Green beyond the shelf
With the green revolution in full swing, retailers in the home channel realize there’s a lot more to sustainability than just selling green products. Retail giants like Wal-Mart, Home Depot and IKEA have all implemented green initiatives into their business strategies to save energy, minimize waste and reduce their carbon footprint, all while cutting operating costs.
One of the most recent examples of a green operations strategy: British DIY retailer B&Q is currently erecting a 2 million watt wind turbine to help power its distribution headquarters in Nottinghamshire, England. When complete, the company expects the turbine to power the entire facility for 30 years (expected life of the turbine), reducing 5,000 tons of carbon dioxide emissions each year, a total of 150,000 tons of carbon dioxide in its lifetime.
Another recent example: in Colorado, Ace customers can now recycle their used compact fluorescent light bulbs at any location of the Ace Hardware co-op. Ace owners have partnered with the Colorado Department of Health and Environment to provide recycling facilities for the bulbs, which contain trace amounts of mercury.
Stores that offer recycling appeal to the growing army of green friendly consumers—plus, they benefit from whatever additional foot traffic a recycling bin can generate. It’s a strategy in play at some of the biggest retailers.
At IKEA, recycling bins on the selling floor encourage customers to bring in their batteries and compact fluorescent light bulbs—even those that were purchased at retailers other than IKEA. Separately, the company aggressively conserves plastic bags by putting a 5-cent price tag on each one. According to the company, the “bag the plastic bag” initiative has been so successful since it’s inception in March 2007, that it will stop offering plastic bags entirely to its customers in October 2008.
Power generation is another green story at IKEA. According to the company’s Web site: “The long-term direction is for all IKEA Group buildings to be supplied with renewable energy generated through energy sources other than fossil fuel.” Another goal is to improve the company’s overall energy efficiency by 25 percent compared with 2005. IKEA plans to meet these goals by using energy-efficient lighting in all its stores, having lights on only when warehouses are open and increasing insulation in its warehouses.
Recycling is one of the green strategies at Home Depot and so is reforestation. Home Depot partnered with The Conservation Fund in October 2006 to offset the carbon emissions from its Atlanta headquarters through reforestation. The project also accounted for emissions created by associates commuting to work and traveling on business.
“Through this program, the Home Depot planted thousands of trees on nearly 130 acres across metro Atlanta as part of The Conservation Fund’s Go Zero program,” said Sarah Molinari, corporate communications manager for Home Depot. According to Molinari, the trees planted will also reduce the heat-island effect in urban areas, reduce erosion and storm-water runoff and help clean the air. “The Home Depot’s commitment marks the largest such carbon offset through reforestation in the United States,” said Molinari.
While the launch of its Eco Options program in 2007 has introduced a myriad of green products to the company’s shelves, the program also encompasses a store recycling program, which Home Depot has recently expanded.
“In addition to our existing card-board recycling program, stores have begun recycling mixed papers and plastics, including shrink wrap, lumber wrap, floral containers and buckets,” she said.
The company estimates that the program has the potential to divert 95 million pounds of trash from landfills over the next year. In addition, the company estimates every month each store can save 13 trees, 2.5 barrels of oil, 4,100 kilowatts of electricity, four cubic yards of landfill space and 7,925 gallons of water through this program.
Home Depot has also been revamping the efficiency of its stores as well.
“Our dedication to home improvement extends not only to our customers, but to our own ‘homes’ as well—our stores and their operations,” said Molinari. “By taking a do-it-yourself approach to our own operations, we reduced energy consumption per square foot in our stores by 12 percent,” she added.
Renovated stores received reconfigured heating, ventilation and air conditioning systems and horizontal lumber doors that open in sections based on the size of the load. The company also converted storefront signs to light emitting diodes and implemented a low-watt bulb program in all lighting displays.
The company is also integrating energy-efficient concepts into its new store design and construction. Some of these elements include reflective roof membranes, rooflines that are four feet lower than the previous design, T-5 fluorescent lighting and entrance vestibules. The result is an average 34 percent energy savings for stores built after 2003, compared to those built earlier.
Mooresville, N.C.-based Lowe’s has reduced its energy costs by approximately 40 percent through upgraded lighting according to Chris Ahearn, vp-public relations for Lowe’s. Part of the reason: Lowe’s has taken advantage of energy-saving roof membranes and energy-efficient lighting. The company has also installed skylights in all of its stores. While most stores use approximately eight skylights, stores in California use more than 100 skylights per store, and four California stores have installed rooftop solar panels. The company is working on plans for an additional solar energy system in Hawaii.
Lowe’s was also one of the first retailers to certify a store to the Leadership in Energy and Environmental Design (LEED) Green Building Standard, with their new store in Southwest Austin, Texas.
“Since then, we have applied many of those aspects in our new prototype stores, and we follow green building standards where practical,” said Ahearn.
One of the biggest stories in green operations belongs to Wal-Mart Stores, which is involved in several high-profile initiatives. A water-shed moment came in October 2005, when CEO Lee Scott outlined the company’s sustainability goals.
