Stanley Black & Decker (SWK) 27 Oct 232023 Q3 Earnings call transcript

Welcome to the Third Quarter 2023 Stanley Black & Decker Earnings Conference Call. My name is Shannon, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to the Vice President of Investor Relations, Dennis Lange. Mr. begin. may you Lange,

Good Black and quarter & Shannon. us webcast. for for Stanley Decker's morning, you, thanks everyone, joining Thank XXXX third

President Tools & On is and Pat Nelson, addition in and Outdoor; EVP and CFO. EVP Allan, COO, of the Chris CEO; President to and Hallinan, and webcast, Don myself,

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

review events the materially prove This uncertainty. our It's future may Act statements statements filed most cautionary direct other and that morning, actual the Such you today. as of we Don, our question during our not Q&A possible in webcast, Chris forward-looking are make XXXX our we by from and be we in risk to accurate, may any do, on may release results to current and such, statements that forward-looking followed views. normally on involve going therefore quarter and session. various X-K that one be Pat sticking We and assumptions are caller. with making just that differ filing. as some they prior we with the will be the we press per results And 'XX a statements will based Consistent third call matters to with based recent

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

continued reflects strategic Decker's good third you, our Black performance Stanley transformation. of advancement and & Dennis, Thank business successful the morning, everyone. quarter

as adjusted year versus improvements per and in cash flow. resulted execution free as earnings prior gross in well margin focused Our share

results our our our and journey our financial now X are the chain across we position. progress. continue. customer is over the position and significant healthier organization runway demonstrate behind in the made execution to our One, and on inventory to is the momentum the supply quarters, cost focus the for transformation, of improve Reflecting have this enhance we stronger Two, confident the and experience last

to capture market provides long-term additional launching compelling Four, the for in growth are to serve. dynamic. and activation that in remain markets opportunities Three, a view solid date the innovation investments our markets we the our performance foundation is will we the

and product Our share innovation further driving efficiency markets, to of on through brands, portfolio core earnings aim our best-in-class gain world-class focus delivering flow. implementing within our is all our cash control in measures cost margin, improve and

important am our execute competitive and on ahead many there team have capable journey, transformation. and highly leadership a us are of our we motivated I position to the strong steps strategy, While confident right that a successfully

year, and in now Tools versus as as was prior healthy remained outdoor performance. $X volume. growth aerospace Shifting Revenue which the the fasteners billion, due third The lower well down automotive for quarter. and demand DIY to to was our demonstrated quarter primarily our Pro and

versus XXXX Tools in Outdoor quarter growth Across of levels. our the U.S. for point end & position retail products sale remained a our this markets,

future stabilizing assess market in and to position and we we that positions a resources As activation in trends, competitive field market continue invest while are our our to believe we we gains. environment demand mixed -- share share

savings XXXX. basis and favorable of point the savings run $XXX XXX the rate in by Our rate end the Adjusted expected global gross rose margin year. improvement XX.X%, a of run billion delivered on compared sequential cost to last points reduction as $X program pretax XXX for quarter, to million basis track

our clearly now inventory chain The performance. and benefits being from supply in our optimization are transformation reflected

are we our our on margins. is to improve control uncertain market to what navigate focus conditions, we As continuing in

of quarterly million gross the our dividend contributed to to margin of reduction additional to This we approximately expect and inventory reduction journey. brings $X.X this debt of flow we billion over which XXXX, year-over-year million which when since and sequential reduction started $XXX We quarter, quarter. mid-XXXX supported in ahead million this $XXX Looking $XXX QX gains. generation, us cash delivered free

to Benefits adjusted from lower diluted our supply than was $X.XX, chain which costs of plan. third contributed quarter better EPS

increasing Our $X.XX year-to-date $X.XX performance at which EPS full midpoint. guidance diluted to supports be range our year XXXX a the up $X.XX, up of adjusted to would

contributed I to in XX,XXX-plus third the world step focus, forward passion and for employees want around our the another quarter. thank to their dedication successful that

Our and of that company levels to and progress flow executing the returns. growth, we positioning well I strong am long-term confident encouraging as is shareholder profitability cash organic are higher deliver by our as strategy,

our Now and discuss then quarter Nelson pass Outdoor review business our segment results. shifting performance I the Chris to will Tools Industrial to it & third to results.

