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Q3 revenue rose 9.0% to $4.12 billion. SB&D lowered their guidance for 2022 and now expects lower revenue for the fourth quarter, mainly driven by their performance in Europe. SB&D reported a high inventory backlog, but expects continued inventory reduction in the fourth quarter, which they believe will translate to capital improvement and positive cash flow. SB&D expects rising currency headwinds and higher production curtailment and destocking costs for the rest of the year. For full year 2022, they expect low double-digit total revenue growth for the Company. Q3 Conference Call: Organic revenue declined 2%, which was an improvement over the first half, due to increased professional power tool supply. Price realization improved 8% versus 2021. US retail point of sale was relatively consistent with the levels at the end of Q2, supported by price and professional demand, but DIY consumer demand continued to soften. Tools & Outdoor revenue grew 10% to $3.5 billion as the MTD and Excel outdoor acquisitions contributed nearly $600 million of revenue or approximately 18% growth, and price realization contributed 7%. These factors were partially offset by a 12% decline in volume and a negative 3% impact from currency. Tools & Outdoor organic revenue is expected to decline in the mid- to high single-digits. Margins continue to be down versus prior year as a result of inflation, acquisition mix and volume deleverage. They will continue to focus on the outdoor acquisition synergy realization as a lever to improve margins within this business unit over the coming years. Across the North American channels, organic sales in retail and ecommerce were down versus 2021 levels. However, compared to a pre-pandemic 2019 baseline, organic sales performance was up double-digits across these channels. Power Tools declined 2% organically, an improvement over the first half of the year. They are seeing better semiconductor supply, which helped raise customer fill rates and contributed to positive organic growth in North America. They expect further progress in the fourth quarter and are following a normalized merchandising and promotional schedule for professional products. Hand tools declined 7% organically, driven by soft retail consumer demand in European customer destock. These factors were partially offset by strength among Pro customers in the US commercial and industrial channels as well as successful new product launches in Craftsman plastic storage. Their improved supply position set them up for strong merchandising support for the holidays across all major brands and categories, and they did sizable promotional shipments to many customers in September and October. They have gained back some key aisle end caps and off-shelf promotion areas after 12 months of limited promotional activity. They believe there's $1.5 to $2 billion of inventory that still needs to be liquidated and will aggressively pursue that. In July they assumed their production levels would begin to normalize at year-end but are now planning to maintain low production levels through the first quarter of 2023. The supply constraints from the semiconductor shortage are mostly behind them. Now they can focus on making sure they’re meeting customer demand. Their on-shelf percentage of all products within major customers looks very good with 95%+ of products on the shelf. They have very little out-of-stock situations now. Their near-term priority is cash generation, and September marked a turning point with planned production curtailments beginning to meaningfully contribute to inventory reductions, supporting positive cash generation in the month. They plan to continue production curtailments in Q4. Commodity prices have declined between 30% and 50% since April. However, lower commodity prices don’t mean they can lower product prices. They still have high-cost inventory in their system that has to flow through and be sold to their customers and eventually to end users, which will probably take a minimum of nine to 12 months. They have optimized their corporate structure to make it flatter, leaner and more responsive. And they have focused their operating model and are transforming their supply chain to drive efficiency and fuel reinvestment. They are elevating three key priorities: one, end user obsession and innovation; two, customer focus; and three, delivering operational and functional excellence. They expect to grow organic revenue 2x to 3x the market over the long term. Their supply chain transformation should enable them to improve their customer service levels and operational efficiency and get gross margins back to the 35% plus level, with customer fill rates greater than 95%. They will begin the optimization of their distribution network in the fourth quarter. They have gained some early traction and are on pace to deliver the savings targeted for 2022. They will continue to build momentum into 2023. Other News: DeWalt will launch a new Trade Scholarship to support education across the country in response to the growing shortage of skilled labor. A recent survey of home and building contractors (see Trends) cited a lack of awareness around career paths in construction as the biggest barrier, followed by outside influences, including parents, the media etc.) that discourage young people from exploring the trades. In addition, nearly half of young people are unaware of how much money they can make in the trades or what opportunities are available. © Robert Bosch Tool Corporation. All rights reserved, no copying or reproducing is permitted without prior written approval.
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