CHICAGO — Grainger today reported results for the second quarter of 2022 with sales of $3.8 billion, up 19.6%, or 22.0% on a daily, constant currency basis compared to the second quarter 2021, driven by strong performance in both segments.
“Our second quarter results reflect the team’s continued commitment to serving customers extraordinarily well in this strong demand environment,” said DG Macpherson, Chairman and CEO. “Our execution on our strategic initiatives is driving sustained growth and share gain across the business. After another quarter that exceeded expectations, we are increasing our 2022 outlook and remain well-positioned to deliver an exceptionally strong year.”
2022 Second Quarter Financial Summary
|
($ in millions) |
Q2 2022 (1) |
Q2 2021 (1) |
Q2 |
|
Fav. (Unfav.) vs. Prior |
|||
|
Net Sales |
$3,837 |
$3,207 |
20 % |
|
Gross Profit |
$1,441 |
$1,124 |
28 % |
|
Operating Earnings |
$534 |
$334 |
60 % |
|
Net Earnings Attributable to W.W. Grainger, Inc. |
$371 |
$225 |
65 % |
|
Diluted Earnings Per Share |
$7.19 |
$4.27 |
68 % |
|
Gross Profit Margin |
37.6 % |
35.0 % |
255 bps |
|
Operating Margin |
13.9 % |
10.4 % |
350 bps |
|
Tax Rate |
24.8 % |
23.6 % |
(120) bps |
(1) |
Neither Q2 2022, nor Q2 2021 results contained any adjusting items, therefore separate adjusted results are not presented above. |
Revenue
Sales on a reported and daily basis in the quarter increased 19.6% as compared to the second quarter of 2021. Excluding the unfavorable foreign exchange impact of 2.4%, sales on a daily, constant currency basis were up 22.0% compared to the second quarter of 2021.
In the High-Touch Solutions N.A. segment, daily sales were up 22.2% compared to the second quarter of 2021 due to both strong price realization and volume growth across all geographies. In the Endless Assortment segment, daily sales were up 11.4%, versus the second quarter of 2021, or up 21.1% on a daily, constant currency basis, reflecting the significant impact of the depreciating Japanese yen. Segment revenue growth continues to be driven by new customer acquisition at both Zoro and MonotaRO and strong repeat and enterprise customer growth at MonotaRO.
Gross Profit Margin
Gross profit margin for the second quarter of 2022 was 37.6%, a 255 basis point increase compared to the second quarter of 2021. The increase was driven by favorability in both segments and includes the lap of a $63 million pandemic product inventory adjustment in the prior year period within the High-Touch Solution N.A. segment.
In the High-Touch Solutions N.A. segment, gross margin expanded by 275 basis points over the prior year second quarter primarily due to the pandemic product inventory adjustment discussed above. Absent this inventory adjustment, gross margin was up over 25 basis points, primarily due to favorable product mix. In the Endless Assortment segment, gross margin expanded by 100 basis points versus the prior year second quarter driven largely by freight efficiencies as average order value increased at both Zoro and MonotaRO.
Earnings
Operating earnings for the second quarter of 2022 of $534 million were up 60% versus the second quarter of 2021. Operating margin in the quarter of 13.9% increased 350 basis points over the second quarter of 2021 on stronger gross margins in both segments combined with 95 basis points of SG&A leverage gained on strong top-line growth.
Earnings per share of $7.19 in the second quarter of 2022 increased 68.4% compared to the second quarter of 2021 due primarily to the strong operating performance.
Tax Rate
The second quarter 2022 tax rate was 24.8%, compared to 23.6% in the second quarter of 2021. The increase in rate year over year was primarily driven by a smaller benefit from the vesting of stock compensation.
Cash Flow
Operating cash flow for the second quarter of 2022 was $250 million, down $19 million over the second quarter of 2021. The decrease was driven by heightened cash used by working capital as the Company used its balance sheet to support strong top-line growth. This more than offset higher net earnings in the quarter. During the quarter, the Company distributed $219 million to shareholders through dividends and share repurchases.
Guidance
Given the strong first half of 2022, the Company is raising its 2022 full year guidance expectations.
|
Total Company (1) |
Previous 2022 Guidance Range |
Updated 2022 Guidance Range |
|
Net Sales |
$14.5 – $14.9 billion |
$15.0 – 15.2 billion |
|
Daily growth |
11.0% – 14.0% |
14.5% – 16.5% |
|
Gross Profit Margin |
36.8% – 37.3% |
37.2% – 37.5% |
|
Operating Margin |
13.0% – 13.6% |
13.6% – 14.0% |
|
Earnings per Share |
$25.00 – $27.00 |
$27.25 – $28.75 |
|
Operating Cash Flow |
$1.15 – $1.35 billion |
$1.25 – $1.35 billion |
|
CapEx (cash basis) |
$275 – $325 million |
$300 – $325 million |
|
Share Repurchase |
$600 – $800 million |
$600 – $700 million |
|
Tax Rate |
~25.0% |
~25.0% |
|
Segment Operating Margin |
||
|
High-Touch Solutions N.A. |
14.9% – 15.5% |
15.4% – 15.8% |
|
Endless Assortment |
7.5% – 8.2% |
7.7% – 8.2% |
(1) |
Guidance provided is on an adjusted basis |
Second Quarter Highlights
- Delivered sales of $3.8 billion, up 19.6%, compared to the second quarter of 2021; up 22.0% on a daily, constant currency basis
- Expanded gross margin by 255 bps compared to the second quarter of 2021
- Generated operating earnings of $534 million, up 60.0%, resulting in EPS of $7.19, an increase of 68.4% versus the second quarter of 2021
- Returned $219 million to shareholders through dividends and share repurchases
- Published 11th Environmental, Social and Governance report highlighting Grainger’s focus on driving sustainable supply chain operations and furthering diversity, equity and inclusion
- Increases full year 2022 guidance, including updated total Company daily sales growth of 14.5% – 16.5%, driving EPS range of $27.25 – $28.75