L.S. Starrett Carries Forward After Historic Quarterly Loss
Tool manufacturer L S Starrett Co. may have been a late arrival to the ball, but the Athol-based company is now feeling the full effects from the economic downturn.
The company, which has been around for 129 years, historically has seen its financial performance lag the overall economy, according to CEO Douglas Starrett. And this recession is no different.
The toolmaker only began to feel the pains of the downturn in December 2008, but now it’s grappling with serious declines in demand for its products.
But coming late the party has not provided any favors. Starrett Co. reported a $4.8 million loss during the most recent quarter, which ended March 28. That’s compared to a $2.9 million profit for the samer period a year earlier.
“We’ve experienced the largest quarterly sales decline in my 33 years in the business,” Starrett said. “The volatility is the difficult thing to cope with.”
A $2.1 million decrease in sales has contributed to a build-up in inventory across the company’s entire supply chain.
But even before the recession began, the company was hard at work expanding its brand into new global markets — Eastern Europe, the Middle East, and China — a strategy that aims to build upon an international sales figure that accounts for 50 percent of the company’s total sales revenue.
“We weren’t caught off guard with the downturn,” Starrett said. “What we didn’t anticipate — and the industry didn’t anticipate — was the severity and steepness of the decline in a short period of time.”
According to an article in the March 31 edition of Manufacturing Technology & News, the “total U.S. market for machine tools in January 2009 was $95 million, a decline of 72 percent from the same month in 2008 when sales were at $338 million.”
Coping Mechanisms
Layoffs and a reduction of employee hours has dominated Starrett’s short-term response, with additional layoffs and “possible temporary idling of manufacturing plants” a consideration if the recession’s impact does not lighten, according to the company’s quarterly report filed with the Securities and Exchange Commission.
Fortunately, the state’s work-share program — which allows employees with reduced hours to collect a percentage of their cut hours’ pay through unemployment — provides a silver lining for the company and its employees as they look to offset the salary reduction.
Despite the company’s current efforts to battle the recession, Starrett’s CEO is adamant that he is not taking a short-term approach to the company’s long-term future, highlighting the company’s emphasis to create a more far-reaching, international presence.
“What we’re trying to do is take our manufacturing expertise and expand that by driving the Starrett brand to more areas of the world,” he said.
The company evolved into a global manufacturer back in the 1950s, opening in Brazil in 1956 and the United Kingdom in 1958, which has eased the process of further, global expansion. The company recently opened warehouses and increased its sales force in Mexico, Argentina and New Zealand.
Still, the recession has had an international effect, Starrett says, which limits how successful the company’s current international expansion can be.
“We’re suffering through a complete destocking throughout the supply chain,” he said. “That is why this has dragged on and will continue to drag on.”
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