Flush with trends: The show returns to Vegas
LAS, VEGAS —The best and the brightest new ideas in home and garden products went on display May 6 to 8 at the 63rd National Hardware Show, proving once again that there’s always room on the shelf for innovative items. The green movement has stretched its tendrils into almost every product category, from electrical to paint to housewares. And in lawn and garden, the original green category, manufacturers are taking their cues from customers who want products to be good for the environment and easy to use.
Even hardware and tools got the green treatment at the show, which took over all three halls of the Las Vegas Convention Center. New York City-based General Tools & Instruments, which took first place for number of new product releases, exhibited a line of specialty instruments that measure energy loss, hidden pockets of moisture, escaping microwaves, flammable gas and ultraviolet exposure. Designed for the consumer market, the “Seeker Series” taps into the growing health and safety market that also includes emergency auto escape tools (General had one of those, too) and generators. Both Northshore Power Systems and Cummins Onan displayed home generators designed to provide standby power during emergencies and peace of mind the rest of the time.
At the Northshore Power Systems booth, CEO Dorrance Noonan said the launch of the Milwaukee-based company’s Honeywell-branded home generators was partly designed to instill confidence at the point of sale and ease of use at home. “Generators are better today in all kinds of ways,” Noonan said. “They are more compact, more reliable. They are certainly more consumer friendly. Remember, this category was initially not designed for consumers at all.”
Consumers who want an affordable home security system can turn to Jasco, which holds the GE license for a wireless alarm device. A Jasco spokesperson explained how the system can simply watch over an outdoor shed or garage, if that’s all the homeowner desires. The Jasco booth also displayed a number of GE-licensed LED products, everything from night lights to votives to moveable light bars.
LED lighting showed up in lanterns, desk lamps, dog collars and task lighting (dip-on lamps for laptops and barbecues). In the New Products World, there was even a strip of LEDs for the brim of baseball caps.
Solar power was also on the upswing, as manufacturers have figured out ways to harness the sun’s natural energy to light up tiki torches, Christmas lights, citronella dispersers and rotating barbecue spits. Other trends at the show included:
In to the Wild. Rapid Tools introduced The Shark, a utility knife/wire stripper that did look a bit menacing. Ali Industries brought out the Zip sander under its Gator line, a palmshaped tool that resembled a computer mouse. Crane Inc. introduced a whole menagerie of animals that double as cool mist humidifiers for children’s rooms.
Back to Basics. Several booths exhibited traditional manual push mowers—no gas or electricity needed. And one vendor resurrected the classic clothesline, a galvanized steel cable and pulley that comes in two finishes, including antique bronze. The Planetary Edger uses rotary cutting blades to trim grass and edge lawns with out exhaust and noise. At the outer reaches of the green category was EcoZone, inventor of the staple-less stapler: the device crimps sheets of paper together with tiny perforations. “You wouldn’t want to use it on more than three sheets,” explained a company spokesperson.
Recycled or “eco-friendly” materials. Consumers are becoming savvier about sourcing. At Fruehauf’s, the largest patio furniture retailer in Colorado, salespeople are frequently queried about exotic looking wood. “People are asking who never would have asked in the past,” said Mary Fruehauf. “They’re asking because they know they should be asking.” Environmental stewardship has now become a marketing tool. NatureCast introduced a line of vases and planters made from dry leaves, dead twigs and bark. Magid gloves launched a line made from 100 percent bamboo fabric. Great American Marketing’s newest pro paintbrush has a wood handle made from bamboo.
Fashion-forward safety wear. Forget those dowdy orange and yellow fluorescent vests. Manufacturers like Ironclad and Dickies showed “high visibility” T-shirts, hooded sweatshirts, pants and coveralls that fulfilled ANSI requirements while keeping workers dry, warm or cool, depending on the season. Choosing between hearing protection and your iPod is no longer necessary, thanks to MP3 compatible headphones and ear buds from Stanley and AOSafety. Both devices have AM/FM settings and filter out noise. MSA Safety introduced AM/FM ear muffs that adjust to the size of left and right ears. “Both ears are not the same,” explained John Quinn, retail segment manager.
