Stanley Black & Decker at 18th Annual Global Conference: Strategic Shifts and Growth

On Tuesday, May 20, 2025, Stanley Black & Decker (NYSE:SWK) presented at the 18th Annual Global Transportation & Industrials Conference, outlining its strategic plans amidst economic challenges. The company highlighted its transformation efforts, focusing on organic growth and margin expansion, while addressing the impact of tariffs and competitive pressures.

Key Takeaways

• Stanley Black & Decker is shifting production to Mexico to mitigate tariff impacts and reduce China exposure.
• The company is transitioning from a product-focused to a brand-focused approach, emphasizing core brands like DeWalt, Stanley, and Craftsman.
• Tariff impact estimates have been revised down, with a commitment to maintaining 35% plus gross margins.
• The professional market segment shows strength, while the DIY segment remains soft.
• Supply chain improvements and portfolio simplification are key to achieving long-term growth.

Financial Results

• Initial tariff impact was estimated at $1.7 billion annually, now revised to $500 million to $600 million.
• Tariff headwind per share reduced from $0.75 to $0.40, with potential benefits to Q2 earnings.
• Commitment to achieving and maintaining a gross margin of over 35%.

Operational Updates

• Centralization of supply chain to enhance efficiency and capacity utilization.
• Emphasis on brand-focused strategies to drive demand and innovation.
• Plans to eliminate China sourcing for U.S. consumption within 12-24 months.
• Expansion of the Mexico footprint to comply with USMCA, targeting 75% to 85% compliance.

Future Outlook

• Focus on improving margins through product line simplification and supply chain efficiencies.
• Inorganic cash generation expected to contribute $500 million towards leverage targets.
• Continued investment in core brands and innovation to support long-term growth.

Q&A Highlights

• The company is actively working to maintain inventory flow and service levels, collaborating with retail partners like Home Depot.
• Inventory turns are targeted to return to pre-pandemic levels of 4x-5x from the current 2.5x.
• Efforts to streamline manufacturing and supply chain are aligned with strategic goals.

In conclusion, Stanley Black & Decker is navigating the current economic landscape with strategic initiatives aimed at growth and profitability. For a more detailed understanding, refer to the full conference call transcript below.

Full transcript - 18th Annual Global Transportation & Industrials Conference:

Chris, Unidentified role, Stanley Black and Decker: Results we had in Q1, which I think is important to note with we’re able to continue our progress and our transformation as we were able to post organic year over year growth as well as year over year margin expansion and continued above market growth for another consecutive quarter with DEWALT, which is certainly important as we can then say that we’re on pace for completing the transformation by the end of the year and have established a very solid foundation on which we believe we can grow in the future. Of course, that being said, we we do certainly realize that in 2025, you know, we’re going to be, you know, obviously measured on our ability to adjust and manage to the to the current trade environment. And as it relates to that, you know, certainly what I’d say is that we we we welcome the changes that we saw over the past couple weeks. And certainly, we think that it’s not only a step in the right direction overall for the direction and for the stability of the economy, but certainly for Stanley Black and Decker as a company. And specifically, if you think about when we went through our our our planning scenarios that we talked about in our last earnings release, we had highlighted approximately a $1,700,000,000 impact to to our company based on the tariffs at the time.

As we look now, based on what was announced a couple weeks ago, that now moves to a range of 500 to 600,000,000 annualized, which is obviously, you know, a move in the right direction, still a significant number that we have to manage, but certainly something that we we feel, you know, is is, like I said, represents progress. As it relates to the planning scenario that we laid out, we talked about in the prior under the prior assumptions, it relating to approximately about a 75¢ headwind versus what we had given for our prior annual planning assumptions. Now with the changes, that is closer to about a $0.40 headwind, which would be plus or minus $0.10 from there. Dennis, I don’t know, is there anything from there you’d want to add?

