Ace Hardware reports sales gains in Q2
Pointing to sales gains in virtually every department, Oak Brook, Ill.-based Ace Hardware Corp. reported second-quarter revenue growth of 9.7% — to $1.74 billion from $1.07 billion. Net income increased to $42.3 million, compared with net income of $14.9 million in the same quarter last year.
CEO John Venhuizen said the co-op is pleased with the results so far in 2013. "Sales increased in virtually every department with significant growth at both wholesale and retail from our Discovery Edge, Level 3 merchandising re-sets and branding inititatives," he said.
The second quarter also included a charge of $6.2 million related to the closing costs of the co-op’s Retail Support Center in Toledo, Ohio.
Across the Ace network, same-store retail sales were up 5.3% for the quarter, with momentum gaining in June (up 6.1%) and July (up 9.8%).
The company’s income statement includes a line for retail revenues — $77.7 million for the three months ended June 29. This line tracks the company’s December 2012 acquisition of Westlake Ace Hardware, which operates 86 stores in the Midwest. Same-store sales at these Ace-owned stores were down 3.4%, which the co-op contributed to a cold spring that limited lawn and garden sales.
On the wholesale side, total wholesale revenues were $1.1 billion, up 2.4%, as compared to the prior year. The increase would have been 4.4%, when including wholesale revenues to WHI, the indirect owner of the Westlake chain.
The Ace co-op added 34 new domestic stores and canceled 19 in the second quarter. The total domestic store tally stands at 4,121 as of June 29.
Valspar patiently awaits profits from Ace deal
Paint giant Valspar has every intention of profiting from its move to acquire the Ace Hardware private-label paint business, it just hasn’t happened yet.
Valspar executives walked analysts through the plan during the company’s third-quarter conference call. The analysts seemed highly interested in Valspar’s seven-month-old relationship with Ace.
"The rollout of our new private label and branded programs with Ace Hardware are on plan," CEO Gary Hendrickson said. "We will start shipping Valspar-branded paints to Ace during the fourth quarter, and we are currently tracking ahead of our internal placement targets for this initiative."
Late last year, Ace and Minneapolis-based Valspar worked out a long-term deal, under which Valspar will manufacture and supply Ace-branded paint products to Ace dealers. The companies also announced that Valspar had acquired Ace Hardware’s paint manufacturing assets, including two manufacturing facilities located near Chicago.
During this week’s conference call, Hendrickson said the deal is not making money yet on the private label side of the Ace deal, as Valspar works to retool the facilities and infrastructure that deliver the paint. But regardless of the branded Valspar business side of the transaction, the private-label Ace deal will eventually result in positive metrics for the paint company, he said.
"We didn’t sell our souls to the devil on the private-label business to win a contract on the branded business," Hendrickson told investors.
Hendrickson was asked to update exactly how many Ace stores had the Valspar brand, but he declined to talk about it and will continue to remain silent on the question "probably for a couple of quarters," he said.
CFO James L. Muehlbauer said Valspar remained "very confident" in the model for its Ace business. "When we get that work done this year, we’ll have a cost structure that allows us to make a nice margin on the private-label business," he said.
Westlake Ace opens store No. 86
Lenexa, Kan.-based Westlake Ace Hardware will open its newest store — store No. 86 — in West Plains, Mo., Aug. 16.
The new Westlake Ace Hardware will serve as the anchor for the West Plains Marketplace shopping center. The new location marks the second store incorporating Westlake’s new store design and layout that uses construction materials and a design approach intended to provide an organic and modern feel, more natural light from garage-style doors and skylights, a wood and metal facade, and polished concrete floors.
“We are very excited to open this new store in West Plains and bring this community our unique, customer-focused retail experience,” said George Smith, CEO of Westlake Hardware. “We are confident consumers in the West Plains area and throughout southern Missouri will appreciate our diverse selection of high-quality products, and the friendly and knowledgeable service that has been our hallmark for decades.”
The new store is located at 1401 Mitchell Rd. in West Plains, Mo.
With stores in Missouri, Kansas, Nebraska, Iowa, Oklahoma, Texas and New Mexico, Westlake Ace Hardware received the 2011 HCN Retailer of the Year Award. The chain was purchased in 2012 by Oak Brook, Ill.-based Ace Hardware, which expressed plans to operate the chain, its largest co-op member, as a standalone company.
The store will carry traditional hardware, such as fasteners, tools, paint, plumbing and electrical supplies, and a large range of lawn and garden products. Westlake also offers a variety of wild bird, pet and patio products, and is known for its assortments of BBQ grills, sauces, rubs and accessories in the communities it serves, according to the press release announcing the opening.