Earnings call transcript Q2 2023

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Operator

Welcome to the Second Quarter 2023 Stanley Black & Decker Earnings Conference Call. My name is Shannon and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

the Dennis to Lange. turn of Vice now Relations, Investor will call the over President I Mr. Lange, may you begin.

Dennis Lange

XXXX Thank you, for Decker's us thanks for quarter Shannon. Good morning, Stanley everyone, Black and joining second webcast. &

CEO; this addition of in Tools and and is President and webcast the Chris Pat for Nelson, to EVP Q&A On Hallinan, us President is Don and myself Allan, Outdoor. and morning joining EVP, CFO; COO,

refer morning's presentation to was Q&A which earlier morning various which issued This IR we will and matters supplemental of session. beginning replay will also by morning, available Our website. earnings release and Pat today. other followed available review section are and this XX the webcast on A a second AM our be a results Don at our of will this quarter

call Consistent caller. will with question making statements one to prior do, going views. we normally the are on webcast, with forward-looking be be just sticking we based And some our we current as per during

Such that our forward-looking press involve X-K we today. any you in make statements our to and release be statements from such, we filed materially direct Act actual XX future may as events accurate, It's cautionary and filing. We based prove they of the may in results not our statements that may that with most and possible that to uncertainty. differ therefore the on risk are assumptions recent

to call turn now will and over the President Allan. CEO, I our Don

Donald Allan

business on fronts. performance everyone. Black Thank across represented towards significant you, & driving quarter transformation multiple strong organization, Decker's Dennis, execution objectives and second our the Stanley good morning, progress

our to Chris Q&A business. have and us we the Outdoor of him leadership started as am extremely Chief for Before I get team Operating the Officer into President pleased our and our Chris and June call Tools to on in joining welcome today. I Nelson results,

which growth record successful Chris industry strong have and profitable knowledge is a implementing business global experienced innovation of and delivered market expansion. strategies, an track customer-centric share leader with

and to and will Outdoor see execution excited Tools energy is of further He Chris. the and for faster which Welcome, business. I'm position us strong bringing Chris new assume growth. profitable leadership perspective,

With this life, in portfolio we shared is to our the strong critical execute company team Together as senior now our growth place. Decker's expansion. bring core Black vision businesses leadership strategy we will brands, Stanley margin and optimizing of appointment, & to our generate sustainable around global and

confidence our including year. over XXXX of Pat long-term and the growth next of our we the first improved from in three As these cost years the hear made in pursue the second further optimization our business, to position, ahead with chain program million six Deploying you'll months moments, and our supply to the this in of is intended million market to momentum. combined few the gains. $XXX building half progress transforming share us The we've to investments accelerate cost of part as serve investments plan $XXX growth gives markets is compelling opportunities a growth target

our maintaining our per also to amounting dividend cash end, our of quarterly And a that are shareholders. commitment $X.XX to approved we priorities, to Board increase investment value these Directors drive share. modest to return we As to our

and performance. to quarter journey to We the Shifting transformation our of we ahead now our second continuing program. that are advance demonstrated planned

aggregate nearly $X.X which to date brings $XXX our to billion by in inventory program reduced million since mid-XXXX. reduction we Specifically, QX,

for the in savings Reduction Our pre-tax $X Program by the on year. end savings annualized billion Global expected run-rate track of the quarter, million Cost of $XXX delivered in this

flow expansion. of million in into points, our actions free improvement sequential all of was translated consecutive second $XXX of gross margin gross for XX these quarter the And Adjusted cash margin quarter XX.X%, of QX. basis a

versus down in the year-over-year Second Outdoor quarter was to have of addition revenue consumer DIY due impact rates as the prior billion to last oil interest tempered lower and the spending rising consumer year gas completed was divestiture year. negative volume, $X.X which and

for represents business. professional demand roughly side the the our remains market, Tools of which of XX% That solid said,

US Tools relates quarter for to potentially end XXXX for is July it our versus growth a the by weeks prior remained of first bolstered XXXX. POS half healthy Outdoor positive year, a levels, As the signal Outdoor through pro back and products markets, and position retail demand. the point-of-sale of in this four the Tools versus growing price Both and

at units homes a encouraged demand US pace sound. construction June, by also housing million are for of strong rising running a X.X cycle. that remains a interest-rate starts in We're stabilizing residential the market, despite signal

a This is in to one-year complemented trend high permits rising housing homes build and positive to completions. single-family by US

the in contractor activity. US year. balanced with repair this with with for Additionally, backlog a similar European healthy are the healthier and remains end of markets remodel of through softer The trends markets DIY activity professionals construction and backlogs experiencing level

end continued are levels a channel we optimizing strength finally, Across aerospace. we And automotive continued be partners headwind and and to our global be our seeing XXXX. that throughout Industrial markets, to expect on then inventory focused modest in

