Q3 2025 Stanley Black & Decker Inc Earnings Call

November 4, 2025

Later, we will conduct a question and answer session. Please note that this conference is being recorded I will now turn the call over to Vice President of Investor Relations, Michael Wherley. Mr. Reilley, you may begin.

Thank you Shannon good morning, everyone and thanks for joining us for our third quarter call.

With us today are Kris Nelson, President and CEO, and Pat Hallinan, EVP and CFO.

Our earnings release, which was issued earlier this morning, and a supplemental presentation, which we will refer to are available on the IR section of our website. A replay of today's webcast will also be available beginning around 11, a M. Eastern time. This morning, Chris and Pat will review, our third quarter results and various other matters followed by a Q&A session during.

<unk> call, we will be making some forward looking statements based on our current views.

Such statements are based on assumptions of future events that may not prove to be accurate and as such they involve risk and uncertainty. It's therefore possible that 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 filing.

Additionally, we may also reference non-GAAP financial measures during the call where applicable reconciliations to the related GAAP financial measure and additional information. Please refer to the appendix of the supplemental presentation and the corresponding press release, which are available on our website under the IR section I'll now turn the call over to our president.

CEO, Chris Nelson.

Thank you Michael and good morning, everyone.

Im honored and energized to be leading Stanley Black <unk> Decker as we embark on our next chapter of growth since joining the team over two years ago, we have focused our businesses on where we want to compete the end users we want to serve and the markets, where we can be a leader. This work has been about being more selective so that we invest our re.

Sources in the places, where we see the most significant opportunities and greatest ROI for our businesses. We show up every day for our customers and end users to deliver what they need when they need it through everything we do this will continue to be our north star.

Over the last few years of transformation Stanley Black <unk> Decker has solidified our foundation and sharpened our focus.

I am proud of the dedication and collective effort that our team of approximately 48000 employees strong has contributed to get us here.

Our ambition is to build a world class branded industrial company by solving our end users most pressing and complex challenges.

We go to market with a portfolio of iconic brands and innovation is in our DNA, we have strong connections with customers and end users and our brands opened doors and afford access to opportunities in geographies around the world. These foundational attributes combined with the renewed focus achieved through our transformation have.

<unk> us to win across industries poised for long term growth <unk>.

Stanley Black <unk> Decker has made tremendous progress towards the objectives, we established at the outset of our strategic transformation.

We achieved these results despite a rapidly shifting operating environment evolving consumer demand dynamics and trade policy fluctuations with the operational proficiency and agility, we have developed through our strategic transformation. We can now serve our customers and end users more effectively and efficiently with a.

Our strong foundation firmly in place and with a significantly simplified and focused business. We believe our future success will now be determined by how effectively we execute our strategy. This presents us with the compelling opportunity to deliver attractive returns for our investors while benefiting all stakeholders.

As we look forward we are on track to successfully deliver the $2 billion cost reduction targeted when we began our transformation over three years ago by year end 2025.

Our next priority is to achieve 35% adjusted gross margin while further strengthening our balance sheet, we will build on our capabilities and strong financial foundation as we execute our three strategic imperatives activating our brands with purpose driving operational excellence and accelerating innovation.

I want to spend a few minutes going into each of these focus areas to give you a better sense of what will drive our profitable organic growth going forward.

The first imperative is activating our brands with purpose, we have pivoted from a product led marketing approach to a brand led market back approach to reinvigorate our organic growth. This included creating a closer feedback loop between our brands and end users and prioritizing innovations that will address and users most.

Pressing needs.

Our core brands to Walt Stanley and Craftsman, each have a distinct identity and we maintain this differentiation along with clearly defined target end users.

This strategic segmentation informs how we prioritize resources and investment in key brands and focus trades.

In addition, it enables broad coverage of the total addressable market with specific and productive solutions that uniquely address the needs of end users ranging from commercial and industrial professionals to residential construction contractors and ambitious DIY enthusiasts.

Our organic growth strategy is anchored on accelerating to waltz performance, while maintaining a strong focus on delivering consistent above market results and Stanley and Craftsman.

<unk> mission is to serve the world's most demanding professionals supported by a more data driven targeted approach. Our commercial teams are executing locally and focusing on the most attractive growth opportunities with trade specific initiatives.

To amplify our presence with professional end users on and off the job site. We've added nearly 600 trade specialists and field resources to our team over the last two years and these investments typically show a payback within 12 months of each hire our trade specialists visit job sites with the Walt solutions.

Demonstrating and promoting our newest innovations.

They also gather valuable end user insights to drive future product development priorities.

In addition, as part of our grow the trades program, we are investing to support the training of new tradespeople and Upskilling of established professionals.

These initiatives are driving continued organic growth for <unk> Walt.

Our results are informing and guiding future investments in real time and ensure our resources are deployed to the best prospects for accelerated growth.

In addition, these initiatives are building to Walt brand ambassadorship, along the way, we rigorously track metrics from commercial activation to operational execution with all efforts ladders up to our strategic vision.

As a result of these efforts positive momentum is also beginning to emerge from the international Stanley brand <unk> effort.

In parallel the Craftsman brand campaign and portfolio expansion is progressing with an improved margin profile and strategy to drive success with the ambitious DIY enthusiasts.

Our next imperative is driving operational excellence, while it all starts with activating our brands with purpose.

Equally vital to our success is our commitment to operational excellence and continuous improvement.

As we move beyond the transformation, we are executing with a lean based operating system to deliver annual productivity gains, which we expect will contribute to both margin expansion and firepower for accelerated growth investments.

Operational excellence also extends to our distribution network business process improvements along with our redesigned distribution network have helped our team to deliver the best global customer service levels in our company's recent history.

As we build strategic partnerships and multiyear growth plans with our channel partners. This will continue to be a top priority.

And finally is innovation the lifeblood of Stanley Black <unk> decker's value proposition to our end users. We are accelerating innovation to advance and expand our end to end workflow solutions across to Walt Stanley and Craftsman.

In parallel the Craftsman brand campaign and portfolio expansion is progressing with an improved margin profile and strategy to drive success with the ambitious DIY enthusiasts.

By innovating faster, we will strengthen our position to provide preferred solutions for our end users and drive growth for our channel partners and for our brands.

Our next imperative is driving operational excellence, while it all starts with activating our brands with purpose.

Equally vital to our success is our commitment to operational excellence and continuous improvement.

We know that our end users, particularly the professional trades are seeking holistic solutions that make them more productive and safer and every task that they perform on the job site, providing this comprehensive set of solutions tailored for the specific needs of each trade all powered by a robust and well established battery plat.

Operational excellence also extends to our distribution network business process improvements along with a redesigned distribution network have helped our team to deliver the best global customer service levels in our company's recent history.

<unk> is our opportunity.

To enable this we've centralized our engineering organization under one leader to unify our global strategy with investments in core capabilities design processes and systems within this operating model. We are accelerating how we deploy the product platforming method, which is a comprehensive approach to modular design and Gov.

As we build strategic partnerships and multiyear growth plans with our channel partners. This will continue to be a top priority.

<unk> it empowers our engineers to dedicate more of their time and expertise towards addressing our end users most pressing and complex challenges.

It also enables us to deliver highly specialized solutions to the market at greater speed year.

Year to date, our team has achieved 20% faster product development and we believe there is runway for an additional 20% improvement by 2027.

By innovating faster, we will strengthen our position to provide preferred solutions for our end users and drive growth for our channel partners and for our brands.

In addition, this approach is streamlining product development and production processes. This allows us to take full advantage of our scale to achieve cost leadership and drive further working capital efficiencies. Our aim is to implement platforming across roughly two thirds of our product portfolio by 2027.

Enabling our 35% plus margin objective.

<unk> is our opportunity.

Our entire organization is contributing to an organic growth oriented culture underpinned by operational excellence.

We believe that by executing this strategy, we can deliver a compelling value creation opportunity.

A year ago, we outlined long term financial targets and those levels of market, beating growth earnings power profitability and cash generation remain the appropriate long term financial targets for our business.

<unk> it empowers our engineers to dedicate more of their time and expertise towards addressing our end users most pressing and complex challenges.

It also enables us to deliver highly specialized solutions to the market at greater speed year.

We expect our capital deployment priorities to focus on funding investment in the business, improving our balance sheet and supporting our long standing dividend.

