CHICAGO — Grainger today reported results for the first quarter of 2022 with sales of $3.6 billion, up 18.2%, or 17.9% on a daily, constant currency basis compared to the first quarter 2021, driven by strong performance in both the High-Touch Solutions N.A. and Endless Assortment segments.
“The Grainger team performed extremely well in the first quarter, with strong financial results supported by a robust demand environment. We continued to execute against our key growth initiatives, drive operational excellence and strengthen our culture,” said DG Macpherson, Chairman and CEO. “Despite the ongoing inflationary and supply chain challenges, we are well positioned for a successful year.”
2022 First Quarter Financial Summary
|
($ in millions) |
Q1 2022 (1) |
Q1 2021 (1) |
Q1 |
|
Fav. (Unfav.) vs. Prior |
|||
|
Net Sales |
$3,647 |
$3,084 |
18% |
|
Gross Profit |
$1,383 |
$1,093 |
27% |
|
Operating Earnings |
$534 |
$358 |
49% |
|
Net Earnings Attributable to |
$366 |
$238 |
54% |
|
Diluted Earnings Per Share |
$7.07 |
$4.48 |
58% |
|
Gross Margin |
37.9% |
35.5% |
245 bps |
|
Operating Margin |
14.6% |
11.6% |
305 bps |
|
Tax Rate |
25.5% |
25.8% |
30 bps |
(1)Neither Q1 2022, nor Q1 2021 results contained any adjusting items, therefore separate adjusted results are not presented above.
Sales in the quarter increased 18.2%, or 16.4% on a daily basis, as compared to the first quarter of 2021, which had one less selling day. Daily sales on a constant currency basis were 17.9% which excludes the unfavorable foreign exchange impact of 1.5% during the first quarter of 2022.In the High-Touch Solutions N.A. segment, daily sales were up 18.2% versus the prior year first quarter due primarily to solid price realization and strong growth with both midsize and large customers across all end markets. In the Endless Assortment segment, daily sales were up 10.4%, versus the first quarter of 2021, or up 17.4% on a daily, constant currency basis, reflecting the impact of the depreciating value of the Japanese Yen on sales in the quarter. Segment revenue growth was driven by acquiring new customers and increasing share of wallet with existing customers.Gross Margin
Gross margin for the first quarter of 2022 was 37.9%, a 245 basis point increase compared to the first quarter of 2021 due primarily to lapping the prior year pandemic product inventory adjustment as well as favorable product and customer mix.In the High-Touch Solutions N.A. segment, the Company lapped the $55 million pre-tax pandemic product inventory adjustment that occurred in the first quarter of 2021, which contributed significantly to the 310 basis point increase in the High-Touch Solutions N.A. segment over the prior year quarter. Given timing, price / cost spread was slightly positive, however largely neutral net of freight inflation. Product mix was also favorable in the quarter. In the Endless Assortment segment, gross margin expanded by 10 basis points versus the prior year first quarter.Earnings
Operating earnings for the first quarter of 2022 of $534 million were up 49% versus the first quarter of 2021. Operating margin in the quarter of 14.6% increased 305 basis points over the first quarter of 2021 on stronger gross margins in both segments combined with SG&A leverage gained on revenue growth.Earnings per share of $7.07 in the first quarter of 2022 increased 57.8% compared to the first quarter of 2021. The increase in earnings per share was due primarily to higher operating earnings.Tax Rate
The first quarter 2022 tax rate was 25.5%, compared to 25.8% in the first quarter of 2021.Cash Flow
Operating cash flow for the first quarter of 2022 was $343 million, up $49 million over the prior year quarter. The increase was driven by higher net earnings which were partially offset by unfavorable working capital. In the quarter, both accounts receivable and inventory increased as a result of strong demand. This was slightly offset by the timing of trade accounts payable activity. During the quarter, the company distributed $163 million to shareholders through dividends and share repurchases.
Guidance
After a strong start to the year, the company is raising its 2022 full year guidance expectations.
|
Total Company |
Original 2022 Guidance Range |
Updated 2022 Guidance Range (1) |
|
Net Sales |
$14.1 – $14.5 billion |
$14.5 – $14.9 billion |
|
Daily growth |
7.5% – 10.5% |
11.0% – 14.0% |
|
Gross Profit Margin |
36.8% – 37.3% |
36.8% – 37.3% |
|
Operating Margin |
12.5% – 13.1% |
13.0% – 13.6% |
|
Earnings per Share |
$23.50 – $25.50 |
$25.00 – $27.00 |
|
Operating Cash Flow |
$1.1 – $1.3 billion |
$1.15 – $1.35 billion |
|
CapEx (cash basis) |
$275 – $325 million |
$275 – $325 million |
|
Share Buyback |
$600 – $800 million |
$600 – $800 million |
|
Tax Rate |
24.0% – 25.0% |
~25.0% |
|
Segment Operating Margin |
||
|
High-Touch Solutions N.A. |
14.4% – 15.0% |
14.9% – 15.5% |
|
Endless Assortment |
7.5% – 8.2% |
7.5% – 8.2% |