Hardware stores carve their niches
When Ron Gladieux Jr. and his family decided to build a new hardware store in 1999, they thought it would be fun to add a small Lionel model train department.
“Lionel started in 1900, so I thought it would be something nostalgic, and something for the kids to do when families came into the store,” said Gladieux Jr., whose family owns Gladieux Do it Best Home Center in Oregon, Ohio. “Now we have a mailing list of over 1,000 people who buy from us. It’s become a lot bigger than we intended.”
In fact, when the Gladieux family redesigned the 17,000-square-foot store a few years ago, they devoted a full 1,200 square feet to Lionel trains, setting up several working displays, including an overhead run with more than 100 feet of track. The store also sponsors three to four train shows a year, which bring in several hundred customers. All told, the Lionel train department produces $150,000 to $200,000 in annual revenues for Gladieux Do it Best Home Center.
“We do the shows on a Sunday, which is our slow day, sending out mailers and offering food to go along with it,” Gladieux Jr. said. “Then people tend to walk through the store and fill their cart with other things, so it definitely creates add-on business.”
Gladieux Do it Best’s Lionel train business is one example of how a hardware store can take a niche department and turn it into a profitable part of the business. In addition to generating revenue, niche departments can also give independent hardware stores a much-needed edge in their marketplace.
When hardware store owner Mike Obermeier tried to resume his old hobby of wine-making after his children were grown in the late 1990s, he couldn’t find the equipment anywhere. So he decided to stock it himself at Obermeier Hardware & Rental in Rockport, Ind.
Obermeier uses one side of a 20-foot aisle to carry stabilizers, sterilants, fruit bases, corkers and bottles for wine making, and malted grains, dried malt, caps and bottles for beer making. The niche serves up $20,000 to $25,000 a year in revenue.
“All our business is through word of mouth, and people come from as far as 60 miles away to buy beer and wine-making supplies,” said Obermeier, whose family has owned the store since 1959. “There are doctors, lawyers, preachers and teachers—you name it. It’s quite profitable also, with the best margins on anything in the store.”
Niche departments come in all shapes and sizes. Johnson’s True Value in Groton, Conn., does a good business in Boy Scout and Girl Scout uniforms, while Lehman’s of Kidron, Ohio, is world famous for offering off-the-grid products like oil lamps, butter churns and crank-powered radios. And then there’s A&G Hardware, a Gillespie, Ill.-based store that takes in dry cleaning while also serving as a UPS drop-off location.
Crouse Lumber, a Do it Best store/lumberyard in Lima, Ohio, also has an interesting niche: Partners Bob Wieging and John Briggs sell house plans, offering a book of designs or custom design services, as well as construction services if required. If the homeowner uses Crouse to build the house, they receive six copies of the plans at no charge.
“Many people only build a home once in a lifetime, and it’s a nice niche for us because we can help them build from the ground up,” said Tim Co-nine, sales manager for Crouse.
Chandler Ace Hardware in Chandler, Ariz., owned by partners Robert Vasquez and Brian Freeland, has several niches, including a selection of complete outdoor kitchens with upscale brands like Viking and Capital grills and rainproof hi-definition LCD televisions.
The store also offers a granite countertop program, through which the customer selects his own slab of granite from the warehouse and can save $5 to $20 per square foot over the nearby big boxes, according to Vasquez.
“What we’re finding out is there are certain niches we can go after and be very competitive,” he said. “With granite countertops, we can beat bigger stores on price. Plus, I babysit every job, so our customers are getting great customer service as well.”
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.”