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Message to Shareholders: Jim Ackroyd

A message from the
Chairman of the Board

Dear Ace Shareholders,

As I retire from the board in May, I want to take this opportunity to say thank you. More specifically, I want to thank the Board of Directors for their continued support and guidance over the years. I want to thank our dedicated Ace corporate team and our CEO for his steadfast leadership and being a true partner. Above all, I want to thank our amazing owners and their teams for making Ace the most Helpful Hardware stores on the planet!

I am pleased that Brett Stephenson, President of Ace Hardware Home Centers, Inc., will be taking over as Chairman of the Board on May 21, 2019. Brett has been a member of the Board for seven years, and currently serves as Chairman of the Compensation Committee. He also serves as the Chairman of the Board for Westlake Ace Hardware. Brett owns two stores in Wyoming and four stores in Colorado, and is an active member of the Rocky Mountain Ace Store Dealer group. I believe Ace is in good hands with Brett and the Board as they continue to be an advocate for our shareholders.

The main responsibility of the Board is to collaborate with management on a strategy that grows the enterprise and ensures our future. We think of our future growth in terms of years and decades rather than months or quarters. This is evidenced by the investments we have made in our distribution network, the resources we have poured into store programs and our people, and the opportunities we provide to our owners to improve and grow their businesses.

As a proud shareholder of this co-op and the owner of Vision Ace Hardware in Florida, we have embraced the programs and procedures Ace offers to grow our business. We have focused our energy and efforts on localizing our stores to be a part of the communities we serve. As I visit successful chains and stores around the country, I find the most successful of them follow the same philosophy.

Stores that achieve Platinum and Pinnacle status are laser-focused on their customers and embrace key performance drivers and programs. This approach enables those stores to provide a better overall shopping experience and ultimately has a positive correlation with sales. On average, Platinum and Pinnacle stores perform better as evidenced by year-over-year same-store sales growth.

Year Over Years Sales 2018 vs. 2017 - Sales - Trans - GP$'s - Visionary - 1.8% - -1.0% - 1.3% - Platinum Performance Retailer - 2.4% - -0.6% - 2.5% - Pinnacle Performance Retailer - 3.7% - 0.4% - 2.9% - Rolling 12 months: Jan '18-Dec '18 vs. LY'

Many stores are also seizing the opportunity to accelerate their revenue growth by focusing on their business to business (B2B) sales. Building this part of the business can provide a healthier, more sustainable store model. In 2018, Ace B2B certified stores saw a 5.2 percent increase in B2B sales.

There is tremendous potential for growth with Ace. By embracing the tools, programs, and support network we have at our disposal, we will continue to see positive results as we deliver the most helpful, convenient shopping experience our customers have come to expect from their local Ace.

It has been my honor and privilege to serve on the Board, thank you all for the opportunity.

Jim Ackroyd Signature

James W. Ackroyd
Chairman of the Board

2018 Successful Business Drivers
Ace
Reward Sales
Training
Hours
% of Stores
using Mango
Not All-In on Ace Rewards
All-In on Ace Rewards
All Other Stores
Platinum
Pinnacle
Board of Directors
James W. Ackroyd James W. Ackroyd
Chairman
Richard W. Bennet, III Richard W. Bennet, III
Brett G. Stephenson Brett G. Stephenson
Stewart C. Elliott, Jr. Stewart C. Elliott, Jr.
Kristen A. Grunder Kristen A. Grunder
Amy E. Kaplanis Amy E. Kaplanis
David F. Karsten David F. Karsten
Karen J. May Karen J. May
Mark J. Schulein Mark J. Schulein
message from the President & CEO