trends and the Stanley strength, a range Black and pockets outcomes continue we to accordingly if markets Decker with & across respond end remain of current stable see we are while the shift. demand of plan we monitoring So relatively will environment for

a of continue $XXX will XQ to our our XXXX our later $X.XX flow we which $X.XX EPS than we to we reduction range provide prioritization better EPS financial $XXX to have a to million. of plan. our at narrowing focused half, made first Due guidance million in generation, free the diluted in was diluted solid on Pat $X.XX our on color up adjusted narrowing cash be presentation. to the cash loss this the range inventory progress on and of and full-year more coming goals to with Operationally, key adjusted are in

that X% was more Outdoor, and $X.X revenue favourable Beginning down Tools walk Now through by with volume was year, our realization of offset segment total let billion business me price prior than decline. versus the details performance. organically

points We inventory, Tools driven our sequentially as continue down Outdoor was margin and on volume to was benefits and curtailment production XXX operating year rate progress from price by which offset control selling through up by more and operating prior high-cost make volume. margin, cost realization basis was the versus adjusted planned than leverage X.X% lower costs

tool like Organic with fill demand. our lower sequentially comparables tougher now while detail we and as would customers were on by from benefits customer well organically modest destocking. order to rates leveraging some as revenues Outdoor geographies. professional various stronger demand better and lap mid-single-digits saw Outdoor more and and as I provide North was weighted Tools down America consumer DIY our strength

emerging performance revenue European X% Southern was they spots bright X% organically. and Our organic organically down markets' regions down as high-single-digit was with UK in posted growth. The both the

particularly you strong impacts was the Brazil, demand This when in channels. growth. led Russian the However, our business from exit, exclude organic by high-single-digit professional remaining the had within countries

our we XX%. Moving business of experienced revenue performance, to strategic organic unit an Outdoor decline

start widely quarter point in industry, entire the did by for challenging the the As POS price products. persisted softness replenishment surrounding the outdoor to many in season. reported and in especially season this higher we experience retail notable And

Notably, volume introduced earlier DIY categories portfolio was including business expanded growth and overcame year. versus DEWALT strength. softline the The prior international this storage softer flat offerings hand with and growth solution organically TOUGHSYSTEM and year tools certain X.X

levels with levels. service the market supply consumer result better with notably quarter momentum, X% leading as Power to demand and inventory softer coupled promotional opportunities, remain organically saw and chain, persisted declined This customers CRAFTSMAN. better as from was continued first with healthier and positive tools we particularly impacts Pro cautious than a DEWALT increased

business, industrial adjusted oil and operating year, continued XQ to as and points strong margin last industrial operating in XX%. declined was adjusted improved actions by this team. had We financial represents for gas This our the to which The versus total basis execution outcome realization than offset more XXX and margin great organic growth segment divestiture of realization XXXX and including year's our the quarter. cost price a quarter shifting Now deliver X% X% revenue by versus currency. price prior

up along aerospace share was offset X%, primarily tools' of destocking of revenue as This including cyclical and declines, result Fastening a Within XX% these captured this inventory XX% by with we favourable growth and levels. performance attachment segment customers revenues as partially rebounds organic in growth fastening auto industrial to their markets Engineered organic of gains. were optimize

remain for we the second temporary fundamentals reductions to long-term impact year solid, growth inventory continue businesses believe industrial While as the well. will half channel in these of

business strength I want summary, energizing the with transformational pockets Black in is to focus a our improve navigate market In priorities. several continue as key very next take margins. thank while of of steps Decker of to the several few our areas The we entire pressure and continues we your organization our team the Stanley to for on conditions progress date journey. to & encouraging

strategy next a Turning like the to slide. would growth. and to accelerate Decker transform market consistent that the of I Black to we importance gains Stanley underscore share launched year drive & to organic ago the

teams traction our primary areas gaining on and of world executing Our the around are focus.

well electrification, end-users One, chain to and Two, optimization. transformation as market. and prioritizing while And gross market believe global and that the inventory to to and better times penetration the channel the for simplifying and continuing achieve impact more generation growth accelerating shifting customers. Three, to innovation, levels, demand. cash adjusted plus fill margins streamlining resources organic various and improving match organization XX% of historical customer we times advance investments have our as three rate to inventory to two supply positive four, prioritize direct a return to with operations flow

and path strategic experiences delivering enabling our our financial enhance is of on our investments behind growth electrification to innovation our the continuing brands, activation. to end-user commitments engine, customer iconic transformation business Our and and while commercial pursuit

innovation, activation our are being launches end-users. the in of product our investments global accelerated customers to Key maximize impact with and coupled with market

