Ace Hardware released its first-quarter results, reporting net income of $10.8 million, down 23 percent from the $14.1 million reported last year.
Total revenues for the Oak Brook, Ill.-based co-op were down 7.2 percent to $872.1 million, while total continuing merchandise sales declined 6.4 percent and retail service revenues declined 13.1 percent.
“Our first-quarter revenues were challenged by a very difficult environment overall at retail and a delay in the transition to spring weather in many parts of the country,” said Ace president and CEO Ray Griffith. “We are hopeful that the current economic stimulus efforts will boost consumer confidence and drive improved selling conditions at retail.”
Merchandise sales from Ace’s international business continued to be strong and contributed $7.8 million in incremental sales, up 22.4 percent compared with 2007. This number was driven by increased sales to existing stores in the Middle East, sales to new stores in the Caribbean and sales growth from foreign-to-foreign wholesale operations located in Shanghai, China, the company said.
Ace added 27 new stores and cancelled 41 stores in the first quarter, which brought the company’s total store count to 4,616, compared to 4,630 at the end of fiscal year 2007.
Ace also saw a $13.3 million decrease in operating expenses, due to a variety of factors, including a reduction in incentive compensation and profit sharing expenses; as well as a decrease in national advertising expenses, savings from the exit if company-owned stores and savings associated with the discontinuation of Ace’s Vision 21 achievement award program.
Still, the company did take a $5.6 million hit due to various debt restructuring activities associated with an accounting error announced in 2007. The $154 million shortfall was identified when an internal review of the company's financial documents found that its inventory total was less than its general ledger balance.
“In light of the current economic conditions, we are aggressively taking action to focus on expense controls given the difficult sales trends that we are experiencing,” said Griffith. “We are prudently reviewing our cost structure and making the necessary changes that will help us maintain strong profitability without sacrificing our ability to drive continued long-term growth.”