Ace Hardware reports best Q3 revenues and profits in company history

• Record third quarter revenues of $1.3 billion, an increase of 13.2 percent from last year 
• Record third quarter net income of $54.2 million, an increase of 45.3 percent from last year
• Accrued patronage to retailers through first nine-months of year tops $130 million, an increase of 7.6 percent from last year

Ace Hardware Corporation (“Ace” or the “Company”), the largest retailer-owned hardware cooperative in the world, today reported third quarter 2015 revenues of $1.3 billion, an increase of $148.5 million or 13.2 percent from the third quarter of 2014. Net income was $54.2 million for the third quarter of 2015, an increase of $16.9 million or 45.3 percent from last year.

"We are delighted to announce the best third quarter sales and profit in Ace’s history," said John Venhuizen, President and CEO, Ace Hardware Corp. "The credit falls squarely on the shoulders of our world-class retailers, associates and corporate teammates.”

For the first nine months of 2015, retail same-store-sales reported by the approximately 3,000 Ace retailers who share daily retail sales data increased 5.1 percent while the total number of new stores increased 149 globally.

Revenues
Consolidated revenues for the three months ended October 3, 2015 totaled $1.3 billion. Total wholesale revenues were $1.2 billion, an increase of $143.4 million, or 13.4 percent, as compared to the prior year quarter. Increases were noted across all departments with electrical, outdoor living and paint showing the largest increases.

Wholesale merchandise revenues from new domestic stores were $21.4 million in the third quarter of 2015. This increase was partially offset by a decrease in wholesale merchandise revenues of $10.5 million due to domestic store cancellations. Wholesale merchandise revenues to comparable domestic stores increased $90.7 million in the third quarter of 2015 compared to the prior year period. Note that the new store, cancelled store and comparable store amounts all exclude the impact of non-recurring Paint Studio equipment revenues in 2014. Wholesale revenues from the Company’s Ace Wholesale Holdings LLC (“AWH”) subsidiary contributed $44.8 million of the increase.

Retail revenues from Ace Retail Holdings (“ARH”) were $60.2 million during the third quarter, an increase of $5.1 million or 9.3 percent. Average ticket price increased 4.3 percent and customer count increased 0.8 percent compared to the prior year period. Same-store-sales increased 5.3 percent compared to the third quarter of 2014 with the largest increases in outdoor living and lawn and garden.

Ace added 36 new domestic stores in the third quarter of 2015 and cancelled 17 stores. This brought the Company’s total domestic store count to 4,275 at the end of the third quarter of 2015, an increase of 28 stores from the third quarter of 2014.

Gross Profit
Wholesale gross profit for the three months ended October 3, 2015, was $165.6 million, an increase of $26.7 million from the third quarter of 2014. The wholesale gross margin percentage was 13.6 percent of wholesale revenues in the third quarter of 2015, an increase from 2014’s third quarter gross margin percentage of 12.9 percent. The increase in the wholesale gross margin percentage was primarily driven by the timing of income received from vendors.

Retail gross profit for the third quarter of 2015 was $27.0 million, an increase of $1.4 million from the third quarter of 2014. The retail gross margin percentage was 44.9 percent of retail revenues in the third quarter of 2015, down from 46.5 percent in the prior year quarter. The decrease in the retail gross margin percentage was primarily the result of an increase in the inventory shrink reserve, product mix and an increase in promotional discounting.

Expenses
Wholesale operating expenses increased $9.2 million, or 9.2 percent, for the third quarter of 2015 as compared to the third quarter of 2014. The increase was primarily driven by additional operating expenses resulting from the AWH acquisition of Jensen-Byrd Co., LLC (“Jensen”) in December 2014 as well as increased costs associated with the higher sales volume. As a percentage of wholesale revenues, wholesale operating expenses decreased from 9.3 percent of wholesale revenues in the third quarter of 2014 to 9.0 percent of wholesale revenues in the third quarter of 2015.

Retail operating expenses of $24.2 million increased $0.8 million, or 3.4 percent, in the third quarter of 2015 as compared to the third quarter of 2014, primarily as a result of higher expenses associated with ARH’s acquisition of five retail stores during the second quarter of 2015 and the opening of a new retail store in the third quarter of 2015. Retail operating expenses as a percent of retail revenues decreased to 40.2 percent of retail revenues in the third quarter of 2015 versus 42.5 percent in the third quarter of 2014.

The Company recorded a $2.0 million warehouse closure reserve in the third quarter of fiscal 2015 as a result of ARH vacating its leased warehouse facility.

Balance Sheet
Receivables increased $23.2 million from the third quarter of 2014 as a result of AWH’s acquisition of Jensen in December of 2014 and higher wholesale revenues in the third quarter of 2015.

Inventories increased $167.7 million from the third quarter of 2014 driven in part by an intentional build-up of LED lighting inventories for planned resets and promotions, increased inventory levels to support higher sales volumes and the carryover of seasonal merchandise.

AWH’s acquisition of Jensen in the fourth quarter of 2014 also contributed $26.2 million towards the increase in inventory. Additionally, ARH inventory increased by $11.5 million compared to the prior year due to retail store acquisitions, the opening of an additional retail store and to support higher sales volumes.

Accounts payable increased $72.7 million from the third quarter of 2014 primarily as a result of an increase in inventory purchases compared to the prior year as well as the acquisition of Jensen.

Debt increased $58.6 million versus the third quarter of 2014 as a result of the acquisition of
Jensen in the fourth quarter of fiscal 2014 and higher inventory levels.

Source : Ace Hardware Press Release
www.acehardware.com