Mild winter hits Ace Hardware sales in Q4

Dive Brief:

Ace Hardware’s total Q4 revenues dropped 3% year over year to $2.1 billion, with retail revenue down 3.6% to $182.6 million and wholesale revenue down 3% to $2 billion. Declines hit most departments, especially plumbing, outdoor power equipment and grilling.
The 3,700 or so domestic Ace stores that share sales data reported a 5.2% Q4 retail comp decline, including a 3.2% same-store transaction decrease and a 2% average ticket decrease. The hardware store retailer squeaked into the black in the quarter, reaching $500,000 from a $4.6 million loss last year, according to a company press release.
For the year, total revenues were nearly flat at $9.1 billion, but net income narrowed by 5% to $323.4 million. Ending inventory shrank 5.3% from 2022, thanks to an effort to reduce overstock. Retail same-store-sales for the year fell 2.2% among coop stores.

Dive Insight:

Home improvement-oriented stores like Ace Hardware are dependent to a great extent on both the weather and the housing market, and neither has been swinging their way lately.

In fact, Ace Hardware CEO John Venhuizen blamed the company’s Q4 sales slump on warm temperatures at the end of the year.

“While Q4 revenue was disappointing, the miss is entirely a result of lower sales on winter goods as a result of a particularly mild December.” he said in a statement.

Things are poised to improve, at least in the early months of the year, according to TD Cowen analysts led by Max Rakhlenko. A “cold February and warmer March should be tailwinds to seasonal categories,” while a cooler April and seasonal May could be neutral or worse, they said in a client note this week.

With interest rates stoked by the Federal Reserve to fight inflation, mortgages have grown more expensive, and the housing market has taken a hit. In turn, furniture and home improvement stores have suffered, and remain in wait-and-see mode. The “near-term outlook is soft,” especially in the first half of this year, according to TD Cowen. These retailers may need to wait until 2025 for a “normalized and strong” outlook, the analysts said.

The category also continues to come down from its peak-pandemic highs. Sales fell for most of 2023 — with double-digit year-over-year declines in October; declines continue this year, as sales fell 7.5% in January.

Despite the challenges, Ace Hardware, largely a coop model, has been expanding. The company added 222 stores last year, per its release. Ace has more than 5,800 locally owned and operated hardware stores in about 60 countries.

The stores’ localization and customer service focus have helped give them some advantages over other chains. Tractor Supply and Ace Hardware tied for the highest level of customer satisfaction in their category in the most recent American Customer Satisfaction Index survey. In its release, Ace Hardware noted that it has ranked highest in J.D. Power’s measure of customer satisfaction among home improvement retailers for 16 out of the last 17 years.