- First quarter revenues of $2.1
billion, an increase of 2.5 percent
- First quarter net income of $46.9
million, a decrease of 29.2 percent
- Accrued patronage dividend to shareholders of $76.5 million, a decrease of 13.5 percent from
the first quarter of 2023
- Ranked the #5 best franchise in the world according to
Entrepreneur Magazine
OAK
BROOK, Ill., May 15, 2024
/PRNewswire/ -- Ace Hardware Corporation ("Ace" or the "Company")
today reported first quarter 2024 revenues of $2.1 billion, an increase of $51.6 million, or 2.5 percent, from the first
quarter of 2023. Net income was $46.9
million for the first quarter of 2024, a decrease of
$19.3 million from the first quarter
of 2023. This decrease was planned in anticipation of higher
operating expenses and increased interest expense.
"Despite strong headwinds in California and Florida, our $51.6
million of sales growth was fueled primarily by our 78 new
domestic Ace stores, acquisitions by our Ace Home Services
business, a 0.4 percent increase in same-store sales, and a 9
percent increase in our digital business," said John Venhuizen, President and CEO. "I want to
thank the entire Ace team for their extraordinary efforts,
particularly as it pertains to our 2.9 percent increase in
same-store gross profit, and the 47 percent increase in our digital
business through the Ace App."
The approximately 3,700 Ace retailers who share daily retail
sales data reported a 0.4 percent increase in U.S. retail
same-store-sales during the first quarter of 2024, which was the
result of a 1.1 percent increase in average ticket; partially
offset by a 0.7 percent decrease in same-store
transactions.
Revenues
Consolidated revenues for the quarter ended March 30, 2024 totaled $2.1 billion. Total wholesale revenues were
$2.0 billion, an increase of
$38.9 million, or 2.0 percent, as
compared to the prior year first quarter. Increases were seen
across many departments with outdoor power equipment, power tools
and lawn and garden showing the largest gains.
Wholesale merchandise revenues to new domestic stores activated
from January 2023 through
March 2024 contributed $60.4 million of incremental revenues during the
first quarter of 2024, while wholesale merchandise revenues
decreased $24.8 million during the
first quarter due to domestic stores whose memberships were
cancelled. Wholesale merchandise revenues to comparable
domestic stores decreased $10.4
million for the quarter. The Company's Ace
International Holdings, Ltd. subsidiary experienced a $5.0 million decrease in wholesale revenue versus
the first quarter of 2023, while Ace Wholesale Holdings LLC
reported a $6.7 million decrease in
wholesale revenues from the first quarter of 2023. The
Company's Ace Services Holdings LLC ("ASH") subsidiary, which is
reported as part of the Company's wholesale business, experienced a
$30.5 million increase in wholesale
revenues from the first quarter of 2023. This is due to the
acquisition of Unique Indoor Comfort Holdings, LLC ("UICH") during
the second quarter of 2023.
Total retail revenues from Ace Retail Holdings LLC ("ARH") for
the quarter were $160.9 million, an
increase of $12.7 million, or 8.6
percent, as compared to the prior year first quarter. The
Westlake Ace Hardware ("Westlake") chain experienced a 6.5 percent
increase in same-store-sales while the Great Lakes Ace Hardware
("GLA") chain experienced a 3.5 percent increase in
same-store-sales in the quarter. The new stores opened by
Westlake and GLA since the end of the fourth quarter of 2022
contributed $4.1 million of
incremental revenues during the first quarter of 2024.
Westlake and GLA together operated 236 stores at the end of the
first quarter of 2024 compared to 230 stores at the end of the
first quarter of 2023.
Ace added 78 new domestic stores in the first quarter of 2024
and cancelled 7 stores. The Company's total domestic store
count was 5,065 at the end of the first quarter of 2024, which was
an increase of 164 stores from the first quarter of 2023. On
a worldwide basis, Ace added 82 stores in the first quarter of 2024
and cancelled 7, bringing the worldwide store count to 5,945 at the
end of the first quarter of 2024.
Gross Profit
Wholesale gross profit for the three months ended March 30, 2024 was $254.3
million, an increase of $1.7
million from the first quarter of 2023. The wholesale
gross margin percentage was 12.9 percent of wholesale revenues in
the first quarter of 2024, down slightly from 13.0 percent in the
first quarter of 2023. The decrease in wholesale gross margin
percentage was primarily driven by an unfavorable mix shift.
