Hart Stores Inc.

Hart Stores Inc., formerly Hartco Enterprises Inc., is a growing chain of 71 mid-sized department stores located in the predominantly secondary and tertiary markets in Quebec, Newfoundland, New Brunswick, Nova Scotia, Labrador and Ontario. The company operates out of an 85,000 square foot leased building located in the Anjou district of Montreal, Quebec. This facility contains the purchasing, administration, advertising, warehousing, and distribution departments of the company.

Hart began its operations in 1960 with the opening of an 8,000 square foot store in the community of Rosemere, which was a rural Quebec community at the time. By 1995, a chain of stores had been developed and the company’s operations had grown to 32 locations. After the demise of one of Hart’s main competitors, the Wise and People’s chain, in 1995, the company acquired an additional 32 stores with well established locations which effectively doubled Hart’s size within a two month period. Also, as a result of these acquisitions, the company’s operations instantly expanded into multiple Canadian provinces. Between 1996 and 2000, several small, under-performing stores were closed to improve the Hart’s financial results.

In 1976, the company began developing a computer and communications businesses that grew considerably in the 1980s and 1990s. In the late 1990s, the organization operated under three separate business segments, namely, the computer, communications, and department store divisions. The board of directors recommended that it would be in the best interest of the company for the computer and communications divisions to be spun-off into a separate publicly traded entity. As a result, in July 2000, Hartco Enterprises Inc. was reorganized into Hart Stores Inc. and Hartco Corporation. Shares for Hartco Corporation were created and distributed to shareholders of the original company, which then changed its name to Hart Stores Inc.

Business Operations & Marketing

The company currently operates under the Hart, Bargain Giant, and Géant des Aubaines banners employing more than 1,300 full-time and part-time workers. Hart’s stores range in size from 20,000 to 45,000 square feet and cover a total gross leasable area of roughly 1.7 million square feet. The chain carries tens of thousands of different products including national and exclusive clothing brands, home furnishings, housewares, appliances, toys, bed and bath accessories and footwear. The company’s target market throughout its 45 year history has consistently been the rural, grass-roots population. Management believes that Hart has developed a genuine feel for the types of products desired by these target consumers.

The company employs two key methods in it promotional activities in order to create and maintain high traffic levels at its stores. Firstly, national advertising plays a significant role in attracting the customers needed to achieve sales and volume targets. Hart produces 25 flyer publications each year which are delivered to the doorstep of more than 1.3 million households in eastern Canada. The company even distributes these flyers to particularly remote communities encouraging cash on delivery orders using parcel post. Secondly, Hart pays careful attention to local activities such as mall promotions, festivals and seasonal events with well-timed radio and newspaper advertising. Furthermore, the company attempts to build customer loyalty by sponsoring annual events like junior hockey tournaments and community celebrations

Entering the Major Retail Market

During 2005, Hart opened eight new stores and more new facilities are slated for fiscal 2006. Although the company’s stores have historically operated in smaller and mid-size communities, during March 2005, Hart made its initial foray into the major Ontario markets and opened its first store in the prime Greater Toronto Area (GTA) with a 40,000 square foot facility in Whitby, Ontario. Later in 2005, two more stores were opened in Ontario including a 45,000 square foot facility in Sudbury and a 29,000 square foot store in Espanola. In addition, the company also opened stores in the larger cities of Laval and LaSalle, which are situated in the greater Montreal area.

With the expansion into these major retail markets management believes Hart is poised to take its place as one of Canada’s leading retail chains. Furthermore, although the company still operates under the Hart, Bargain Giant and Geant des Aubaines banners, all newly opened stores and those slated for future expansion will operate under the Hart name.

New Office

During December 2005, the company announced that it will be relocating its head office and distribution centre to Laval, the second largest city in Quebec. The current facility in Ville d’Anjou, Montreal has reached full capacity and the decision to move to a new office is the result of the continuing growth that Hart has sustained over the last few years. Management believes that the investment in the new 220,000 square foot facility will provide the company with a more efficient distribution infrastructure required for future growth. Hart recognizes that Laval is a growing city with excellent trucking routes and easy access to the highway network. Management expects to move to its new location in May 2006.