Stanley Black & Decker CFO: No Big Deals Until We’ve Upgraded Supply Chain
It’s no longer debatable that the COVID-19 pandemic launched an overhaul of global trade flows and supply chains. It’s merely that the scope of that rewiring often remains fuzzy.
At Stanley Black & Decker Inc., though, the picture is very clear: A supply chain upgrade is so paramount that the world’s largest tool manufacturer is taking off the table any significant acquisitions until 2025, when its leaders expect to have turned their supply chain from “a problem creator to a strategic and competitive advantage.”
Speaking to a Credit Suisse investor conference earlier this month, interim CFO Corbin Walburger said the executive team at Connecticut-based Stanley Black & Decker is targeting $1.5 billion in supply-chain savings by 2025 (on about $18 billion in 2021 pro forma revenues) from a plan that will formally start next month. That push, Walburger said, will build on work the company had been doing prior to the pandemic to get closer to its customers—about 60% of revenues come from U.S. customers, with Europe and emerging markets each accounting for about 15%.
And the attention paid to that plan will not be diluted by a big purchase.
“It's kind of hard to say as the person that’s in charge of M&A at the company but it’s the right thing to do,” said Walburger, who this summer stepped into the interim CFO role in addition to being vice president of corporate business development. “The supply chain transformation is so important for us that I’m happy to say, ‘You know what, we’ll stand down. We’ll get plugged into other places where we can help.’”
M&A has been a mainstay of Stanley Black & Decker’s business model for years: The company has spent $13.5 billion on deals since 2002—it also this summer sold its security business to Securitas for more than $3 billion—and Walburger, a Goldman Sachs alumnus, told the Credit Suisse audience he has been involved in about 80 acquisitions and more than 25 divestitures since coming aboard in 2008. But he said that type of work will take a back seat to the supply chain overhaul, which will include:
- A 40% reduction in the number of stock-keeping units the company markets
- An emphasis on more strategic supplier relationships
- The closing of “a significant portion” of the company’s 120 plants.
On the latter point, Walburger said that Stanley Black & Decker hasn’t always pushed as hard as it could to wring out costs from acquired operations or the redundancies their additions created. When it came to realizing cost savings, he said, the third years of integration processes—which typically would include plant shutdowns—often didn’t deliver on their part of the total calculations.
“This time, […] we are going to have the discipline to go all the way on those things,” he said.
Shares of Stanley Black & Decker (Ticker: SWK) closed Dec. 7 at $77.25. Over the past six months, they have lost about a third of their value, shrinking the company’s market capitalization to about $11.5 billion.
