Stanley Black & Decker (SWK) 4 May 232023 Q1 Earnings call transcript

Welcome to the First Quarter 2023 Stanley Black & Decker Earnings Conference Call. My name is Shannon, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

the Dennis to Lange. turn of Vice now Relations, Investor will call the over President I Mr. Lange, may you begin.

XXXX Thank you, for Decker's us thanks for Quarter Shannon. Good morning, Stanley everyone, Black and joining First Webcast. &

and addition in and Don and Vice webcast the Pat to Executive On Hallinan, Allan, myself, President CEO; CFO. President

will earlier this which our be on the the also section morning of supplemental morning's to, presentation, XX Our earnings this refer available release, which A are of replay website. webcast was issued at today. beginning and we will available IR a.m.

per first the morning, year followed do, normally Pat This call views. Consistent are just during and will be caller. Don will Q&A we current question be a and review with some based matters And our other as to forward-looking XXXX webcast, our statements we with going quarter we various prior on making session. results sticking by one

we most of statements accurate risk not on may direct with any future differ that press based that are It's uncertainty. results and filed you as in in the statements and, may the may cautionary therefore filing. possible materially that make X-K assumptions we Such today. forward-looking actual our events that be such, to prove and release to recent from XX-F the our We statements involve

I'll now turn and Allan. the our Don to call over CEO, President

everyone. morning good and Dennis you Thank

branded and joining business brings value deep Chief today a begin, extremely appointed growth to of Patrick call Before on pleased competitive our and am record complex delivering team I board Stanley have track the we Pat consumer creation Decker’s and Black businesses. to as Officer. Financial newly performance, & Hallinan

as will outlook. highlights as remarks, our Pat. take financial the you through Pat current my Welcome Following well

and mid-June market relationships strategies and we week of Tools of Officer Chief which have with Operating and Chris our in customers. global leader industry the entire make Executive to our and business. and him as implementing joining delivered growth. centric Earlier record portfolio knowledge team Pat, is existing His Nelson leader company exceptional the of company with growth President optimize execute experienced that Vice and to be I of strong innovation our we and President profitable Outdoor. track an also and the Chris the and strategy customer streamline core will businesses sustainable for this our share outdoor Chris announced look many leadership forward partnering success tools expansion brands with generate ideal global and as around

and start we we billion to program the The increase we've performance focused for make activation. delivered we savings serve build cost $X annualized the achieve in better $XXX and strong business organization enhanced steps Since and total forward investments believe quarter and We expected in the transformation rate as This took captured great terms of plan. to continue our to by additional momentum supply program is end. total year savings. this stakeholders the ahead end-user on a of and run QX chain to of progress remains our global In while savings leveraging on a our launched our continuing we of our rate reducing by which million innovation controls in quarter optimizing pre-tax are key run global million is customers deliver track program modestly $XXX of cost reduction inventory, plan.

profitability reduced to strong in approximately some thus with I also strategically we categories build am $XXX is ahead a return. have executing prepare flow improvement long-term while am are reduction the positioning upcoming million Inventory company of season, outdoor our our Even by and we of far the generation, Day encouraged I progress the inventory billion for strategy by incremental for shareholder Father's quarter. $X in and confident and merchandising we growth, mid-XXXX. plan since cash inventory now that

billion was industrial price volume, of and consumer offset demand with was lower as professional divestiture. and revenue construction QX currency gas XXXX. solid prior quarter first in more oil Our This line $X.X than versus and and business was and by realization down DIY the year

Let April up slow gross a bolstered versus on me a XXXX XXX start tools now Adjusted perspective point sequentially been position by and retail point U.S. growth market pro versus outdoor quarter QX trends price was demand. for provide remained points products The for XXXX. some but demand. basis levels XX.X% sale sale of quarter and weekly end in our healthy The of outdoor this season encouraging. had March margin have in the

are is still moderate. seeing we destocking gross to adjusted impacts work there as improve more done, be margin While