Year to date, our team has achieved 20% faster product development and we believe there is runway for an additional 20% improvement by 2027 in.

Once these priorities have been satisfied and our leverage is sustained below two five times, our preference for excess capital, we'll be opportunistic share repurchases. We are executing with purpose leveraging our core strengths and deploying capital with discipline, while we continue to navigate a dynamic macro.

Today, we believe we are taking the actions required to serve our end users and customers protect the profitability of the business and make progress toward our long term financial goals.

Enabling our 35% plus margin objective.

Our entire organization is contributing to an organic growth oriented culture underpinned by operational excellence.

By fully executing against the strategic imperatives that I outlined we are confident in achieving strong long term shareholder returns.

We believe that by executing this strategy, we can deliver a compelling value creation opportunity.

Now turning to our third quarter 2025 performance.

Our operational agility helped us deliver sales and adjusted EBITDA in line with our expectations.

Furthermore, gross margin increased year over year, restoring progress towards our expansion trajectory and overcoming the tariff driven interruption experienced during the second quarter.

We expect our capital deployment priorities to focus on funding investment in the business, improving our balance sheet and supporting our long standing dividend.

We accomplished these results despite the persistently challenging macroeconomic environment total revenue was $3 8 billion flat with the prior year period and down one point organically driven by pricing up 5% and volume down six.

We continue to generate growth in our dewalt brand in the third quarter supported by relatively resilient professional demand <unk>.

Today, we believe we are taking the actions required to serve our end users and customers protect the profitability of the business and make progress toward our long term financial goals.

Consistent with prior quarters, the overall consumer backdrop remains soft.

Our third quarter adjusted gross margin rate was 31, 6% up 110 basis points versus last year predominantly driven by the benefits of our pricing strategies in the supply chain transformation efficiencies.

By fully executing against the strategic imperatives that I outlined we are confident in achieving strong long term shareholder returns.

This result is a testament to the dedication and collective focus of our teams around the company.

Now turning to our third quarter 2025 performance.

Our operational agility helped us deliver sales and adjusted EBITDA in line with our expectations.

It is even more noteworthy given it was achieved in a dynamic macroeconomic environment and with the ongoing production transitions we expect.

Furthermore, gross margin increased year over year, restoring progress towards our expansion trajectory and overcoming the tariff driven interruption experienced during the second quarter.

To continue our trajectory of year over year, adjusted gross margin improvement with expansion projected on a full year basis for 2025 and 2026.

Third quarter adjusted EBITDA margin was 12, 3%, reflecting a 150 basis point improvement year over year, mainly attributed to the gross margin expansion.

Adjusted earnings per share was $1 43.

We continue to generate growth in our dewalt brand in the third quarter supported by relatively resilient professional demand <unk>.

Which includes a 25 cent tax benefit that we had previously expected to land in the fourth quarter.

Third quarter free cash flow was $155 million a solid result, as we effectively manage working capital while shifting an increasing percentage of our U S supply chain to North America.

Consistent with prior quarters, the overall consumer backdrop remains soft.

Turning to our operating performance by segment I'll start with tools and outdoor.

Third quarter revenue was approximately $3 3 billion.

This result is a testament to the dedication and collective focus of our teams around the company.

Which was flat year over year as with the total company revenue drivers the drivers for tools and outdoor were in line with our expectations organic revenue declined by 2% as a 5% benefit from targeted pricing actions was more than offset by a 7% decrease in volume currency tailwind.

It is even more noteworthy given it was achieved in a dynamic macroeconomic environment and with the ongoing production transitions we expect.

To continue our trajectory of year over year, adjusted gross margin improvement with expansion projected on a full year basis for 2025 and 2026.

And a small product line transfer from engineered fastening each contributed a 1% benefit in the quarter. The volume decrease was partially due to expected price elasticities and partially impacted by tariff related promotional reductions within the retail channel as we had indicated during our second quarter earnings call.

Third quarter adjusted EBITA margin was 12, 3%, reflecting a 150 basis point improvement year over year, mainly attributed to the gross margin expansion.

Adjusted earnings per share was $1 43.

Price realization in the third quarter was consistent with our expectations based on the April price increase consistent with prior disclosure. We are implementing a second price increase during the fourth quarter to maintain our innovation and brand investments given the pressures, resulting from tariff related cost increases.

Which includes a 25 cent tax benefit that we had previously expected to land in the fourth quarter.

Third quarter free cash flow was $155 million a solid result, as we effectively manage working capital while shifting an increasing percentage of our U S supply chain to North America.

Walt our powerhouse professional brand maintained strong momentum and continued to demonstrate topline growth the.

Turning to our operating performance by segment I'll start with tools and outdoor.

Third quarter revenue was approximately $3 3 billion.

The brand delivered revenue expansion across all product lines and regions.

This result reflects the positive impact of our ongoing targeted investments in innovation and market activation tools and outdoor adjusted segment margin was 12% up 90 basis points year over year.

Margin expansion was driven by price realization and supply chain transformation efficiencies, partially offset by the impact of tariffs lower volume and inflation.

Shifting to performance by product line.

Power tools organic revenue declined 2%.

Largely resulting from tariff related promotional cancellations in North America and continued softness in consumer demand.

Hand tools organic revenue was flat strength within the commercial and industrial channels was offset by softer retail channel performance.

Outdoor organic revenue decreased 3% as we ended a subdued outdoor season, where the independent dealer channel partners focused on selling through their remaining inventory, we anticipate inventory will be right sized heading into preseason ordering for 2026.

Walt our powerhouse professional brand maintained strong momentum and continued to demonstrate topline growth the.

The brand delivered revenue expansion across all product lines and regions.

Now tools and outdoor performance by region in North America organic revenue declined 2%, reflecting trends consistent with the overall segment performance.

This result reflects the positive impact of our ongoing targeted investments in innovation and market activation tools and outdoor adjusted segment margin was 12% up 90 basis points year over year.

End user demand as measured by U S retail tools and outdoor Pos started the quarter strong, but moderated later in the quarter with aggregate third quarter performance at a level that was relatively flat on a dollar basis.

Margin expansion was driven by price realization and supply chain transformation efficiencies, partially offset by the impact of tariffs lower volume and inflation.

In Europe organic revenue was flat.

Shifting to performance by product line.

Both in the U K and key investment markets, including Central and Eastern Europe was offset by softer market conditions in France and Germany.

Power tools organic revenue declined 2%.

Largely resulting from tariff related promotional cancellations in North America and continued softness in consumer demand.

The rest of world organic revenue declined 1%, primarily due to pockets of market softness in Asia.

Hand tools organic revenue was flat strength within the commercial and industrial channels was offset by softer retail channel performance.

Turning to engineered fastening.

Third quarter revenue grew 3% on a reported basis and 5% organically as compared to the prior year.

Revenue growth was comprised of a 4% volume increase.

A 1% price benefit and a 1% contribution from currency.

This was partially offset by a 3% headwind from the previously disclosed product line transfer to the tools and outdoor segment the.

Now tools and outdoor performance by region in North America organic revenue declined 2%, reflecting trends consistent with the overall segment performance and.

The aerospace business continued its strong trajectory achieving over 25% organic growth.

<unk> by robust demand for fasteners and fittings.

This business maintained its exceptional year over year and sequential topline growth supported by a solid backlog.

The automotive business delivered low single digit organic growth, reflecting a stronger than anticipated automotive market during the quarter.

In Europe organic revenue was flat growth in the UK and key investment markets, including Central and Eastern Europe was offset by softer market conditions in France and Germany.

General industrial fasteners organic revenue declined by mid single digits adjusted segment margin for engineered fastening was 12, 8%, which reflects elevated production costs in relation to a tough prior year comparable on a sequential basis adjusted segment margin expanded by 200 basis points versus.

The rest of world organic revenue declined 1%, primarily due to pockets of market softness in Asia.

Turning to engineered fastening.

Third quarter revenue grew 3% on a reported basis and 5% organically as compared to the prior year.

The second quarter, reflecting improvements in the automotive market.

Overall, our teams delivered results in line with expectations through disciplined execution targeted pricing strategies and a continued optimization of our supply chain.

Revenue growth was comprised of a 4% volume increase.

A 1% price benefit and a 1% contribution from currency.

