CHICAGO — Grainger today reported results for the third quarter of 2022 with sales of $3.9 billion, up 16.9% on a reported and daily basis, and up 20.3% on a daily, constant currency basis, compared to the third quarter 2021, driven by strong performance in both the High-Touch Solutions N.A. and Endless Assortment segments.
“The third quarter performance reflects our focused execution against our long-term strategy and ability to serve customers well in this demand environment,” said D.G. Macpherson, Chairman and CEO. “Our teams are driving impressive results across both business segments and, after another quarter of strong performance, we are increasing our 2022 full year guidance. We remain on track to deliver an exceptional year.”
2022 Third Quarter Financial Summary
|
($ in millions) |
Q3 2022 (1) |
Q3 2021 (1) |
Q3 |
|
Fav. (Unfav.) vs. Prior |
|||
|
Net Sales |
$3,942 |
$3,372 |
16.9 % |
|
Gross Profit |
$1,519 |
$1,250 |
21.5 % |
|
Operating Earnings |
$603 |
$438 |
37.6 % |
|
Net Earnings Attributable to |
$426 |
$297 |
43.4 % |
|
Diluted Earnings Per Share |
$8.27 |
$5.65 |
46.4 % |
|
Gross Profit Margin |
38.5 % |
37.1 % |
145 bps |
|
Operating Margin |
15.3 % |
13.0 % |
230 bps |
|
Tax Rate |
24.7 % |
25.5 % |
80 bps |
(1) Neither Q3 2022 nor Q3 2021 results contained any adjusting items, therefore separate adjusted results are not presented above. |
Revenue
Sales in the quarter, on a reported and daily basis, increased 16.9% as compared to the third quarter of 2021. Excluding the unfavorable foreign exchange impact of 3.4%, sales on a daily, constant currency basis were up 20.3% compared to the third quarter of 2021 which normalizes for the significant impact of the depreciating Japanese yen.
In the High-Touch Solutions N.A. segment, daily sales were up 19.4% compared to the third quarter of 2021, due to both strong price realization and continued volume growth across all geographies. In the Endless Assortment segment, daily sales were up 8.6% versus the third quarter of 2021 and up 23.7% on a daily, constant currency basis. Revenue growth was driven by strong new customer acquisition and repeat business for the segment, as well as enterprise customer growth at MonotaRO.
Gross Profit Margin
Gross profit margin for the third quarter of 2022 was 38.5%, a 145 basis point increase compared to the third quarter of 2021. The increase was driven by favorability in both segments.
In the High-Touch Solutions N.A. segment, gross margin expanded by 125 basis points over the prior year third quarter primarily due to improved product mix and favorable price/cost spread due largely to timing. This was partially offset by freight inflation. In the Endless Assortment segment, gross margin expanded by 130 basis points versus the prior year third quarter driven largely by freight efficiencies and favorable business unit mix.
Earnings
Operating earnings for the third quarter of 2022 of $603 million were up 37.6% versus the third quarter of 2021. Operating margin in the quarter of 15.3% increased 230 basis points over the third quarter of 2021 on stronger gross margins in both segments combined with 85 basis points of SG&A leverage gained on strong top-line growth.
Diluted earnings per share of $8.27 in the third quarter of 2022 increased 46.4% compared to the third quarter of 2021 due primarily to the strong operating performance.
Tax Rate
The third quarter 2022 tax rate was 24.7%, compared to 25.5% in the third quarter of 2021. The decrease in the rate was primarily due to our mix of foreign earnings and an increased tax benefit from stock compensation.
Cash Flow
Operating cash flow for the third quarter of 2022 was $380 million, an increase of $219 million over the third quarter of 2021. The increase was largely driven by the higher net earnings as well as favorable net working capital in the current year period. During the quarter, the Company distributed $286 million to shareholders through dividends and share repurchases.
Guidance
Given the strong third quarter results, the Company is raising its 2022 full year guidance expectations.
|
Total Company (1) |
Previous 2022 Guidance Range |
Updated 2022 Guidance Range |
|
Net Sales |
$15.0 – $15.2 billion |
$15.1 – $15.2 billion |
|
Daily Growth |
14.5% – 16.5% |
15.5% – 16.5% |
|
Gross Profit Margin |
37.2% – 37.5% |
38.0% – 38.1% |
|
Operating Margin |
13.6% – 14.0% |
14.3% – 14.4% |
|
Diluted Earnings per Share |
$27.25 – $28.75 |
$29.10 – $29.70 |
|
Operating Cash Flow |
$1.25 – $1.35 billion |
$1.25 – $1.35 billion |
|
CapEx (cash basis) |
$300 – $325 million |
$275 – $300 million |
|
Share Repurchase |
$600 – $700 million |
$600 – $625 million |
|
Tax Rate |
~25.0% |
~25.0% |
|
Segment Operating Margin |
||
|
High-Touch Solutions N.A. |
15.4% – 15.8% |
16.2% – 16.3% |
|
Endless Assortment |
7.7% – 8.2% |
8.0% – 8.2% |
(1) Guidance provided is on an adjusted basis |