It’s our passionate view that if we keep doing things the way we always have, we can’t expect our outcomes to change. We can’t expect to serve our customers better. We can’t expect to compete more effectively. We can’t expect to grow, or build something of lasting value. This is why your new chairman and I would like to begin our first annual report message as leaders of True Value Company with three words.
Change is here.
We strongly believe there’s a place for the independent hardware store in the hearts and minds of today’s consumer. That’s why we’re driving change at True Value to center everything we do on helping our retailers, affiliates and supply partners connect to more customers and become more relevant in their lives.
A key part of that effort is a new brand strategy that focuses on the emotional side of what we do: enabling the wonderful satisfaction our customer gets from a job well done. This focus on satisfaction sets us apart from others in our category who emphasize products and “helpful” attributes—valid, yes, but not particularly inspiring. The new branding approach, along with other initiatives such as building our capability for one-to-one marketing, is designed to connect True Value to a new generation of hardware customers.
Big picture, we are building a new True Value on three strategic pillars: engagement, growth and efficiency. We will be inclusive, engaging everyone in the value chain to develop and implement bold new ideas. We will be more aggressive in our pursuit of growth that we can sustain together for years to come. And we will focus on continuously improving efficiency everywhere in our business.
The new True Value will be prepared to lead the way. We’re determined to change from a partner that provides tools to grow your business to one that can show you how to grow your business. This fundamental shift at True Value starts at the top, and we are very proud of the transformation of our leadership team to get this done.
To build the True Value we envision, we have brought a new generation of leaders to the executive team: Ken Goodgame, our new senior vice president of Merchandising; Abhinav Shukla, who became our new senior vice president and Chief Operating Officer; and Tim Mills, who joined us to take the new position of senior vice president, Growth.
Ken brings a stellar background in supplier/manufacturing, wholesale cooperative and big-box retailing to our team, with senior management experience at Ace, Techtronics North America, Newell/Rubbermaid and The Home Depot. His mandate is to take our product productivity to the next level.
Abhinav is an expert in distribution and logistics, with a distinguished career helping Fortune 500 companies improve financial and operational performance as a senior consultant for AlixPartners, Druker Capital and the Boston Consulting Group. Abhinav will oversee the consolidation and management of our supply chain, distribution and logistics functions.
Tim’s career spans executive positions in operations, sales and strategic development, distribution, process excellence and customer service at industry leaders such as HD Supply and Bankers Life and Casualty, among others. He is a Six Sigma black belt who is here for one reason: Tim is skilled at teaching people how to improve retail operations for profitable growth.
Together with our talented group of long-standing executives, these enthusiastic new leaders are already making a difference in the direction and pace of change at True Value.
We’re in the midst of developing a detailed strategic plan, focusing first on establishing a deep understanding of who we are, where we stand in the marketplace and what we can become. We will leverage this knowledge with “break the box” thinking to leave the status quo behind and create a plan that guides our future.
Our strategic plan will not be a binder that gathers dust on the bookshelf. It will be a living, breathing roadmap that will both guide us and hold us accountable. It will be a long-term plan, reviewed and refreshed every year. Many of you have already participated in the exciting, energizing process of developing this plan—we are looking forward to unveiling it later in 2014.
We had no shortage of challenges in 2013, but the improvement we saw as the year progressed was something to build upon. Together we grew retail comparable-store sales by 2.1 percent. We also saw a healthy increase in our wholesale comparable-store sales of 2.4 percent on a gross billings basis. Our net margin was down for the year by 5.3 percent not including last year’s one-time gain and was on plan. We will be issuing a $54.3 million patronage dividend at the end of March. While on plan, the dividend is less than last year’s primarily due to the 2012 special dividend paid on that year’s litigation settlement gain.
Most of our merchandise categories did well in 2013, led by Farm and Ranch, Automotive and Pet, which grew by 11.2 percent over 2012. We continued to invest in our retailers’ success, loaning $15.6 million to help finance Destination True Value (DTV) new stores and remodels. We ended the year with 31 new stores and 51 remodels, adding approximately 864,000 square feet of DTV space with good momentum going into 2014.
We were particularly encouraged by the 137 new hardware stores that joined True Value in 2013. Forty-one were brand new stores with the remainder being conversions from other co-ops and buying organizations. Included in these conversions to True Value was new affiliate member Family Farm & Home, a 28-store chain based in Michigan, which was a significant win for the co-op.
Our future is bright. We have a well-known and iconic brand, and we are doing great work to focus and strengthen it. We are financially solid, with the resources we need to invest in our success. We have an excellent leadership team, a group of bright, highly committed associates, a network of great suppliers and, most important, a family of True Value retailers and affiliates who are truly dedicated to their customers and communities.
We talk about change, but we want to remind you of what won’t change: Our values. Customer first, respect, integrity, driven to succeed, teamwork and stewardship. They are the bedrock of our business, and the chairman and I share them personally. In fact, along with my passion for the independent retailer, the company values are one of the main reasons I chose to join True Value.
We have an exciting journey in front of us. It will not be easy, but we have an opportunity to build something better, something more relevant, something that endures.
Together we are going to demonstrate that True Value’s best years are ahead.
John R. Hartmann
President and Chief Executive Officer
Brent A. Burger
Chairman of the Board