Ace Hardware Sales Gain But Charges Impact Q4

Ace Hardware drove overall and comparable sales higher in fiscal 2019 but the hardware cooperative’s wholesale holdings and Grommet operations hurt earnings in the fourth quarter.

For the fourth quarter, Ace posted net income of $3.5 million versus $25.2 million in the period a year earlier.

Included in the fourth quarter 2019 results are pre-tax charges of $8.5 million for a non-cash goodwill impairment charge related to The Grommet, $5 million for the write-down of inventory related to the transition to the Benjamin Moore paint program, $2.5 million for retail pre-opening costs related to new Westlake stores in California and $1.2 million for severance related costs.

Among the 3,200 Ace retailers who share daily retail sales data, comparable sales increased 2.1% in the quarter year over year with average ticket up 3.2% but transactions down 1.1%. Revenues in the fourth quarter were $1.48 billion, up 6.1% from the year-prior quarter. Wholesale revenues were $1.33 billion versus $1.28 billion and retail revenues were $142.2 million versus $108.7 million in the quarter a year previous.

For the full fiscal year, net income was $140.4 million versus $128.2 million in the previous fiscal year.

Comps increased 2.8% year over year with average ticket up 2.6% and transactions up 0.2%. Revenues were $6.07 billion versus $5.72 billion in the year-past. Wholesale revenues were $5.56 billion versus $5.34 billion and retail revenues were $506.7 million versus $375.4 million in fiscal 2018.

John Venhuizen, Ace president and CEO, said, “Our best-ever sales and dividend payments to shareholders were largely driven by 208 new store openings across the globe, a 59% increase in our acehardware.com business and solid same store sales growth of 2.8% from our very talented local Ace owners across the U.S.”

He added, “Our Ace wholesale holdings and Ace e-commerce holdings— The Grommet— businesses however, struggled to achieve their revenue targets. Both businesses posted large losses in 2019. While our plans call for significant improvements in these businesses going forward, the facts are that they were a meaningful drag on an otherwise stellar year for the company. We expect the Ace wholesale holdings business to recover substantially in 2020 and to achieve operating profitability in 2021. The recovery of The Grommet business, however, is likely to take longer. As such, we were required to take a non-cash goodwill impairment charge of $8.5 million in the fourth quarter of 2019 to write-down the value of our investment in The Grommet.”