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Ace Hardware Same Store Sales Up 6.9 Percent in Q3

Ace Hardware and Christmas ornaments
Ace helpful hardware man Lou Manfredini & Christmas ornaments/Ace

OAK BROOK, Ill.—Ace Hardware Corporation, a cooperative firm owned by thousands of hardware store franchisees, reported its third quarter and year to date financial results to its hardware store owners last month.

"We're pleased with the growth at both wholesale and retail in the third quarter," said John Venhuizen, Ace president and chief executive officer to the company's licensee investors. "Retail same store sales in the U.S. were up 6.9% for the quarter and stand at 4.4% year to date. We continue to invest heavily in retail initiatives to help fuel growth for our local owners and that growth, in turn, is propelling the corporation."

Ace added 36 new domestic stores and cancelled 21 domestic stores in the third quarter of 2013 for a net increase in store count of 15. This brought the company's total domestic store count to 4,136 at the end of third quarter 2013, an increase of 58 stores from the third quarter of 2012.

"During the third quarter we also launched our meaningful investment in the rollout of the Paint Studio Initiative which will transform the paint department in over 3,000 Ace stores in preparation for the May 2014 national launch." Venhuizen continued, "As part of our strategic alliance with The Valspar Corporation, this investment is a significant portion of our strategy to double paint market share for our Ace retailers."

At Ace, store licensees collectively set operating standards and overall business processes for the system's stores. The company issues financial statements to its hardware store franchisees even though no shares of stock in the corporation are publicly traded. When hardware retailers buy into the Ace system, they purchase shares of the licensor's stock, which gives them voting rights in the cooperative. This is their investment in the licensor, system and brand. Ace's bylaws dictate that a minimum of eight of the directors on the board must be hardware store owners. For example, its current chairman, David Ziegler owns Ziegler's Ace Hardware in Elgin, Illinois. A maximum of 25% of the directors may be non-licensees, which helps Ace have a diversity of expertise on the board.

In 2013 Ace was ranked for the seventh consecutive year as the "Highest in Customer Satisfaction among Home Improvement Stores" by J.D. Power and Associates. The cooperative also ranked among the highest in brand customer loyalty according to Brand Keys' 17th annual Customer Loyalty Engagement Index.

Hardware store franchisees saw total revenues for their cooperative of $1.0 billion for the third quarter of 2013, an increase of $84.4 million or 8.9 percent from 2012. In regard to the bottom line, net income for Ace Hardware Corporation was $34.4 million for the third quarter of 2013, which was essentially flat from the $34.3 million earned in 2012.

Wholesale merchandise revenues to comparable stores increased $25.1 million in the third quarter of 2013. Wholesale merchandise revenues to new domestic stores activated in the 2012 and 2013 fiscal year periods contributed $22.0 million in incremental revenues during the quarter, while wholesale merchandise revenues decreased $8.2 million due to terminated stores. Wholesale service revenues were up $8.2 million primarily due to the timing of advertising revenues.

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