Power Tools Industry September 2023

Stanley, Black & Decker
Q2 revenues fell 5% to $4.2 billion. The quarterly loss was less than expected as cost-cutting measures helped offset the impact from falling DIY demand for power tools and the divestiture of their oil and gas business.
 
Q2 Conference Call with Analysts:
 
Chris Nelson started in June as Chief Operating Officer and President of the Tools & Outdoor business. SB&D’s senior leadership team is now in place. Chris Nelson has spent at least a day with every business unit and has visited seven factories as well.
 
Tools & Outdoor total revenue was $3.5 billion, down 5% organically versus Q2 2022 as favorable price realization was more than offset by volume decline. North America was down mid-single digits organically due to lower consumer outdoor and DIY tool demand as well as modest customer destocking.
 
Power tools declined 4% organically as softer consumer market demand persisted and customers remained cautious with inventory levels. This was still an improvement over the first quarter, due to continued strength from Pros and a healthier supply chain that allowed for better service levels and increased promotional opportunities, particularly for DeWalt and Craftsman.
 
US retail POS for Tools & Outdoors grew compared to 2019 due to price and strong demand from Pros. POS also grew for the first four weeks of July, a positive sign for the second half of the year. Operationally, they will continue to focus on inventory reduction and cash generation.
 
Outdoor organic revenue declined 12% due to the challenging start to the outdoor season persisting for the entire season along with notable softness in POS and replenishment in the quarter, particularly surrounding higher-price-point retail products.
 
Contractor backlog remains healthy for repair and remodeling activity.
 
Channel partners continue to be focused on managing inventory. They expect that will prove to be a modest headwind for 2023. They continue to monitor demand and plan for a variety of possible scenarios.
 
The fully-integrated campaign they launched for Craftsman in Q2 has driven both online and offline traffic to their key retail partners and improved POS. The campaign was also designed to incentivize customers to make repeat purchases and get the attention of new users.
 
Their engineering team is continuing to work on developing best-in-class products and job site solutions that improve productivity and performance and enhance safety. 
 
Their cost-reduction program is running modestly ahead of schedule and should deliver $1 billion in pre-tax savings this year. About half the savings were related to manufacturing costs.
 
They have now decommissioned more than 20,000 SKUs and have about 50,000 to go. Because they have substitutes for almost all products, they believe the revenue risk is less than $50 million annually. 
 
In the second quarter they reduced inventory by $375 million, bringing their year-to-date progress to $575 million. Over the last 12 months, they’ve achieved approximately $1.4 billion in inventory reduction.
 
They lowered their guidance and are now planning for total company organic growth to be down mid-single digits for the year. They expect Tools & Outdoor total organic revenue to be down mid-single to high-single digits for the year.
 
They are reducing their expectations for outdoors and are expecting continued DIY softness. Because their supply chain position has been improved, they think pricing will be flat to slightly negative.
 
They expect to resume cordless power tool promotions in the second half of the year. They intend to pursue continuing electrification in some categories that are rapidly changing.
 
They need to invest in more engineering resources in key areas in order to take advantage of opportunities and drive innovation. They also need to invest more in digital marketing, social media and engaging their end users.
 
Freight costs have gone down dramatically and metals and other commodities are starting to pull back. However, they don’t see any need to adjust their pricing strategy because they want DeWalt to be priced at a premium versus competitors.
 
Consumers are continuing to shift their spending and investing less in home improvements and remodeling.
 
TTI/Techtronic Industries
First-half sales fell 2.2% to US $6.9 billion. Sales in North America fell 3.9%. Milwaukee sales grew a strong 8.7%.
 
First Half Conference Call with Analysts:
 
The consumer business was down 15% in the first half and they believe their global retail partners are still reducing inventory, but they believe they are coming to the end of that cycle.
 
They have stepped back and become more conservative. They are currently focused on inventory reduction and cash flow management.
 
They will continue driving down inventory in the second half. And after aggressively spending over the past three years, they will cut back on capital investments.
 
They scaled back new product development on the consumer side of the business and will only invest in the highest priorities until they see demand begin to pick up again. However, they still have products in the pipeline.
 
Last year they were up 10% in the first half so comps are tough. In 2021 they grew 52%. So in reality they have basically held on to the massive growth in market share they achieved over the past five years.
 
Their Milwaukee business grew 9% globally and 7% in the US. It has good margins and is still growing. They project Milwaukee will grow in the high single- or low double-digits through 2026. There is a lot of potential to grow the Milwaukee business outside of the US. Milwaukee has a total of 425 cordless products.
 
They just launched Forge, a next-generation battery platform they say is the most powerful, longest-lasting, easiest and fastest to charge battery system available today. The new cell technology they are using cuts down on friction and heat.
 
They are aggressively reducing headcount and expenses for the Ryobi DIY business, part of the consumer group, in order to set themselves up for the future. Ryobi continues to be the global market leader in cordless DIY tools.
 
They believe they will deliver mid-single-digit growth for the company in the second half after an excellent July, when they saw strong demand and stronger POS.
 
The rollout of the lithium sub-compact system for Ryobi last year that uses a USB charging system has allowed them to produce a whole range of superior sub-compact cordless products, which has given them access to new users with smaller homes or condos who are intermittent DIYers. This also allows them to address the market for in-home assembly of things such as bicycles, fitness equipment and baby items that all need assembly. They have many new USB products in the pipeline.
 
Ryobi One+ has more than 300 products now and they intend to be the leader in 40V systems. This system guarantees brand loyalty and means that people are already pre-disposed to buying a product that works with the system they have. 

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