Ace Hardware 2005 Annual Report Download - page 4

2005 ANNUAL REPORT NEW FRONTIERS. NEW OPPORTUNITIES. 3
As you are aware, 2005 was my first
year at the helm of Ace Hardware
Corporation. I am grateful and humbled
by the opportunity to lead this world-
class organization.
Thanks to all of our retailer stockholders
for a great year and your attention to retail
execution. You continue to move our brand
further into prominence. I am especially
proud of our recent ranking by Corporate
Research International. This independent
firm’s survey of Real People Ratings “Best of
2005” ranks Ace Hardware number one in
the home improvement category of providing
customer service, beating out Home Depot,
Lowe’s, Menards, True Value and others.
Congratulations, Ace retailers!
As you read this annual report, you will garner
more information, but financially your company
had a record-breaking year – a record total
dividend return of $185.4 million in upfront
and paid dividends to our retailers. Our
domestic business increased 5.1 percent, while
our international business surged 11.9 percent
and continues to produce solid gains. As a result
of a strong fourth quarter with sales up 9.9
percent, we finished the year with the largest
sales increase for our company since 1998!
Our second year commitment to the Ace
Growth Strategy continues to reflect progress
with our Vision 21 - achieving retailers leading
all vital categories as indicated by a wholesale
purchase increase of 11.5 percent and a
comparable retail same store sales increase
of nearly 4.0 percent. We have 3,600 stores
representing 88 percent of our wholesale
business committed to one of our two great
homes at Ace – Vision 21 or Individually
Branded Retailer. At retail, the initiatives
around this strategy produce significant results,
and we appreciate your continued participation.
This past year we took a fresh look to ensure
that your company is committed to operating
efficiently by adopting a “Good to Great”
methodology and philosophy. We completed
a “stop doing list,” addressed the “brutal facts”
and took $12.9 million out of our cost
infrastructure. We are better positioned for
2006 and beyond because of this effort.
Our joint challenges are many, partially because
we strive for continuous improvement, everyday,
everywhere … as we should and as you do
in your businesses. We lead the $55 billion
convenience segment of the industry with
proactive strategies. Our focus is on our
end consumer and improving the retail
store model, and we are committed to
that end.
Going forward, we are focused on
completing our Eagle Technology
initiative. I expect 2006 to be a water-
shed year for EagleVision®. This
technology platform is critical for
our retail stores and our longer term
integrated supply chain project.
New stores are also critical to our
growth, and we will continue to be
creative in soliciting new stores. We
opened 131 quality new Ace stores in
2005. The number of branching out
stores increased 16 percent in 2005,
while new investors opening Ace stores
were up 58 percent.
You can be very proud of your company, the
brand and our past performance. Today, Ace
ranks in the top 25 of all retail organizations
and is the number one hardlines cooperative
in America. We have the best entrepreneurial
retailers in any business, anywhere. We are
blessed with an extremely capable and dedicated
officer team surrounded by managers and
associates at all levels who are committed and
are proud of their company, and we have an
energetic and devoted Board of Directors
supporting all that we do.
I thank you for your business, your input and
your continued support. We look forward to
sharing even better results with you at the end
of 2006.
Regards,
Ray A. Griffith
President and CEO
Ace has
achieved its
third consecutive
$100 million
bottom line year.