Be kind to animals. Glue traps and rat poisons are being replaced with more humane “catch and release” pest control devices. One trap used a plastic water or soda bottle—recycled, of course—to relocate mice. Another wand-like instrument caught spiders without harming them. One Chinese inventor exhibited a dog collar that uses air pressure—instead of an electric shock—as a pet training and containment device.
Say no to solvents. Vendors in both the cleaning products and the paint categories came up with numerous alternatives to traditional paint removers, drain clearers, toilet, tub and tile cleaners, and other harsh chemicals. Some were as simple as the “Yellow Submarine,” a battery-operated mini drill with a long, flexible brush to unclog drains. Morton Salt unveiled “EcoSafe” ice melt and Ground Works displayed an ice melt made of potash that also acts as a fertilizer. UGL, a manufacturer of oil-based wood refinishing products, came to the show with a line of green paint removers, strippers, brush cleaners, deglossers and stains.
Personal pest control. Those big backyard mosquito-killing machines have become portable. Amcor’s “Bug Away” diffuser clips to your belt and repels insects with the help of a small fan and non-toxic geraniol (geranium oil) pellets. BugBand is a wristband that also uses geraniol vapors to create a protective shield. Bugband also makes one-application moist towelettes. Also, garden clog-maker Sloggers debuted a line of insect repellant hats and apparel that can stand up to 70 washings, it said.
Gardening made easy. Time-starved consumers found plenty of shortcuts to a beautiful backyard, including light meters, battery-powered sprayers, release-on-demand fertilizers and plant-watering mats. Two companies offered readymade vegetable gardens, and one vendor sold a “grow your own tree” kit (elm, apple, gingko, pine) that came in a biodegradable coconut coir pot. DuPont introduced an invisible tree anchoring fabric that replaces traditional collars and wires. Garden Groom introduced a new electric trimmer and hedger that suck up the clippings, like little outdoor vacuum cleaners.
Scott Peterson, a buyer for Sloat Garden Center in Northern California, said he was shopping for two types of customers: the “serious” gardeners and the ones who were usually in a hurry. “Less time is the key to today’s younger gardener,” he said. But he thought both groups would like the Audubon birdhouse—“they seem to have nailed the style people like, and it’s made of recycled materials”—and PotHoles drainage discs. “You put these down instead of a layer of stones, which creates a reservoir of water,” Peters on explained. “That’s not what you want in a potted plant.”
A group of British gardening manufacturers banded together to form the U.K pavilion in the south building, which was completely devoted to lawn and garden. The Central Hall hosted hardware & tools, paint & home decor, and housewares. The Global Hardware Expo settled into the North Hall. The World wide DIY Council organized a big-box tour of Las Vegas for a busload of executives from India, Indonesia, the Philippines, New Zealand, Australia, Ireland, Spain, Belgium, Brazil, Canada, France, the Netherlands and Sweden. They visited Home Depot, Lowe’s, Costco and Wal-Mart.
“They were very impressed with Costco,” said Bob Vereen, a Worldwide DIY Council representative who accompanied them on the tour. But overall, the foreign executives observed that most merchandise presentations they saw “lacked flair,” according to Vereen.
Preliminary attendance figures for the show indicate a 14 percent increase in the number of buyers over last year’s show, according to show sponsor Reed Exhibitions, which estimated the number at 14,057. Vendors filled a total of 3,500 booths.
Retailers holding “Open to Buy Days” this year included Kmart, Sears, Do it Best, True Value, Westlake Ace Hardware, Handy Hardware, and Northern Tool&Equipment. The President’s Council also arranged 15-minute meetings with buyers from Dixieline and Lumbermens (two divisions of Pro Build Holdings), True Value, Orgill, Do it Best, German retailer OBI, U.K.-based Homebase, the Andersons hardware chain in Ohio and Marvin’s home centers in Alabama. Proceeds benefitted City of Hope.
Restoration Hardware buyout gets green light
Corte Madera, Calif.-based Restoration Hardware received shareholder approval for a planned buyout by private equity group Catterton Partners for about $179 million, a deal that was challenged at several points by Sears Holdings.
The company said that more than 99 percent of votes cast by shareholders at a meeting held yesterday were in favor of the deal. Catterton will purchase Restoration Hardware’s outstanding shares for approximately $4.50 in cash.
The deal is expected to be completed by next week.
