Stanley Black & Decker (SWK) investor relations material

Strategic direction and leadership

• Leadership transition to a new CEO is described as evolutionary, maintaining focus on organic growth and margin expansion over M&A, with priority on core brands and modest portfolio tightening.

• The strategy emphasizes being a branded, products-oriented company, with aggressive focus on financial metrics and organic growth.

• Brand strategy has shifted from product push to brand-led, targeting specific end users and geographies for each brand.

• Non-core brands are being refocused on their strengths, with limited resources and leadership attention, and some may be divested if they lack growth or margin potential.

• The aerospace fastener business is the most likely candidate for divestiture to address leverage issues.

Financial targets and margin improvement

• Long-term targets remain mid-single-digit top-line growth, 35%+ gross margin, and high-teens EBITDA margin, with the gross margin target now expected by Q4 2026 due to tariff impacts.

• Gross margin progress is driven by $350–$375 million in COGS improvements and $200+ million in tariff mitigation, mainly through moving SKUs out of China and optimizing supply chain nodes.

• SG&A is managed tightly, with $100 million shifted from back office to front office investments, focusing on product and field resources.

• Inventory reduction of about $200 million is targeted for next year, with longer-term goals of $800 million to $1 billion as platforming and supply chain changes mature.

• Free cash flow target for the year is $600 million, with the majority generated in the fourth quarter through net income, D&A, and working capital improvements.

Supply chain and tariff mitigation

• Tariffs delayed margin targets by about 12 months, but price increases and mitigation efforts have offset much of the impact.

• Less than 5% of COGS will be sourced from China by year-end, down from 15% at the start of the year.

• Manufacturing footprint is expanding from three to four or five centers, increasing flexibility but adding inventory complexity.

• Platforming strategy centralizes engineering and product development, using shared component libraries to drive cost efficiency and inventory reduction.

• Tariff mitigation is managed through intense project management, tracking SKU movement and compliance to reduce costs.