Adjusted plan the loss efforts EPS period of for $X.XX significantly by prioritization impacted was reduction. a inventory around our

our We continuing and are our committed control. to forward our is within transformation advancing journey focus plan on business persistent what with

and economic the of which planning and for of outcomes as possibility global a the prospect continuation environment of range We with potential current the further demand trends slowdown. improvement balance are demand well as dynamics monitoring a the the of

these We will planned trends we scenarios current have shift. for accordingly if see all and respond three of

are will later We as range this year $X color cash to guidance presentation. provide our million free adjusted Pat in of more reiterating billion. on EPS XXXX of well to diluted our zero $X $XXX full our guidance flow as

activation ensure we activities elevate focused these electrification brands, platforming, which user additional are speed generate the iconic street brands. business growth will hiring iconic we sustainable on engineers engine, margin continuing positions innovation as as the and and of well This product commercialization leadership on expansion. we and extend activation savings, the for innovation to cost make strategic investments to our position includes electrification As in to

improvement improved One, second further Successfully half on-going stronger Our transformation margin strong executing XXXX as our Outdoor priorities back EBITDA result on we remain these to reduction inventory adjusted assist Three, gaining & as a to focus in unchanged. we get chain business. significantly major the market XXXX XXXX. drive sheet categories share Tools of in and of priorities in head in cash into debt flow all sequential in will our balance through deleveraging. supply Two, initiatives. with gross

well me walk let decline impact and a from more decline a average. business segment with outdoor. currency. by to volume Volume and XX% of a billion, realization reduced negative consumer the details DIY impacted our March was than slow inventory modestly Revenue by season with retail a performance. demand offset tools outdoor and as Now to was in market X-year and lower the of the was due channel price Beginning $X.X temperatures below cold through start

price impacted the as by inflation, offset Outdoor supply more Europe were Emerging as Russian region business prior operating and segment. Tools than growth. access organic the This X% East. our both was Brazil, covered the down chain realization the margin adjusted factors markets was were North organically, down & X% led X% for from reasons Middle production in down volume. impacts curtailment by organically the both higher and cost, by had were but and XX% America strength versus was the overall year lower excluding China

to largely the results business organically planned demand impacted consumer The versus were The business Moving X unit respectively. primarily the slow X and cooler weather. points. power by declining XX% tools start consumer approximately and our XX% tools and hand performance, Outdoor impacted X% by organically, demand declined softer outdoor to to our softer season by strategic pressured

if up. recaptured be this XXXX We in season to ramping is are could demand monitoring weeks potentially recent with POS signalling determine in the encouraging now

under a across handheld performance A a our key growth network. start Cub Hustler dealer our area cordless the strong acquisition. Pro channel products double-digits This the products for solid had we in our acquired are XXXX delivered building and with leveraging up quarter with and is outdoor we was and dealers traction brands Pro Cadet that DEWALT year-over-year. the

Now as had X% quarter year’s shifting year. growth which currency points last gas with Total and X% double-digit up realization price basis to margin than versus more oil of offset to revenue by productivity and prior team XX% price our volume. the margin. XXX leveraged versus in was The & adjusted operating realization industrial organic XXXX deliver the segment declined operating business, divestiture,

of segment Engineered by Fastening growth market. organic this and XX% industrial up revenues offset softer X% auto led X% Within aerospace growth were of by

our driven done gross continued of was drove improved maintained efforts. summary, businesses revenues our strategic conversion job seeing this significant In were results and revenue organic are environment. X%, across to the this the right and continue in the by inventory a well we to thanks of My of as team team margin the board areas tools Attachment pricing a and actions reduce backlog. mixed we focus up we entire our on

well levels & consistent that Decker On long-term would we to organic the like slide, next above Stanley we launched market our transformed review drive to Black at strategy growth growth. last accelerated July as I

focus. traction organisation Our to of teams believe our positive that primary simplifying streamlining and One, prioritise have executing and resources for we as the shifting customers and impact world on our end the a around and well investment direct gaining more are as users. areas

optimization gross custom chain and to growth continuing better XX% Two, plus cash rate three penetration four, organic advance to return to to adjusted improving global inventory the to margins and accelerating with the while generation market operations times electrification fill and inventory to supply historical two of level market. prioritizing flow transformation advance. match innovation, and Three, achieve

to elevate on we track level. class world these to and business as experiences deliver Our transformation our remains to on user customer financial end commitments strive

streamlining gain savings supply streams achieved The $XXX initiatives million strategy of advancing and chain and creation momentum. chain supply forward in first the strides meaningful quarter. four the to transformation The tracking are expectations our our with company of and value continuing to a within are

our is global speed. Our with team strategy against activating

across is and to operations globe. I’d my energy our associates to extend sincere passion the like The evident thanks and

