Q3 2024 Stanley Black & Decker Inc Earnings Call

October 29, 2024

Accurate and as such they involve risk and uncertainty.

It's therefore possible that the actual results may materially differ from any forward looking statements that we might make today, we direct you to the cautionary statements in the 8-K that we filed with our press release and in our most recent 34 Act filings. Additionally, we may also reference non-GAAP financial measures during the call for applicable reconciliations.

<unk> to the related GAAP financial measure and additional information. Please refer to the appendix of the supplemental presentation and corresponding press release, which are available on our website under the IR section I'll now turn the call over to our President and CEO Don Allen. Thank you Dennis and good morning, everyone.

Don Allen: This quarter, our team again delivered gross margin improvements as well as robust cash generation all as a result of continued solid execution against our operational priorities and framework. We created over two years ago. As you saw in this morning's release, we remain focused on executing against key areas within our <unk>.

Don Allen: Troll, our supply chain transformation and initiatives to accelerate share gains.

By executing our strategy, we continue to reshape our cost structure to capture efficiencies across our value chain and fund new growth investments and a slow choppy market to gain share. We expect these actions together will further strengthen our powerful brands accelerate innovation and enhance our end market activation.

Don Allen: To position us as the supplier of choice and capture the compelling long term opportunities in our industries we serve.

Don Allen: Our priorities remain consistent as we work toward completing our strategic transformation on today's call you will hear about progress in each of our key areas of focus gross margin expansion strong free cash flow generation and prioritize investments to stimulate sustainable growth and share gains.

Don Allen: First gross margin.

Don Allen: We continue to drive profitability through the significant transformation of our supply chain to achieve our target of 35% gross margin our global cost reduction program remains on track for expected run rate savings of $1 $5 billion by the end of 2024 and $2 billion by the end of 2025 next.

Don Allen: We experienced strong free cash flow generation behind profitability improvements supporting further balance sheet strength the progress on reducing our leverage has been significant in 2024, and finally, we have deployed new investments to stimulate sustainable growth with the primary goal of reinvigorating share gain to achieve.

Don Allen: <unk> growth at two to three times the market over the long term through our transformation, we have stabilized the company and are setting a solid foundation for future growth and significant EBITDA expansion. We're also strengthening our organizational culture to be centered around organic growth with an operational excellence mindset, which we expect.

Don Allen: To carry forward into the future for the next decade.

Don Allen: The entire Stanley Black <unk> Decker team has persevered through challenges and with hard earned self generated momentum behind us we have conviction that there are solid value creation opportunities in the short medium and long term as.

Don Allen: As we look at our markets in aggregate today.

Don Allen: They remain relatively stable on the surface that said some continued to be pressured by the continuation of mix consumer trends, especially related to housing as well as weak automotive production backdrop.

Our value chain and fund new growth investments and a slow choppy market to gain share. We expect these actions together will further strengthen our powerful brands accelerate innovation and enhance our in market activation to position us as a supplier of choice and capture the compelling long term opportunity.

Don Allen: These factors are informing our current focus to refine and improve agility within our current cost structure.

Don Allen: At the same time, we are funding new growth investments and the relatively healthy pockets of our business such as the Walt professional tool, which gained share for the sixth consecutive quarter.

In our industries, we serve are.

Our priorities remain consistent as we work toward completing our strategic transformation on today's call you will hear about progress in each of our key areas of focus gross margin expansion.

Don Allen: We are optimistic that the markets will turn in our favor in the future as interest rate cuts in many geographies likely will prove to be an initial catalyst there will be a lag between lower rates and the flow through to demand for our categories and we expect choppy markets will extend into the front half of next year until interest rate reduction.

Strong free cash flow generation, and prioritize investments to stimulate sustainable growth and share gains for us.

Gross margin.

Right.

Don Allen: <unk> have a greater effect and the U S. Election result is known and settled as a short cycle business. We will plan, our production and inventory thoughtfully to ensure we are ready for stronger demand in the future, which could be as early as the second half of 2025.

Achieve our target of 35% gross margin our global cost.

Okay.

Each of our target.

Cost reduction program remains on track for expected run rate savings of $1 $5 billion by the end of 2024 and $2 billion by the end of 2025.

Yes.

Our global footprint.

Okay.

One 5 billion.

Okay.

Pipe and tube.

Next we experienced strong free cash flow generation behind profitability improvements supporting further balance sheet strength the progress in reducing our leverage has been significant in 2024, and finally, we have deployed new investments to stimulate sustainable growth with the primary goal of reinvigorating share gain to achieve.

Excellent.

Don Allen: Before I get into the third quarter results I'd like to mention our upcoming capital markets day on November 20th at the New York Stock Exchange, which will also be available via live webcast.

Free cash flow generation.

The improvement.

Speaker Change: Good morning.

Speaker Change: Great.

Speaker Change: Progress in reducing our leverage has been Michigan.

Don Allen: The leadership team and I are looking forward to hosting this event, we will use it as a forum for key leaders many new to the company with fresh perspectives to share more about how the operational changes implemented over the last two years set us up for future success. We will discuss what is next as we continue to position the company to deliver higher levels of organic.

Speaker Change: And finally.

Speaker Change: Slide <unk>.

Speaker Change: Right.

Speaker Change: The primary cohort invigorating.

Organic growth at two to three times the market over the long term through our transformation, we have stabilized the company and are setting a solid foundation for future growth and significant EBITDA expansion. We're also strengthening our organizational culture to be centered around organic growth with an operational excellence mindset, which we.

Speaker Change: To achieve organic growth.

Speaker Change: Okay.

Speaker Change: Through our transformation.

Speaker Change: Right.

Speaker Change: And are setting our foundation for growth.

Don Allen: <unk> revenue growth profitability and cash flow over the long term, which will drive strong long term shareholder return via significant EBITDA expansion.

Speaker Change: Okay.

Speaker Change: Additional cost.

Speaker Change: Growth.

Expect to carry forward into the future for the next decade.

Speaker Change: Great.

Speaker Change: We expect to carry forward.

The entire Stanley Black <unk> Decker team has persevered through challenges and with hard earned self generated momentum behind us we have conviction that there are solid value creation opportunities in the short medium and long term.

Don Allen: If you are interested in attending reach out to Dennis and the IR team for more information.

Speaker Change: I understand.

Speaker Change: Active equity.

Speaker Change: Yes.

Don Allen: Now shifting to the third quarter results.

Speaker Change: And with hard.

Speaker Change: At the moment.

Don Allen: We delivered $3 $8 billion of revenue down 5% versus the prior year with organic revenue down two points.

Speaker Change: I'll do that mix shift.

Speaker Change: Our solid value creation.

Speaker Change: Sure.

Speaker Change: As we look at our markets in aggregate today.

Speaker Change: Okay.

Don Allen: Volume was down three points on a weak consumer backdrop and mixed end market demand, which was partially offset by a point of price we capitalize on pockets of relatively healthy market demand and delivered our sixth consecutive quarter of toward growth as well as higher sales in aerospace fasteners.

Speaker Change: They remain relatively stable on the surface that said some continued to be pressured by the continuation of mixed consumer trends, especially related to housing as well as weak automotive production backdrop.

Speaker Change: Okay.

Thank you.

Speaker Change: Right.

Speaker Change: You bet.

Speaker Change: Sure.

Speaker Change: Our consumer.

Speaker Change: Echo as well.

These factors are informing our current focus to refine.

Speaker Change: Okay.

Don Allen: The infrastructure divestiture, which closed early in the second quarter was a two point drag currency had a negative one point impact to revenue.

Don Allen: Adjusted gross margin was 35% up 290 basis points versus the third quarter of last year, a step up primarily attributed to the supply chain transformation. Adjusted EBITDA margin was 10, 8%, which is up 140 basis points versus prior year.

Don Allen: This was driven by our gross margin expansion, partially offset by prioritize investments designed to deliver future market share gains.

Don Allen: Adjusted Diluting earnings per share was $1 22 for the quarter.

Don Allen: Free cash flow was approximately $200 million in the third quarter, which provided capacity to reduce debt by $100 million.

Don Allen: Strong cash generation continues to support our ongoing capital allocation priority, namely shareholder dividend balance sheet strength and organic investments. Finally, we are narrowing our 2020 for full year adjusted diluted EPS guidance range to $3 90.

Turning to the third quarter results.

I'd like to mention our upcoming capital markets day on November 20th at the New York Stock Exchange, which will also be available via live webcast.

The leadership team and I are looking forward to hosting this event, we will use it as a forum for key leaders many new to the company with fresh perspective to share more about how the operational changes implemented over the last two years set us up for future success. We will discuss what is next as we continue to position the company to deliver higher levels of organic.

Up to $4 30.

Don Allen: And reiterating our free cash flow guidance of $650 million to $850 million.

Don Allen: Pat will provide more color on this later in our presentation I want to thank our team members for their persistence and staying focused and forging ahead. Despite a choppy macro environment. We continue to make substantial progress on our transformation plan and achieved the financial milestones. We established over two years ago, we will remain committed to our.

Ganic revenue growth profitability and cash flow over the long term, which will drive strong long term shareholder return via significant EBITDA expansion.

Don Allen: <unk> per share gain and the margin expansion journey that is generally within our control I will now pass it to Chris Nelson to review the business segment performance.

If you are interested in attending reach out to Dennis and the IR team for more information.

Now shifting to the third quarter results.

We delivered $3 $8 billion of revenue down 5% versus the prior year with organic revenue down two points.

Chris Nelson: Thank you Don and good morning, everyone.

Chris Nelson: Beginning with tools and outdoor third quarter revenue was approximately $3 3 billion.

Speaker Change: Volume was down three points on a weak consumer backdrop and mixed end market demand, which was partially offset by one point of price, we capitalize on pockets of relatively healthy market demand and delivered our sixth consecutive quarter of the world growth as well as higher sales in aerospace fasteners.

Chris Nelson: Down 2% organically versus prior year to Walt was a bright spot delivering its sixth consecutive quarter of organic growth as the brand continues to attract demand across the tools and outdoor product line price was plus 1% in the quarter, a weak consumer and DIY backdrop contributed to volumes declining 3% with currency.

