CHICAGO — Grainger today reported results for the second quarter of 2023 with sales of $4.2 billion, up 9.0%, or 10.1% on a daily, constant currency basis, and diluted EPS of $9.28, up 29.1% compared to the second quarter of 2022.
“The team delivered another strong quarter of performance, as overall demand remains reasonably steady, and we show up well with our customers. Across the business, we continue to invest in our team members and operations, including the recent announcement of our new Northwest Distribution Center, all while producing great results at the top and bottom line,” said D.G. Macpherson, Chairman and CEO. “Given the success of the first half, we are raising the midpoint of our revenue and EPS ranges and expect to continue driving strong execution in the back half of 2023.”
2023 Second Quarter Financial Summary
|
($ in millions, except per share amounts) |
Q2 2023 (1) |
Q2 2022 (1) |
Q2’23 vs. Q1’22 |
|
Fav. / (Unfav.) |
|||
|
Net Sales |
$4,182 |
$3,837 |
9.0 % |
|
Gross Profit |
$1,644 |
$1,441 |
14.0 % |
|
Operating Earnings |
$661 |
$534 |
23.5 % |
|
Net Earnings Attributable to W.W. Grainger, Inc. |
$470 |
$371 |
26.5 % |
|
Diluted Earnings Per Share |
$9.28 |
$7.19 |
29.1 % |
|
Gross Profit Margin |
39.3 % |
37.6 % |
170 bps |
|
Operating Margin |
15.8 % |
13.9 % |
190 bps |
|
Effective Tax Rate |
24.0 % |
24.8 % |
80 bps |
(1) Results are consistent on a reported and adjusted basis. |
|||
Revenue
Sales in the quarter, on a reported and daily basis, increased 9.0% compared to the second quarter of 2022. Excluding the unfavorable foreign exchange impact of 1.1%, sales on a daily, constant currency basis increased 10.1% compared to the second quarter of 2022.
In the High-Touch Solutions – N.A. segment, daily sales were up 9.9% compared to the second quarter of 2022, primarily due to continued price realization and solid volume growth. In the Endless Assortment segment, daily sales were up 4.5% or 10.1% on a daily, constant currency basis compared to the second quarter of 2022. Revenue growth was driven by new customer acquisition across the segment as well as enterprise customer growth at MonotaRO.
Gross Profit Margin
Gross profit margin for the second quarter of 2023 was 39.3%, a 170-basis point increase compared to the second quarter of 2022. The increase was driven by favorability in both segments.
In the High-Touch Solutions – N.A. segment, gross profit margin expanded by 200-basis points over the second quarter of 2022 primarily due to sustained freight and supply chain efficiencies, as well as continued favorable product mix. In the Endless Assortment segment, gross profit margin expanded by 50-basis points over the second quarter of 2022 driven by strong price realization and continued freight efficiencies at MonotaRO, offsetting unfavorable product mix at Zoro.
Earnings
Operating earnings for the second quarter of 2023 were $661 million, up 23.5% compared to the second quarter of 2022. Operating margin in the quarter was 15.8%, a 190-basis point increase over the second quarter of 2022 driven by expanded gross profit margins in both segments and further aided by SG&A leverage in the High-Touch Solutions – N.A. segment.
Diluted earnings per share of $9.28 in the second quarter of 2023, increased 29.1% compared to the second quarter of 2022 due primarily to the strong operating performance.
Tax Rate
The second quarter 2023 effective tax rate was 24.0%, compared to 24.8% in the second quarter of 2022. The decrease in the effective tax rate was primarily due to increased stock compensation tax benefit.
Cash Flow
During the second quarter of 2023, the Company generated $450 million of cash flow from operating activities, as net earnings were partially offset by a higher accounts receivable balance and tax payments in the period. The Company invested $95 million in capital expenditures, resulting in free cash flow of $355 million. During the quarter, the Company returned $265 million to Grainger shareholders through dividends and share repurchases.
Guidance
|
Total Company(1) |
Previous 2023 Guidance Range (as of April 27, 2023) |
Updated 2023 Guidance Range (as of July 27, 2023) |
|
Net Sales |
$16.2 – $16.8 billion |
$16.4 – $16.8 billion |
|
Sales Growth |
6.6% – 10.6% |
8.0% – 10.6% |
|
Daily Sales Growth |
7.0% – 11.0% |
8.5% – 11.0% |
|
Gross Profit Margin |
39.1% – 39.4% |
39.1% – 39.4% |
|
Operating Margin |
15.2% – 15.7% |
15.2% – 15.7% |
|
Diluted Earnings per Share |
$34.25 – $36.75 |
$35.00 – $36.75 |
|
Operating Cash Flow |
$1.6 – $1.8 billion |
$1.70 – $1.85 billion |
|
CapEx (cash basis) |
$450 – $525 million |
$450 – $525 million |
|
Share Buyback |
$650 – $800 million |
$750 – $850 million |
|
Effective Tax Rate |
~24.0% |
~24.0% |
|
Segment Operating Margin |
||
|
High-Touch Solutions – N.A. |
17.3% – 17.8% |
17.3% – 17.8% |
|
Endless Assortment |
7.9% – 8.3% |
7.4% – 7.8% |
(1) |
Guidance provided is on an adjusted basis. Daily sales growth adjusted for the impact of one fewer selling day in 2023 compared to 2022. The Company does not reconcile forward-looking non-GAAP financial measures. For further details see the supplemental information of this release. |