so the vision of every much the is the to milestone made shared for completed nine We last future. have in our months contributing supply progress and chain

in this area. Now particular updates a few

are of rationalization few portfolio the we working quarters. have value XX,XXX the to now the stream is SKUs no manufactured SKUs Within being the of approved coming our balance customers we XX,XXX across are The reduction with transition in and longer platforming which remaining new and decommissioned. to product

complete a to spend been savings as we has tranche $X the billion sourcing assessment. of strong Strategic first contributor

track targeted on the savings. achieve to are We

to existing a consolidation. deliberate Our improve supply geographic base new diversification and will vendors include both and intent with

are is team savings capturing while new changes dedicated Our to processes cost successfully. ensure sourcing executed deploying

optimization in expansions, site were manufacturing related to into as excellence, made announcements consolidation. footprint March, initial of as transformations site includes which manufacturing well the centers Our

on to optimize logistics expectations manufacturing our our and asset taking and approach are and a base. of track base we We holistic our utilization network ensure efficiency to are with the

sites. we our in plants four factories. the re-emphasizing the kicked nine along with we focus on our in practices model increasing manufacturing quarter playbook We first are lean off excellence March at at operating this additional SBD Finally, manufacturing at and deployed and

capturing are these tools and traction strong activated. improved productivity seeing efficiencies are We where were

are make months can with expect the you progress excited continue us We and the quarters. to coming and in to strides

and of organizational Turning layers, to SG&A, simplifying spans quarter for approximately pre-tax and of we the of end streamlining million reducing spend. million savings captured from of pace structure, $XXX year control are on savings indirect the corporate $XXX and leadership by the this

confident by XXXX from capture of XXXX rate in by billion of are $X of and to $X this end program. run our savings We the billion ability savings annualized

of tenet acceleration our investment electrification. in the key innovation strategy A of and is

making from deliberate market-leading our A outdoor to strategic season. maintain year's couple are this innovation We investments ecosystem. highlights

carries and line-up in and washer garden The tools. lighter CRAFTSMAN force designed is new addition of new weight runtime and performance. joins products, This In cordless its extended lawn the and this XX-volt also XX-volt new prior other the gas-powered runtime pressure delivering range equivalent brushless innovative includes to cordless the cordless for of than line-up generations. trimmer string is than better that terms more

and excited our system currently gas expand reception. cords to this wherever to about initial season the limitation for the is work These are enabling Continuing available items market the XX-volt is of go engines. without users or are we

New Additionally, Decker. we won received that and CRAFTSMAN, and we & Awards Yard Garden just XXXX notice Mechanics Black Popular Product eight Best across DEWALT,

base Black DEWALT duty great to & is of and consumer Decker quality light user a demanding entire as for the of was recognition the This ability pruning most pruning String to from serve the market pro. Contractors Trimmer chainsaw use. and and the the highlighted, innovation were for best we the the CRAFTSMAN the named to offerings our Best In bring addition to our just saw awarded

outlets. the now some further on for call to Let quarter turn Pat highlights our me latest financial the over and

Stanley respect & you, team Black and at I'm & to Thank for morning the honored Black tremendous Tools Don, and of leadership and everyone. the company's the history. brands. portfolio & Decker, worldwide such Stanley pivotal good leader professional have moment in Decker's a in I consumer Outdoor, join iconic

rapidly depth underway. impressed have savings of Observing phases, During breadth initial early the during the my of traction captured market that help transformation performance. leading forward and am company's I multi-year been it legacy the of to clear and is with accelerate program transformation the the the to energized company's company-wide I and innovation the long and the is enhance profit and weeks, progressing journey powerfully. initial our

walk improving exited inventory towards $XXX last and we of reduced targeted The was quarter. by magnitude reduction me during supply of the our This successfully curtailments mid-XXXX, company's half first seasonal We the $X margins. approximately capital of of inventory. driven first have progress reducing typical let minimize by through conditions his improved Now quarter. instituted helped $X.X achievement We of details Since year which back XXXX the over by the gross the with billion reduced billion. build today. million in the production and chain working planned inventory continue inventory and

performance frame first via has As working our was million, quarter capital our it reference, build cash reduction. improving inventory primarily $XXX averaged a quarter this million years, the five of last while over $XXX

component expected track goods. reduction inventory of and are half $XXX first inventory achieve as we raw down finished on to We out work while our selling million material

pace reduction a of Our moments and demand will of within drive remains $X balance return million billion inventory considering strengthen back I demand our cover significant XXXX down to cash scenarios dividends. cash inventory commitment few reduction be generation target long-standing flow full debt, in and sheet, to year to will to through shareholders our our and range to dependent we pay value are the XXXX the Overall, guidance. our $XXX

improving which consistent margins, also a with gross in plan. manner to Turning our are