Speaker Change: The infrastructure divestiture, which closed early in the second quarter was a two point drag currency had a negative one point impact to revenue adjusted gross.

Chris Nelson: <unk> revenue by another 1% third quarter adjusted segment margin rate was 11, 1%, a 180 basis point improvement compared to the third quarter last year, our supply chain transformation continues to help us deliver year over year margin expansion, while also funding our deliberate increase in growth investments.

<unk> margin was 35% up 290 basis points versus the third quarter of last year.

Speaker Change: Step up primarily attributed to the supply chain transformation adjusted EBITDA margin was 10, 8%, which is up 140 basis points versus prior year.

Chris Nelson: Turning to the product line performance for the third quarter power tools declined 1% organically due to softness in consumer and DIY brands on the positive side to Walt Cordless products grew in the quarter volume was also supported by the initial holiday season selling across our priority brands. We are excited by a great lineup of offering.

Speaker Change: This was driven by our gross margin expansion, partially offset by prioritizing investments designed to deliver future market share gains.

Speaker Change: Adjusted Diluting earnings per share was $1 22 for the quarter.

Speaker Change: Free cash flow was approximately $200 million in the third quarter, which provided capacity to reduce debt by $100 million.

That will be available to our end users in the fourth quarter and tools faced similar pressure from the consumer environment and organic revenue was down 3% power.

Speaker Change: Strong cash generation continues to support our ongoing capital allocation priorities, namely shareholder dividend balance sheet strength and organic investments.

Chris Nelson: However, we saw a strong customer response to our recent product launches of the dewalt <unk> system to <unk> storage lineup as well as our expansion in the material handling space with the construction Jack These innovative new products designed to enhance end user safety and productivity were meaningful contributors to the dewalt <unk>.

Speaker Change: Finally, we are narrowing our 2020 for full year adjusted diluted EPS guidance range to $3 90.

Speaker Change: Up to $4 30.

Speaker Change: And reiterating our free cash flow guidance of $650 million to $850 million.

Chris Nelson: <unk> growth in the quarter outdoor organic revenue declined 3% pressured by what we believe to be the final innings of Destocking within the independent dealer channel.

Speaker Change: Pat will provide more color on this later in our presentation.

I want to thank our team members for their persistence and staying focused and forging ahead. Despite a choppy macro environment. We continue to make substantial progress on our transformation plan and achieved the financial milestones. We established over two years ago, We will remain committed to our investments for share gain and the margin expansion journey that is.

Chris Nelson: Turning to performance by region, North America declined 4% organically driven by the same factors as the overall segment European revenue grew 1% organically. Despite a soft market backdrop. This was driven by double digit growth in both central Europe, and Iberia, which more than offset pressure in the UK.

Speaker Change: Generally within our control I will now pass it to Chris Nelson to review the business segment performance.

Chris Nelson: We are prioritizing investments to advance our regional presence and accelerate new product listings. These investments are designed to support market share expansion and will serve as well as our customers become more optimistic on the prospects for market growth.

Chris Nelson: Don and good morning, everyone bigger.

Chris Nelson: Beginning with tools and outdoor third quarter revenue was approximately $3 3 billion.

Chris Nelson: <unk>, 2% organically versus prior year to Walt was a bright spot delivering six consecutive quarter of organic growth as the brand continues to attract demand across the tools and outdoor product line price was plus 1% in the quarter, a weak consumer and DIY backdrop contributed to volumes declining 3% with currency.

Chris Nelson: Our remaining regions outside North America, and Europe in aggregate delivered solid performance generating 6% organic growth.

Chris Nelson: This was driven by double digit growth in Latin America led by Brazil, along with high single digit growth in India.

Chris Nelson: In summary for tools and outdoor growth into wall was once again the highlight along with the strong segment margin performance. As we look ahead, we remain focused on our efforts to continue to improve our gross margins and further strengthen our growth culture focusing on these two core imperatives allows us to prioritize resources and make <unk>.

Chris Nelson: New investments behind our best prospects for share gain.

Now moving to industrial third quarter revenue declined 18% on a reported basis versus the prior year, which was nearly all attributable to the infrastructure business divestiture organic revenue was down 1% as market softness in automotive contributed to segment volumes declining, 2%, which was offset by a point of price.

That will be available to our end users in the fourth quarter and tools faced similar pressure from the consumer environment and organic revenue was down 3%.

Chris Nelson: Automotive was down double digits as Oems reduced light vehicle production schedules and constrained capex spending.

Chris Nelson: The aerospace business grew 22% organically supported by new content wins, and a strong booking rate general industrial fasteners was up low single digits and we were pleased to see this business returned to growth after prolonged customer destocking. The industrial adjusted segment margin rate was 13, 9% and.

Chris Nelson: <unk> growth in the quarter outdoor organic revenue declined 3% pressured by what we believe to be the final innings of Destocking within the independent dealer channel.

Chris Nelson: Improvement of 170 basis points versus prior year, driven predominantly by price realization and cost control. This performance is notable given the mixed market conditions. We are encouraged to see the enterprise wide transformation efforts, resulting in adjusted operating margin expansion across both segments.

Chris Nelson: Turning to performance by region, North America declined 4% organically driven by the same factors as the overall segment European revenue grew 1% organically. Despite the soft market backdrop. This was driven by double digit growth in both central Europe, and Iberia, which more than offset pressure in the UK.

Speaker Change: Moving to the next slide I would like to highlight a couple of examples of how we are thoughtfully and aggressively prioritizing resources to accelerate growth in tools and outdoor first we are committed to investing $30 million by 2027 and initiatives to support tradespeople and their priorities, including skills development. There is a.

We are prioritizing investments to advance our regional presence and accelerate new product listings. These investments are designed to support market share expansion and will serve us well as our customers become more optimistic on the prospects for market growth.

Speaker Change: <unk> of trades people today and they are both our core end users and in high demand.

Chris Nelson: Our remaining regions outside North America, and Europe in aggregate delivered solid performance generating 6% organic growth.

We've already invested more than $10 million in the program and related initiatives since its inception, and we will continue to fund. This commitment. The program is designed to grow the number of skilled trades people, which means investing both in initiatives to support newer generations entering into the trades as well as to Upskill tradespeople that are already established in there.

Chris Nelson: This was driven by double digit growth in Latin America led by Brazil, along with high single digit growth in India.

Speaker Change: Our careers helped.

Speaker Change: Helping to solve the gap in trade skills is important not only to support the communities. We serve but it is also key to unlocking future growth in our industry.

Speaker Change: These investments also advance our end user focused business strategy by investing more to promote the long term vitality and success of our professional end users. We can support both newer generations and established treats people to help expand trades capacity building deeper connections with our end users while amplifying to Walt.

Chris Nelson: New investments behind our best prospects for share gains.

Chris Nelson: Now moving to industrial third quarter revenue declined 18% on a reported basis versus the prior year, which was nearly all attributable to the infrastructure business divestiture organic revenue was down 1% as market softness in automotive contributed to segment volumes declining, 2%, which was offset by a point of price.

Speaker Change: Strong brand loyalty to highlight a couple of recent examples where we partnered with organizations that share our commitment on.

Chris Nelson: Automotive was down double digits as Oems reduced light vehicle production schedules and constrained capex spending.

Speaker Change: On September 20th in honor of National Trades person day, we announced that's a wall awarded nearly $4 million and grow the trades grants to 166 organizations in the United States and Canada focused on scaling Reskilling and Upskilling tradespeople to while also sponsor street scholarships to support education.

Chris Nelson: The aerospace business grew 22% organically supported by new content wins, and a strong booking rate general industrial fasteners was up low single digits and we were pleased to see this business return to growth after prolonged customer destocking. The industrial adjusted segment margin rate was 13, 9% and.

Speaker Change: <unk> and fields, including the concrete mechanical finishing and pipe trades.

Speaker Change: We are also proud of our long standing partnership with World skills. This year at the competition and Leon France to Walt was the platinum partner Stanley. If a com were also featured as official tools partners. One final highlight I'll share is our recent participation at the trades women build Nations conference in New Orleans.

Speaker Change: Our booth and throughout the event our <unk> team members spent time getting to know the trades within better their personal experiences challenges and aspirations you are accustomed to hearing from us about new product innovations, but these investment programs are just as important they are creating a virtuous flywheel by supporting our end users today to create more.

Speaker Change: First we are committed to investing $30 million by 2027 and initiatives to support tradespeople and their priorities, including skills development. There is a shortage of tradespeople today and they are both our core end users and in high demand.

Speaker Change: Sustainable demand in the future and as I shared last quarter, our loyal and users are one of the top essential attributes for success. We continue to prioritize building deeper connections with these end users to deliver purpose built innovation.

We've already invested more than $10 million in the program and related initiatives since its inception, and we will continue to fund. This commitment. The program is designed to grow the number of skilled tradespeople, which means investing both in initiatives to support newer generations entering into the trades as well as to Upskill tradespeople that are already established in there.

Speaker Change: Another key attribute for success is our differentiated innovation engine as a leader in total job site solutions. We are focused on continuing to empower trades people on the job site by optimizing user workflow productivity and safety.

Speaker Change: Our careers helped.

Speaker Change: Helping to solve the gap in trade skills is important not only to support the communities. We serve but it is also key to unlocking future growth in our industry.

Speaker Change: The recent unveil of the 20 volt Max Grabow lifter is one of several new additions to waltz ecosystem of tools and technology that provides end to end solutions designed for trade professionals. The grabow utilizes a powerful electric vacuum pump to help maximize user control during lifting carrying.

Speaker Change: These investments also advance our end user focused business strategy by investing more to promote the long term vitality and success of our professional end users. We can support both newer generations and established trades people to help expand trades capacity building deeper connections with our end users while amplifying to Walt.

Speaker Change: Or installation applications for a wide range of heavy construction materials. This is just one example of how we are focused on driving robust innovation to help solve the most pressing challenges our professional end users face, particularly to enhance safety and productivity on the job site. Our talented team is moving with speed and a clear <unk>.

Speaker Change: Strong brand loyalty to highlight a couple of recent examples where we partnered with organizations that share our commitment on.

