Are Toughbuilt in trouble...?

...and most importantly what does that mean for fans and users of the product? It's a widely rumored debate that Toughbuilt have been in trouble for a while now. But they're still very visible in the marketplace and turning out new products. So what's the actual situation with the popular tool brand?

The latest news

In August this year, the California-based Toughbuilt faced some real challenges meeting Nasdaq's listing requirements. They were then informed of it's de-listing from Nasdaq in the same month. It's largely though that this was down to their failing to comply with reporting obligations, notably missing key quarterly and annual filings. And this outcome means they typically wouldn't be able to re-list for at least 5 years.

This in and of itself isn't insurmountable though as ToughBuilt’s stock is now trading on the OTC market, while the company is working to submit overdue financial reports to regain compliance with regulatory standards.

Plus, there are many huge businesses who were once similarly de-listed but who went on to flourish. Our very own Jonathan's favourite tipple of choice is just one of those who underwent the de-listing. Monster Beverage Corp (Monster energy drinks) was once delisted from Nasdaq due to accounting issues. The company managed to re-list after addressing these concerns and pivoted to focus on its core energy drink product. Monster’s stock has since become highly successful, even securing a partnership with Coca-Cola, which boosted its global distribution. A great example of how following a de-listing, a brand can go on to even bigger and better things.

Feeling the strain

Financially, ToughBuilt is clearly strained, with substantial operating losses and high debt relative to its cash reserves.The word on Wall Street isn't looking good either. Any peek at the investment analysis platforms makes for grim reading with some siting financial distress levels of 80%. The company’s debt-to-equity ratio and poor cash flow has long since raised red-flags for many. With concerns abound over its capacity to manage ongoing obligations. Despite its apparent small market capitalisation and declining revenue, ToughBuilt have continued product operations and seem to be continuing in the face of adversity. For you and me though, the reality of this means that stock remains highly volatile and heavily impacted by the uncertain financial outlook.

Rumours emerged recently about it's failure to pay rents on it's facilities in North Carolina. This somewhat flies against their reported winning of grant funding back in April to invest in supply chain and business growth initiatives though. 

Recently the world's leading fintech portfolio organisation platform MacroAxis indicate that Toughbuilt have a "probability of bankruptcy rating" of over 100%. So that's a huge red flag for followers of the brand.

 Are ToughBuilt alone in these issues?

There is good reason why everyone isn't too worried about the current ToughBuilt position just yet. After all, many precedents have been set by those who came before. Over the years lots of tool brands have experienced financial difficulties, yet gone on to thrive. Some notable examples:

Stanley Black and Decker

At various points, Stanley Black & Decker faced challenges themselves. Largely due to increasing market competition and high operational costs. In response, they diversified into other more diverse sectors to strengthen financial stability.

To counter their declining tool sales they also expanded their product lines with innovative tools and acquired DeWalt, Craftsman, and other brands, which have helped cement their position as a market leader in power tools. Quite the turnaround!

Craftsman

The aforementioned Craftsman is another good example. Originally owned by Sears, Craftsman’s sales declined as Sears faced bankruptcy. Concerns grew that the iconic brand might disappear or lose value. However, as stated earlier Stanley Black & Decker acquired Craftsman in 2017 and revitalised it with new product lines and expanded distribution. Craftsman tools were brought back to high visibility and this not least helped Craftsman grow its market presence again.

So based on the above case-studies it might be considered that acquisitions and mergers could be a good outcome for a struggling ToughBuilt, but that's far from the only possibility. As the below examples of struggling tool brands also show:

Snap On

Despite its long history, Snap-On faced periods where profitability was challenged due to competition and high production costs. The brand focused on increasing productivity by moving some manufacturing overseas and expanding its direct sales model, which helped it stay profitable. 

Husqvarna

The Swedish outdoor equipment brand faced financial instability in the early 2000's, partly due to high operational costs and a competitive landscape in outdoor power equipment. In response, they restructured, focusing on core products like chainsaws and lawn equipment, and invested in eco-friendly, battery-operated options. This shift helped them recover and expand, now being widely used in both consumer and professional markets.

The way forward for ToughBuilt

So, globalisation, changing sales models, or flex and change of direction could all be get-out-of-jail-free cards for struggling Toughbuilt if they aren't taken over by one of the tool giants. But speculation is rife online since one of their biggest distributors in the USA, Lowes struggle to keep stock on the shelves. It's even rumoured that in Canada the manufacturer of the products are covertly re-badging ToughBuilt tools in an effort to liquidate inventory that should have been sold as ToughBuilt. Strange when as recently as October ToughBuilt were promoting Canadian Atlas Machinery as stockists and teasing two new major Canadian distribution partners. 

It's clear from the online chat that a lot of people are feeling the sting of this. What ToughBuilt have done with the StackTech system is truly innovative. That's refreshing in an already congested market.

There's a lot to like about the system. That, not least is why we and countless others have already invested in them. So if the capacity to grow and add to those systems in years to come is in the balance, it's bound to be unsettling. 

Even as recently as a few days ago, they're sharing on Instagram posts like:

"At ToughBuilt, we began with a mission to develop a brighter, faster, more functional future for organization and storage. Our process hinges on one question- how can we better serve people who need the next level of rugged capability and change the inconveniences accepted in our trades since 1890?

ToughBuilt is about disruption for discovery. It's about using the impossible as our starting point and doing our best to make innovators like Henry O. Studley proud."

...which is either a very positive sign of things to come or supremely mis-placed confidence in the face of possible adversity. To paraphrase their own words, using impossible as their starting point for turning things around and continuing to better serve people will absolutely be their next big challenge. But with a great display of tenacity and resilience, it's one they don't seem to be shying away from as their recent heartening Instagram post suggests: 

"As autumn unfolds, we are hearing many great questions, and we know that lately, rolling with Team ToughBuilt has presented some unexpectedly rough terrain!

The climb is hardest just before you reach the peak, but it's always well worth the view. We wanted to set aside a moment to update our incredible community on the latest as we sharpen the ice picks for the summit.

Thanks for sticking with us. We'll see you up there. 🗻🏴"

They don't shy away from answering the concerns of their customers and investors, directly addressing many of the most widespread concerns. As they rightly say "no one corners creativity". We love what we've seen from this brand so far and wish them well on this uphill journey. We certainly will "watch this space" with interest.