First to initiatives as benefit, as versus something we XXX XX%, approximately and XXXX, quarter our headwind adjusted a the fourth transformation from sequentially actions basis quarter saw gross points expect greater a smaller margins up destocking provide statement we income were continue.

first Production destock the to and were of the in year impacted margin containments relatively gross XXX similar XXX points. levels the half of back at approximately to quarter those by basis last

of a second that impact margin second consistent expect adjusted with resulting similar the the gross quarter quarter. to quarter in first We

the margin the Our base production speed expansion shift targeted case second impact year. of mid-to-high XXs will gross destocking guidance adverse earlier depending curtailments or The on environment from inventory timing half improved through our ease later anticipates could of adjusted the the the into production margin and Supporting and reduction. normalized the gross for margin demand year. corresponding of and

and optimize delivered of improvement adjust leading We in XXXX. throughout important An quarter. savings will demand pace margin for margin first chain is to XXX actively our gross supply supply of transformation reduction the indicator million the inventory monitor the chain and

will initial target return later is As margins these plus range. this margin expand multi-year encouraging to see savings to inventory year, adjusted the the further. XX to through gross towards our gross turn percent It progress

improvement, growth margin these value executing positioning are against and balance long-term the we priorities, company gross cash sheet prioritizing generation, are for and By creation. We strength.

to XXXX guidance. Now turning

We expenses to reiterating of the we charges outdoor estimate earnings per one-time share adjusted per approximately of The four-year XX% to negative earnings to being chain transformation narrowed of from be inclusive $X global these million per GAAP share. $X share are primarily On to the charges XXX range integration. to our $X.XX basis, with range current supply pre-tax a $X.XX, expect XXX was and non-cash. guidance

to framework the to $X target February, remains XXXX we reduction. with of planned scenarios primarily million by macroeconomic dynamic. shared and billion, demand in cash outlook Consistent as around continue three generation free We $XXX continue forecast driven flow inventory the to

to unfavorable experienced organic what assumes market modestly are softer scenario, we a the to outdoor scenario year. during to of second season. Our compared total the environment demand the low half In base to incorporating be growth this last case we assuming mid-single-digit, start down

the low while to The production single-digit Outdoor, to maintain intention & assumes with we Tools normalized we third mid-single-digit, the return industrial. quarter. the base revenue to expect that levels case curtailment production low be down is expected total during organic also growth for to

fixed low operating As under-absorption manufacturing to second single-digit. would continue the a result, quarter to margins costs constrain of

operating the range, in to year, to full-year in production single-digit we normalized mid-to-high As in improve margins back resulting expect returns levels margin the of the to the half operating mid-single-digit.

million base annualized investments environment. case the We demand growth of depending XXX the Finally, be reduction. includes Outdoor and measured complexity reinvestment approximately timing of the Tools targeting such & acceleration on plan and to with magnitude

stronger scenario, a supporting improvement. expect and contemplates a scenario margin levels inventory acceleration half the this quicker half In environment, organic second would gross second XXXX. normalization growth of demand we The of in

pressures. for organic second operating position accelerate flat the due growth the half, to macro the margins reality, scenario expect the reflects in relatively company a Total & demand organic would industrial deliver our of downside single-digit Outdoor would as in level case well volume both by reinvestment deceleration If as of becomes The a recessionary high decline Tools we transformation. declines mid-single-digit, to to full-year elevated with to year. This be and larger revenues the would this segments. scenario

