Tariff-Related ‘Pull-Forward’ of Acuity Brands Orders Crimped Q2 Sales, Says CEO
LED lighting and IoT products supplier Acuity Brands grew revenue by 3 percent in its Q2 ended Feb. 28, but it would have been higher if not for the “pull-forward” of orders in Q1 from customers trying to beat Acuity’s price increases from the Section 301 tariffs on Chinese components imports, said CEO Vern Nagel on a Wednesday earnings call. Acuity is “unable to determine the precise impact of the sales shift between quarters,” he said.
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Acuity argued unsuccessfully last summer for the removal of 10 tariff lines of components from the 10 percent List 3 duties that took effect Sept. 6. “Acuity is particularly concerned about the inclusion of a number of electrical component parts, electrical hardware, and batteries, because these components are part of a variety of energy-efficient products and smart technologies that Acuity produces,” it said then.
Global trade issues, plus the “current rhetoric” from the Trump administration threatening the closure of the southern border, “have certainly created greater volatility in demand in our various end markets and we expect that to continue,” said Nagel. Though Acuity’s price hikes helped offset its higher tariff costs, the company expects “imported electrical components and finished goods, freight and wages will continue to rise,” he said. “These potential cost increases could have a negative impact on our financial results due to the timing and nature of any mitigation efforts, including potential future price increases and other actions to reduce costs.”
Investors shouldn’t read too much into Cree’s recent agreement to sell its lighting products business (see 1903150038), said Nagel when asked if the deal signals weakness in the LED lighting business. “My comment on the lighting industry is it's not going anywhere,” he said. “It's a robust industry, it's growing. It brings a lot of value.” Cree was among “smaller bit players" in the business that "didn't make the right investments and they misstepped, and so they didn't win,” he said. Cree didn’t comment Thursday.