Snap-on Pricing Spineometer: 1 of 5 Vertebrae

Snap-on, a tool and equipment manufacturer enabling the makers and fixers of the world of heavy equipment, had a strongly positive Q1 2023. Revenue rose 7.7% to $1.2 billion while earnings before interest and taxes rose 16% to $259 million over the same period last year.

What led to these positive results? CEO Nick Pinchuk and CFO Aldo Pagliari shared their understanding in the Snap-on earnings call held on 20 April 2023.

Pinchuk attributed the positive results to their “Rapid Continuous Improvement” effort, product launches, and industry changes.  The Zeus, Mitchell 1, and ADAS product launches reportedly were well received by technicians. Technicians themselves are experiencing heavy demand for their services today.  And, the technician’s job is changing, partly with the motion towards EV automobiles but largely with the increased complexity of heavy equipment, to increase demand for Snap-on products.

Pagliari largely hewed the message of Pinchuk but did mention the positive impact of pricing actions partially offset by negative input cost and exchange rates.

Is price management optimized at Snap-on?  Regional kickoffs included discounts on toolboxes yet toolbox production is backlogged and currently executives are considering further investment in manufacturing capacity of toolboxes.  A pricing professional would quickly identify this as a missed opportunity.  However, Pinchuk stated when asked why the company was discounting an observably hot product: “Because we offer discount packages all the time. That’s part of the reason to buy now. You could say, okay, you don’t have to have the discount package, but in reality, … our franchisees are conditioned to sell off a kind of deal. Our art is to make that deal attractive but leaner or richer depending on how we want to move the product.”

Research into the quality of Snap-on’s pricing team yielded uninspiring results.  Pricing professionals could not be identified. Though people in supply chain, product management, sales, and even marketing communication identify pricing as part of their skill set, touching pricing and managing pricing decisions are very different.  Forward-looking, we could not identify job openings focused on pricing specifically at Snap-on either.

Pricing at Snap-on does appear to be a missed opportunity for profit management.

1. If we concede that the recent quarter’s economic environment and reasonably sound management led to the recent strong financial performance, are simultaneously calling into doubt the ability of Snap-on to perform well during an economic downturn with an inflationary environment.
2. There was mention of the need for software and frequent software updates to perform diagnostics. Considering the efforts in heavy equipment, medical devices, and farming to convert these software-driven opportunities into SaaS offerings, it was surprising to hear little of that effort from Snap-on executives.

Given the importance and capability of pricing at Snap-on as indicated in financial reports, management comments, and our pricing team research, and given their performance, we have come to the following conclusion as of June ‘23.

Snap-on Pricing Spineometer:  1 out of 5 Vertebrae.

SNA (Snap-on Inc.) rose from 238 on the day prior to their earnings call to 259 one week later. FY 2022 revenue of $4.5 B with a 21% operating margin and P/E ratio near 14.

Currently, a 1% improvement in price would yield a 4.8% improvement in EBIT holding all else constant for Snap-on.

Engage the latest Pricing Spineometer insights and commentary at the next Pricing and Profit Management Luncheon near you.  Visit wiglafpricing.com/events/ for more details.