Dennis, Unidentified role, Stanley Black and Decker: Yes. I think if you think about that $0.35 or so, clearly, was an impact to the second quarter as it relates to tariffs until we get the countermeasures in place. If you mark that with originally, we had the second quarter a little bit better than breakeven. Much of that $0.35 would then benefit the second quarter. So we’re in a little bit better scenario there.

And then also, we talked a lot about cash on the call with about $05,000,000,000 plus. This change obviously gets us more on the plus side of those.

Chris, Unidentified role, Stanley Black and Decker: Yes. So I think that that’s we certainly we welcome the change. We feel very good about the strategies that we’re following, which I’m sure we’ll have more opportunity to talk to. But then the important thing is that when we look at the competitive environment structurally, our strategy remains intact and our goals are intact. And we still we’re on that journey to be driving towards the 35% plus gross margins, continuing to pivot to and drive more of a growth culture.

Certainly, we’ll be able to use the foundation that we’ve set up through our supply chain transformation to drive the productivity that we believe we need in the business to be able to continue to funnel our investments more closer to the customer with our core brands, making sure that we’re activating, we’re putting salespeople in the field to be able to drive the growth that we believe is there to be had with the professional, making sure that we continue to drive more dollars to our innovation and research and development to make sure that we have the right products for our our our end users, and we’re there to support them as well as with the way that we promote and and advance our brands and strengthen our core brands. So we feel very good about our ability to manage the short term and and certainly didn’t want to lose track of the fact that we’ve been able to set a a solid foundation for the long term as well. And, you know, the the the strategy to manage this year is very complementary to what we’re trying to accomplish long term in the company as well.

Nigel, Unidentified role: Thanks, Chris. That was great setting the table. And one of these years, we’re going have a year where we aren’t going to talk about supply chains or recessions or pandemics. I don’t know what we’ll do with

Chris, Unidentified role, Stanley Black and Decker: ourselves. Maybe

Nigel, Unidentified role: you never know. You probably expect me to start off with some of the math there, but want to take a step back. You’ve been a stand now for, I think, just over two years, if I’m not mistaken. Maybe just talk about some of the changes you’ve put in place, the foundations you’ve referred how is Stanley today operating differently within our two and at that T and O business compared to maybe three years ago?

Chris, Unidentified role, Stanley Black and Decker: Yeah. So I’d say there’s a few things. I’ll highlight three things foundationally. One is, you know, as I arrived, there was very clearly an opportunity for us to better integrate and and centralize our supply chain in order to drive better better productivity and benefits from our scale. So if we look at what we’ve been doing in the transformation with, you know, really driving more efficiency in the way that we we source our products, making sure that we were able to think about better capacity utilization and shrinking our footprint, and then driving more lean processes into the business to be able to drive kind of more year over year productivity.

I think that those things are capabilities that have certainly paid dividends to date, but they’re just in their infancy, honestly, of what we think we can drive for productivity going forward, which is leads into kind of the next portion of you know, by and large, Stanley Black and Decker was a company that was assembled by acquisition. And as a result, a lot of the focus was on thinking about ways that we could take the product portfolio and put it put it in different brands to then think about how we could get increased levels of shelf space. So we’re a very product focused company thinking about individual product to product to product development. What we’ve now and I think as we went and talked to customers and and and to our end users and said, you know, what is it that you need out of us and where are we missing the mark? It was really thinking much more in terms of brands.

That we we with our core brands, you know, with DeWalt, Stanley, and Craftsman, we serve a customer set. That customer set expects us to be able to provide them what they need to do their job end to end. You know, if you’re a carpenter, you need to have all the tools for your carpentry workflow. If you’re a if you’re a mechanical contractor, you need those tools. And we had a long way to go to think about the business that way.

