Building a Future for Distributors and Dealers of Building Products

Volume 44,  Issue 9                                       November/December  2005

     Big Box Bulletin

Annual NCB Co-op 100 Reports Hardware and Lumber Co-ops Prospered in 2004
The National Cooperative Bank (NCB) released its annual list of the nation’s 100 highest revenue-earning cooperatives, announcing that the top hardware and lumber cooperatives earned $9.9 billion in revenues during 2004, a billion more than the previous year. 

The NCB Co-op 100, the only annual report of its kind to track revenues generated by cooperatives, further indicates the strength and yearly growth of these businesses nationwide, according to an NCB news release. 

“Overall, the nation’s top 100 cooperatives increased revenues by almost $15 billion dollars in 2004, a 14-percent increase from the same period last year and the highest-ever yearly revenue,” noted Charles E. Snyder, president and chief executive officer. 

“This double-digit growth, rarely experienced in other business sectors, further demonstrates the vital role of cooperatives in the marketplace and the financial stability they bring to communities nationwide.” 

In 2004, hardware and lumber cooperatives maintained a consistent presence on the NCB Co-op 100 with six businesses ranking in the top 100, and an 11-percent increase in revenues from the previous year. Ranked number seven, ACE Hardware Corp., located in Oakbrook, Ill., led this industry in 2004. 

Additional cooperatives in this sector, in descending rank order, include Do-it-Best Corp., True Value Corp., ENAP Inc., Progressive Affiliated Lumbermen Co-op Inc. and Allied Building Stores Inc. 

Although similar to other business models, a cooperative has several unique features, according to the release. It is owned and controlled by members who have joined together to use the cooperative’s goods, services and facilities. A board of directors, elected by the membership, sets both policies and procedures. By pooling resources, members can leverage their power to buy, sell, market or bargain as one group, achieving economics of scale and sharing in any profits generated. 

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The Home Depot Cannot Claim “Lowest Prices Guaranteed”
The National Advertising Division (NAD) of the Council of Better Business Bureaus Inc., the advertising industry’s self-regulatory forum, has announced that Atlanta-based Home Depot was able to support some of its pricing claims, but recommended that the advertiser discontinue others. 

The truth and accuracy of the advertiser’s claims was brought to the attention of the NAD by the Better Business Bureau serving Metro Atlanta, Athens and Northeast Georgia.
NAD concluded that claims that state that “Nobody beats ...” The Home Depot’s prices are consistent with the store’s price-beating policy and are supported as long as they are accompanied by a clear and conspicuous disclosure outlining that policy. 

NAD, however, found that claims of “lowest prices guaranteed” are inconsistent with a price-beating policy and, in the absence of evidence that The Home Depot will always have the lowest prices, must be discontinued. Finally, NAD found the advertiser’s claim of “2000 appliances” supported.

In a statement to NAD, The Home Depot expressed that it “has welcomed this opportunity to participate in the NAD’s self-regulatory process.” The advertiser further stated that it appreciates NAD’s conclusions and “plans to comply with NAD’s recommendation in future advertising, consistent with Section 1(k) of the BBB’s Code of Advertising.”

In other company news, Home Depot has stated that it will be closing 15 of its EXPO Design centers and converting five others to regular Home Depot stores.

Home Depot introduced the EXPO stores 11 years ago. EXPO Design Center caters to a wealthier customer base than Home Depot, selling high-end fixtures to people looking to remodel. Unlike Home Depot, where customers tend to make frequent trips over shorter distances, the EXPO Design Center attracts people interested in larger projects that do not require as many visits. 

“EXPO is a popular, profitable and viable business,” said Jean Osta, the public relations manager for the EXPO Design Center. “Certain EXPO stores did not meet our strategic business objectives. These changes will allow us to focus on growth opportunities in our remaining stores and position the EXPO brand for a strong future.”

Fifty-four EXPO stores are currently operated across the country.

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84 Lumber Closes Six Stores 
84 Lumber of Eighty Four, Pa., has announced the closing of six locations in five states as a result of limited housing starts in each market. 

According to 84 Lumber chief operating officer Bill Myrick, the company routinely conducts three-year business evaluations of each of its nearly 500 stores nationwide to assess individual store performance as it relates to local market conditions.

“More than 90 percent of our business is with residential builders, so housing starts are the critical factor to long term success for any of our stores. Housing starts in these markets are very limited leaving a business base that is not strong enough to continue to support these stores,” said Myrick. 

The stores being closed are in Fulton, Mo.; Manhattan and Cimarron, Kan.; Paragould, Ark.; Silsbee, Texas; and Orville, Ohio. Approximately 40 associates affected by the closings have been offered the opportunity to relocate to other 84 Lumber stores or operations. 

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Ace and Madden Sign Up For Six More Years
As ABC-TV’s historic partnership with NFL Monday Night Football enters its final year this season, another high-profile tandem—John Madden and Ace Hardware—have announced they will remain advertising teammates into the next decade.

Ace has renewed its contract with the legendary football coach and TV analyst for six additional years. Already, the 18-year association between the popular Madden and the nation’s largest hardware cooperative is the second longest spokesperson relationship existing today, just behind Michael Jordan and Nike, according to Frank Rothing, Ace Hardware advertising manager. 

“John’s personality and image continue to resonate with Ace customers, as evidenced from quarterly monitoring by Gallup that shows awareness levels and consumer association of John with Ace often exceed 80 percent,” said Rothing. “Extending John’s involvement in many of Ace’s promotional programs strongly complements our other brand-building initiatives.”

Madden will continue to do voice-overs for radio commercials and select TV spots. His name and image also will be utilized, as in the past, in printed materials such as advertising circulars and point-of-sale displays.

The 6-year Ace/Madden deal, which ends in 2011, coincides with Madden’s new contract with NBC-TV to broadcast Sunday night NFL football games starting next fall.

In other news, Ace has reported that its wholesale hardline sales for the second quarter ended June 30, 2005, at $913.9 million, an increase of 4.9 percent over the second quarter 2004. Net earnings for the second quarter were $33.5 million, compared to $36.7 million in 2004. On a year-to-date basis, net earnings were $48.1 million, compared to $53.4 million in 2004. 

Contributing to the strong sales results was a 5.2 percent increase in sales through Ace’s 15 retail support centers, along with international sales surging 12.4 percent for the quarter.

Year-to-date, Ace’s wholesale sales have increased 3.2 percent, with total international sales increasing 7.4 percent.

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