Stanley Works (NYSE:SWK) is a manufacturer of hardware, power tools, and home improvement products. In 2010, Stanley Works' largest market was in security sales, bringing in 14.5% of the profit for net sales. As of 2010, 55% of Stanley Works' revenue came from operations in North America, approximately 25% came from operations in Europe and 9% of revenues came from Asia.
In FY2009, Stanley Black & Decker posted annual losses of $689 million as a result of the economic downturn Despite these losses, Stanley Black & Decker posted record gross margins of 40.4% for FY2009. Earnings in 2009 reflected the company's second-best performance in terms of income and annual growth. Financial results from the first quarter of 2010 reflected the company's first earnings after the merger. Net sales for the first quarter were up 38% to $1.3 billion as a result of the acquisition. Sales in the company's CDIY and Industrial segments increased by 85% and 22% respectively; profit similarly increased by 190% and 54% respectively in both CDIY and Industrial segments. Sales from the company's Security segment increased by 11%, however profit declined by 2%.
Stanley Black & Decker operates its business through three segments
Stanley Black & Decker operates its business in five geographical segments (% of sales given using 2010 data)
Stanley Black & Decker posted a 9% increase in revenues for the first quarter of 2011, after taking into account the previous year's merger. Net sales for the first quarter were up 89% when compared to year-ago results, totaling $2.4 billion. Gross margin rates for the first quarter were 37.1%, a decrease from previous years as a result of inflation. Expenses stayed constant at 25.4% from last year to this year.
Stanley Black & Decker posted positive profits for each of its segments for the first quarter of 2011. Profits for CDIY, Security, and the Industrial segments were $156.5 million, $72.7 million, and $106.9 million respectively. Sales for these segments were $1.2 billion, $557 million, and $613 million respectively for CDIY, Security, and Industrial segments.
Stanley Black & Decker announced increased revenues of 10% for the fourth quarter of 2010, totaling $2.4 billion Net sales for the quarter were up by 149% as a result of the merger, totaling 2.4 billion. Gross margin was down as compared to year-ago results, but finished at 36.5% for the quarter. All three of Stanley Black & Decker's segments were profitable for the fourth quarter, with sales increasing by 274%, 44% and 144% for CDIY, Security, and Industrial segments respectively.
Revenues for the full year were $8.4 billion, an increase of 125% from the previous year as a result of the merger. This growth was driven by international, emerging markets, especially in Latin America. Revenues from these markets increased by 29% for FY2010. Like quarterly segment results, all three segments of Stanley Black and Decker's operations increased in sales for the full fiscal year. CDIY, Security, and Industrial segments had sales of $4.4 billion, $2.1 billion, and $1.9 billion respectively.
The collapse and continued weakness of the housing market directly affects Stanley Black & Decker's business operations by impacting sales in all major business segments, especially in CDIY and Industrial operations. Both Stanley as well as Black & Decker were impacted by these trends prior to their merger. Black and Decker, before the merger with Stanley Works, experienced a 23% decrease in group sales, along with a 20% drop in industrial-product sales. These losses were set against the backdrop of a 20% decrease in U.S. consumer sales.
The $4.5 billion merger between Stanley Works and The Black & Decker Corps holds potential for increased revenues, EBITDA, as well as diversified segmental operations; however, such a merger has impacted earnings as of early 2010 by exacting costs on combining business operations. First quarter earnings were cut by $108.6 million by the cost of incorporating Black & Decker. That being said, Stanley Black & Decker earned a net $70.2 million on sales of $1.26 billion. Also, Stanley has integrated nearly 60 companies since 2002 and has entered into talks with Black & Decker on three separate occasions which prompted a campaign to right-size respective cost bases.
Poor economic conditions globally led to a 20% decrease in the amount of goods Stanley Black & Decker has been able to sell. Whereas the decline was 18% in the Americas and 11% in Asia, the losses were most drastic in Europe where volume decreased by 24%. Continuing economic crises in Europe, including the Greek debt crises, threaten the stability of large portions of Stanley Black & Decker's business operations. European market performance drove the 1% drop in unit volume for its CDIY operations. Business operations were also impacted by unfavorable currency translations in all regions. The largest impact, however, was again felt in Europe leading to a 2% loss in revenues.
Prior to the 2010 merger, Stanley Works' biggest competitor was Black & Decker. Stanley Black & Decker, however, still faces competition in several of its business segments from companies such as Snap-On (SNA), P & F Industries (PFIN) ,and Pentair (PNR). Stanley Black & Decker also faces small, private label competitors abroad, especially in smaller markets such as Asia.