Snap-on at 37th Annual ROTH Conference: Strategic Shifts Amid Uncertainty

On Monday, 17 March 2025, Snap-on Inc. (NYSE: SNA) presented at the 37th Annual ROTH Conference, providing a strategic overview of its operations and future outlook. CEO Nick Pinchuk highlighted the company’s customer-centric approach and its pivot to lower-priced products. Despite economic challenges, Snap-on remains confident in its long-term growth potential, supported by a strong brand and innovative solutions.

Key Takeaways

• Snap-on is shifting focus to lower-priced products to adapt to changing customer demands.
• The company maintains a positive outlook for mid-single-digit growth despite economic uncertainties.
• Snap-on’s credit portfolio shows solid performance, leveraging franchisee-technician relationships.
• Expansion into industries such as military, aviation, and oil and gas is underway.
• AI and technology are being utilized to enhance employee capabilities, not replace them.

Financial Results

• OI Margin Improvement: Snap-on has consistently improved its operating income margin by an average of 85 basis points annually over the past 15 to 17 years.
• Tools Group Sales Decline: Sales in the Tools Group have declined sequentially, with a 7% drop in the first quarter, 7.7% in the second, 3.7% in the third, and 1.4% in the fourth quarter, indicating a gradual recovery.
• Snap-on Credit Yield Rate: The credit portfolio boasts a yield rate of 17.7%, with a cost of about 5%.
• RS&I Profitability: Achieved 26.6% profitability last quarter, with gross margins reaching an all-time high, up 200 basis points.

Operational Updates

• Pivot to Lower-Priced Products: Snap-on is adjusting its product offerings to meet evolving customer preferences.
• Technician Demand: While demand for technicians is high, economic uncertainty affects their confidence.
• Tariffs: The company is relatively insulated from tariffs but remains vigilant about potential counter-tariffs.
• RS&I Growth: Growth is driven by the increasing complexity of vehicle repair and a proprietary database of repair instances.
• Industry Expansion: Snap-on is extending its reach into critical sectors like military, aviation, and oil and gas.

Future Outlook

• No Specific Guidance: The company refrains from providing specific financial forecasts.
• Long-Term Growth: Snap-on anticipates mid-single-digit growth over the long term.
• Economic Uncertainty: The company acknowledges potential recession risks but remains focused on workforce development and the importance of skilled trades.

Q&A Highlights

• AI Application: AI is being used to analyze large data sets and improve report accuracy through natural language processing.
• Franchisee Role: Franchisees play a crucial role in the credit decision process.
• Essential Workforce: Manufacturing and garage workers are deemed essential to societal function.

For a deeper dive into Snap-on’s strategic plans and financial performance, readers are encouraged to refer to the full transcript below.

Full transcript - 37th Annual ROTH Conference:

Scott Stember, Analyst: All right, everybody. Thanks for joining us for this Fireside Chat with Snap on. With us today, we have our CEO, Nick Pinchuk. Thank you for joining us. I’m Scott Stember, Analyst covering Recreation and Leisure Auto Parts.

If anybody has any questions following the meeting, you could email me at stemberroth dot com. And again, Nick, thanks for being here. Snap on is the largest producer of parts or excuse me, tools for the mechanics and dealerships in the automotive industry. You guys have what I call a secret sauce behind the Snap on valuation creation model. Can you maybe just talk about how it all works?

How you guys are able to continually stay on front and remain the top player?

Nick Pinchuk, CEO, Snap-on: It’s a big question. But look, happy St. Patrick’s Day. I didn’t realize it’s St. Patrick’s Day before I came here.

My old neighborhood, they’ve been at the bars like five hours already. So in their honor, Aaron go bra.

Scott Stember, Analyst: Aaron go bra.

Nick Pinchuk, CEO, Snap-on: Aaron go bra. That’s it, boy. Off to

Scott Stember, Analyst: a good start.

