Grainger Posts Seven Percent Sales Increase

Grainger (NYSE: GWW) reported sales of $2.6 billion for the third quarter of the year. This represents a 7 percent increase over the same period in 2013. The distributor’s net earnings for the third quarter increased 9 percent to $230 million versus $211 million in 2013.  Earnings per share of $3.30 increased 12 percent versus $2.95 in 2013. With three quarters complete, Grainger lowered the top end of its sales and earnings per share guidance for 2014 and now expects 5.0 to 5.5 percent sales growth and earnings per share of $12.20 to $12.30. 

“We were pleased with the overall performance of the business in the quarter,” said Jim Ryan, chairman, president, and CEO, in a company press release. “Strong volume growth and positive operating leverage in the U.S. business were the primary drivers of our results. We were encouraged by better top line growth in Canada this quarter, but margins remain under pressure due to currency and additional investments.”
Grainger’s 7 percent sales increased consisted of 2 percentage points from acquisitions, net of dispositions, and a 1 percentage point reduction from unfavorable foreign exchange. The company’s gross profit margin decreased 0.8 percentage point to 43.0 percent versus 43.8 percent in the 2013 third quarter, with more than half the decline due to unfavorable mix from the recently acquired businesses. The remainder of the decline was due to faster growth with lower gross margin customers and lower gross profit margins outside of the U.S.

Sales for Grainger’s U.S. segment increased 7 percent in the third quarter of 2014 versus the prior year. Results for the quarter included 2 percentage points from acquisitions, net of dispositions. The company says sales growth in heavy and light manufacturing, commercial, retail, and natural resources customer end markets contributed to the sales increase.

In Canada, Grainger’s third quarter sales increased 3 percent versus the prior year, 8 percent in local currency. The sales increase for the quarter was led by solid growth to customers in the commercial, transportation, oil and gas, government, and heavy and light manufacturing end markets.

Overseas, the company’s “other businesses” sales increased 16 percent during the third quarter. According to Grainger, that sales increase was primarily driven by the single channel businesses, MonotaRO in Japan and Zoro in the U.S, and from the business in Mexico.
For the nine months ended September 30, 2014, Grainger’s sales of $7.5 billion increased 6 percent versus $7.1 billion in the same period in 2013. The company’s reported net earnings increased 2 percent to $653 million versus $640 million in the first nine months of 2013. Reported earnings per share for the first nine months increased 4 percent to $9.30 versus $8.92 for 2013.          

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