Speaker Change: On September 20th in honor of National Trades person day, we announced that's a wall awarded nearly $4 million and grow the trades grants to 166 organizations in the United States and Canada focused on scaling Reskilling and Upskilling tradespeople. So while also sponsors trade scholarships to support education.

Speaker Change: <unk> executing our transformation plan and accelerating share gain we are focused and organized and we believe we are well positioned to deliver sustainable profitable growth.

Speaker Change: Thank you very much and I'll now pass the call over to Pat Hallinan.

Speaker Change: <unk> and fields, including the concrete mechanical finishing and pipe trades.

Pat Hallinan: Thanks, Chris and good morning, as Dom shared we continue to make meaningful progress on our transformation journey I will now highlight our financial accomplishments during the third quarter and detail our focus on delivering our 2024 objective and our margin progression in 2025 and beyond.

We are also proud of our longstanding partnership with world skills. This year at the competition and Leon France to Walt was the platinum partner Stanley. If a com were also featured as official tools partners. One final highlight I'll share is our recent participation at the trades women build Nations conference in New Orleans.

Pat Hallinan: In the third quarter, we achieved approximately $105 million of pretax run rate cost savings, bringing our aggregate savings to approximately $1 4 billion since the program's inception, our third quarter and program to date performance demonstrates strong execution by employees across our organization.

Speaker Change: Our booth and throughout the event our Dwaal team members spent time getting to know the trades within better their personal experiences challenges and aspirations you are accustomed to hearing from us about new product innovations, but these investment programs are just as important they are creating a virtuous flywheel by supporting our end users today to create more.

Pat Hallinan: Station.

Pat Hallinan: We are tracking to plan driven by consistent progress across our work streams, we are diligently capturing cost efficiencies amid a backdrop of soft demand and freight inflation as we complete the transformation and pursue the actions needed to meet our gross margin objectives.

Speaker Change: Sustainable demand in the future and as I shared last quarter, our Royal and users are one of the top essential attributes for success. We continue to prioritize building deeper connections with these end users to deliver purpose built innovation.

Pat Hallinan: Stepping back we continue to target $1 5 billion of pre tax run rate savings by the end of 2024 and $2 billion of pre tax run rate savings by the end of 2025, we are on track to achieve both targets as we work towards our 35% plus adjusted gross margin target.

Pat Hallinan: As a reminder, our core supply chain transformation savings initiatives, our strategic sourcing operations excellence footprint actions and complexity reduction.

Pat Hallinan: Strategic sourcing remains the largest contributor to our transformation savings to date driven by component related savings captured in 2020 for.

Our installation applications for a wide range of heavy construction materials. This is just one example of how we are focused on driving robust innovation to help solve the most pressing challenges our professional end user space, particularly to enhance safety and productivity on the job site. Our talented team is moving with speed and a clear <unk>.

Pat Hallinan: Sourcing activities are leveraging the advantages of our functional center of excellence, capturing economies of scale and rationalizing our supply base to focus spend on our critical strategic suppliers.

Pat Hallinan: Operations Excellence is the next area of opportunity, which translate the productivity improvements across our system. This initiative leverages lean principles, which are being implemented at targeted site throughout the globe.

Speaker Change: Date, executing our transformation plan and accelerating share gains we are focused and organized and we believe we are well positioned to deliver sustainable profitable growth.

Pat Hallinan: We are optimizing our distribution footprint as well as redesigning our manufacturing network to leverage scale and centers of excellence as we maximize operational efficiency approximately one third of our facilities are undergoing significant change. During 2024, we expect this work to continue into 2025 and potential.

Speaker Change: Thank you very much and I'll now pass the call over to Pat Hallinan.

Pat Hallinan: Beyond.

Pat Hallinan: We are well underway with our platforming strategy as we identify methods to standardized parts and components across product families. The aimed as simplicity, which we will achieve by reducing complexity, improving procurement scale and ultimately decreasing the cycle time of our innovation process. We are combining this with a fresh design.

Pat Hallinan: The value approach to better serve our customers at a competitive cost advantage. This method takes a holistic approach to designing and bringing new products to market faster. While also doing so more efficiently, which can generate material productivity and cost savings well beyond 2025.

Pat Hallinan: <unk>.

As much as it is a method is the mindset that we are instilling across the company as we continue to look for productivity enhancements going forward I would like to commend the organization for diligently pursuing the goals of our transformation. This journey would not be possible without everyones contribution.

Stepping back we continue to target $1 5 billion of pre tax run rate savings by the end of 2024 and $2 billion of pre tax run rate savings by the end of 2025, we are on track to achieve both targets as we work towards our 35% plus adjusted gross margin target.

Pat Hallinan: The progress we've shared today, including developing a sustainable cost structure and generating operational efficiency gives us confidence in our ability to achieve our gross margin objectives for 2024.

Pat Hallinan: As a reminder, our core supply chain transformation savings initiatives, our strategic sourcing operations excellence footprint actions and complexity reduction.

Pat Hallinan: And to achieve 35 plus percent adjusted gross margin as we work to close out the transformation with that said we believe this is not the end goal rather a waypoint on the journey.

Pat Hallinan: Strategic sourcing remains the largest contributor to our transformation savings to date driven by component related savings captured in 2024.

Pat Hallinan: Moving to the next slide during the third quarter, we continued to make progress on two main areas of focus <unk>.

Pat Hallinan: <unk> generated free cash flow and expanding gross margins to support investment in long term profitable growth and share gain.

Pat Hallinan: Operations Excellence is the next area of opportunity, which translates to productivity improvements across our system. This initiative leverages lean principles, which are being implemented at targeted sites throughout the globe.

Pat Hallinan: We generated nearly $200 million of free cash flow in the third quarter. This brings year to date free cash flow broadly in line with where it was the prior year that said and importantly, the composition of free cash flow reflects a healthier mix.

Pat Hallinan: We are optimizing our distribution footprint as well as redesigning our manufacturing network to leverage scale and centers of excellence as we maximize operational efficiency approximately one third of our facilities are undergoing significant change during 2024, we expect this work to continue into 2025 and.

In the current fiscal year free cash flow is weighted towards cash earnings and benefits from transformation cost efficiencies. In addition to working capital reduction.

Pat Hallinan: The latter of which dominated 2023 free cash flow generation. This shift in makeup is a strong signal that our profitability and operating improvements are translating to sustainable free cash flow generation.

<unk> beyond.

Pat Hallinan: We are well underway with our platforming strategy as we identify methods to standardized parts and components across product families. The aim is simplicity, which we will achieve by reducing complexity, improving procurement scale and ultimately decreasing the cycle time of our innovation process.

Pat Hallinan: We are reiterating our full year free cash flow guidance range of $650 million to $850 million we.

Pat Hallinan: We expect fourth quarter cash generation to be supported by positive earnings working capital reductions from our seasonal drawdown on our receivables as well as a modest reduction of inventory our 2020 for outlook for capital expenditures is $325 million to $375 million.

Pat Hallinan: We are combining this with our fresh design to value approach to better serve our customers at a competitive cost advantage.

Pat Hallinan: This method takes a holistic approach to designing and bringing new products to market faster. While also doing so more efficiently, which can generate material productivity and cost savings well beyond 2025.

Pat Hallinan: Which is approximately $75 million lower at the midpoint than our previous assumption. This.

As much as the method is the mindset that we are instilling across the company as we continue to look for productivity enhancements going forward I would like to commend the organization for diligently pursuing the goals of our transformation. This journey would not be possible without everyones contribution.

Pat Hallinan: This benefit for 2024 is offset by an expectation that we will carry slightly higher levels of inventory at year end versus our July guidance with that in mind. We are taking a measured approach to inventory management in the back half of 2024 and into 2025, as we navigate potential changes to the external environment.

Pat Hallinan: <unk> and our market, including the possibility for an acceleration of demand looking forward. We are planning to allocate free cash flow in excess of the dividend to support debt reduction, which we expect will result in a total gross debt balance that is a little over $6 billion as of the end of 2020 for beyond.

Pat Hallinan: And to achieve 35 plus percent adjusted gross margin as we work to close out the transformation with that said we believe this is not the end goal rather a waypoint on the journey.

Pat Hallinan: 2024, we are planning for further deleveraging with a goal to achieve our targeted leverage metrics of approximately two five times net debt to EBITDA by year end 2025, we plan to achieve this objective by utilizing excess free cash flow beyond the dividend and modest portfolio.

Pat Hallinan: Moving to the next slide during the third quarter, we continued to make progress on two main areas of focus <unk>.

Pat Hallinan: <unk> generating free cash flow and.

Pat Hallinan: And expanding gross margins to support investment in long term profitable growth and share gains we.

Pat Hallinan: Pruning actions.

Pat Hallinan: Turning to profitability.

Pat Hallinan: Adjusted gross margin was 35% in the third quarter of 290 basis point improvement versus prior year, primarily driven by savings from the supply chain transformation net of normal wage and benefit inflation. We are planning for further sequential improvement in the fourth quarter supported by our supply chain transformation.

Pat Hallinan: In the current fiscal year free cash flow is weighted towards cash earnings and benefits from transformation cost efficiencies. In addition to working capital reduction.

Pat Hallinan: <unk> initiatives, our current plan puts us on the path to achieve our goal of approximately 30% full year 2024 adjusted gross margin.

Pat Hallinan: Now turning to 2020 for guidance and the remaining key assumptions. In addition to reiterating free cash flow guidance, we are guiding GAAP earnings per share range to $1 15.

Pat Hallinan: We are reiterating our full year free cash flow guidance range of $650 million to $850 million we.

Pat Hallinan: To a $1 75.

Pat Hallinan: And adjusted earnings per share range to $3 90.

Pat Hallinan: The $4 30.

Pat Hallinan: With both range has narrowed but unchanged at the midpoint as compared to our prior guidance our outlook factors in the continuation of a relatively soft macro environment in the fourth quarter. One that is marginally weaker than that anticipated at the end of the second quarter driven by continued consumer softness in global automotive production.

Pat Hallinan: Which is approximately $75 million lower at the midpoint than our previous assumption.

Pat Hallinan: Klein that appear to have yet bottomed.