Nick Pinchuk, CEO, Snap-on: Okay. Well, let’s talk about Snap on Value Creation. We have two things. One is we say we have our runways for growth and that’s enhance the van channel, expand with repair shop owners and managers, extend the critical industries and build in emerging markets. But we also have something called Snap on Value Creation, which is all about improvement.

And we say it’s surrounding the processes of safety, quality, customer connection, innovation and rapid continuous improvement. It drives the improvement we’ve had. And we say We can improve even if we don’t have extra volume. And over the last fifteen, sixty or maybe seventeen years, we’ve averaged 85 basis points of improvement in OI margin every year on average. And that’s been based at Snap on value creation.

And it fits what I would call our Snap on’s operating doctrine. It is customer connected, as we said there. It’s I suppose it’s product complex and it is people centric. Everybody would say people centric, but in fact, it’s driven by the people. So let me explain a little bit.

The principal value creating mechanism for Snap on is being in the workplace, observing the work. And we call that this process customer connection. We don’t survey the customer, we go stand next to them and observe what they’re doing. And we have people who can observe the work and say, look, there’s a particular idiosyncrasy about this particular task, which is critical and we will produce a tool, either a wrench or a piece of software that will make it easier. Now the problem with this is, it drives an incredible product complexity because we will do that for a high volume product or a small volume product, believing that the customer will pay us for this.

So it is customer connected, product complex and then how do we manage the complexity is one of the questions. So we have as part of this Snap on value creation, safety, quality. We make sure that we keep our people safe because if we make things for working men and women, what can we do if we can’t keep our own people safe? We make it quality. Nobody questions whether Snap on products are quality.

But the other thing we have is rapid continuous improvement. In other words, our people get up every day and try to figure out how to manage this complexity, how to make their jobs easier. We have every major facility, we have somebody in those facilities whose job it is to urge people on to do this. Couple three dozen times a year, we have Japanese consultants come in and people come from all over Snap on and work on Kaizen in that factory and to try to move that factory forward also to understand to create greater understanding of Kaizen in themselves and then irrigate their own plants in this way or own offices. And then once a year, we have the Snap on management team do this.

And then every year, we have a Sapon RCI, Rapid Continuous Improvement contest, where thirty, forty teams come from all over the country. They exhibit what they did. We name a grand champion. They have a traveling trophy and we give them $10,000 for a party. And so our view about customer rapid continuous improvement is the people are at the center.

Scott Stember, Analyst: We

Nick Pinchuk, CEO, Snap-on: have the people at the center, we Kaizen it, we see if we need technology to move it forward and then we train the people on the technology and we go forward. Our idea is we use technology to make our people more powerful, not technology to replace them. Also, one of the things that’s about this is, we don’t look at a problem and say, we’re driven by the problem, not by the technology itself. So we don’t bring out new products because we can, we bring out new products because they will solve a problem and people will pay us for it. That’s it.

Scott Stember, Analyst: Well said. Thank you. So last year or so, the tools group has seen, I guess, some of the end users have been pivoting to lower priced product and you guys have been pivoting yourself to supply the net and it’s had an impact on the business. How far along are we in the pivot process because the declines in organic sales have definitely been abating?

Nick Pinchuk, CEO, Snap-on: Second derivative of the Tools Group is better, of course, is a small comfort. I feel comforted by this. I think first quarter of last year, Tools Group was down year over year 7%, second quarter seven point seven %, third quarter three point seven %, fourth quarter one point four %, therefore the second derivative got positive. And part of that is driven mostly by the pivoting. And we’re not all the way because you have to pivot designs and you just don’t wake up someday, go into be in a garage or a factory or someplace and say, I need this new tool and it’s going to appear overnight.

And so that is something we have to do. And so that takes a while to bring out the tools. Secondly, manufacturing takes a little longer to pivot. And even selling takes longer to pivot because when you’re selling through franchisees, which are third party, not third party people, but there are people who have their own idea of what their business are, some of them love selling big payback items. You got to get them the longer payback items.

