Ace’s Griffith: ‘We’re moving on.’
St. Louis — The tone at the opening general session was noticeably more enthusiastic than that of last year’s event in Denver, the first Ace market in the wake of the company’s unpleasant accounting error reported in 2007. Spontaneous applause broke out several times during Griffith’s 35-minute speech here at the America’s Center.
“Most of you say it’s time to move on, time to move this company forward, and that’s what we plan to do,” Griffith said. “It’s time to get back to work.”
When the audience applauded, Griffith responded: “I’m all in.”
The Oak Brook, Ill.-based hardware co-op that sits atop the Home Channel News Top 150 Distributors list, hosted thousands of dealers to its fall market here. And the event kicked off with Griffith explaining how the co-op is going to get to work.
• Point of sale strategy: The company intends to develop an alliance with an additional point of sale technology provider. “You told us we needed to inject competition for improved rates and service, and we plan to do so,” he said.
• Loyalty program: Griffith also said the co-op is planning to make Ace Rewards available to more dealers by integrating it with more “authorized systems.”
• Supply chain: The company is in the third year of a supply chain transformation that Griffith describes as “One of the largest, most comprehensive reengineering projects in your company’s history.” SAP technology will replace 150 home-grown software systems.
Griffith didn’t directly mention the 2007 accounting error, which stemmed from a $150 million dollar difference between the company’s general ledger inventory balances and that of its perpetual inventory records. But he did describe some macroeconomic challenges. For instance, the cost of shipping a 40-foot container from Shanghai to the West Coast jumped 150 percent since 2000. Steel is up 30 percent so far in 2008. And petroleum is rising.
Griffith described the economy as the “800-pound gorilla” in the room and a challenge as tough as the retail competition. “Many of you are working harder for less,” he said.
On the positive side, Ace’s operating expenses are expected to be some $16 million below 2007. Comp-store sales at Ace were down in the second quarter, but not as far down as big-box competitors. Through August, bottom line income stands at $57.3 million, ahead of last year’s $52.7 million.
“Ace financially is rock solid, and the brand is vibrant, folks,” he said.
Ace has opened 66 new stores so far this year, with 29 branch stores, 24 new investors and 13 conversions, and 109 prospects registered at the St. Louis convention.
Several dealers in St. Louis said they were responding to economic conditions with a conservative merchandising strategy. “We’re not looking to gout on a limb and try fancy new products,” said Jim Lee, manager of one of two Kings Ace Hardware stores in Billings, Mont. “We’ll stick with what we know and do our very best.”
Some of the areas include zone heating, programmable thermostats and weather stripping, he said.
“We were very happy with [Griffith’s] message,” Lee said. “You can’t dwell on the past.”
Government bans sale of some Scotts products
Scotts Miracle-Gro, a supplier of lawn and garden products, said it received orders from U.S. environmental regulators prohibiting the sale and use of several products, including certain pesticides, according to a report from Reuters.
In a regulatory filing, the company said the U.S. Environmental Protection Agency (EPA) had issued “Stop Sale, Use or Removal Orders” on several of its products, including Season Long Max Weed and Grass Killer Plus Preventer, Weed B Gon Lawn Weed Killer and Ortho Roach Ant and Spider Killer.
“Scotts Miracle-Gro withheld these seven pesticide-containing products that were in the filing,” Scotts spokeswoman Carrie Butler told Home Channel News. “We have voluntarily withheld them from the shelves since June, when there were found to be problems with the labels. The EPA released the product names on Sept. 15 and is allowing us to sell these products after they have been re-labeled.”
Scotts Miracle-Gro said it does not expect delayed shipments of the affected products — which account for less than 1 percent of the company’s sales — to have a material impact on its financial results for fiscal year 2008 or fiscal year 2009.
However, the company expects costs related to all product recalls and known registration issues related to the ongoing investigation to range from $50 million to $55 million in fiscal year 2008 and about $10 million in fiscal year 2009.
Home channel stocks feel the pain
Wall Street continued to dominate the news wires yesterday as the Dow Jones Industrial Average sank almost 450 points, or 4.06 percent. The home channel certainly felt some of the financial pain. Shares of Home Depot and Lowe’s both dropped more than 7 percent in value on the day.
Among other major movers in the home channel yesterday, Louisiana-Pacific shares declined $1.13, or 10.98 percent, to $9.16; and Scotts Miracle-Gro declined $2, or 6.96 percent, to $26.75.
Only two of 20 home channel stocks tracked by Home Channel News showed gains. Simpson Manufacturing increased 78 cents to $28.55, up 2.81 percent, and Builders FirstSource gained slightly.