Florida Pneumatic markets its air tool products to four primary sectors within the pneumatic tool market; Automotive, Retail, Aerospace and Industrial. It also generates revenue from its Berkley products line, as well as a line of air filters and other OEM parts (“Other”).
Automotive revenue declined this quarter, compared to the same period in 2022, due primarily to an across-the-board price increase in all distribution channels in order to address rising input costs. This change in pricing strategy led to a decline in the number of unit sales and thus overall revenue in this category. However, Automotive gross margin improved as a result of this change. Florida Pneumatic’s third quarter 2023 Retail revenue improved a modest 1.7%, when compared to the same period in the prior year, despite The Home Depot’s (“THD”) continued efforts that began earlier this year of reducing the number of individual stock keeping units offered, as well as the quantity of each, and reducing the display area of their pneumatic tools. We believe that THD is facing increased pressure from on-line distributors, as well as other “brick and mortar” retailers that are expanding their presence in this product line. Aerospace revenue improved 12.8% when comparing the third quarter of 2023 to the same period in 2022. This improvement was driven by, among other factors, increased demand for new consumable parts, that Jiffy had begun to market earlier this year, and improved market conditions in both the commercial and military aviation. In addition, Jiffy has increased its sales in Europe significantly and is also seeing initial sales of recently introduced products. Lastly, the slight decline in Industrial revenue was due primarily to supply chain issues and by economic uncertainty in the sector.
Florida Pneumatic’s nine-month revenue analysis is quite similar to that of its third quarter 2023 results. When compared to the nine-month period ended September 30, 2022, Florida Pneumatic’s third quarter 2023 Automotive revenue declined due primarily to our revised pricing and marketing changes put into effect mid-2022. However, as will be discussed later in this discussion and analysis, this change contributed to an overall improvement in Florida Pneumatic’s gross margin. The significant factors causing the decline in our Retail revenue for the nine-month periods ended September 30, 2023, compared to the same period in 2022 was the product rollout that occurred in the second quarter of 2022 with no such event occurring during 2023. This year-over-year decline was also driven by THD’s decision to lower its inventory of floor display space this year. During the nine-month period ended September 30, 2023, Aerospace revenue increased 26.1%, when compared to the same period in the prior year. The improvement was driven by resurgence in both the commercial and military components of the Aerospace sector, and increased demand for the new, consumable parts that Jiffy has begun to market. In addition, Jiffy has increased its sales in Europe, and is also seeing initial sales of recently introduced products.
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