Grainger Reports Results For The 2016 Third Quarter

Grainger (NYSE: GWW) today reported results for the 2016 third quarter ended September 30, 2016.  Sales of $2.6 billion increased 3 percent versus $2.5 billion in the third quarter of 2015.  There were 64 selling days in the 2016 third quarter, the same as the 2015 third quarter.  Net earnings for the quarter of $186 million were down 3 percent versus $192 million in 2015.  Earnings per share of $3.05 increased 4 percent versus $2.92 in 2015.

“We continue to operate in a challenging economic environment,” said DG Macpherson, Chief Executive Officer.  “The third quarter results were within our expectations.  I’m pleased with our ability to continue to effectively manage costs in this low growth environment while still investing in our future success.”  Macpherson added, “During the quarter, we continued to see strong revenue and earnings growth in our single channel online businesses, and we started operations in our new 1.3 million square foot distribution center in New Jersey.  We expect fourth quarter demand to remain challenged, and as a result, we have narrowed our guidance and lowered the midpoint for the full year.  We remain committed to managing the company for long-term success with a focus on providing our customers an exceptional experience at every touch.”

The company now expects 2016 sales growth of 1.5 to 2.5 percent and earnings per share of $11.40 to $11.70.  The company’s previous 2016 guidance, communicated on July 19, 2016, included sales growth of 1 to 4 percent and earnings per share of $11.20 to $12.20.

Sales increased 3 percent in the 2016 third quarter versus the prior year.  The sales performance included a 2 percentage point contribution from Cromwell Group (Holdings) Limited, acquired on September 1, 2015, and a 1 percentage point contribution from foreign exchange.  Excluding acquisitions and foreign exchange, organic sales were flat consisting of a 1 percentage point contribution from sales of seasonal products offset by a 1 percentage point reduction in price.

The company’s gross profit margin declined 1.9 percentage points to 40.0 percent versus 41.9 percent in the 2015 third quarter, due primarily to unfavorable customer mix and price deflation exceeding product cost deflation.  Operating expenses for the company declined 1 percent driven by lower payroll and benefits costs.

Company operating earnings of $323 million for the 2016 third quarter declined 5 percent versus $341 million in the 2015 quarter.  The decline was driven by lower gross profit margins partially offset by lower operating expenses.
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