This was partially offset by a 3% headwind from the previously disclosed product line transfer to the tools and outdoor segment the.

A solid quarter and are trying environment with significant credit to the global Stanley Black <unk> Decker team together.

The aerospace business continued its strong trajectory achieving over 25% organic growth propelled by robust demand for fasteners and fittings.

Together, we all continue to make meaningful progress on what is within our control.

Thank you to our team around the world for all your hard work and the dedication you display every day to our customers and end users I will now pass the call to Pat to discuss progress we achieved on key performance metrics and to outline our latest 2025 planning assumptions.

This business maintained its exceptional year over year and sequential topline growth supported by a solid backlog.

The automotive business delivered low single digit organic growth, reflecting a stronger than anticipated automotive market during the quarter.

Thank you, Chris and good morning to everyone joining us today.

I'm going to start by diving deeper into our gross margin performance in.

In the third quarter. The company achieved adjusted gross margin of 31, 6%, representing a 110 basis point increase over the same period last year.

Our entire organization has prioritized margin expansion and through the implementation of targeted initiatives, we have achieved tangible year over year margin improvement.

The second quarter, reflecting improvements in the automotive market.

Overall, our teams delivered results in line with expectations through disciplined execution targeted pricing strategies and a continued optimization of our supply chain.

The improvements have been primarily driven by our disciplined pricing strategies and enhanced supply chain efficiencies are targeted initiatives contributed meaningfully to our performance. This quarter, though the benefits were partially offset by tariffs reduced volume and inflation.

A solid quarter and are trying environment with significant credit to the global Stanley Black <unk> Decker team together.

Together, we all continue to make meaningful progress on what is within our control.

Our gross margin trajectory remains firmly positive, reflecting the organization's steadfast dedication to operational excellence.

Thank you to our team around the world for all your hard work and the dedication your display every day to our customers and end users I.

The team's commitment and capability to deliver as exemplified by the fact that even with the significant tariff expenses hitting our P&L starting in April we only had a single quarter of gross margin setback despite broader market volatility.

I will now pass the call to Pat to discuss progress we achieved on key performance metrics and to outline our latest 2025 planning assumptions.

Chris and good morning to everyone joining us today.

Our teams have demonstrated remarkable agility and focus.

I'm going to start by diving deeper into our gross margin performance.

Ensuring we sustained profitable growth even in uncertain environments.

In the third quarter. The company achieved adjusted gross margin of 31, 6%, representing a 110 basis point increase over the same period last year.

And looking forward to 2026.

We foresee a strong opportunity for significant year over year adjusted gross margin expansion versus 2025.

Our entire organization has prioritized margin expansion and through the implementation of targeted initiatives, we have achieved tangible year over year margin improvement.

Even if the macro conditions do not improve materially.

We continue to target 35, plus percent adjusted gross margin.

As a team we continue to strive to achieve or be very close to this target by the fourth quarter of 2026.

Turning now to our global cost reduction transformation program.

In the third quarter, we continued to make substantial progress delivering approximately $120 million in incremental pretax run rate cost savings.

Our gross margin trajectory remains firmly positive, reflecting the organization's steadfast dedication to operational excellence.

These actions are instrumental in supporting our ongoing margin improvement trajectory, which ultimately enable sustained investment in growth.

Since its inception in mid 2022. The program has generated about $1 9 billion and pretax run rate cost savings underscoring the scale and effectiveness of our transformation agenda. We are on track to meet our targets with consistent progress across all work streams we.

Ensuring we sustained profitable growth even in uncertain environments.

And looking forward to 2026.

The transformation program to yield cost savings of $500 million in 2025, and $2 billion overall by the end of this year, marking the successful achievement of this initiatives original cost reduction goals.

We foresee a strong opportunity for significant year over year adjusted gross margin expansion versus 2025.

Even if the macro conditions do not improve materially.

We continue to target 35, plus percent adjusted gross margin.

A key element of our tariff mitigation and gross margin improvement strategy centers on minimizing the amount of U S supply that comes from China.

As a team we continue to strive to achieve or be very close to this target by the fourth quarter of 2026.

We are making substantial advancements in this area and systematically progressing along a clearly defined path. We have been rapidly moving cordless production from China to Mexico, while also rapidly increasing our levels of U S. MCA compliant production in Mexico.

Turning now to our global cost reduction transformation program.

In the third quarter, we continued to make substantial progress delivering approximately $120 million in incremental pretax run rate cost savings.

These actions are instrumental in supporting our ongoing margin improvement trajectory, which ultimately enable sustained investment in growth.

We expect to continue to meet targeted reductions in U S goods from China, We plan to reduce from 2024 levels when approximately 15% of our U S supply was sourced from China, so less than 10% by the middle of 2026, and two less than 5% by the end of 2026.

These milestones are essential for achieving targeted gross margin objectives and for improving supply chain resiliency.

By diversifying our supply chain, we are better positioning our business to navigate evolving trade dynamics.

Bond of regulatory changes and deliver operational excellence.

Operational excellence via platforming lean manufacturing and further fixed cost reductions will remain a top priority beyond 2025.

A key element of our tariff mitigation and gross margin improvement strategy centers on minimizing the amount of U S supply that comes from China.

We remain confident in our ability to sustain positive momentum as we move into 2026 and that our focus on disciplined execution will deliver sustainable productivity gains and cost leadership.

Annual productivity improvements will serve as the engine to fund investments that drive topline growth and further our competitive position.

The actions we are taking today are foundational to supporting ongoing margin improvement and achieving our long term adjusted gross margin target of 35%.

Now, let's take a look at our planning assumption for 2025.

These milestones are essential for achieving targeted gross margin objectives and for improving supply chain resiliency.

Adjusted earnings per share is expected to be approximately $4 and 55.

A reduction of 10.

By diversifying our supply chain, we are better positioning our business to navigate evolving trade dynamics.

Compared to the estimate from last quarter. This revision reflects higher than anticipated production costs, resulting from tariff related volume softness and supply chain changes.

Bond of regulatory changes and deliver operational excellence.

Operational excellence via platforming lean manufacturing and further fixed cost reduction will remain a top priority beyond 2025.

We will correct for these items during the fourth quarter to facilitate achievement of targeted 2026 gross margin improvement, making these headwinds temporary elements of our tariff mitigation response plan.

We remain confident in our ability to sustain positive momentum as we move into 2026 and that our focus on disciplined execution will deliver sustainable productivity gains and cost leadership.

Our earnings outlook for the year reflects an updated GAAP earnings per share range of $2 55.

To $2 70.

This revision from the previous planning assumption is primarily attributable to a $169 million pre tax noncash asset impairment charge recorded in the third quarter.

Annual productivity improvements will serve as the engine to fund investments that drive topline growth and further our competitive position.

The actions we are taking today are foundational to supporting ongoing margin improvement and achieving our long term adjusted gross margin target of 35%.

Let me provide clarity on these impairment charges.

First updates to our brand prioritization strategy to focus more company resources and investment on the wall Craftsman and Stanley, which we have discussed many times over the past year impacted three trade names specifically Lenox.

Now, let's take a look at our planning assumption for 2025.

Adjusted earnings per share is expected to be approximately $4 and 55.

A reduction of 10 cents.

Troy built and Irwin.

Compared to the estimate from last quarter. This revision reflects higher than anticipated production costs, resulting from tariff related volume softness and supply chain changes.

This was the vast majority of the impairment charges.

Going forward, we intend to focus our marketing of the specialty brands to specific product categories and regions, where they hold their most meaningful market positions and value to end users.

Second we've made a strategic decision to exit most of our noncore legacy corporate venture investments, which resulted in the write down of certain minority investments in the quarter.

Our earnings outlook for the year reflects an updated GAAP earnings per share range of $2 55.

Total pre tax non-GAAP adjustments for the year are estimated to range between $370 million to $400 million, primarily related to the supply chain transformation.

To $2 70.

This revision from the previous planning assumption is primarily attributable to a $169 million pre tax noncash asset impairment charge recorded in the third quarter.

Noncash asset impairment charges and other cost actions that will benefit SG&A, we expect approximately 45% of these adjustments to be noncash as they pertain to the aforementioned trade name impairment charges and write down of certain minority investments associated with legacy corporate ventures.

Let me provide clarity on these impairment charges.

