Snap-on Tools Group Reports 9.6% Organic Sales Growth For Q4

For the fourth quarter of 2022, Snap-on Inc. reported $1.16 billion in net sales — up $47.60 million (or 4.3%) compared to a year ago, reflecting an $85.30 million (or 8.0%) organic sales gain that was partially offset by $37.70 million in unfavorable foreign currency translation.

Notably, organic sales were up 22.7% compared to the pre-pandemic fourth quarter of 2019. It was Snap-on’s 10th consecutive quarter above pre-pandemic levels.

The company’s gross profit increased 5.1% to $560.70 million for the quarter, and its gross margin grew 40 basis points to 48.5%. Net earnings rose 6.7% to $244.50 million year over year.

“Wow, it’s been some year and quite a quarter — China knee-jerking from ‘Zero COVID’ and strict lockdowns to living with COVID, an unprecedented virus explosion, diminished but still continuing spikes in the supply chain, the ongoing Ukraine war, the re-emergence of Brexit and now the rising shadow of the recession — echoing in almost daily public pronouncements,” Chairman and CEO Nick Pinchuk said on the company’s Feb. 2 earnings call. “And, through it all, Snap-on delivered another in a long line of encouraging performances.”

Pinchuk added: “The fourth quarter was encouraging. We believe it emphatically demonstrates the continuing resilience of our markets and the capability of our operations to achieve in the face of difficulty, wielding the power of our products, our brand, our people and our strategic position.”

He also told analysts that automotive repair remains very favorable.

“The average age of vehicles continues to increase. The complexity of repairs is rising steeply as new platforms enter the vehicle parc, and enter they have, starting in dealerships,” Pinchuk said. “We have seen a resurgence in dealership projects, despite a still-recovering supply chain. Changes in internal combustion, the rise of electric vehicles and the expansion of vehicle autonomy have made dealerships eager for new equipment to support the complex repair tasks of the evolving vehicle parc, and we see it.

“Projects and powertrains aside, dealerships continue to see healthy demand in repair and maintenance and in warranty, driving the need for shop expansion and more technicians. You can see it in the macros: repair spending, technician numbers, technician wages — all up. Our dealership segment is expanding.”

For independent repair shops, he said confidence remains sky-high across the board.

“Shop owners and managers confirm that demand for repairs, for technicians, for complex skills are all rising, and our sales growth in that sector mirrors that enthusiasm,” Pinchuk said. “We believe we’re moving into what we can call the golden age of vehicle repair, and our Tools Group and RS&I Group are uniquely positioned with the product, the brand and the people to take full advantage, even in the midst of turbulence.”

TOOLS GROUP … Snap-on Tools Group (TG) net sales increased by $37.90 million (or 7.5%) to $542.70 million, attributable to a $47.40 million (or 9.6%) organic sales gain, partially offset by $9.50 million in unfavorable foreign currency translation. The organic increase came from a double-digit gain in the U.S. business and a low-single-digit increase in the segment’s international operations.

“It was all led by big-ticket items,” Pinchuk said. “Tool storage and diagnostics, both with double-digit gains.”

TG operating earnings grew 5.1% to $116.10 million; however, its operating margin slipped from 21.9% to 21.4% on a year-over-year basis, negatively impacted by currency and by product mix.

RS&IG … Repair Systems & Information Group (RS&IG) net sales grew by $45.40 million (or 11.6%) to $437.90 million, reflecting a $54.90 million (or 14.3%) organic sales increase that was partially offset by $9.50 million in unfavorable foreign currency translation.

According to Pinchuk, the organic sales were authored by a double-digit increase in OEM dealerships, as manufacturers continued to release new models, invest in new equipment and implement essential tool programs.

“Our business in the independent garages also expanded nicely, with double-digit growth in our undercar equipment and in our diagnostics and repair information products — twin pillars of strength,” he told analysts on the call. “Shop owners need upgrades to follow the changing car parc, and they now have confidence regarding their futures to act on that imperative, and Snap-on is ready to help.”

RS&IG operating earnings rose 13.8% to $110.60 million, and its operating margin grew from 24.8% to 25.3% on a year-over-year basis.         — Marc Vincent

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