“We are pleased with the outcome of today’s vote and appreciate the strong support demonstrated by our shareholders,” said Gary Friedman, Restoration Hardware’s chairman, president and CEO.
Restoration Hardware also announced that it reached a preliminary agreement for the settlement of a shareholder complaint filed in the Superior Court of the State of California. The class action complaint was filed against Restoration Hardware, each of its directors, Catterton Partners and certain shareholders participating in the deal.
According to the settlement, Restoration Hardware will pay $3.7 million, approximately 10 cents to 13 cents a share, to shareholders involved in the complaint.
Board member Raymond Hemmig said that the lawsuit was without merit, but settling would expedite the merger agreement. The settlement is conditional on successfully closing the merger.
Top 500 Annual Industry Retail Scoreboard
The numbers are in and — no surprise — they reflect a challenging market.
For the first time since Home Channel News began compiling the Top 500 Scoreboard more than 20 years ago, home improvement retailers showed an overall decline in sales in 2007. On the positive side: hardware stores and farm and fleet retailers showed surprisingly strong sales results, boosted respectively by smaller projects around the home and big-time agriculture spending.
The worst housing downturn in recent memory has led to sub-par performances for several major retailers, dragging down overall sales of the Top 500 retailers to $251 billion — a 2.1 percent falloff from the list’s $256 billion posted the previous year.
In 2007, pro dealers were the hardest hit retailers on HCN’s Top 500 list, which also includes large home centers, hardware stores, farm suppliers and paint and floor covering retailers. Pro dealers, who cater to both new home builders and large remodelers, showed a 14.6 percent decline for the year, with Top 20 players like Builder’s FirstSource (No. 17), BMHC (No. 12) and 84 Lumber (No. 10) down 28.9 percent, 28.7 percent and 20.9 percent, respectively. Most notably, Ply Mart (No. 34) went out of business altogether.
On the other hand, hardware stores and farm and fleet retailers showed surprisingly strong sales results, boosted respectively by agriculture spending and smaller projects around the home. Overall, decliners led gainers. Just 162 companies on the list showed sales gains, while 281 showed sales declines. Compare those numbers to a good year — in 2004, for example, 404 companies showed gains, with just seven showing losses — and it brings the severity of the housing crisis into sharp focus.
“Almost certainly, the decline in these sales is a sympathetic reflection of the plunge in new home building, the steep decline in existing home sales, a slowdown in renovations and a drop in property values,” said James Glassman, managing director and senior policy strategist with JPMorgan Chase & Co. in New York.
“And 2008 sales comparisons could be worse than 2007 because activity late last year and early this year has been so abysmal. Home building remains weak, home prices are still falling and credit remains expensive and in short supply for housing.”
Two years ago, the weakness was concentrated in the industrial Midwest — places like Detroit and northern Ohio, with strong ties on the auto industry. But in 2007, the housing crisis spread to metro markets that had seen rapid price appreciation over the previous five years. The worst of these were California, Las Vegas, Phoenix and all of Florida, while Texas, the Pacific Northwest and parts of the Southwest have been somewhat more insulated.
“We’ve seen the biggest decline in the housing market since the Great Depression,” said Paul Hylbert, CEO of ProBuild Holdings (ranked 7th), which was down 16 percent in sales after an almost 30 percent increase the previous year. He said the “housing depression” has been the most pronounced in Florida, Arizona, Atlanta, Denver and Chicago because of the high incidence of exotic mortgages and subprime activity in the mid-2000s. Hylbert also pointed to deflation in wood prices from 2006 to 2007 as a driving factor in the sharp decline for LBM dealers.
Large home centers were basically flat (down 0.2 percent) for the year, but that doesn’t tell the whole story. No. 1-ranked Home Depot suffered its first-ever sales decline (2.1 percent), while the critical comp-store sales number was negative 6.7 percent. And to underscore what CEO Frank Blake called “a difficult year financially,” the retailer announced in May that it would close 15 underperforming stores — leading to the layoff of about 1,300 employees — and remove 50 future openings from the new store pipeline.
No. 2-ranked Lowe’s fared little better, with earnings down 9.5 percent and comp-store sales down 5.1 percent, while No. 5-ranked Sears suffered a 6.5 percent sales decline, with net income off almost 45 percent. “We need to come up with bigger and better ideas,” Sears chairman Edward Lampert said during the company’s annual meeting May 5, adding that he sees “no evidence” of a U.S. economic recovery in the near term.
