Power Tool Industry December 2022
Stanley Black & Decker
Morgan Stanley Laguna Conference:
They are focused on streamlining their business, 90% of which is in the tools and outdoor market. That means focusing on their brands, their people and supporting innovation. After the “massive wave of inflation” they’ve dealt with over the past 18 months they need to streamline and de-layer corporate, improve day-to-day operations and transform their supply chain into one where more products are made in North America and parts of the world other than Asia.
They believe supply chain transformation can drive $1.5 billion of value. They will also be reducing the complexity of their product families and SKUs in order to improve their manufacturing footprint and supply chain.
They also want to reduce the number of suppliers even further and consolidate their facilities. They plan to reduce facilities by 30% over the next three years.
They will also focus on getting back to operational excellence and lean productivity. They lost some of that during the pandemic as they tried to meet unexpectedly high levels of demand. They need to get gross margins back to 35% or better in the tools business.
They are focused on removing both cost and complexity; they will use some of the savings to invest in growing their core strengths, improving their digital marketing and investing in the supply chain in order to help drive their transformation. Continuing to improve fill rates with their customers will also help them grow their businesses.
About 20% of their SKUs generate 80% of their revenue. So they need to review the 80% of other SKUs and decide which ones are necessary to meet the needs of their end users and customers. They believe many SKUs can be discontinued.
Their consumer business is slightly down from pre-pandemic levels. On the Pro side, the business is up and continues to grow. There is a healthy backlog of work for construction workers, general contractors and builders. Companies that supply materials to construction also have significant backlogs of six to nine months.
They are grappling with what the state of the housing industry will be in 2023, and whether it will slow down the construction market. They believe there will be at least a modest pullback, but nothing like occurred between 2007 and 2009 when there was a massive correction.
Real estate values are probably overinflated but there is still a great need for new construction of both homes and commercial buildings as well as infrastructure.
September and October are big shipping months as their customers bring in merchandise for the holidays and they are on track to fulfill those orders and meet expectations.
The skilled workforce in construction took a big hit in the Great Recession and never recovered. People who left the industry then found other jobs. It is slowly improving. However, the current shortage of workers ensures that if there is a mild recession most workers will ride it out rather than leave their profession.
They want as much organic growth as possible, but it has to be at the right profit levels that produce margins of 35% or more. They feel they are slugging it out with their major competitor (TTI) and they will keep aggressively going after share gains.
After their competitors go through their rounds of price increases, they will evaluate and see where their price points stack up and decide how to respond.
They want to work at increasing their presence with one customer where their major competitor has a bigger presence. At other customers’ stores, their brands dominate. They intend to go after more share with all their customers.
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