CHICAGO — Grainger today reported results for the fourth quarter and full year 2022. Sales of $3.8 billion in the fourth quarter 2022 increased 13.2%, or 17.2% on a daily, constant currency basis versus the fourth quarter of 2021. For the full year, sales of $15.2 billion increased 16.9%, or 19.3% on a daily, constant currency basis compared to the prior year.
“Our strong 2022 performance was driven by the team’s focused execution against our long-term strategy in a robust demand market. Both our High-Touch Solutions and Endless Assortment segments delivered above expectations by remaining committed to our purpose, We Keep the World Working®,” said D.G. Macpherson, Chairman and CEO. “As we look to 2023, we remain focused on delivering value for our customers and strong results for shareholders and team members.”
2022 Financial Summary
¹Results exclude the divestiture of Cromwell’s enterprise software business completed in the fourth quarter of 2022. Reconciliations of the adjusted measures reflected in this table to the most directly comparable GAAP measures are provided in the supplemental information of this release.
Sales
For the fourth quarter of 2022, total Company sales on a reported and daily basis increased 13.2% as compared to the fourth quarter of 2021. Normalizing for the Japanese Yen’s depreciation, sales on a daily, constant currency basis were up 17.2% compared to the fourth quarter of 2021.
In the High-Touch Solutions N.A. segment, sales were up 16.8%, or 17.2% on a daily, constant currency basis versus the fourth quarter of 2021 driven by strong price realization and continued volume growth. In the Endless Assortment segment, sales were up 0.9%, or 18.2% on a daily, constant currency basis versus the fourth quarter of 2021. Growth in the segment was driven by strong new customer acquisition and repeat business for the segment, as well as enterprise customer growth at MonotaRO.
For the full year 2022, total Company sales increased 16.9% versus the full year 2021. Daily sales on a constant currency basis increased 19.3% versus the prior year.
Gross Profit Margin
For the fourth quarter of 2022, total Company gross profit margin was 39.6%, up 230 basis points compared to 37.3% in the fourth quarter of 2021.
In the High-Touch Solutions N.A. segment, gross margin expanded by 225 basis points over the fourth quarter of 2021 as the segment benefited from improved product mix, lower freight costs and the favorable net impact of LIFO inventory adjustments. In the Endless Assortment segment, gross margin expanded by 170 basis points versus the fourth quarter of 2021 driven by strong price realization, freight efficiencies and favorable business unit mix.
For the full year 2022, total Company gross profit margin was 38.4%, up 215 basis points versus the prior year. The increase in gross profit margin was primarily driven by improved product mix and price / cost favorability as well as lapping the $118 million pandemic inventory adjustment from 2021. The increase was partially offset by freight inflation.
Earnings
For the fourth quarter of 2022, reported operating earnings for the total company were $544 million, up 30.4% over the fourth quarter of 2021. Reported operating margin was 14.3%, a 190 basis point increase over the fourth quarter of 2021. On an adjusted basis, which excludes the gain from the fourth quarter divestiture of Cromwell’s enterprise software business, operating earnings for the quarter were $523 million, up 25.5% over the fourth quarter of 2021. Adjusted operating margin was 13.8%, a 135 basis point increase over the fourth quarter of 2021. The increase in adjusted operating margin was driven by gross profit margin expansion, which was partially offset by decreased SG&A leverage as the Company continued to invest to support growth and incurred $35 million of non-recurring items in the period.
Diluted earnings per share for the fourth quarter of 2022 were $7.54 on a reported basis, up 38.6% versus the fourth quarter of 2021. On an adjusted basis, diluted earnings per share were $7.14, up 31.3% versus the fourth quarter of 2021. The increase in earnings per share was due primarily to the strong operating performance in the quarter.
For the full year 2022, reported operating earnings for the total Company of $2,215 million were up 43.2% versus the prior year, and resulted in reported operating margin of 14.5%, an increase of 265 basis points. On an adjusted basis, 2022 operating earnings of $2,194 million were up 41.9% versus the prior year, and resulted in adjusted operating margin of 14.4%, an increase of 255 basis points. During the year, the Company achieved 40 basis points of SG&A leverage on strong revenue growth.
Diluted earnings per share of $30.06 on a reported basis increased 51.5% versus 2021 earnings per share of $19.84. On an adjusted basis, 2022 diluted earnings per share were $29.66, up 49.5% versus the prior year. The increase in earnings per share was due primarily to the strong operating performance in the year.
Tax Rate
For the fourth quarter of 2022, the tax rate was 24.3% compared to 24.8% in the fourth quarter of 2021. On an adjusted basis, the tax rate was 25.3% compared to 24.8% in the prior year quarter. The variance was driven primarily by a decrease in stock compensation tax benefit as compared to the fourth quarter of 2021.
For the full year 2022, the reported tax rate was 24.8% versus 25.0% in 2021. On an adjusted basis, the full year tax rate was 25.1% versus 25.0% in the prior year.
Cash Flow
Operating cash flow for the quarter was $360 million as net earnings were partially offset by working capital in the period. As compared to the fourth quarter of 2021, operating cash flow increased $147 million, an increase of 69.0%. The increase over the prior year quarter was primarily due to higher net earnings as well as favorable working capital in the fourth quarter of 2022.
For the full year 2022, the Company generated operating cash flow of $1,333 million as net earnings were partially offset by working capital in the period. As compared to 2021, operating cash flow increased $396 million, an increase of 42.3%. The increase over the prior year was driven by the higher net earnings, which were partially offset by 2022 investments in working capital to support growth.
In 2022, the Company invested $256 million through capital expenditures and returned $949 million to Grainger shareholders, comprised of $347 million in dividends and $602 million to repurchase 1.1 million shares.
2023 Company Guidance
The Company is providing the following outlook for 2023:
