Ace Hardware Reports 2007 Financial Results
New Business, Strong International Sales Contributed to Revenue Growth
April 22, 2008 // Franchising.com // Oak Brook, Ill.– Despite the decline in the U.S. housing market and overall economy, Ace Hardware Corporation reported wholesale revenues of $3.97 billion for the year ending December 29, 2007, which was a $39.4 million, or 1.0 percent increase, over the $3.93 billion in wholesale revenues from the comparable period in 2006. This increase represents the sixth consecutive year of positive revenue growth for Ace, the largest retailer-owned cooperative in the home improvement industry.
The revenue increase was driven, in part, by the 171 new stores worldwide to join the Ace enterprise in 2007, 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 63 countries.
Ace reported net income of $86.9 million for full year 2007, which was down from record net income of $94.5 million generated in 2006. The decline in net income in 2007 was reflective of 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. Year-end patronage dividends distributed to retailers for 2007 were $81.2 million.
"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."
Griffith highlighted these investments to include the following:
- A continued focus on re-engineering Ace's supply chain and employing software enhancements to produce added efficiencies throughout its distribution, merchandising and inventory control systems.
- A retail roll-out of an exclusive initiative to improve service and the overall customer experience at Ace stores, while increasing retail profitability, by optimizing associates time on the sales floor.
- A piloted test of an enhanced product offering to increase retail sales and profits throughout the store.
- A 2008 roll-out of an all-new integrated consumer marketing plan to drive traffic, retail sales, retail profitability and average transaction size.
- Targeting new 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 to better serve customers throughout the world with helpful and knowledgeable home improvement service.
"Along with the sluggish economy and waning consumer confidence, we've been faced with many challenges this past year," Griffith acknowledged. "We've had to look at our business differently and make some difficult strategic decisions to operate smarter and leaner. With our incredibly strong brand and retailer base, I'm confident that we're well positioned to continue to be the leader in hardware convenience in the marketplace."
About Ace Hardware
Throughout its 84-year history, Ace Hardware has been known as the "helpful place" by customers in the communities it serves. In 2007, Ace Hardware was rated "Highest in Customer Satisfaction among Major Home Improvement Stores" by J.D. Power and Associates. With 4,600 hardware, home center and building materials stores generating annual retail sales of more than $12 billion, Ace is the largest retailer-owned hardware cooperative in the industry.
Headquartered in Oak Brook, Ill., Ace currently operates 14 distribution centers in the U.S. and one warehouse in Shanghai, China. More information about Ace can be found at www.acehardware.com.