ACE HARDWARE REPORTS REPORTS SECOND QUARTER 2022 RELEASES

  • Record second quarter revenues $2.5 BillionThis is an increase in 2.7 percent, on top last year’s 8.2 percent.
  • Second quarter net income $124.8 MillionThis is 7.6 percentage more than last year.
  • Dividends from patronage accrued to shareholders $247.3 MillionThis represents a 20.8 per cent increase over the first six month of 2021
  • Ranked “Highest in Customer Satisfaction with Home Improvement Retail Stores”According to J.D. J.D.

OAK BROOK, Ill., Aug. 24, 2022/PRNewswire/ — Ace Hardware Corporation”Ace”Or the “Company”Today, ) reported record revenues for the second quarter 2022 $2.5 BillionA rise in $66.1 million2.7% in the second quarter of 2021.  Net income was $124.8 MillionThe rise in $8.8 MillionThe second quarter 2021.  These are the results for the second quarter of 2021. $10.8 MillionIn non-recurring fees related to The Grommet’s closure. 

“Nominal growth continues to be solid,” John VenhuizenPresident & Chief Executive Officer.  “The primary fuel has come from last year’s 182 new domestic stores, this year’s 88, and the aberrant and stubborn impact of inflation.”

According to daily retail sales data from 3,600 Ace retailers, there was an increase of 0.6% in U.S. Same-Store Sales during the quarter two of 2022. Due to 11.4 percent inflation in retail prices, the average ticket saw 8.0% growth. The same-store transactions decreased 6.9%.

Revenues

Consolidated Revenues for the Quarter Ended July 2, 2022 totaled $2.5 Billion.  Total wholesale revenues $2.3 BillionA rise in $63.4 MillionThe increase was 2.9% compared to the previous quarter.  The biggest increases were seen in most departments, with outdoor power equipment and plumbing, paint, and outdoor living showing the greatest gains.  The stores that have been activated are considered new stores. January 2021From June 2022 to June 2022.  The Company saw an increase of wholesale merchandise revenue from domestic stores. $68.6 millionThe second quarter of 2022 was a very busy period.  This was partially offset partly by a decrease in wholesale merchandise revenues due to domestic store cancellations. $14.2 Million.  Increased wholesale merchandise sales to domestic stores comparable with them $0.3 MillionThe quarter.  This was due 12.0 percent wholesale inflation.  Ace International Holdings Ltd. was a subsidiary. $19.4 MillionAce Wholesale Holdings LLC reported a decrease of wholesale revenue relative the second quarter 2021. $8.7 millionWholesale revenues will rise starting in the second quarter 2021

The quarter’s total retail revenues were $258.0 millionAn increase in $2.7 Million1.1% compared to the previous quarter.  Ace Retail Holdings LLC (Retail revenues)”ARH”) were $252.4 MillionIn the second quarter of 2022, there was an increase in $3.7 MillionOnly 1.5 percent was recorded in the second quarter 2021.  This was due to the addition of new Westlake Ace Hardware stores (“Westlake”) and the Great Lakes Ace Hardware (“GLA”Since the second quarter 2021, there have been a total of 5) chains.  GLA and Westlake had 215 stores at the end of the second quarter 2022, as opposed to 211 at that time.  Inflation caused sales growths of 0.2 percentage for Westlake and 0.4% in GLA during the quarter.  Ace Ecommerce Holdings LLC’s retail revenues were $2.5 million. $5.6 MillionIn the second quarter 2022 there was a decrease $1.0 Million– 15.2 percent from the second quarter 2021, due to the announcement about the Grommet’s closing.

Ace opened 38 new domestic store during the second quarter 2022 and closed twelve others.  The Ace domestic store count was 4,816 at the end of the second quarter 2022. This was an increase of 87 stores compared to the second quarter.  Ace added 46 stores to its worldwide store count and canceled 12. This brings Ace’s total Ace store count to 5,660 at the end of the second quarter of 2022.

Gross Profit

The three-months concluded with wholesale gross profits July 2, 2022Was $287.3 MillionAn increase in $24.1 MillionThe second quarter of 2021 was the most profitable.  The wholesale gross margin percentage grew from 11.9% in 2021 to 12.6% in the second quarter 2022.  The increase in wholesale gross margin percentage was due mainly to the increase in vendor funds earned and the absence of personal protective equipment inventory write-downs.  These improvements were partially offset by an increase of LIFO expense due in part to higher vendor prices. 

Retail gross profit for the three months ended July 2, 2022Was $114.5 millionA rise in $0.8 MillionThe second quarter in 2021.  Retail gross margin percentage was 44.4 per cent of retail revenues in 2022’s second quarter, a slight decrease from 44.5 percent in 2021’s second quarter.  Retail gross margin also includes: $0.9 MillionThe Grommet charges inventory write-downs  The retail gross margin percentage is 44.7 percent, excluding this fee.  ARH’s wholesale acquisition cost of product is the basis for retail gross profit. This does not include ARH’s acquisition costs which include a markup from ARH.

