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Sales down at Lennox International

BY HBSDEALER Staff

HVAC manufacturer Lennox International said earnings fell 26.7 percent in the first quarter, to $6.3 million from $8.6 million in the same period last year. Sales also fell, down 3 percent to $767.1 million from $791.5 million in the first quarter of 2007.

Like many other manufacturers of building materials and other large purchase items, Lennox’s earnings suffered from softness in the housing sector.

“As expected, difficult residential new construction and replacement markets challenged our first-quarter results,” said Todd Bluedorn, CEO of Lennox International. “Disciplined cost reductions, combined with strong performance in our North America Commercial and Refrigeration businesses, helped offset the headwinds.

Bluedorn also said the company is revising its projected full-year revenue expectations because of the downturn in the housing market. The company expects revenue to stay flat compared with last year or rise by up to 2 percent. Initial projections pegged year-end revenue growth of 2 percent to 5 percent.

Of its four business segments, the company saw revenue growth in commercial heating and cooling — up 2 percent — and refrigeration. Revenue from installed services and residential heating and cooling fell in the quarter.

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Tough talk at HTF

BY HBSDEALER Staff

Memphis, Tenn. The Hardlines Technology Forum, held here April 21 to 24, offered in-depth seminars on data synchronization, supply chain visibility and other essential topics for tech-savvy manufacturers. But this year’s conference, organized by the American Hardware Manufacturers Association (AHMA), added a new feature that appealed to suppliers of every stripe: “How to Do Business with [insert retailer].”

Do it Best went first, with a two-hour session on its new vendor portal, vendor scorecards, market enhancements and efforts to develop a consistent set of product attributes for all its warehouse items. The Fort Wayne, Ind., co-op brought six executives to the event, and three of them gave presentations and answered questions during “How to do Business with Do it Best.”

One of the executives was divisional merchandise manger Dave Cole, who came from the business side of Do it Best. After asking for a show of hands, Cole noted that many of the conference attendees worked in non-IT positions. The AHMA made an effort to recruit these individuals this year by adding a new track aimed at “business side professionals” who work in tandem with EDI and logistics staff.

“How to do Business with Lowe’s” was a primer on the basics of setting up new items, sending advanced shipping notices and ironing out the kinks in invoices and purchase orders. An all-female team from Lowe’s, clad in red shirts and blacks pants, represented EDI/vendor support, electronic commerce, product information, accounting and PCM initiatives. They responded to specific inquiries and dispensed advice, although the latter often ended with a visit to LowesLink.com. The team also included Michelle Adams, director of merchandising operations and planning for Lowe’s.

The conference continues today with more educational sessions, “How to Do Business with True Value” and the retail panel presentation. This year’s panel includes representatives from Do it Best, True Value, Lowe’s and Orgill. Other retailers who attended the conference include Home Depot and Mitre 10, the Australian home improvement chain.

Patrick Wischmeier, vp-information technology at Oatey Co., used one of the many networking breaks to get face time with Howard White, Home Depot’s manager of sourcing and vendor management. “Our biggest customers are Home Depot and Lowe’s, and they’re both here,” Wischmeier said. “I’m very interested in what their agenda is for the next year.”

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Ace reports revenue increase in 2007

BY HBSDEALER Staff

Oak Brook, Ill.-based Ace Hardware reported wholesale revenues of $3.97 billion for the year ending Dec. 29, 2007, which was a $39.4 million — or 1 percent — increase over wholesale revenues of $3.93 billion in 2006.

This jump, the sixth consecutive annual increase for Ace, came despite declines in the U.S. housing market and a weak economy, as well as a sizable internal accounting error discovered in August that put Ace’s equity — previously reported at $320 million — at $168 million.

Ace said the revenue increase was driven, in part, by 171 new Ace stores worldwide, as well as an increase in international revenues of $24.1 million, or 14.4 percent. Ace currently operates stores in all 50 states and in 63 countries.

“Our operations are solid, and we’re making investments in both our retail and wholesale infrastructure for the benefit of both the short- and long term,” said Ace president and CEO Ray Griffith. “We are pleased to have the audit of our 2007 financial statements complete and are encouraged by our 2007 results, especially in light of the economic pressures on our sales and overall operating expenses.”

Ace reported net income of $86.9 million for the full year 2007, which was down from record net income of $94.5 million generated in 2006. The decline in net income in 2007 reflected lower gross profit rates due to one-time gains realized in 2006 on commodity pricing and opening stock order discounts associated with the opening of a new distribution center and higher expenses to support new retail initiatives and the cost of the 2006 financial restatement, the company said.

Year-end patronage dividends distributed to retailers for 2007 were $81.2 million.

Griffith said Ace continues to focus on re-engineering its supply chain and employing software enhancements for added efficiencies throughout its distribution, merchandising and inventory control systems. He also highlighted a retail rollout of an exclusive initiative to improve service and the overall customer experience at Ace stores, as well as a piloted test of an enhanced product offering to increase retail sales and profits throughout the store.

Other programs going forward include a 2008 roll-out of an all-new integrated consumer marketing plan to drive traffic, retail sales, retail profitability and average transaction size; and an effort to enhance store growth by attracting new investors and helping existing Ace retailers branch out and open additional locations. Ace anticipates 125 new stores will open in 2008.

“Along with the sluggish economy and waning consumer confidence, we’ve been faced with many challenges this past year,” Griffith said. “We’ve had to look at our business differently and make some difficult strategic decisions to operate smarter and leaner.”

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