Ace show focuses on growth: Ace management also addressed the co-op’s accounting issues

DENVER —As an estimated 7,500 Ace Hardware store owners, managers and employees gathered in Denver for the company’s 2007 Ace Fall Convention & Exhibits. Ace CEO and president Ray Griffith, as well as other executives, pointed to a focus on growth and continued to describe the company’s accounting problem as a manageable challenge.

The accounting issue—the co-op reported a $154 million discrepancy in its books earlier in September—figured prominently in meetings with retailers and vendors during the market’s events on Sept. 27. Still, management stressed that the co-op is moving ahead with business and focusing on growth under the directions of its board.

Addressing vendors and other market guests, Griffith was upbeat. “Operationally, we are rock solid,” he said. “Our business is sound, our brand is sound and our retailers are sound across the country. And we can handle this. I’d rather not have to handle it, but we can handle it.”

Several retailers who spoke anonymously with Home Channel News, however, complained that there remained a lot of unanswered question regarding how the $154 million discrepancy is going to affect them.

After attending a closed-to-the-press “Town Hall Meeting,” one retailer told HCN: “You learn some tidbits but not a lot more,” and he described the meeting as a “gripe session.”

Another attendee suggested: “I don’t think they know enough to really give good answers.”

The accounting error was described as a $154 million difference between the general ledger and the perpetual inventory, or the actual inventories in the company’s retail support centers. Experts are continuing to study the issue, and Griffith suggested that as transit inventories are reconciled, “the difference will go down.”

As evidence of Ace’s stability in spite of the challenge, Griffith told vendors that since Sept. 5, when the accounting error was announced, he is aware of only two retailers who are considering leaving the co-op. “That’s an indication of the strength of this organization and the strength of this brand,” he said.

As questions about the accounting issue lingered, there were clear signs Thursday that many retailers were focused on the business of growing their business. While the four concurrent regional town hall meetings were taking place in rooms in the lower levels of the Colorado Convention Center, retailers mixed with vendors on the main hall above, where Lawn & Garden exhibits opened on Sept. 27.

There was also a steady flow of retailers through the new product area, where dealers scouted out the new merchandise available through the Ace support centers. The products ranged from Culligan home water filters to Fortress Products knit caps to heart-shaped Jelly Belly lollipops.

Lori Bossmann, vp-merchandising, advertising and marketing, explained that Ace’s merchandising team continues to hammer its three key objectives: increase traffic, enhance productivity and maximize return. She described a new weather trend service from Wayne, Pa.-based Planalytics that the co-op believes will lead to more lucrative assortments in what is anticipated to be a colder, wetter winter.

On Friday morning, the company’s merchandise team talked strategy for two hours in a giant ballroom packed with retailers, some standing two-deep in the back of the room. Gary Paulson, general merchandise manager, described some areas of opportunity, including home electronics, which is “one of our top performing categories,” he said. Demand for cables and adaptors is driven by high-definition television, and is likely to continue as high definition sets replace the older analog technology.

Ace also unveiled its environmentally friendly brand and logo: “helpful earth choices,” which will apply to a variety of products. A marquee product, compact fluorescent light (CFL) bulbs are one of the fastest growing categories across the board, with 20 percent growth at Ace stores in 2007. Energy-efficient CFL bulbs now account for a quarter of all bulb sales at Ace, Paulson said.

Building on green retailing, lawn and garden merchandise manager Guy DuVall pointed to an influx of organic-focused vendors—13 new Ace vendors are bringing organic fertilizers pesticides and other lawn and garden products to Ace’s retail service centers. And in response to dealer and customer demand, Ace now offers retailers a compost bin, made of recycled material, he said.

CEO Griffith said he’s focused on business, despite the distraction of the accounting issue. He guaranteed to vendors that there will be no problems getting paid, and he said he instructed accounts payable “to err in the favor of the vendor, and process the check.”

The company’s labor optimization program—optional for its retailer dealers—is an example of focusing on growth, he stressed.

“We are not coming to a standstill,” he said. “We are charging forward.”