U.S. DIY and Professional home improvement industry still showing weakness

May 14, 2024: Jeffrey Cohen, U.S. Advanced Computing Infrastructure, Inc.

Drivers of the industry
Each quarter we review the earnings and commentary from the home improvement industry. We watch the retailers (e.g., Menards, Lowe's and Home Depot) and the manufacturers (e.g., Stanley Black & Decker, Techtronics Industries, Ltd, and Snap-On, along with Bosch and other firms).

We also read the tea-leaves for the underlying drivers of strength in this industry:

• Good Weather
• Age of homes (older requires more work)
• Housing Prices (absolute level)
• Housing Price Growth Rate (TTM and forward expectation)
• Rate of Home Sales (new and used)

The last two items are largely driven by the economy, inflation, and interest rates.

If housing prices are high, and rising, and homes are selling rapidly, then people and professionals need tools to fix things up. Non-Discretionary repairs (e.g., replacing a broken appliance, window or home utility) need to be completed all the time. However, the larger projects and discretionary projects are what move this industry sub-segment.

Q1 2024 results are starting to trickle in. What do we see?

Techtronic Industries Company Limited (TTNDY)
Leading manufacturer of tools and vacuum machines out of PRC announced a fat dividend of $0.627 ex-date May 16, 2024. Stock has been rising since 1 March 2024.

Makita Corporation (MKTAY)
No news

Stanley Black & Decker (SWK) announced earnings in early May. 
KTA: Flat, weak, slightly negative volumes and pricing in North America and Europe.

Don Allan, President and CEO, "This is particularly notable considering a significantly worse negative macro environment and corresponding revenue performance in 2023 and '24 versus our initial expectations at the outset of our transformation in mid-2022."

"cyclically depressed outdoor business and the rapidly recovering aerospace fastener business"

Chris Nelson, COO, EVP and President of Tools & Outdoor, "We believe our share position in tools is now stable to increasing. For example, our 2023 point-of-sale data in tools performed better than the category average across the North American home centers, which was led by our iconic DEWALT Professional brand."

"organic revenue was flat as Engineered Fastening and DEWALT growth was offset by muted consumer and DIY demand"

"Beginning with Tools & Outdoor, first quarter revenue was approximately $3.3 billion, down 1% organically versus prior year as growth in DEWALT was more than offset by muted consumer and DIY demand, which pressured volume. Pricing was relatively flat, consistent with our expectations. "

"Organic revenue for hand tools declined 7% pressured by lower DIY demand."

"Turning to Tools & Outdoor performance by region. North America was down 2% organically, driven by factors consistent with the overall segment. In Europe, organic revenue was down 3% as declines in France and Germany were partially offset by growth in the Nordics and the UK."

"In aggregate, all other regions were up 7% organically in the quarter, driven by mid-teens growth in Latin America, Brazil, Mexico, Central America and the Caribbean led this performance for the quarter."