC show they care about the success of our business and will remain in the forefront of our business."

Mike Braun and Tom Chasteen of The Hardware Industry Inc., presented information to attending distributors about a new program that provides product samples to retailers to preview. The conference also featured a popular new product display area. Distributor attendees selected the best new products and presented awards to the manufacturers by category.
During separate membership meetings, both DA and PRO Group presented honors to distributors and manufacturers for achievements. DA’s top vendors were Cooper Hand Tools,

Keeper Corp., Feit Electric Co., Boss Mfg. Co., Midwest Fastener Corp., Hyde Tools and Genova Products.

PRO Group’s key suppliers were Magna Industries, LDR Industries, Thermwell Products, Aearo Co., Chapin International, The Designers Edge and Genova Products. The Bostwick-Braun Co. was named PRO Hardware Distributor of the Year, while Horizon Distribution was honored for best target vendor support and Blackstone Supply for merchandising distributor of the year.

DA honored Jensen Distribution Services for outstanding sales growth and inventory management, House-Hasson for asset management, Emery-Waterhouse for service performance and Blish-Mize received the Soaring Eagle Award.

BLISH-MIZE HOSTS RECORD NUMBER OF PROSPECTS AT FALL MARKET

Blish-Mize welcomed both existing dealers and a record number of prospects to its Fall Market Sept. 21-22 in Overland Park, Kan.

According to Executive Vice President Jonathan Mize, despite challenges with the economy, more than 350 retailers attended the two-day event, which is similar attendance to past fall markets. “However, we had more prospects than ever before,” he says. “Several conversions were made from larger co-ops and larger distributors, which is always exciting.”

Mize said customers enjoyed the change in market schedule, with the event being held over two days instead of its traditional three-day span. However, the event featured expanded hours on both Friday and Saturday to give attendees plenty of time to take advantage of all the spiffs and market specials.

With most building supply retailers facing a tough year due to economic uncertainties in the home building industry, Mize said customers were understandably conservative on their purchases, placing more stock orders versus drop ships. “I think our customers are smart and are just monitoring their inventory carefully right now,” he says. “I predict they will continue to buy conservatively through mid-2008, but then I think things will start to change next year.”

On the program front, Blish-Mize launched a new consumer loyalty program at the market that was well received and rolled out its new lighting selection as part of the Hardware House direct import program. The new assortment includes 70 new items in lighting, bringing the total SKUs available to 280 in the Hardware House lighting category. “This expansion allows us to go after the lighting showrooms and other retailers that are dominant in the category,” says Mize.

Monday, Oct. 29, 2007

CONGRESS BUSY AS SESSION DRAWS TO A CLOSE

Congressional Democrats are using spending bills to stake out political differences between their party and the Bush administration. Unlike recent years when lawmakers rolled most of the dozen appropriations bills into one omnibus piece of legislation, this year Democrats are insisting on enacting each bill individually and sending them to the president who has threatened several vetoes. At this point, though, Congressional leaders are finding it difficult to pass the appropriations bills. The government is operating on a short-term continuing resolution that provides funding through the middle of November.

That’s how John Satagaj, Washington legislative counsel for the North American Retail Hardware Association (NRHA), summed up the current situation in Washington during the last of NRHA’s 2007 National Legislative Teleconferences.

Turning to specific issues, Satagaj held out hope for a resolution of the estate tax issue before the end of the current session. Noting that Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee, has said he wants hearings on estate tax relief in the spring, Satagaj said it seems that lawmakers want to reach a permanent resolution before current law repeals the estate tax in 2010.

He said it looked as though the Senate was moving toward a one- or two-year patch to protect middle-income taxpayers from the alternative minimum tax (AMT), adding that last year’s patch had expired and that millions of taxpayers would be subject to the AMT if Congress does not act.

Satagaj noted that legislation to extend the moratorium on Internet access taxes is not the sales tax fairness issue of interest to retailers. Action to allow states to require remote sellers to collect sales and use taxes has been pushed into the background until the Streamlined Sales Tax Governing Board can resolve several serious problems.

He suggested that retailers who use independent contractors might want to take note of legislation recently introduced in the Senate to make it more difficult to claim some of these workers as independent contractors.

Energy legislation could still pass in this session, but, Satagaj said, it is uncertain whether it will include energy conservation incentives that would benefit sales of conservation products.

Satagaj concluded by advising that Congress was certain to tighten consumer protection regulations. He noted that first steps could involve recalls and product labeling that might affect retailers. Comprehensive product safety legislation could be introduced yet this year, but likely would not pass until next year.

ACE WORKS TO RECONCILE PAST FINANCIAL FIGURES

More than 7,500 Ace Hardware retailers and their associates convened in Denver Sept. 28-Oct. 1 for the co-op’s Fall Convention, and they had much more than buying on their minds.

Two weeks earlier, Ace officials reported a $154 million accounting error. The news took members by surprise and many came to Denver looking to get their questions answered.

Ace held a series of town hall meetings with members to provide an update about the accounting discrepancy and attempt to answer some of their questions. Ace board members were a visible presence, signifying that they will remain intimately involved in the process to seek solutions.

Ace executives said their finance team was continuing to work closely with Protiviti, the independent firm hired to assist with the reconciliation. They were optimistic that the reconciliation project could be completed by the end of the year. The most recent estimate is that in-transit inventory at the end of 2006 totals about $19 million, which will reduce the $154 million difference between the general ledger and the perpetual inventory carried in Ace’s retail support centers.

Ace President and CEO Ray Griffith and Chairman Tom Glenn emphasized that while the company continues to leave no stone unturned in investigating the cause and scope of the accounting error, they remain committed to conducting business as usual. Griffith noted sales are up 2.1 percent over last year and that the co-op’s labor force optimization test program is producing average labor expense savings of 15 percent to 18 percent.

“In no way am I diminishing the magnitude of this error or failing to acknowledge that all of us will experience some pain in the short term,” Griffith told members. “What I am saying, however, is that the long-term prospects for this company are simply too great not to keep moving ahead on certain critical strategies that will contribute to your retail success and make Ace a stronger company.”

Griffith added that the co-op has not had any store cancellations as a direct result of the accounting issue and he reiterated that Ace has a manageable level of debt. The company’s current borrowings include about $187 million of long-term