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ACME UNITED CORP (ACU)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered modest top-line growth with net sales up 2% to $46.0M and diluted EPS up 5% to $0.41; gross margin expanded 30bps to 39.0% on productivity gains .
  • Both revenue and EPS missed consensus, with revenue at $45.96M vs $46.76M* and EPS at $0.41 vs $0.47*; only one covering estimate, reducing signal strength [GetEstimates]*.
  • First Aid drove the quarter (+14% sales), while Westcott cutting tools declined on a tough comp from a major craft launch in Q1’24; Europe -7% USD (-4% LC) on promo timing, Canada +5% USD (+6% LC) .
  • Management withheld formal FY guidance due to extreme tariff uncertainty (China tariff levels cited as fluctuating rapidly), but indicated planned price increases to offset costs and >$2M productivity savings in 2025 .
  • Potential near-term catalysts: clarity on tariff regime and announced price increases, progress on automation (robotics in First Aid plants) and a robust M&A pipeline as competitors face working capital pressure .

What Went Well and What Went Wrong

What Went Well

  • First Aid momentum: “Our net sales in first aid increased 14% during the first quarter of 2025” .
  • Margin resilience: gross margin expanded to 39.0% vs 38.7% YoY, driven by “more than $2.0 million in productivity savings this year from our investments in our operations” .
  • Automation and operational execution: installed first robotic system (4 robots, ~$650k cost, replaces 7 employees, <2-year payback) in Rocky Mount, NC; a second system ordered for Vancouver, WA .

What Went Wrong

  • Westcott cutting tools decline due to non-repeating large Q1’24 craft launch with a major U.S. retailer; consumer stress and tariff-driven uncertainty could pressure demand mix further .
  • Europe down on timing: net sales decreased 7% in USD and 4% in LC due to a large 2024 promotion not repeating; mix expected to spread more evenly through 2025 .
  • Estimates miss: EPS ($0.41 vs $0.47*) and revenue ($45.96M vs $46.76M*) missed consensus, though coverage was thin (# of estimates = 1) [GetEstimates]*.

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025Consensus Q1 2025
Revenue ($USD Millions)$45.0 $48.17 $45.94 $45.96 $46.76*
Diluted EPS ($USD)$0.39 $0.54 $0.41 $0.41 $0.47*
Gross Margin (%)38.7% 38.5% 38.7% 39.0% N/A
Operating Income ($USD Millions)$2.56 $2.93 $2.28 $2.43 N/A
Net Income ($USD Millions)$1.64 $2.23 $1.71 $1.65 N/A
SG&A ($USD Millions)$14.84 $15.64 $15.48 $15.49 N/A
SG&A (% of Sales)33% 32% 34% 34% N/A
  • Estimates marked with * are from S&P Global (Capital IQ).

Segment and category performance

Segment/CategoryQ1 2025 YoY (USD)Q1 2025 YoY (Local Currency)Commentary
U.S. Net Sales+3% N/AFirst Aid strong; school/office down on prior-year craft launch comp
Europe Net Sales-7% -4% Large 2024 promotion did not repeat; sales expected to spread through 2025
Canada Net Sales+5% +6% First Aid strong; school/office soft economy headwind
First Aid (Company-wide)+14% N/AGrowth supported by automation and expanded offerings
Westcott Cutting ToolsDeclined N/ALapping major Q1’24 craft rollout; consumer/tariff uncertainty

KPIs and balance sheet

KPIQ3 2024Q4 2024Q1 2025
Bank Debt less Cash ($USD Millions)$26.7 $21.5 $27.2
Free Cash Flow (LTM, approx.)$6.2 $5.0 ~$12.0
Cash & Equivalents ($USD Millions)$5.70 $6.40 $3.45
Inventories ($USD Millions)$55.99 $56.25 $57.27
Gross Margin (%)38.5% 38.7% 39.0%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue/EPSFY 2025None providedNone provided due to tariff uncertainty Maintained: no formal guidance
SG&A % of SalesFY 2025Indicated 31–32% range No update provided in Q1 call No update
Pricing2025Regular inflationary increases already in place New round of price increases to match increased costs Raised
Productivity Savings2025~$2.0M annual savings achieved in 2024 >$2.0M productivity savings expected in 2025 Increasing
DividendQ1 2025$0.15 declared (payable Apr 16, 2025) Later increased to $0.16 (payable Jul 24, 2025) Raised (post-Q1)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Tariffs/MacroDiversification out of China to Thailand/Philippines; prepared for tariffs Extreme tariff uncertainty; cited rapid changes; withholding guidance; planning price increases Intensifying risk; active pricing response
Automation/ProductivityWarehouse racking expansion; $2M annual savings in 2024 Robotic system installed in Rocky Mount; second ordered; <2-year payback Accelerating automation and ROI
First Aid Smart ComplianceNew RFID automatic replenishment introduced (no competitor analog) Strong customer interest; trials ongoing; not in 2025 forecast yet Early adoption; potential future growth
Supply Chain DiversificationMoves into Thailand, Philippines, India, Egypt; US/Canada plants Continuing shifts; leveraging domestic production; monitoring tariff-driven sourcing Ongoing diversification
AcquisitionsPositioned for accretive deals; strong liquidity Proactive pipeline; potential larger transactions; competitors facing working capital stress Opportunity set widening
Regional TrendsEurope +10% in Q3; Canada mixed Europe -7% USD (-4% LC) on timing; Canada +5% USD (+6% LC) Mixed; timing-driven volatility
Westcott/Craft/KitchenStrong in Q3; market share gains Decline on tough comp; consumer stress may impact demand; DMT kitchen expansion continues Mixed performance; product expansion offsetting

