Despite higher interest rates slowing the economy and e-commerce shifting more buying away from brick-and-mortar stores, Ace Hardware boosted its third quarter earnings and sales this year and continues to add more stores.
Ace, which is owned by the nearly 5,000 local stores that share its brand, expects to add about 170 new hardware locations in the United States and, even with some closings, should have a net gain of 130 or more stores in 2024, company CEO John Venhuizen said in an interview Thursday.
In a more sluggish economy, Venhuizen said Ace Hardware stores are doing better by offering cost-conscious consumers more of what they need.
"This type of economy drives people a bit more to the core of our business model to fix, repair, preserve, replace and protect what people have," Venhuizen said following a luncheon speech Thursday to the Chattanooga Rotary Club. "Our customer traffic has remained very strong this year."
Ace Hardware Corp. reported a 2.5% gain in third quarter revenues to $2.3 billion and a 29.2% jump in net income in the quarter to $130 million.
Venhuizen said service, convenience and value are key to Ace Hardware's continued success. A locally owned Ace Hardware store, including the 15 Elder's Ace Hardware locations in metro Chattanooga, is within a 15-minute drive of 76% of the U.S. population. The company's app, which bills its stores as "the helpful place," highlights its convenience with its "ready in 15 minutes" product pickup promotion.
"Our digital business this year is up 17%, and 90% of that is being fulfilled by the local store -- either the customer picking it up or in some instances the store employee delivering it for the customer to the home," Venhuizen said. "We exploit our localization, and we're faster than Amazon if the product is in stock."
Venhuizen said he's uncertain about the macroeconomic outlook for building and repair activity next year with the economic cross currents of changing interest rates, consumer confidence and political uncertainty in an election year.
But the Ace CEO said he and the member stores that collectively own Ace are confident enough in their own business model to be preparing for record capital spending in 2024 along with a $25 million boost in advertising in the new year.
"Irrespective of the macro-economic environment, we're moving forward, and we think the opportunity is there," he said.
Consumer research consulting firm J.D. Power has ranked Ace Hardware highest in customer satisfaction among home improvement retailers for 16 of the past 17 years.
Service and convenience is key, Venhuizen said, and in his speech to the Chattanooga Rotary Club, the Ace CEO urged the community and business leaders gathered at the Chattanooga Convention Center to focus on their staff and employees.
Although surveys indicate many Americans have a negative view of business, Venhuizen praised the virtues of American capitalism and said businesses provide the goods, services, jobs, income, taxes and meaningful employment that power our way of life.
To succeed in a competitive market for products and labor, the businesses that succeed will be those that best deliver what customers want and the employers that succeed will be those who attract and maintain workers based on their employment practices, he said.
"Capitalism demands that you as a business leader be a good servant to others," he said.