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Letter to Our Shareholders

Dear Shareholders:

2019, for the second consecutive year, was characterized by extreme volatility and uncertainty regarding large external factors such as tariffs, dollar strength and cost inflation, which in this case, had the potential to negatively impact our operations by $445 million of operating profit.

Further, although U.S. consumer (ex-automotive) and construction markets were generally supportive, the majority of end markets outside the U.S. slowed during the year and, by the second half, most global industrial markets were in recessionary territory. Despite the obstacles, once again Stanley Black & Decker rose to the occasion and delivered a respectable financial performance under the circumstances.

Throughout the year, our team also remained focused on our long-term aspirational vision by continuing the pursuit of the three objectives of (1) continuing to deliver top-quartile financial performance, (2) becoming known as one of the world’s great innovative companies and (3) elevating our commitment to social responsibility. This alignment, along with our purpose —For Those Who Make the World—provide the overarching framework for “winning in the 2020s,” which is exactly what we intend to do.

The new decade is upon us and with it comes a host of new challenges, with the most significant one of them all being something called VUCA, a term which emanated from a military college in the U.S. in response to the onset of the post-Cold War era. VUCA stands for volatility, uncertainty, complexity and ambiguity. While, in that period, VUCA described the backdrop for the formation of a new world order, this time I believe it describes what leaders of all institutions will have to consider as we devise strategies and tactics to thrive in what can now be called the new world disorder of the 2020s. It’s an exciting world, full of disruptive risks and opportunities, with the accelerating pace of technological change always pushing the limits of what individuals and institutions can absorb. This new world has given rise to new axes of competition, neatly characterized by Boston Consulting Group’s Henderson Institute. Three that we find most relevant are: (1) competing on the rate of learning; (2) competing on resilience; and (3) leveraging ecosystems.

In 2019, we put much thought into what it will take to win in this environment, and we were perhaps blessed by having to deal with the unusually volatile conditions we faced in 2018 and 2019. For structural reasons, our recent external challenges may have been more pronounced than encountered by most diversified global industrials. Ironically, we feel fortunate that we experienced them and endured through them, as we have now emerged with the fitness and mindset to take on the challenges of the 2020s.

2019 Summary of Results


Total Revenues

+3% Versus Prior Year


Organic Growth


Operating Margin

Overcoming $445 Million in External Headwinds


Free Cash Flow Conversion


Cash Flow Return on Investment

*Excludes M&A related and other charges

Financial Performance

Stanley Black & Decker reported a solid 2019, overcoming approximately $445 million in external headwinds related to tariffs, foreign exchange and commodity inflation. With our performance-focused organization, we continued to generate above-market organic growth of 3%, low single-digit adjusted EPS growth and robust free cash flow in a dynamic operating environment.

Full-year revenue totaled $14.4 billion, a 3% increase from the prior year. Our full-year operating margin rate was 13.5%,* relatively consistent with the prior year despite the intense, externally driven cost pressures. Diluted EPS* was $8.40, up 3% over the prior year. Free cash flow was $1.1 billion, representing a conversion rate of 113% of net income. Our strong free cash flow profile supported our 52nd annual dividend increase, a series of strategic acquisitions and a modest amount of deleveraging, in line with our strong investment credit grade targets. Our cash flow return on investment grew to 14%, in line with our long-term objectives.

Tools & Storage achieved an impressive 5% organic growth rate in 2019, with North America (+7%) and Europe (+4%) leading the way. Our team has exhibited excellent commercial execution, leveraging a formidable array of growth catalysts to continue gaining share despite slowing international and industrial end markets. Current catalysts consist of the CRAFTSMAN brand rollout, e-commerce and core and breakthrough innovation, including DEWALT FLEXVOLT, ATOMIC and XTREME.

In Industrial, we achieved 11% total revenue growth primarily from the Nelson Fastener and IES Attachments acquisitions. Industrial organic growth (−3%) was challenged by weak automotive and general industrial end markets. However, we are continuing to leverage our operating model to gain share and achieve above-market growth, best signified by our automotive fastener penetration gains, which accounted for 360 bps growth above global light vehicle production levels.

Security demonstrated forward progress in 2019 with 1% organic growth and 20 basis points of operating margin rate* improvement. While it would seem to be a modest improvement, behind the scenes we are achieving cost efficiencies while investing in business model transformation and other initiatives directed at achieving consistent organic growth with operating margin improvement. We are encouraged by the progress, as we exited the year with significant organic growth momentum (+4% in the fourth quarter) that we believe can continue into 2020 and beyond.

