Wall Street is reacting with calm detachment to the news that Home Depot will drop Black & Decker Corp.'s plumbing products from many of its stores.
The Towson-based toolmaker had noted in its second-quarter filing with the Securities and Exchange Commission that "a major retailer" was expected to significantly reduce shelf space for Black & Decker's Price Pfister faucet line and that it would affect the manufacturer's overall revenue.
Black & Decker confirmed Monday that that retailer was Home Depot Inc. and that the plumbing line is being phased out of the chain's Midwest and East Coast stores.
Black & Decker said its sales will be off at least $15 million this year because of the change and $50 million on an annualized basis.
Joseph Sroka, an analyst at Merrill Lynch Global Securities in New York, said yesterday that the announcement was expected and that Monday's news had a silver lining: Home Depot will still carry Price Pfister on the West Coast.
"The risk was that they might have lost all the business," he said. "To us, the news was maybe a mild positive."
Shares of Black & Decker fell 1.7 percent, or 72 cents, Monday. The Dow Jones industrial average fell 1.4 percent that day. Yesterday, shares fell 36 cents, or 0.88 percent, to $40.40 as the Dow closed down 2.4 percent.
Sroka, who rates the toolmaker a "buy," said Black & Decker's relaunching of its Kwikset locks at the end of last year with new product names and packaging, which resulted in a gain in market share, should make up for some of the Price Pfister loss.
He added, however, that "faucets have a higher margin, so that's an issue."
A spokesman for Home Depot said the decision to drop Price Pfister from many of its stores was made as part of the retailer's overall goal of reducing vendors for similar types of items. The Price Pfister line will largely be replaced with the Glacier Bay line, a Home Depot private-label brand, giving the retailer better margins.
"We did this reluctantly, but we can't deny the business case that was involved," said Home Depot's John Simely. He said Price Pfister is very popular on the West Coast and so will not be dropped from stores there. It will still be possible to order Price Pfister products from any Home Depot store.
Black & Decker, which had sales of $4.3 billion last year, said it expects to meet analysts' per-share earnings estimates for the third quarter (83 cents) and the full year ($3.03.)
"This is kind of the nature of the beast when you go through these [product] line reviews: You win some and you lose some," Black & Decker Chairman and Chief Executive Officer Nolan D. Archibald said at a Bank of America investment conference Monday.
"We lost this one here, and over the years we've lost a few, and we've won more than we lost."