Management Commentary

  • “Our net sales in first aid increased 14% during the first quarter of 2025.”
  • “The current tariff environment is very uncertain and challenging… We expect to reduce costs through supplier negotiations and lower shipping costs and benefit from more than $2.0 million in productivity savings this year… And we will be increasing prices where necessary.”
  • On automation: “This system has 4 robots… cost about $650,000, replaces 7 employees and has less than a 2-year payback.”
  • On guidance: “I think it’d be… even Walmart pulled off guidance… you have to have a stability of your cost base to be able to forecast… We will begin… announcing the next round of price increases… matching the increased costs.”
  • Acquisition stance: “We pay fair prices… the environment may create new opportunities… I’ve got an open mind to a larger deal.”

Q&A Highlights

  • Acquisitions: Management is actively evaluating both horizontal and component suppliers in cutting tools and First Aid; larger deals are possible in the current environment given competitor pressures and Acme’s balance sheet .
  • Tariffs: Extreme uncertainty (China tariff levels cited as changing week to week); inventory safety stock helps, but management will implement price increases while adjusting sourcing and mix; not issuing guidance until cost base stabilizes .
  • Sourcing shift: Increased domestic production with eight U.S. plants; further shifts to Thailand, India, etc., but “you can’t move overnight” under rapidly changing tariffs .
  • Westcott outlook: Expect Westcott to be more affected than First Aid if tariffs persist; craft category still in planograms; addressing channel shifts post Joann Fabric bankruptcy .
  • Smart Compliance: Strong interest and trials for automatic refill kits with scanner integration; not yet included in forecasts but could deliver material customer savings .

Estimates Context

MetricActual (Q1 2025)Consensus (Q1 2025)Surprise
Revenue ($USD Millions)$45.96 $46.76*Miss
Primary EPS ($USD)$0.41 $0.47*Miss
# of Estimates (Revenue / EPS)N/A1 / 1*Thin coverage
  • Results missed both revenue and EPS vs S&P Global consensus; limited analyst coverage (1 estimate each) reduces statistical confidence in the “miss” signal [GetEstimates]*.
  • With tariffs driving pricing and sourcing uncertainty, expect estimate dispersion/revisions as management implements price increases and volumes/mix evolve .
  • Estimates marked with * are from S&P Global (Capital IQ).

Key Takeaways for Investors

  • Q1 was resilient operationally (GM expansion, First Aid +14%), but below thin Street estimates; monitor follow-through from price increases and tariff clarity for Q2 trajectory [GetEstimates]*.
  • Productivity/automation is a structural margin lever (> $2M savings; robotics with <2-year payback), supporting gross margin amid cost pressures .
  • Westcott likely more exposed to consumer stress and tariffs than First Aid; expect category mix to favor First Aid and DMT kitchen expansion near term .
  • M&A optionality high: robust pipeline and potential for larger deals as competitors struggle with working capital under high tariffs; balance sheet and operational capabilities are advantages .
  • Segment outlook: Europe’s decline tied to timing; Canada First Aid strength persists; U.S. growth anchored by First Aid while school/office faces softer demand .
  • Near-term trading lens: Stock likely sensitive to policy headlines and pricing announcements; positive catalysts include tariff stabilization, announced price increases taking hold, and automation ROI realization .
  • Medium-term thesis: Diversified sourcing, domestic manufacturing base, Smart Compliance annuity model, and disciplined capital allocation (including dividend increases) support durable margin and cash flow profile .