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Offering an edge

BY Kate Fazzini

This year’s National Hardware Show will feature a new emphasis on the housewares sector, the independent dealer channel, the global hardware market and the race for the newest products.

Home Channel News spoke with Dean Russo, group vp for Reed Exhibitions, who will head the National Hardware Show this year. In his new role, Russo has had the opportunity to gain some perspective on these new programs, on how vendors and retailers are sourcing new products and on the all-important role of the rocky housing market in the home channel business.

“For retail overall, it’s no secret that things are tough right now. Consumers are obviously cost-conscious. They’re looking to do more with less,” Russo said. “This offers challenges, but it also offers new opportunities. Right now is the time to gain a competitive advantage—when things are tough, you have to be focused on investing in your business for the long term. That’s how we look at it.”

Expected attendance for this year’s show is up 7 percent to 10 percent over last year, Russo noted. He highlighted some trends, such as outdoor living, that are continuing to grow, as well as some new trends that are just emerging.

Participation is up in categories such as outdoor lighting, organizational items and home decor products, he said. The housewares segment is seeing higher participation because of additions by the hardware show, as well as increasing consumer interest in items that can help homeowners, as he said, “do more with less.”

The ever-growing category of “green” will return bigger and better in 2008, he said, with new additions and a first of its kind “Green Products World” showcasing merchandise that offers environmental friendliness or energy efficiency, or both. (See story on page 38.)

Russo broke down some of the newest features of this year’s show and how those features are relevant in the present home improvement market.

Housewares

Last year, the National Hardware Show introduced the Homewares Show, which added an expanded mix of small appliances and home enhancement items to the convention hall floor. This year, the NHS has capitalized on the popularity of that category.

“We’re obviously doing a lot more to focus on the housewares category,” Russo said. “You’re seeing consumers go to more non-traditional outlets for these products, like Home Depot. It really all comes down to what’s being driven by the consumer, which is the trend of further enhancing the inside of your house.”

Expanding on the Homewares Show, this year the NHS will hold its first Homewares Show Awards, offering recognition for the most innovative products on the market.

Judges for the awards come from major retailers, small retailers and Internet purveyors. The judging panel includes representatives from Home Depot, Ace Hardware, JCPenney, Amazon.com, Organize.com, Shopco and specialty online retailer Kitchen Kapers.

“So it’s a really nice list and a diverse list,” Russo said. “We expect about 50 to 60 vendors will enter products for the contest.”

Independents

Russo characterized this year’s additions for the independent channel as “one thing we are most excited about.”

“We were really looking forward to customizing the event this year to our independent retailers,” he said.

New features include a dedicated lounge for independent dealers and designated “VIP” status for those representing independents. Special sessions include “Retail Top Guns,” with representatives from top-performing independent retailers.

“There is a much more concerted effort on the vendor side to really look at the landscape of independent retailers,” Russo said. “Doing business with the big boxes is obviously still important, but the independent channel is also important. It’s different than in the ’90s—it’s become increasingly clear that there are different things you can achieve in this channel as opposed to others.”

Global

This year, the National Hardware Show’s international marketplace—the Global Hardware Expo—has seen participation rise 10 percent compared with last year, a testament to an increasingly global manufacturing base in the home improvement market.

In its second year under the Global Hardware Expo name, the special section features more than 600 vendors. Those vendors are vetted through the Hardware Show’s network of international sales organizations, Russo explained, to ensure quality participants from around the world.

“We’ve always had the international participation, but five, seven, eight years ago, you saw a much different attitude towards the international vendors,” he said. “It was seen as ‘they’re there to take business away from domestic vendors.’ But now, we see [domestic vendors] are sourcing from them. So it’s both retailers and vendors that are interested in this part of the show.”

With more vendors and retailers traveling overseas, the Hardware Show is positioning the Global Hardware Expo as a way to save costs and time spent to source products in other countries.

“We’re really marketing our global expo as a way to bring those [international] vendors to their backyard,” he said. “A lot of the vendors and retailers—they’re all spending a lot of time overseas to source new products, to source OEM products. Here we’re saying, ‘we are giving you an Asian and international sourcing opportunity, and saving that time, expense and effort.’”

Inventors

The National Hardware Show last year added the Inventors’ Showcase, a move that attracted just over 50 makers of patented or patent-pending new items. This year, attendance has increased more than three-fold, as of this writing, to 153 inventors of new products. Again the NHS will widen its focus on the minds behind new products.

The inventor personalities are always colorful, Russo said, and range from “the guy who came up with a handy new item in his garage” to established companies offering up new prototypes fresh out of research and development.

Retailers, particularly the big boxes, occupy an increasingly more competitive landscape, where exclusive new products are key in gaining an edge, he said, which makes it more important to show products when they’re right out of the gate. The showcase also offers vendors the opportunity to stake out new products to add to their assortments.

“It’s a turnkey display opportunity,” Russo explained, “and these are products that are really brand new.”

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Home Depot to close 15 stores

BY HBSDEALER Staff

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.

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Sherwin-Williams earnings fall in the first quarter

BY HBSDEALER Staff

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.”

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