Industrial and consumer tools maker Stanley Black & Decker reported its 2023 third quarter financial results on Oct. 27, showing that while year-over-year sales declines continued, the company’s margins improved considerably.

SBD reported 3Q total sales of $3.95 billion, down 4.0% year-over-year, with organic revenues also down 4.0%. That follows total sales declines of $5.3% in 2Q and 12% in 1Q. The New Britain, Connecticut-based manufacturer said the revenue decline was primarily due to lower outdoor and DIY volume, as well as attachment tool customer destocking.

SBD’s 3Q gross margin of 26.8% jumped 210 basis points year-over-year and was far ahead of 2Q’s 22.4%, while adjusted gross margin of 27.6% was an even better 290 bps improvement year-over-year and up 400 bps from 2Q.

The company’s 3Q operating margin of 6.7% improved 140 bps year-over-year and nearly tripled 2Q’s 2.3%. SBD managed a 3Q net profit of $4.7 million — a fraction of the $845 million from a year earlier and 2Q’s $177 million.

“We successfully advanced our strategic business transformation in the third quarter,” company President and CEO Donald Allan, Jr. said in SBD’s 3Q earnings release. “Our focused execution resulted in improvements versus prior year in adjusted gross margins* and earnings per share as well as free cash flow. These performance improvements provide a solid foundation for additional investments in innovation and market activation to capture the compelling long-term growth opportunities in the markets we serve.”

By SBD business segment in 3Q23:

• Tools & Outdoor sales of $3.36 billion declined approximately 4% year-over-year, with organic revenue down about 5%. The company attributed the decline primarily to lower consumer outdoor and DIY market demand.
  • Operating margin of 8.1% far surpassed 2Q’s 2.9%, and adjusted operating margin was 9.3%
• Industrial sales of $599 million declined approximately 4% year-over-year, with organic revenue down about 2%. Engineered Fastening organic revenues improved 6%, while Attachment Tools sunk 26%. The company said Engineered Fastening saw double-digit organic growth in aerospace and high-single digit growth in Automotive, partially offset by customer destocking in industrial markets. Meanwhile, SBD cited continued customer inventory reductions driving the decline in Attachment Tools.
  • Operating margin of 10.4% trailed 2Q’s 11.6%, while adjusted operating margin was 12.2%

Cost Savings Update

Like it did in 2Q, SBD’s 3Q earnings release provided an update on the company’s Global Cost Reduction Program, which was initially announced this past March and headlined by plant closures in South Carolina and Texas that involved over 350 job cuts.

SBD said the program’s initiatives, which include SKU reduction and platforming; strategic sourcing; facility consolidation; and operational excellence — are on track to modestly exceed the original 2023 pre-tax run-rate cost savings target of $1 billion by the end of 2023 and positioned to grow about $2 billion by the end of 2025.

SBD added that, year-to-date, the program remains ahead of schedule and achieved $675 million of savings from lower headcount, indirect spend reductions and supply chain transformation. The company also reduced inventory by about $880 million year-to-date and is on track to hit $1 billion of inventory reduction for the full year.