Ace trends up in Q3 despite challenging economy
Ace Hardware released results for the third quarter of 2008, reporting net income of $26.4 million, an increase of $4 million, or 18.1 percent, compared to $22.4 million in the third quarter of 2007. The Oak Brook, Ill.-based co-op also reported that for the nine month period ended Sept. 27, net income was $70.6 million, an increase of $4.6 million or 7 percent over 2007.
On the down side, revenues for the quarter decreased $7.6 million, or 0.8 percent, to $969.2 million from $976.7 million in 2007, and merchandise sales to comparable stores were flat.
Overall, Ace president and CEO Ray Griffith was pleased with the co-op’s sales performance, given the down housing market and poor economy. He said that hardware stores, which cater to everyday home project needs, were less impacted by the economic downturn than the overall home improvement industry.
“We responded to the challenging economic environment by strategically reducing our year-to-date operating expenses and by making investments in inventory to support the business,” Griffith said. “We are in a solid financial position, particularly because we refinanced our debt earlier in the year.”
On a category basis, domestic sales were negatively impacted by declines in the tools, sundry and housewares categories and were partially offset by a sales increase in the lawn and garden category.
On a regional basis, sales improved in the Gulf Coast region due to rebuilding efforts in the wake of September hurricanes, while sales in the states most negatively impacted by the housing market decline -- most notably California, Arizona and Florida -- continued to trend down.
Merchandise sales from Ace’s international business continued to be strong and contributed $6.2 million in incremental sales in the quarter, up 12.5 percent over 2007. This increase was driven by higher sales to existing stores in the Middle East, South America and Canada.
Gross profit in the quarter was $120.9 million, an increase of $9.5 million over 2007, and the gross profit percentage was 12.47 percent as compared to 11.4 percent last year. The gross profit percentage increase in 2008 was attributable to higher margins on merchandise sales due to vendor driven price increases -- a direct result of the escalating costs of raw materials.