Pat Hallinan: As we have done throughout the year, we are leveraging the cost savings primarily within our control to offset these pressures and generate adjusted EBITDA growth versus the prior year.

Pat Hallinan: At the midpoint of our guidance, we are assuming full year organic revenue will be down one percentage point with fourth quarter organic revenue declining approximately one 5%.

Pat Hallinan: Our full year total revenue guidance at the third quarter ending foreign currency rates.

Pat Hallinan: As relatively similar to our prior revenue guidance as recent currency rates are less negative than previously forecast offsetting the moderate incremental weakness in organic revenue.

Pat Hallinan: Turning to the segments.

Pat Hallinan: Our outlook for tools and outdoor full year organic revenue is unchanged at down 1% at the midpoint plus or minus 50 basis points.

Pat Hallinan: Pruning actions.

Pat Hallinan: With relatively flat pricing for the full year.

Pat Hallinan: Turning to profitability.

Pat Hallinan: We have updated our expectation for the industrial segment.

Pat Hallinan: To be down 1% at the midpoint, plus or minus 50 basis points.

Pat Hallinan: This assumption now incorporates more pronounced global automotive production headwind than our prior guidance and assumes that the fourth quarter organic revenue will be in a similar zone to that at the end of the third quarter.

Pat Hallinan: <unk> initiatives.

Pat Hallinan: Our current plan puts us on the path to achieve our goal of approximately 30% full year 2024, adjusted gross margin now.

Pat Hallinan: Broadly we remain positive about our industry's long term growth prospects near term, we expect markets to remain choppy and soft until interest rate reductions have greater effect global automotive production fully correct and the U S. Election result is known.

Pat Hallinan: Now turning to 2020 for guidance and the remaining key assumptions. In addition to reiterating free cash flow guidance, we are guiding GAAP earnings per share range to $1 15.

Pat Hallinan: We remain committed to our investments for share gain and the margin expansion journey that is generally within our control.

Pat Hallinan: To a $1 75.

Pat Hallinan: And adjusted earnings per share range to $3 90.

Pat Hallinan: Turning to SG&A.

Pat Hallinan: The $4 30.

Pat Hallinan: We are maintaining a disciplined approach to cost management, given the near term market softness while prioritizing investments for long term organic growth.

Pat Hallinan: With both ranges narrowed but unchanged at the midpoint as compared to our prior guidance our outlook factors in the continuation of a relatively soft macro environment in the fourth quarter. One that is marginally weaker than that anticipated at the end of the second quarter, driven by continued consumer softness and global automotive production.

Our planning assumption for innovation brand marketing activation and technology growth investments remains an incremental $100 million in 2024.

Pat Hallinan: We expect full year 2020 for SG&A as a percentage of sales to be in the low 21% zone.

Pat Hallinan: Klein that appear to have yet bottomed.

Pat Hallinan: We expect total company adjusted EBITDA margin to approximate 10% for the full year.

At the midpoint of our guidance, we are assuming full year organic revenue will be down one percentage point with fourth quarter organic revenue declining approximately one 5%.

Pat Hallinan: Ported by savings from the transformation program.

Pat Hallinan: Our adjusted segment margin assumptions for tools and outdoor and industrial are relatively consistent with our prior plan and expected to be up year over year.

Pat Hallinan: Our full year total revenue guidance as the third quarter ending foreign currency rates.

Pat Hallinan: Our adjusted earnings per share range is 40.

As relatively similar to our prior revenue guidance as recent currency rates are less negative than previously forecast offsetting the moderate incremental weakness in organic revenue.

Pat Hallinan: With variability and market demand being the largest contributor between the high and low end.

Pat Hallinan: We remain focused on our goal for adjusted gross margin and expect to manage SG&A thoughtfully in this environment, while working hard to make the investments that position the business for long term growth turning to other elements of guidance.

Pat Hallinan: Turning to the segments.

Pat Hallinan: Our outlook for tools and outdoor full year organic revenue is unchanged at down 1% at the midpoint plus or minus 50 basis points.

Pat Hallinan: GAAP earnings include pretax non-GAAP adjustments, ranging from $455 million to $485 million.

Pat Hallinan: With relatively flat pricing for the full year.

Pat Hallinan: We have updated our expectation for the industrial segment.

<unk> at the midpoint versus prior guidance.

Pat Hallinan: To be down 1% at the midpoint, plus or minus 50 basis points.

Pat Hallinan: These charges largely relate to the supply chain transformation program.

Pat Hallinan: This assumption now incorporates more pronounced global automotive production headwind than our prior guidance.

Pat Hallinan: The second quarter Environmental reserve adjustment.

Pat Hallinan: And the noncash brand impairment charge from the third quarter.

Pat Hallinan: And assumes that the fourth quarter organic revenue will be in a similar zone to that at the end of the third quarter.

Pat Hallinan: The adjusted tax rate is expected to be 10% for the full year, which will imply a tax benefit in the fourth quarter.

Pat Hallinan: Although 2024 guidance assumptions at the midpoint are noted on the slide to assist with modeling.

Pat Hallinan: In summary, we remain focused on executing our supply chain improvements to further improve gross margin and earnings our progress to date support our narrowed full year earnings and free cash flow outlook.

Pat Hallinan: We remain committed to our investments for share gain and the margin expansion journey that is generally within our control.

Pat Hallinan: We remain confident that our actions to drive towards our target of 35% plus adjusted gross margin while funding additional organic revenue growth investments.

Pat Hallinan: Turning to SG&A.

Pat Hallinan: We are maintaining a disciplined approach to cost management, given the near term market softness while prioritizing investments for long term organic growth.

Pat Hallinan: We will continue to generate positive results.

Pat Hallinan: Our planning assumption for innovation brand marketing activation and technology growth investments remains an incremental $100 million in 2024.

Pat Hallinan: Our top priorities remain delivering margin expansion generating cash and further strengthening the balance sheet to position the company for long term growth and value creation with that I will now pass the call back to Don.

Pat Hallinan: We expect full year 2020 for SG&A as a percentage of sales to be in the low 21% zone.

Don Allen: Thank you Pat as you heard this morning, the company is making meaningful progress across our key priorities of margin improvement cash generation and balance sheet strength, while also investing in future sustainable growth to drive share gains. We are moving decisively to continue to deliver results. Despite mixed end market demand.

We expect total company adjusted EBITDA margin to approximate 10% for the full year.

Pat Hallinan: Supported by savings from the transformation program.

Our adjusted segment margin assumptions for tools and outdoor and industrial are relatively consistent with our prior plan and expected to be up year over year.

Don Allen: Which likely will continue through the middle of 2025.

Don Allen: We will stay focused on this consistent execution, while positioning the company to deliver higher levels of sustainable organic revenue growth profitability and cash flow, which will drive strong long term shareholder return via significant EBITDA expansion.

Pat Hallinan: Our adjusted earnings per share range is 40.

With variability and market demand being the largest contributor between the high and low end we.

Pat Hallinan: We remain focused on our goals for adjusted gross margin and expect to manage SG&A thoughtfully in this environment, while working hard to make the investments that position the business for long term growth turning to other elements of guidance.

Dennis: We are now ready for Q&A Dennis.

Speaker Change: Great. Thanks, Dan Shannon, we can now start the Q&A. Please thank you.

Speaker Change: Thank you to ask a question you will need to press star one on your telephone.

Pat Hallinan: GAAP earnings include pre tax non-GAAP adjustments, ranging from $455 million to $485 million.

Speaker Change: Inherent automated message advising your hands raised.

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Pat Hallinan: Unchanged at the midpoint versus prior guidance.

Speaker Change: Please standby what capello the Q&A roster.

Pat Hallinan: These charges largely relate to the supply chain transformation program.

Speaker Change: Our first question comes from the line of Julian Mitchell with Barclays. Your line is now open.

Pat Hallinan: The second quarter Environmental reserve adjustment.

Pat Hallinan: And the noncash brand impairment charge from the third quarter.

Speaker Change: Hi, good morning, maybe.

The adjusted tax rate is expected to be 10% for the full year, which will imply a tax benefit in the fourth quarter.

Speaker Change: Maybe just wanted to good.

Speaker Change: Good morning, wondering if you could flesh out a little bit.

How do I think about next year.

Pat Hallinan: Although 2024 guidance assumptions at the midpoint are noted on the slide to assist with modeling.

Speaker Change: And just sort of within touching distance.

Speaker Change: So just wanted to sort of you still confident of that kind of 35 10, plus gross margin.

Pat Hallinan: In summary, we remain focused on executing our supply chain improvements to further improve gross margin and earnings our progress to date supports our narrowed full year earnings and free cash flow outlook.

Speaker Change: Exiting next year.

Speaker Change: Thinking about the sort of construct as it looks today.

Speaker Change: Should we be thinking sort of first half of next year flat to down sales similar to how you're exiting 2020 full and then the margin expansion. It looks like operating margins exiting this year up about 100 bps year on year in Q4.

Pat Hallinan: We remain confident that our actions to drive towards our target of 35% plus adjusted gross margin while funding additional organic revenue growth investments.

Pat Hallinan: We will continue to generate positive results are.

Pat Hallinan: Our top priorities remain delivering margin expansion.

Speaker Change: That is sort of a good place told early next year and next year, it's really about the second half when you see a big revenue and margin jumped thank you.

Pat Hallinan: Generating cash and further strengthening the balance sheet to position the company for long term growth and value creation with that I will now pass the call back to Don.

Speaker Change: Thanks, Julian so.

Don: Thank you Pat as you heard this morning, the company is making meaningful progress across our key priorities of margin improvement cash generation and balance sheet strength, while also investing in future sustainable growth to drive share gains. We are moving decisively to continue to deliver results. Despite mixed end market demand.

Speaker Change: Well I'll, let Pat give some color and thoughts of where we are related to 2025, and then I'll circle back at the end with some perspective on progress in the transformation, how we close out the transformation in the next 12 to 18 months.

Pat Hallinan: Yes, Julien a lot a lot in there.

Pat Hallinan: If I start with sales.

Don: Which likely will continue through the middle of 2025.

Pat Hallinan: I would say, we're not here to give precise 25 guidance, but certainly we expect the macros we're facing now.

