DISTRIBUTORS/CO-OPS

Highlights from True Value’s 2017 Financials

BY HBSDealer Staff

True Value Company posted its 2017 Financial Report, showing a slight sales decline during the company’s last full year as a co-op. The co-op’s net margin increased to $24.8 million, compared to $23.7 million in 2016.

In April, True Value finalized the sale of 70% the company to ACON investments. The move ushers in a new era for True Value, which ends its run as a member-owned co-op becoming instead a nationally branded wholesale distributor.

Here are some of the financial highlights from the company’s last year as a co-op. [See full report here.]

Revenue: In 2017, revenue decreased 1.7% to $1.49 billion, compared to $1.51 billion in 2016.

Gross billings: Compared to the prior year, gross billings declined 0.9% to $2.055 billion in 2017. That slight decline followed six years of consecutive growth. Gross billings include warehouse revenue, vendor direct revenue and other fees before the reduction for vendor direct costs of revenue. The $2.05 billion figure marks “the company’s second highest level of sales in the past decade.”

Comparable store sales: With more than 1,700 stores reporting, retail comps grew 0.8% in 2017. Retail sales showed gains in eight of the company’s 12 U.S. regions. Gains were also recorded in six out of nine merchandise categories. Leading the way: hand and power tools.

Net margin: In 2017, net margin was $24.8 million, up from $23.7 million in the previous year. These figures include strategic plan investment expenses of $24.8 million in 2017, and $18.8 million in 2016.

Store count: The co-op finished the year with 4,311 stores, down from 4,392 stores at the end of 2016. During 2017, the company signed 59 new core hardware stores. An additional 27 U.S. retailers converted to True Value from other buying groups.

Sales to new stores increased by $29.6 million. However, lost revenue from terminated stores was $47.5 million.

In its financial report, True Value added: “Due to competitors capitalizing on sale rumors, the Company experienced a lower level of conversions from other buying groups to True Value in the second half of 2017.”

Patronage dividend: The co-op’s $23.6 million patronage dividend increased by about $500,000 over the dividend from 2016.

E-commerce: Sales were up 21%.

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Poll question: The impact of the co-op model

BY HBSDealer Staff

Independent hardware and building supply dealers come in all kinds of sizes and all kinds of business models. And in the last half century or so, the co-op business model has played a major role in the industry.

This week’s poll question examines the extent of the impact of the co-op on the independent dealer. HBSDealer asks: “How much credit should be given to the co-op business model for the success of the independent hardware and building supply dealer over the last half century?”

Take the survey on the right side of this page (or scroll down on your mobile advice.) HBSDealer also encourages your opinions via e-mail, send them to [email protected].

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True Value nation awaits results

BY Ken Clark

These are pivotal times for the True Value Company. The results of the membership’s vote on the Chicago-based co-op’s deal with ACON Investments are expected to be announced Friday, April 20.

As of press time, the signs pointed to a high probability of the deal passing, bringing an end to the long history of True Value as a co-op. The deal would also result in the sale of 70% of the company and the return to member shareholders of $229 million.

True Value’s headquarters released an early tally of the votes on April 13. In the tally, 85% of the members had voted for the proposal after 72% of the proxies had been counted. That announcement followed a 15-stop bus tour in which CEO John Hartmann led “town hall” discussions about the proposed deal. True Value described the meetings as successful and positive.

One dealer who attended the Manchester, N.H., meeting, Tom Cost Jr. of Killingworth (Conn.) True Value, described the attitude of the dealer attendees this way: “I think the mood has swung from very upset and frustrated, to mildly concerned and cautiously optimistic,” he told HBSDealer.

The ACON Investments deal is supported unanimously by the True Value board of directors.

But signs of a lingering opposition were readily apparent on a Facebook page called Concerned True Value Members. The site contains criticisms of the deal and the amount of time and information members were given to consider the deal. The page also shows organized efforts to convert voters from “yes” to “no” — including votes already cast. It’s unclear if those efforts swayed significant numbers of votes.

Particularly outspoken in opposition is Richard Reese, owner of True Value member Standard Plumbing in Sandy, Utah. Reese brought a lawsuit to block the deal to the Delaware Chancery Court. The suit failed to sink the deal, but did result in extending the voting a week, as management provided additional information related to the transaction.

Still the co-op management expressed confidence that the deal would go forward. A special meeting was slated for April 20, when the board of True Value will announce the results of the vote. “Based on the massive vote support, our plan remains to close the transaction on or around April 20th, following the special meeting,” John Hartmann wrote in a statement to members.

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