W.W. Grainger, Inc.
) reported a 5% year over year increase in sales in Apr 2014.
However, the growth was less compared with the 8% rise registered
in Mar 2014 and in April 2013.
Apr 2014 had 22 selling days, the same as last year. The gain in
April sales stemmed from positive contribution from acquisitions (1
percentage points) which offset a 1 percentage points decline from
foreign exchange. On an organic basis, sales improved 5% on volume
growth (7 percentage points), partially offset by a decline of 2
percentage points during the timing of the Easter.
Geographically, daily sales in the U.S. rose 7%, aided by higher
volume (7 percentage points) and acquisitions (2 percentage
points), partly offset by the shift of Easter into April (2
Retail, government, heavy manufacturing, commercial and light
manufacturing sales rose in the mid single-digits, followed by low
single-digits gains in natural resources and reseller. Contractor
sales were down in the mid single-digits.
Daily sales in Canada declined 12% in U.S. currency and 5% in local
currency, impacted by the timing of the Easter and unfavorable
foreign exchange rates.
Daily sales at Grainger's other businesses, which include
operations in Asia, Europe and Latin America, climbed 18% as higher
volume and favorable pricing (23 percentage points) were offset by
negative foreign currency translation (4 percentage points) and
decline during the timing of the Easter (1 percentage point).
According to Grainger, daily sales gain in May is trending in line
with what was achieved in Apr.
Grainger, in its first-quarter earnings call, maintained its
earnings per share guidance in the range of $12.10-$12.85 per share
for fiscal 2014. Its sales growth guidance is expected to range
between 5% and 9%. Grainger is expecting minimal gross margin
expansion compared with 2013 due to lower gross margins from the
The company is expected to benefit in the long term from its
incessant focus on expanding its sales force and product offerings.
Grainger also continues to invest in e-commerce and expects to
increase its number of customers, utilizing this channel and its
percentage of overall sales.
Furthermore, Grainger increased its quarterly dividend by 16% to
$1.08 per share payable on June 1, 2014, to shareholders of record
on May 12, 2014. In addition, the company also announced its plan
to purchase up to 10 million shares. Its low debt level,
dividend increment and share repurchases will also drive growth.
On the flipside, Grainger's business in Canada continues to face a
sluggish macroeconomic environment and an unfavorable currency
exchange rate. The weakness in the Canadian economy is being driven
by lower commodity prices and a reduction in Canadian exports.
Lake Forest, IL-based Grainger is a leading North American
distributor of material handling equipment, safety and security
supplies, lighting and electrical products, power and hand tools,
pumps and plumbing supplies, cleaning and maintenance supplies,
forestry and agriculture equipment, building and home inspection
supplies, vehicle and fleet components, and various aftermarket
Grainger currently retains a short-term Zacks Rank #3 (Hold).
Better ranked stocks in the same sector are
Adept Technology Inc.
). All of these stocks carry a Zacks Rank #2 (Buy).
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