points business margin Third operating volume revenue lower Oil by a as continued adjusted declined last year quarter were versus more by year, driven our price and realization in deliver strong and divestiture. quarter. team. Industrial impact This margin Industrial's improved margin XX.X% Industrial Gas cost [ to We currency X% represents ] than and and for offset adjusted expansion from XXX our execution XXXX actions basis realization year-over-year the price by versus of QX prior operating & X-point continued

these fastening. capture growth growth up recoveries X% the industrial XX% we continue aerospace segment were in cyclical which of what partially Fastening, of Within to the Engineered and auto X%, offset occurred markets, by in strong was organic including revenues as

tool as organic a normalize revenue result declines Our to primarily inventory levels. customer of their experienced destocking attachment business

inventory attachment XXXX. exit for long-term in be we temporary will in we remains as and complete The businesses, growth fundamentals all solid tools channel these the believe destocking

segment. is double-digit adjusted fifth thank Industrial This margin operating for their strong business for consecutive execution. I the the quarter want the of to

by are the businesses. leverage operating excited gain and We growth, for runway these share in

Chris, performance. now Outdoor I review to will to the Tools turn over our call &

my this users, spent customers has time our about I Thank Black you, I've the & at excitement highly reinforced with and capable organization. Stanley future Outdoor this Decker am passionate end mark really for morning, X.X and good and Don, my at now month and everyone. Tools the & period business.

and CADET, strong products. are that pipeline capturing on CRAFTSMAN, remain a of We our such users We focused newest and for iconic STANLEY have innovation customers eager opportunity. brands as and CUB who DEWALT,

making to the are transformation. We progress committed growth impactful share the necessary efficiencies with in rapidly supporting support we commercial gain resources cost will prioritize as most remains be and market. and brand in organization our The to reaccelerate investments innovation, additional the that

third revenue DIY year Now as market quarter outdoor versus consumer the and Outdoor billion, Tools of result turning X% to was down Total demand. lower $X.X prior organically performance. & a

Russia aggregate, down XX%, was quarter, with while the SBUs, Our outdoor tools, our in business the exit, were organically positive consistent expectations. in excluding

We Price period basis year. X which substantial by consistent successfully points This regained driven improvement improving as segment margin-accretive points high-cost adjusted to points X.X%. down for the was basis sell-through promotions XXX revenue. organic margin historical in were activity. cordless sequential with savings progress in by better was XXX made lower operating This partially the was transformation step-up we and than inventory, of shipping reduced chain reduced offset costs, supply last of a and

outdoor the demand XXXX and price. quarter tools was North organic by organically. growth positive, declined. point supported terms prepandemic the while down by U.S. to remained for Similar In digits performance sale segment, America retail of overall in above mid-single professional levels, America North region, was of strength

year, was quarter supported by Third DEWALT positive last promotions. versus for POS

demand. sustained product Our Pro inspired and new professional offerings

was Our spots and with the European organic low bright organic revenue in single-digit growth in down the double-digit X%, from growth U.K. Nordics.

are tools. cordless leveraging targeted programs share capture professional We to with DEWALT

Russia from digits we grew excluding mid-single emerging declined the sales organic impact, impact organically, In business the Including this markets, exit. X%.

America, Latin growth. has was Solid now by of emerging markets consecutive performance quarters recorded X which led organic

have the channels. seen in particularly Brazil, We professional strength notable within

X% Power hand organically, grew North with strong momentum, organically chain, and year. tools. our America a This by opportunities. is service includes prior impacts pressured promotional organic enhanced to Pro-driven growth our supported new expanded positive levels product versus Moving and offerings coupled and retailers supply tools business mid-single-digit performance. consumer sales. strategic unit healthier in declined America, Latin from supporting tools at X% by business The

are resets choppiness inventory cycles. the the excited opportunity due the innovation in globally the industry we long-term leading pandemic outdoor as bringing in to in This from brands. current there market organic impacting fewer replenishment are era. to Transitioning revenue as Despite outdoor, about elevated resulted environment, shipments across market powerful the quarter declined demand levels to our

their and team I execution margin opportunity. the return shareholder as continue for we thank to this capturing focus strong customers the to in growth, our want quarter winning with and amazing on

of now highlight expansion. to to slide. examples trade-focused few our we a cordless I outdoor offerings Turning are how and evolving would next like the

class, highest XX-volt and ideal the With max in innovation torque professional launched cordless of industry's rated use recently tradespeople This X.X-inch mind, is heavy-duty we impact wrench in top its DEWALT high-torque applications. impact max for wrench. end-user the

and Puff charger in System conditions. introduced box, productive first to charger. now the world's container protect, site also X.X port DEWALT dual weather-resistant job store wall despite a charge Users professionals to durable, keep We rough batteries battery the can

snow. the outdoor, tackle we snowblower. the Powered heavy demands pack engineered winter, MAX is In tough with it DEWALT gear XX-volt batteries, as down category two has and up snow single-stage or entered by for wet FLEXVOLT break to

introduce Pro continue power job the and will map on categories across while Inspire to enhance road site solutions safety innovation performance. our elevating Our that

to our efforts. changing social with responsibility DEWALT's Now new involvement gears