And ultimately, so that we could then start driving the demand and pull through of those products and not just the placement of those products. So we’ve changed and organized the company now by brand. So we have brand business units with brand general managers that have the category managers, the product development. And we think in terms of, from the customer back, what is it that that brand needs to be successful? What products do we need in the pipeline, what types of support do we need in the field, what types of activation resources, what types of salespeople working with our contractors to make all that happen on a brand by brand basis because our our end users count on us to to be to deliver solutions for them in a brand because they like to have a battery platform stay in that and make sure that they understand that they can be successful in the future going forward.

That was the second big thing, and I think that’s had a material impact on the way we think about the business from an end to end perspective and even how we we integrate better with the supply chain. And then thirdly, it was then saying, how can we work to better accelerate and modularize our development? In that, you know, there was the the company has always had a tremendous innovation engine. It was fairly diffuse and autonomous. Then You’d have individual product managers working with individual engineers, and so they had a pretty complex product portfolio, not a lot of platforming.

So we’ve centralized that engineering organization to two effects. One, to say, you know, those brand organizations work to specify what we need and then standard processes and and kind of making sure that we have the centralized capacity to get that done quickly. And secondarily, that that allows us to go much more to a common platforming strategy, which ultimately will allow us to get even more leverage, more scale in our supply chain. So that then drives the loop back around to more productivity to which we can reinvest. So it’s been it’s been a lot of change and a journey where we have we have a great team that wants to win.

I feel good about the talent that is there and that we’ve brought in. And, you know, I think that when we talk to our end user, when we talk to our customers, when we talk to our employees, people are excited about what we’ve seen and what we have ahead of us. And I think that we have some proof in the pudding by what we’ve been seeing with our progress in DEWALT.

Nigel, Unidentified role: Great. And of course there’s been a lot of talent brought into the merger. Yes. So Home Depot, your biggest retail partner reported this morning. We’ve Lowe’s tomorrow.

I’m guessing nothing that Home Depot showed this morning surprised you. I mean, you’d have known this when you reported your results. But they did refer to a commitment to retaining prices unchanged basically. Not sure how much of that was politics versus as we all know, I sense that this issue is. But what is your view right now on pricing?

Obviously, you’ve scaled back the implied guide, the 40¢, implies that you’re scaling back your price increases. So just maybe talk about that.

Chris, Unidentified role, Stanley Black and Decker: So I’d say that it’s a very volatile environment. That I think that would be an understatement. Probably one that’s more volatile than anything I’ve certainly seen in my career. But we have, since last summer, been working on this from a from a strategy perspective. What is it that we need to anchor on is what we’re going to do?

And I and I’d say we’ve been very consistent in that, and we remain consistent in that. I think that’s allowed us to be effective through this transition. We’ve been through this whole time very open book and collaborative with everyone, you know, all our large partners and partners in general. And that’s been, first and foremost, we need to make sure that we’re there for our collective customers and we are not turning on and off sources of supply. We want to keep inventory flowing because we want to make sure that our service levels stay where they need to be so we can service our end users because they need our stuff to be able to do their jobs.

And I’d say, in some previous environments, we weren’t as dedicated towards that, and it and it costs us in the long run when you’re not there to support your customer in a difficult time. So that was first and foremost. Secondarily, we wanted to we committed to continue our journey to reduce our exposure to China. It’s been a path that we’ve been on, and I should say, reduce our exposure to China for U. S.

Consumption. We’ve been on that journey for several years. It was going back when we were talking about the previous time, we’re at 40 ish percent. Now we’re in mid teens, and we would expect to be effectively out of China for US consumption within twelve to twenty four months. So anchoring on that was really important as well.

And then saying that our preference would be to continue to leverage our unique North American footprint, not just the production we have in The US, but we have a large facility and network that we’ve built in Mexico that we can continue to build out as well. So moving that production into Mexico and then working to make it USMCA qualified have been the bedrocks. And then we’ve talked about how, obviously, we will be committed to our long term, as I said, 35% plus margin journey. Pricing will always be a part of that as a lever we can and will pull. And we did put forth an increase, as was mentioned in our last earnings release.

