Oak Brook, Ill.-based Ace Hardware reported wholesale revenues of $3.97 billion for the year ending Dec. 29, 2007, which was a $39.4 million -- or 1 percent -- increase over wholesale revenues of $3.93 billion in 2006.
This jump, the sixth consecutive annual increase for Ace, came despite declines in the U.S. housing market and a weak economy, as well as a sizable internal accounting error discovered in August that put Ace's equity -- previously reported at $320 million -- at $168 million.
Ace said the revenue increase was driven, in part, by 171 new Ace stores worldwide, as well as an increase in international revenues of $24.1 million, or 14.4 percent. Ace currently operates stores in all 50 states and in 63 countries.
"Our operations are solid, and we're making investments in both our retail and wholesale infrastructure for the benefit of both the short- and long term," said Ace president and CEO Ray Griffith. "We are pleased to have the audit of our 2007 financial statements complete and are encouraged by our 2007 results, especially in light of the economic pressures on our sales and overall operating expenses."
Ace reported net income of $86.9 million for the full year 2007, which was down from record net income of $94.5 million generated in 2006. The decline in net income in 2007 reflected lower gross profit rates due to one-time gains realized in 2006 on commodity pricing and opening stock order discounts associated with the opening of a new distribution center and higher expenses to support new retail initiatives and the cost of the 2006 financial restatement, the company said.
Year-end patronage dividends distributed to retailers for 2007 were $81.2 million.
Griffith said Ace continues to focus on re-engineering its supply chain and employing software enhancements for added efficiencies throughout its distribution, merchandising and inventory control systems. He also highlighted a retail rollout of an exclusive initiative to improve service and the overall customer experience at Ace stores, as well as a piloted test of an enhanced product offering to increase retail sales and profits throughout the store.
Other programs going forward include a 2008 roll-out of an all-new integrated consumer marketing plan to drive traffic, retail sales, retail profitability and average transaction size; and an effort to enhance store growth by attracting new investors and helping existing Ace retailers branch out and open additional locations. Ace anticipates 125 new stores will open in 2008.
"Along with the sluggish economy and waning consumer confidence, we've been faced with many challenges this past year," Griffith said. "We've had to look at our business differently and make some difficult strategic decisions to operate smarter and leaner."