This train, broader the to by our nonprofits quarter, electrical technology trade skills education. the working by directly the tomorrow's opened we gap the the XXXX. example necessary XXXX Trade trade Grow and Trees trades is are to supporting to third invest shaping to with close and trades. reskill provide the a We great $XX construction end-user trade Grant These the resources plumbing million Program. people of prepare grow skills Scholarship future and commitment In of initiatives DEWALT and and

call Don. the turn I'll Now to back

I team. perspective with I that transformation you excited as business the Thanks, strong and am a continue energy our have on our company's brought Chris. to team, key appreciate you leader management strategic the to and

across next our impact to shifting have investments users channel for and Turning like to believe areas and I slide. reinforce as to would well as various more the our that simplifying focus transformation. company's One, end and positive organization we customers. resources streamlining prioritize a the the direct

Two, return customer to operations gross fill demand. accelerating margin with better adjusted inventory the XX% while to improving chain match rates transformation supply and historical plus levels to

penetration to inventory X flow prioritizing growth organic advance cash continuing Three, to achieve the revenue global optimization. of to and market. market Xx And innovation, generation electrification then and four,

strategy our we will ensure continue margin, this goals. while of dramatically expectations control earnings improve believe exceed cost innovation maximize opportunities experience. is parallel, our users, In we and or end to we as investment the our flow customer will meet deliver product cash our fuel best to maintained within we channel and -- We the

expand, share to focus margins our our is accelerate As gains.

maximize to return. We and market gain across our are investments growth activation brands, prospects and and prioritizing targeting best share powerful innovation the

We continue businesses. will for simpler, to And further XX next benefit months, simplification across opportunities & our to from over the across focused and more Tools company expect a Outdoor we Industrial. being we XX find

As will where invest evaluate pragmatic ways the we continue of view maximize portfolio of businesses. to we shareholder our a to take return, and to best

when those will is we demonstrates record decisions. right track act Our portfolio decisively the on time

will updates to call on now quarter outlook turn financial our transformation, year. share and the progress the over latest the to for the I Pat, our on Pat? revised insights

Thank morning, and you, Don, good everyone.

continue momentum. strong transformation go-forward results generate and to We

rate our run reduction savings This and exceed $XXX savings in quarter, cost positions our run rate million $X target cost billion to XXXX. $X $XXX billion of inception. program Our us aggregate million program by deliver since bringing well to rate delivered or run this pretax approximately year approximately savings deliver slightly savings to the

As components actions chain to early supply since focused largest initiatives supply as the program savings The strategic the other and chain remain sourcing strategic to it logistics well as relates contributor on transformation, inception. areas.

XXXX now the consistent spend, covered with savings approximately the contemplated program targeted in carry-in have of X/X establishing a procurement that target. We trajectory

management chain teams sourcing and engineering drive and continue will improvement beyond. to through supply Our XXXX

the principles. productivity Activating our manufacturing year. operations savings plants, activated, increased leveraging excellence we this significant seeing contributed program when been also this has lean are In has

projects on schedule progressing this begin year. savings footprint-related initial Our with to are

are transition SKUs of the teams to our exiting it as replacement customers to products XX,XXX relates As goal reduction, of XXXX. with the they assisting complexity end by

gross investments We transformation are our to our margin or fund adjusted our These greater. are additional can actions organic efficiency cost confident the the to growth support flexibility sustainable needed in core creating XX% that business. to return

$XXX margin and year-to-date by inventory to reduction million to We inventory approximately approximately bringing gross Turning $XXX reduced our our improvement. progress million.

The in company's generation quarter $XXX supported the third history. of the cash flow in the the in million reduction quarter free one period, cash inventory generations approximately of strongest of resulting third

this achieved of and $X.X of XXXX. by the inventory strategic planned reduced billion half production have initiated middle management the improved back curtailments supply XXXX. through inventory during We conditions, We since chain the

We year the objective XXXX outdoor quarter, billion changes. at our of which and prepare network would to inventory fourth bring expect $X inventory next 'XX reduction year's near in supply we modest chain for improvement our season or full as

year Inventory reduction to million to our will free of contributor be cash $XXX flow full a major $XXX target million.

