A retooled Black & Decker aims to continue its growth Challenges persist for Towson firm

April 28, 1996|By Sean Somerville | Sean Somerville,SUN STAFF

When Nolan D. Archibald became Black & Decker Corp.'s chief executive officer in March 1986, he took over a company suffering a number of woes: shrinking market share, erratic new products and precarious earnings.

But after a decade that included recovery from a giant acquisition on Mr. Archibald's watch that saddled the company with debt, the Towson-based tool and appliance maker is boasting of record profits. Last Tuesday, as the 52-year-old Mr. Archibald chaired his 10th annual meeting, the company's stock soared to $40 -- its highest level in more than two decades.

As Mr. Archibald, also the company's chairman, begins his second decade at the helm of one of five Maryland Fortune 500 companies, challenges persist. The company must turn around its struggling European business, continue whittling its debt, satisfy the appetites of mega-stores and keep churning out new products, analysts say.

"They will not be able to rest on their laurels," said David Leibowitz, an analyst for Burnham Securities. "This is a very competitive arena. And Black & Decker is going to have to stay on top of its game."

Mr. Archibald says Black & Decker, with its debt shrinking and its new products division humming, is poised for growth. "I don't think it's going to be any tougher over the next few years than it has been over the last few," he said. "In fact, we've removed a lot of obstacles."

For Mr. Archibald, it's been a long struggle. After he closed plants and streamlined distribution to cut costs, Black & Decker bought Emhart Corp. in 1989 in a bid to broaden its earnings base. But the purchase of the giant Connecticut-based conglomerate, which had businesses ranging from defense consulting to Price Pfister faucets, sent the company's debt skyrocketing to $4 billion, or 85 percent of the company's capital, eroding earnings and sending its stock price plunging. Mr. Archibald halved the debt, largely by selling Emhart companies that didn't fit well with Black & Decker, like defense-related PRC Inc.

At the same time, the company developed marketplace hits like the SnakeLight flexible flashlight and VersaPak line, which uses an interchangeable and rechargeable battery pack to power a range of cordless tools from drills to hedge trimmers. And the company continued to close and consolidate plants.

Analysts see complacency as Black & Decker's biggest opponent in the next few years. But if the past few weeks are any indication, that doesn't seem to be a danger.

As Black & Decker released first-quarter earnings that, at $34.6 million, were 35 percent higher than the same period in 1995, it also announced that it would cut 1,100 jobs in Europe -- 4 #F percent of its global work force of 29,300, with 3,000 in Maryland. At last week's annual meeting, Black & Decker said it would release a record number of new products over the next two years.

For anyone who missed the point, Mr. Archibald spelled out the company's three corporate objectives: improving costs and productivity, exploiting international markets and developing new products.

"We aren't dependent on having a SnakeLight every year or a VersaPak every year," Mr. Archibald said in an interview. "In all the businesses we've got, we're always going to have two or three hits. Some of them are going to be home runs. Some of them are going to be triples, doubles and singles. But whether you get five singles or one home run, the effect on sales is about the same."

Clifford F. Ransom, an analyst for St. Petersburg, Fla.-based Raymond James & Associates Inc., predicts success for Black & Decker's new products. Over the years, he said, new products have become "an integral part of their culture."

Although analysts say some markets for Black & Decker products are saturated, Mr. Archibald counters that innovative products can create their own market. The SnakeLight, for instance, was inspired by an engineer who found himself doing a plumbing job with a flashlight clenched under his chin, Mr. Archibald said.

Joseph Galli, Black & Decker's president of power tools, sees opportunity for new products worldwide -- in the aging buildings of Britain, in the developing economies of countries like China, in booming construction in Poland. "All these things say we don't see a top to the market," he said.

The new products cannot only serve as blockbusters themselves -- like SnakeLight, said Susan Gallagher, an analyst for NatWest Securities Corp. who expects the stock to hit the high $40s or even $50 in the next 18 months. They also carve niches that Black & Decker can continue to fill.

Indeed, the company has produced a family of SnakeLights and is currently working on 15 VersaPak products. It also announced a new range of power tools for professionals under the DeWalt brand name, a line introduced in 1992. "New products are the lifeblood of the company," Ms. Gallagher said.

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