Other expenses

Wholesale operations expenses have increased $3.0 MillionThe increase is 1.6 per cent over the second quarter of 2021.  This is due to higher advertising costs and higher leasing expenses.  Wholesale operating expenses as a percentage of wholesale revenue decreased slightly from 8.4 percent in the second trimestre 2021 to 8.3 percent in the second quarter 2022. 

Retail operating expenses increased $12.1 MillionAn increase of 17.5 percent over the second quarter 2021.  This increase includes a nonrecurring cost of $9.9 MillionThe Grommet’s closure resulted in the impairment of assets as well as severance-related costs.  The remaining increase was due to an increase in store payroll and expenses incurred by new stores opening since 2021’s second quarter.  Retail operating expenses as a percent of retail revenues rose to 31.4 % in 2022, compared to 27.0 % in 2021. Retail operating expenses as a percentage retail revenue were 27.6 percent without non-recurring charges.

Cash Flow and Balance sheet

Receipts increased $81.5 millionThe second quarter 2021 will see an increase in sales volumes and dates of seasonal programmes.

Stocks increase $329.7 millionIntentional inventory buildup in order to protect against supplier shortages and increase Ace owners’ fill rates will continue into the second quarter of 2021.  The late arrival of spring in 2022 has caused an overstock of garden and patio inventory, which will be carried over into 2023’s spring selling season.  

Increased long term debt, which includes current maturities. $142.7 MillionComparative to the 2nd quarter of 2021.  At the end of the second quarter 2022, the long term debt was at its lowest level. $191.8 Millionoutstanding on the Revolving Credit Facility $36.7 MillionPreviously-retailers owe this money.

About Ace Hardware

Ace Hardware is the largest cooperative of hardware retailers owned by retailers around the globe, with over 5,600 stores in 65 countries.  Headquartered in Oak Brook, Ill.Ace and its subsidiaries are able to distribute in the United States. They also have a vast network distribution centers that can be found across the country. Ningbo (China)Santa Catarina, Mexico.  Ace has been a part of many local communities all over the world since 1924 and is known as the “place with the helpful hardware people”. For more information, visit acehardware.com or newsroom.acehardware.com.

In 2022 Ace ranked “Highest in Customer Satisfaction with Home Improvement Retail Stores”J.D. According to J.D.

Contact Media

Shareholders’/Investors’ Inquiries:
William Guzik, Executive Vice President & Chief Financial Officer & Chief Risk Officer
630-990-3325, [email protected]

Media Inquiries
Jeff GoodingVice President, Consumer Marketing
630-990-3600, [email protected]

ACE HARDWARE COMPANY

CONSOLIDATED STATEMENTS ON INCOME

(Unaudited in Millions)



End of three months


Six Months Ended




July 2,


July 3,


July 2,


July 3,



2022


2021


2022


2021



(13 Weeks)


(13 Weeks)


(26 Weeks)


(26 Weeks)











Revenues:









Wholesale revenues

$    2,275.0


$     2,211.6


$     4,332.0


$     4,080.7


Retail revenues

258.0


255.3


414.6


418.0


Total revenues

2,533.0


2,466.9


4,746.6


4,498.7


Revenues:









Wholesale revenues at a cost

1,987.7


1,948.4


3,782.7


3,573.9


Retail cost of revenues

143.5


141.6


227.1


228.2


Total cost of revenues

2,131.2


2,090.0


4,009.8


3,802.1


Gross profit









Gross profit in wholesale

287.3


263.2


549.3


506.8


Retail gross profit

114.5


113.7


187.5


189.8


Gross profit

401.8


376.9


736.8


696.6











Wholesale operating expenses:









Distribution operations expenses

64.6


65.5


126.1


119.9


Selling, general and administrative expenses

56.6


55.4


113.8


108.0


Retailer success and development costs

66.7


64.0


109.4


102.6


Retail operating expenses

81.1


69.0


148.9


130.7


Retail pre-opening expenses

0.5


1.1


0.7


1.7


Total operating expenses

269.5


255.0


498.9


462.9


Operating income

132.3


121.9


237.9


233.7











Interest expense

(4.4)


(3.4)


(8.4)


(7.4)


Interest income

0.1


1.5


1.7


2.7


Other income, net

0.3


1.1


22.0


1.6


Income tax expense

(3.5)


(5.1)


(8.6)


(9.2)


Net income

124.8


116.0


244.6


221.4


 

Net loss due to non controlling interests is less

(0.1)



(0.4)


(0.1)


Ace Hardware Corporation’s net income

$          124.9


$         116.0


$         245.0


$         221.5


Patronage distributions accrued

$          111.7


$           95.7


$         247.3


$         204.7


Third-party retailers can earn patronage distributions

$          106.4


$           92.6


$         237.3


$         198.7


ACE HARDWARE COMPANY

CONSOLIDATED BALANCES SHEETS

(Excluding share data)



July 2,


January 1,


 July 3,


2022


2022


2021

Assets

(Unaudited)


(Audited)


(Unaudited)