We transformation on reinvestment demand to and In and would our XXXX margin demand, the and and of the we this scenario, generation. in believe have CapEx to until reinvestment outcomes, would With maintain in we through production it reduction the XXXX, curtailments timeline cash ranges extent of adjust gross place duration extending inventory lower is we approaches levels, impacts. the production of of our more level the clarity as macro end these recovery. of prudent remain prioritize likely

issued be to relatively Turning below-the-line elements early full similar in we the to year, guidance, of important for remaining guidance the February. total expenses in to the expect

assumption. modestly which by an for expectation expense, a XXXX tax interest is offset lower We expense are building higher

are primarily Adjusted the levels to expense For is tax for loss to per profit, higher improvement operating seasonally the be gross share margin be Adjusted similar quarter, expecting at the planned a in planned in from sequential a first of XXs, a that EPS we at is low versus an relatively second of the approximately revenue. higher expectation $X.XX quarter. quarter. the midpoint, first of incorporating to

reduction. positive Free from primarily the second to quarter, flow be expected inventory is cash in

to February, generating as plan off This build couple to positively the inflect next Our the our of our run this rate year, base of view is approximately savings the $X.X in is to in we the calls earnings over deliver to billion. $X.X years. half believe second an similar annualized EBITDA appropriate for and transformation we range of

We dynamic are to margin the feel long-term to as successfully driving we we navigate expansion. operating environment planning and the forward organic continue, and our strategy in for on path remain focused have place growth above-market,

will turn back over With now that, I Don. the to call

Pat. you, Thank

across We solid all progress elements savings, the quarter and reduction, path forge are strong We forward. continuing made again the to of plan. advancements transformation in our cost first with inventory

As more and three-year we financial we in XXXX, benefits. transformation material horizon, over drive our execute will our against begin efforts the time to strategy believe

shareholder robust focus, core us reshape, organic enhanced and be in strengthen the will we faster toward $XXX as million well innovation to the these profitability. actions to growth to activation. value as $XXX million to We stimulate over benefits our long-term our focus believe continue businesses, will of and reinvest enhanced as demand via with to Our reinvest deliver enable machine and organization, growth strong streamline end-user our

the people, and the brands, our industry. best the have We in innovation powerful most best engine

I and what recreate can market we and across passion, the gives to every day, see will on be significant ultimately we energy, commitment successful, that organization share a the control Combine confidence me focus great machine. and will this it we gaining with

are we Q&A. now Dennis? ready that, With for

start Shannon, Q&A, Don. Thank please. now Thanks, you. Great. we can

with from Research. Instructions] comes Nigel the Our Coe Thank line you. first question [Operator Wolfe of

Your line is open. now

everyone. Good Thanks. morning,

Morning.

to congratulations look we really Pat, you someone Chris well, and good Morning, soon, meeting on Don, and He's hiring forward so Nelson. guy. know

Thank you.

North just on sales -- So more America. detail Tools Storage is & my really question the in just maybe

above the footprint fact maybe XXXX just the but levels, wondering and about sales being looked DIY. how of talked that Pro You year-over-year,

see activity Thanks. promotional the pricing a how To of X%. maybe lot through of was then year? extent outdoor? that around the And And pricing trending do what you

a to ask POS, little the part color question. of I'll little Yes, a give then and color the on Pat give on pricing

in trends them low-single Other mid-single POS some you are customers obviously, So customers, year-over-year, when our to I, at digits down of the look the flat. the digits. to only they're digits are in high-single for down

different mixed or continue. the as quarters QX seeing, because there, the side dynamic. got different trend are major not So The areas to sequentially a to shift for No relatively side three overall, seeing a and comp trend around major we've things you but consumer bag magnitude, of last in in any the to We're second The flat continues shifts gets continues last, lesser year. be consumer POS that QX, but QX, there, happening across been will what QX trend strengthening not that quarter any in as be PRO from United we shifts healthy. down to dollars easier States. that continue since experiencing very to the certainly of year-over-year will on continue their likely to the at two people

that shifts weather been great the the trend a a week or little Northeast and last is but England Outdoor rough the overall, time then to to of of a would And weather. the March half kind the the to looking and back into New say to weeks, eight trending hasn't saw next last is got a obviously Things be weather bit better, due got that we the the as weather But way the not Midwest in in forecaster, much expect. as pretty we to and a stages positive. week, of weather so is as April we've as later so we go choppy I first frame. better little in better hopefully would POS in six seen bumpiness

But choppiness. it's of a little bit

to next retailers, that so will POS, probably month of I color price will of our factored guidance us think, that what are do our that now. really season. be at we've little and And, the ultimately trends to us, But a the success customers, the way or in in a all effectively. ourselves, the looking allows the think Pat, I on maybe navigate as all define

