Stanley Black & Decker
Q1 sales rose 4% to $3.3 billion. Organic growth rose 5%, acquisitions contributed 3% and price added 2%, while negative currency subtracted 4%.
Tools & Storage revenues increased 3%, with 7% organic growth offset by 4 points of currency pressure. Organic growth included 5% from volume and 2% from price. All regions and business units contributed to growth. They raised their full-year adjusted EPS guidance by a nickel to a range of $8.50 to $8.70, with organic growth of 4%. They expect Tools & Storage to deliver mid-single digit organic growth this year.
From their Q1 Conference Call with Analysts:
The operating margin for Tools & Storage fell to 12.1% as positive benefits were more than offset by $160 million in 2018 carryover impacts from currency, commodity inflation and tariffs. They continue to see the benefits from the price actions they took in the second half of 2018 and the additional price increases implemented this year in response to the List 3 tariffs.
Power Tools and Equipment delivered 6% organic growth, with solid contribution from new products launched under the Craftsman, DeWalt and FlexVolt brands. Hand tools, accessories and storage delivered 9% organic growth, with contributions from Craftsman as well as synergies from Lenox and Irwin.
Tools & Storage continues to carry high levels of inventory to support the Craftsman rollout and other brand transitions.
North America led the way, with 11% growth driven by the US retail channel, which posted growth in the high teens. North America’s growth continues to be fueled by the Craftsman brand rollout, new product innovations and price realization. Lowe’s and Ace Hardware are seeing great momentum from the Craftsman rollout, with strong positive response from their customers as products roll out in stores.
There was growth across all categories in Craftsman, and their expansion plan remains on track. They are well on their way to delivering their target of $1 billion in incremental sales by 2021.
They think Craftsman will contribute about 3% to Tools & Storage growth this year. They will have a better sense of Craftsman’s overall contribution for the year after they complete the rollout at Lowe’s stores during the second quarter. The market is more stable than they had expected given the choppiness in the housing market. They have moved the rollout of new customers for Craftsman, which would include Amazon, to the beginning of the second half of the year to make sure they can accommodate the stronger-than-anticipated demand from current customers.
About one-third of Craftsman products sold in the US are currently being manufactured domestically. When they took over the brand, virtually all of the manufacturing was done outside the US. They plan to double the percentage of Craftsman products being made in the US going forward and will provide more detail in May.
They have just begun to roll out Stanley and Stanley FatMax products and they are now flowing through the supply chain and out into the stores They should begin to appear on store shelves in May.
The DeWalt FlexVolt platform was up double-digits for the quarter as they grew core products and expanded into the outdoor category.
There was a slow start to the outdoor season in the first quarter, with much of the country experiencing very wet or snowy weather.
They expect customers will be able to choose between gas or electric at the same price point in categories like string trimmers, hedge trimmers, blowers, chainsaws and other outdoor products that have traditionally been gas-powered. It’s the first time in history there has not been a price differential between the two categories. With products like walk-behind and ride-on mowers there is still a gap between gas and electric, and they have more work to do before they will be able to close that gap.
They launched the 20-volt Atomic series globally. Atomic augments the existing DeWalt 20 volt line, which is now the largest professional cordless system in the world with well over 200 products. Atomic is just beginning to ship and they expect to see incremental growth in Pro power tools within the year. They will detail this innovation during their investor day on May 16.
They refer to their actions to get their margins back up into their historic range as their margin resiliency initiative. There will be some modest impact this year and next year but the real impact will be in 2021.
Tariffs remain a strategic wild card for everyone, with no one sure whether or not the US will make a deal with China, and if we do, what that will mean for tariffs. SB&D also thinks there could be a bit more currency pressure as they move through the year.
They closed two strategic transactions during the quarter, completing their acquisition of the Pengo and Paladin businesses from IES as well as their 20% equity investment in MTD, a large supplier of Craftsman outdoor power equipment as well as the owner of the Cub Cadet and Troy-Bilt brands. They described their investment in MTD as a strategic bet on the long-term growth potential of the $20 billion lawn and garden market.
They are very confident they will get MTD’s profitability up to a point where they will be able to add it to their portfolio in 2021 or 2022 in a way that will be very good additional growth for them and also very good for MTD.
SB&D opened a new high-tech manufacturing facility in Elyria, Ohio that will produce stud welding equipment and fasteners for construction, industrial and defense sectors. The facility is expected to add industrial Internet of Things capability to its machines by the third quarter. When it starts up, there will be about 70 employees at the facility.
SB&D opened Manufactory 4.0 in Hartford, Connecticut. The state of the art facility, which employs about 50 industry experts, is designed to build solutions to help digitalize plant operations. Part of the goal is to replace old factory equipment with new technologies. The center will enable SB&D to rapidly test and deploy technologies and engage with a wide range of public and private partners. CEO Jim Loree says they see the center becoming the hub of the next industrial revolution. SB&D currently has three locations in the US they’ve designated as “Lighthouse Factories” that have partially implemented Industry 4.0 across their facilities. They plan to update an additional 25 facilities this year.
SB&D has agreed to a $1.9 million settlement with the Treasury Department (OFAC) for violating the Iranian Transactions and Sanctions Regulations through their Chinese subsidiary Jiangsu Guoqiang Tools Company (GTC) between June 2013 and December 2014. Apparently GTC failed to comply with SB&Ds procedures and kept exporting products to Iran during the sanctions. When SB&D discovered their error, they reported it to OFAC, and eventually agreed to the settlement.
SB&D was named one of the 100 Most Reputable Companies in the United States by the Reputation Institute. The Institute surveys 167,000 respondents from the general public and evaluates companies across seven dimensions, including Products & Services, Innovation, Workplace, Governance, Citizenship, Leadership and Performance. SB&D ranked number 28 on the list.
CEO Jim Loree was tapped for Connecticut Governor Ned Lamont’s revamped economic development team after he played a key role on a state commission seeking to improve Connecticut’s competitiveness and fiscal condition.
The Department of Construction Management at Colorado State University is expanding their leadership program in training and research for 3D building design, construction management, digital fabrication, civil infrastructure, geomatics and the sustainable built environment. An in-kind grant from Trimble will enable CSU to integrate Trimble solutions that are transforming how building and living environments are designed and constructed. The program will be recognized as “Technologies by Trimble.” The department’s labs will include RalWorks scanning software, Trimble Business Center, Vico Office Suite, Tekla Structures and 3D modeling software SketchUp Pro, among others.
© Robert Bosch Tool Corporation. All rights reserved, no copying or reproducing is permitted without prior written approval.