Stanley Black & Decker, Inc. (NYSE:SWK) Q2 2020 Earnings Conference Call - Final Transcript
Jul 30, 2020 • 08:00 am ET
James M. Loree
better margin performance and growth as we take stock here in the middle innings, and we look forward. Let me give you a sense of some of the accomplishments our team has wrapped up since this crisis began. We were able to operate continuously across the globe with only minor and temporary supply disruptions while protecting our employees and maintaining the highest health and safety standards.
We managed to handle with remarkable efficiency the most volatile intra-quarter demand swings we've ever experienced, beginning in the first four weeks of April, during which revenues were down approximately 40%, followed by an explosive May and June, which brought our point-of-sale in North American retail to stratospheric levels that we've never seen before. Security revenues also improved dramatically as the quarter progressed. We took swift and decisive cost actions early in the crisis, announcing a $1 billion annual cost reduction initiative in April, of which $175 million was realized in the second quarter. Our margin resiliency initiative now in its second year contributed to this impressive performance. We substantially raised our second quarter revenue planning assumptions twice during the quarter while maintaining our cost reductions intact.
This bodes well for the remainder of the year, and we were able to upgrade our internal full year revenue and margin scenario analyses accordingly. Now our current base case for full year 2020 revenue and operating margin exceeds what we thought our best case was for the year back in April. And as a consequence of the better 2Q volume in conjunction with our cost and margin actions, we delivered $3.1 billion of revenue and $1.60 in EPS. Our operating margin rate came in at 12.8%, just 200 basis points lower than in second quarter 2019, and the Tools & Storage business logged an impressive 17% segment operating margin rate, flat with prior year, which means that, that business achieved its previous peak margin performance in what we currently believe will be the trough quarter in the cycle for tools, with revenues down 16%.
As we enter July, given the uncertain economic outlook ahead, we decided to convert the run rate financial impact of our temporary salaried workforce reductions into permanent savings. We will implement this in early October by eliminating our temporary salaried actions that is furloughs and modified work weeks, returning 9,300 employees to a full work schedule while transferring the remaining 1,000 or so to permanent reduction status. This action will be a major step in ensuring the sustainability of the bulk of our $1 billion cost reduction actions, and we believe it paves the way for us to manage successfully through any reasonable economic scenario, which may unfold in the coming months. In the back half of the quarter, with the supply chain performing and the cost reductions intact, we decided to identify a series of supercharged growth initiatives, which we will pursue in addition to the ones already in place.
These initiatives have become even more attractive as a result of