November 14, 2024 // Franchising.com // Oak Brook, Ill. Ace Hardware Corporation (“Ace” or the “Company”) today reported third quarter 2024 revenues of $2.4 billion, an increase of $64.8 million, or 2.8 percent, from the third quarter of 2023. Net income was $99.0 million for the third quarter of 2024, a decrease of $31.0 million from the third quarter of 2023. This decrease was due entirely to higher planned expenses as the Company continues to make strategic investments in its supply chain infrastructure and digital marketing expense to support future growth.
“In this challenging environment, it’s encouraging for me to report growth in new stores, growth in our digital business, and overall growth to $2.4 billion for the quarter," said John Venhuizen, Ace President & CEO. "I’m never particularly pleased to report a decline in net income, but it was almost exactly on plan and nearly $100 million for the three-month period. It’s a privilege to take the field with such a talented Ace team around the world."
The approximately 3,700 Ace retailers who share daily retail sales data reported a 2.2 percent decrease in U.S. retail same-store-sales during the third quarter of 2024, which was the result of a 2.2 percent decrease in same-store transactions; partially offset by a 0.1 percent increase in average ticket.
Consolidated revenues for the quarter ended September 28, 2024 totaled $2.4 billion. Total wholesale revenues were $2.1 billion, an increase of $56.3 million, or 2.7 percent, as compared to the prior year third quarter. Increases were seen across many departments with grilling, power tools and outdoor power equipment showing the largest gains.
Wholesale merchandise revenues to new domestic stores activated from January 2023 through September 2024 contributed $57.6 million of incremental revenues during the third quarter of 2024, while wholesale merchandise revenues decreased $7.2 million during the third quarter due to domestic stores whose memberships were cancelled. Wholesale merchandise revenues to comparable domestic stores decreased $18.9 million for the quarter. The Company’s Ace International Holdings, Ltd. subsidiary experienced a $0.6 million decrease in wholesale revenue versus the third quarter of 2023, while Ace Wholesale Holdings LLC reported a $2.4 million increase in wholesale revenues from the third quarter of 2023. The Company’s Ace Services Holdings LLC subsidiary, which is reported as part of the Company’s wholesale business, experienced a $1.7 million decrease in revenues from the third quarter of 2023.
Total retail revenues from Ace Retail Holdings LLC (“ARH”) for the quarter were $203.4 million, an increase of $8.5 million, or 4.4 percent, as compared to the prior year third quarter. The Westlake Ace Hardware (“Westlake”) chain experienced a 1.9 percent decrease in same-store-sales, while the Great Lakes Ace Hardware (“GLA”) chain experienced a 1.7 percent decrease in same-store-sales in the quarter. The new stores opened by Westlake and GLA since the end of the second quarter of 2023 contributed $12.1 million of incremental revenues during the third quarter of 2024.Westlake and GLA together operated 253 stores at the end of the third quarter of 2024 compared to 233 stores at the end of the third quarter of 2023.
The Company’s total domestic store count was 5,093 at the end of the third quarter of 2024, which was an increase of 150 stores from the third quarter of 2023. The worldwide store count was 5,973 at the end of the third quarter of 2024.
Wholesale gross profit for the three months ended September 28, 2024 was $313.1 million, a decrease of $5.8 million from the third quarter of 2023. The wholesale gross margin percentage was 14.6 percent of wholesale revenues in the third quarter of 2024, down from 15.2 percent in the third quarter of 2023. The decrease in wholesale gross margin percentage was primarily driven by unfavorable product gross profit rates and a decrease in LIFO income from the third quarter of 2023 when certain vendor prices declined.
Retail gross profit for the three months ended September 28, 2024 was $94.8 million, an increase of $5.0 million from the third quarter of 2023. The retail gross margin percentage was 46.6 percent of retail revenues in the third quarter of 2024, up from 46.1 percent in the third quarter of 2023. For ARH, retail gross profit is based on the Company’s wholesale acquisition cost of product, not ARH’s acquisition cost, which includes a markup from the Company.
Wholesale operating expenses increased $30.5 million, or 15.5 percent, from the third quarter of 2023. The increase is due to a $21.7 million increase in marketing and advertising spending and a $9.1 million increase in Retail Support Center related costs. Wholesale operating expenses as a percent of wholesale revenue was 10.6 percent, up from 9.4 percent in the third quarter of 2023.
Retail operating expenses increased $4.1 million, or 5.8 percent, from the third quarter of 2023. This increase was primarily driven by expenses incurred related to the new stores added since the end of the second quarter of 2023. Retail operating expenses as a percent of retail revenue increased to 36.5 percent in the third quarter of 2024 from 36.0 percent in the third quarter of 2023.
Receivables increased $55.8 million from the third quarter of 2023 due to higher sales volumes.
Inventories decreased $57.0 million from the third quarter of 2023 primarily as a result of ongoing efforts to reduce overstock inventory.
Long-term debt, including current maturities, increased $91.0 million versus the third quarter of 2023. At the end of the third quarter of 2024, long-term debt consisted of $400.0 million outstanding on the revolving credit facility, $43.7 million outstanding on the Westlake credit facility, and $52.7 million owed to former retailers.
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Ace Hardware is the largest retailer-owned hardware cooperative in the world with over 5,900 locally owned and operated hardware stores in approximately 60 countries. Headquartered in Oak Brook, Ill., Ace and its subsidiaries operate an expansive network of distribution centers in the U.S. and have distribution capabilities in Ningbo, China; and Cuautitlán Izcalli, Mexico. Since 1924, Ace has been a part of local communities around the world and known as the place with the helpful hardware folks. For more information, visit acehardware.com or newsroom.acehardware.com.
SOURCE Ace Hardware
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