Stanley Black & Decker
Q2 revenue rose 10% to $3.2 billion. Net sales rose 17% in the Tools & Storage segment, and organic growth in Tools & Storage was 8%. Their recent acquisitions of Newell Tools and the Craftsman brand added 7 points of revenue growth.
From their Q2 Conference Call with Analysts:
Their Tools business is greatly exceeding their expectations, and the integration of Newell Tools and Craftsman is going well.
Tools & Storage revenues were up 17% in the quarter, due to 8% organic growth and an 11-point contribution from acquisitions, partially offset by 2 points of pressure from the combined impact of currency and divestitures.
Each Tools & Storage region posted organic growth in the quarter, with North America leading the way with 9% organic growth. There was high single-digit growth in their U.S. industrial and commercial channels and low double-digit growth within U.S. retail, which includes ecommerce.
North American POS data was up in the mid-single digits, which was very strong because it was being comped against mid-teen POS growth from Q2 2016.
The power tools and equipment group was up 10%, led by professional power tools as well as contributions from the outdoor and home products segment. Within the Tools & Storage SBUs, all lines were positive for the quarter. Tools & Storage also benefitted from new product innovation, including FlexVolt and strong commercial execution.
FlexVolt sales were approximately $60 million for the quarter. Based on year-to-date results and planned second half FlexVolt product launches they believe they will approach $300 million in revenue from FlexVolt in 2017. When factoring in cannibalization, that represents $200 million of SB&D revenue or $100 million of growth compared to 2016. FlexVolt margins will be a little bit lower than line average throughout this year. They expect that dynamic to change as volume increases and they have less promotional activity.
They noted there has been no answer in the market to FlexVolt yet. They are building an install base, which lays the foundation for future growth and expansion. They believe that sooner or later a competitor will come out with a similar product.
Hand tools, accessories and storage organization delivered 5% growth on new product introductions and benefitted from strong performance in the North American industrial end markets, led by the Mac Tools business.
The Lennox and Irwin teams are excited to be part of a larger and highly committed tool business. Their commercial teams are in the process of building plants to support revenue synergies.
For Craftsman, they are working to develop commercial strategies and are confident they will achieve approximately $100 million a year in incremental annual revenue growth for the foreseeable future. They are planning for a mid-2018 launch of Craftsman outside of Sears. They have started a new distribution center in Charlotte, North Carolina and are aggressively moving supply and customer fulfillment into the new facility to support the Craftsman business.
They didn’t want to go into too much detail about their Craftsman plans, but said that they are designing a complete and comprehensive product line that spans all categories that will be a high-quality, high-value line and will incorporate some of the best attributes of their high-value products from across all their brands into the designs. Customer discussions are going very well and interest is very high. They will make some decisions about how they expect to go to market from a channel perspective in the late third or early fourth quarter.
They expect to improve their working capital turns in the second half of the year, from 7.1 to 9 times by the end of the year.
They are anticipating a combined commodity inflation and FX headwind of about $100 to $105 million. Currency pressures have fallen since the first quarter but they are seeing increased pressures in commodities, particularly steel and some purchased components.
They are starting to get more heavily into industry 4.0, which involves creating smart factories and then embellishing them with robotics and 3D printing. They are not yet at the robotics and 3D printing phases, but are definitely making a lot of progress in making the factories more data-driven in real time, and are seeing above average productivity.
From the William Blair Growth Conference:
They have organic top line growth of more than 6.5%. They have divested themselves of seven smaller businesses with the last year and a half.
They have been very active over the past few years in Building Information Modeling (BIM). This is not about design, it’s about steel models that actually represent detail down to the level of an anchor bolt for accuracy. They work with the high-value trade in the vertical construction industry.
Both the building and infrastructure segments are underserved and underpenetrated by technology; they look for markets where they can deliver a value proposition that drives productivity. They described construction as a very unproductive industry. About 80% of projects are late, and between 20% and 40% are over budget. They believe they have the technology that can challenge the industry. They manage more than 11 million models and components in their solutions.
They have two joint ventures with Caterpillar and one with Hilti. In North America more than 10,000 surveyors and mapping firms use their technology.
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