You got to get them to focus on shorter payback items. So we’re moving along. The characteristic of what you saw there was the balance between our ability to pivot and the ups and downs of uncertainty in the customer base. The uncertainty goes up, we hope we can keep pace. If it explodes, maybe not, you can’t keep pace, that kind of thing.

Scott Stember, Analyst: Got it. So throughout this whole process, you’ve been saying that the economics and the sentiment or more of the, I guess, the economics of the repair technician and the shops remains very strong. Has that changed at all? There

Nick Pinchuk, CEO, Snap-on: are a lot of different ways, windshield surveys, I go into garages myself, they seem cool. I was just in a dealership and the dealer the guy who runs the dealership, not runs the dealership, but runs the shop comes up to me and says, you know any place I can get more technicians, I need more technicians, I’m bursting. And you see this in almost every shop you go to. And then if you look at it, if you talk to our franchisees, I just talked to 50 of them all over the country and they said the shops are pretty full. And then if you look at the Bureau of Labor data, they say spending on household spending on automobile repair up.

The number of technicians up, which is faster than I’ve ever seen it grow before, 3% as opposed to 1% over the last fifteen, sixteen years. And then pay is up mid single digits. So that’s moving quite positively. What you saw though in the uncertainty was just explain a little bit why is it the Tools Group is down is because the technicians are cash rich, but their confidence poor. And so they’re saying, well, I’m pretty good now, but I don’t know what the hell is going to happen in the medium term.

I’m not sure what’s going to happen in that medium term. And therefore, I’m not going to tie myself to something that might be a toolbox. We sell toolboxes $10,000. They pay them off over four to five years. They’re reluctant to do that in this environment, not zero sales of those things where people are more reluctant.

So that’s the point is they’re pivoting to the things they think they can pay off earlier. Now, you can see it right now with the tariff. I mean, I think it’s a classic example with the tariffs and so on. You see the tariffs, by the way, if you talk to people in the garages, you talk to franchisees, they love the current president. They’re like on Space Mountain though now.

They’re like on Space Mountain. Ever go on Space Mountain in Disney World? You get in Space Mountain, it goes out and you’re in the dark. And Everything goes left tonight, left tonight, left tonight, left tonight, but you believe that you’re going to get to a good place at the end. This is the way all our people are feeling now.

Left and right, left and right, left and right. And lately, because of the so many things that are going on, they wonder if the President is going to screw things up in the shorter term and does he know what he’s doing, but they believe he’s going to get us to the right place. So that’s where they are. So therein lies the whole idea of uncertainty. It had different roots before last year.

Now it’s metastasizing on that idea.

Scott Stember, Analyst: So I know you guys don’t give guidance in every quarter we’ve seen the same store sales number.

Nick Pinchuk, CEO, Snap-on: I’ll give you guidance. Milwaukee Bucks are going to win the NBA.

Scott Stember, Analyst: Okay. Beyond that. Okay. Okay. As far as are we getting closer to being flat to inflecting up, do you think, in the next six months?

Nick Pinchuk, CEO, Snap-on: We don’t give guidance.

Scott Stember, Analyst: There you go.

Nick Pinchuk, CEO, Snap-on: We don’t give guidance. I mean, look, I was at an I don’t first of all, we don’t have backlog. We don’t have much backlog in that situation. So I’m telling you, I know we’re making progress. I love our chances in the future.

We have strength in product brand and we have a great group of people that I think aren’t inexperienced. This isn’t our first rodeo. But I was just at an event in in Washington where 92% of the CEOs thought we were going in recession. So your guess is as good as mine with some of this stuff. I mean, nobody knows I think the Space Mountain analogy is true.

I think that left and right, left and right, people think they’re getting in the right position, but they’re not sure that the President even said himself we might go into recession. So that’s going to create that kind of thing. However, I will say, in terms of the long term trajectory, I’m not talking about this quarter or anything like that, because it could be worse. We ain’t shaking in our boots. I understand you had like a country lesson last night.