Now in regards to the revenue outlook for the full year, we anticipate total company sales to be flat to down 1% as compared to 2024.

Troy built and Irwin.

This was the vast majority of the impairment charges.

Most likely at the lower end of this range.

Going forward, we intend to focus our marketing of the specialty brands to specific product categories and regions, where they hold their most meaningful market positions and value to end users.

Organic revenue is projected to decline in the same zone as the total company and price realization is expected to be offset by anticipated volume declines.

Currency is expected to contribute a positive one percentage point.

Second we've made a strategic decision to exit most of our noncore legacy corporate venture investments, which resulted in the write down of certain minority investments in the quarter.

Which will be offset by the first quarter comparable impact from the infrastructure divestiture.

We expect adjusted gross margins to remain resilient and based on our current trajectory, we expect to be approaching 31% adjusted gross margin for the full year 2025.

Total pre tax non-GAAP adjustments for the year are estimated to range between $370 million to $400 million, primarily related to the supply chain transformation.

To deliver profit and cash in a dynamic environment, we will continue to advance our tariff mitigation and gross margin expansion journeys and we will manage SG&A thoughtfully relative to expected volumes, while preserving growth investments.

Looking forward to the fourth quarter, we expect continued year over year expansion of adjusted gross margin to around 33% plus or minus 50 basis points.

Now in regards to the revenue outlook for the full year, we anticipate total company sales to be flat to down 1% as compared to 2024.

This outlook is supported by our second round of price increases.

Ongoing benefits from our supply chain transformation and additional tariff mitigation measures, partially pressured by tariff related production costs.

Most likely at the lower end of this range.

Organic revenue is projected to decline in the same zone as the total company and price realization is expected to be offset by anticipated volume declines.

SG&A as a percentage of sales for both the year and the fourth quarter is planned to be 21% and a fraction characterized by judicious cost management, while protecting strategic growth investments.

Currency is expected to contribute a positive one percentage point, which will be offset by the first quarter comparable impact from the infrastructure divestiture.

We remain committed to investing in high growth high return opportunities with over $100 million being reinvested in 2025 to drive market activation strengthen our brands and support commercial expansion, while managing SG&A costs down elsewhere in the business.

We expect adjusted gross margins to remain resilient and based on our current trajectory, we expect to be approaching 31% adjusted gross margin for the full year of 2025.

For the full year and fourth quarter. Adjusted EBITDA margins are also expected to expand year over year supported by gross margin improvements and the cost actions we are implementing.

Shifting to our segments.

Looking forward to the fourth quarter, we expect continued year over year expansion of adjusted gross margin to around 33% plus or minus 50 basis points.

For the tools and outdoor segment the full year organic revenue outlook is projected to decline approximately one percentage point.

The engineered fastening segment is expected to achieve low single digit organic revenue growth led by aerospace.

This outlook is supported by our second round of price increases.

Ongoing benefits from our supply chain transformation and additional tariff mitigation measures, partially pressured by tariff related production costs.

Now turning to cash generation, we generated $155 million in free cash flow during the third quarter.

SG&A as a percentage of sales for both the year and the fourth quarter is planned to be 21% and a fraction characterized by judicious cost management, while protecting strategic growth investments.

Making progress toward our full year 2025 free cash flow objective of $600 million, which remains unchanged from a quarter ago.

As we advance through the last quarter of 2025 and into 2026, we remain committed to diligent inventory management and.

We remain committed to investing in high growth high return opportunities.

With over $100 million being reinvested in 2025 to drive market activation strengthen our brands and support commercial expansion, while managing SG&A costs down elsewhere in the business.

Ensuring customer order fulfillment remains a top priority, even as we proactively navigate evolving supply chain dynamics and potential shifts in the external market environment.

Our capital expenditure outlook for 2025 remains approximately $300 million in line with previous planning assumptions.

For the full year and fourth quarter. Adjusted EBITDA margins are also expected to expand year over year supported by gross margin improvements and the cost actions we are implementing.

On capital allocation, we intend to allocate free cash flow in excess of our dividend toward debt reduction in the near term.

Shifting to our segments.

Maintaining a strong and resilient balance sheet is a top priority and we are committed to achieving our net debt to adjusted EBITDA ratio of less than or equal to two five times.

For the tools and outdoor segment the full year organic revenue outlook is projected to decline approximately one percentage point.

The engineered fastening segment is expected to achieve low single digit organic revenue growth led by aerospace.

Our strategy to reach this leverage objective is to be supported by the proceeds from an asset sale. We are targeting within the next 12 months.

Now turning to cash generation, we generated $155 million in free cash flow during the third quarter, making progress toward our full year 2025 free cash flow objective of $600 million.

We continue to anticipate our adjusted tax rate will be approximately 15% for the year.

Other modeling assumptions for 2025 as shown here are generally consistent with the assumptions shared with you in July.

It remains unchanged from a quarter ago.

As we advance through the last quarter of 2025 and into 2026, we remain committed to diligent inventory management and.

For the fourth quarter, we anticipate organic revenue to be flat as price increases are offset by volume pressures stemming from a subdued consumer DIY market in the fourth quarter. We expect continued pre tax earnings growth and working capital efficiencies driven by the seasonal drawdown.

Ensuring customer order fulfillment remains a top priority, even as we proactively navigate evolving supply chain dynamics and potential shifts in the external market environment.

Our capital expenditure outlook for 2025 remains approximately $300 million in line with previous planning assumptions.

Of receivables and a modest decrease in inventory to deliver our free cash flow target.

Adjusted earnings per share for the fourth quarter is expected to be approximately $1 29.

On capital allocation, we intend to allocate free cash flow in excess of our dividend toward debt reduction in the near term.

We remain optimistic about the long term growth prospects for our industry and our business.

Maintaining a strong and resilient balance sheet is a top priority and we are committed to achieving our net debt to adjusted EBITDA ratio of less than or equal to two five times.

The targets, we laid out for you a year ago at our capital markets day remain appropriate for the business and our focus, albeit delayed by roughly a year due to the impact of increased tariffs.

Our strategy to reach this leverage objective is to be supported by the proceeds from an asset sale. We are targeting within the next 12 months.

Near term, we expect market conditions to remain dynamic and challenging.

We continue to anticipate our adjusted tax rate will be approximately 15% for the year.

We will continue to respond decisively through targeted supply chain and SG&A adjustments underscoring our commitment to meet the needs of our end users and customers, while delivering financial results improvement.

Other modeling assumptions for 2025 as shown here are generally consistent with the assumptions shared with you in July for the fourth quarter, we anticipate organic revenue to be flat as price increases are offset by volume pressures stemming from a subdued consumer DIY market in the fourth.

We continue to focus on enhancing the company's long term earnings power and strengthening the balance sheet.

Thank you and I will now turn the call back to Chris.

Thank you Pat.

<unk>, we expect continued pre tax earnings growth and working capital efficiencies driven by the seasonal drawdown of receivables and a modest decrease in inventory to deliver our free cash flow target.

We are strengthening our operational resilience on a daily basis, our disciplined data driven approach empowers us to navigate evolving market conditions.

These emerging opportunities and consistently deliver value to our stakeholders.

Adjusted earnings per share for the fourth quarter is expected to be approximately $1 29.

As Pat outlined we are continuing to proactively manage factors within our control to facilitate the achievement and advancement of our goals.

We remain optimistic about the long term growth prospects for our industry and our business.

We believe our outlook for 2025 is balanced given the elevated levels of global uncertainty.

The targets, we laid out for you a year ago at our capital markets day remain appropriate for the business and our focus, albeit delayed by roughly a year due to the impact of increased tariffs.

We recognize the operating environment is challenging.

And we are focused on creating significant value from our powerful brands and businesses to generate long term revenue growth.

Near term, we expect market conditions to remain dynamic and challenging.

Margin expansion cash generation and shareholder return we.

We remain committed to driving towards the goals outlined during our November 2024 capital markets day I am.

Confident that with the collective dedication of our talented team and an unwavering commitment to supporting our customers and end users Stanley Black <unk> Decker will continue to set new standards for excellence in the years to come.

We continue to focus on enhancing the company's long term earnings power and strengthening the balance sheet.

Thank you and I will now turn the call back to Chris.

Thank you Pat.

We are now ready for Q&A Michael.

