Ace Hardware Corporation (“Ace” or the “Company”) today reported record first quarter 2021 revenues of $2.0 billion, an increase of $601.4 million, or 42.0 percent, from the first quarter of 2020. Net income was $105.4 million for the first quarter of 2021, an increase of $69.2 million from the first quarter of 2020.
“Same-store sales growth of 29.9 percent, 51 new stores, a 220 percent increase in our digital business, and increased retail inventory depth drove the best first quarter in Ace’s history,” said John Venhuizen, President & CEO. “Elevated demand, limited supply, and a ridiculously disrupted global supply chain continue to create a difficult environment operationally. My sincere thanks to the Ace team and our local retailers for their rigor to protect their people and passion to safely serve their community.”
The 29.9 percent increase in U.S. retail same-store-sales during the first quarter of 2021 reported by the approximately 3,400 Ace retailers who share daily retail sales data was the result of a 12.3 percent increase in same-store transactions and a 15.7 percent increase in average ticket.
Consolidated revenues for the quarter ended April 3, 2021 totaled $2.0 billion. Total wholesale revenues were $1.9 billion, an increase of $551.1 million, or 41.8 percent, as compared to the prior year first quarter. Wholesale merchandise revenues to new domestic stores activated from January 2020 through March 2021 contributed $40.1 million of incremental revenues during the first quarter of 2021, while wholesale merchandise revenues decreased $9.6 million during the first quarter due to domestic stores whose memberships were cancelled. Wholesale merchandise revenues to comparable domestic stores increased $480.5 million for the quarter. Increases were seen across all departments with outdoor power equipment, grilling, power tools and paint showing the largest gains. The Company’s Ace International Holdings, Ltd. (“AIH”) subsidiary experienced a $12.0 million increase in wholesale revenue versus the first quarter of 2020, while Ace Wholesale Holdings LLC (“AWH”) reported a $15.5 million increase in wholesale revenues from the first quarter of 2020.
Total retail revenues for the quarter were $162.7 million, an increase of $50.3 million, or 44.8 percent, as compared to the prior year first quarter. Retail revenues from Ace Retail Holdings LLC (“ARH”) were $157.1 million in the first quarter of 2021, an increase of $49.0 million, or 45.3 percent, from the first quarter of 2020. The Westlake Ace Hardware (“Westlake”) chain experienced a 36.5 percent increase in same-store-sales while the Great Lakes Ace Hardware, Inc. (“GLA”) chain grew same-store-sales by 48.9 percent in the quarter. The new stores opened by Westlake and GLA in the prior year contributed $9.1 million of the increase. Westlake and GLA together operated 209 stores at the end of the first quarter of 2021 compared to 191 stores at the end of the first quarter of 2020. Retail revenues from Ace Ecommerce Holdings LLC (“AEH”) were $5.6 million in the first quarter of 2021, an increase of $1.3 million, or 30.2 percent, from the first quarter of 2020.
Ace added 48 new domestic stores in the first quarter of 2021 and cancelled 15 stores. The Company’s total domestic store count was 4,680 at the end of the first quarter of 2021 which was an increase of 114 stores from the first quarter of 2020. On a worldwide basis, Ace added 51 stores in the first quarter of 2021 and cancelled 16, bringing the worldwide store count to 5,498 at the end of the first quarter of 2021.
Wholesale gross profit for the three months ended April 3, 2021 was $243.6 million, an increase of $73.8 million from the first quarter of 2020. The wholesale gross margin percentage was 13.0 percent of wholesale revenues in the first quarter of 2021, up slightly from 12.9 percent in the first quarter of 2020.
Retail gross profit for the three months ended April 3, 2021 was $76.1 million, an increase of $23.3 million from the first quarter of 2020. This increase was the result of the 45.3 percent increase in ARH revenues. The retail gross margin percentage was 46.8 percent of retail revenues in the first quarter of 2021, a slight decrease from 47.0 percent in the first quarter of 2020. For ARH, retail gross profit is based on the Company’s wholesale acquisition cost of product, not ARH’s acquisition cost which includes a markup from the Company.
Expenses and Other
Wholesale operating expenses increased $17.1 million, or 13.3 percent, from the first quarter of 2020. The increase is due to higher distribution costs resulting from higher wholesale revenues and an increase in consumer advertising expenses. The 41.8 percent increase in wholesale revenue far exceeded the 13.3 percent increase in wholesale operating expenses, which allowed the Company to leverage and scale much of its fixed expenses and infrastructure. As a result, wholesale operating expenses as a percent of wholesale revenues decreased significantly to 7.8 percent in the first quarter of 2021 from 9.7 percent in the first quarter of 2020.
Retail operating expenses increased $6.2 million, or 11.2 percent, from the first quarter of 2020. This increase was primarily driven by store payroll and operating costs to support the increase in retail revenues along with expenses incurred related to the new stores opened in 2020 and 2021. The 44.8 percent increase in retail revenue far exceeded the 11.2 percent increase in retail expenses, which allowed the Company to leverage and scale much of its fixed operating expenses. As a result, retail operating expenses as a percent of retail revenue decreased to 37.9 percent in the first quarter of 2021 from 49.4 percent in the first quarter of 2020.
Balance Sheet and Cash Flow
Receivables increased $85.8 million from the first quarter of 2020 due to higher sales volumes and an increase in vendor rebates receivable.
Inventories increased $231.9 million from the first quarter of 2020 due to the intentional build-up of inventory to support increased demand and to act as a hedge against supplier shortages.
Long-term debt, including current maturities, decreased $587.7 million versus the first quarter of 2020. In March 2020, the Company increased its borrowings to $675.0 million under its $700.0 million line-of-credit in order to ensure the Company’s ongoing liquidity during the COVID-19 pandemic. Net debt (long-term debt less cash and cash equivalents) decreased $309.5 million due to cash generated by operating activities in the last twelve months offset by capital expenditures and record patronage distributions. At the end of the first quarter of 2021, long term debt consisted of $139.8 million outstanding on the revolving credit facility, $30.0 million outstanding on the Westlake credit facility, and $27.4 million owed to former retailers.
About Ace Hardware
Ace Hardware is the largest retailer-owned hardware cooperative in the world with approximately 5,500 locally owned and operated hardware stores in approximately 65 countries. Headquartered in Oak Brook, Ill., Ace and its subsidiaries operate an expansive network of distribution centers in the U.S. and have distribution capabilities in Ningbo, China; Colon, Panama; and Dubai, United Arab Emirates. Since 1924, Ace has become a part of local communities around the world and known as the place with the helpful hardware folks. For more information, visit acehardware.com or newsroom.acehardware.com.