Pricing price has stable. was competitors, across the increase. in first quarter you a price dynamic Broadly that pricing The the stable. increase largely the remains environment and It most appears the We us focused so market preserving that our through pricing. and, year, in the expect pricing. margin in to are enhancement environment of been us on additional referenced for in balance the stable carry-in price channels don't therefore, outlook

We supply will dynamic be chain to promotions we've been traditional seasonal engaging dynamic and traditional the be, so improvements the in throughout of seasonal new will given returning, year, less of be more will a that's making, return promotions. we a that pricing but

you. Thank

Our comes the Julian Barclays. from with next of line Mitchell question

Your line open. is now

the much. question think margins of second sales of uplift parse sort single less versus try in less be is quarter and digits of how around, to from think anything quarter would amid about when versus phasing that earnings, just versus destock major call of Thanks to the about sort there? out maybe underproduction, you my of high Maybe much third low half, single uplift we how very that the digits out fourth

and through magnitude gross headwinds inventory to and the half. order improvement in you'll and the statement or strong Most have providing of to into uplift going get is, transformation the the XXX XXX the production as first gross the by from and volume destock less year, of that. of progress curtailment as points driven margin first of some component, SG&A half uplift is half the income second half it the in particularly that we And more back half back Yes. margin to is profit margin to most of of of basis opposed the the

Thank you.

question comes Baird. next line from the of Tim with Wojs Our

is line open. now Your

of POS everybody, like Maybe of morning, on of Good – I Hey. guess, levels and comfort does what just do kind got you've sounds activity between customers. welcome know, you I of, mean, you varying it of kind kind channel channels, into inventory like? your what their Pat. and what looking channel the and they're kind of current how translate inventory is holding kind that of

they Yes. yes, North that and was major asking kind historical you customers I Europe I But, would of when still starting Thanks that down. to look the of get inventory, didn't America into question, but say are traditional the Tim, come our channels about I levels are because for in inventory POS. in levels and high really when talking at

so we're see in improvement that. to starting And

I the us good compared news to starting high particular, been other we in inventory within And always think other level of has industry with competitors. that for folks weren't and a the maybe

you know, not higher we're versus Depot. where is that, what inventory, to we would typically be. level at see. an example, want Lowe's so Home as a far Home from higher much would little as to tends they when So what all you and bit Depot it a than we look but Lowe's to within it of at run of away would traditionally or week be We're a want

So pretty we feel good it. about

the you'll we QX a our goes. I in demand depending see inventory customers and on of bit little of a little our working year, through the where work that bit continued of maybe in think as down and QX

with some but So manageable something very it's for we're don't de-stocking, that's done of I versus the think are think maybe us right I dealing our now. with what competitors

Thank you.

comes line with Pokrzywinski the Morgan Stanley. of question next Our Josh from

open. is Your line now

Hi, guys. good morning,

Morning.

to maybe the just up SKU I want follow So, on Don, reduction.

that through guess and space I with what products? what of kind you the how drag So just on of, been maybe something loss, organic have backfill you much know, what can contemplated drops shelf you done you've similar you to, know, has for growth? far, so versus guys etcetera,

asking good for to a that's question for that. Thank Yes, me you clarify.

on thoughtful very being we're So do how we this.

that XX,XXX ones When going hear an you tied really is those to about eliminated the little inventory wonder SKUs. the had, impact revenue. And first phase of them on that, But to if you revenue we've so start system. the have little very a in SKUs that's very in lot to and

the really our the you're selling as XX,XXX that, ones now been years. several revenue eliminating What there's to about we that, just something are and last that hasn't inventory left there's well. in stopped tied manufacturing, tied was really to it that over is SKUs, it So, which with system

to so, a process all very other exist that And & nature. thoughtful customers products are to Decker with Black in our go that you similar conversion Stanley of from in through need those of products

product Now, selling example an version older through that. be a in could upgraded been but customer customer certain particular a to under an a the of takes innovation XX has brand. over could whether XX that and and that's And an still to sold through. brand It different it of brand a upgraded is we that that be switch to months being that example similar version, want navigate that the to probably product

it's so, with the process an slow world of overall the on have in really impact to be to that potential objective to revenue not and inventory. a might And very minimize being any write-outs methodical exist going

effective navigating supply commercial so I on still have tools very the as they're resources and outdoor work has this of we job this aspects are us. think grasp the there's chain. a they our very through doing that it. And And dedicated business. ahead lot within team focused good have far, but far in successful And an And a so of doing well as that, been of of

you. Thank

the from comes Rehaut question next Our Michael with of line JPMorgan.