As the environment is fluid and as it changes, I think we we work real time with our with our partners to see what that means. You know, for us, we know what our strategy is to make sure that we can deliver the mitigation we need to operationally. But we work very open book and collaboratively with our partners to say, what are the what are the tools, you know, literally the tools we can provide you that would be tariff optimized? We have a we have a very unique global footprint that allows us to say, to make it very specific in terms. You know, we have these different nine impact wrenches.

Six of them are made in Mexico. Three of them are made in China. How do we anchor around the six that are made in Mexico and make sure that we build our our plans and our portfolio around that together with our with our partners? And that’s a form of mitigation. As as the, you know, kind of environment continues to evolve, you know, if we would need price, it’s a lever we have.

You know, it remains I’m not gonna you know, it depends because things change so quickly. But obviously, you know, if it were to be necessary, you know, vis a vis when we talked at earnings, it would be a much, much more muted type of necessity. But we’re still working through the those plans with our partners as we speak.

Nigel, Unidentified role: So it sounds like there’s a toggle on the price versus the tariff. That’s pretty clear. I don’t want get into the murky world of LIFO accounting, but it does sound like you still have a pretty heavy charge in 2Q, obviously not as heavy as it was, but still reflective of

Chris, Unidentified role, Stanley Black and Decker: the You could see me backing up here

Nigel, Unidentified role: and that’s exactly it.

Dennis, Unidentified role, Stanley Black and Decker: Yes. Nigel, I think the best way to think about the 2Q impact is, one, these mitigation countermeasures that we’ve put in place, they’re starting to layer into the P and L as we move through the year. The second piece is that eventually, you get to one quarter of what the annualized tariff is. And we will see a step up in 2Q and have a portion of that bill. And just keep in the back of your mind too, I mean, we were paying higher tariff rates for about one point months.

And so there’s an impact to that. That isn’t a go forward, but it remains in place and will impact the second quarter.

Nigel, Unidentified role: We’ve seen progressively weaker consumer through the year. Are you seeing that coming through on the POS on your DIY side?

Chris, Unidentified role, Stanley Black and Decker: We continue to see the relative strength of the professional versus the DIYer. Yes. And I would say that and we consider we continue to see our our strength in the professional relative to even a relatively strong market. So we feel like we’re doing a good job of of gaining share there. As it relates to the DIYer, it remains a little bit soft, and I would expect it to continue to be softer until we see more stability in the economy and, you know, or maybe a more favorable interest rate environment that would, you know, allow there to be, you know, more turnover of existing homes, more R and R activity, people able to access and willing to access maybe some more of the home equity that they’ve built in order to kick off projects.

But I feel like the the steps that we’re taking right now to shore up that that that brand and that that product lineup will pay off because there will be an unlock there. Sure.

Nigel, Unidentified role: You mentioned reducing further reducing your China sourcing footprint for The U. S. Consumption from where it is today to the next twelve to twelve months. Maybe just talk about where that goes. Is that down to Vietnam, Southeast Asia, Mexico?

Maybe just touch on USMCA compliance, think it’s about a third as of 1Q. What are the measures you’re taking to tick that up?

Chris, Unidentified role, Stanley Black and Decker: Yes. Okay. So I’ll I’ll handle the so our our preferred or primary route would be continue to build out our Mexico footprint. That’s not gonna be exclusively the case, but, for many of the products that we make, we have already dual qualified SKUs and it’s a matter of turning off production in one place and turning on another in Mexico. And then some products that we make in Mexico are similar, but not the same as what we make in China.

And it’s a matter of just qualifying the new processes and bringing those new products up and running. And then some of them will be completely new products. So there will be varying timelines, but generally speaking, that is gonna be our preferred route. Now, if there is a trade off that says we don’t believe that for some reason we could absorb it in Mexico, a particular product line, or it’ll be more difficult to become USMCA qualified than we are. We do have other areas of low cost production that we would potentially look at accessing, whether it’s Vietnam or what we’re doing to continue to build out our our footprint in Pune, India.

