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Dive Brief:
- Ace Hardware’s second-quarter revenues were $2.7 billion, a 3.1% year-over-year increase from $2.6 billion last year. Increases across outdoor power equipment, tools, lawn and garden, and grilling drove the largest gains in revenue, per a company press release. However, retail revenue fell 0.8% to $259 million from a year ago.
- Net income for Q2 fell $12.3 million or 9.7% to $114.4 million. Marketing expense increases and retail store expenses drove the decline, Ace said. Online sales increased 16%, and the company continued to invest in new stores, opening its 5,000th location in the quarter and remaining on track to open 200 new stores this year.
- Same-store sales declined 1.7% in Q2 at the approximately 3,800 Ace stores in the U.S. that share sales data. Same-store transactions fell 2.6%, offset by a 0.9% increase in average ticket.
Dive Insight:
Looking at sales growth alone, Ace Hardware edged out two major competitors in the home improvement space in Q2.
The Home Depot last week said its Q2 sales rose just 0.6% to $43.2 billion, nudging the company back to growth, although overall comps fell 3.3%. Second-quarter net sales at Lowe’s were worse off, dropping 5.5%, with comps falling 5.1%.
However, Ace Hardware has a different business model than those big-box home improvement stores, Dale Fennel, the company’s vice president of merchandising, told Retail Dive in a recent interview. In contrast with Lowe’s and Home Depot, most Ace Hardware stores do not offer large appliances or building materials. That position, Fennel said, has insulated the company somewhat from ongoing consumer reticence or unwillingness to spend money on major discretionary purchases.
While Ace’s top-line growth is notable in Q2, though, “cracks from the general softness in home improvement are showing themselves in the lower profit numbers, the decline in retail sales, and the comparable wholesale sales decline,” GlobalData Managing Director Neil Saunders told Retail Dive via email. “While Ace is picking up customers who are doing smaller projects because of the local and convenient nature of the stores, it is not immune to the wider downswing in the number of DIY projects being undertaken.”
The retailer’s latest earnings come shortly after Ace announced the launch of a new experiential store model, Elevate Ace. Changes include an expanded product assortment, new store-in-store brand showrooms and repositioning frontline employees to serve as brand advocates who can better guide customers through a purchasing journey. Ace said it plans to spend over $1 billion over the next five years to implement the initiative in new and existing stores.
In June, the company announced the expansion of its home services offerings to over 5,000 zip codes. Ace Hardware Home Services vary by location but typically offer professional plumbing, electrical, painting, heating and cooling, carpentry and general home maintenance work.
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Nate Delesline III, Khareem Sudlow
