DISTRIBUTORS/CO-OPS

Products and promotions shine in Chicago

BY Ken Clark

Chicago — Among the plethora of merchandise stories playing out in the cavernous McCormick Place convention center here at the Ace Convention and Exhibits, Ace merchants pointed to a handful of hot categories.

One of them is the tried-and-true paint department. At the paint area of the show floor, Ace was showing off its new Color Sample Station, rolled out in April. It's a point-of-purchase display that offers consumers free testers. Since its rollout, stores that allow dealers to "try it" have seen sales increase 60%, the co-op said.

All around the exhibit floor, dealers are looking for the next big thing. One possibility, according to Chris Hankla, Ace's lawn and garden merchant, is the lightweight portable hammock from Eagle Nest Outfitters. "This could be the very next Yeti," he said, referring to the hot-selling cooler brand.

According to Ace, light bulbs rank first in both retail sales dollars and gross profit dollars across Ace stores. The company rolled out a new Ace brand LED product for price-sensitive customers looking to trade up to LED.

Also on the show floor are 77 new vendors. The co-op's Convention and Exhibits runs through Saturday.

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Putting the ‘General’ in General Session

BY Ken Clark

Chicago — Ace Hardware kicked off its 2016 Convention and Exhibits here with a General Session packed with motivation and leadership lessons.

Part of the motivation was supplied by guest speaker and retired General Stanley McChrystal, who led the Joint Special Operations Command in Iraq and shared lessons of dealing with adversity and complexity.

In the hardware arena, John Surane hammered on the themes of convenience, quality and service. Surane pointed to progress across the board since the advent of 20/20 Vision in 2012. Same store sales are up 15%, transactions up 3.5%, and same store gross profit dollars up 18%.

He elaborated on some of the keys to building on that progress, the most dramatic being the need to enrich the assortment in the face of tough competition. "We either differentiate or die," Surane said.

The first order of business, he said, is to fulfil what he calls the helpful promise.

"We've got to be the helpful place," said Surane. "Arming your people on those store floors with the best training you can possibly offer them."

Progress means embracing business to business sales. "It's a billion dollar opportunity and we're just scratching the surface," he said.

Surane's message was punctuated with a heavy metal soundtrack and quotations from Warren Buffet. And most of it dealt with investing in the brand. The co-op intends to steadily raise its advertising spend from a $65 million level in 2016 to $101 million in 2020.

"The goal is not to spend a bunch more of your money on advertising," Surane said. "The goal is to use that advertising as the means to drive sales to your profit and your business."

The plan includes embracing the digital realm, bringing 800,000 more impressions per store to the Ace family of retailers.

"When someone types in 'Weber grill' in Google, your store is going to come up much more often," Surane added.

General Stanley McChrystal shared his experiences leading special forces in Iraq and the challenges he encountered. He described the danger of silos within organizations, and the need to adapt.

In his introduction to the general, Ace CEO John Venhuizen espoused the virtues of overcoming big challenges: "Almost everything worthwhile is uphil," he said.

One of McChrystal's key messages was about the type of leadership that's most successful in a complicated world. The image of the strong leader shouting orders and making every decision is not the McChrystal ideal.

For a real, modern leader, think gardener.

"A gardener doesn't grow anything," he said. "A gardener plants, waters, feeds, weeds, harvests. A gardener creates an environment so that plants can do only what plants can do."

As the session came to a close in a standing ovation, McChrystal had the last word: "Now everybody can get back to work."

Other highlights from the general session:

• The session kicked off with a congratulatory message celebrating a 10th consecutive year being ranked first in customer service by J.D. Power and Associates in the home improvement retailing category.

• Ace's Children's Miracle Network All-Star Kasey Harvey, a cancer survivor 10 months in remission, thanked dealers for their contributions to CMN hospitals around the country. Since 1991, Ace has raised $72 million for such hospitals.

• Harvey also announced and congratulated this year's CMN All Star retailer — Matt Mazzone of Mazzone Ace Hardware in Brooklyn, New York.

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More stores, more sales for Ace Hardware

BY HBSDealer Staff

Boosted by store growth and crisp sales of outdoor living, paint and lawn and garden, Ace Hardware Corporation Tuesday reported second quarter 2016 revenues of $1.4 billion, an increase 0.6% from the second quarter of 2015. 

Net income was up 5.8% to $63.4 million, the second highest in company’s history.

“New store growth was the primary driver of our record revenue,” said John Venhuizen, President and CEO.  “While records are nice, we are not satisfied with the growth as the enterprise and our retailers are working far too hard to settle for modest increases. Given their collective and effective execution year-to-date, I remain optimistic about accelerating both our growth and earnings going forward.”

For the first six months of 2016, the 2.4% increase in retail same-store-sales reported by the approximately 3,000 Ace retailers who share daily retail sales data was primarily the result of a 2.2% increase in average transaction size.

Total wholesale revenues were $1.3 billion, an increase of 0.5%.

The Company’s Ace Wholesale Holdings LLC subsidiary contributed $4.1 million of incremental revenue in the second quarter of 2016, which was an increase of 4.4% from the prior year second quarter.

Retail revenues from Ace Retail Holdings – essentially sales from Westlake Ace Hardware — were $87.4 million in the second quarter of 2016.  up 2.3% from the second quarter of 2015.  Same-store-sales increased 1.6% compared to the prior year with the largest increases in outdoor living and lawn and garden.

Ace added 42 new domestic stores in the second quarter of 2016 and cancelled 29 stores.  This brought the company’s total domestic store count to 4,315 at the end of the second quarter of 2016, an increase of 59 stores from the second quarter of 2015.

Wholesale gross profit for the three months ended July 2, 2016 was $172.5 million, an increase of $9.0 million from the second quarter of 2015.  The wholesale gross margin percentage was 12.9% of wholesale revenues in the second quarter of 2016, an increase from the 2015 second quarter gross margin percentage of 12.3%. The increase in the wholesale gross margin percentage was primarily driven by the timing of income from vendors.

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