News Stories for October

Hardware Federation Industry Leaders Lunch

Consorting with the enemy….L-R: Rod Evins from the HFA catches Barry Fagg and Graeme Danks trading secrets

More than 100 industry representatives attended the recent HFA Industry Leaders Luncheon held at the All Season Premier Menzies Hotel in Sydney. The event which was sponsored by the Australian Hardware Journal, attracted senior executives from Danks, Mitre 10, Bunnings, NBSG, and HBT, along with a host of major suppliers. Frank Whitford, Chief Executive Officer of Mitre 10 was special guest speaker. Whitford’s presentation focused on the significant change that the industry is presently undergoing, and the change, that he predicts, is yet to come. “The challenge of the future is the biggest challenge,” he said. “But I believe it will continue to be a very profitable industry.” He started his speech with a comment about how necessary it is for the hardware industry to keep up with the demands of customers.

L-R: Gary Bedford (Australian Hardware Journal), Stephen Johnston (Danks), Neil Connon (ITW Proline)

“Customers are becoming more demanding yet out industry tends to be notorious for not having products stocked,” he said. “Getting things on the shelves is a bigger issue than ever before.” Whitford also highlighted the phenomenon of homes and gardens becoming fashion items, and he stated that in his opinion, the discretionary income of the ‘baby boomers’ will not be spent on travel, but on homes and gardens. According to Whitford, the independent sector will be increasingly under strain, but he believes independents will be able to compete in the future. “There is a big challenge to maintain market share,” he said. “If independents think corporately, they can compete very aggressively and can grow market share.”

Bunnings Launches Series 3000

Bunnings is gearing up to launch its new Series 3000 stores in Australia and New Zealand.

The first store will open in the Wellington (NZ) suburb of Nae Nae in December. Three more of the stores are set to open in Victoria in early 2005 – in Warnambool, Sunbury and Pakenham. The first store in NSW will be in Griffith. The Series 3000 stores are a smaller format than the warehouses, ranging from 3,000 sq m to 5,000 sq m. Peter Davis, Bunnings’ Chief Operating Officer, confirmed that 19 Series 3000 stores are in various stages of planning. “The majority of Series 3000 stores will be located in regional areas,” said Davis. This development comes after Wesfarmers announced a record net profit for the 2004 financial year of $873.1 million. Bunnings’ earnings, before interest and tax, of $392.1 million were 12.3% higher than last year’s. Strong growth was achieved particularly in Queensland, Western Australia and New South Wales, but growth was lower in Victoria. New Zealand sales continued to grow strongly as a result of the rebranding program and the successful opening of the new Bunnings Warehouses in Christchurch and Hamilton. New store development continued during the year with the opening of 12 new warehouse stores, the largest number of openings in a single year. The store network improvement program resulted in the completion of 15 store upgrades during the year. In addition, the network rationalization program resulted in the closure of three warehouses and nine traditional stores. At the end of the 2004 financial year, Bunnings had 125 warehouse stores and 85 traditional stores operating across Australia and New Zealand. New warehouse development is forecast to continue at between eight to 12 stores per year.

According to Wesfarmers CEO, Michael Chaney, implementation of new processes and procedures during the year resulted in significant improvement in margin and inventory management. “We’re currently investigating new IT systems which will ensure that we stay ahead of the expansion challenges,” said Chaney. Chaney also said he doesn’t consider the roll-out of Mitre 10 MEGA stores to be a serious threat to the company. “The Mega stores and the Bunnings warehouse stores are quite different,” he said. “The Mega stores have a narrower hardware range and more of a focus on things like kitchens, bathrooms and appliances, and we see them as targeting quite a different market segment.

“No doubt, like any competitor, these stores will have some impact on Bunnings’ sales but we don’t consider it will be significant. We will continue to combat all competition through our everyday low-price model.” Chaney also confirmed the company is enhancing its marketing efforts in Victoria to combat lagging sales. “Demand in Victoria has been fairly weak for some time,” he said. Michael Chaney is due to leave Wesfarmers next year to take over the reins at the National Australia Bank.

Record Second Quarter for Home Depot

Home Depot has turned in record second-quarter results that have outpaced its own expectations. The American giant reported second quarter net-earnings of US$1.5 billion, a 19% increase over net earnings of $1.3 billion during the second quarter of 2003. Net earnings for the first six months of 2004 increased 20% to $2.6 billion. Second quarter sales also reached a milestone and increased 11% to $20 billion. “This was the first quarter in company history that we achieved $20 billion in sales,” said Bob Nardelli, Home Depot’s CEO. “This is a major accomplishment made by only seven other companies in the Dow.”

During the second quarter, Home Depot completed its acquisition of 20 Home Mart stores in Mexico, giving the retailer a 42-store presence in the country. Overall, Home Depot opened 48 new stores during the quarter, giving it a total of 1,788 stores. Home Depot also grew its service business, catering to the “do it for me” crowd by 27% in the second quarter. Carpet, countertops, kitchens, windows and roofing were all top performers. As Home Depot continues to invest $2 billion in its store modernization, technology has also been a source of investment. Self-checkout counters are now in 830 US and Canadian stores. More than 100 million purchases have been conducted through the counters this year and 250 million since their introduction. The company has also installed 40,000 two-way cordless scan guns in its stores which have reduced customer checkout time and increased customer accuracy.

Meanwhile, Lowes, the world’s second largest home improvement retailer, reported second quarter sales of $10.2 billion, up 17.3% from $8.7 billion during the same quarter last year. Lowes opened 20 new stores during the quarter and at the quarter’s end, the company operated 997 stores in 45 states. Next quarter’s earnings of both Home Depot and Lowes are expected to be affected by the recent hurricanes that devastated Florida and other southern states.

For more news information go to the news section in the Australian Hardware Journal’s October issue.