shown built integrated traffic through was retail fully our example, purchases, engage strong CRAFTSMAN campaign repeat and to users. new partners, we've clutter. key results breaking For our the instant drive To-date, industry initial to

we've run-rate We're the from improved support traffic exciting excited brand in retail and to this driven momentum brand to to positive launched see continued versus prior point-of-sale the demonstrated and share quarter, campaign the Since year online offline growth. both market second campaign. tools CRAFTSMAN

well recently We launched product core expand XX-volt any End-User delivering professional with electrical, design automotive, released experience. on meets leveraging with as durability our two a Sealed new XR site. job the of power, of are XX-volt Head roadmap as versatility, improve We extreme The innovative to to tradespeople. mechanical brand strength Ratchets. the particularly, Pro-inspired offerings the product and mind, DEWALT Pros MAX enhanced The options, also innovation DEWALT needs engineered industries and we as across in MAX the the

These applications. Tools Brushless such DEWALT and automotive fastening introduced Rivet XX-volt nose a XR tools quarter. storage pre-fabrication, as features this and were Cordless each collector have roofing, shot. MAX piece assembly, after rivets on-board The to HVAC, precision for also Design mandrel new and catch

we Series XX-foot innovation measure, core of introduced our example line. DEWALT a Lastly, product tape a LED within great Tough new

engineering well job site performance to solutions and we Our our team across roadmap on electrify continues and safety and the balance push innovation with our enhance of as categories. end-users best-in-class power advance products for as the our as

and over the Pat turn me Let the to on outlook. quarter to insights transformation, our our the now share updates call latest and latest financial progress

Patrick Hallinan

Thank and everyone. morning, you, good

mentioned, half our transformation Don quarter year. on we made the and As of in progress meaningful the first

billion cost of is plan savings in and deliver $X to track year-to-date. on Our XXXX ahead run-rate pre-tax modestly reduction is program of

$XXX program we'll in in manufacturing half million inception. delivered to inventory, were Our our transformation costs the savings second through on turn savings $XXX continuing prioritization the benefits of run-rate $XXX totaling such and starting chain to of see the million XXXX to and in coupled simplification begin off our and Approximately related since XXXX. million balance second as and half sheet, efforts the year-to-date with quarter P&L and these build supply

our is sourcing plan. contributor future life chain for persistent of is the of sustainable of vision supply a with Our is Strategic XXXX progress. the bringing and major ahead organization to savings

are the and additional to capabilities executed we secure are further ensure currently changes in savings. place RFPs We have to successfully activating

savings with along well as reducing bottlenecks coming yielding model in efficiencies downtime. alleviating operating and will the manufacturing manufacturing sustainable practices important an SBD is such This become as the months waste and lean quarters. behind momentum of The productivity source production process as

efficiency improve Our of manufacturing and work network we optimization and track, on utilization as base. asset the logistics to the remains

we SKUs. complexity reduction, XX,XXX relates rationalization an of is our this Finally, as initiative stage, fashion. to the the in it reduction progressing orderly approved SKU At have approximately

products are to coming to their with We our working assist customers with transition over replacing the quarters.

that XX,XXX revenue remaining exit now that risks suitable XX,XXX have will We the less methodical in We without will We reduction, potential which million substitutes over creates annually. have this we loss the decommissioned mitigate effectively believe offerings, of as disruption customers undue via of a believe SKUs. we we our managing complexity or way to share. value size at than all XX

We run-rate savings reduction XXXX. the program the billion of with XXXX our global of savings confident $X end of $X are in and billion of pleased of run-rate ability to end and our progress by cost are by capture the

reduction reduced million quarter, the bringing we progress inventory trajectory. by $XXX million. In second our to Turning progress $XXX gross and our inventory year-to-date to margin

the last we've supply half production inventory chain in planned Over and of curtailments $X.X XXXX. achieved improved during instituted XX approximately the through months, billion conditions the reduction back

pre-pandemic the inventory reduction To build our first-half $XXX of $XXX first-half performance, contextualize the to favourably average approximately million. million compares

the $XXX and that to We flow generate our committed remain commitment be return reduction supporting that represents cash dividends. We $XXX improvement about value days. is expecting to inventory XXX strengthen used to our a are productivity cash which inventory full-year to through to balance DSI, will long-standing be while shareholders our between sheet million, XXXX million ongoing to

ahead transformation Turning pace deflation margin. has to gross execution plan. expectations are of of to freight and favourable as been improvement modestly The

was margin the high-cost headwinds of sequentially approximately up liquidating basis points the basis gross basis points adjusted the from margin in quarter XXX versus impact represented of XXX and first quarter. curtailments quarter production XX XX.X%, Second to second points inventory the XXXX,

our expect cost lower turning adjusted the increased in Moving P&L. an forward, as inventory driven by continued improves from benefit we and improvement transformation gross a margin impact high-cost sequential

