Stanley Works (SWK) Lowers Guidance, Cuts 2K Jobs; Shipments Worse Than Early '70s

December 11, 2008 7:30 AM EST

The Stanley Works (NYSE: SWK) expects full year 2008 earnings per share from continuing operations before fourth quarter charges to be between $3.30 and $3.40, approximately $0.35 to $0.45 lower than previously indicated. The consensus is $3.72.

The Stanley Works said it has experienced rapidly deteriorating business conditions in its Construction/DIY (CDIY) and Industrial segments during the quarter. Further, the recent sudden strengthening of the U.S. dollar against major currencies has exerted additional downward pressure on fourth quarter earnings.

During previous recessions dating back to the early 1970s, at times when the company had much higher percentage exposure to CDIY markets and customers than today, the company's physical unit volume shipments have never declined by 7% or greater for two consecutive quarters. As previously reported, the company's third quarter 2008 unit volume shipments declined by 7% and fourth quarter unit volume shipments are now expected to decline between 12% and 14%, approximately 6 to 8 percentage points lower than previously anticipated. This outlook implies that CDIY and Industrial markets are undergoing an exceptionally severe economically-driven contraction at this time.

As a results, Stanley Works is announcing the elimination of approximately 2,000 positions (10% of the current employee base), the closure of three manufacturing facilities and the elimination of certain layers of management. The measures announced today will require a pre-tax charge of approximately $80 million in the fourth quarter and are expected to produce a pre-tax earnings benefit of approximately $115 million in 2009.

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