Ace builds on its ‘Famous Four’
Chicago — The specter of Amazon.com floated in and out of the marketing plan presentation here at the general session of the Ace Hardware Fall Convention and Exhibits. The hardware co-op hammered on the message of service, convenience and quality – areas where the retailer believes the advantage tilts toward the independent.
And it plans to keep on hammering on those themes throughout 2018.
Recognizing the disruptive power of companies like Amazon – and warehouse superstores for that matter – Ace said it intends to exploit its core strengths in its messaging in 2018. Brian Wiborg, the new VP of marketing, retail training and store operations for the co-op, led dealers through a strategy of investing heavily in what the co-op is calling the “Famous Four” categories: holiday gifts, paint, backyard and bbq, and home preservation.
“We must own these categories,” Wiborg said.
To help achieve that kind ownership, Ace will spend $83 million in measured media in 2018. That’s part of a plan to reach the $100 million level in advertising by 2020, and it marks a major step up from its $30 million spend in 2013.
And as for competition with Amazon, Wiborg endeared himself to the cause of local independents by describing the Seattle-based retail disrupter as “a faceless organization that can give two rips about the community.”
In contrast, concern for the community was in full display mode at the general session, where Bill and Susan Murff of Cypress Ace Hardware in Texas were recognized as the co-op’s 2017 All Star for their support of the local Children’s Miracle Network hospital. Cypress raised $66,000 for the charity.
The general session kicked off the co-op’s fall market here at McCormick Center, where retailers were looking for deals and buys at 3,420 booths, including 90 new vendors.
[Click here for the company's most recent quarterly earnings report.]
John Surane, executive VP of merchandising, retail operations, business to business and wholesale holdings for Ace Hardware, encouraged dealers to seek out three “don’t miss” areas: Lawn and garden, the impulse queue, and plumbing.
Impulse queues — sophisticated trails of heavy-impulse high-margin products that lead customers to the cash register – have shown “awesome” results among a hundred or so early adopters, Surane said.
He urged retailers to consider adopting some of the new plumbing plans on the show floor, partly because “the market has changed significantly,” he said. And in the realm of lawn and garden, Surane encouraged forward thinking: "Let's plan to win next spring, and it starts here."
Ace executives didn't sugar-coat the challenges. Amazon's ability to connect with customers — particularly in the realm of delivery — is improving. Amazon Prime continues to grow its household penetration numbers, and there have been recent reports of Amazon cutting its delivery time down to a mere 12 minutes, in some rare cases.
But Wiborg also summed the optimism in the room: “As entrepreneurs, we're in the business of solving problems, and it’s what we’ll do head on," he said.
Ace Hardware reports 4.6% sales gain
The co-op’s sales for the three-month period hit $1.5 billion. Net income of $51.1 declined $12.3 million from the second quarter of 2016. The company cited a $7.8 million one-time pre-tax charges primarily related to the future closure of certain warehouse and distribution facilities as part of a network reconfiguration to support future growth.
Same-store sales for the 3,000 or so Ace retailers who share daily retail sales data increased 3.2%.
“We are pleased with the 3.2% same-store-sales increase that fueled our record revenue and second quarter increase of 4.6 percent,” said CEO John Venhuizen. “I couldn’t be more proud of our local Ace owners for being named ‘America’s favorite home improvement store,’ by Market Force Information and for ranking ‘highest in customer satisfaction,’ by J.D. Power for the eleventh consecutive year.”
Total wholesale revenues were $1.4 billion, an increase of $63.1 million, or 4.7 percent, as compared to the prior year second quarter.
Increases were noted across most departments with outdoor living, housewares, impulse and tools showing the largest gains. Retail revenues from Ace Retail Holdings – Westlake Ace Hardware — were $90.3 million in the second quarter of 2017, up 3.3% from the second quarter of 2016. The increase was the result of new retail stores added since the second quarter of 2016.
Overall, Ace added 27 new domestic stores in the second quarter of 2017 and cancelled 28 stores. This brought the Company’s total domestic store count to 4,357 at the end of the second quarter of 2017, an increase of 42 stores from the second quarter of 2016.
On a worldwide basis, Ace added 52 stores in the second quarter of 2017 and cancelled 31, bringing the worldwide store count to 5,024 at the end of the second quarter of 2017.
[See the company’s second-quarter earnings release here.]
Fast-growing SRS strikes again
In recent months, McKinney, Texas-based building product distributor and roofing specialist SRS Distribution has been on an expansion streak that few rivals in the building industry can match. This week, expansion struck again with the acquisition of National Building Supply Corp., with three New Jersey locations in Belleville, Roselle and Dover.
National Building Supply was founded in 1962 and since then operated as a family business. It currently employs a team of over 30 people.
In July, SRS announced the opening of four locations – one each in North Carolina, Florida, Texas and Illinois. Prior to that, the company said it was planning to acquire SG Wholesale Roofing Supplies of Southern California. In April, it was Kohl Building Products that joined the SRS team. http://www.hbsdealer.com/article/srs-distribution-acquires-kohl-building-products
The company’s newest acquisition, National Building Supply, covers a primary market area of Northern & Central New Jersey servicing professional contractors, local homebuilders, home improvement contractors, and remodelers. Tom Lazur, National's current owner, and National's entire sales and operations team will be staying with the company to run the branches, SRS said. All National locations will continue to operate under that name and will become part of SRS's family of independent distributors.
Dan Tinker, President & CEO of SRS Distribution, said SRS has known the Lazur family for a long time.
One of the things we love about this industry is how many friends you make over time and decades later you get an opportunity like this to work together as partners. The addition of National makes us exponentially stronger in New Jersey and also provides us with access to the CertainTeed Vinyl Siding line in the region."
Tinker also like the idea of gaining access to the CertainTeed Vinyl Siding line in the region, he said.
Tom Lazur, Owner & President of National, added, "I am pleased that I have found the right partner for the future of National and look forward to joining forces with my friends at SRS. My family and I have owned and operated National as an independent distributor for almost 40 years, but felt it was time to find a partner that could help us grow the business and preserve our family's legacy for decades to come.
Lazur said the time was right to find a partner that could help the company grow and preserve the family’s legacy.
SRS is a roofing distribution holding company that, with the addition of National Building Supply, will include 192 locations in 41 states operating under the names: Suncoast Roofers Supply, Southern Shingles, Midwest Roofing Supply, River City Wholesale, Superior Distribution, Shake & Shingle Supply, Roofline Supply & Delivery, Stoneway Roofing Supply, Heritage Wholesalers, Myles F. Kelly, Commercial Distribution Specialists, B&L Wholesale Supply, Advanced Distribution Specialists, B&L Wholesale Supply, Advanced Building Products, Atlantic Roofing Distributors, Monroe Aluminum Products, National Building and Roofing Supplies, Metro Roofing Supplies, Kohl Building Products, SG Wholesale Roofing Supplies, and National Building Supply.
SRS is a portfolio company of Berkshire Partners LLC.