Assuming the our XX% margin the other adjusted to demand be guidance, expect gross XX% improvement versus a half, in assumptions levels underpin quarters. that we to and second strong recent

up the into in sales step we While improvement this on of sheet lower-cost corresponds cost-savings that balance already quarters. generated have significant line-of-sight performance, margin a the from the front-half and is coming to and the

our starting the margin remain focused plus gross we'll by to the of XX% reductions on benefits targeted reap conclude, To and supply from delivering we're and transformation inventory chain XXXX. adjusted

Now turning to guidance. XXXX

share $X.XX from negative Our earnings supply and $X.XX to $X.XX, chain to narrowed per inclusive expected to charges, one-time outdoor GAAP of been $X.XX primarily negative the integration. transformation negative range positive global has from

million impacted first the was the per loss benefits narrowed with of estimate XX% profile $XXX non-cash. being impact the charges pre-tax GAAP annual factored GAAP into pre-tax current earnings The tax share XXXX $XXX our approximately is certain and The these to quarterly million tax to interim significantly by of and rate expenses of in taxes half effective assumption.

guidance the However, $X.XX per full-year and This as benefit reverse we to our expect to generate with pre-tax we half. narrowing income be second range previous expect our zero our parallel, to adjusted guidance. In share also tax to are in interim consistent full-year of earnings $X.XX prior we will rate from $X. range to tax relatively guidance

an this At keeping have prior gross other expectation, XX% are by profit the This $X.XX performance interest-rate versus interest We is consistent line, margin. offset $X lower higher the organic expenses to midpoint, growth stronger operating by impact the adjusted better and is full-year we of from the offset margin. our in results XX% approximate operating which, previous with assumed improved midpoint below and guidance framework an modestly driven.

are We million our billion. million $XXX cash range full-year free to to flow $X from narrowing million $XXX to $XXX

and inventory, Outdoor net reduction capital. flow to We half cash be supported a from working the in positive further income, benefit seasonal and Tools expect by second normal

for mid-single-digits planning year. are to be We growth total down the for organic company

the for incorporating down Outdoor for in inventory softness continued to Tools channel Outdoor organic as softer DIY be the well outlook, as is mid-to-high single-digits total In business and conservatism. expectations the terms of and year, revenue segment expected outlook

the assumed promotions our as Tool activities. pricing reflecting position. in supply And Power relatively these flat second half, Cordless with be regain to is improved to slightly consistent expecting are such, We to negative

auto. with DIY strong. Industrial, see continued industrial continue demand We stronger attachment modestly cyclical is organic outlook variability and than low-single-digit aerospace we holding of And a incorporate back this consumer growth for customer an basis for half. to assumption demand This and potential balance the our the the rebound a point, for user lower In in we covers outcomes full-year by Pro in range fastening. and expect destocking for US to in as believe at on flat supported the the we prior professional volume tool some tools

the investments pace on normalization growth of and Production flexed both will based be demand.

growth. our We We are in normalize organic approach to recognizing drive planning the for to fourth production flexible and reinvesting the in quarter volume. disciplined remain lower to

is our fund on focus while deliver improvements margin financial growth Our utilizing expectations to investments. gross to

annualized Clearly, with to invest approximately expansion assumes the trajectory. investment million as years. our next outlook along $XXX ultimately Our over willingness increases $XXX million million goal deploy gross a to progress to we of $XXX our margin three

half offset operating second margins be expect our adjusted cost single-digit efficiencies to in as volume the pressures. mid-to-high We

remaining quarter third amounts. within the a Turning quarter XX% improvement to from than XXX% in full-year primarily sequential be expectation losses to Adjusted third half, the EPS The the more lesser And and of of impact cost the guidance. EPS. approximately is a elements first planned our adjusted destocking. to adjusted operating a back-half reduction adjusted be of important full-year from EPS total for the EPS due initiatives for of benefits profit, would the the the be will

our summary, we now in reduction our are to and within first improvement cash fund are cost-savings driving initiatives items we significant and mirror, investments. the So margin on control the the more focusing half some further the our inventory exiting to from with impacts strong in across generation with momentum rear-view deliver of

as to place expansion successfully returns. We with continue the and on organic growth navigate driving strategy the believe in our we business remain focused manage with mind long-term margin in forward enhance shareholder path the we and above-market right have to we

over call will Don. pass now back to the that, I With

Donald Allan

Pat. you, Thank

We are machine, report transformation amazing toward our plan growth with brands, our strengthen and to Successful the enhanced faster our as innovation meaningful to execution more unleash our with increase on user focus the gives journey. to of our of stimulate progress another power the pleased reinvestment against activation. us team fuel related quarter resources confidence to demand end we

core actions significant over term reshape, enable in organic to reinvest as and value our well believe as and our will focus via robust profitability. our deliver the growth long us streamline shareholder We to organization enhanced businesses

people, the alongside our most I best engine am the the and proud to best brands, powerful industry. in be innovation

continue can recreating be what market we I successful, significant that we we control machine. am to gaining on As confident share to focus are a

With that, we are Dennis. now ready for Q&A,

Dennis Lange

Don. we can please. now Thanks, Great. Q&A, Thank start Shannon, you.

