Ace Hardware Reports Record 3Q Results
Ace Hardware Corp. reported record third quarter 2023 revenues of $2.3 billion, an increase of $55.8 million, or 2.5 percent, from the third quarter of 2022. Record net income was $130.0 million for the third quarter of 2023 was an increase of $29.4 million from the third quarter of 2022. The accrued patronage dividend to shareholders of $338.2 million was a slight 1.7 percent decrease from the first nine months of 2022.
“It’s quite the privilege to once again announce record revenue and record earnings for the quarter,” said John Venhuizen, president and CEO. “Nearly 24 percent growth in our digital business is a testament to the efficacy of the Ace team and the degree to which our local retailers have integrated our digital and physical assets as 90 percent of the business is either picked up in store, or, delivered to the customer by our retail associates.”
The approximately 3,700 Ace retailers who share daily retail sales data reported a 0.7 percent decrease in U.S. retail same-store-sales during the third quarter of 2023, which was the result of a 0.5 percent decrease in average ticket and a 0.2 percent decrease in same-store transactions. Removing the deflationary impact of lumber stores, U.S. retail same-store-sales were up 0.6 percent in the third quarter of 2023.
Consolidated revenues for the quarter ended September 30, 2023 totaled $2.3 billion. Total wholesale revenues were $2.1 billion, an increase of $54.3 million, or 2.7 percent, as compared to the prior year third quarter. Increases were seen across a majority of departments with outdoor power equipment, power tools and lawn and garden showing the largest gains.
Wholesale merchandise revenues to comparable domestic stores decreased $43.0 million for the quarter. The company’s Ace International Holdings, Ltd. subsidiary experienced a $1.9 million decrease in wholesale revenue versus the third quarter of 2022, while Ace Wholesale Holdings LLC reported a $0.8 million decrease in wholesale revenues from the third quarter of 2022. The company’s Ace Services Holdings LLC subsidiary, which is reported as part of the company’s wholesale business, experienced a $41.9 million increase in wholesale revenues from the third quarter of 2022. This is primarily due to the acquisition of Unique Indoor Comfort Holdings, LLC during the second quarter of 2023, which contributed $39.7 million of incremental revenues.
Total retail revenues for the quarter were $194.9 million, an increase of $1.5 million, or 0.8 percent, as compared to the prior year third quarter. Ace Retail Holdings revenues increased $2.8 million, or 1.5 percent, from the third quarter of 2022. This increase was driven by new stores added by the Westlake Ace Hardware and the Great Lakes Ace Hardware (GLA) chains since the end of the second quarter of 2022, which contributed $5.7 million of incremental revenues. Westlake experienced a 1.0 percent decrease in same-store-sales, while GLA experienced a 0.4 percent decrease in same-store-sales in the quarter. Westlake and Great Lakes Ace together operated 233 stores at the end of the third quarter of 2023 compared to 216 stores at the end of the third quarter of 2022.
Ace added 36 new domestic stores in the third quarter of 2023 and canceled 17 stores. The company’s total domestic store count was 4,943 at the end of the third quarter of 2023, which was an increase of 102 stores from the third quarter of 2022. On a worldwide basis, Ace added 38 stores in the third quarter of 2023 and canceled 21, bringing the worldwide store count to 5,828 at the end of the third quarter of 2023.
Wholesale gross profit for the three months ended September 30, 2023 was $318.9 million, an increase of $46.4 million from the third quarter of 2022. The wholesale gross margin percentage was 15.2 percent of wholesale revenues in the third quarter of 2023, up from 13.4 percent in the third quarter of 2022. The increase in wholesale gross margin percentage was primarily due to a reversal in LIFO from an expense in 2022 when vendor prices were rising, to LIFO income in the third quarter of 2023 as certain vendor prices declined.
Retail gross profit for the three months ended September 30, 2023 was $89.8 million, an increase of $1.7 million from the third quarter of 2022. The retail gross margin percentage was 46.1 percent of retail revenues in the third quarter of 2023, up from 45.6 percent in the third quarter of 2022. The increase in retail gross margin percentage was primarily due to vendor funds earned related to new store openings.
Receivables increased $18.1 million from the third quarter of 2022 driven by an increase in notes receivable from Ace retailers due in future years. Inventories decreased $135.3 million from the third quarter of 2022, primarily as a result of efforts to reduce overstock inventory.
Long-term debt, including current maturities, increased $156.5 million versus the third quarter of 2022. At the end of the third quarter of 2023, long-term debt consisted of $343.9 million outstanding on the revolving credit facility, $13.8 million outstanding on the Westlake credit facility, and $47.7 million owed to former retailers.
