Gross Margin Expansion and Cost Reduction Boost Stanley Black & Decker’s Third Quarter Performance

Operational Excellence and Cost Controls Drive Margin Improvement

Stanley Black & Decker’s (NYSE: SWK) third quarter 2025 results demonstrate the company's ability to execute effectively in a challenging economic landscape. Revenue for the quarter came in at $3.76 billion, effectively unchanged from the prior year, but the company managed a notable gross margin improvement to 31.4%, a jump of 150 basis points year-over-year. This uptick highlights progress on supply chain transformation and successful price management, offsetting continued volume softness.

Segment data show solid execution across key brands, particularly DEWALT, which continues to outpace weaker segments despite the soft consumer environment and promotional adjustments due to tariffs. The Tools & Outdoor segment held revenues steady, with price increases (+5%) and favorable currency movements (+1%) balancing out a 7% decline in volume. Europe delivered the best regional growth (+6%), while North America saw a modest decline (-2%).

Segment Margins Rebound: Tools & Outdoor Margin Climbs 180 Basis Points

The Tools & Outdoor segment improved its adjusted margin to 12.0%, up from 11.1% a year ago. The Engineered Fastening division faced year-over-year pressure but rebounded strongly on a sequential basis thanks to automotive and aerospace gains. These results reinforce SWK’s strategy to invest in operational improvements, with gross margin and cost reduction program outcomes now translating to stronger segment profitability.

Cost Reduction Milestone: $1.9 Billion Saved, Approaching $2.0 Billion Target

SWK’s multi-year global cost reduction program achieved approximately $120 million in incremental run-rate savings during the third quarter, pushing total realized savings since mid-2022 to $1.9 billion—nearly hitting the targeted $2.0 billion. These cost actions have directly contributed to margin expansion and ongoing operational efficiency, despite continued external pressures from tariffs, inflation, and fluctuating volumes.

Cash Flow and Guidance Remain Resilient Despite Impairment Charges

Free cash flow for the quarter reached $155 million, supporting ongoing investment and shareholder returns. Despite recording non-cash asset impairment charges of $169 million due to a brand strategy review and write-downs on legacy ventures, SWK reaffirmed its full-year 2025 free cash flow target at approximately $600 million. Adjusted EPS guidance for the year was slightly revised to $4.55 due to temporarily elevated production costs, with GAAP EPS impacted by impairment charges.

Strategic Transformation Fuels Long-Term Margin and Value Growth

Leadership reaffirmed their commitment to achieving an adjusted gross margin of 35% or greater. With cost savings tracking ahead of schedule and innovation-focused investments continuing, Stanley Black & Decker positions itself for sustained margin enhancement, cash generation, and improved earnings power. As CEO Christopher J. Nelson put it, the company is building on the foundation laid by transformation, with sharper brand activation, disciplined operational execution, and an emphasis on profitable growth.

Investors and market watchers may want to pay close attention to SWK’s progress in returning gross margins to historical levels, particularly as the benefits of recent cost actions flow through future quarters. The continued growth of marquee brands like DEWALT, alongside resilient segment margins, suggests that the company is executing effectively on its roadmap—regardless of near-term external challenges.

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