Pat Hallinan
Executive Vice President, CFO at Stanley Black & Decker
Thanks, Chris, and good morning.
Turning to the next slide, I would like to highlight the progress we've made along our transformation journey in the first quarter. We achieved approximately 145 million pre-tax run rate cost savings in the period bringing our aggregate savings to approximately $1.2 billion since program inception. As we focus our portfolio, streamline our business structure and transform our operations our teams are actively identifying and prioritizing opportunities to further optimize our cost structure.
Given the dynamic macro environment we continue to refine and mobilize plans to deliver targeted savings. We are confident in our ability to execute those plans, we continue to target $1.5 billion of pre-tax run rate savings by the end of 2024 and $2 billion pre-tax run rate cost savings by the end of 2025. Strategic sourcing remains the largest contributor to our transformation savings to date. We are leveraging savings on the $5 billion of addressable spend across areas such as materials and components, finished goods and indirect expenditures.
Our operations excellence program, which leverages lean manufacturing principles is driving productivity improvements. The scope of this work stream improves efficiency and effectiveness within our production and distribution facilities. A pipeline of projects is robust with initiatives lined up to deliver efficiency gains in 2024 and beyond. Footprint-related projects and product platforming, which are more event-driven, will become increasingly important throughout the remainder of our transformation. We are optimizing our distribution footprint, as well as redesigning our manufacturing network to leverage centers of excellence and to optimize our operations. This multiyear endeavor is accelerating in 2024 as we plan to exit or transform a number of facilities across the globe during 2024 and 2025.
The manufacturing sites we previously announced for closure have ceased production and we expect to exit these sites in the near future. We continued to execute manufacturing footprint changes during the first quarter, which affected five sites with the goal to complete these site modifications this year. Regarding product platforming, this initiative will unlock value by reducing complexity across our value chain. This savings initiative identifies various parts and components that can be standardized across a product family, which eliminates complexity and improves procurement scale.
In aggregate, our supply chain transformation initiatives are expected to generate approximately $0.5 billion of savings in 2024, improving margins and generating resources for additional growth investments in our core business. We remain confident that our transformation can support the sustainable cost structure and efficiency needed to return our adjusted gross margin to 35% or greater while enabling targeted growth investments.
Moving to the next slide. We continue prioritizing free cash flow generation and gross margin expansion to support long-term growth and value creation. First quarter free cash outflow was in line with typical historical trends due to seasonal account receivable increases. This quarter, our inventory control contained the working capital build to approximately $360 million where we've traditionally averaged a roughly $700 million increase in the first quarter of the year. Days of inventory is now approximately 150 days, and improvement of 10 days versus the prior year and moving toward our long-term target of approximately 120 days to 130 days.
We use the net proceeds from the infrastructure sale to reduce our commercial paper balance in the beginning of the second quarter. Because this occurred subsequent to the first quarter close, it is not reflected in the first quarter balance sheet. We remain focused on working capital optimization and profitability improvement to generate strong, free cash flow in 2024. For the full year 2024, we plan to reduce inventory by $400 million to $500 million as we continue prioritizing working capital efficiency. Capex is expected to range between $400 million to $500 million, which includes support for the footprint-related transformation initiatives. These items, combined with organic cash generation support our full year free cash flow range of $600 million to $800 million, which is unchanged from our guidance communicated earlier in the year.
Our capital deployment priorities remain consistent, investing in organic growth and our transformation. Funding our longstanding commitment to return value to shareholders through cash dividends and further strengthening our balance sheet.
Turning to profitability. Adjusted gross margin of 29% in the first quarter improved 590 basis points versus prior year, driven by lower inventory destocking costs, supply chain transformation benefits and lower shipping cost. We expect to increase adjusted gross margin sequentially in each half of 2024. And we are planning for total company adjusted gross margin to approximate 30% for the full year. We continue to expect to exit the year at an adjusted gross margin rate in the low 30s. We are off to a solid start in 2024, and the hard work we've done to make adjusted gross margin progress allows us to fund incremental investments to accelerate long-term organic revenue growth.
Now, turning to the 2024 guidance and the remaining key assumptions. In addition to the free cash flow guidance I just covered, we are reiterating GAAP earnings per share range of a $1.60 to $2.85, and an adjusted earnings per share range of $3.50 to $4.50 we are maintaining the range of organic revenue assumptions to be plus or minus low single digits. We believe the most likely outcome for organic revenue is to be flat to down 1%. At this level, we expect to achieve the midpoint of our adjusted EPS range through cost controls. Our view incorporates modest headwinds in aggregate for our markets, and we remain focused on gaining share in this environment. We are maintaining a disciplined approach to cost management and remain committed to funding investments for long-term organic growth.
Turning to the segments, Tools & Outdoor organic revenue is expected to be plus or minus low single digits, most likely below flat. Consistent with the total company, the industrial segment, organic revenue is expected to be relatively flat to slightly positive. Infrastructures first quarter decline will impact the segment's full year organic growth. And now that the deal is closed. We will report the divestiture revenue impact quarterly. Our planning assumption for growth investments is approximately an incremental $100 million in 2024. These are designed to accelerate innovation, market activation, and to support our powerful DEWALT, CRAFTSMAN and STANLEY brands. This should result in 2024 SG&A as a percentage of sales in the mid-21% zone for the full year. We will remain agile with the pace of investments should the demand outlook swing in or out of our favor.
Turning to profitability. We expect total company adjusted EBITDA margin to approximate 10% for the full year, supported by the benefits of the transformation program. Segment margin and Tools & Outdoor is planned to be up year-over-year, also driven by continued momentum from our ongoing strategic transformation. The industrial segment margin is expected to be flat to slightly positive versus prior year as operating improvement in Engineered Fastening is offset by the dilution from the infrastructure business divestiture. Our adjusted EPS range remains $1, with variability in market demand being the largest contributor. We will work to optimize adjusted gross margin and manage SG&A thoughtfully throughout the year to balance the macro uncertainty while working hard to preserve investments to position the business for longer term growth.
Turning to other elements of guidance. GAAP earnings include pre-tax non-GAAP adjustments ranging from $290 million to $340 million largely relating to the supply chain transformation program with approximately 25% of these expenses being noncash footprint rationalization costs. Our adjusted tax-rate is expected to be 10% for 2024 with the second and third quarters in the low 30s. Discrete tax planning items are expected to reduce the full year rate and primarily impact the fourth quarter. Other 2024 guidance assumptions at the midpoint are noted on the slide to assist with modeling. We expect a second quarter adjusted earnings per share to be approximately 21% to 22% of the full year at the midpoint. Adjusted EBITDA for the second quarter as a percentage of the full year is expected to exceed 25%, with EPS contribution lower due to the quarterly tax profile.
In summary, we continue to make progress on our transformation journey with an unwavering focus on gross margin expansion, cash generation, balance sheet strength, and share gains in a soft market. We are confident that successful execution of our strategy can position the company for long-term growth and value creation.
With that, I will now pass the call back to Don.