Don: We will stay focused on this consistent execution, while positioning the company to deliver higher levels of sustainable organic revenue growth profitability and cash flow, which will drive strong long term shareholder return via significant EBITDA expansion.

Pat Hallinan: To be characterizing the front part of next year. So.

Soft and choppy tools demand.

Pat Hallinan: And probably still some auto headwinds into the front part of next year, so more likely than not we're expecting a flat to down start to the year, obviously, we'll update that.

Dennis: We are now ready for Q&A Dennis.

Dennis: Great. Thanks, Tom Shannon, we can now start the Q&A. Please thank you.

Speaker Change: Thank you to ask a question you will need to press star one on your telephone.

Pat Hallinan: When we give guidance in the early days of 25, but I would say flat to down more likely down is probably where we can start and then on the gross margin gross margin has been a key part of our journey and remains a key part of our journey and certainly we continue to work towards 35 in the fourth quarter of <unk>.

Speaker Change: Her an automated message advising your hands raised.

Speaker Change: Your question. Please press star one again.

Speaker Change: We ask that you please limit yourself to one question.

Speaker Change: Please standby was how the Q&A roster.

Speaker Change: Our first question comes from the line of Julian Mitchell with Barclays. Your line is now open.

Pat Hallinan: Next year, but the transformation is about gross margin improvement it.

Speaker Change: Hi, good.

Speaker Change: Morning, maybe.

Speaker Change: Maybe just wanted to good.

Pat Hallinan: It's also about.

Speaker Change: Good morning, wondering if you could flesh out a little bit.

Pat Hallinan: Returning to share driven growth and getting the margin and the growth together.

Speaker Change: How are you thinking about next year.

Speaker Change: And just sort of within touching distance.

Pat Hallinan: To achieve.

Speaker Change: So just wanted to sort of you still confident of that kind of 35% plus gross margin.

Pat Hallinan: Two plus billion dollars of EBITDA, but from the business and.

Pat Hallinan: As a team we remain very confident in getting to 35% plus and to getting to $2 billion plus EBITDA.

Speaker Change: Exiting next year.

Speaker Change: Thinking about the sort of construct as it looks today.

Pat Hallinan: The timing of that is going to depend on the headwinds. We we really feel like those are the right targets.

Pat Hallinan: But we've had a lot of headwinds in this journey.

Pat Hallinan: We are right now identifying and accelerating incremental activities to drive that margin expansion and to the extent to which those accelerated activities are timed up enough relative to the headwinds again, we'll update you when we give guidance in the early part of next year.

Speaker Change: That is sort of a good place told early next year and next year, it's really about the second half when you see a big revenue and margin jumped thank you.

Speaker Change: Thanks, Julian so.

Speaker Change: Yes.

Speaker Change: Pat give some color and thoughts of where we are related to 2025, and then I'll circle back at the end with some perspectives on progress in the transformation, how we close out the transformation in the next 12 to 18 months.

Pat Hallinan: Sure.

Pat Hallinan: That is certainly our focus.

Pat Hallinan: And it's going to be just a balancing act of the acceleration of our activities relative to the headwinds.

Pat Hallinan: And then in terms of.

Pat Hallinan: The margin in the early part of the year I mean, I think we will be 31 ish in the fourth quarter.

Pat Hallinan: Yes, Julien a lot a lot in there.

If I start with sales.

Pat Hallinan: Of.

Pat Hallinan: I would say, we're not here to give precise 25 guidance, but certainly we expect the.

Pat Hallinan: This year, and then it'll be a little bit of a similar dynamic as we click into the first half.

Pat Hallinan: The macros, we're facing now.

Pat Hallinan: Next year relative to the back half of this year, where you have some of the natural seasonal headwinds from the outdoor business in the early part of the year.

Pat Hallinan: To be characterizing the front part of next year. So.

Pat Hallinan: Soft and choppy tools demand.

Pat Hallinan: And probably still some auto headwinds into the front part of next year, so more likely than not we're expecting a flat to down start to the year, obviously, we will update that.

Pat Hallinan: Plus some of the under absorption from the slow demand the back part of this year. So I do expect the year over year dynamics at least.

Pat Hallinan: First half of 'twenty five.

Pat Hallinan: When we give guidance in the early days of 25, but I would say flat to down more likely down is probably where we start and then on the gross margin gross margin has been a key part of our journey and remain a key part of our journey and certainly we continue to work towards 35 in the fourth quarter of <unk>.

Pat Hallinan: The first half of 'twenty four to look a little bit in terms of incremental improvement a bit like what you saw from 24 to 23.

Pat Hallinan: If I just kind of circle back to the overall broader transformation framework that we established.

Pat Hallinan: Two five years ago, roughly and we went into this journey knowing that there were a handful of things that we needed to address and obviously the first thing was developing a muscle around organic growth and gaining share that had not been consistently in place at Stanley Black <unk> Decker over the.

Pat Hallinan: Next year, but the transformation is about gross margin improvement it.

Pat Hallinan: It's also about.

Pat Hallinan: Returning to share driven growth and to getting the margin and the growth together.

Pat Hallinan: To achieve.

Pat Hallinan: Two plus billion dollars of EBITDA, but from the business and.

Pat Hallinan: Last several decades, we grew through a lot of other things such as acquisitions and created a significant amount of value.

Pat Hallinan: As a team we remain very confident in getting to 35% plus and to getting to $2 billion plus EBITDA.

And so we continue to build that muscle and that's an important part of this transformation in both I and Chris made comments today and the progress in that journey and we still have more progress to make.

Pat Hallinan: The timing of that is going to depend on the headwinds. We we really feel like those are the right targets.

Pat Hallinan: The other thing was the profitability of the business and the cash flow and getting ourselves to 35%, we still feel very strongly in our ability to get above 35% gross margin.

Pat Hallinan: But we've had a lot of headwinds in this journey.

Speaker Change: The timing of it as Pat said could vary a little bit, but due to headwinds and other factors, but as we've gotten deeper and deeper into this in the last 18 months as we work together as a team.

Speaker Change: See a lot of value drivers for the next three years to four years that can continue to improve our margins and allow us to continue to invest more into the front end of the business. So that we can develop the strength in the muscle. So we do gain share in a sustainable long term basis.

Pat Hallinan: <unk>.

Pat Hallinan: That is certainly our focus.

Pat Hallinan: And it's going to be just a balancing act of the.

Pat Hallinan: <unk> of our activities relative to the headwinds and then in terms of <unk>.

The margin in the early part of the year I mean, I think we will be 31 ish in the fourth quarter.

Speaker Change: Our industry, which is something that we think is the biggest value driver of all once we get our margins above that 35%.

Pat Hallinan: <unk>.

Pat Hallinan: This year, and then it'll be a little bit of a similar dynamic as we click into the first half.

Speaker Change: So more to come on that Investor day, we're excited to walk through more details.

Pat Hallinan: Next year relative to the back half of this year, where you have some of the natural seasonal headwinds from the outdoor business in the early part of the year.

Speaker Change: In about three weeks from now.

Speaker Change: We're very pleased with the progress and we still are very committed to the overall objectives, we established a transformation two and a half years ago.

Pat Hallinan: Plus some of the under absorption from the slow demand the back part of this year. So I do expect the year over year dynamics at least.

Speaker Change: Thank you. Our next question comes from the line of Chris Snyder with Morgan Stanley. Your line is now open.

Pat Hallinan: First half of 'twenty five.

Pat Hallinan: The first half of 'twenty four to look a little bit in terms of incremental improvement a bit like what you saw from 24% to 23.

Speaker Change: Chris Schneider. Your line is open please check your mute button.

Chris Snyder: Oh, sorry about that thank you.

Chris Snyder: I wanted to follow up on the gross margin commentary. So it seems like 2024, maybe you'll exit the year up 150 basis points.

Pat Hallinan: And if I, just kind of circle back to the overall broader transformation framework that we established.

Pat Hallinan: Two and a half years ago, roughly and you know we went into this journey knowing that there were a handful of things that we needed to address and obviously the first thing was developing a muscle.

Speaker Change: To get to that 35% at year end 25, you kind of need to then have 25 350 year year on year basis points, though.

Chris Snyder: Yes.

Speaker Change: Was the prior commentary basically saying that that's not a year end 'twenty five target any more it's kind of more in the distance.

Pat Hallinan: Organic growth and gaining share that had not been consistently in place at Stanley Black <unk> Decker over the last several decades, we grew through a lot of other things such as acquisitions that created a significant amount of value.

Speaker Change: And I know that it's macro dependent so maybe if there is any thing you can kind of say on the macro that's needed to get to that 35 to exit next year that'd be helpful. Thank you.

Pat Hallinan: And so we continue to build that muscle and that's an important part of this transformation in both I and Chris made comments today and the progress in that journey and we still have more progress to make.

Speaker Change: Yes, Chris I don't know that its not the objective anymore, that's not what we said.

Speaker Change: We're still working towards that it's really a question of given the headwinds the back part of this year I'd say the back part of this year are our sales have been about a point lower than we expected and we still feel like auto hasnt fully correct and Thats a pretty.

Pat Hallinan: The other thing was the profitability of the business and the cash flow and getting ourselves to 35%, we still feel very strongly in our ability to get above 35% gross margin.

Speaker Change: The timing of it as Pat said could vary a little bit, but due to headwinds and other factors.

Speaker Change: Profitable part of our industrial portfolio.

Speaker Change: But as we've gotten deeper and deeper into this in the last 18 months as we've worked together as a team.

Speaker Change: And then while it's a smaller part of our portfolio, we'll we'll probably see some blip next year from the Boeing strike. So it's just a question of will we tee up enough incremental and accelerated activities to offset that and any other headwinds that come our way.

Speaker Change: We see a lot of value drivers for the next three or four years that can continue to improve our margins and allow us to continue to invest more into the front end of the business. So that we can develop the strength in the muscle. So we do gain share in a sustainable long term basis in our industry, which is something that we.

Speaker Change: And we just we just don't want to get ahead of ourselves, we'll kind of update everybody on that when we get to guidance at the end of next year, it's still.

Speaker Change: <unk> is the biggest value driver of all once we get our margins above that 35%.

Speaker Change: The working goal of our team.

I'd say, what what's really going to affect it probably as much or more than anything is at what pace do interest rates start taking effect.

Speaker Change: So more to come on that Investor day, we're excited to walk through more details.

About three weeks from now.

Speaker Change: We're very pleased with the progress and we still are very committed to the overall objectives, we established through the transformation two and a half years ago.

Speaker Change: And how quickly does auto correct, because thats, a very profitable part of that industrial business.

Speaker Change: And then how much.

Thank you. Our next question comes from the line of Chris Snyder with Morgan Stanley. Your line is now open.

Cost reduction activity, we will be able to.

Speaker Change: Both implement and complete in time for it to roll off the balance sheet next year I think those will be the factors that affect that timing precisely.

Speaker Change: Chris Schneider. Your line is open please check your mute button.

Chris Snyder: Oh, sorry about that thank you.

Speaker Change: But like I said, Thats still our working GUL and yes.

Chris Snyder: I wanted to follow up on the gross margin commentary. So it seems like 2024, maybe you'll exit the year up 150 basis points.

Speaker Change: Along the way the headwinds have certainly made the slope of nextgen, a little bit steeper than we would've preferred but.

Speaker Change: To get to that 35% at year end 'twenty, Bob you kind of need to then have 25 would be up 350 year year on year basis points, though.

We have every confidence we get to 35 plus percent in fact, we see good opportunities of platforming to go beyond that so I think the timing is just the match up of headwinds versus accelerated activity.

Chris Snyder: I guess it was.

Speaker Change: Was the prior commentary basically saying that that's not a year end 'twenty five target any more it's kind of more in the distance.

Speaker Change: Thank you. Our next question comes from the line of Tim Welsh with Baird. Your line is now open.

Speaker Change: And I know that it's macro dependent so maybe if theres any thing you can kind of say on the macro that's needed to get to that 35 to exit next year that'd be helpful. Thank you.

Speaker Change: Hey, guys skewed.

Speaker Change: Good morning, Thanks for the trailer.

Just a follow up to that last question and then my question. So I guess first Pat could.

Speaker Change: Yes, Chris I don't know that its not the objective anymore, that's not what we said.

Tim Welsh: Could you just talk about what the accelerated activity is and kind of what cost buckets youre kind of attacking because you guys are already kind of taking out a lot of cost. So I'm just kind of curious where the incremental pieces are and then second just Don as you kind of change the mindset internally.

Speaker Change: We're still working towards that.

Speaker Change: Really a question of given the headwinds the back part of this year I'd say the back part of this year or.

Speaker Change: Our sales of that about a point lower than we expected and we still feel like auto hasnt fully corrected that's a pretty.

Tim Welsh: Maybe something Thats more acquisition and kind of integration focus to organic focused what are the biggest changes that you need to make to the organization internally to kind of get the algorithm right.

Speaker Change: Profitable part of our industrial portfolio.

Speaker Change: And then while it's a smaller part of our portfolio, we'll we'll probably see some blip next year from the Boeing strike. So it's just a question of will we tee up.

Don Allen: Once you start yes, I'll answer that ill start Kevin as you mentioned, yes, we have a lot of streams of work going I think.

Speaker Change: Incremental and accelerated activities.

Don Allen: When we're talking about 25 and 25 specifically.

Speaker Change: To offset that and any other headwinds that come our way and.

Don Allen: I think youre going to see acceleration on three fronts sourcing footprint and platforming, but the.

Speaker Change: And we just we just don't want to get ahead of ourselves what kind of update everybody on that when we get to guidance at the end of next year, it's still.

Don Allen: The key to unlocking next year is probably more the middle one footprint.

Speaker Change: All the working goal of our team.

Don Allen: But again.

Speaker Change: I would say you know, what what's really going to affect it probably as much or more than anything.

Don Allen: That's something we're still working internally, but we will be pulling all three of those levers greater than expected, but I'd say the key to unlocking next year some footprint actions.

Speaker Change: Is at what pace do interest rates start taking effect.

Speaker Change: And how quickly does auto correct, because that's a very profitable part of that industrial business.

Speaker Change: And thanks for the question Tim.

Speaker Change: Culture aspect is shifting from heavily weighted towards M&A too.

Speaker Change: And then how much fixed.

Speaker Change: Fixed cost reduction activity, we will be able to.

Speaker Change: Intense focus on organic growth and market share gains and it is something that we've been working very hard at for the last two and a half years, but in particular in the last 12 months to 15 months as Kris Nelson joined Us and he's made some changes to his team and so I'm going to actually ask Chris to give some color on the things that we're doing within <unk>.

Speaker Change: Both implement and complete in time for it to roll off the balance sheet next year I think those will be the factors that affect that timing precisely.

Speaker Change: But like I said Thats still our working Golan, yes.

Speaker Change: Along the way the headwinds have certainly made the slope of next year, a little bit steeper than we would have preferred but we.

Speaker Change: And then.

Speaker Change: As we work through that we'll begin to translate some of that over to industrial So Chris why don't you give us some more color on that.

We have every confidence we can get to 35 plus percent in fact, we see good opportunities of platforming to go beyond that so I think the timing is just a match up of headwinds versus accelerated activity.

Speaker Change: So.

Chris Nelson: Thanks, a lot for the question Tim I mean first of all I'd say the most important thing that we have been changing and leaning into is really our focus and alignment around our core branch understanding that.

Speaker Change: Thank you. Our next question comes from the line of Tim Welsh with Baird. Your line is now open.

Chris Nelson: Yes, we produce products, but what our customers and end users count on us for is to be able to provide them the solutions that they need with the brands that they that they respect and trust.

Speaker Change: Hey, guys scooter.

Speaker Change: Morning, Thanks for the trailer.

Speaker Change: Just a follow up to that last question and then my question. So I guess first Pat could.

Chris Nelson: Think that as we've organized more around a brand centric culture and how we can then provide those solutions.

Chris Nelson: It has been a significant cultural change to the organization secondarily really as well as the laser focus that we have on the brand building also making sure that we have a very clear focus on.

Tim Welsh: Maybe something Thats more acquisition and kind of integration focus to organic focused.

Tim Welsh: What are the biggest changes that you need to make to the organization internally.

Chris Nelson: What end users, we are serving and making sure that we are driving innovation that they need for their.

Tim Welsh: Get the algorithm right.

Speaker Change: Once you start yes, I'll answer that so I'll start Ken <unk>.

Chris Nelson: To make their lives easier, particularly making sure that with the professional end user we are driving more purpose driven innovation to make sure that we can enhance the safety and productivity of our professional end users on their job sites and making sure that all of the innovation that's going into our pipeline really serves that.

Speaker Change: You mentioned, yes, we have a lot of streams of work going I think.

When we're talking about 25 and 25 specifically.

Speaker Change: I think youre going to see acceleration on three fronts sourcing footprint and platforming, but.

Speaker Change: The key to unlocking next year is probably more the middle one footprint.

Chris Nelson: That that end goal and serves the brands that we are focused on from a third thing is really then making sure that we are focused on.

Speaker Change: But again.

Speaker Change: That's something we're still working internally, but we will be pulling on.

Speaker Change: All three of those levers greater than expected, but I'd say the key to unlocking next year some footprint actions.

Chris Nelson: Our speed to market.

Chris Nelson: That as we identify which brands we want to grow and as we identify the key pain points. We wanted to address some of those professional end users that we can get those products to market quickly and effectively.

Speaker Change: And thanks for the question Tim on the culture aspect is shifting from heavily weighted towards M&A too.

Speaker Change: An intense focus on organic growth and market share gains and it is something that we've been working very hard at for the last two and a half years, but in particular <unk>.

In an integrated manner and make sure that we get those tools in the hands of our end users to drive growth and then finally is really making sure that we think in terms of driving investment into the front end of the business, meaning that we want to have our Stanley Black <unk> Decker representatives.

Speaker Change: At 12 to 15 months as Kris Nelson joined Us and he's made some changes to his team and so I'm going to actually ask Chris to give some color on the things that we're doing within piano and then.

Speaker Change: As we work through that we'll begin to translate some of that over to industrial So Chris why don't you give us some.

Chris Nelson: Meeting with our end users and our customers to make sure that we're supporting them and explaining our innovations and driving share gain in the field and then working integrated marketing programs. So that they can.

Chris Nelson: Any more color than that absolutely. So thanks.

Chris Nelson: Understand sample packs and then ultimately purchase and utilize our tools going forward I think that that pivot to driving.

Chris Nelson: The preponderance of our investment towards the front end is kind of the final piece of the puzzle.

Chris Nelson: Think that as we've organized more around a brand centric culture and how we can then provide those solutions.

Chris Nelson: Thank you.

Speaker Change: Our next question comes from the line of Jeffrey Sprague with vertical Research partners. Your line is now open.

Chris Nelson: That has been a significant cultural change to the organization secondarily really as well as the laser focus that we have on the brand building also making sure that we have a very clear focus on.

Jeffrey Sprague: Hey, Thank you good morning, everyone.

Jeffrey Sprague: I guess, just one follow up on some of the outlook questions and comments and then something unrelated to that but first just on again sort of on the outlook and the trajectory.

Jeffrey Sprague: You had been previously kind of pointing to that 2 billion plus of EBITDA in 2026.

Chris Nelson: What end users, we are serving and making sure that we are driving innovation that they need for their.

Jeffrey Sprague: Pat mentioned that again.

Jeffrey Sprague: <unk> didn't say anything about that timeframe.

Jeffrey Sprague: Time frame just wondering if your confidence on that is sort of slipping given the slow start to 2025 and then my.

My other question is just kind of help us think about what's going on with share in North America.

Jeffrey Sprague: You pointed to the warrant gains that look like.

Chris Nelson: That that end goal and serves the brands that we are focused on from a third thing is really then making sure that we are focused on.

Jeffrey Sprague: Our continuing compounding on each other just also as a little mathematically curious, though that North America sales.

<unk>.

Chris Nelson: Our speed to market.

Jeffrey Sprague: Underperform each of your three categories right North America down four but.