Retail gross profit for the three months ended March 30, 2024 was $75.7
million, an increase of $5.7
million from the first quarter of 2023. The retail
gross margin percentage was 47.0 percent of retail revenues in the
first quarter of 2024, down slightly from 47.2 percent in the first
quarter of 2023. The decline in retail gross margin
percentage primarily resulted from product mix. 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.
Expenses and Other
Wholesale operating expenses increased $24.7 million, or 13.9 percent, from the first
quarter of 2023. The increase is primarily due to the
acquisition of UICH, which added $17.0
million of incremental operating expenses. Wholesale
operating expenses as a percent of wholesale revenue was 10.2
percent, up from 9.2 percent in first quarter of 2023.
Retail operating expenses increased $1.5
million, or 2.1 percent, from the first quarter of
2023. This increase was primarily driven by expenses incurred
related to the new stores added since the end of the fourth quarter
of 2022. Retail operating expenses as a percent of retail
revenue improved to 44.6 percent in the first quarter of 2024 from
47.4 percent in the first quarter of 2023.
Interest expense increased $5.9
million from the first quarter of 2023 due to increased
borrowings for the acquisition of UICH and higher interest
rates.
Other income, net increased $1.5
million primarily due to the absence of UICH acquisition
fees recognized in the first quarter of 2023.
Balance Sheet and Cash Flow
Receivables increased $63.9
million from the first quarter of 2023 due to higher sales
volumes.
Inventories decreased $121.1
million from the first quarter of 2023 primarily as a result
of efforts to reduce overstock inventory.
Long-term debt, including current maturities, increased
$301.5 million versus the first
quarter of 2023. At the end of the first quarter of 2024,
long-term debt consisted of $374.7
million outstanding on the revolving credit facility,
$59.6 million outstanding on the
Westlake credit facility, and $46.2
million owed to former retailers.
About Ace Hardware
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.
Contacts:
Shareholders'/Investors' Inquiries:
William Guzik, Executive Vice
President, Chief Financial Officer & Chief Risk Officer
630-990-3325, guzik@acehardware.com
Media Inquiries:
Jeff Gooding, Vice President,
Consumer Marketing
630-990-3600, media@acehardware.com
|
ACE HARDWARE
CORPORATION
CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited, in
millions)
|
|
|
Three Months
Ended
|
|
March
30,
|
|
April
1,
|
|
2024
|
|
2023
|
|
(13
Weeks)
|
|
(13
Weeks)
|
|
|
|
|
|
Revenues:
|
|
|
|
|
Wholesale
revenues
|
$ 1,976.9
|
|
$ 1,938.0
|
|
Retail
revenues
|
160.9
|
|
148.2
|
|
Total
revenues
|
2,137.8
|
|
2,086.2
|
|
Cost of
revenues:
|
|
|
|
|
Wholesale cost of
revenues
|
1,722.6
|
|
1,685.4
|
|
Retail cost of
revenues
|
85.2
|
|
78.2
|
|
Total cost of
revenues
|
1,807.8
|
|
1,763.6
|
|
Gross
profit:
|
|
|
|
|
Wholesale gross
profit
|
254.3
|
|
252.6
|
|
Retail gross
profit
|
75.7
|
|
70.0
|
|
Total gross
profit
|
330.0
|
|
322.6
|
|
|
|
|
|
Wholesale operating
expenses:
|
|
|
|
|
Distribution
