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Ace trends up in Q3 despite challenging economy

BY HBSDEALER Staff

Ace Hardware released results for the third quarter of 2008, reporting net income of $26.4 million, an increase of $4 million, or 18.1 percent, compared to $22.4 million in the third quarter of 2007. The Oak Brook, Ill.-based co-op also reported that for the nine month period ended Sept. 27, net income was $70.6 million, an increase of $4.6 million or 7 percent over 2007.

On the down side, revenues for the quarter decreased $7.6 million, or 0.8 percent, to $969.2 million from $976.7 million in 2007, and merchandise sales to comparable stores were flat.

Overall, Ace president and CEO Ray Griffith was pleased with the co-op’s sales performance, given the down housing market and poor economy. He said that hardware stores, which cater to everyday home project needs, were less impacted by the economic downturn than the overall home improvement industry.

“We responded to the challenging economic environment by strategically reducing our year-to-date operating expenses and by making investments in inventory to support the business,” Griffith said. “We are in a solid financial position, particularly because we refinanced our debt earlier in the year.”

On a category basis, domestic sales were negatively impacted by declines in the tools, sundry and housewares categories and were partially offset by a sales increase in the lawn and garden category.

On a regional basis, sales improved in the Gulf Coast region due to rebuilding efforts in the wake of September hurricanes, while sales in the states most negatively impacted by the housing market decline — most notably California, Arizona and Florida — continued to trend down.

Merchandise sales from Ace’s international business continued to be strong and contributed $6.2 million in incremental sales in the quarter, up 12.5 percent over 2007. This increase was driven by higher sales to existing stores in the Middle East, South America and Canada.

Gross profit in the quarter was $120.9 million, an increase of $9.5 million over 2007, and the gross profit percentage was 12.47 percent as compared to 11.4 percent last year. The gross profit percentage increase in 2008 was attributable to higher margins on merchandise sales due to vendor driven price increases — a direct result of the escalating costs of raw materials.

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STAFDA meets in Denver

BY HBSDEALER Staff

Denver — STAFDA president Rick Peterson hammered away at the Employee Free Choice Act (EFCA) and offered free advice to STAFDA distributors during the organization’s 32nd Annual Convention & Trade Show and during the most volatile year in recent memory.

In comments that received spontaneous applause during Peterson’s address to members, he called the EFCA “terrible” and “Orwellian” and a “serious threat to small businesses.” Among its provisions is the elimination of the secret ballot in certain union elections.

“If passed, what this terrible legislation would do would eliminate the time honored requirement for secret ballots of union elections and enable union proponents to coerce and intimidate workers who disagree with the union objectives,” he said.

On March 1, 2007, the House of Representatives passed the act by a vote of 241 to 185. It subsequently stalled in the Senate.

Peterson, the president of Seattle-based All-West Fasteners, shared four points of advice to STAFDA houses. Adopt improved supply chain partnerships, such as Vendor Managed Inventory (VMI). The goals of VMI are to make sure the customers’ production line never shuts down due to a product shortage and to minimize the total cost of supply. He cautioned distributors not to get burned on special inventory. A tool they should use is non-cancelable, non-returnable agreements (NCNRs).

Athird suggestion was to ensure that company’s terms and conditions protect them from product liability. “Remember, we’re the distributor, not the insurer against all things bad in the universe,” he said.

Finally, Peterson called on STAFDA houses to protect themselves from giving customers detailed industry descriptions that they can use to shop pricing and sourcing with their competitors.

During his general session address Monday morning, Peterson described his company’s increasing diversification since its founding in 1978. It started out as “two guys in a nearly empty warehouse” and reinvented itself as a supplier of aircraft fasteners and military specification hardware, supporting Boeing and the U.S. Navy. More recently, All-West added electronic hardware to its offerings.

Other STAFDA members are currently shifting sales to commercial, industrial and other market sectors, and that’s what the trade show is for — new products to help in this transition.

Incoming STAFDA president Hal Look, of Livermore, Calif.-base ORCO Construction Supply, summed up 2008 with two concepts: the presidential election and turbulent economic times.

“This year has not been normal to say the least,” said Georgia Foley, STAFDA executive director. Still the 32nd event will stand as the fourth largest meeting in the organization’s history at about 4,500 attendees. Some 880 booths were on the show floor, down from 969 booths last year, a record high. Of those 880 exhibitors in Denver, 19 percent were not present last year.

STAFDA membership has dipped slightly in 2008 to 2,845, including 1,215 distributors.

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United Cooperative sells hardware store

BY HBSDEALER Staff

United Cooperative, a full-service cooperative offering feed, grain, agronomy and energy products to south-central Wisconsin farmers and consumers, has sold its hardware store to a local businessman and his wife, according to an article in the Daily Citizen newspaper of Beaver Dam, Wis.

Steve and Linda Behn, who purchased Reedsburg United Cooperative Hardware Hank in Reedsburg, Wis., said they were interested in owning and operating a hardware store.

Karl Beth, United Cooperative vp and chief operating officer, said his company was not actively trying to sell the hardware store, but when approached by a realtor representing the Behns, they began to consider it. Steve Behn owned a construction business for 25 years and felt this was a good opportunity to continue serving the Reedsburg community, he said.

In addition to offering core hardware categories, the Reedsburg hardware store will continue to fill propane tanks and sell United Cooperative’s line of feed and lube oil.

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