Ace plans to keep up the pace, in Q4 and beyond

ACE2016Las Vegas — Ace had plenty to congratulate its members for at the General Session here at the Ace Hardware Spring Market.

In 2015, the co-op made $5.05 billion in revenue (that’s up 7.3%), as well as logged a 10% increase in consolidated net income. Domestic retail same-store sales grew 4.6%, and that’s not even counting various forms of recognition it received (it was #24 on the NRF’s Hot 100 Retailers, as well as the #2 happiest retailer to work for according to Forbes).

Not ones to rest on their laurels, Ace executives spent the majority of the General Session discussing the various ways in which they’ll be helping members pick up the ball during the fourth quarter this year.

“I would be a hopium-smoking liar if I didn’t admit to you that we are still littered with challenges,” said president and CEO John Venhuizen.

Venhuizen pointed out that for 75% of domestic Ace retailers, the two biggest sales months are in the spring. There are under 20% of U.S. stores that hit the payday in November and December like the rest of the retail world. And those stores are doing $43/sq. ft. more than the retailers who rely on the busy spring season.

To go after this opportunity, the co-op will have to grapple with three main challenges: a general decline in brick and mortar; lack of holiday shopping awareness; and the current Q4 dependency on extreme weather.

Instead, Ace is looking to change direction and learn from the retailers who exposed this opportunity in the first place.

The first thing they’re doing right? Advertising. Venhuizen confessed that corporate has spent exactly $0 on national television advertising in December over the past 89 years. This year, Ace will spend more than $13 million on advertising in November and December to increase the brand’s holiday visibility.

Additionally, the company is embarking on a new initiative to strip 1 million hours of wasted time by “unearthing and exposing the low-hanging fruit of bureaucracy and junk corporate tends to inflict” on its retailers. Both EVP and CFO William Guzick and VP retail development & supply Brian Wiborg will spearhead this retailer simplification project, which will involve workforce management software and an electronically integrated drop-ship program through Ace Net Direct.

Furthermore, the co-op will bulwark itself against an uninspiring product assortment.

“if all we sell is the same undifferentiated crap you can buy online, we’re dead,” said Venhuizen. A prominent holiday decor section on the show floor directly reflects the current messaging, which is that many stores shy away from the $6 billion category to their own detriment.

Here’s what else Ace has up its sleeve:

  • A patronage loan program for $5 million in funding for 5 years, meant to spur more store renovations.
  • Ambitious growth aims for Children’s Miracle Network fundraising, which was up 22% in 2015.
  • Staying the course with its 20/20 Vision plan, and raising the bar for high-profit stores: 8% operating income, 18% pre-tax return on equity, and 90% or more in rankings from customers on mystery shopping engagement is the bar Ace wants to set.
  • Getting more out of active Ace Rewards members. According to John Surane, EVP merchandising, marketing and sales, the company could have pulled in an additional $450 million if every active member had shopped with Ace one more time in Q4 for an average spend of $25.
  • A store reset program, with early adopter pricing that amounts to $1,500 in savings over 12 months, and a $3,000 buyback credit for retailers who reset their own stores. There’s an additional $500 credit show special for those who act by April 3.
  • More judicious (read: reduced) use of print advertising, with savings of $5,000 that will be reallocated toward Ace Rewards.
  • More TV and digital advertising, with $60 million spend. The new commercials, which were revealed at the session, were met with approving laughter.
  • A move to double the company’s B2B business by using LED lighting as a “crowbar into local businesses,” in Wiborg’s words.