XXXX above and the $X reduction we multiyear or opportunity to at beyond, additional to be Looking expect billion. inventory

We pace of per at expect reduction million year. $XXX the to inventory to further pursue million $XXX

We will and impacting balance distribution inventory working goal through navigate upcoming capital sufficient of service customers. with ensuring to efficiency manufacturing without network our changes to

focused cash remain working capital improvements to on increasing flow. free We profitability and generate

fund through and deployment our to cash is further our dividends sheet. capital strengthen for commitment shareholders priority to to Our value long-standing return to balance

delivered chain and destocking versus expansion year all which shipping was margin sequential recorded up second quarter costs, This inventory quarter. that improving organic of adjusted is revenue. and XXX the the points than of costs, prior benefits we driven versus points more of the basis lower transformation We profitability. impact lower Year-over-year third margin Shifting by to consecutive improvement. XX.X%, gross basis reduced supply XXX gross offset

by expect gross Moving margin we rate chain supply transformation. the adjusted benefits of the expansion, driven forward, continued

gross margin again Our for in guidance fourth adjusted the incrementally calls to improve quarter.

inventory XX-plus Now third half gross continue turned and we in journey a of adjusted expect the approaching margin. Achieving by the quarter to on XX% our the high-cost the supported was transformation. year deliver gross success XXXX, restore significant percent our to adjusted has expanding the chain margin margins full to milestone that supply P&L, into adjusted gross front through

Xx flow resources to of revenue will our investment toward is our The to momentum of translating goal in and upward supply to chain accelerate cash margins progression market. long-term transformation fund X sustainable provide and growth to our the organic

XXXX to guidance. Now turning our

the revised has intangibles expected negative noncash of related GAAP $XXX Our $X.XX, charge impairment earnings been negative to share third $X negative range also primarily to negative to to earnings from per $X.XX $X.XX GAAP million. transformation integration. million include onetime of million half and outdoor chain with The charges other primarily from is expenses now of supply and being charges acquisition-related $XXX estimate to these approximately the noncash. global current $XXX pretax business quarter

a $X.XX the of adjusted our guidance previous range strength $X.XX $X.XX. we range quarter, year the are on Based third to guidance per earnings of raising share full to $X.XX to from

and free third target delivered We strong $XXX maintaining flow million. million are to year a quarter of performance cash our cash full $XXX

expect inventory flow cash We quarter supported fourth reduction seasonal be typical to Outdoor. cash receivables Tools positive by earnings, reduction and & the in

organic includes strikes unchanged the a down implies and The the is auto customer outlook to growth billion of for infrastructure risks for company year, midpoint revenue estimated $XX.X with expected for mid-single digits. the and destocking. total This continued year be

elements remaining of Turning to important guidance.

continue to and to expectation gains. fourth Our invest to production remain for normalize disciplined to is We growth approach the share and in drive in quarter. our organic flexible

activation to X ultimately $XXX with innovation approximately investment $XXX next of a Our and over to years. $XXX deploy million million market the annualized assumes outlook million goal

profit fourth to midpoint sequentially expect our adjusted in strong business. while the gross improve strategic our This to with $XXX cost guidance. investments prioritizing program the at operating We adjusted million zone, momentum reduction the approximate XX% of continues quarter the to from both margin

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

Thank you, Pat.

transforming of Decker. us Stanley which successful gives investments, another our growth to powerful our We against confidence quarter organic Consistent our plan execution will most Black on are progress journey accelerate behind report to increase of pleased & brands. the

industry-leading I can the control on end-user company brands, We transformation focus gaining continue and be more believe to will a creating people, produce that our stronger market inspired our focused amazing we outcome are successful, confident sustainable a and great of am what with innovation. we to As machine. we share

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

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

Instructions] Thank first Barclays. from Julian you. Mitchell Our question line of [Operator the of comes

my tools X question, And in on update the business. there great the margins. Slide and Maybe some commentary from that to Chris on momentum the of just around hear

down it one operating up somewhat. gross guess, just looks of I like but QX, So margin's margin sort is in the sequentially

that sort of any just parts moving calling maybe out? So within worth

And talked higher gross into year. first the then of the half you margin moving sequentially next about

what that maybe sort us confidence tell EPS framework have in of in perhaps put in mentioned next terms $X So of us that for of does you the past, of there's to $X context that in kind about that number for earnings the some year?

