Rona Hardware
Rona readies for expansion explosion, eyes U.S. entry - Brief ArticleAndrew M. Carlo
BOUCHERVILLE, QUEBEC -- Rona, the dealer-owned buying group that earlier this year became Canada's largest distributor and retailer of hardware and home improvement products, has announced that it wants to increase its store count by 25 percent over the next three years.
This summer Rona bulked up when it purchased 50 Revy, Revelstoke and Lansing Buildall stores from West Fraser Timber for 220 million Canadian dollars (US$139.1 million).
With the purchase, Rona's retail network grew to 540 stores, including 47 big-box units. The purchase ultimately transformed Rona, which had national aspirations, into a coast-to-coast Canadian player. Rona now looks to add another 250 independent outlets, mainly in Alberta and Ontario. On Nov. 19, while addressing the Canadian Club of Montreal, Rona president Robert Dutton invited "independent retailers in Canada to join us to reap the unique benefits that Rona can offer."
Rona put those benefits on display when it announced on Nov. 29 that net earnings for the third quarter ended Sept. 30, 2001 were C$8.7 million (US$5.49 million), a 72 percent climb from earnings of the same period a year ago. For the nine-month period, Rona posted net earnings of C$20.1 million (US$12.6 million), up 33 percent from the same nine-month period in 2000. Net sales for the third quarter of C$594.7 million ($US 375.6 million), a jump of 69 percent from C$351.7 million during the corresponding quarter last year. For the first nine months of 2001, Rona's sales increased 31.4 percent to C$1.32 billion ($US 838 million).
"These quarterly results clearly attest to the competence and dedication of Rona's 16,000 employees from coast to coast," Rona president and CEO Robert Dutton said. "They have succeeded in producing these record figures even as they faced the challenges of integrating our networks across Canada."
In September, Rona took the first step in uniting its forces by rebannering five Rona Home-Solutions and Revy Home & Garden stores in Toronto as Rona Home & Garden. Also, eight former Lansing Buildall stores in the greater Toronto area, became Rona Lansing stores, and 65 Cashway Building Centres in Ontario were renamed Rona Cashway. In Alberta, Saskatchewan and British Columbia, 29 Revelstoke and Revy Home Centers retained their name.
Rona still has some work to do on the integration front, however. "The next step for us will begin with managing the synergies of the new components of the company -- creating a new company," said Sylvain Morissette, a company spokesman.
A major element of that task will involve reworking its distribution network to ensure the company's distribution centers are up to the task of supplying new dealers. With distribution centers at its headquarters in Quebec, two in or near Toronto (one included in the Lansing purchase, the other a small lumber products-only facility); Calgary, Alberta; and British Columbia, Rona is positioned to move east, west, north and in perhaps its grandest plan, south.
The company is contemplating entry into the U.S. market, perhaps within the next three years. "We're not so far from the cities in New England," said Morissette, who added that such a move could come via acquisition. "We can do it easy. It's not a problem to go to the south at all."
Any effort to penetrate the United States, Morissette said, is contingent on Rona "increas[ing] the strength of our distribution network."
On the more immediate horizon is the construction of eight new big-box stores, the majority of which will be built in Ontario over the next two years. The company just started construction on a 145,000 square-foot store, featuring a 25,000 square-foot indoor lumberyard, in Glouster, a suburb of Ottawa. Also in the works is another 145,000 square-foot store in Mississauga, outside of Toronto.
In the meantime, Morissette said the recruitment of new members is "creating a buzz and a good mood in the industry." Discussions with a few possible new members are already occurring. These new members could bring as many as 10 to 12 stores apiece into the Rona network.
Currently Rona's has an array of 540 dealer-owned stores, corporate stores and shared ownership units. Some 375 independent dealers own 62.5 percent of the company, and the corporation owns 135 stores. Rona may resell some of its big box stores to members within the next five years.
"We want to keep our roots and divvy up the company with the new strength we get from our partners," Morissette said.
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