So what we wanna move to is a strategy where we have larger hubs that have more flexibility and more diversity on a on a on a on a geographic and global basis. So think about Mexico, think about Vietnam, think about India, Taiwan, Thailand are all places we have pretty substantial scale, and we’ll continue to to leverage those as opportunities. But for this move, the primary route is gonna be Mexico. As far as USMCA compliance, you you noted that we’re about a little less than a third right now. The type of work that has to be done is on the spectrum of things more simple than what would be an overall production move.

We don’t need to move production. What we need to do is change some bills of material and local sources for some components to be able to, you know, kind of cross the threshold for USMCA compliance. Of note, you know, though USMCA has been around for a while, it wasn’t especially relevant to our industry until recently. But the work to be done in order to become qualified is on the simpler side of of what we have to do. And I’d say that when you think about that twelve to twenty four month time frame, getting a higher rate of USMCA compliance would be higher to the closer to the twelve than it would the twenty four.

Nigel, Unidentified role: Okay. And then just given that so much of the, I guess, the value chain, be it batteries or Powertronics today resides in China, Where do you think that can go? Where do you think USMCA compliance can go? 70?

Chris, Unidentified role, Stanley Black and Decker: I think that people have talked about the air kind of industrials being that 75% to 85%. Don’t know right now. We’re building out the plans, but, you know, kind of the lower end of that doesn’t seem like it would be something that would be out of range for a target for us. But we we we still have a lot of work to do to figure that out. But what we do know is that we think that as we have the solutions, they’ll be fairly chunky in nature.

Once you solve an issue for one category of products, it’ll be something that carries over to the other one. So we’re working to develop that kind of timeline as we speak.

Nigel, Unidentified role: Great. Thanks, Chris. Time is flying by. We’ve seven minutes left. So I want to make sure we get any questions from the room.

Any questions? Hand in the air? Nope. I guess the questions are great. So let’s carry on.

So Dennis, I think post quarter when we were talking about the price increases and the obviously the $1,700,000,000 inflation, I we were talking about exit rates of maybe 32% on gross margins. So in that kind of zone, low 30s. Where do you see that now based on the current map?

Dennis, Unidentified role, Stanley Black and Decker: Yes. Mean, we’ll have to we’re not here to give a new framework or anything along those lines. We’re trying to be helpful just with the changes in the policy. And I think the thing to take away from Chris’ comments earlier and her comments today is that the goal of 35% plus is still very realistic. Nothing’s changed in our mind with the events of this year that changed that goal.

And it’s reasonable to assume that we’ll be on that path. Now how things unfold this year, policy wise, countermeasures, etcetera, will make us smarter and being able to get more precise about where and when we get there.

Nigel, Unidentified role: Was a try, wasn’t it? Okay. So all of the movements on the supply chain and these are significant moves. Is there a pickup in CapEx that’s required here to and I know you’re scaling back in CapEx this year, but this like hundreds of millions of dollars of CapEx?

Chris, Unidentified role, Stanley Black and Decker: Or No. I I think where we’re fortunate is that it’s these are relatively capital light moves from the standpoint of we have the floor space and infrastructure that we need for the moves we’re talking about in Mexico. We have a lot of the capacity of the large capital equipment that we would need for the moves in Mexico as well. As we’re thinking about different tools and and maybe assembly capabilities and fixturing, there’s some investment that is needed, but it’s not it’s not a large number. So I think we’re very fortunate both from a speed and capital perspective there.

I think that the bigger the bigger kind of emphasis we’re gonna have is making sure that we work closely with our suppliers so that they’re in step with us to invest in the capacity and have the capital to invest that they need to drive following us as we ramp up and make that a larger part of our production base.

