Stanley Black & Decker (NYSE:SWK) -15.2% pre-market Thursday after reporting Q2 adjusted earnings and revenues that came in far short of expectations, cutting full-year guidance and implementing a cost reduction program aimed at saving $1B by year-end 2023.
Q2 net income plunged to $87.6M, or $0.57/share, from $459.5M, or $2.75/share, in the year-earlier quarter, while sales rose 16% Y/Y to $4.4B, but much of the gains were attributed to outdoor power equipment acquisitions.
Q2 gross margin fell 800 bps to 27.9%, as price realization was more than offset by commodity inflation, higher supply chain costs and lower volume.
Inventory at the end of Q2 increased $400MQ/Q to $6.6B, elevated vs. expectations and a year ago due to the impact of softer demand and the dwindling effects of supply chain constraints.
For the full year, Stanley Black & Decker (SWK) now sees adjusted EPS of $5.00-$6.00, down from prior guidance of $9.50-$10.50, including a ~$4.25/share reduction from weaker H2 revenue, primarily due to slower consumer demand in Tools & Outdoor and moderate expectations for price.
The company said it will target $1B in cost savings by year-end 2023 and ~$2B in three years, planning to take three years to overhaul its supply chain, move closer to customers and achieve at least 35% adjusted gross margins.
“As the softening of the demand environment accelerated rapidly during the last portion of the quarter, we began taking immediate corrective cost actions, which we are continuing to implement,” CEO Donald Allan Jr. said, adding the company is “preparing for demand to normalize closer to 2019 levels for the remainder of 2022.”
Stanley Black & Decker’s (SWK) stock price return shows a 37% YTD loss and a 42% decline during the past year.