Stanley CEO Loree cautiously optimistic as toolmaker enacts $1B cost-reduction program

PHOTO | Robert Benson Photography Stanley Black & Decker's New Britain headquarters.

Write a Comment

By Sean Teehan

Stanley Black & Decker on Thursday said it’s in the middle of a $1-billion cost reduction program that includes company wide layoffs, pay and benefit cuts as well as other spending reductions as the New Britain-based toolmaker faces headwinds from the global coronavirus pandemic.

The company’s most senior executives have agreed to a 20% reduction of their cash compensation for at least the remainder of the year, while Stanley is projecting second-quarter revenues to decline by as much as 45%, according to President and CEO Jim Loree.

Even still, Loree projected big-picture optimism during a quarterly earnings call Thursday morning, noting the company has weathered economic downturns in the past. But he also prepared shareholders for a projected revenue dip of 15% to 30% for the year.

"Second quarter will likely be the trough in 2020, albeit a deep one," Loree said. "We believe we have sufficient flexibility to navigate through this volatile period and emerge even stronger on the other side."

Stanley on Thursday released its first-quarter earnings, which declined by 27%. The company said its profits for the January-to-March period totaled $133.2 million, or 88 cents per diluted share, down from $169.9 million, or $1.13 per diluted share, in the year-ago period.

Its net sales during the quarter dropped by about 7% to $3.1 billion.

The coronavirus has led to a deep fall in demand in the automotive and aerospace sector, and general industrial orders from manufacturing plants also dried up, Loree said. A bright spot, however, was North American retail. Stanley saw an uptick in retail tool sales, as home-bound Americans apparently used lockdown orders to tackle home-improvement projects.

Stanley had already announced in October a $200 million cost-cutting initiative that included layoffs and the possible shuttering of some operations, and earlier this month said it will pull back on acquisitions and reduce “non-essential” staffing, including through layoffs.

"Our approach in this area is to ensure we are preserving our ability to reduce labor costs in a manner that allows us to treat employees with compassion in these incredibly difficult times," Allan said. "And to prepare us for a demand recovery at the appropriate time by making these actions as temporary as possible."

Stanley expects the initiative will deliver $1 billion in annualized cost savings, with an approximate pre-tax charge of $160 million expected to be recognized primarily in the second quarter.
Stanley already had about $180 million in fourth-quarter savings related to the plan it enacted in October, Allan said, and with the additional cost-saving measures the company should save about $500 million in 2020.

In the event of a quick recovery, the savings measures could be reversed, Allan said. In the event of a prolonged economic downturn, they could be made permanent.

Loree said he's cautiously optimistic about Stanley's prospects in weathering the pandemic.

"We were in a strong position going into the crisis and are taking the necessary actions to stay strong during the crisis, and to emerge from it even stronger," Loree said. "We have the resources, the strength and the mindset to take on the first great challenge of the 2020s."