Ace Hardware Sees Second Quarter Gains

Ace Hardware Corporation has reported total revenues of $1.2 billion for the second quarter of 2013, ended June 29, an increase of $103.4 million or 9.7% from 2012 (or 4.4% excluding all accounting impacts from the 2012 acquisition of Westlake Ace Hardware). Net income was $42.3 million for the second quarter of 2013, an increase of $27.4 million from the $14.9 million earned in 2012.

The second quarter 2013 results include a charge of $6.2 million related to the estimated costs to close a Toledo, Ohio Retail Support Center, while second quarter 2012 results included a charge of $19.9 million related to a loss on the early extinguishment of debt.

“We were pleased with our second quarter and first half results,” said John Venhuizen, Ace president and chief executive officer. “Sales increased in virtually every department with significant growth at both wholesale and retail from our Discovery Edge, Level 3 merchandising re-sets and branding initiatives.”

“At the halfway point, we are also optimistic about the remainder of the year as a result of our Ace retailers adoption and execution of 2020 Vision, our long-term growth strategy,” Venhuizen continued. “Same store retail sales were up 5.3% for the quarter and are up 3% for the first half. Same store retail sales growth has continued to accelerate. June same store retail sales were up 6.1% and July was up 9.8%.”

The hardware cooperative noted that the December 2012 acquisition by Ace of WHI Holdings Corp., the indirect owner of the 86 store Westlake Ace Hardware retail chain, results in the consolidation of WHI’s financial statements into Ace’s financial statements for 2013. This affects the comparability of the 2013 and 2012 financial statements and results in a reduction of reported wholesale revenues, as wholesale revenues from Ace to WHI are now eliminated. This elimination totaled $21.9 million in wholesale revenues for the second quarter of 2013 and $40.8 million for the first half of 2013. Ace’s balance sheet is also affected by the WHI acquisition. The Ace balance sheet as of June 29, 2013 now includes $69 million of WHI inventory, $19.1 million of property and equipment, $23 million of goodwill and other intangibles, and $21.9 million of WHI acquisition debt.

In December 2012, the company also sold its paint manufacturing assets to The Valspar Corporation. This also affects the comparability of 2013 and 2012 as the inventory and fixed assets of this business are no longer reflected in its balance sheet.

Ace added 34 new domestic stores and cancelled 19 domestic stores in the second quarter of 2013 for a net increase in store count of 15. This brought the company’s total domestic store count to 4,121 at the end of second quarter 2013.