*Excludes M&A related and other charges

Our Evolving Operating Model

Driving Performance and Innovation in a Dynamic World

Our successful, long-standing Stanley Fulfillment Operating System (now known as SFS 2.0) has continuously evolved over the last 15 years and has served as the framework for our businesses to focus their priorities and allocate resources in order to sustain financial performance. In light of the rapidly moving dynamics of the new VUCA world, including the acceleration of technological change, geopolitical instability and the changing nature of work, this past year we decided to contemporize SFS 2.0 for the 2020s.

The result is the new SBD Operating Model, which is being introduced across the Company as this report is being issued. It is an evolution of SFS 2.0, designed to propel the Company forward, addressing both the new axes of competition, as well as updating classic execution best practices with a renewed energy and focus on relevant themes for the current decade. At the center of the model is the concept of the interrelationship between people and technology. The remaining four categories are: Performance Resiliency; Extreme Innovation; Operations Excellence; and Extraordinary Customer Experience. Each of these elements co-exists synergistically with the others in a systems-based approach.

People and Technology

This pillar emphasizes our belief that the right combination of digitally proficient people applying technology such as artificial intelligence, machine learning, advanced analytics, IoT and others in focused ways can be an enormous source of value creation and sustainability for the corporation. It also brings to light the changing nature of work and the talent and skillsets required for individuals and institutions to thrive in the future. With technology infiltrating the workplace at an increasingly rapid pace, we believe that the winners in the 2020s will invest heavily in reskilling, upskilling and lifelong learning, with an emphasis on the places where people and technology intersect.

In other words, technology can make humans more powerful and productive if, and only if, humans know how to apply the technology to maximum advantage. We have created plans and programs, as well as a new leadership model to ensure our people have the right skills, tools and mindsets to thrive in this era. The ability of our employees to embrace technology, learn and relearn new skills and take advantage of the opportunities presented in this new world will be critical to our success.

Performance Resiliency

If there is one thing the last two years have reinforced, it’s the criticality of resiliency. We think of performance resiliency as the agility, flexibility and adaptability to sustain strong performance regardless of operating environment conditions. That is causing us to plan for the unexpected and anticipate exogenous volatility as the new normal. Technology, applied to our key processes, products and business models, will be a key enabler for value creation and performance resiliency as we execute sustainable, ongoing transformation across the enterprise.

Extreme Innovation

Stanley Black & Decker has a strong heritage of innovation, consistently launching more than 1,000 products a year, including breakthroughs such as DEWALT FLEXVOLT, ATOMIC and XTREME. In recent years, we’ve expanded our innovation-focused internal teams and external partnerships, but now we are growing that innovation ecosystem at a rapid pace, expanding the number of external collaborations with startups and entrepreneurs, academic institutions, research labs and others. This innovation culture, which includes a focus on social impact in addition to our traditional product and customer focus, enables our Company to introduce products to market faster and reimagine how we operate in today’s technology-enabled, fast-paced world.

Operations Excellence

An intense focus on operations excellence and asset efficiency is mandatory in a dynamic world in which the bar for competitiveness is always moving higher. To help maintain our edge, a much more agile, adaptable and technology-enabled supply chain is necessary. Industry 4.0 is essential to this transformation. For several years, we have been moving to a “Make Where We Sell” and “Buy Where We Make” system, where more products are being manufactured in local markets. Today, about 50% of the products sold in North America are made in North America and our target is to continue to push that higher. This will improve customer responsiveness, lower lead times, reduce costs and mitigate geopolitical and currency risk, while facilitating major improvements in carbon footprint.

Extraordinary Customer Experience

Customers are increasingly demanding world class experiences from their brands and expectations for execution at the customer level are growing every day. It is no longer sufficient to have great products on the shelf or in the catalog. We know that to sustain our market share growth, we need to evolve and adapt to provide the types of experiences that our customers now expect. While commercial excellence has always been a big part of SFS 2.0 and will continue to be part of our new model, our new thrust in this area takes it to another level. Each of our businesses is making a baseline assessment and segmentation of their various customer experiences, while systematically gaining insights into what can be done to elevate them to the extraordinary level. Once again, the interaction between people and technology will define our success in this area. 

Value Creation Model

Value Creation Model and Innovation Ecosystem

Our well-established value creation model has produced strong, long-term shareholder returns. It starts with our world class brands, attractive growth platforms, and scalable and defensible franchises. Importantly, it leverages the power of our operating model—enabling the achievement of the Company’s long-term financial objectives.