So we ain’t shaking our actually, I was quoted, Reuters saying the same thing and we’re not.

Scott Stember, Analyst: So the traditional mid single digit growth narrative has not changed longer term at all?

Nick Pinchuk, CEO, Snap-on: No. I mean, look, our strength is I still boy, if you were a Snap on guy and you realize that huge percentage of technicians or customers all wanted your product, they may not want to pay that much, but they all want your product. I think we just got an email on CNBC, I think today somebody said, well, once people are using Snap on tools, they’re not going to go to anything else. That’s true. And so we have a product advantage.

We have a brand that people put our wrenches in the hands of their babies and carve their tombstones in the shape of our tool storage box. So our brand is nonpareil. And then I think we’ve got a great group of experienced people. The average guy at Snap on has been there fifteen years, which means when they walk in the door, they’re going to be there thirty years. That’s a lot of experience about understanding what will solve problems in places like auto repair or aviation or oil and gas, which is the principal value creating mechanism of our company and it depends on experience.

Scott Stember, Analyst: Got it. And just talk about the Snap on loan portfolio. The delinquency rates and write downs have creeped up just a little bit, but it seems like it’s more in line with pre pandemic levels. Just talk about the favorable risk reward scenario of running this business.

Nick Pinchuk, CEO, Snap-on: I think I always like to say that Snap on Credit Company is the business that fell from Saturn. I mean, the thing is that we sell we have a yield rate of what is the yield rate like 17.7% It was down a 10% this quarter, but it’s pretty solid there. The cost is about 5%. And so if you look at credit companies, you’ll see that our returns are pretty solid. And in fact, come hell or high water in the great financial recession or the pandemic or anything.

We didn’t spit up blood over any of those things with our portfolio. So the portfolio is solid. And one of the reasons, there’s a logical reason why this is the case is because we’re not a regular credit company. We sell we loan to the same guy over and over and over and over and over again and that’s a technician. So we know how technicians behave and we can tell the good risks from the bad risks.

And so when we ask when a guy wants to borrow from the credit company, we ask the franchisee what they think and we strike the franchisees as how good they are at it and a huge portion of them, even if the credit bureaus, which are specialized on technicians, say no, we’ll listen to the franchisee and it mostly works. And so what that means is for every big ticket item, the franchisee is part of the credit decision. And then he’s on the hook if the technician if the borrower defaults, the franchisee is on the hook for 25%. So he’s got an interest. He collects every week from these guys.

He sees them every week, sees them every week. And then but here’s the cool thing. That’s 35% of the business most times. 65% of the business, the franchisee sells small ticket items to him like a power tool, $600 He doesn’t say $600 He says $50 a week and that he knows that’s over twelve weeks. By the way, guy gets on a van sometimes for a power tool and a franchisee will say, I don’t think you need that power tool.

It doesn’t really fit your work. We’re bringing out a new one in eight months. And I asked the guy, I asked the franchisee, why did you do that? And he says, because I know this guy’s he’s paying me $100 a week already. I know his girl his daughter is going to college next month.

I want to see him pay when his with his daughter is in college. So he makes a credit decision. And then he collects that $50 a week every week for himself. So what that means is every transaction on the van, a credit decision by the franchisee, everyone. Every interaction weekly with the technicians, a collection.

The franchisees are the most powerful credit collection or practiced credit and collection force in the country. That’s why this business works like it. The credit company works like

Scott Stember, Analyst: it. Let’s pivot over to RS and I.

Nick Pinchuk, CEO, Snap-on: Oh, RS and I, yes.

Scott Stember, Analyst: You guys have been taking advantage of increased complexity of vehicle repair. Maybe just talk about how you’ve been able to do that?