We are strengthening our operational resilience on a daily basis, our disciplined data driven approach empowers us to navigate evolving market conditions seize emerging opportunities and consistently deliver value to our stakeholders.

Thank you Chris Shannon you can begin the Q&A now.

Thank you to ask a question you will need to press star one on your telephone you Levin here not admitted message advising your hand is raised to withdraw your question. Please press star one again, we ask that you. Please limit yourself to one question. Please standby, while we compile the Q&A roster.

As Pat outlined we are continuing to proactively manage factors within our control to facilitate the achievement and advancement of our goals.

We believe our outlook for 2025 is balanced given the elevated levels of global uncertainty.

Okay.

Our first question comes from Tim <unk> with Baird. Your line is now open.

We recognize the operating environment is challenging and.

And we are focused on creating significant value from our powerful brands and businesses to generate long term revenue growth.

Hey, guys. Good morning, Thanks, Thanks for all the details.

Just maybe on the volumes I'm just curious how those performed relative to your expectations.

Margin expansion cash generation and shareholder return.

We remain committed to driving towards the goals outlined during our November 2024 capital markets day.

I guess, if you could break down the volume between kind of what was impacted by tariffs and kind of what the.

I am confident that with the collective dedication of our talented team and an unwavering commitment to supporting our customers and end users Stanley Black <unk> Decker will continue to set new standards for excellence in the years to come.

I guess elasticity you saw in the quarter and as.

If you think about the next few quarters with pricing volume do you expect that kind of one for one trade off to kind of continue.

With price and volume or do you think there could be some underlying improvement in that dynamic.

We are now ready for Q&A Michael.

Thank you Chris Shannon you can begin the Q&A now.

Hey, Tim this is Chris.

Morning, Thanks for joining us.

Yes, I would say that our volumes were relatively in line with expectations.

Thank you to ask a question you will need to press star one on your telephone you have been here not admitted message advising your hand is raised to withdraw your question. Please press star one again, we ask that you. Please limit yourself to one question. Please standby, while we compile the Q&A roster.

We started the quarter fairly strong and there was a little bit of.

Tapering towards the end of three Q, but that really was.

More do we believe too.

As we had referenced in earlier conversations.

Okay.

Our first question comes from Tim <unk> with Baird. Your line is now open.

Non standard promotional window and we're in as we go into Q4.

Hey, guys. Good morning, Thanks, Thanks for all the details.

We actually we will get back on a more normal promotional calendar, we're actually very excited about the promotions we have for the holiday season, which as you know is as important to our business.

Just maybe on the volumes I'm just curious how those performed relative to your expectations.

I guess, if you could break down the volume between kind of what was impacted by tariffs and kind of what the.

I would say that we expect the environment to remain similar in Q4, and then we will continue to.

I guess elasticity you saw in the quarter and as you think about the next few quarters with pricing volume do you expect that kind of one for one trade off to kind of continue.

Monitor and adjust as we go into the new year in 2026, but I would say that while we see the environment as Pat certainly mentioned is challenging it is relatively stable and we're excited about.

With price and volume or do you think there could be some underlying improvement that dynamic. Thanks.

Hey, Tim this is Chris.

The promotional calendar, we have to close out the year, it's going to be important for us to monitor.

Thanks for joining us.

I would say that our volumes were relatively in line with expectations.

Thank you.

Our next question comes from the line of Julian Mitchell with Barclays. Your line is now open.

Started the quarter fairly strong and there was a little bit of.

Hi, good morning.

Tapering towards the end of three Q, but that really was.

Maybe just my question would be around.

More do we believe too.

Dialing into some of the profit believers in a bit more details so I think for the fourth quarter.

We had referenced in earlier conversations.

We're assuming operating profit.

Non standard promotional window and we're in as we go into Q4.

A few tens of millions of dollars sequentially with flattish sales and is that all really coming from this extra price increase and then as you're thinking about 2026, it's only eight weeks away now seems like it won't get much help from volume based.

We actually will get back on a more normal promotional calendar. We are actually very excited about the promotions we have for the holiday season, which as you know is as important to our business.

I would say that we expect the environment to remain similar in Q4, and then we will continue to.

The exit rate from this year, so maybe help us understand what are some of the main gross margin drivers most enthused about for 2026.

Monitor and adjust as we go into the new year in 2026, but I'd say that while we see the environment as Pat certainly mentioned is challenging it is relatively stable and we're excited about the.

Thanks Julien.

Yes, so operating profit for the fourth quarter is going to expand.

The promotional calendar, we have to close out the year and it's going to be important for us to monitor.

Really two levers, we certainly expense expect to continue making progress on the gross margin front.

Thank you.

Our next question comes from the line of Julian Mitchell with Barclays. Your line is now open.

We expect.

Fourth quarter.

Gross margin around 33% could bounce around plus or minus 50 basis points, but that's certainly what we're targeting and tracking towards and then one of the things <unk> been talking about all year is judiciously, managing SG&A expense relative to.

Hi, good morning.

Maybe just my question would be around.

Dialing into some of the profit believers in a bit more detail. So I think for the fourth quarter.

We're assuming operating profit.

A few tens of millions of dollars sequentially with flattish sales and is that all really coming from this extra price increase and then as you're thinking about 2026, it's only eight weeks away now.

So the volume environment.

I'll still protecting growth investment so while we're still targeting around $100 million of growth investments.

We're in the business.

We're really reducing SG&A expense.

Like you won't get much help from volume base.

Quite considerably almost to an equal amount this year and our 25 full year income statement.

Based on the exit rate from this year, so maybe help us understand what are some of the main.

We will probably on a year over year basis be down in SG&A.

Gross margin drivers most enthused about for 2026.

<unk> 40, or so million dollars versus the same quarter last year. So the profit expansion in the fourth quarter is a mix of gross margin expansion and SG&A reduction those are the primary drivers in a quarter.

Thanks Julien.

Yes, so operating profit for the fourth quarter is going to expand.

Really two levers, we certainly expense expect to continue making progress on the gross margin front.

Where overall our net sales line is roughly flat.

We expect.

Fourth quarter <unk>.

So thats, where youre getting this year I'd say as we as we work into.

Gross margin around 33% could bounce around plus or minus 50 basis points, but that's certainly what we're targeting and tracking towards them.

Next year on gross margin we're still.

As an organization very focused on our long term objective of 35 plus percent.

And then one of the things we've been talking about all year.

His judiciously, managing SG&A expense relative to the volume environment.

Every day, we get up trying to solve the rental it's hard to get there by the fourth quarter of next year and Thats still our objective will be there or thereabouts.

Still protecting growth investments, so while we're still targeting around $100 million of growth investments and elsewhere in the business.

Working on that assuming.

The macro environment is kind of in line with where we are better obviously, if there was a big recession, we might need to revisit that.

We're really reducing SG&A expense.

Considerably almost to an equal amount this year and our 25 full year income statement.

And the levers we're going to be pulling for next year.

We're still going to be working.

<unk> will probably on a year over year basis B down in SG&A.

Strategic sourcing in plant continuous improvement.

40, or so million dollars versus the same quarter last year. So the profit.

Platforming is going to be starting to play a bigger role.

And we still have some facility decisions ahead of us. So all of those levers are still in play for 2006 and beyond.

Expansion in the fourth quarter is a mix of gross margin expansion and SG&A reduction those are the primary drivers in a quarter.

And.

They will all be playing very significant roles and as we mentioned as we adjusted the outlook.

Where overall our net sales line is roughly flat.

So thats, where youre getting this year I would say as we as we work into.

For the fourth quarter of this year, we went into.

Next year on gross margin, we're still as.

The back half of this year.

With a bias to having some excess capacity in our plants to deal with.

As an organization very focused on our long term objective of 35 plus percent.

The circumstances of elasticity ended up being more favorable.

Every day, we get up trying to solve the riddle of how to get there by the fourth quarter of next year and Thats still our objective will will be there or thereabouts.

And accommodate some of the global transitions of supply and we will be having to kind of adjust for those types of costs is to as we go into the early parts of 26.

Working on that I'm assuming.

The macro environment is kind of in line with where we are better obviously, if there was a big recession, we might need to revisit that.

Thank you. Our next question comes from the line of Nigel Coe with Wolfe Research. Your line is now open.

And the levers we're going to be pulling for next year.

