UPDATE – Home Depot, Praktiker rumors resurface
Home Depot CEO Frank Blake shot down rumors that began circulating late last month that the retailer was considering a takeover of Germany’s DIY giant Praktiker AG. When asked by an analyst at the company’s annual analyst meeting on June 5, and later in the by reporters, about whether Home Depot was interested in taking over a European company, Blake said simply, “No.”
Rumors that Home Depot would consider a bid at taking over the German big-box DIY retailer resurfaced May 28 after shares of Praktiker rose 9 percent, ostensibly on the takeover speculation.
Blake said the retailer is focused on expansion opportunities in China and Mexico, but that rumors about an entry into the European market were just that: rumors. He specifically discussed China, and Home Depot’s plans to get its 12 stores in that country into a “profitable model” before a larger rollout some time in the future.
Home Depot has been rumored to be considering European acquisitions on and off for years, as far aback as 2001. Names have included Praktiker and Kingfisher, parent of European chains B&Q, Castorama and Brico Depot.
RONA same-store sales, income down in first quarter
Pointing to poor economic and weather conditions, Boucherville, Quebec, Canada-based hardware retailer RONA announced that same-store sales were down 5.2 percent in the first quarter of 2008, a period that also saw operating income decline 18.2 percent from $40.9 million to $33.4 million.
While RONA’s sales did increase 3.8 percent from $878.5 million to $911.5 million for the quarter, net earnings stood at $1.0 million, or $0.01 per share, compared to $9.0 million, or $0.08 per share, in 2007.
“The results for first quarter 2008 reflect the strong drop in consumer confidence in the country’s economic growth,” said RONA president and CEO Robert Dutton. “Results were also affected by weather conditions that were particularly unfavourable to construction and renovation activity in Ontario and Quebec, where we get nearly 70 percent of our sales.”
Dutton further explained that, because of the seasonality of RONA’s business, only 15 percent of annual sales and 5 percent of earnings are on average generated in the first quarter of the year. “So we have very little room to manoeuvre at the beginning of the year to compensate for these difficult market conditions,” he said.
Still, RONA introduced several initiatives in the quarter under its new PEP (Productivity, Efficiency, Profitability) program, with the following results:
• 130 basis point improvement in gross margin
• More than 10 percent growth in sales of private brand products and installation services
• $83 million, or 9 percent, reduction in inventories on a comparable basis versus first quarter 2007
In addition, RONA stepped up training for employees in sales support in several products and services, including the Project Guide service, RONA by Design, installation services, credit and financing solutions and the new line of RONA ECO products.
“The results of these efforts are very encouraging for the coming quarters. This, combined with the various initiatives to boost sales and stimulate customer loyalty, will allow us to mitigate for the current slowdown in our industry,” Dutton said.
RONA, a distributor and retailer of hardware, home renovation and gardening products, operates a network of more than 680 corporate, franchise and affiliate stores and generates over $6.3 billion in annual retail sales.
RONA will target commercial, pro markets in ’08
Canadian DIY giant RONA unveiled some of its plans for the new year at the company’s annual meeting of shareholders.
The company announced that it has recruited “nine new independent dealer-owners in the last two months.” The company did not release the names of the new dealers, but said in a statement, “Eight of these dealer-owners operate stores ranging from 2,000 to 24,000 square feet, and one will build a 52,000-square-foot proximity store.”
“Recruiting independent dealer-owners is one of RONA’s key growth vectors,” said RONA President and CEO Robert Dutton. “Over the last five years, we have increased our affiliated store network by close to 50 percent through the recruitment of 140 dealer-owners across Canada. Over the next few years, we will pursue our development of this market niche, which still represents over 50 percent of the renovation/construction market in Canada.”
The company also has its eyes set on the commercial and professional markets. At the end of 2007, the company created a division devoted “solely to this market segment.” RONA said the Canadian commercial and professional market is estimated at about $70 billion in sales.
Most recently, RONA opened four big-box stores in Ontario and one in Alberta, as well as two proximity stores in Ontario. In 2007, RONA also “stepped up its presence in the commercial and professional market in these regions by acquiring plumbing specialist Noble Trade in Ontario and construction materials specialist Dick’s Lumber in British Columbia.”
Currently, RONA operates a network of more than 680 corporate, franchise and affiliate stores of various sizes and formats.