We also employ a balanced capital allocation approach over time, in which we commit to returning 50% of our capital to shareholders in the form of dividends and/or opportunistic share repurchases, with the remaining 50% earmarked for acquisitions to further strengthen our business portfolio and fuel growth.

Our pursuit to become known as one of the world’s great innovative companies is a consuming passion for us. In this ever more complex, faster-moving world with disruption and democratization of innovation occurring across the globe, no one individual or institution alone can possibly have the imagination, knowledge and resources to successfully go it alone. Therefore, in addition to our breakthrough innovation teams and core innovators, we are rapidly building a vast network of resources to advance our products and processes, generate new revenue models and give us a lens into the various disruptive forces representing both future threats and opportunities. This network includes entrepreneurial accelerators, academics, other companies, our venture investment portfolio, STANLEY X (Silicon Valley unit), Industry 4.0, Advanced Analytics and AI centers of excellence, government research labs and much more. Stanley Black & Decker’s ecosystem addresses all technologies that we consider strategic and cuts across all of our businesses and functions. It is loosely coordinated through the Technology Council under the direction of the Chief Technology Officer.

The Company’s strategy, value creation model, operating model and innovation ecosystem have grown and evolved to respond to a changing world.

Innovation Ecosystem

Well Positioned for Profitable Growth

Leveraging our operating model and capital deployment approach, we are executing a number of major revenue catalysts that we believe will sustain our above-market growth potential for the foreseeable future.

  • CRAFTSMAN—This iconic brand rollout is expected to reach $1 billion of growth, net of cannibalization, by 2021 with $600 million generated through 2019.

  • Core & Breakthrough Innovation—We continually generate share gain with a steady stream of innovation that we bring to the marketplace. In addition, our disruptive trio of breakthroughs, FLEXVOLT, ATOMIC and XTREME have been well received by our end users and are generating hundreds of millions of dollars of growth.

  • e-Commerce—With revenues in excess of $1 billion, this global opportunity has the potential for double-digit growth for the foreseeable future.

  • Revenue Synergies—In addition to the cost synergies committed in our acquisitions, we view inorganic growth as a way of catalyzing organic growth from revenue synergies. We continue to see benefits from our Lenox and Irwin, Nelson and IES acquisitions.

Growing our businesses through M&A is central to our strategy. While we continue to monitor the market for acquisitions, we already have a line of sight for acquisition growth over the next few years with two defined and negotiated opportunities.

In early 2020, we reached agreement to acquire Consolidated Aerospace Manufacturing or CAM. Growing and diversifying our Industrial business through M&A is a key priority for the Company and a focus of our strategic capital deployment. CAM, with revenues of $375 million, is an ideal platform asset to scale within our Engineered Fastening business and significantly adds to our exposure in the high growth, high margin aerospace market. CAM is a quality asset bringing well-recognized brands, a proven business model, strong customer relationships, an experienced management team and compelling cash flow characteristics, which create an attractive pathway for profitable growth and shareholder returns.

During 2019, we also closed on a 20% stake in MTD Holdings, a leading outdoor power equipment manufacturer. This is an exciting opportunity to increase our presence in the $20 billion outdoor power equipment market. Our respective teams are working on multiple opportunities to generate operational efficiency and growth. Beginning in 2021, we have an option to purchase the remaining 80% with the potential to add up to $3 billion of revenue at an all-in EBITDA multiple in the range of 7–8 times. We are excited by this opportunity to leverage MTD’s strengths while bringing our brands, technology and scale to this adjacent market.

Strategic Framework


  • SBD OPERATING MODEL as a catalyst
  • MIX into higher growth, higher margin businesses
  • INCREASE relative weighting of emerging markets


  • BRAND is meaningful

  • VALUE proposition is definable and sustainable through innovation

  • GLOBAL cost leadership is achievable


  • BUILD upon global Tools platform

  • EXPAND Industrial platform / diversify Engineered Fastening and Infrastructure

  • CONSOLIDATE Commercial Electronic Security industry, pending transformation

The Purpose of a Corporation: Be a Force for Good

Last August, along with 183 other CEOs of large American corporations, I was a signatory to the Business Roundtable’s (BRT) significant update on the purpose of a corporation. The new statement declared that the purpose of a corporation was “to create value for all our stakeholders.” It does not prioritize any other stakeholders over shareholders.