operations expenses
|
68.9
|
|
66.5
|
|
Selling, general and
administrative expenses
|
84.1
|
|
67.2
|
|
Retailer success and
development expenses
|
49.6
|
|
44.2
|
|
Retail operating
expenses
|
71.7
|
|
70.2
|
|
Retail pre-opening
expenses
|
0.6
|
|
1.4
|
|
Total operating
expenses
|
274.9
|
|
249.5
|
|
Operating
income
|
55.1
|
|
73.1
|
|
|
|
|
|
Interest
expense
|
(12.2)
|
|
(6.3)
|
|
Interest
income
|
1.9
|
|
1.3
|
|
Other income,
net
|
2.2
|
|
0.7
|
|
Income tax
expense
|
(0.1)
|
|
(2.6)
|
|
Net income
|
46.9
|
|
66.2
|
|
Less: net loss
attributable to noncontrolling interests
|
(0.3)
|
|
(0.4)
|
|
Net income
attributable to Ace Hardware Corporation
|
$
47.2
|
|
$
66.6
|
|
Patronage
distributions accrued
|
$
76.5
|
|
$
88.4
|
|
Patronage
distributions accrued for third party Retailers
|
$
72.0
|
|
$
83.8
|
|
ACE HARDWARE
CORPORATION
CONSOLIDATED BALANCE
SHEETS
(In millions, except
share data)
|
|
|
March
30,
|
|
December
30,
|
|
April
1,
|
|
2024
|
|
2023
|
|
2023
|
|
Assets
|
(Unaudited)
|
|
(Audited)
|
|
(Unaudited)
|
|
Cash and cash
equivalents
|
$
33.6
|
|
$
31.9
|
|
$
46.4
|
|
Marketable
securities
|
50.0
|
|
49.4
|
|
49.7
|
|
Receivables, net of
allowance for doubtful accounts of $13.9, $12.1
and $9.0,
respectively
|
883.2
|
|
674.4
|
|
819.3
|
|
Inventories
|
1,330.3
|
|
1,235.1
|
|
1,451.4
|
|
Prepaid expenses and
other current assets
|
75.2
|
|
69.9
|
|
57.8
|
|
Total current
assets
|
2,372.3
|
|
2,060.7
|
|
2,424.6
|
|
Property and equipment,
net
|
547.3
|
|
541.0
|
|
480.8
|
|
Operating lease
right-of-use assets, net
|
653.1
|
|
668.0
|
|
677.2
|
|
Finance lease
right-of-use assets, net
|
121.6
|
|
123.9
|
|
121.1
|
|
Goodwill and other
intangible assets, net
|
411.6
|
|
410.9
|
|
106.7
|
|
Other assets
|
159.8
|
|
153.1
|
|
141.6
|
|
Total
assets
|
$
4,265.7
|
|
$
3,957.6
|
|
$
3,952.0
|
|
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
|
|
|
Current maturities of
long-term debt
|
$
78.3
|
|
$
49.1
|
|
$
56.1
|
|
Accounts
payable
|
1,386.0
|
|
1,081.5
|
|
1,440.6
|
|
Patronage distributions
payable in cash
|
166.6
|
|
137.1
|
|
167.5
|
|
Patronage refund
certificates payable
|
29.0
|
|
29.1
|
|
23.0
|
|
Current operating lease
liabilities
|
86.9
|
|
88.5
|
|
71.7
|
|
Current finance lease
liabilities
|
26.2
|
|
25.6
|
|
20.3
|
|
Accrued
expenses
|
218.0
|
|
292.0
|
|
202.6
|
|
Total current
liabilities
|
1,991.0
|
|
1,702.9
|
|
1,981.8
|
|
Long-term
debt
|
402.2
|
|
359.2
|
|
122.9
|
|
Patronage refund
certificates payable
|
164.1
|
|
149.6
|
|
121.7
|
|
Long-term operating
lease liabilities
|
588.7
|
|
603.2
|
|
629.5
|
|
Long-term finance lease
liabilities
|
96.6
|
|
100.4
|
|
99.3
|
|
Other long-term
liabilities
|
122.3
|
|
120.9
|
|
106.9
|
|
Total
liabilities
|
3,364.9
|
|
3,036.2
|
|
3,062.1
|
|
Member Retailers'
Equity:
|
|
|
|
|
|
|
Class A voting common
stock, $1,000 par value, 10,000 shares
authorized, 2,616, 2,615 and 2,659 issued and
outstanding,
respectively
|
2.6
|
|
2.6
|
|
2.7
|
|
Class C nonvoting
common stock, $100 par value, 10,000,000 shares
authorized, 7,083,302, 7,226,176 and 6,396,829 issued
and
outstanding, respectively
|
708.3
|
|
722.6
|
|
639.7
|
|
Class C nonvoting
common stock, $100 par value, issuable to retailers
for
patronage distributions, 1,086,986, 897,317 and
1,486,130
shares
issuable, respectively
|
108.7
|
|
89.7
|
|
148.6
|
|
Contributed
capital
|
19.2
|
|
19.2
|
|
19.1
|
|
Retained
earnings
|
53.3
|
|
78.2
|
|
70.0
|
|
Accumulated other
comprehensive income (loss)
|
0.1
|
|
0.3
|
|
(1.1)
|
|
Equity attributable to
Ace member retailers
|
892.2
|
|
912.6
|
|
879.0
|
|
Equity attributable to
noncontrolling interests
|
8.6
|
|
8.8
|
|
10.9
|
|
Total
equity
|
900.8
|
|
921.4
|
|
889.9
|
|
Total liabilities and
equity
|
$
4,265.7
|
|
$
3,957.6
|
|
$
3,952.0
|
|
ACE HARDWARE
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited, in
millions)
|
|
|
Three Months
Ended
|
|
|
March
30,
|
|
April
1,
|
|
|
2024
|
|
2023
|
|
|
(13
Weeks)
|
|
(13
Weeks)
|
|
|
Operating
Activities
|
|
|
|
|
|
Net income
|
$
46.9
|
|
$
66.2
|
|
|
Adjustments to
reconcile net income to net cash provided by (used in)
operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
24.1
|
|
20.3
|
|
|
Non cash lease
expense
|
7.3
|
|
6.1
|
|
|
Amortization of
deferred financing costs
|
0.2
|
|
0.6
|
|
|
Loss on the disposal
of assets, net
|
-
|
|
2.6
|
|
|
Provision for doubtful
accounts
|
1.4
|
|
2.8
|
|
|
Other, net
|
(1.8)
|
|
(0.3)
|
|
|
Changes in operating
assets and liabilities, exclusive of effects of
acquisitions:
|
|
|
|
|
|
Receivables
|
(221.9)
|
|
(183.8)
|
|
|
Inventories
|
(95.2)
|
|
(146.6)
|
|
|
Other current
assets
|
(5.3)
|
|
2.0
|
|
|
Other long-term
assets
|
(3.5)
|
|
(3.2)
|
|
|
Accounts payable and
accrued expenses
|
258.9
|
|
208.6
|
|
|
Other long-term
liabilities
|
2.7
|
|
2.6
|
|
|
Deferred
taxes
|
(0.6)
|
|
(0.1)
|
|
|
Net cash provided by
(used in) operating activities
|
13.2
|
|
(22.2)
|
|
|
Investing
Activities
|
|
|
|
|
|
Purchases of investment securities
|
(6.5)
|
|
(4.2)
|
|
|
Proceeds from sale of
investment securities
|
5.5
|
|
8.0
|
|
|
Purchases of property
and equipment
|
(34.4)
|
|
(43.7)
|
|
|
Cash paid for acquired
businesses, net of cash acquired
|
-
|
|
(2.3)
|
|
|
Increase in notes
receivable, net
|
(10.7)
|
|
(6.7)
|
|
|
Other, net
|
0.1
|
|
(0.2)
|
|
|
Net cash used in
investing activities
|
(46.0)
|
|
(49.1)
|
|
|
Financing
Activities
|
|
|
|
|
|
Net
borrowings under revolving lines of credit
|
72.3
|
|
135.6
|
|
|
Principal payments on
long-term debt
|
(4.8)
|
|
(3.9)
|
|
|
Payments of debt
issuance costs
|
-
|
|
(4.4)
|
|
|
Principal portion of
finance lease payments
|
(8.3)
|
|
(8.9)
|
|
|
Payments of patronage
refund certificates
|
(22.5)
|
|
(26.6)
|
|
|
Repurchase of
stock
|
(2.6)
|
|
(2.8)
|
|
|
Purchase of
noncontrolling interests
|
(0.2)
|
|
(0.2)
|
|
|
Other, net
|
0.6
|
|
0.4
|
|
|
Net cash provided by
financing activities
|
34.5
|
|
89.2
|
|
|
Increase in cash and
cash equivalents
|
1.7
|
|
17.9
|
|
|
Cash and cash
equivalents at beginning of period
|
31.9
|
|
28.5
|
|
|
Cash and cash
equivalents at end of period
|
$
33.6
|
|
$
46.4
|
|
|
|
|
|
|
|
Supplemental disclosure
of cash flow information:
|
|
|
|
|
|
Interest paid
|
$
14.0
|
|
$
7.3
|
|
|
Income taxes paid
|
$
0.7
|
|
$
0.3
|
|
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SOURCE Ace Hardware Corporation