Operator

Thank you. line the of first Wojs comes [Operator Instructions] Baird. Tim Our question with from

now open. is line Your

Timothy Wojs

Hey Good guys. morning.

Donald Allan

morning. Good

Timothy Wojs

risk going ask At yelled at, being try I'm to of to two-parter. a

guess you're the of back got, we've that and bit Pat, half, how the I looking is you you've maybe the observations you're to in first second guess first I of half in first of to give some cost to the XXs And of from production low in on XX% since of you of into there? the kind kind seeing then Chris, kind just second, question, of could half, just to some little get as go hoping how thoughts margins gross early much color a versus XX% that the if, us as So on terms half call, his bridge savings at that business. gotten maybe the

Patrick Hallinan

a transformation probably, generated curtailment high-cost the to parts number of regard. fading both savings It's XXX of is journey. know, Tim, roughly our back up, cost we're start, from high-cost slightly inventory. know, of delivering of of inventory big of with equal step that say, it meaningful XX% roll-off XX%-ish And this it the of a our I'll past, is points in an A mix dissipation each the you chunk confident over the at for important margin. by and about the I'd bridge balance You up it's gross of half is away and production XX%, the in year. part but

Chris Nelson

the just And company's to growth the long-term I saying This join by & to Black entire help bring of and Decker organic Stanley team strategic accelerated is I life. Tim, Chris. question. honored the thanks leadership Don am how to for wanted to vision start

company's As this just well -- meaning have and progress you drive transformation grateful to plan on know, I'm ambitious Don meaningful made the help opportunity for the forward. and the team

business spent time to might As I've come observations it's that, in far product you customer whirlwind this with products, unit it's trends, expect, all today I'd design and thus I Then, and key first the been key what bend in the lot meetings. several learn been major every through had North opportunities key got the future, America, listen. say to the stand real the six-ish quite factories least market on going at board, as taking And say, roadmaps through three centers the weeks. a for is And process, out. a of seven and

of & the our is brands Decker's and Black like underestimated something put, First due for grow the us. Stanley that really to exist that's our the opportunities our And be strength products brands commercial long-term and impressive with cannot future. to really, customers want products. Simply and

that the differentiating is Black Decker I amazing is engine capability. a within is do innovation Secondly and & it believe Stanley

work been to problems solutions and then then their seeing able obviously their the I've operations, a in turn of spent will and rapidly company. continue future amount the putting transformation. trying customers for foundation will that future those help is be issues of that to really to become the the importantly, the being and to business are operations place going to solve and the with and growth. put is, reinvested to the be and our exists And -- ability this that important that that early clear be opportunity also and as P&L start we're implementation innings Pat in but Our is that through referenced well as out to traction that expansion. benefits the I able see factories that transformation that accruing in There on products earlier, into environment chain as it's third more and of the be time the as the an efficient And in make catalyst end-user in to for supply the they solve to with understand design the as and growth real ample are as sustainable savings -- there's can -- well fuel future back and margin runway the and long-term

really value of observations key really the been these as it far creation the long-term very Stanley Black opportunity So combination and within for three -- opportunities as has excited & Decker.

Operator

Thank you.

Our next question Mitchell Barclays. comes from Julian the line of with

now Your line is open.

Julian Mitchell

Hi. as the midpoint. a half Good look of half it's into the on assumption. off next. year, half morning you my It's half at I understood and your including now just Maybe year from at but this was give bridge second maybe based to some guidance sort your And of just question any for if second suppose, welcome year, could of outdoor to second this seasonality Chris. guide just that on to first bridge color annualized wanted from whole this about we EPS check X.XX

sort into that about any thoughts You for wondered $X-ish talked had of just next updated EPS so I previously, on year XXXX. EPS a step-up

historical QX, to when I of sort at well about looks Thank year. your still And of like so square December, that, you normalization wanted but just production talk norms be during you. thinking to end away related will that sort inventories of it the above about next

