Stanley Black & Decker Q2 Revenue Sags But Rebound Projected
CEO James Loree declared “a rapidly improving demand environment” for the second half of the year, including bullish expectations for the security business.
NEW BRITAIN, Conn. — Stanley Black & Decker (NYSE: SWK) on Thursday reported double-digit declines in second-quarter revenue and profit. Net income of $238.4 million, or $1.52 a share, was down 33% from the second quarter the prior year. Revenue for the quarter ending June 30 was $3.1 billion, down 16%.
Still, the company beat Wall Street estimates of $1.27 per share and revenue projections by $20 million, according to Zacks Investment Research.
During an earnings call with investors Thursday, executives discussed the performance of its three operating segments — Tools & Storage, Industrial and Security — and ongoing impacts of the coronavirus pandemic. The worst of the financial impact may have passed, with CEO James Loree declaring “a rapidly improving demand environment” for the second half of the year.
Despite historic challenges in the first half of the year, Loree said the pandemic has “cast a new and very positive light” across the company’s portfolio, with three trends in particular to emerge: a sudden acceleration in the shift to e-commerce; a reconnection with the home and garden and a trend toward nesting and DIY; and, a newfound societal obsession with health and safety.
To the latter trend, Loree commented: “This, in turn, has thrust our security business with its healthcare, electronic security and automatic doors businesses, smack in the middle of a new growth landscape. For example, we are commercializing new solutions such as automated entrance management with temperature monitoring, contact and proximity tracing and touchless stores for commercial buildings and manufacturing plants.”
He said the company is allocating resources to scale these solutions and to quickly seize upon new sources of potential growth.
Donald Allan, Jr., executive vice president and CFO, said expectations for the Stanley Security business are for it to be relatively stable and continue on an improvement trajectory with a second half range of down 8% to flat. Although the business has declined 4% in the past eight weeks, Allan said backlog remains strong, which supports an opportunity for sequential improvement with installation and maintenance activity.
The security business performed better than initial expectations in Q2, despite revenue declining 11% as volume was down 9%. North America organic growth declined 7% and Europe was down 10%, with businesses impacted by government and customer restrictions, especially early in the quarter.
“We saw this dynamic improve in May and June, allowing us to perform more installation and maintenance activity,” Allan said.
On April 2, Stanley Black & Decker announced a comprehensive cost reduction plan that it projects will deliver $500 million of savings in 2020 and $1 billion over the next 12 months. During Q2, the company achieved cuts of $175 million.
In October, the company plans to restore to full-time 9,300 workers furloughed or employed on reduced schedules. However, the company said it will eliminate 1,000 jobs as part of its overall cost-cutting program.
“This action will be a major step in ensuring the sustainability of the bulk of our $1 billion cost-reduction actions, and we believe it paves the way for us to manage successfully through any reasonable economic scenario, which may unfold in the coming months,” Loree said.
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