Your open. now line is

And everyone. morning, again, to to so and nice see you speak. Good Thanks. Pat, welcome

to something kind maybe I actually. believe clarification sense results. a upside first I into of a just What my quarter guess looking margins? if I question; the get to wanted on you're the operating One break First, it more parts, on the is two XQ. flattish well, drove can for only I of

terms how And But curious PRO about think particularly with positive half. remaining in you're healthy. talked then just inflection back about guidance, tools how looking was just secondly, being is more the of thinking when case, PRO in figures you and I you PRO, guidance or and the flat, in that that? a on if for the in the about storage base

the Mike, Yes, question. for thanks

the transformation. well of first quarter terms the executing In are on favorability, we

transformation. delivering that just And XXXX, not but road ahead plan. And feeling about on so of running good, beyond XXXX the about transformation is and the we're

to perfectly phasing balance your it's rolls your to get of sheet throughout off the of inventory how sheet. balance what you and So predict the difficult I inventory that's it would say year, just, level rolls more when just off

XX% would way consistent margins in the say first that's XX% and half think guidance profit high highly of of business. I original the profit half guidance back gross So in the with is the should the margins gross having low you

should And on to it to way what and bit the is type confidence little transformation that. mix in quarter You depend off is going have of coming balance quarter the delivering always inventory a the sheet. flows

that half than profit first other I wouldn't subscribe So gross margin. to the anything

falling performance transformation balance update the off Solid just on where is the an and inventory sheet.

the across the the of In Tools throughout we what softer pro-environment seen the a terms quarter environment dynamics the and market to expect of for is the and strength balance be of & would in which the first relatively that consumer quarters. of the year, in persist to balance continued outlook Outdoor consistent end in the year, dynamic we've

as quarter easier gets to comp third the Q&A, earlier, the quarter. mentioned we Don second from as the get But

So it's end it's year. buyer of comp the more the change market a the of three easing year, the less and about quarters behavior in in latter the last part in

you. Thank

Our next question comes of Chris from UBS. Snyder with the line

now Your open. is line

you. Thank

to April reduction at So the million. HD seems But be destock maybe certainly expectations. stock tracking this that guide the signal you inventory the ahead left some of guys destock? March. X XXX you. of in Or unchanged QX Does relative sound of to into think forward about pulled we outdoor was upside is does Thank rate potential it like the QX? Because the first improving on should half

XXX really, committed the first by relatively given change flow environment. and a reason that, the And The dynamic commitment. start high throughout to half the I'd through borrowing And costs. to is is million half we're you Yes, the for remain second expect the team year. the destocking to as macro a that's with environment and channels billion reiterating working a dynamic macro not conservative short-term would that,

right But year, we'll outlook so, environment they're changes. inventory the soon that too facing second And it's the to on and the and now, half just continue to first second half same the year. our navigate change achieve

you. Thank

the question Cleveland Our next line Research. Eric comes from of with Bosshard

line open. now Your is

bit there aggressive the really you you inventory promotions demand there to XXXX? that that inventory where clear The is inventory? in promotions and as about solve about where to How it opportunity curious environment inventories are is. Thanks. through Is or through dynamic? billion. the bit Good on be in little the think think to are slow navigate pace an through that heavy. through curious retail to into is you hear be be I working through are and an guidance solving heavy. more out a the patient as I'm that a Patrick, a inventories desire for your positioned environment better to XXXX XXX which an Or where a morning. I'm work at do you things

the question, thanks for Eric. Now,

be to Our on through except and margins not planning. is XXXX. around intent, to SKU thoughtful rationalization be focused and around not It That be aggressive not drive We're improving our pricing. pricing to more inventory our throughout beyond is is we're and intent the XXXX to going change sales operations an it's areas, our inclination intent. on going for disciplined

that, we'll around macro unfolds. appropriate to the sales addressing we'll internal and production channel be So planning as behavior by as guidance the update, really relative unfolds as Eric, and

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

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

Thank call. conference today's concludes participating. for This you

may You disconnect. now