Cash and cash equivalents

$     48.8


$        37.6


$      51.7

Marketable securities

52.8


58.0


61.8

Receivables net of allowance to doubtful account of $5.8, 4.3, and $6.4

827.6


533.6


746.1

Inventories

1,533.3


1,224.3


1,203.6

Prepaid expenses and other current assets

59.8


63.9


61.3

Total current assets

2,522.3


1,917.4


2,124.5

Net property and equipment

451.6


453.4


437.6

Operating lease right of use assets net

616.9


497.3


532.4

Finance lease right-of-use assets net

80.4


68.1


44.8

Goodwill and immaterial assets net

93.8


99.5


100.3

Other assets

115.2


105.7


109.9

Total assets

$   3,880.2


$   3,141.4


$   3,349.5







Liabilities & Equity






Current maturities of long-term debt

$       13.6


$        17.1


$        11.9

Accounts payable

1,503.8


1,095.2


1,413.3

Patronage distributions payable in cash

97.6


120.6


82.0

Patronage refund certificate available

27.2


27.2


26.5

Current operating lease liabilities

70.4


64.3


66.6

Current finance lease obligations

14.0


10.9


6.9

Accrued expenses

213.6


282.9


182.9

Total current liabilities

1,940.2


1,618.2


1,790.1

Long-term debt

214.9


18.6


73.9

Patronage refund certificate available

111.6


92.8


105.6

Leases with long-term terms

571.7


456.3


488.1

Leases for long-term finance

65.4


56.4


37.2

Other long-term liabilities

96.8


91.0


78.1

Total liabilities

3,000.6


2,333.3


2,573.0

Member Retailers’ Equity






$1,000 par value, 10,000 shares of authorized class A voting common stock. 2,675, 2,681 and 2,697 were issued and are still outstanding.

2.7


2.7


2.7

Class C common stock, $100 par price, 10,000,000 shares authorized. 6,753,381, 5,838,265 and 6,007.367 have been issued and are still outstanding, respectively.

675.3


583.8


600.8

Non-voting Class C common Stock, $100 par price, can be purchased for patronage distributions. It is available in 981,230 shares, 1,209 075 shares and 848 949.

98.2


120.9


84.9

Contributed capital

19.0


19.1


19.0

Retained earnings

76.7


68.9


55.0

Accumulated other comprehensive (loss -) income

(3.7)


1.0


1.7

Ace member retailers receive equity

868.2


796.4


764.1

Equity attributable to non controlling interests

11.4


11.7


12.4

Total equity

879.6


808.1


776.5

Total liabilities and equity

$   3,880.2


$   3,141.4


$   3,349.5

ACE HARDWARE COMPANY

CONSOLIDATED STATEMENTS REGARDING CASH FLOWS

(Unaudited in Millions)



Six Months Ended


July 2,


July 3,


2022


2021


(26 Weeks)


(26 Weeks)

Operational Activities




Net income

$       244.6


$        221.4

Adjustments to reconcile net income to net cash from operations




Amortization & depreciation

46.6


34.8

Amortization deferred funding costs

0.2


0.2

The net disposal of assets can yield a profit

(21.7)


(0.2)

Provision for doubtful accounts

2.1


1.4

Other, net

11.7


4.7

Changes in operating assets, liabilities, and other effects than acquisitions




         Receivables

(328.2)


(246.2)

Inventories

(308.4)


(69.0)

Other assets

4.0


(6.1)

Other long-term investments

(3.4)


6.0

Accrued expense and accounts payable

365.7


269.5

Other long-term liabilities

5.8


4.5

Deferred taxes

0.5


(3.7)

Operating activities generate net cash

19.5


217.3

Investing Activities




         Purchases of investment securities

(7.8)


(32.3)

Proceeds from the disposition of investment securities

6.8


16.2

Purchases of equipment or property

(45.5)


(51.7)

Cash received for businesses that are acquired, but less cash paid

(1.0)


(2.6)

Notes payable to increase net

(9.3)


(8.1)

Proceeds from assets that were sold

28.3


Other, net

(1.1)


(0.2)

Net cash can be used to invest in activities

(29.6)


(78.7)

Financing Activities




         Net borrowings under revolving lines of credit

186.9


28.2

Principal payments for long term debt

(6.1)


(6.6)

Principal portion of finance lease payment

(8.3)


(3.6)

Patronage distribution: Cash payments

(121.0)


(113.8)

Patronage refund certificates for payments

(25.9)


(16.9)

Stock purchase

(4.8)


(3.7)

Noncontrolling interests are possible to be purchased

(0.4)


(0.2)

Other, net

0.9


0.8

Financing activities can provide net cash.

21.3


(115.8)

Cash and cash equivalents rise

11.2


22.8

Cash and cash equivalents in the beginning of the period

37.6


28.9

Cash and cash equivalents at end of period

$         48.8


$         51.7





Additional disclosure of cash flow data




                Interest paid

$           8.0


$           8.6

                Income taxes paid

$           1.0


$         10.2

SOURCE Ace Hardware Corporation

ACE HARDWARE REPORTS RECEIVES SECOND QUARTER 2022 RELEASES

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