Nick Pinchuk, CEO, Snap-on: Well, look, I think one of the things that drives actually all our businesses in vehicle repair and it’s 70% between the tools group, which is 40% and RS and I, which is like 28%, thirty %. It’s driven mostly by the changes in the vehicles. And the vehicles keep changing. They’ve been changing for thirty years. I mean, back in ’90s, when you can measure the number of electronic codes on a vehicle in dozens, now you measure them in 10,000.

So the electronics has got much more complex and the vehicles become more fly by wire. And so we make the decoder ring to understand what the vehicle is saying based on what’s wrong. Now you might think this is simple. It ain’t that simple. Because even though they have tens of thousands of these codes, you do what you do, you scan them.

So it will give you the fingerprint and then you have to fare it through or go through a decision tree if this, if that, if this, if generally. But we have databases, one database, 3,000,000,000 repair instances when the car said this, this was really what was wrong. You pay us for that, we will allow you to say, okay, put in the make, model and mileage of the car and say what the show us the car’s fingerprint based on a scan and we’ll give you a Pareto diagram says 69% of the time was a mass airflow sensor, 12% of the time it was the local wiring harness. It saves a huge amount of time for mechanics and as the number of data trouble codes get bigger and bigger, you aren’t going to be able to decode that by sound or even by decision tree. You’re going to need something like this and we have it and it’s proprietary.

And then for those things that are outside the Pareto diagram that come up on alternate Wednesdays in months with ours in them, we have a 500,000,000,000 data point database that you can fare it through and solve these things. And these are the things that really create havoc in an independent repair garage because it will take days to find the problem, not to fix it, just to find out what the problem is. And then you got to figure out how to fix it. We have the database to do that. So that’s the RS and I business as well as some advanced lifts and aligners and tire changers.

That business profitability was 26.6% last quarter, up 150 basis points, 200 basis points at the gross margin line and it was an all time high.

Scott Stember, Analyst: Over to commercial and industrial, you’ve been gaining some nice momentum as of late despite weakness in the general economy and in Europe and other countries. Have you been able to do that?

Nick Pinchuk, CEO, Snap-on: Well, look, RS and I is you can think of it this way, rolling a Snap on brand out of the garage. Now, right here it allows us to talk about one thing. What is our space? And our space is the critical. In other words, we solve things where the penalty for failure and solving those things or fixing the product is high.

And the need for repeatability and reliability justifies a Snap on level product. Now we used to think we’re just in automotive repair because that’s one of those places. But then we realize there’s a whole bunch of places like this like military, aviation, oil and gas, natural resources, even education. So we’re building product lines in all those places and building our understanding so that we understand the military problems and the aviation problems the way we understand vehicle repair. And what that is, it’s growing because we’re building our product line and penetrating that place.

Now the people who work in those places really love Snap on products, so they like to get them. We just didn’t have the fixes that they have now. So we’re building those out. It’s working pretty well for us and it is very critical. We discipline ourselves.

For example, I used to work in the air conditioning industry and for people for reasons passing understanding, air conditioning people don’t think it’s critical to fix it. United Technologies, they had Otis and Carrier. The Board would ask me why does Otis Elevator have higher margin service than Carrier. I just said people don’t get trapped in air conditioners and that is sort of the thing. So we don’t sell to the air conditioning industry, we can sell to the elevator industry though.

Scott Stember, Analyst: And before we turn it to questions, talk about tariffs, you guys are relatively insulated compared to many other industries. We are resistant, not immune.

Nick Pinchuk, CEO, Snap-on: So the thing is we make in the markets where we sell. We import some stuff from China. We don’t import hardly anything from Canada. So we’re kind of but we can be hit by this, but it’s not got us wringing our hands. Now, where we don’t know what’s going to happen is if there’s sort of like counter tariffs in places like Canada.

Canada keeps 25% on, we sell in there. So that’s we’ll have to figure out how to deal with this. We already did something. We just pound in a lot of inventory in there. So we’ll wait to see how it plays out.

We can run off the inventory for a while. But let’s say for example, Europe does that or other countries do that. We’ll have to work around those, but it’s not going to be trajectory altering for us.

