) delivered sales growth of 11% for the month of July 2012 compared
with a sales growth of 21% in July last year.
Acquisitions added 5 percentage points to growth. Organic sales
increased 8% with higher volume and pricing contributing 4
percentage points each. However, the growth was partially offset by
a 2 percentage point dip from unfavorable foreign exchange.
Despite the hot weather experienced in many regions during the
month, the company stated that the sales of seasonal products did
not contribute to sales growth for the period.
Geographically, daily sales in the U.S. increased 6% with volume
contributing 2 percentage points and price adding 4 percentage
points. Among the end-markets, Heavy and Light Manufacturing
increased in the high single-digits, while Retail and Commercial
went up in the mid single-digits. Government and Natural Resources
upped in the low single-digits and Reseller and Contractor remained
Canada saw an increase of 10%, driven by a 14 percentage point
increase in volume and 2 percentage point rise in price, partially
offset by negative foreign exchange impact of 6%. In local
currency, sales increased 16%, driven by growth in the Commercial,
Construction, Oil and Gas, Retail/Wholesale, Forestry and Utilities
Daily sales at the company's Other businesses, which include
operations in Europe, Japan, Mexico, India, Puerto Rico, China,
Dominican Republic and Panama, increased 71%, primarily driven by
solid businesses in Europe and Brazil, which were acquired over the
last 12 months. Excluding acquisitions, sales increased 17%, driven
primarily by strong growth in Japan.
The company also benefited from an extra selling day in July
2012 compared with July 2011. Looking forward, August will have 23
selling days, the same as last year while the third quarter of
fiscal 2012 will have 63 selling days, one day less than the
Grainger reported revenues of $2.25 billion in the second
quarter of 2012, up 12% from $2 billion in the year-ago period.
Revenues fell short of the Zacks Consensus Estimate of $2.26
billion. The improvement in revenue in the quarter was attributed
to volume growth, favorable pricing and also acquisitions, partly
offset unfavorable foreign exchange.
The July sales growth rate is the lowest so far this year.
Grainger's sales growth has trailed from the highest level of 18%
in February to record 12% in April, 13% in May and 12% in June. For
2012, the company maintained its forecast of sales growth in the
range of 12% to 14%
Grainger remains focused on expanding its product offerings and
growing the share of its private label products. The company
currently offers 413,000 products and has a long-term vision to
expand the product count to 500,000 by 2015. The company has
historically seen annual sales growth of approximately 2% from
products added through the program.
Grainger also focuses on expansion programs for strengthening its
businesses across its operating regions, mainly in Asia and Latin
America. Revenues from Other businesses continue its solid growth
run, reflecting strong growth in Japan and Mexico and acquisitions.
However, the recent slowdown in the sales growth rate raises our
concern. Margins are expected to remain under pressure due to
Grainger's accelerated investments in product line expansion, sales
force expansion, eCommerce, inventory services, distribution
centers and international expansion.
) has recently launched www.AmazonSupply.com, a website offering
more than 500,000 parts/supplies to business, industrial,
scientific and commercial customers at competitive prices.
Grainger, so long a dominant player in industrial maintenance,
repair & operations distribution, would face pricing pressure
with the entry of Amazon.
The company currently retains a Zacks #3 Rank (short-term Hold
APPLD INDL TECH (AIT): Free Stock Analysis
AMAZON.COM INC (AMZN): Free Stock Analysis
GRAINGER W W (GWW): Free Stock Analysis Report
WESCO INTL INC (WCC): Free Stock Analysis
To read this article on Zacks.com click here.
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. The company competes
Applied Industrial Technologies Inc.
WESCO International Inc.