questions the because very they're that we're long for Thanks on. they're focused good Julian, questions there, but multiple things

tying we give our range will we're in us on improvement, Pat QX. is a your on $X as the a to give still then Pat to ask around good more rate with in more believe that little And QX we far well. and will potential really what feel and out to outcome questions what As as into I'm and year, And pleased play next margin color us, going it $X margin. color for Pat? for that occurred

then in quarter. the off in another XXX mostly improvement expectation. balance Julian, operating shipping margins cash sheet effects, to has you coming was had. the effects we're of points basis both of margin, to off the also the around that the XXX quarter, from points. model And the and back driving XXX of sheet until of gross basis broader generation Deflation traditionally to the XXX is to of to that program the say coming balance cost remain high-cost we the points. helped And XXX basis expected savings our inventory margin focus the going business our saw tune I'd

could we margin our sheet, and expansion. at off the the cadence. and high-cost drove the that hard we teams well coming came But see was within expectations gross important the as the to investors, on to program been inventory It's deliver see to which telegraphing balance together great had working rate

we here, pathway going range XX a quarter XX%. From Obviously, going of but to going forward, be on to in to more it's perfectly points be it's not linear, the have pathway a basis to the gross certainly margin. XXX

invest continue your both that in less revenue to generation. dynamic just And and operating of on the was in we margin in was to expansion difference as the head this a -- into margin and going as the 'XX, focused gross quarter driver the margin million As business. do question, more forward, we're and to had continued fourth we cash it about $XXX-plus with operating that quarter, really go

growth. that's the and of and doing part of what that investing quarter, delevering we're to cash in We are we're the realm. and for environment means that well. going macro what And be to to as what that's do be for 'XX mindful But we'll in fourth along plan delivery going

to $X or $X a . I on $X, reasonable And environment. $X deflation in the the $X I see say the of still say business the that to inflationary the back Certainly, range. as a to the would of dependent improving macro. year we performance versus given in anticipates macro $X a market, stable the would it's the would I and dynamic half say, the

a side stable you on at of if higher macro, side an lower go you're at of the And towards that the you're range. the If side kind macro, of range. of you're probably the improving

Wojs from comes question [Operator line of Baird. next Our with the Instructions] Tim

Our Partners. line next from of with comes question Sprague Vertical Jeff the Research

you selling on kind part doing pricing happen just a the kind you The pivot you're in just on maybe from most as But force, outright growth that that little or How also. just kind much margin of seeing little And this what discussion? and up in and thinking all of of I inside does cost of reduction that a environment gross about you color selling general things bit mentioned? -- question, on and bit just of of kind the related sales reinvesting COGS of trades the as a market. like, again. it Good maybe Chris. to multi-parter just Hello, kind developing maybe you're guess, ends reinvestment of of to hear more voice promotion the for of

on be little selling, and let's to more ask more Jeff, resources clearly heavily Chris color It give to you a Chris that. Chris? and weighted is give little SG&A going color on to opportunity a that, But activities. an to I'll give

per the Nice areas forward about to in want how focused most Yes, Jeff, lot. as the a believe would And the in we see I say what there. and that Don's comments, investments drive would in I we what invest we're that levers you is that leverage, think we business, we brands have hearing making which to pull move will sure thanks want say, and we going from again. to

quarter. that. And near-term obviously, did, Pro the the gathering we've a in the look, to as keep in was and on as there -- story positive seen strength steam far was DEWALT need we with We

down is launches investment say to the end end I'd as to emphasis professional What because on for we referenced investments a of leverage, Pro few the could brand that we of and thinking right well double the as the we in for far types are we're having as of as marketplace. the continue have most of strength we for near user the where And buckets, see the user have We what those in term. the going that large the certainly, in us. a products is

the commercial want -- some that customers, with to ground the right on grow the we area working in that we that have on in because ways really make great Similarly, right we resources them area. opportunities together with we sure in that can markets our there's the think

really, to So that's out emphasis gate, is where going the of the lie.

is going because part started is we quarter we're to out promotional traditional levels it other of forward. important and did it promotional it that in an As back on we we to we're business, activities, question be we the -- your to mindset strong, the of the that see business in far -- that and we did reference for And promotion, happy and be on think our we're QX. where returning saw back going and healthy and accretive what as

new year continue also new and the going the with that launches, our growth. lean that going was sell-through seeing the in the the in in to of are Now expectations. line to we're going into into certainly with our QX, all we're back supplement all, to half -- launches we But

far discipline in and going to see in healthy sure we're as traditional we continue we also deep mix. opportunities as said, with as marketplace through pricing, But see into make be then, I And leaning our as Pro. and the far and growth the no promotional driving organically that the discounting, like

