Quick Adaption to New Circumstances Key Driver to Acme United’s Success

When Acme United (ACU – $21.67) announced its second quarter results a couple of weeks ago, it was refreshing to find out how quickly the Company had adapted to the new world that we currently live in.

Next to record breaking Q2 sales and earnings, Acme was also positive about the future. The Company mentioned that overall sales of its Westcott, Cuda, and Camillus brands increased and continued to do so.

Although schools may not immediately open when the new school year starts, students will get educated, and as such need school supplies. As a result, sales of Westcott are not only holding up, but are in fact increasing. In addition, Westcott will re-emphasize on its anti-microbial scissors and rulers, which it launched a couple of years ago. Although they were a success when first launched, the second time around may be much bigger, as parents, more than ever, focus on keeping their children germ-free.

Also strong sales of Cuda, the fresh and saltwater fishing tools brand, and Camillus, the world-renowned knife brand, may have come as a surprise due to COVID-19, but were somewhat logical as people seek more isolated activities, away from large crowds. Fishing, hunting, and camping all fall under that category.

Of course, the main driver for Acme United’s solid numbers in the second quarter was first aid. Good to know is that the Company introduced new personal protection kits that have gloves, sanitizers, masks, wipes and thermometers for use in offices, schools, dining facilities, planes and many other locations. These new items will ship in the current quarter.

Online ICAST Doesn’t Stop Cuda From Moving Forward

As mentioned above, Cuda continues to perform very well. Last month, ICAST, the world’s largest sportfishing trade show, cancelled its physical event. Nevertheless, Cuda introduced several new tools and accessories to help make a day on the water both exciting and rewarding.

For example, new heavy duty mono cutters will soon enter the market. Made out of Zirconium infused stainless steel, the cutters are designed for the commercial fishing market as they provide a solution for heavy duty 400lb mono cutting. Also fingerless Cool & Dry fishing gloves will soon be available at a major retailer. These gloves are designed to absorb sweat and cool a user off with patches on the back of the hand (one patch keeps you dry and the other keeps you cool). A true innovation to the glove category. In addition, a tape measure with inches on one side and centimeters on the back side, will be launched. The tape is UV protected, tear-resistant, and has magnetic ends for easy fold and storage?

Although the cancellation of ICAST was tough, as it is the largest annual marketing event for Cuda, the brand was able to do its own outreach to existing and new potential customers. Good to know is that distribution of the Cuda products continues to expand to many online and physical stores and chains.

From its humble beginnings in 2014, Cuda has evolved to a brand with over 125 different products in its range today. Consequently, it’s safe to say that Cuda has a tool that will satisfy every freshwater, saltwater, inshore, offshore or river bank angler.

Conclusion

The COVID-19 pandemic has changed the way the world is doing business right now. However, innovation never stops. This is again why Acme is able to outperform, as innovation is truly in the heart and soul of the Company.

Although financial results are even more uncertain now than in other years, we feel that there are many positive signs for a solid third quarter for Acme United. In fact, the Company is significantly increasing its inventory as it expects a strong order flow and wants to be prepared for potential supply chain disruptions during the coming quarters. Smallcaps Recommendation: BUY.

Smallcaps.us Advice: Buy	Price Target: $59.86	Latest Company Report (pdf)
For important disclosures, please read our disclaimer.