“Those goals are to be supplied by 100 percent renewable energy, create zero waste and sell products that sustain our resources and environment,” said Kory Lundberg, a spokesman for the company. “Wal-Mart has been working to become a more efficient company for years.”
The company has certainly taken an all-categories approach to going green. To date it has built seven high efficiency stores that boast an annual energy savings of 20 percent to 45 percent, depending on the specific technology used in the store.
“All of our new stores are built with sustainability related features, from daylight harvesting systems to LED lights in the freezer cases, even concrete floors made with recycled content,” said Lundberg.
“In addition, we are retrofitting existing stores with much of this new technology.”
Logistically, the company has revamped its shipping fleet and was named a “superior environmental performer” by the U.S. Environmental Protection Agency’s SmartWay Transport Partnership in 2007. The company earned the honor by eliminating approximately 678,954 tons of carbon dioxide, 38.1 tons of nitrogen oxide and 1,539 tons of particulate matter from entering the atmosphere.
Home Depot to close 15 stores
Home Depot will close 15 underperforming stores, the company has announced, and remove 50 future openings from the new store pipeline. The closings will include layoffs of about 1,300 employees.
The closings, at locations in the Midwest and Northeast, will generate approximately $547 million in pre-tax charges in the company’s first quarter. The company will release first-quarter results on May 20.
The stores to be closed are as follows:
• Store no. 2015 in East Fort Wayne, Ind.
• Store no. 2032 in Marion, Ind.
• Store no. 2310 in Frankfort, Ky.
• Store no. 379 Opelousas, La.
• Store no. 2819 Cottage Grove, Minn.
• Store no. 6901 East Brunswick, N.J.
• Store no. 6904 Saddle Brook, N.J.
• Store no. 6171 Rome, N.Y.
• Store no. 3702 Bismarck, N.D.
• Store no. 3874 Findlay, Ohio
• Store no. 3865 Lima, Ohio
• Store no. 4552 Brattleboro, Vt.
• Store no. 4932 Beaver Dam, Wis.
• Store no. 4933 Fond du Lac, Wis.
• Store no. 4913 Milwaukee, Wis.
Home Depot said in a statement it still intends to build 55 new stores this fiscal year, including 36 new stores in the United States.
As for other stores in the works, the company said it has “determined that it will no longer pursue the opening of approximately 50 U.S. stores that have been in its new store pipeline, in some cases for more than 10 years. Accordingly, the company will record a charge of approximately $400 million related to capitalized development costs and ongoing obligations associated with those future store locations.”
“This is a continuation of our disciplined approach to capital allocation that we outlined last year,” said Frank Blake, Home Depot chairman and CEO, in a statement. “We will invest in our core retail business, in this case our existing stores, which drive our most profitable sales. Our capital efficiency model will also provide improved returns for our shareholders through dividends and share repurchase.”
Home Depot added that investments in existing retail stores will continue to include “maintenance, merchandising resets and other initiatives to improve all elements of the customer’s shopping experience.”
The company reiterated that its total capital spending for the current fiscal year is projected to be approximately $2.3 billion, down from $3.6 billion last year.
Sherwin-Williams earnings fall in the first quarter
Sherwin-Williams saw earnings fall in the first quarter of 2008, but the worldwide paint and coatings giant is still seeing strength in international sales.
Earnings fell 30.3 percent in the first quarter to $77.9 million from $111.8 million in the same period last year. Net sales grew just over 1 percent to $1.78 billion from $1.76 billion in the same period last year.
The stronger net sales were in large part due to strong Global Group sales, as was the case last quarter. Favorable currency rates and eight acquisitions since last year’s first quarter helped aid international sales, according to the paint company.
In the company’s retail Paint Stores Group, net sales were $1.031 billion in the quarter, 1.9 percent lower than in last year’s first quarter. Sales were weak due to “soft architectural paint sales and weak sales in non-paint categories partially offset by improved industrial maintenance product sales.”
Same-store sales decreased 6.5 percent compared with last year, and earnings decreased 31.9 percent. Earnings were weaker because of increased product and freight costs, the company noted.
The company’s Consumer Group, which includes paint products like Dutch Boy, saw sales decrease 4.8 percent in the quarter to $286.9 million. The sales decline was due primarily “to soft DIY demand at most of the segment’s retail customers.” Earnings in the Consumer Group were down 23.7 percent due to higher raw material costs, as well as a lower volume of movement at the company’s distribution centers.
The Global Group’s net sales increased 14.8 percent to $461.9 million due to market share gains, selling price increases, favorable currency translation and acquisitions. Earnings for the Global Group increased 21.7 percent to $7.7 million.
“Paint demand in the domestic new residential, residential repaint, DIY and commercial markets was weaker during the first quarter than we had anticipated at the start of the year,” said Christopher Connor, chairman and CEO of Sherwin-Williams. “We continue to be pleased with the strong sales improvements of the foreign business units in our Global Group and the continued growth they have been achieving in the architectural, industrial maintenance, OEM and automotive finishes product lines.”
Connor also noted that the Paint Stores Group opened 17 new stores in the first quarter and closed 23 “redundant stores.”