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

I of just in drove understand you're, I of the in guide. if the seems like guidance, the implied quarter Kind wanted fourth what some kind updated may. third effect, And takes to the of the an on on effect, EPS in puts basis, reiterating and quarter? really, it upside

think relative I in know the the XQ? reiterating dynamic to And drove reiteration to that understand something and maybe of prior the free there if fourth that's expectations. flow the guidance, the investing to you're what's the growth. I you're that point, that bridge as increasing guidance don't what well? in would of the quarter you relative why raising also, of love referenced perhaps But cash upside to XQ EPS

us. was quarter a for strong Third quarter

generation, from is a expecting in in drove the and strength gross margin ahead Our bit margin as EPS gross SG&A absolute that we drove program dollar the management. and perspective. gross strength The a a came we of the roughly performance of quarter margin beat both pace the factor of running were and and sales on

revisiting the of on thoughtfully to SG&A fourth and are a from probably I environment. Also, Chris quarter, bit managing the out helped that net-net. year board and Our priorities, of will of that came macro in quarter and was part current there third shift quarter kind third spent as the SG&A quarter the the teams team future

have an and into around the some Most would head the tools at of line in so our we headwinds we the a could in also with saw As that bit the the top quarter probably in million $XXX-ish auto of the UAW had a attachment and business. trends fourth expectation to that to the outdoors versus manufacturers of tune unsettled ago. that pose big expectations baking or probably quarter fastening is softer, quarter, is least third strike two we

softness is in reasons a the the fourth terms the there. that absolute the slightly of the in guidance quarter is one at fourth So top line quarter in

And then investing, we mentioned. are as I

be third quarter from a confident a in little a and of Some point generation trajectory, growth, we investing EPS the to that doing quarter. constant for fourth we we're fourth together, But things, amount need the in to shift our quarter. at the start in keep where bit of the will And two fourth the are those SG&A quarter. we're cash margin and

largely And stays free it then for quarter. plan out is are cash year free of much dynamics is much the And why what the And flow this capital cash working guide and flow continuing free those year's to cash that's flow, dynamics. by the of on generated play according to and forecast.

line Our Tim next the Baird. Wojs question from of Instructions] with is [Operator

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

of prior around about XXX improvement. exiting follow commentary of XX the points to on at bps wanted it imply up up year-on-year midpoint. seems that It quarterly the I gross XXX 'XX margin basis would to

growth about So maybe? bit freight what standpoint, metal you a from next assumes very that year. a strong talk a Can obviously, guess, interest little standpoint maybe macro and I from just and and both cost volume also

because at where the our important margin in such progress year 'XX of especially guidance around and fourth when Yes. quarter. of it's the point put can do focused gross But an directions, few We'll a energy end I is. our our detailed the give we

above margins the come a XX%, XX-ish a means range. that XX% around than on little think full year in I somewhere higher year potentially exiting basis, in full for would we expect bit XX%. Obviously, because 'XX, we gross

is XXs. to exit so going think update to We'll it is I what be in in have somewhere January. that the right. It low And degree rate you an that's

year, of stronger what's when think a a macro, all in bit we world, shift you I our macro would in inventories on resetting little given dynamic services. about have expect. of and buying business the business and this while going COVID from post bit the the of buying going outdoor a the the probably resetting that's And to lot than channels of goods the is in it's held talk consumers a of there's the kind certainly environment, that

goods I next the stabilized top a the it's type COVID. elements our post has line consumer outdoor depend to environment so going business and stable-ish dynamic with rebalance It's next expecting around on in on, But macro we're some to going between the year. has And really stabilized volume the year, it. think services really depend similar and

Our next line Coe question Wolfe the Nigel of with comes Research. from

everyone's that setup? think in is It about keep macro maybe you IRWIN and question. stable the but what's then of flat my the follow-on question write-downs? what brands? of into a questions kind maybe into given us in I'm little of sort especially the is, I line like obviously just within initiative? macro, this do Troy-Bilt X part Any those this insights kind And in -- reduction bit I'll attachments in even tell those can inventory is grow at try question the mean, top of and write-down and outdoor, seems you the destock, knows. X Who like a getting or not. in thinking one driving

Yes.

