DISTRIBUTORS/CO-OPS

Ace prepares for ‘logistics revolution’

‘Retailers in Stores Eating Popcorn’ is screened in Chicago.

BY Ken Clark

Chicago – Retail success stories, plans for supply chain improvements and a spirited endorsement of the co-op hardware model highlighted the Ace Hardware General Session here during the co-op’s Fall Convention.

During the 90-minute presentation, a wide variety of Ace dealers were recognized for achieving growth and serving their communities. In a video segment titled “Retailers in Stores eating Popcorn,” Brett Seright, owner of Seright’s Ace in Post Falls, Idaho, described his store’s successful renovation. He pointed to 14% sales increase along with a 5% increase in customer count in 2017.

“if you’re not growing, you’re stagnating,” he said.

Also on the big screen, owners of Costello’s Ace Hardware of New York described the company culture as established by the founder Vince Costello: “We have a culture of growing and creating more opportunities,” said Michael Costello. “That’s very important for us.” His sister Jaimie added: “We love what we do.”

There was no shortage of these feel-good retail stories during the 90-minute session. They came from Sneade’s Ace Home Center, in Maryland; Ken’s Ace Hardware in Jackson, Mo.; and the story of Whitmore Ace Hardware in Wilmington, Ill., was the show stopper. Here a prom-dress drive honors the tragic death of a former teenage employee. The drive has grown over the years into a major community program supplying thousands of dresses – and professional styling – to girls in need.

“We have to remember it’s way bigger than just money,” said Ace CEO John Venhuizen, describing the role of Ace nation in general. “We’ve got to make distinctive impacts in the communities we serve.”

John Venhuizen

The co-op pointed out that more than 400 stores converted and joined the Ace family over the last seven years. These stores have generated more than $1.3 billion and nearly $2.5 billion at retail.

The event was punctuated with a surprise performance from musical star Rachel Platten to close the curtain.

Ace executives also addressed challenges – specifically, the disappointing supply chain performance during the recent high-demand spring selling season. “For several areas of the country our supply chain hasn’t lived up to our high expectations,” said Venhuizen.

The problem was fueled by several factors, and Executive VP and Chief Supply Chain Officer Lori Bossman described them: rapid growth, an unprecedented surge in demand that accompanied a late spring, a shortage of truckers, and high turnovers in distribution centers magnified by very low unemployment across the country.

In response, Ace added $150 million in inventory to its retail support centers. It also established new rules that penalize vendors for late shipments – these rules have led to 10% improvement in on-time shipments. In its DCs, Ace has addressed turnover with retention bonuses. An expansion of its Ohio facility has been moved up a year.

Within the next two months, the co-op will launch an Uber-like tool called “Where’s my truck,” an app that shows retailers the location of delivery trucks.

Striving to be the best wholesaler, and investing for the long-haul were major themes of Venhuizen’s presentation. “We will not think quarters,” he said, referring to investment strategy. “We will think quarter centuries.”

Areas receiving investment include digital marketing (“moving from mailers to mobile,”); The Supply Place B2B business; and the distributor’s supply chain.

By the second quarter of 2019, Ace intends to realize in 70% of the country what it calls a “Logistics Revolution” to make Ace “faster than Amazon” on the 100,000 items Ace stocks.

Venhuizen also carried the flag of the co-op model into the general session, pointing to the track record of growth, and embracing the benefits of collective ownership for Ace members. Since 2002, Ace Corp. sales increased from $3.4 billion to $5.7 billion. And Ace Corp. net project increased from $77 million to $155 million, delivering more than 30% return on equity for Ace shareholders.

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Former CFO returns to Huttig

The distributor names Philip Keipp as senior financial consultant.

BY HBSDealer Staff

St. Louis-based Huttig Building Products, one of the nation’s largest wholesale distributors of millwork and specialty building products, on Monday announced that Philip Keipp has rejoined the company as a senior financial consultant.

Keipp previously served as vice president and CFO for Huttig from July 2009 through June 2015.

“I am pleased to announce that we have retained Phil as a senior financial consultant,” said Jon Vrabely, Huttig’s president and CEO.  “Phil’s experience and knowledge of our business will provide immediate value as we continue to execute our strategic initiatives.”

Huttig, now in its 134th year of business, distributes its products through 27 distribution centers serving 41 states. Huttig’s wholesale distribution centers sell principally to building materials dealers, national buying groups, home centers and industrial users.

In January of this year, the company announced Oscar Martinez was out as CFO.

In its most recent quarter, Huttig reported a 13% sales gain and a narrowing net loss of $500,000.

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True Value’s first 100 Days

CEO John Hartmann says the company is ‘off and running.’

BY Ken Clark

Chicago — July 29 marks the 100th day since True Value’s members voted in favor of the ACON Investment deal that converted the company from a co-op to a no-stock-required hardware distributor. As part of the deal, True Value members kept 30% of the company, and received payouts totaling some $230 million.

True Value CEO John Hartmann pointed to a number of achievements in the first 100 days of the new deal. Topping them off was the return of equity to the dealers.

“Almost a quarter of a billion dollars have flowed back to dealers in the last 100 days,” he told HBSDealer in an interview at True Value headquarters in Chicago. “We’re still in the early days, and we’re seeing a lot of that money reinvested in retailers’ business,” including in the form of new branch locations, paint programs and inventory purchases.

During the first 100 days, a number of boxes have been checked:

  • True Value delivered $210 million in capital to shareholders within three weeks of the close;
  • The company mailed patronage dividend checks in late July, a month ahead of schedule;
  • The company sold more Customized True Blue assortments in the last 90 days than were sold at the previous market; and
  • In the first half of 2018, 69 new customers have come on board, with the vast majority post transaction. That figure is well above the 19 new members who came on in the first half of each of the two prior years.

Of those roughly 70 new customers, a third of them are going to fly the True Value flag,” he said. “So, we are off and running.”

There’s no surprise, he added, that some of the ambiguity and uncertainty during the transitional period from co-op to distributor resulted in lost business. Some customers were unsettled by the rumors, he said.  But since the members voted 84% in favor of the deal, new business has more than made up for the lost time.

Meanwhile, Hartmann remains bullish on the growth opportunities of the independent retailer who invests in their business and maintains a relevant offering of products and services. “I believe firmly in the capability of our independent retailers to continue to innovate and adjust as they have for decades and generations,” he said. “Amazon isn’t the first challenge for these guys.”

Neither is the big box. And True Value has seen countless examples or dealers of all stripes who continue to thrive in the shadows of Home Depot, Lowe’s and Menards.

John Hartmann

Hartmann elaborated on the strength of the independent. “It’s the differentiated service model. Whether it’s a professional contractor-based model, or a core hardware store, the successful independent typically (though not always) operates out of a smaller format; they are embedded in the community, they know their customers. They offer quick in and out. And they not only have the products that customers need, they have the knowledge and ability to explain to customers how to use them.

“Those attributes can’t be duplicated by a drone,” he said.

Looking ahead, Hartmann said he can’t wait for the company’s first post-deal market – the True Value Reunions in Denver in late September. “I’m fired up about Denver,” he said. “Our message will be: ‘Here we are, nothing’s changed. And you’ll see the same passion for the independent retailer.”

And looking back at the first 100 days since the transaction, Hartmann’s assessment is one of business as usual, and business fuel-injected with previously untapped equity for True Value dealers.

“We have met every commitment that we made to our shareholders and members of the cooperative. Our premise was to continue to constantly serve our existing customers while we get stronger as a whole company by adding new customers. And we are just keeping our mouth shut and doing exactly what we said we were going to do.”

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