Oh, Thanks, good morning, and Chris Congratulations.

Relations on I'm actually sitting in on the throne right now I guess, but congratulations.

We're still going to be working.

Strategic sourcing.

Maybe I think you mentioned <unk> gone out with another price increase in the quarter. So can you just maybe mark to markets somewhere you expect price to maybe.

In plant continuous improvement.

Platforming is going to be starting to play a bigger role.

And we still have some facility decisions ahead of us. So all of those levers are still in play for 2006 and beyond.

Maybe come into the fourth quarter, and maybe just give us a quick amongst market on another.

I know it changes a lot, but on the tariff inflation.

And.

They will all be playing very significant roles and as we mentioned as we adjusted the outlook.

How do you see it right now.

And I'll use down in this 10% central attempt production does that have an impact on <unk>.

For the fourth quarter of this year, we went into.

Thanks, a lot Nigel a nice hearing from you I'll start and I'll, let Pat wrap up but I would say that the price increase.

The back half of this year.

With a bias to having some excess capacity in our plants to deal with.

The second price increase as I mentioned in my remarks, we're in process right now and it's going to be.

The circumstances of elasticity ended up being more favorable.

And accommodate some of the global transitions of supply and we will be having to kind of adjust for those types of costs is to as we go into the early parts of 26.

In that low single digit realm that we talked about in previous conversations and we're on track to that and we're working with all our channel.

Partners constructively to get that in place because our goal.

Thank you. Our next question comes from the line of Nigel Coe with Wolfe Research. Your line is now open.

Actively is to make sure that we do everything and anything we can to minimize.

Oh, Thanks, good morning, and Chris Congratulations on the.

What the stress would be on our end users and therefore.

Im actually sitting on the throne right now I guess, but congratulations.

Our real emphasis is is <unk>.

Driving our production moves and mitigation.

Maybe I think you mentioned, it's gone out with another price increase in the quarter. So can you just maybe mark to markets somewhere you expect price too.

You too.

Reduce our reliance on China imports for U S consumption, and we've been making significant progress there.

Maybe come in for the fourth quarter, and maybe just give us a quick kind of mark to market on.

We remain on on.

Now it changes a lot, but on the tariff inflation.

Pace to be below 10% by the end of the year and below at or below 5% by the end of 2026, we're making great progress there and that's really the emphasis so as it relates to the second part of your question, which would be the.

How do you see it right now.

And are you down in this 10% federal attempt production does that have an impact on <unk>.

Thanks, a lot Nigel a nice hearing from you I'll start and I'll, let Pat wrap up.

I would say that the price increase.

Tariff exposure based on.

The second price increase as I mentioned in my remarks, we are in process right now and it's going to be.

<unk>.

He just information it really it really has no material impact.

In that low single digit realm that we talked about in previous conversations and we're on track to that and where we're working with all our channel.

It's still right about the same area based on the changes that have come in 230 twos combined with the reduction in China, It's kind of netted out. So we're right in that same ballpark and as it relates to what that means for our mitigation efforts. We were basically as I mentioned earlier, we were planning in.

Partners constructively to get that in place because our goal <unk>.

<unk> is to make sure that we do everything and anything we can to minimize.

What the stress would be on our end users and therefore, our real emphasis is is draw.

Not too distant future to be largely.

<unk> seen from China as a source of supply for the U S. So it really has minimal impact on our our medium to long term strategies. There. So I don't know Pat if you had anything else to add there.

Driving our production moves and mitigation.

You too.

Reduce our reliance on China imports for U S consumption, and we've been making significant progress there.

I think you covered most of it Chris I'd say.

We remain on on.

To reiterate a few things Chris said is our end game plan kind of end of 2006 forward is.

To be below 5% U S Cogs from China.

That's what drove our total mitigation strategy, both supply chain changes and pricing and so.

Given that.

<unk>.

This reduction and 10% of 10 percentage points of the China tariffs doesn't meaningfully change that outcome.

Latest.

He just information it really it really has no material impact.

You asked a little bit of is there a fourth quarter benefit.

It's probably in the ballpark of very low single digit millions.

Given that it affects one corridor and then you you are pretty much all I get the LIFO portion of that.

For the fourth quarter, it's a very small amount, it's a slight help.

Not too distant future to be largely.

Absent from China as a source of supply for the U S. So it really has minimal impact on our our medium to long term strategies. There. So I don't know Pat if you had anything else to add there.

Probably in the five to 10 range of each of the first two quarters of next year or thereabouts, but.

It's not a game changer long term.

Certainly any relief is welcome, but it's not it's not a big magnitude item.

I think you covered most of it Chris I'd say.

Just to reiterate a few things Chris that is.

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

Our end game plan kind of end of 2006 forward is.

To be below 5% U S Cogs from China.

That's what drove our total mitigation strategy, both supply chain changes and pricing and so.

Christopher Snyder your line is open please check your mute button.

Sorry about that.

I wanted to ask about tools and outdoor topline.

Given that.

This reduction and 10% of 10 percentage points of the China tariffs doesn't meaningfully change that outcome.

Price this quarter I think you guys said.

5%, but I thought the conversation on the Q2 conference call was for high single digit price, maybe that was more of a back half comment than a Q3 comment. So any color there would be appreciated and then also tools and outdoor is calling for a better Q4 market seems like maybe flat organic.

You asked a little bit of is there a fourth quarter benefit.

It's probably in the ballpark of very low single digit millions.

Given that it affects one quarter and then you are you pretty much all I get the LIFO portion of that so for the fourth quarter. It's a very small amount, it's a slight help.

Q3 was negative two and now we have them.

More difficult comp into Q4. So can you just maybe talk about why that two year cycle, we'll get better I know price comes through but we would think with the one for one offset that that would be.

Probably in the five to 10 range of each of the first two quarters of next year or thereabouts, but.

Accounted for on lower volumes. Thank you.

It's not a game changer long term certain.

Yes.

So Chris.

Any relief is welcome, but it's not it's not a big magnitude item.

Pricing can get confusing because obviously, it's a portion of all the work we're doing to mitigate tariffs, obviously theres a lot of supply chain changes in addition to that.

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

But it's largely a United states tools and outdoor phenomenon. So youre talking about taking considerable price on 60% of our business not on a 100% of our business. So you are accurate and understanding that.

Christopher Snyder your line is open please check your mute button.

Sorry about that.

I wanted to ask about tools and outdoor topline.

Price this quarter I think you guys said.

5%.

Our pricing ultimately when we get through the second round of price increases, but even.

The conversation on the Q2 conference call was for high single digit price, maybe that was more of a back half comment on our Q3 comments. So any color there would be appreciated and then also tools and outdoor is calling for a better Q4 market seems like may be flat organic.

Even.

The pricing we've already taken is in the high single digit range, it's probably going to across our U S product lines be in that high single.

Maybe even into low double digit depending on the SKU youre looking at.

Q3 was negative two and now we have a more difficult comp into Q4. So can you just maybe talk about why that two year cycle, we'll get better I know price comes through but you would think with the one for one offset that that would be.

But again when you take basically 60% of that you are getting into a mid single digit.

Global viewpoint on pricing, both global for <unk> and global for total Stanley Black <unk> Decker. So we if you look at our outlook and planning assumption information.

Accounted for on lower volumes. Thank you.

Yes.

So Chris.

Pricing can get confusing because obviously, it's a portion of all the work we're doing to mitigate tariffs, obviously theres a lot of supply chain changes in addition to that.

Been referencing on an enterprise wide basis expecting mid single digits.

U S <unk> high single digits or above and Thats exactly what were seeing so.

But it's largely a United states tools and outdoor phenomena, so youre talking about.

It's a lot of hard work by our team and a lot of hard work with our channel partners to do it thoughtfully, but we're getting the price we expected.

Taking considerable price on 60% of our business not on a 100% of our business. So you are accurate.

And you saw in the pricing.

Reconciliation for the third quarter. It was five percentage points and that's right in the ZIP code. We expected obviously, we're taking a second round of pricing in the fourth quarter.

And understanding that.

Our pricing ultimately when we get through the second round of price increases, but even.

Even.

The pricing we've already taken is in the high single digit range, it's probably going to.

But we're also going to be running back to kind of a more normal promotional cadence. So I would expect a reconciliation for the fourth quarter to BNS similar ZIP code. It can kind of move up or down from that five based on a.