Scott Stember, Analyst: Got it. I’ll turn it over to the audience if you have any questions.

Nick Pinchuk, CEO, Snap-on: I can talk about who’s going to win the Kentucky Derby, if you’d like, maybe a few tips on that. Yes, okay. Journalism, okay. Is the name of the horse. Yes.

So he holds that. That’s my point is he’s got 65% of his he’s got a franchisee can have $200,000 on the street, right? So he’s got his own credit portfolio himself. That’s why I say there that’s one of the reasons why our credit company is powerful is because these guys are seeing the people every week and they know how to do it. Yes.

Look, I think the whole thing is like this. Two things. One is, it leads us to be able to it comes back to the scanning process. AI fits in a bunch of other places here, but it’s I think like in most places it happens over time. I don’t think there is any deliver you from evil technology.

I’ve been in a business, I’ve been running general I’ve been a General Manager or President of a big company for forty years and I’ve never seen a singularity till this day. Even robots, we just bring them in and they helped us, but they didn’t change everything overnight. But AI will help a lot in this situation. You got these dozens of fingerprint. So one, it will able to sort through this and find the patterns in there in the 500,000,000,000 database quicker.

But the other thing it helps us is natural language processing, which you get a report. Our base data is a report from a technician. Here’s what the car said. Here’s what I did. The problem is technician is a whole other language.

There are 37 different nouns for the mass airflow sensor. You got to you think I’m kidding? I’m not. And so therefore, you have to ferret through this. And oh, by the way, they’re not that the most assiduous when they fill out the repair form.

And so the AI helps you bridge those gaps and use more of that data we’re taking in. That helps us a lot.

Scott Stember, Analyst: Any other questions?

Nick Pinchuk, CEO, Snap-on: Yes. Nice hat. Good and Irish. All for the franchise? No, no, no, retail.

It’s not our business. We’re not a make your money by the penny company. Now the franchisees are only 40% of our business. But remember, that’s our principal value creating mechanism is to be in the garage, to add value by telling the that the worker, the franchisees, the guy who’s doing the job, this will fix your job and we observe it and we’ll come back and we’ll generate a product that really will fix his job. Then if you’re talking about the vans, we some of the stuff we guarantee for life.

So we’ll fix it for you right on the van or give you a new one, you don’t have to go to a shop. And the technicians are subprime credit risks. Who else would lend to them but the people who called on them directly?

Scott Stember, Analyst: Franchises

Nick Pinchuk, CEO, Snap-on: market research is a very euphemistic description of what they do in that situation. It’s a franchisees plus our own people who ride with the franchisees are in the garage. I’ve been in a garage myself. I actually solved a couple of problems. People can’t believe it, but it happened.

Scott Stember, Analyst: Time for one last question.

Nick Pinchuk, CEO, Snap-on: Yes, I was on actually I was on SquawkBox the other day talking about this. It isn’t the tariffs that’s going to make the difference. There are already 429,000 jobs empty in manufacturing. And there are two reasons you got to skill them. So you got to work with nine thirty three technical schools with Snap on certification.

Secondly, I’m doing all I can at the top of my lungs to say how essential these jobs are. All you got to do is think about the pandemic. During the pandemic, the people of work, the people in the factory in the garage were at their post keeping our society from disintegrating while we engaged and defeated the COVID. LeBron James makes a lot of money, but he wasn’t at his post. He makes a lot of money because he’s the only person who does what he does, but he’s not essential.

The welder is essential and the more we talk about that, the more we’re able to do that. And we’re trying the President just did this. He launched he declared February the Current Technical Education Month and he said, we will create alternate paths to university education that will provide real skills for real careers that communities need and we will make technology work for our people, work for Americans, not Americans for technology. And that says it all. It says that these people are essential.

And the more we talk about that, the more we’ll be able to recruit people. Sure, sure. Yes. Well, the techs, we make them snap on customers for life.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.