Milwaukee-based Brady Corp. saw its net sales drop by 2% in its second fiscal quarter, a decline attributed to declining global demand for industrial products and foreign currency exchange.
“The economy certainly is not helping us at the moment and we don’t expect it to improve in the near term,” J. Michael Nauman, president and chief executive officer at Brady, said during the company’s earnings call Thursday.
The maker of labels, signs, safety devices, printing systems and software serves customers in electronics, telecommunications, manufacturing, electrical, construction, medical, aerospace and other industries.
While net sales dropped from $282.4 million last year to $276.7 million, Brady saw its net income increase 14.8% to $33.6 million. Gross profit margin also improved from 49.5% to 50.3% and selling, general and administrative expenses declined from 32.8% of sales to 31.6%.
Brady attributed the improved gross margins to continued investment in automation and manufacturing efficiency in recent years. Nauman said when he first arrived Brady the company often had different processes at each individual location but has become better at sharing best practices across its operation.
“We’re not only become more efficient in individual facilities, we’re collectively becoming more efficient,” he said.
Brady also attributed the drop in SG&A expenses to efficiency gains in administrative expenses and non-customer facing selling expenses.
But Nauman also pointed out Brady is not simply seeking cost savings but instead is focused on helping customers more efficiently.
“What we find is that if we’re more efficient in helping our customers, it actually drives down our costs,” he said.
Following its second quarter performance, Brady changed its full year guidance. The company now expects earnings per share of $2.55 to $2.65, up from $2.50 to $2.60 following the first quarter. The company also scaled back its outlook for organic sales growth from 1.5% to 2.5% following the first quarter to flat to slightly positive now.
Overall, Nauman said the company is in “an enviable position” despite weakness in the industrial economy.
“The key to our success is that coming out of these downturns, because we continue to invest throughout the downturn, we will be much stronger than our competitors on the other side,” he said.
