) reported year-over-year sales growth of 12% in April 2012. Growth
slackened from 17% in January, 18% in February and 15% in March
this year because of sluggish customer end markets.
Acquisitions added 5 percentage points to growth and organic
sales increased 7% with higher volume contributing 5 percentage
points and pricing another 3 percentage points. However, a
1-percentage point dip from unfavorable foreign exchange was a
Geographically, daily sales in the United States increased 7%,
with 4% contribution from volume and 3% from price. As per end
markets, Reseller was up in the low double digits followed by Heavy
Manufacturing, Light Manufacturing, Retail, Commercial and Natural
Resources, which were up in the high single digits. Government
increased in the low single digits while Contractor remained flat.
E-Commerce sales in the United States sustained its pace of growth
at approximately two times the rate of other channels, contributing
31% of total U.S. sales.
Canada saw an increase of 9% due to volume (12%) and price
effects (1%) which were offset by negative foreign exchange (4%).
In local currency, sales increased 13% driven by growth in the
Commercial, Light Manufacturing and Oil and Gas end markets.
Daily sales at the company's Other businesses, which include
operations in Europe, Japan, Mexico, India, Puerto Rico, China,
Dominican Republic and Panama, increased 79%, primarily due to
incremental sales from Fabory. Excluding acquisitions, sales in
other businesses increased 20%, driven by strong growth in Japan
and Columbia. However, Fabory sales were weak due to the scenario
April 2012 had 21 selling days, the same as April 2011. Looking
forward, May will have 22 selling days compared with 21 last year;
the second quarter of fiscal 2012 will have 64 selling days, the
same as the prior-year quarter.
Grainger's first quarter 2012 earnings increased 19% year over
year to $2.57 per share, and revenues went up 16% to $2.193
billion. For 2012, the company envisions sales growth in the range
of 12% to 14% and earnings per share between $10.40 and $10.80.
Grainger remains focused on expanding its product offerings and
growing the share of its private label brands. The company's recent
catalog, issued in February 2012, offers 413,000 facilities
maintenance and other products, up from 350,000 products in the
February 2011 issue. Grainger has a long-term vision to expand the
count to 500,000 products by 2015. The company has historically
seen growth of approximately 2% per year on sales from products
added through the program.
Currently, 23% of Grainger sales are from private label, but the
company expects to increase that to 40% over time. Private label
has been a significant driver of sustainable margin expansion over
the past few years, especially in the globally sourced product
Grainger also focuses on expansion programs for strengthening
its businesses in each of its operating regions, mainly in Asia and
Latin America. The primary areas of focus for international growth
are sales and earnings growth in the existing markets, selective
expansion into new markets in a phased approach and ongoing
development of the global infrastructure.
E-commerce is one of Grainger's most efficient channels as it is
reportedly growing twice as fast as the other channels. There is
scope to drive it up to 50% of revenues in the next five years.
This channel also carries higher margins as it requires lower
selling, general and administrative costs.
Despite the momentum slipping in the most recent month, we
believe Grainger is solidly placed to push sales growth thanks to
its in-place initiatives. Currently, the shares of Grainger have a
Zacks #2 Rank, implying a short-term "Buy" recommendation. It
competes with companies like
Applied Industrial Technologies Inc.
WESCO International Inc.
Illinois-based Grainger is a leading North American distributor
of material handling equipment including safety and security
supplies, lighting and electrical products, power and hand tools,
pumps and plumbing supplies, etc. The company's services comprise
inventory management and energy efficiency solutions.
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