Power Tool Industry February 2021
Stanley Black & Decker
Q4 revenue rose 19% to $4.4 billion with organic growth of 16%.
Q4 Tools & Storage revenue rose 25% with organic revenue rising 23% and price contributing 2%.
FY 2020 revenue rose 1% to $4.408 billion with 10% organic growth in the second half offsetting the pandemically impacted first half.
Q4 and FY 2020 Conference Call:
Despite record Q4 results and FY 2020 coming in above expectations, CEO Jim Loree expects the operating environment for 2021 to be volatile, uncertain, complex and ambiguous, which he dubbed VUCA.
For FY 2021 they expect 4% to 8% organic growth. The MTD acquisition in the second half is not included in their guidance.
The second half of 2020 proved to be an all-out test of their supply chain resiliency and their ability to keep up with demand. 2020 proved to be the most difficult year they’ve ever faced.
Customer inventory levels had been substantially reduced by mid-year and global factories were running at historically high levels, as they still are today. They faced rolling labor shortages, supplier issues and various government regulations and restrictions.
In Q4 all regions in the US benefited from exceptionally strong revenue trends related to consumers growing dedication to indoor and outdoor home improvements. North America was up 27% organically. Retail continued to see exceptionally strong POS, delivering 36% organic growth.
Power Tools delivered 32% organic growth in Q4, thanks to strong trends, excellent execution over the holidays and new product introductions.
Power Tools continues to see strong share gains from new innovations in FlexVolt, Atomic and Xtreme, which now account for a combined total of $600 million of annual revenue.
The Hand Tools, Accessories and Storage business grew 15% organically in Q4, supported by new product launches, strong performances in emerging markets and Mac Tools, combined with the rebound in professional demand.
Retailer inventories ended the year slightly below Q3 levels and well below prior-year.
Construction customers within the North American commercial and industrial channels were up in the mid-teens in Q4, another strong signal that professional demand is back and accelerating.
They believe the investments they made will drive further organic growth in 2021 and 2022. They invested in further developing their brands via increasing digital marketing, distribution capacity and adding additional commercial resources to support both brick-and-mortar and ecommerce business. Growth catalysts included FlexVolt, Craftsman, Atomic, Xtreme and Power Detect, along with an overall boost from ecommerce.
The industrial portion of the Tools segment is in the midst of a cyclical rebound.
They expect to exercise their option to acquire the remaining 80% of MTD during the second half with the potential addition of up to $3 billion in revenue from MTD in 2022.
They have designed, developed and are launching new cordless 20 volt DeWalt walk-behind mowers and MTD will launch a new lineup of gas handheld products under the Black & Decker brand.
For 2021 they expect strong growth in Tools & Storage to continue and expect organic revenue growth for the entire company between 21% and 26% during the first quarter.
They expect Tools & Storage to grow 30% to 40% organically during Q1. That represents $600 million to $800 million of organic growth in Q1.
For FY 2021 they expect Tools & Storage to grow 4% to 8%, based on organic growth of 27% to 32% in the first half and a decline of 7% to 12% in the second half. They have not assumed the market will remain robust for the entire year of 2021 but will be ready to respond if it does. About 75% to 80% of growth is weighted to the US and North America.
Their guidance assumes continuing strong demand and the potential for customer inventories to start to move back up to historic levels. They expect the strong trends to moderate in the second quarter but still remain robust. Beginning in May 2020 they built up more than $500 million in inventory to serve the demand that was occurring, which enabled them to get ahead and stay ahead.
For the second half they expect growth to moderate and will have to deal with comparisons to historically high comp growth during the second half of 2020.
They expect $125 million of carryover cost savings net the reversal of temporary actions from the cost reduction program they implemented in the second half of 2020.
They believe that their installed customer base for battery systems is very important to growth, as more and more first timers buy new battery systems and then invest in additional tools. Growth overall could be a short-term bubble that moderates over time or a trend that continues to grow modestly over a number of years.
CEO Jim Loree believes that once people discover DIY it becomes “somewhat addictive” and they invest more. Eventually that acceleration declines over time.
Pros started coming back in the third quarter and now are so busy it is impossible to get a contractor in much of the country.
January 2021 is on track to deliver $400 million in growth for the month in Tools & Storage. January is typically a very slow month, and in 2020 February and March were both negative comps as well.
From an inflation perspective they see the potential for $75 million of headwinds, primarily from steel, base metals, transportation, electronic components and resins. They generally lock in supply agreements one to two quarters out. They have about 100 people focused full time on inflation trends and estimate that drives between $100 million and $150 million of annual value.
The billion dollars in headwinds they faced between 2017 and 2019 are behind them, and were driven by inflation, tariffs and foreign exchange, which combined to create headwinds too large to offset with the normal methods they typically employ. That is not a material issue this year.
Their commitment to their “Make Where You Sell” campaign over the past three or four years has had the effect of significantly adding capacity throughout North America, including Mexico and the US. Major plants in both Mexico and the US will be coming online later in 2021.
In the third and fourth quarters of 2020 they employed many heroic measures to meet demand, including air freight and expediting products; eventually that will not be necessary as more capacity comes online.
They successfully exceeded all of their five-year medium- term environmental health and safety goals established in 2015, including a 20% reduction in energy consumption, carbon emissions, water use and waste generated by facilities.
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