ATLANTA — Acuity Inc. (“Acuity”) is reporting a solid second quarter of net sales and operating profit, while also discussing the potential impact of tariffs that were imposed on April 2.
“For total Acuity, we generated net sales in the second quarter of $1 billion which was $100 million or 11% above the prior year, Karen Holcomb, Chief Financial Officer announced. “This improvement was driven by the continued growth in Intelligent Spaces and the inclusion of two months of QSC sales. During the quarter, our adjusted operating profit was $163 million which was up around $23 million or 16% from last year, and we expanded our adjusted operating profit margin to 16.2%, an increase of 70 basis points from the prior year.”
Neil Ashe, Acuity Chairman of the Board, President, and CEO, described the quarterly earnings as “steady”, while also keeping an eye on the tariff situation.
“Now as we look forward, there is obviously uncertainty in the marketplace, specifically with regard to tariffs,” Ashe told reporters. “We approach tariffs as the equivalent of a supply shock, and our financial priorities are, first, to manage the dollar impact, and second, to manage the margin impact. Across the company, we have taken pricing actions in response to tariffs that were in place through the end of March. As the tariff policy continues to evolve, we will continue to take necessary pricing actions, and we will work to accelerate our productivity efforts.”
Ashe also made it clear that Acuity will focus on factors “within our control”, but refused to get in to specifics on price increases due to competitive reasons, saying only that he expects increases to be in the “lower middle single digits”.
“We have worked hard to get to where we are and have the dexterity that we do have,” Ashe continued. “On a relative basis to our competitors, we feel confident in the position that we are in. We’ve got about 18% from Asia. So that is China plus other countries. About half comes from Mexico and almost all of that is USMCA compliant.”
In explaining pricing, Ashe says the lag between the implementation of the tariffs and what is already in the U.S. inventory will impact pricing for the short term. “Those pricing actions will take a little bit of time to be fully implemented. So there’s a lag between the time that the price actions take effect. There’s also a lag from a cash flow perspective. So those tariffs are basically due in 30 days. So we will be paying those faster than we will be collecting ultimately from customers and those tariffs then need to flow through inventory as it flows through our system and to our customers,” Ashe explained.
“So big picture, we will be working to cover the dollar cost first that there will be a little bit of a lag in our ability to do that just because of how the channel works. And there will be some cash flow impact as a result of the tariffs. But, I want to emphasize we have an outstanding, high performing diversified global supply chain. So we have the dexterity to move throughout our platform and we will do that going forward.”
Ashe referred to the tariffs as “supply shock” which was similar to what happened five years ago at the beginning of the COVID pandemic.
“When we say we’re focused on dollars, if there’s $100 of impact, we’re going to pass on at least $100 of price,” Ashe said. “And let’s ignore the impact to demand for a second. We will at least pass on $100 of price. The impact then would be mildly diluted to the percentage margins in the periods in which we are cycling through this. That’s why we refer to it as a supply shock, and we experienced the same thing during kind of the rapid inflation periods of the pandemic.”