Across our U S product lines be in that high single.

Maybe even into low double digit depending on the SKU youre looking at but again when you take basically 60% of that youre getting into a mid single digit.

Promotional mix to relative safe.

Sales in.

In terms of the growth cadence for.

Global viewpoint on pricing, both global for <unk> and global for total Stanley Black <unk> Decker. So we if you look at our outlook and planning assumption information, we've been referencing on an enterprise wide basis expecting mid single digits.

The quarter and the year.

Full year enterprise wide.

We're expecting net sales for the full year enterprise wide on a organic basis to be.

Flat to down 1%, probably more likely towards the lower end of that range.

U S <unk> high single digits or above and Thats exactly what were seeing so.

And for <unk> for the quarter were also kind of expecting flat to down one ish percent and again probably towards the lower end of that range. So that's going to have an enterprise where <unk>.

It's a lot of hard work by our team and a lot of hard work with our channel partners to do it thoughtfully, but we're getting the price we expected.

And you saw in the pricing reconciliation for the third quarter. It was five percentage points and that's right in the ZIP code. We expected obviously, we're taking a second round of pricing in the fourth quarter.

For the quarter and the year.

Is down somewhere between zero flat to down 1% closer to that down 1% and youre going to have SCS scf up about two percentage points on the year and Thats whats going to drive the overall enterprise to the enterprise expectation.

We're also going to be running back to kind of a more normal promotional cadence. So I would expect a reconciliation for the fourth quarter to be in a similar ZIP code. It can kind of move up or down from that five based on a.

Thank you. Our next question comes from the line of Michael Rehaut with Jpmorgan. Your line is now open.

Promotional mix to relative.

Sales in.

Thanks, Good morning, everyone. Thanks for taking my question.

In terms of the growth cadence for.

Wanted to focus on.

The quarter in the year for the full year enterprise wide.

Without really getting into guidance for next year.

We're expecting net sales for the full year enterprise wide on an organic basis to be.

Focus on some of the actions you've taken this past year and how they might impact 'twenty six and in particular.

Flat to down 1%, probably more likely towards the lower end of that range.

Thinking of number one.

The carryover impact.

And for <unk> for the quarter were also kind of expecting flat to down one ish percent and again probably towards the lower end of that range. So that's going to have an enterprise, where P&L for the quarter and the year.

Kind of like from an annualized.

The perspective on what the.

Cost reduction.

That you're on track to do that the $2 billion by the end of this year.

What impact on a full annualized basis would that have to benefit 2026, as well as the movement of supply chain with the China footprint reduction.

That would extensively.

As that comes down throughout the year.

Good figure have some type of also some type of benefit.

Yeah.

Two two cost.

Thank you. Our next question comes from the line of Michael Rehaut with Jpmorgan. Your line is now open.

Thank you.

Yes, Mike.

It's a fair question.

We certainly are going to be looking at you know.

Thanks, Good morning, everyone. Thanks for taking my question.

How this quarter plays out from.

Wanted to focus on.

Consumer confidence consumer engagement and volume perspective before.

Without really getting into guidance for next year.

Focus on some of the actions you've taken this past year and how they might impact 'twenty six and in particular.

Going to feel like talking about 26 guidance as appropriate but.

Anchor stones to 'twenty six.

Of number one.

Kind of no matter the macro are going to be making gross margin progression and managing SG&A thoughtfully. So.

The carryover impact.

Kind of like from an annualized.

The perspective on what the.

We're we're working.

Cost reduction.

Game plans for 2006 that have us around 35% in the fourth quarter, we're going to be finishing this full year.

That you are on track to do that the $2 billion by the end of this year.

What impact on a full annualized basis would that have to benefit 2026, as well as the movement of supply chain with the China footprint reduction.

On a like a 31 ish percent basis so.

The full year 2006, we're going to obviously be targeting something very much in between those two points of of 31% and 35.

That would extensively.

As that comes down throughout the year I would figure have some type of also some type of benefit.

And as I mentioned to the questions Julien was asking all of the levers are still in play.

Two two cost.

<unk>.

We're going to need to be generating.

Yes, Mike.

It's a fair question.

In terms of gross productivity next year.

We certainly are going to be looking at.

We're in the 350 $400 million range, that's going to be our rough focus point again.

How this quarter plays out from.

Consumer confidence consumer engagement and volume perspective before.

Irrespective of the macro to continue marching on that gross margin path.

Going to feel like talking about 26 guidance as appropriate but.

And then we're going to be working.

Anchor stones to 'twenty six.

On mitigation path of getting.

Kind of no matter the macro are going to be making gross margin progression and managing SG&A thoughtfully. So.

$2 million to $300 million of tariff expense out of the system.

The weather.

Whether thats sure.

We're we're working.

Shifting product out of China and or.

<unk> plans for 2006 that have us around 35% in the fourth quarter, we're going to be finishing this full year.

Increasing U S. MCA compliance. So those are our focus areas those are levers that we're pulling and.

And we will continue to kind of manage SG&A in that 'twenty, one ish and a fraction range.

On a like a 31 ish percent basis so.

The full year 26, we're going to obviously be targeting something very much in between those two points of of 31% and 35.

Again, working to generate growth investments, while tightening up the cost structure elsewhere.

Thank you.

And as I mentioned to the questions Julien was asking all the levers are still in play.

Our next question comes from the line of Adam Baumgarten with vertical Research partners. Your line is now open.

Hey, good morning, everyone. Just curious pacing here in North America, our haynesville volumes compared to the market in the third quarter.

We're going to need to be generating.

In terms of gross productivity next year.

We're in the 350 $400 million range, that's going to be our rough focus point again.

Hey, Adam.

So I think we're relatively in line with market I'd say, a couple of things we know.

Irrespective of the macro to continue marching on that gross margin path.

Walt continues to grow year over year.

And then we're going to be working.

In the absolute terms and I think that that would be pacing the market. We've been seeing more signs of progress staying in line with market levels with our other two <unk>.

On mitigation path of getting.

$2 million to $300 million of tariff expense out of the system.

Core brands I think the important thing to understand is that in the in the short term.

The weather.

Whether thats shifting product out of China and or.

With the amount of change that has happened with.

Increasing U S. MCA compliance. So those are our focus areas those are levers that we're pulling.

Various responses to tariff policy pricing as well as promotional calendars, there's just.

And we will continue to kind of manage SG&A in that 'twenty, one ish and a fraction range.

There's been a lot of volatility in the market, we're going to keep on keep.

Again, working to generate growth investments, while tightening up the cost structure elsewhere.

Keep on monitoring and see how things progress not only as we wrap this year, but going into next year into 2026, but I'd say, we have been relatively in line with what we think the market would be and I would say exceeding what we think the market is with our dwarf brand.

Okay.

Thank you.

Our next question comes from the line of Adam Baumgarten with vertical Research partners. Your line is now open.

Hey, good morning, everyone. Just curious pacing here in North America, our haynesville volumes compared to the market in the third quarter.

Thank you. Our next question comes from the line of Jonathan <unk> with Jefferies. Your line is now open.

Hey, Adam.

So I think we're relatively in line with market I'd say, a couple of things we know.

Great. Good morning, and thanks for taking my question. There is a lot of moving pieces with housing policy for the current administration was hoping you could talk to how you see Stanley Black <unk> Decker as a potential beneficiary of some of these proposals to catalyze and unlock dorm.

To Walt continues to grow year over year.

In the absolute terms and I think that that would be pacing the market. We've been seeing more signs of progress staying in line with market levels with our other two <unk>.

Housing supply in the future. Thank you.

Core brands I think the important thing to understand is that in the in the short term.

Thanks, a lot Jonathan nice hearing from you let.

With the amount of.

Let me start by just saying that.

The change that has happened with.

Yes.

Various responses to tariff policy pricing as well as promotional calendars, there's just.

We understand that and.

And we would say that we don't see any real near term catalyst right now for that market. So we're focused on making sure we control what we control. We're excited about what we're doing we're excited the progress we're making in our margin expansion and our.

There's been a lot of volatility in the market, we're going to keep on keep.

And our product line expansions and and we will continue driving towards that.

And.

For lack of a better term, we're going to continue to.