Donald Allan

a far on more kick then perspective as over it off I'll And and for our as it detail, for Pat next pass the year. you little questions. to Thank

a We or $X range have $X in for XXXX for talked to calls a about $X EPS. previous --

plant opportunity to the drive pressure more next to be $X the a And out achieve some continued the Those to guidance grow? itself across a we share gross and that factors. inventory couple in think half we in more little when making you SG&A do seeing in much the insight, sense back of we've we're do revenue maintain that are where are Given we're think activity. gain in the seeds inventory us depending half the or the that to go of currently ourselves in want to for future positioning of early for due we of allows we're gain Or what the back do what the that we're give investments Pat improvement the in how and provide portion reasons? figure built year, in will margins, that we do revenues, investment mentioned. we Does that and range And $X more to projecting We questions we'll I economic we'll on but really think 'XX, for see share him year. foundation question pass I'll journey we let to from where give a we of over here. globe? some

Patrick Hallinan

left Don Yes, Julian, where up pick I'll off.

look at macro look as from next to year's that we'll think, growth. range, the next year. performance decide operating I we an and we'll investment for And I our for productivity think and we're as Don said, guidance, EPS level at will targeting long-term towards EPS our level, get that but

on that of half year already projecting gross in this we sheet and back of this gross savings margin the following terms balance In and see rhythm margin the we're levels can already really that year, into our opening question, on our year. for next

savings are, those the incremental the COGS next next end $XXX So into your gross part, of for around year. And of sheet of one few how this rates of that revenue going million our our then as margin the delivery already through step XXXX for of Think we do of most base. off years on every question year. balance

XXX to a basis year of talking calendar XXX You're points gross margin improvement.

transformation. And our long-term continue track so on we cost to

that could year we next that's you gross be And should of the of year, percent year. you level of of improvement at XX-ish margin if kind next couple into finish in back this gross half so carried be basis momentum And the the to XXX-plus of years. point the margin expecting kind expect

this make In year, the time we since end still levels, will an continue this a to our horizon. towards next by to a a XXX year, terms to that Black make the we inventory, specifically absolute that, and to of inventory the correct below Decker we out give to is we're significant when for rather going outdoors year, multiyear get time in point of inventory legacy of levels, working progress across more be changed our but but $X acquired is have Stanley business dollars around talk progress at & obviously that make the is billion-ish we will long-term below about than higher from the which this below across history and or level but will We'll end days-ish progress which we XXX range, XXX inventory XXX. year multi range, you're which guidance of continue be

year, Next some of will changes. network be balanced progress our our against

next long-term altogether, so bringing service next will make progress year, online are a some in against our DCs year making DC new while be improve We it balanced costs some decisions we'll the and some of footprint. DC new to and footprint we're

Operator

Thank you.

the line Our Nigel next with of comes Coe question Research. from Wolfe

Your is line now open.

Nigel Coe

Thanks. Good morning.

Donald Allan

morning. Good

Nigel Coe

bit guys. try hear question I'll make welcome. and Chris, you. punchier. And Thanks, to Good this a

well, $X.XX midpoint. $X.XX XQ roughly for EPS, the So for,

of XQ. And margin about benefits that so between would I think benefit more how XQ. I'd wondering just the cadence that that so slightly, XQ we gross and XQ down implies maybe have some thought XQ than think cost should

then is for & maybe the just or And segment? whole flat that is outdoor pricing for that. through just negative, corporation, Tools slightly about just specifically So run comment the to that

Patrick Hallinan

cadence just the even to is tend the to cadence, XQ holiday you roughly From you're sold is be that will quarter momentum seeing so a really just if gross the a a would third higher, the so product quarter on We I'd normal the in quarters, seasonality. perspective, XQ they'll see season, in, ship is you're across Yes, in of a not margin in be to lot quarter the seasonal through margin that journey fourth And Nigel, track. being dollars normal right? from the EPS say slightly it's EPS all all one next. right seeing

reintroduction, Friday this time cadence, frame, kind Tools offsetting pricing, introduction that of pricing new cadence. of terms should promotional around we're of seeing XX% seasonal of without normal of Black & all Outdoor. the a in think, I fact you're the is increases a in promotional say, especially business that And normal -- year I back price to gross is our

be that small the us That's of a of cadence amount. take us will both you're dynamics. those with normal So should a just seeing pricing, potentially it but marginal below re-entering promotional all dynamic flat real it's

Donald Allan

a that reminder does impact your of And the versus flow through new does just products it previous new that product through we higher recognizing line, not launch it's the the replacing price throughout price but margins. price that, year, as points the flow at

full impact the processes we you necessarily because pricing decisions So that. of across the that see and company have of don't

Operator

you. Thank

Our the Rehaut next comes question from line JPMorgan. Michael with of

Your line is now open.

