Suburb offers tax incentive for Ace owner
Civic leaders in Barrington, Ill., 32 miles northwest of Chicago, approved an economic incentive and special use permit sought by an applicant for an Ace Hardware store, according to an article in the Chicago Daily Herald. The agreement allows the hardware store to recoup up to $13,000 per year in municipal sales tax for its first five years. Anything above that would be paid to the village as usual.
The town is unaccustomed to granting economic incentives, but local residents have put a hardware store at the top of their list of desired new businesses, according to an economic development official. The town has been without a hardware store since one closed several years ago.
The new Ace Hardware will occupy an existing building that is approximately 10,000 sq. ft. It is expected to open in November.
Ace paints a picture of improvement
Chicago — Ace Hardware supplied several growth-minded statistics to members during the co-op’s Fall Market general session, which was heavy on strategy initiatives and inspirational messages for store owners.
The paint department figured heavily in the Thursday morning presentation. So did payment systems, logistics and — as one would expect — the concept of customer service as delivered by a friendly store.
One of the big new tools in the works is an instant-savings Ace Rewards card, which senior VP merchandising John Surane described as “our most impactful promotional tool next year.” It’s expected to launch in January 2013.
With instant savings, customers won’t have to deal with mail-in or e-rebates. Also, the new system through Epicor will allow a national lookup of Ace Rewards members, so customers who forget their card can still be served.
The Ace Rewards card has 23 million users, he said, delivering about a 13% greater profit than non-cardholder transactions.
The general session included a balcony scene from an actor playing “Beach house,” a color and self-described “soul mate” from the co-op’s Clark + Kensington paint marketing campaign. Describing the campaign, Surane said: “We had do to something different to break through the clutter.”
Another strategy was to offer free paint. During seven free-paint Saturdays, Ace gave away 1 million trials. The events grew 15% more store transactions for the entire store, he said, while increasing several other metrics. “We plan to sustain our attack in 2013,” Surane added.
Ace showed statistics that its liquid paint market-share grew from 4% to 5.3% since 2009. And after a slow first year, the co-op is on pace to reach its five-year-plan target of 8% market share.
Ace Hardware COO John Venhuizen told the co-op members: “You are owners of a company that is on the move.”
It’s a good thing, too, he said, as competitors such as Amazon.com are rising in the home improvement market, and Home Depot said it’s spending more than $2 billion on technology and store improvements.
The COO supported his case for the effectiveness of corporate programs by showing that Best in Class Ace members have a much higher adoption of programs, such as Ace Rewards, Craftsman merchandise sets and light bulb resets.
Venhuizen pointed to some examples from the wholesale performance side of the business, too:
• A 97.1% fill rate, showing a 70-basis point improvement from a year ago;
• $90 million lower costs through the SAP-powered transportation management system; and
• Seven-consecutive years of reduction in labor hours per 1,000 line orders.
The Ace convention held here at McCormick Place runs though Aug. 18.
Ace’s Ray Griffith: Room for growth
Of all the statistics Ace Hardware CEO Ray Griffith presented during the co-op’s Fall Market general session, the one he seemed to be most enthusiastic about focused on simple geography.
He said about 50% of the United States population lives within three miles of an Ace store. “That means there’s plenty of room for growth,” he said.
After introducing Ace’s new CFO Bull Guzik, who brings 13 years of CFO experience from Midas, Griffith rattled off several growth-minded stats. Year to date, Ace sales are up 4.5%, ahead of the budgeted 4.0%. The company opened 78 new stores so far, with a goal of 179 in North America.
Griffith laid out the reasoning for a refinancing of the co-op’s refinancing package — a five-year $600 million senior credit facility, with $400 million revolving credit and $200 a million term loan. Essentially, the company was lured by low interest rates.
The deal led to a one time expense in the co-op’s recent quarter, But, “the really good news is in 2013, saving $45 million over the term of this new financing.”
On the general economy, Griffith said the co-op’s same-store sales are up 3.8% year to date, and transactions are up 1.5% year to date. “I think it reflects the strength of the home improvement market.”