It seems every company is dealing with supply chain issues and cost inflation these days, but Nick Pinchuk, chairman and chief executive officer of Kenosha-based Snap-on Inc., made a point during an earnings call Thursday of highlighting how his company’s business model protects it from the issues hitting any number of industries.
“We found opportunities on our runway for growth and improvement even amidst these challenging times, and you can see it in the numbers, encouraging,” Pinchuk said.
Snap-on reported net sales of $1.04 billion for its third quarter, a 10.2% increase from 2020 and up 15.1% from 2019. Net income also improved from $179.7 million to $196.2 million.
Pinchuk said the company’s direct selling model and strong brand position allow it be more agile in pricing while vertical integration and shorter supply chain make it less vulnerable to supply issues. When shortages do occur, he pointed to the company’s more than 80,000 SKUs and broad product line as a tool to sell around shortages.
“It’s not like we weren’t without impact, but we kind of overcame it,” Pinchuk said.
Asked if there are any areas where issues did occur, Pinchuk said he might have expected to see it in the commercial and industrial segment, which has a wide range of products.
“You might have a kit with 1,000 items in it and you have to ship it complete, yet that business was up pretty well in the quarter,” he said.
The C&I segment reported a 14% increase in net sales to $351.4 million and increased operating earnings by $10.5 million to $53.6 million.
Pinchuk said Snap-on’s vertical integration means the company is not buying a lot of items.
“Most of the stuff is in our house,” he said, adding that the company does buy steel in the U.S. along with sourcing computer chips from the U.S. where possible.
He added the company is “very aggressive in spot buying.”
“We go out and spot buy because we don’t buy large quantities of any one thing,” Pinchuk said, noting the difference with automakers who might be locked in with a supplier and then face challenges when a port shuts down because of COVID cases or some other disruption.
“That’s why we are not seeing so much in terms of shortage,” he said. “It may be still a little cost increase, but then we’re agile pricing. So we don’t have such a big problem in that regard. I’m not saying we’re not actively working because, boy, our people are putting a lot of energy into it, but if you look at the numbers, pretty well managed.”
Even with potential advantages in dealing with supply chain issues, Pinchuk said Snap-on isn’t necessarily in a position to capture business from competitors that may be facing more constraints.
“Our technicians either decide to buy Snap-on or they decide to buy another group of products,” he said, noting a technician likely wouldn’t opt to buy a Snap-on tool just because their preferred brand isn’t available.
“It certainly puts us in a better position to grow and probably capture new customers who might not be serviced by these people,” Pinchuk said. “There’s some of that, I think.”