Chris Nelson: That as we identify which brands we want to grow and as we identify the key pain points. We wanted to address of those professional end users that we can get those products to market quickly and effectively.

Speaker Change: Only down one hand tools and outdoor down three so yes.

Speaker Change: Is there something else going on there and maybe speak to share on Craftsman and Stanley brand or any other perspective, you just kind of add on that complexion of the North American sales.

Chris Nelson: In an integrated manner and make sure that we get those tools in the hands of our end users to drive growth and then finally is really making sure that we think in terms of driving investment into the front end of the business, meaning that we want to have our Stanley Black <unk> Decker representatives.

Pat Hallinan: Hey, Jeff Hey, Jeff It's Pat.

I'll take the outlet question, then I'll, let Chris comment on U S market share. So I would still say no or will it be very much targeting.

Pat Hallinan: Two plus billion dollars of EBITDA by 26 in fact, I think kind of on a rolling four quarter basis, Thats, probably somewhere in the front half of 'twenty six so I don't think anything has changed there.

Meeting with our end users and our customers to make sure that we're supporting them and explaining our innovations and driving share gain in the field and then working integrated marketing programs. So that they can.

Chris Nelson: Understand sample passed and then ultimately purchase and utilize our tools going forward I think that that pivot to driving.

Pat Hallinan: As I mentioned in the gross margin comments were accelerating initiatives to offset the headwinds, but we're also going to manage our total income statement to drive the EBITDA I mean, we recognize the value of driving EBITDA.

Chris Nelson: The preponderance of our investment towards the front end is kind of the final piece of the puzzle.

Pat Hallinan: Growth as quickly as possible and so I don't think there's anything that's changed in terms of our meaning timeframe meaningful timeframe on an EBITDA expansion like I said, probably on a rolling basis sometime in the front part of 'twenty six we're at that $2 billion ish threshold.

Thank you.

Speaker Change: And our next question comes from the line of Jeffrey Sprague with vertical Research partners. Your line is now open.

Jeffrey Sprague: Hey, Thank you good morning, everyone.

Jeffrey Sprague: I guess, just one follow up on some of the outlook questions and comments and then something unrelated to that but first just on again sort of on the outlook and the trajectory.

Chris Snyder: Alright, Hey, Jeff. This is Chris nice hearing from you just to provide a little more color on the share in North America, what I would say is that.

Jeffrey Sprague: You had been previously kind of pointing to that 2 billion plus of EBITDA in 2026.

Chris Snyder: First of all where we're confident that we are stable to slightly growing our share over the over the course of this year for sure.

Pat mentioned that again.

Chris Snyder: And as you pointed out we've certainly been experiencing.

Speaker Change: <unk> didn't say anything about the timeframe I was wondering if your confidence on that is sort of slipping given the slow start to 2025 and then my.

Chris Snyder: Nice success in that share gain with the Dewalt brand I think underlying that would be a little bit of a dynamic we have been talking about where that the pro is relatively stronger than the diyer due to some of the underlying consumer trends and as a result, we certainly have seen that play out and impact of crashed.

Speaker Change: My other question is just kind of help us think about what's going on with share in North America.

Speaker Change: You pointed to the warrant gains that look like they are continuing in compounding on each other just also as a little mathematically curious, though that North America sales and tools.

Chris Snyder: <unk> brand more than the Walt brands. So I think that as we see that not only the strength of that brand continuing to grow but that as we see the consumer.

Speaker Change: Underperform each of your three categories right North America down four but only down one hand tools and outdoor down three.

Chris Snyder: Strengthen as well as we talked about thinking about some somewhere in the back half of next year, we should see some of that additional momentum.

Speaker Change: So.

Chris Snyder: Kind of compound what we're seeing with <unk>.

Speaker Change: Thank you. Our next question comes from the line of Nicole <unk> with Deutsche Bank. Your line is now open yes.

Pat Hallinan: Hey, Jeff Hey, Jeff It's Pat.

Speaker Change: Yeah. Thanks, good morning, guys.

Pat Hallinan: I'll take the outlet question, then I'll, let Chris comment on U S market share so I would still say no.

Speaker Change: Good morning.

Nicole: Can you guys talk a little bit about what youre seeing on the cost side totally appreciate the additional pressures with respect to topline, but steel costs are down obviously youre your component costs and input costs are much broader than steel, but if you could talk a little bit about what youre seeing there and how that's impacting gross margins.

Pat Hallinan: <unk> will be very much targeting.

Pat Hallinan: Two plus billion dollars of EBITDA by 26 in fact, I think kind of on a rolling four quarter basis, Thats, probably somewhere in the front half of 2006. So I don't think anything has changed there.

Speaker Change: Nicole I would say, we kind of expected all year.

Pat Hallinan: As I mentioned in the gross margin comments were accelerating initiatives to offset the headwinds, but we're also going to manage our total income statement to drive to EBITDA I mean, we recognize the value of driving EBITDA.

Materials to be slightly down freight to be slightly up.

Speaker Change: And I would say thematic Lee thats largely been the.

Play that's been running where I would say is.

Speaker Change: Brown freight in the U S has been a bit higher in a bit more persistent than we would expect and so you've kind of put the two together.

Speaker Change: You have some net inflation from ground freight, which and the ground freight seems to be moving these days a bit more from labor cost and actual vehicle capital cost as opposed to fuel.

Jeffrey Sprague: Alright, Hey, Jeff. This is Chris nice hearing from you just to provide a little more color on the share in North America.

Speaker Change: What I'd say is that.

Speaker Change: So.

Speaker Change: Neither have been at extremes, I'd say, just slightly higher headwinds from freight.

Chris Nelson: First of all where we're confident that we are stable to slightly growing our share over the over the course of this year for sure and as you pointed out we've certainly been experiencing.

Speaker Change: Offsetting as you mentioned some of the material tailwind that we.

Speaker Change: I would see.

Speaker Change: I'd say for next year at this at this point, we're kind of expecting kind of neutral price cost and no.

Chris Nelson: This success in that share gain with the Walt brand I think underlying that would be a little bit of the dynamic we have been talking about where that the pro is relatively stronger than the diyer due to some of the underlying consumer trends and as a result, we certainly have seen that play out and impact the craftsman.

Speaker Change: No extremes and inflation or deflation.

Speaker Change: Thank you our.

Speaker Change: Our next question comes from the line of Nigel Coe with Wolfe Research. Your line is now open.

Nigel Coe: Thanks, Good morning, everyone.

Chris Nelson: Brand more than the Walt brands, So I think that as we see that not only the strength of that brand continuing to grow but that as we see the consumer.

Nigel Coe: Obviously, a lot of talk about the gradient of the gross margin.

Nigel Coe: Improvement here, so is the message the $2 billion of exit rates.

Chris Nelson: Strengthened as well as we talked about you know thinking about some somewhere in the back half of next year, we should see some of that additional momentum.

Nigel Coe: For next year is still.

Nigel Coe: Still in place, but we've got some volume and mix effects.

Nigel Coe: It is at play here just want make sure. That's the case, maybe just don't just talk about the election and some of the <unk>.

Chris Nelson: Kind of compound what we're seeing with the Walt.

Speaker Change: Thank you. Our next question comes from the line of Nicole <unk> with Deutsche Bank. Your line is now open.

Nigel Coe: We have plenty of them and place them, obviously, if trump wins tariffs are in place.

Nigel Coe: Maybe just address that.

Yeah. Thanks, good morning, guys.

Speaker Change: Okay I'll take that first part I'll start with the first part and I'll, Joe Yes, I'd say, we're focused on all three returning to share gain driven growth gross margin and EBITDA.

Speaker Change: Good morning, good morning.

Nicole: Can you guys talk a little bit about what youre seeing on the cost side totally appreciate the additional pressures with respect to topline, but scale cost are down obviously youre your component costs and input costs are much broader than steel, but if you could talk a little bit about what youre seeing there and how that's impacting gross margins.

Speaker Change: And yes, the precise timing of 35%.

Speaker Change: May alter slightly.

Speaker Change: But we still feel like on an exit run rate basis or a rolling.

Speaker Change: Sure.

Speaker Change: I would say, we kind of expected all year.

Speaker Change: 12 month basis, we're hitting that $2 billion EBITDA threshold in the first part of 'twenty six and that's still our focus and we'll manage the total income statement to get there.

Speaker Change: Materials to be slightly down freight to be slightly up.

Speaker Change: And I'd say thematic Lee that's largely banned.

Speaker Change: Yeah and on the tariff front related to the election, if trump wins the election.

Speaker Change: Play that's been running where I would say is.

Speaker Change: Ground freight in the U S has been a bit higher in a bit more persistent than we would expect and so you kind of put the two together.

Speaker Change: Likely in a new tariff regime.

Speaker Change: It is good question the magnitude at this point is exactly how that will be rolled out and will it be specific to industries or more broad based but how many countries will be covered in it.

Speaker Change: You have some net inflation from ground freight, which and the ground freight seems to be moving these days a bit more from labor cost and actual vehicle.

Speaker Change: And so theres a lot of still unknowns associated with it however.

Speaker Change: As we've mentioned in previous settings.

Speaker Change: Capital cost as opposed to.

Speaker Change: We have been planning for this possibility since.

Speaker Change: Fuel.

Speaker Change: And so.

Speaker Change: Since the spring and have gone through.

Speaker Change: Neither have been at extremes, I'd say, just slightly higher headwinds from freight.

Speaker Change: Variety of different scenarios planned for and obviously coming out of the gate.

Speaker Change: Offsetting as you mentioned some of the material tailwind that we would.

Speaker Change: There would be price increases associated with tariffs that we put into the market.

Speaker Change: Would see and I'd say for next year at this at this point, we're kind of expecting kind of neutral price cost and.

Speaker Change: And so we've worked through a lot of that will continue to work through as if this scenario plays out and the terrorists become more concrete we will.

Speaker Change: No extremes and inflation or deflation.

Speaker Change: So we're getting those into the market in a reasonable timeframe.

Speaker Change: Thank you.

Speaker Change: Knowing that theres, usually some type of delay given the processes that our customers have around implementing price.

Speaker Change: Our next question comes from the line of Nigel Coe with Wolfe Research. Your line is now open.

