Stanley Black & Decker has just announced their plans to buy the Craftsman brand from Sears, for $900 Million. PDF Announcement Here.
First, we’ll take a look at Stanley Black & Decker’s statements, and then we’ll talk a little about what this deal will mean for us tool buyers and users.
Much of the following information comes from Stanley Black & Decker’s Investor Relations presentation. The “translations” are to the best of my understanding of the situation.
Obtaining Rights To Develop, Manufacture And Sell Craftsman Brand In Non-Sears Retail, Industrial & Online Channels
Translation: Stanley Black & Decker can develop, manufacture, and sell Craftsman tools as they please.
Sears To Continue Developing, Sourcing & Selling Craftsman In All Sears Retail Channels Under Perpetual License Agreement.
Translation: Sears can continue business as usual for Craftsman brand?
Perpetual License Allowing Sears To Continue Selling In Sears-Related Channels (Royalty-Free For 15 Years, 3% Thereafter).
Translation: If Sears is still around in 15 years, they’ll start paying Stanley Black & Decker a royalty based on products sold.
SBD To Significantly Increase Availability And Innovation Of Craftsman Products And Add Manufacturing In the U.S. To Support Growth.
Translation: Expect to see new Craftsman tools sold outside of Sears. What about current tools??
Strong Organic Revenue Growth Potential – To Contribute ~$100M Of Average Annual Revenue Growth Per Year For Approximately Next Ten Years.
Translation: Stanley Black & Decker intends to grow the Craftsman brand.
Transaction Structured To Minimize On-Going Risks Associated With Sears.
- SBD Assuming No Contractual Credit Risk From Sears Relative To Transaction
- No Tie To Sears Organic Growth Trajectory
- No Incremental Obligation To Supply Sears
Translation: Stanley Black & Decker should be minimally affected in case Sears suffers continued decline.
Stanley Black & Decker sees this as an opportunity to work into their made in USA expansion plans. There’s also mention of their MAC Tools Mobile Conversion Program, and they see this as an opportunity to expand product distribution points at the industrial channel.
There’s also mention of their growing US tools and storage products manufacturing base.
There’s an interesting breakdown of Craftsman’s retail breakdown – how much each product segment contributes to their around $1.9 Billion in [annual?] sales.
- Hand tools: ~25%
- Power tools: ~10%
- Tractors and mowers: ~25%
- Lawn & garden equipment: ~15%
- Tool storage & garage: ~20%
- Other: ~5%
What Does This Mean?!
The way I understand this, both Sears and Stanley Black & Decker will develop, manufacturer, and sell Craftsman tools.
If accurate, this would mean that Craftsman’s current partners, such as Vaughan, Apex Tool Group, TTI, Chervon, Western Forge, and other OEMs, would continue to develop and manufacture tools to be sold at Sears.
Stanley Black & Decker has already announced their plans to develop, manufacture, and sell Craftsman tools.
Additionally, they make specific mentions of expanding USA manufacturing.
If Sears sales should continue to decline, and they declare bankruptcy, which – if any – of their OEM partners will continue to work with Stanley Black & Decker? The Craftsman brand will live on, but I don’t think the same can be said about the current Sears/Craftsman and OEM arrangements.
As I understand the announcement, there is the possibility for there to be 2 different lines of Craftsman tools. Tools developed, manufactured, and sold by Sears and their current Craftsman OEM partners, and tools developed and manufactured by Stanley Black & Decker to be sold through their retail and distribution partners.
What about the Craftsman lifetime guarantee on [most] hand tools? And if there’s an issue, where would tools be exchanged? Will Sears no longer do this?
Does this mean we’ll start seeing newly developed Craftsman tools made in the USA? Which ones?!
Will Stanley Black & Decker go the “lick and stick” route and manufacture existing designs under the Craftsman brand, or will the tools be specially developed for their new brand?
I’m thinking there might be redundancy in a lot of categories, where existing Stanley Black & Decker tools would be a good fit. Hammers, wrenches, sockets, etc. They already have many well-designed tools at every quality and price level.
Will there be new retail partnerships? Perhaps a surge of Craftsman hand tool SKUs at Home Depot? Craftsman power tools at Lowes? Craftsman tool storage at Lowes? Through industrial dealers, such as MSC?
Right now, there are a lot of questions and few answers, but I have a positive outlook on this.
I am sure that Stanley Black & Decker had plenty of time to plan things out. It’s been several years since a marketing executive mentioned at an event that “like other brands they were watching the situation closely,” or something to that effect, when the subject of a potential Sears bankruptcy and Craftsman sale came up.
The only thing I find surprising about the situation is that the purchase price is only $900 Million. They also recently announced plans to purchase Irwin and Lenox tool brands, for nearly $2 Billion.
But, this is also a complex situation. Sears can continue to develop, manufacture, and sell Craftsman tools royalty-free for 15 years. After that, it’s 3% per year. What’s 3% of nearly $2 Billion? $60 Million.
SBD will pay: Annual Cash Payments Of Between 2.5% – 3.5% On New SBD Craftsman Sales Through Year 15 (2.5% Through 2020, 3% Through January 2023, And 3.5% Thereafter).
Wow, just wow. It will be very interesting to see where this goes.
Am I surprised? Yes and no. I would have thought that buying the Craftsman brand would have been more desirable for TTI. But on the other hand, Stanley Black & Decker is a more varied tool brand, in regard to their existing tool design and manufacturing capabilities.
I had not considered the possibility for Sears to continue developing and manufacturing Craftsman tools after selling the brand.
If anyone at Stanley Black & Decker is reading this, I have 2 requests: PLEASE bring some of your European tool brand designs to the USA. I love Facom hand tools, and would love seeing some of them under Craftsman branding. PLEASE develop more benchtop tools, such as a good drill press, a good small jointer, and a good disc and small belt combo sander.
What do you think this will mean for us tool buyers and users?
Thank you to John B for the heads-up!
More Info(PDF via Stanley Black & Decker Investor Relations Presentation)