( GWW) reported a 6% year-over-year increase in sales in Feb
2013. The growth has decelerated from the prior-month increase of
8% and is one-third of highest growth rate of 18% achieved in the
same period last year. However, Grainger shares fell 2% on the
Feb 2013 had 20 selling days, compared with 21 last year. The
growth in Feb sales stemmed from higher volumes (4%) and prices
(2%) and from acquisitions (1%), partially offset by a 1% decline
from foreign exchange. Geographically, daily sales in the U.S.
rose 7% helped by higher volume (3%), favorable pricing (2%),
sale of seasonal products (1%) and acquisitions (1%). Commercial,
Contractor and Retail were up in the mid-single digits while
government was up in the low single digits.
Canada saw 6% growth in sales, driven by a 7 percentage point
growth in volume, 1 percentage point increase in sales of
seasonal products, offset by an unfavorable currency impact of 2
percentage points. In local currency, sales increased 8%, driven
by growth in the Commercial, Construction, Oil and Gas end
Daily sales at the company's Other businesses, which include
operations in Asia, Europe and Latin America, increased 7%,
driven by higher volume (9%), acquisitions (4%), partly offset by
unfavorable impacts of foreign currency translation (6%).
According to Grainger, daily sales growth in March is
currently trending below the 6% growth in February. The first
quarter will have 63 selling days, one day less than the
prior-year. The first quarter of 2013 will face tough comparison
as it is pitted against 16% sales growth recorded in the first
quarter of 2012.
Furthermore, Good Friday will fall in first quarter 2013. In
2012, the Easter holiday fell in the second quarter. Business is
usually slow around the Easter holiday, with Good Friday
generally representing a very light day.
Reflecting on the sales growth figures last year, we see that
it trended in the upper double digits till March. The momentum
slowed with growth hovering in the lower double digits till
declining to 10% in August. Since then sales growth has remained
in the single digits registering 9% in September and plunging to
the lowest level of 2% in December. The timing of the holidays
(Christmas and New Year's Day) had a negative impact on sales in
the fourth quarter. Although Grainger's sales growth recovered to
8% in Jan 2013, it was almost half of the 17% growth achieved in
January last year.
Grainger reported fourth-quarter earnings of $2.42 per share,
up 14% year over year from $2.13 per share but well short of the
Zacks Consensus Estimate of $2.61. Total revenue was $2.23
billion, up 7.2% from $2.08 billion in the year-ago period but
missed the Zacks Consensus Estimate of $2.24 million. Grainger
reaffirmed its EPS guidance in the range of $10.85-$12.00 per
share for fiscal 2013. Grainger, however, increased its sales
growth guidance to a new range of 3% to 9%, up from the prior
projection of 2% to 8%.
Grainger, however, continues to expand its product portfolio
and expects to increase its product count from the current
413,000 to 500,000 products by 2015. The company has historically
seen annual growth of approximately 2% on sales from products
added through the program. Additionally, it focuses on expansion
programs for strengthening its businesses across its operating
regions, mainly in Asia and Latin America.
Grainger also continues to invest in e-commerce, as it is
reportedly growing two fold compared to other channels and is
deemed to be its most profitable channel. Grainger posted $2.7
billion in e-commerce sales in 2012, representing 30% of the
total company sales. Grainger's target is to increase it up to
50% by 2015. This channel also carries higher margins as it
requires lower selling, general and administrative costs.
However, the recent slowdown in sales is a concern. Grainger
has an incremental $135 million of growth spending in the
pipeline for 2013. Even though these initiatives will lead to
additional share gains in the future, it will weigh on margins in
the short term.
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 Zacks #3 Rank (Hold). Other
industrial product makers with favorable Zacks rank are
Houston Wire & Cable Company
), which retain a Zacks Rank #2 (Buy).
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