At Stanley Black & Decker, we applaud the BRT’s great achievement. It is no small task to get that many CEOs aligned around any topic, let alone purpose. Essentially, in the past, modern-day capitalism has been explicitly and often solely linked to profits. Since the 1970s, the World Economic Forum has advocated for cooperation and collaboration among political, business and other private sector leaders to bring to bear their combined resources to do good for all of society’s stakeholders, including the planet. It seems like Klaus Schwab’s once idealistic concept has finally come of age.

Today, more than ever, I believe that corporations pursuing purpose will lead to higher profits and company valuations. Whether you look at income inequality, geopolitical turmoil or the accelerating pace of technological change, it’s clear the world needs help. For businesses and capitalism to thrive, we need sustained economic prosperity, geopolitical stability and an environmental climate that supports the people of this earth, our customers. To put it in the simplest language, businesses need customers, and more prosperous customers are generally better for business.

When I became CEO in mid-2016, we updated our strategy and rolled out our aspirational 22/22 Vision—to double the size of our Company to $22 billion of revenue by the year 2022. But we also understood that the world was rapidly changing, and that the companies that survived over the decades and centuries were those that operated with foresight—they had mastered the art of strategic renewal and staying current with the world around them.

At the time, Stanley Black & Decker was on the cusp of its 175th anniversary, and my job as CEO would be to ensure that I was setting up the Company to be successful in the 2020s. To do this, we also needed to understand the changing societal expectations of our customers, employees, investors, governments and other key stakeholders.

With that in mind, we set about the process of excavating Stanley Black & Decker’s purpose. After considerable research and evaluation, in 2017, we launched our purpose—For Those Who Make The World—across our enterprise, our strategy and our brands. For Those Who Make The World is not about our Company or us. It’s about our stakeholders and our communities across the globe. It’s about our customers and end users—the builders and the caregivers—those out doing the hard work every day to contribute to our society and make the world a safer and better place.

When we launched our purpose, I thought it would position us well for the future. I have been pleasantly surprised by how incredibly powerful it has been for guiding our Company forward and how integral being a force for good is to a corporation’s success and license to operate in the future.

The world is evolving even faster than I imagined and purpose has now become mainstream. Customers are making buying decisions based on it. Many younger employee prospects, those with contemporary skillsets, will not join a company if it doesn’t have a purpose or if the company’s purpose does not resonate with them. Buyside investors are increasingly scrutinizing company commitment to ESG, purpose and social responsibility as part of their investment decisions.

It goes beyond that. Purpose not only inspires performance, it catalyzes it. Organizations around the world are recognizing that not only can you operate with purpose and generate profits, but that profits can actually be generated by a business model based on purpose.

Inherent in the concept of purpose and stakeholder capitalism is corporate social responsibility. Our mission to elevate our commitment to corporate social responsibility might seem like it’s just getting started, however, it is embedded in our culture and has been for 177 years now, dating back to our founder, Frederick Stanley. We are very excited by this most recent chapter. Launched just three years ago, our initiative combines a top-down strategy, including specific focus areas and deliverables, with a grassroots movement led by our 60,000 associates. It is a great combination and it inspires our people every day. It is about engagement, accountability and social impact.

The strategy has three components:

The first is Empower Makers, with the goal of enabling 10 million creators and makers to thrive in a changing world. We will work to upskill and reskill our own employees and those in the community, empowering citizens with vocational training, STEAM education and access to what they need to be successful in this technology-focused world that has the potential to leave many behind.

The second is Innovate With Purpose, with the goal of innovating our products to enhance the lives of 500 million people and improve environmental impacts. Our focus here is to innovate, using our own expertise and our ecosystem to develop value propositions to meet underserved societal needs and improve the lifecycle impact of our products and supply chain.

The third is to Create A More Sustainable World, with the goal of positively impacting the environment (beyond carbon neutral) through our operations, and improving environmental impacts related to greenhouse gas emissions, water and waste, among others.

As we work towards these goals, diversity and inclusion, ethics and integrity will be integrated and essential to all we do. You can learn more about our specific projects that support these initiatives, as well as our progress to date, in our Annual Year-In-Review at

Our Vision

In Closing

I want to thank you for your interest in and support of Stanley Black & Decker, and for being part of our journey in whatever way you participate through this interesting period in our history. I continue to be honored and humbled to lead this remarkable, 177-year-old global organization comprised of people who really care. Our entire team is committed to performance, innovation and social responsibility, delivering for shareholders and doing what we can to be a force for good in society. The 2020s are here, and we are ready for the challenges and opportunities ahead.

James M. Loree
President & Chief Executive Officer