There were, however, some bright spots on last year’s cloudy landscape. The farm & fleet segment — aided by the booming agricultural sector — showed a 12.9 percent increase, as markets like Iowa, Idaho, and parts of Ohio, Illinois and Indiana prospered because of soaring corn and wheat prices. This, in turn, led to increased sales of farm equipment and farm animal-related products and a generally better economic climate in those areas.
The jump in sales for these farm suppliers speaks volumes: No. 167 Valley Co-Ops in Jerome, Idaho, was up 66.7 percent; No. 219 C-A-L Stores in Idaho Falls, Idaho, was up 64.7 percent; No. 273 Agland Co-op in Canfield, Ohio, was up 31.9 percent; and No. 126 Farmers Cooperative Elevator in Arcadia, Iowa, was up 23.9 percent.
“Farmers have money, which is good for us in those markets, too,” said ProBuild’s Hylbert. “Of course, it’s not a large share of the business, but it does help offset what’s happening in the metro markets, which have been hardest hit.”
No. 11-ranked Tractor Supply — up 14.1 percent — opened 89 new stores in 2007, venturing into new markets like Louisiana and New Mexico. According to president and chairman Jim Wright, some of his company’s best-performing products involved the health and well-being of animals and pets, including pharmaceuticals and housing for agricultural animals, vaccinations, animal feed, and all price levels and brands of pet food.
“When you look at the categories that have performed well for Tractor Supply, it’s categories that aren’t really available in the hardware and home improvement channels,” said Wright, whose company now has 791 stores in 43 states. “The real markets we serve are not as impacted by housing, and our customers tend to be conservative in terms of taking on debt.”
Hardware store sales were also up (11.7 percent), which Do it Best president and CEO Bob Taylor attributes to homeowners focusing on smaller projects in the current economy. “When you look at the general hardware piece of it, in many cases, the members cater to more day-to-day care and maintenance,” said Taylor. “If people are staying closer to home, they’re investing in the home, so it’s more stable. We’re not talking about the major remodel — it’s the everyday activity.”
In fact, remodeling activity showed a decline in 2007 (4 percent), according to NAHB chief economist David Seiders, who estimated a 7 percent drop-off for 2008. Not quite as hard-hit as those catering to new home builders, retailers relying mainly on remodeling jobs experienced declines in the high single-digit range, according to Kermit Baker, director of the Remodeling Futures Program for Harvard University’s Joint Center for Housing Studies.
“The decline in the sales of existing homes has really taken the wind out of the remodeling market,” Baker said. “With housing prices declining, homeowners have less equity to tap into for renovations, and there’s enough uncertainty to give a lot of people pause as to whether to invest — even to sell — because they’re afraid they won’t get that money back.”
Baker believes the slide will continue this year as the commercial construction market — considered healthy in 2007 — is also slipping. “And with non-residential construction down, flooring stores (up 2.1 percent) and paint stores (down 0.6 percent) could fare even worse this year because they won’t have that market to fall back on,” he said.
Some companies have taken aggressive measures in response to these trying times. 84 Lumber announced the closing of nine stores in March and another 30 in April — bringing the total number of closures to 118 since April 2006. In other news, BMHC announced last month the intention of closing an undisclosed number of underperforming units and possibly cutting about 2,000 jobs.
Glassman, from JPMorgan Chase & Co.’s, believes we are beginning to see some positive signs, including the fact that subprime adjustable rate mortgages are being reset to lower levels, and that — in accordance with the government’s stimulus package — rebate checks began to go out April 28 and are starting to show up in retail sales.
“Most of the excess valuation in housing markets has been flushed out, with house price now back into alignment with income (affordability) that we had in 2003,” he said. “And the broad economy is looking more like it stalled last winter than falling into recession.”
Still, most experts agree, the housing market will probably not significantly improve until the early to middle part of next year. “I think the bottom is kind of in sight, and then we’ll possibly bump along for a couple of quarters as the financial markets begin to reset,” Hylbert said. “Maybe by mid-2009 we’ll start to see some things getting stronger. I hope it’s earlier, but there’s so much inventory, it will take awhile to absorb it.”