Snap-on's Q1 sales climb nearly 8% YoY
Snap-on Incorporated reported first quarter net sales of $1.2 million, an increase of $85.2 million, or 7.8%, from 2022 levels, reflecting a $109.2 million, or 10.2%, organic sales gain, partially offset by $24.0 million of unfavorable foreign currency translation.
Other highlights include:
- Operating earnings before financial services for the quarter of $259.8 million compared to $223.1 million in 2022. As a percentage of net sales, operating earnings before financial services of 22.0% in the first quarter improved 170 basis points from 20.3% last year.
- Financial services revenue in the quarter of $92.6 million compared to $87.7 million in 2022; financial services operating earnings of $66.3 million compared to $70.4 million last year.
- Consolidated operating earnings for the quarter of $326.1 million, or 25.6% of revenues (net sales plus financial services revenue), compared to $293.5 million, or 24.8% of revenues, last year.
- The first quarter effective income tax rate was 23.1% in 2023 and 23.7% in 2022.
- Net earnings in the quarter of $248.7 million, or $4.60 per diluted share, compared to net earnings of $217.4 million, or $4.00 per diluted share, a year ago.
“We’re again encouraged by our performance, achieved against the general uncertainty and turbulence of these times," said said Nick Pinchuk, Snap-on chairman and chief executive officer. "Our results validate the extraordinary resilience of our critical markets and demonstrate the ongoing and upward momentum present across our operations. Our experienced and capable team overcame the difficulties of the day, further building our strategic and tactical advantages in our product and in our brand, all while maintaining our established trajectory of continuing progress.
"We believe our quarter is clear testimony to the abundant opportunities along our runways for growth," he continued. "Our businesses serving critical industries are well positioned to extend our activities outside the garage, and within automotive repair, we are poised to sustain our advance in that robust market, by enhancing the van channel and expanding with repair shop owners and managers. At the same time, we believe the period confirms the power of our Snap-on Value Creation Processes and our considerable capacity for improvement. Finally, I want to thank our franchisees and our associates worldwide for their valuable contributions, for their steadfast dedication, and for their unfailing confidence in our future.”
Segment Results
Commercial & Industrial Group segment sales of $363.8 million in the quarter compared to $340.1 million last year, reflecting a $36.2 million, or 11.1%, organic sales gain, partially offset by $12.5 million of unfavorable foreign currency translation. The organic increase is primarily due to gains in sales to customers in critical industries, as well as higher activity in the segment’s specialty tools and European-based hand tools businesses.
Operating earnings of $55.8 million in the period, including $2.0 million of unfavorable foreign currency effects, compared to $45.7 million in 2022. The operating margin (operating earnings as a percentage of segment sales) of 15.3% improved 190 basis points from 13.4% last year.
Snap-on Tools Group segment sales of $537.0 million in the quarter compared to $512.1 million last year, reflecting a $32.0 million, or 6.3%, organic sales gain, partially offset by $7.1 million of unfavorable foreign currency translation. The organic increase is primarily due to higher sales in the U.S. franchise operations.
Operating earnings of $131.7 million in the period, including $6.1 million of unfavorable foreign currency effects, compared to $116.0 million in 2022. The operating margin of 24.5% improved 180 basis points from 22.7% last year.
Repair Systems & Information Group segment sales of $446.6 million in the quarter compared to $398.2 million last year, reflecting a $54.4 million, or 13.9%, organic sales increase, partially offset by $6.0 million of unfavorable foreign currency translation. The organic gain includes increased sales of undercar equipment, higher activity with OEM dealerships, and higher sales of diagnostic and repair information products to independent repair shop owners and managers.
Operating earnings of $104.6 million in the period, including $0.5 million of favorable foreign currency effects, compared to $91.6 million in 2022. The operating margin of 23.4% compared to 23.0% a year ago.
Financial Services operating earnings of $66.3 million on revenue of $92.6 million in the quarter compared to operating earnings of $70.4 million on revenue of $87.7 million a year ago. Originations of $300.9 million in the first quarter increased $55.3 million, or 22.5%, from 2022 levels.
Corporate expenses in the first quarter of $32.3 million compared to $30.2 million last year.
Outlook
The company stated: "We believe that our markets and our operations possess and have demonstrated continuing and considerable resilience against the uncertainties of the current environment. In 2023, Snap-on expects to make ongoing progress along its defined runways for coherent growth, leveraging capabilities already demonstrated in the automotive repair arena and developing and expanding its professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high. In pursuit of these initiatives, it is projected that capital expenditures in 2023 will approximate $100 million, of which $23.0 million was incurred in the first three months of the year.
"Snap-on currently anticipates that its full year 2023 effective income tax rate will be in the range of 23% to 24%."
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