Michael Rehaut

Outdoor. little right. for & more and to Tools outlook Good a the into everyone, growth change morning, welcome, dial in All bit Chris. your Wanted Thanks. in organic

which the of terms difference, kind I think driven back X% drive POS of positive, positive I maybe what's change. or also for be you continues, kind guidance factors, by the would that it of guess, signal of you that was turning guidance? a if that could to bucket kind part said driving you difference, if any potentially kind conservatism. inventory a because upside was to of hoping those outdoor, is said of half. in it channel your several if the I tie softer If the in And you X% the was DIY prior drivers outlook different it can weakness, of could

Patrick Hallinan

the of of year. outlined Mike, moving a we parts as the obviously had to half think we few back

our I'd capital I quarter, is And of in weak tools channel say, going had we margin would on. margin keep items. cash, for consistently deliver many on in saw outdoor, saw and bit and pressure Industrial business, both more to DIY obviously. quarter the and in consumer think the is in our the under want especially I second -- reduction improvement, we outdoors competing objective we year high-price-point start dynamics in on so the a conservancy primary working the conservatism inventory. And subsegments marketplace. And And where second to this be

quarter. demand the them I'd of the sensitivity and North out predominantly thought of any in the it goods, and like our I'd stabilized been with drivers dynamics the to Industrial And but and So that's strong for part, the consumer strong the why, out most a has on softened best, environment of our you quarter. we play don't adjustment given in with DIY now, business. first that was couple of in the quarter, infrastructure year. up those And half about automotive saw, sales in good and equal price And the of half our adjustment stayed say of second when change, those outdoor right the that's anticipate consumer is million and to the that in half revenue they've they stabilized fact DIY macro us, we have environment a we of those taking the And the news out America really played Then And a a us out. year expectations kind destocking back there's level think feel a dollars end all with all forecast, almost things new our consumer. kind stabilized. the kind has so business. winter around back channel absent continued the that gave hundred our then aero new in We we quarter; similar of of demand dynamic pro were we played softness all dynamics as of guidance I second say expected in anticipated the at back

very Those that has tool emerge, our the some back but And demand that things surprised referenced think, spots, hasn't year been broader stabilized actually power challenging. about has student see. at I it when actions. like end in our the fed Don intent things we'll environment a the may more us new bringing feel dynamic good for we is around demand absent Our outlook bright loan the half. there start and we're feeling repayments up have then macro like And October, picture, into POS of quarter. say sense I'd been the the throughout given this

positive And upside. they so they trends do, if continue, those hopefully, present and

Operator

Thank you.

UBS. the Snyder comes question next Chris from line Our with of

Your open. line is now

Christopher Snyder

Thank guys but step-up the point. understand, the half we already annualized also wanted closer said, more if It the annualize offset like in maybe back EPS you $X just like growth the the up $X than low tailwind half, we're provide on XXs that next the obviously I margin a the if earlier and on versus back seasonality, a at would follow feels seasonally can EPS. you. adjust so of EPS, year, And low for feels that? is sounds into investments, very Thank significant I That's XXXX. in like, you to to bridge high you're color commentary more incremental gross XXs. it up maybe you. some it on you

Donald Allan

articulated invest Pat a and think detail of could added And to we robust I what is are bullish at we good some think a this I where detail case it be company. things higher you it fact more sure Well, and point. summary to build you to that our pretty but factor make in want really continue we certain the in to should key to next year, that numbers for do the in have that we

to innovation changing out want We talked We in need engineering continue are have pockets rapidly. resources to closer more to very opportunities. field, additional to key drive categories more certain that resources electrification. our to about We've on end have We users. that to in do the get

putting that front, There's our and in aware to to as the continue in opportunity and to cash the to we need do for sense social in into activities digital products, going do of so right users we fully we the later We look the have flow growth as really in the with to around our things on want make at we balance earnings strike the we year are markets continue invest this great as the invest have XXXX. end investing more evaluate we're to innovation to in machine marketplace. Those and that and have we media what that that what's to marketing and the XXXX that space. of

as good our successful a to for much That's really happen future. and sense wildcard Pat seeds an next in gain that we going change for articulated. have balance. going the gross makes of way conditions think If $X in that market invest the stage. more that's we to next sure right opportunities We And important year about of of level as to to I possible, how business it that's range to with decades, part make margins, the or to the the of much $X of really we think our right plant we because ensure why do think, right model that invest, the way want to soon we'll as perspective is several do want share then how And but and we're as year, what's you next we this about sense. we probably think want provide other at it's to

Operator

Thank you.

Deutsche Our DeBlase question of the line Nicole from with Bank. next comes

open. Your line is now

Nicole DeBlase

morning, thanks. Good guys. Yeah,

Donald Allan

morning Good

Nicole DeBlase

just prior from couple follow-ups that Maybe asked. were of questions a

out the like That concerning about expectation would guys of business, So think seeing? channel? inventories channel channel on there? your you're that, versus the talked just tools are then to be Anything I dynamics in kind you inventory some you that competitive pricing, the the would adjustments them to the can the that continues environment characterize back this where quarter. And great. respect you you. in Thank into Is be Where half? with

Donald Allan

Sure.

