Having implemented a $1 billion cost-savings program several months earlier due to COVID-19 impacts, Stanley Black & Decker reported its 2020 second quarter financial results on Thursday, showing the pandemic had major impacts on the amount of product sold.
The New Britain, CT-based company posted total Q2 sales of $3.1 billion, down 16 percent year-over-year (YoY) that was largely driven by a 17 percent reduction in volume. The Q2 sales total was nearly identical to Q1, which saw a 6 percent YoY decline.
Q2 gross margin of 32.2 percent was down from 34.6 percent a year earlier, while operating margin of 8.9 percent was down from 13.8 percent a year earlier. Operating profit of $166 million was far below the $464 million SBD had a year earlier, while total Q2 profit of $238 million was down 33.1 percent YoY.
"We effectively managed through a multitude of challenges during the second quarter to finish with a strong outcome given the environment," said James Loree, SBD president and CEO. "Our team demonstrated agility in the face of changing demand, swiftly implementing appropriate cost reduction actions while also responding to serve a rapidly improving demand picture in Tools & Storage and Security.
By business segment in Q2:
- Tools & Storage sales of $2.2 billion fell 16 percent YoY and were down from $2.1 billion in Q1, as volume sunk 16 percent. The company said organic revenue across all regions was impacted by reduced business activity related to COVID-19, with organic revenue down 10 percent in North America, down 21 percent in Europe and down 29 percent in emerging markets. SBD said the North America organic decline was driven by channel inventory reductions and reduced construction activity. Profit rate of 17.0 percent was flat YoY, with profit totalling $345 million, down from $440 a year earlier.
- Industrial sales of $518 million declined 20 percent YoY and down from $591 in Q1, driven by a 29 percentage point YoY decline in volume, partially offset by a 10-point gain from SBD's recent acquisition of fastener supplier CAM Aerospace. "The trough of the organic volume decline occurred in April with modest sequential improvement each month since," SBD said. Engineered Fastening organic revenues were down 35 percent YoY, which the ocmpany attributed to lower global automotive light vehicle and general industrial production. Infrastructure organic revenues were down 19 percent, which SBD said was due to lower volumes in attachment tools and oil & gas. Profit rate, excluding charges, was 8.8 percent, while segment profit of $5 million was dwarfed by $95 million of a year earlier.
- Security sales of $433 million fell 11 percent YoY and were down from $468 in Q1 as volume fell 9 percent from a year earlier. Organic sales were down 7 percent in North America and fell 10 percent in Europe. The company said all businesses were impacted by customer restrictions, which were most pronounced early int he quarter. Profit rate of 9.6 percent was down from 11.2 percent of a year earlier, while total profit of $9 million fell from $38 million of a year earlier.
"We are delighted with the second quarter performance under the circumstances," Loree added. "In particular, our ability to deliver against the weak but rapidly improving demand picture while maintaining our $1 billion cost reduction program enabled near peak level operating margin rates in Tools & Storage during a quarter currently believed to be a trough, was very encouraging."
SBD said it achieved approximately $175 million in cost savings during Q2 and is expecting about $325 million in savings over the second half of 2020. Part of that includes converting a majority of temporary compensation savings to permanent.