Nigel, Unidentified role: Okay. Inventory turns. Obviously, you’ve got a lot more inventory today than you had three, four years ago. So turns, I think, are running about 2.5x today, running 4x or 5x pre pandemic. What is the scope to get back to those kinds of levels over time?

Or are we running in a persistently higher inventory environment?

Chris, Unidentified role, Stanley Black and Decker: I’ll let you start.

Dennis, Unidentified role, Stanley Black and Decker: Yes, sure. I mean, we think of it more in days. And so if you kind of normalize for the portfolio, look at a more even loading across the year, the tools and the outdoor business were more like 120 to 130. And we’re sitting today in the low 150s. So clearly, there’s still an opportunity versus that.

Chris, Unidentified role, Stanley Black and Decker: And I think that really when we think of the levers, getting to a simpler manufacturing footprint is is a big part of it, and that’s that’s part of what we’re accelerating now as a part of, you know it’s very hand in hand with what we’re doing on our supply chain moves given the the trade environment. That’s a part of it. And then as we’re going through and and driving more of the the approach to platforming, we’re able to then think and, you know, our ability to plan with with a simpler component infrastructure and take down our whip is is is there as well. So I the the 20 to 30 is is very doable. The only counterbalance to that is as we are working over the next twelve to twenty four months to do all these production moves, there are, you know, temporary.

We’re gonna have to build buffers and move lines from plant a to plant b. So that may delay a little bit of getting some of that goodness, but all the underlying work that’s required to drive down those levels is absolutely happening.

Nigel, Unidentified role: Okay. That’s great, Chris. I want to get a couple more questions in, if I can. The outdoor in the spirit of the margin improvement strategy, the outdoor product group is still, I think, well below kind of the average. When that came in, it was mid single digits, I think it was.

So I don’t if you can comment on where those are today, but maybe just talk about strategy to improve those margins.

Chris, Unidentified role, Stanley Black and Decker: Yeah. I think it’s it’s a very similar strategy that, you know, we were working to simplify the product line for sure. You know, we had a very complex product line that that led to, I’d say, pretty high levels of cost and high levels of inventory in the channel and and therefore obsolescence as a result. There are the the supply chain efficiencies that we need to drive on a on a sourcing perspective. And, you know, really, as we continue to streamline our footprint in the out outdoor arena as well with a with a kind of a little bit of a a modest volume improvement because that’s been the that’s really been the part of the industry that’s been hit the hardest with the volume pull down.

Yeah. As we start to see that come down with a smaller footprint is with a rationalized product line, we we do see a path to improve margins. So it’s a similar formula with probably a little bit more focus on the footprint aspect.

Nigel, Unidentified role: Okay. And my final question is on the portfolio. Obviously, a lot of work has been done already. You still have the fasteners on the industrial side. You talked about maybe 5,000,000 of sales within the Tools and Outdoor segment that’s maybe not strategic longer term.

Can we talk about where we are in that sort of final stage of the portfolio cleanup?

Chris, Unidentified role, Stanley Black and Decker: Yes. I think that right now, as we’ve talked about, there’ll probably be, you know, some activity, small activity from a pruning perspective that really is gonna be looking at something that’s small and and not necessarily core to what we do that would not only simplify the portfolio, but then also play an important role in in the inorganic cash generation of 500 to get down to our our our leverage target. So I don’t know, Dennis, if you wanted to add anything

Dennis, Unidentified role, Stanley Black and Decker: No, I think that’s the right zone, Chris. And that’s been a part of our strategy that we laid out really throughout this period, but more notably in the fall of last year. And nothing’s really changed in our mind around that being a component of it over the year plus or minus zone. Okay.

Nigel, Unidentified role: We’re out of time. So we’ll draw a line there. Thanks, Chris. Thanks, Dennis. That was a

Chris, Unidentified role, Stanley Black and Decker: great

Nigel, Unidentified role: chat. Thank you.

Chris, Unidentified role, Stanley Black and Decker: Thank you.

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