Makita Earnings: Expect Profitability to Improve Despite Limited Top-Line Growth in 2024

While Makita's sluggish March-quarter sales in local currency and guidance for a 4% revenue decline in fiscal 2024 (ending March 2025) suggest that the recovery in North America is slower than we had expected, we are encouraged that the company expects operating margin of 10.6% in fiscal 2024, implying a 1.7-percentage-point increase from last year. This supports our view that narrow-moat Makita will improve profitability despite near-term headwinds, aided by price raises and a pickup in capacity utilization. During the earnings call, the company said its inventory levels are normalized at 9 months, down from the peak of 11.7 months a year and a half ago. Accordingly, we expect capacity utilization to gradually increase and drive Makita’s margin expansion.