Thank you. Our next question comes from the line of Jonathan <unk> with Jefferies. Your line is now open.

Improved based on the actions that we take on the things that we control and that's what we're concentrating on and I think that I am excited about the progress we've been making and we expect to continue to make along those lines as we go into 2026 as it relates to.

Any any release of momentum in the housing market, whether it be new construction and repair and remodel.

We certainly believe that we are very well positioned to be a beneficiary of that we certainly serve those markets and serve those trades with very high share positions and we have been using this time of what I would say is a little bit more of a retention retrenchment of that market to invest heavily to make sure.

Housing supply in the future. Thank you.

Thanks, a lot Jonathan nice hearing from you.

Let me start by just saying that.

Yes.

We understand that.

We are there with those end users with those contractors and with that industry to rebuilding the relationships and building the innovation so that as that does unlock that we will be there to certainly.

And our product line expansions and we will continue driving towards that and.

Yes.

Be a beneficiary of it and probably more than our fair share.

Thank you.

For lack of a better term, we're going to continue to.

Our next question comes from the line of Joe O'dea with Wells Fargo. Your line is now open.

Improve based on the actions that we take on the things that we control and that's what we're concentrating on and I think that I am excited about the progress we've been making and we expect to continue to make along those lines as we go into 2026 as it relates to.

Hi, good morning, Thanks for taking my question.

You gave some helpful color on China, and U S supply exposure, there and what you expect on that trajectory.

Any any perspective on U S. MCA compliance in the past that you are on there.

Any any.

Release of momentum in the housing market, whether it be.

And then along with that just on the <unk> pricing that you talked about being kind of in process for how much of the quarter would you expect that price to be flowing through the P&L the incremental price that you're in process on that.

New construction and repair and remodel.

I'll start with U S. MCA, and then I'll turn it over to pass on the pricing question. So U S. MCA and I think I stated this on our last call that we.

We are making significant progress.

We are there with those end users with those contractors and with that industry to be building the relationships and building the innovation so that as that does unlock that we will be there to certainly.

A big part of our mitigation efforts as we as we've talked about our strategy from the very outset.

On managing the tariffs were going to support our customers, we are going to mitigate our operations, we're going to price where necessary and we're going to maintain our.

Be a beneficiary of it and probably more than our fair share.

Thank you Aaron.

Communications with the administration.

Our next question comes from the line of Joe O'dea with Wells Fargo. Your line is now open.

We we certainly priced for what we believed our end state mitigation was going to look like as we went out of 2026. So it's.

Hi, good morning, Thanks for taking my question.

You gave some helpful color on China, and U S supply exposure, there and what you expect on that trajectory.

<unk>.

All hands on deck to get us towards that end, because thats, a big part of what our mitigation and margin journey is all a part of as it relates specifically to U S. MCA.

Any any perspective on U S. MCA compliance in the past that you are on there.

Making progress and we see no.

No structural.

Roadblocks to us being at or around what I would say is the average for industrials that look like us and we will be there over the medium term. So we're making great progress and we see we see good opportunity there to make sure that we can continue to.

I'll start with U S MCA and I'll turn it over to passing pricing question. So U S. MCA and I think I stated this on our last call that we.

Have the products that are end users need at the prices that they can afford.

We are making significant progress.

A big part of our mitigation efforts as we are.

Yes, and Joe.

Relative to fourth quarter pricing.

As we've talked about our strategy from the very outset.

A fair number of those discussions with channel partners.

On managing the tariffs were going to support our customers, we are going to mitigate our operations, we're going to price where necessary and we're going to maintain our.

I have been completed and those pricing.

Actions are starting to go underway, we would expect the balance of them.

Communications with the administration.

To be complete.

We we certainly priced for what we believed our end state mitigation was going to look like as we went out of 2026. So it's it's.

Completed here in the early part of November.

And so I kind of think of it as for the most part two of the three months of the quarter.

<unk>.

All hands on deck to get us towards that end, because thats, a big part of what our mitigation and margin journey is all a part of as it relates specifically to U S. MCA.

And we feel like we're tracking on that and with all the variables.

Managing in this quarter within our planning assumption, where we're comfortable with where we are on that front.

Making progress and we see no.

No structural.

Thank you.

Last question comes from the line of Joe Ritchie with Goldman Sachs. Your line is now open.

Hey, guys. Thanks for fitting me in.

Just the only question I have right now is really around inventory levels. It looks like you reduced.

To reduce your inventories.

Have the products that are end users need at the prices that they can afford.

Over the past year and also sequentially.

How far above do you still think you are from an inventory perspective, and what's your expectation for reduction in 2026.

Yes, and Joe.

Relative to fourth quarter pricing.

A fair number of those discussions with channel partners.

Yes, good good question, Joe I think.

I have been completed and those pricing.

I would raise it to the topic of cash and then come back inventory because.

Actions are starting to go underway, we would expect the balance of them.

We still are in a delevering mode, and very focused on generating cash.

To be complete.

Completed here in the early part of November.

And obviously, we have work to do this quarter.

So I kind of think of it as for the most part two of the three months of the quarter.

And so we expect.

And we feel like we're tracking on that and with all the variables.

The gross margin improvement in the SG&A management I referenced in the earlier in the Q&A to drive profit expansion.

We are managing in this quarter within our planning assumption, we're we're comfortable with where we are on that front.

In the fourth quarter, and then we will be pushing for over $500 million of working capital reduction in the quarter, that's both receivables and inventory.

Thank you. Our last question comes from the line of Joe Ritchie with Goldman Sachs. Your line is now open.

I would say this whole year.

Hey, guys. Thanks for fitting me in.

To this point in the year were a little bit heavier on inventory than we'd like to be.

The only question I have right now is really around inventory levels. It looks like you reduced your inventories.

But that is understandable relative to all the supply chain moves we are doing I mean, obviously, we're taken 15 percentage points of our U S Cogs and moving them out of China that.

Over the past year and also sequentially.

How far above do you still think you are from an inventory perspective, and what's your expectation for a reduction in 2026.

That ends up requiring some inventory slack in the system and Thats part of our challenge I would say for next year, we're probably targeting.

Yeah. Good question, Joe I think.

I would raise it to the topic of cash and then come back inventory because.

At least $200 million, we'd like to be better than that because I I think our longer term opportunity.

We still are in a delevering mode, and very focused on generating cash.

And a level at this revenue stage, probably approaches $1 billion of working capital reduction Thats not just.

And obviously, we have work to do this quarter.

And so we expect.

Kind of on the margin thing, that's that's leveraging platforming and improving the way, we do planning and a host of other things that drive inventory, but I still think that that's the opportunity that's out in front of us.

Gross margin improvement in the SG&A management I referenced in the earlier in the Q&A to drive profit expansion.

In the fourth quarter, and then we will be pushing for over $500 million of working capital reduction in the quarter, that's both receivables and inventory.

But with some of the tariff mitigation thats going to consume the first half to two thirds of next year I think.

I would say this whole year.

<unk> in the $2 million to $300 million range closer to two for next year is probably more appropriate.

To this point in the year were a little bit heavier on inventory than we'd like to be.

Thank you I would now like to turn the call back over to Michael Wherley for closing remarks.

But that is understandable relative to all the supply chain moves we are doing I mean, obviously, we're taken 15 percentage points of our U S Cogs and moving them out of China that.

Thank you Shannon wed like to thank everyone again for their time and participation on today's call do you have any further questions. Please reach out to me directly have a good day.

That ends up requiring some inventory slack in the system and that's part of our challenge I would say for next year, we're probably targeting.

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

At least $200 million, we'd like to be better than that because I I think our longer term opportunity.

And a level at this revenue stage, probably approaches $1 billion of working capital reduction Thats not just.

But with some of the tariff litigation Thats going to consume the first half to two thirds of next year I think.

Target in the $2 million to $300 million range closer to two for next year is probably more appropriate.

Thank you I would now like to turn the call back over to Michael Wherley for closing remarks.

Thank you Shannon wed like to thank everyone again for their time and participation on today's call do you have any further questions. Please reach out to me directly have a good day.

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

Yes.

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Sure.

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Okay.

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No.

Yes.

Sure.

Yes.

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<unk>.

[music].

Okay.

Yes.

Okay.

Yes.

Q3 2025 Stanley Black & Decker Inc Earnings Call

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