question to and on focus I I'll as a and start they're very our of the the with aspects our simplification question the The macro company, think grow line. in there's lot that. of are of navigate about to our portfolio. we top next brands good thoughts year to outstanding continue we and brands brand the But -- brands, IRWIN and related Troy-Bilt could

looking there's we and work how our market effective and we way. of and at we brands we aspects a effectively simplification the also do we efficient in how most. But utilize them the the go of and business with internally to the customers more There's our how have suppliers, can where

that. We we focal them clearly have brands STANLEY going strategy important like IRWIN utilize next into very will more and of bit utilize the really strategy impact with we'll there, our sheet. impact our we're it to as going that you're I nothing brands Troy-Bilt, going three forward. are the of CRAFTSMAN And the There's way. think to It's the in cetera, you effectively, balance simplified LENOX adjustment a or that them but more that rationalization forward. it's But but strategic than those more et the and seeing value utilize or the in will a of points SKU of get DEWALT, was that in really little incredibly way for powerful tier to be on

next macro is mixed things thinking that's And it's -- as at are gave is Looking I going next that. Pat view way into And we're mean, it similar of a year, really not to they're today. and it's answer I to for the kind year then good our kind to the of be dynamic. think going

our We business. have pockets tool strength of professional like

and points Industrial in fastener into we And and behind weak portions that outdoor destocking in next strength some trends. businesses. got aerospace go consumer We have our industrial business some be auto will have as year. in We other in we and probably of happening us our

throughout get that most worse? to going Could better? be it's that's possible, Possibly. things think like of mix things year. Could Yes, too. we next be So

related stable interest think to this. what like the think environment somewhat then to does all too, will interest a we be that rise, continue not will If be I Fed rates. it do there I rates feel manage can that watching consistent to see we to we're

'XX, is investing to to reason And we where of long & of and And lost some gaining And time, Well, actually about we've we pretty in market been late are objective went and felt that. get for and focus But again of we And a Decker. gaining positioning the if Black market share we the in that shortage share. back stable, really it position -- we've the had clear market frank put in a to share. Stanley and impact history can of semiconductors share. period a we where us are main gain grow? 'XX is at ourselves through we particular, to

Chris of like above and that this referred commentary market the whatever negative, their market we won't And at Pat in the we believe X somewhere bit. we that the as goal between it's to, investments we we've that's to grow us we've that And allow we'd stabilized to, we're that be these will If is grow grow market, be little stage. And can say that we'll market. if believe are is. Xx things a able lot the And negative. time, And and probably much stable to neutral, over really after. as said, a slight objective the going to or

Our next line the Rob question of comes from Wertheimer Melius with Research.

go-to-market change you holding projects, trends in if obviously a where just any guess, or I'm I'd that And America there. your I on Pro, more actually projects, have you where construction the mix in I'm bit maybe high ended have whether question, margin specifically impacts have impact of in and any North been there's about share you maybe is need, mega housing's there just has market a whatever, start high there. to market or share maybe that, maybe from reliability, curious are my larger not. you on like little business? curious more

but then the I there's think because Yes, Rob. current it's deal what heavily activity and I There's market we activity, some construction happening. bit great was to very using extent, to of a shifts it but ago, a situation commercial and months probably the a the shifted slowed was lot Thanks, appropriate describe commercial from where think word pandemic word down. focused, went we're focused quite dynamic, XX, it to certainly an over and of the it's residential different XX

types different see to shifts. continue of we So

in how stage. model market shifts this our to not or radical business see do we We go at though

tools. channels are our ultimately & the One to professional, Decker that over Black that we is the the been of really very the individuals, on right great is focused things the end user, the Stanley that years, the what ones, use about have,

markets the shifting as channels time a have that them presence to e-commerce the channel. that because serve the go America, user. in have user ability to in end to we they've and that to we European if sell emerging but spent want that able the continue distributor is need traditional very that strong And be as the we around through e-commerce, that to when only end we to ensure the of of to And the well. Or history they if have North those we're not markets presence well meeting as globe,

think future. in positioned I for well the are whatever we happen So may

over time focus where address activity. over be will there e-commerce able well and We ourselves that. more on Clearly, continue the to people positioned shift a more last continued -- shift decade to to be

I some of as deal other. with e-commerce distributors shifting time close people of pandemic to during that as and well. want you'll where to they've period to of think as a channels And with that more you we've get industrial been commercial these built the larger into see didn't adjust get each to some able

sure to time going to will make will we continue be It we're that. area an over channel. of we the invest needs those meet probably So to that in do that

Our Joe Fargo. with next question O'Dea comes from Wells the of line

to ask the targets of around spend. investment wanted I on sort returns

And how So so targeted million, you about how tracking them, that? . that million, the and tracking growth you do go the returns so market do when achieving spend the think as when outcomes? think as there it's out $XXX the investing about about both well you of $XXX and actually you evidence from

investments centered. are probably our term, very is in somewhere to talking Yes. mostly And has around you these financial we're SG&A. Joe, have SG&A want we net would percent long XX-ish productive that to investments of algorithm where That's say what long-term I sales.