So question pass I'll to I'll channel Pat. the pricing question the over take and inventory

deflation I lot is, are a space. where freight things different we seeing think around we're in occurring the of

we'll as So as to I We're try seeing that that freight, down in when all we've freight leverage have that. dramatically. and much P&L benefit opportunity We're we continue to think, possible. look at our costs seen gone experiencing

we're of far space, as commodity and back, starting a side commodity bit metals indication the to pull little prices. seeing are things as that On

moving And is dramatically at so commodity we're for basket chasing down us not opportunity, overall that the stage. this but

to through that will the eventually have to get opportunities they next in into that the up so does the read year ensure given what later XXXX, we that on benefit And pricing. out, but then Now benefit much on inventory of level the inventory won't hung books. that probably just we how and that becomes we pursuing or see this will XXXX also question when we actually recognize here to in are mean get in emerge our of we depending plays that year, these have do

any into don't like in be feel deflation What's want If market a And that happening to and is And go brands needs right associated continue see we so now where And that. at what a to conditions with versus DEWALT, versus like our tend we so to to at market? look we for we this adjustments a need with the to as point, it many competitors. at the and do make? We feel is premium the especially and number like will healthy be, evaluate we we position competitors. XXXX, bigger becomes place, adjustments need our pricing that. of in any pricing

of and not have as inflationary actions we XXX% remember took that, do pain did so to recovery that. transition we customers However, experienced get in for we we pricing a It through historical into on our lot many get cycle, went price period. that the to this quarters margin

for our way we're there do balanced right thing and so where going? this we to take And them. in it and And particular for deflationary back a past, approach, to we've And the whatever where is. work you think we're done it's as company this continue end in customers associated approach do for we'll to cycle. to talk channel we our a are with right has the be with with ourselves, inventory cycle, about going that want the tail Pat, to the at and

Patrick Hallinan

or inventories. look of relative at normal Nicole, channel channel level We history. right of We're inventory. Yes. very inventories around our much levels channel current at to

the inventory their rates as in things there's support the low new there because stay as if to the to think, inventory there $XX would to if ahead We It's don't million there to fact or out and talked try are, guidance say half the of we back what we've today, macro somewhere obviously would but our be anticipates us. that's picture is pretty back if short-term something think biased wasn't their I in of rate of moves with keep to could good to lows. so uncertainty it and, think, very the high of half for we rates the big of to we've neighborhood of here that's upside, partners I mean are paying outside more the a that think reduction our weren't as macro changes, $XXX the million find year. and year. guidance, range number or our channel in And much bias is not, uncertainty, where but they I half macro short-term if considered modest. environment I for of back we And in particular, the

Operator

you. Thank

the comes line of question next & Adam Associates. Baumgarten Zelman from Our with

is line now Your open.

Adam Baumgarten

Hey, good morning.

Donald Allan

morning. Good

Adam Baumgarten

trended Can encouraging. quarter. demand you just is the July how talk it the seems into throughout And commentary pretty about built the quarter July? throughout It like

be Just helpful. would maybe there color some additional

Donald Allan

are Well, I markets do have to think them. volatility some -- the

outdoor positive, to I months the continue the look indication items, not all something more and And of the the experiencing of business and experienced ticket see there purchasing quarter. start mentioned has my doubt in that be we're back At higher-priced in a the pressure been bubble and to back-end again to. And at brings see the and what There's last activity and future. been experienced going that home, industry step the July everyone outdoor it trends challenging that is you a at that here already said a in The that very we're to outperform in no -- here through my trends that when a And we point, 'XX, we're to we in was point. in a some I POS then went continue good know it's it experienced expectations. an comments. it of we like was feel it. because starting we'll year in this season. 'XX to effect pandemic. of presentation, were people be in as lot during However, six first the We XXXX, the emerging have

monitor see where shift and continues see said, lot consumer we evaluate from and us but and we Pat make summer. that are As just that to to away the have go a to home money we'll it's the And improvement a potential to continue trending, what monitor for happens. throughout upside as we of things sure

at this as a plays weeks evolves at look stage. too back an positive excited of to want half the and opportunity about that, but or So as activity out, hopefully, four it I get I don't three

Operator

hand over remarks. now would conference Dennis Lange closing Thank the like to you. to I back for

Dennis Lange

contact thank and on We'd you. have Thank like their me, everyone thanks. questions. time participation to you again Obviously, please further the call. if for Shannon,

Operator

for today's joining. conference call. concludes This you Thank

You may disconnect. now

Stanley Black & Decker (SWK) 1 Aug 232023 Q2 Earnings call transcript