Dive Brief:
- Ace Hardware on Wednesday reported third-quarter revenues increased 2.8% year over year to a record of $2.4 billion, while U.S. same-store sales fell 2.2% at the approximately 3,700 Ace stores that share sales data. Retail revenue for the quarter rose 4.4% year over year to $203.4 million, while wholesale revenue increased 2.7% to $2.1 billion.
- Net income fell 24% to $99 million for the quarter, down $31 million from a year ago. The company said that decrease aligns with expectations as a result of higher planned investments in its supply chain and digital marketing to support future growth.
- The retail gross profit for the quarter was $94.8 million, a 5.5% increase from a year ago. However, Ace’s total gross profit of $407.9 million was nearly flat year over year.
Dive Insight:
Ace Hardware said it is thriving despite the effects of a harsh economy and profit declines.
“In this challenging environment, it’s encouraging for me to report growth in new stores, growth in our digital business, and overall growth to $2.4 billion for the quarter," John Venhuizen, Ace president and CEO, said in a statement. "I’m never particularly pleased to report a decline in net income, but it was almost exactly on plan and nearly $100 million for the three-month period.”
Ace’s grilling, power tool and outdoor power departments enabled revenue gains, which contributed to the company’s overall revenue performance. Revenue for Ace’s digital business rose 6% during the quarter, with mobile app revenue up 37%.
Total operating expenses increased 12.7% year over year to $302.9 million. Wholesale operating expenses increased by nearly 16% year over year to $30.5 million due mainly to investments in marketing and ad spend. Retail operating expenses increased by nearly 6% driven by 30 new store openings during the quarter for a total of 5,973 stores globally.
Ace’s ongoing investments include plans to spend more than $1 billion to debut a new experiential store model in new stores and existing locations over the next five years. The changes include new product assortments, the addition of store-in-store brand showrooms and enhanced customer service. The full debut of the new model is set to start in January.
Ace’s earnings announcement follows the release of Q3 results last week at The Home Depot. Net income fell 4.3% year over year at the larger rival retailer, while net sales for the quarter rose 6.6% to $40.2 billion, the company said Tuesday.