more need term, line into SG&A, at average. top we into margin or that's out of our as that's And at above these the a much to every investments, $X And five very so certainly, very, put getting than intent. go of you those we gross the time fleet long be

and obviously point Chris the on innovation and are now, But where innovation. know that's and growth probably time. at XX% now there's right then I pre-existing financial the And your two investments may but want to getting reenergizing don't Right our the together maybe making. making want marketing that depending above happens Those competitive anything activation to of and can to you're Chris? that given if around engine and which to reenergizing biggest of focus pace get you back on some we're it's the our investment all that growth. in per you is to are to The that, to which investments add spend market in this, the things around our differ XX% certain algorithm. dynamics brands add at a engineering

also as taking have, as the comment that brands Don just about Pro three driving how made think in have place and we only net resources investment, it's a right returns making well and that we towards existing dollars we we that reallocate brands well. look it's about the I incremental those No, priority key the not seeing three initiatives sure and . see user flagship can with end those the as be commercial that the to that but

just So be that at returns fleet entirety of Pat average we're to that into that at not of to looking referenced. sure we're getting net then the the thinking driving make and spend types the incremental, initiatives above and the measurable able

. Bank. question with comes Nicole line Deutsche of the DeBlase next Our from

to wanted on Just ask one pricing.

So the I in think originally, down quarter. to of you slightly guys were expecting flat kind

a bit little For than that. tools, obviously, weaker

and thoughts on into XXXX? process thought bit little from XQ a color this Just a around your pricing on perspective more perhaps maybe competitive and

Go ahead, Pat.

bounds. I'd accretive. P&L. around that the actual say very the a Nicole, guidance dynamic much bit differently Power accretive quarter which a out in I'd perspective, say margin a to tools was played is Yes, purely bit the and mix within the from the was only higher, net-net promotional

the promotional just unfolds of margin expected. You the than provide color, was bit I saw the and a on in quarter, quarter. activity little and more the have kind that's gross out reconcile margin the performance would But just think as actual in pricing of how we you

related want don't think may But kind of change dynamics? I we pricing to the -- see competitive the and add to to dynamics, to the this, of Chris inclusive I competitive any

No.

and and business levels. the is the at kind think stability brands because in it's of of and those of continue As not our our to aspect just in to traditional I out a pricing of customers, the said see good those products front earlier, and -- And key our we we I be to intend discounting. important fairly end to lot in have think users promotional focus healthily our we reiterate, involved deep competitive

well. how But be we looking to through and products to and able our think as grow we to more about importantly, launching margins new are supplement continue those innovations

comes of from Sachs. the Ritchie Joe with question Goldman line next Our

So do -- much about onetime two-part of you maybe the curious, stay it's piece, production a hits production you maybe throughout that quarter. question, the for talked whether does kind you normalized XXXX? how expect your about normalized can what And profitability think piece, bridge help XXXX, the to production in the at inventory as some you quantify to XXXX? getting I'm fourth a of in then the

be the we of gotten of a that stable. expect assume it the level little that in year described $X are Yes. quarter. EPS, to but that here we've if Pat that of more manufacturing view next range, would this Pat more the $X because if macro that, And give color we on in stable to let a is, to we environment pleased fourth to around continue where we're I'll is, the at the point,

inventory We will continue to focus next year. optimizing on

So on more that. Pat, color little a maybe give

Yes.

leaner, of billion much to probably $X the tune billion over next we feel at Joe, to year. $XXX opportunity to we get a think, years right, like pace X million X the to certainly $X.X of to $XXX have I million inventory a

to cost production and rest of T&O about, $X billion-ish the of business. as the items our it kind industry for production part, the we'll space, of we find base, $XX levels outdoor of structure, in kind relates mindful that's and as production to the onetime expect the I billion, to COVID normalized. kind be new kick the say a $XX billion outdoor outdoor but Obviously, relates of 'XX, in it you most I'd we of normalization think be asked as the post

we quarter into tied 'XX, fourth But So in market I schedules as be tools in normalized. realities speaking, head see to production think the those has this and production will we broadly outdoor.

think this onetime year. fourth I quarter about of you our of exit you're those cost, kind talk as as the gross profit the seeing we in

seeing 'XX. one fourth a you've of almost points in margin total, That the XXX of which third of and cost And of So or we'll probably quarter. XX% inventory in played and fixed profit -- points within be in the of you're was at costs. basis which which seen has in kind out high-cost during gross the XXX absorption quarter, year, hit of above was that about this roughly under XXX basis that

so that margin And as us. kind percent head we next of the we're into gross that's behind XX-plus of And building continues. year and off program 'XX

for Lange to I now Dennis call like remarks. back hand closing the over you. Thank would to

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

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

now disconnect. You may