Speaker Change: The second thing is we built a fairly robust plan of how we would mitigate over the next two years these tariffs by moving production.

Speaker Change: Yes.

Speaker Change: Thanks, Good morning, everyone.

Nigel Coe: Obviously, a lot of talk about the Caribbean and the gross margin.

Nigel Coe: Improvement here, so is the message the $2 billion exit rates.

Speaker Change: And aspects of the supply chain to different parts of the world.

Nigel Coe: For next year is still.

Speaker Change: Some of that would be potentially moving things from China to other parts of Asia.

Nigel Coe: Still in place, but we've got some volume and mix factors.

Nigel Coe: Factors at play here, just want to make sure Thats the case and maybe just talk about the election and some of the.

Speaker Change: Maybe to Mexico will see.

Speaker Change: But likely to other parts of Asia, and so unlikely that we're moving a lot back to the U S. Because it's just not cost effective to do and there's questions about whether we even have the labor to ask.

Nigel Coe: Scenario planning you've got in place them, obviously, if trump wins tariffs are in place just maybe just stress that things.

Speaker Change: Okay, I'll take that first part and I'll start with the first part and I'll, Joe, Yes, I'd say, yes.

Speaker Change: Do that in this country.

Speaker Change: We're focused on all three returning to share gain driven growth gross margin and EBITDA.

Speaker Change: So we have a fairly robust plan, what we don't know, which scenario is going to play out and exactly how that.

Speaker Change: It would be is it going to be just China is it going to be every country is it going to be 60%, China or is it going to be 25% China for everything those are all things that are.

Speaker Change: And yes, the precise timing of 35% may alter slightly but.

But we still feel like on an exit run rate basis or a rolling.

Speaker Change: To be determined but I feel like we have a playbook.

Speaker Change: On the shelf ready to go depending if this scenario plays out and then obviously, we've been working our government relations.

Yeah and on the tariff front related to the election, if trump wins the election.

Speaker Change: Activities are very significantly over the summer into the fall to educate.

Speaker Change: Likely in a new tariff regime.

Speaker Change: A variety of different politicians is too.

Speaker Change: It is your question the magnitude at this point exactly how that will be rolled out and will it be specific to industries or more broad based but how many countries will be covered in it.

Speaker Change: This industry and the dynamics of supply chain and how we serve our customers and how this would actually play out over the next two years. So that's an important part of the process as well.

Speaker Change: And so theres a lot of still unknowns associated with it however.

Speaker Change: Thank you. Our next question comes from the line of Adam Baumgarten with Zelman and Associates. Your line is now open.

Speaker Change: As we've mentioned in previous settings.

Speaker Change: We have been planning for this possibility yes.

Adam Baumgarten: Hey, guys.

Speaker Change: Since the spring and have gone through a variety of different scenarios to plan for and obviously coming out of the gate.

Adam Baumgarten: Just on the path of gross margins from here as you know the implied <unk> should we expect gross margin to step down sequentially in <unk>, and then move higher quarter over quarter from there next year kind of like you saw this year.

Speaker Change: There would be price increases associated with tariffs that we've put into the market and so we've worked through a lot of that will continue to work through as if this scenario plays out and the terrorists become more concrete.

Yes, Adam.

Speaker Change: I don't know that I'd get that precise.

Speaker Change: In the sense that we will get into the early parts of next year.

Speaker Change: We will work to getting those into the market in a reasonable timeframe.

Speaker Change: Things that drive gross margin.

Speaker Change: Net theres, usually some type of delay given the processes that our customers have around implementing price.

Speaker Change: Variability across the early months of the year or just the mix of outdoor relative to everything else and in this case as we head into 'twenty five it'll be a little bit of how much of the auto correction in our industrial businesses.

Speaker Change: The second thing is we've built a fairly robust plan of how we would mitigate over the next two years. These tariffs by moving production.

Speaker Change: <unk> slow down or whether it's still in midstream and so I would just say I think it's going to broadly if you look at half to half.

Speaker Change: And aspects of the supply chain to different parts of the world and some of that would be potentially moving things from China to other parts of Asia.

Speaker Change: Maybe to Mexico will see.

Speaker Change: You'll just see somewhere in the <unk>.

Speaker Change: But likely the other parts of Asia.

Speaker Change: <unk> 31 ish percent, maybe 31, plus or minus a few bps throughout the first half.

So unlikely that we're moving a lot back to the U S. Because it's just not cost effective to do and there's questions about whether we even have the labor to actually do that in this country.

Speaker Change: Maybe we can accelerate a few things and get it above that but I don't know that I'd start getting specific timing.

Speaker Change: We have a fairly robust plan, what we don't know, which scenario is going to play out and exactly how that.

Speaker Change: Fourth quarter to first quarter, because those types of things are going to get into very specific shipment flows.

Speaker Change: Would be is it going to be just China is it going to be every country is it going to be 60% in China or is it going to be 25% China for everything.

Speaker Change: Thank you. Our next question comes from the line of Rob Wertheimer with Melius Research. Your line is now open.

Speaker Change: Those are all things that are to be determined but I feel like we have a playbook.

Speaker Change: Thanks, Good morning.

Rob Wertheimer: I Wonder if you could unpack just a little bit more of the north American tools and outdoor maybe some of that is your channel partners wanting different inventory strategy and maybe some of the weakness at retail and maybe some of that is the expectation of weaker holiday season.

Speaker Change: On the shelf ready to go depending if this scenario plays out and then you know obviously, we've been working our government relations.

Speaker Change: Activities are very significantly over the summer into the fall to educate.

Speaker Change: A variety of different politicians as to.

Speaker Change: Maybe give a sense of order of magnitude.

Speaker Change: How the different factors are contributing to the sales decline. Thank you.

Speaker Change: Yes, so I think theres a few things in there.

Speaker Change: One would be that.

Speaker Change: First and foremost our pls was modestly negative in the quarter and Thats, what we expected and we had talked about that probably being the cases, we one of the dynamics as we rolled off of what was an earlier start to the outdoor season, we kind of normalized in Q3 secondary.

Speaker Change: Thank you. Our next question comes from the line of Adam Baumgarten with Zelman and Associates. Your line is now open.

Speaker Change: Hey, guys.

Speaker Change: Really.

Speaker Change: We do see there being.

Speaker Change: Yeah, Adam I.

Speaker Change: I don't know that I would get that precise.

Speaker Change: Much more momentum and strength on the professional and then there would be on the Diyer and if you look at some of the underlying.

Speaker Change: In the sense that we will get into the early parts of next year.

Speaker Change: You know things that drive gross margin.

Speaker Change: What kind of metrics that we look at in the marketplace to explain that Theres, obviously consumer sentiment, but then there's also the activity levels for R&R activity, which are notably down this year I think that thats probably.

Speaker Change: [noise] variability across the early months of the year or just the mix of outdoor relative to everything else.

Speaker Change: And in this case as we head into 'twenty fives, it'll be a little bit of how much of the auto correction in our industrial businesses.

Speaker Change: Having a pretty significant effect on what we're seeing in the diyer as well.

Speaker Change: <unk> slow down or whether it's still in midstream and so I would just say I think it's going to broadly if you look at half to half.

Speaker Change: Moving forward.

Speaker Change: As we talked about we don't see any real catalyst in the first quarter or first half that will change those dynamics, but we are optimistic youre, taking a look at the longer term trends in our industry and as we start to see some of the improvements in some of those longer term constructing spending construction.

Speaker Change: You know Youll, just see somewhere in the.

Speaker Change: 31 ish percent, maybe 31, plus or minus a few bps throughout the first half.

Speaker Change: Maybe we can accelerate a few things and get it above that but I don't know that I'd start getting specific timing.

Speaker Change: Earnings.

Speaker Change: R&R activity residential home starts we'll see we'll see more progress in growth in the marketplace.

Speaker Change: Fourth quarter to first quarter cause those types of things are going to get into very specific shipment flows.

Speaker Change: Thank you. This concludes the question and answer session I would now like to hand, the call back over to Dennis Lange for closing remarks.

Speaker Change: Thank you. Our next question comes from the line of Rob Wertheimer with Melius Research. Your line is now open.

Speaker Change: Shannon Thanks, we'd like to thank everyone again for their time and participation on the call. Obviously, please contact me if you have any further questions. Thank you.

Speaker Change: Thanks, Good morning.

Speaker Change: Wonder if you could unpack just a little bit more of the north American tools and outdoor maybe some of that as you are.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: Channel partners wanting different inventory strategy and maybe some of that is just weakness at retail and maybe some of that is the expectation of weaker holiday season.

Speaker Change: Maybe give a sense of order of magnitude.

Speaker Change: All of the different factors are contributing to the sales part. Thank you.

Speaker Change: Yes, so I think theres a few things in there.

Speaker Change: One would be that.

Speaker Change: First and foremost our Pls was was modestly negative in the quarter and Thats, what we expected and we had talked about that probably being the cases, we one of the dynamics as we rolled off of what was an earlier start to the outdoor season, we kind of normalized in Q3 secondary.

Speaker Change: Orally.

Speaker Change: We do see there being.

Speaker Change: Much more momentum and strength on the professional and then there would be on the Diyer and if you look at some of the underlying.

Speaker Change: Having a pretty significant effect on what we're seeing in the diyer as well.

Moving forward.

Speaker Change: As we talked about we don't see any real catalyst in the first quarter or first half that will change those dynamics, but we are optimistic of taking a look at the longer term trends in our industry and as we start to see some of the improvements in some of those longer term constructing spending construction.

Speaker Change: Earnings.

Speaker Change: R&R activity residential home starts we'll see we'll see more progress in growth in the marketplace.

Speaker Change: Thank you. This concludes the question and answer session I would now like to hand, the call back over to Dennis Lange for closing remarks.

Speaker Change: Shannon Thanks, we'd like to thank everyone again for their time and participation on the call. Obviously, please contact me if you have any further questions. Thank you.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Okay.

[music].

Yeah.

Speaker Change: Hmm.

Speaker Change: Hum.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Welcome to the third quarter 2020.

Q3 2024 Stanley Black & Decker Inc Earnings Call

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