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To: Johnny Canuck who wrote (40970)	4/7/2004 12:07:17 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 70771

Rona faces tough battle to control 25% of home improvement retail market 12:01 AM EDT Apr 07 NANCY CARR TORONTO (CP) - With consolidation underway among hardware and home improvement retailers, Rona Inc. plans to grow aggressively over the next three years by snatching up mom-and-pop shops as well as building new big-box stores, the company's chief executive said Tuesday. But the Quebec-based retailer's bid to double its market share to 25 per cent by 2007 will be a hard-fought battle against Home Depot and the independents in a highly competitive market and at a time when home renovations may be slowing down. According to Benoit Caron, an analyst with Canaccord Capital in Montreal, the home improvement industry has an "absence of low-hanging fruits" for Rona to pick. After Rona's 2003 acquisition of Reno-Depot Inc. and the Cashway Building Centres and Revy Home Centres in the three years before that, few medium to large chains are still available to fatten Rona's bottom line. Rona CEO Robert Dutton said Tuesday one of the company's main expansion strategies includes recruiting dealers and buying up small regional chains. "Three or four stores, $50 to $100 million in retail sales in a specific region. That's an opportunity for us," said Dutton, noting that Rona had just opened a 300,000-square-foot distribution centre in Calgary. "Now it's working and we can start our recruitment in the West." Caron agreed the distribution centre could be a big advantage for Rona in its drive to recruit independent store owners and those affiliated with Home Hardware, based in St. Jacobs, Ont., because it could lower the cost of goods. Luring dealers away from their current banners is tough, Caron said, but Rona has already begun signing up Western Canadian affiliates, starting with two Newton Enterprise hardware stores in Manitoba. Rona's other expansion plans include adding three big-box stores and 500 jobs in the Ontario communities of Barrie, Peterborough and Kitchener-Waterloo by 2005. "The big-box format in Canada, believe it or not, is not fully developed, particularly in Western Canada," said analyst Jim Durran, with National Bank Financial in Toronto. And while that may be good news for Rona, it's great news for Home Depot Inc., the deep-pocketed American megastore with 2003 earnings of $4.3 billion US, compared to Rona's profit of $78 million. Home Depot of Canada Inc., which made its move north of the border nine years ago, has 104 stores, all of them big-box style, and added 13 of those in 2003. Rona, meanwhile, has about 530, with more than 60 big-box stores. According analyst Michael McLarney, who publishes the industry newsletter Hardlines, there's "no question" that competition in the home improvement retailing industry is intense. "Since these large-format U.S. retailers came up a decade ago it has really heated up and consolidation has been ongoing," McLarney said. "You've got fewer, tougher players and definitely the competition is very strong." McLarney said Rona holds a 12.2 per cent share of the home improvement retailing market, compared with Home Depot at 14 per cent share and Home Hardware with 12 per cent. Part of Rona's strength, Dutton said, is its banner can fit in smaller communities. "We are not only concentrated in big types of stores like big-box stores," Dutton said. "For each area in Canada we have a type of store." Dutton also said he wasn't worried by the Canadian Mortgage and Housing Corp.'s prediction that spending on home renovations will grow by only about 4.4 per cent in 2004, down from about 10.4 per cent in 2003. "We met our dealers and store managers last week and realised the orders they have from the small contractors is still very high for 2004 and 2005," Dutton said. "The potential for home renovation is so high in Canada that I have no problem with it at all." Shares in Rona (TSX:RON) closed up 80 cents Tuesday at $30.10 on the Toronto stock market.