Grainger sales drop 12 percent for first quarter compared to ‘08

Grainger reduces headcount; further sales decline expected

Jack Keough -- Industrial Distribution, 4/14/2009 2:01:07 PM
W.W. Grainger reported today first quarter sales of $1.5 billion, down 12 percent versus first quarter 2008. Net earnings for the quarter decreased 16 percent to $96 million versus $114 million in 2008. The company said earnings per share declined by 11 percent to $1.25 versus $1.41 for first quarter 2008.

"Businesses and institutions have responded to the recession by buying less and looking for ways to improve productivity. We are in a great position to help our customers become more efficient by consolidating their supplier base using our expanded product line especially in these challenging times," said Grainger's president and CEO Jim Ryan in a press release. "We are keeping service levels high as other competitors are pulling back, as we have the ability to selectively invest in the business in order to gain more market share."

Ryan added, "We do not believe that we've seen the bottom to the sales decline and expect increased pricing pressure throughout the remainder of the year. Given our financial strength, we see an opportunity to gain more share. We expect to incur some reductions to our margins by expanding our sales force and implementing additional customer incentives in the second quarter. We expect these actions to cost $25-50 million this year. We'll calibrate our level of investment in the back half of the year based on our success."

Daily sales for Grainger decreased 9 percent in January, 10 percent in February and 12 percent in March. For the quarter, sales were negatively affected by foreign exchange, which contributed approximately 2 percentage points to the decline. Price contributed a positive 6 percent while volume was down 14 percent. There were 63 selling days in the quarter, one less than in 2008 first quarter.

Effective with the first quarter, the company has two reportable business segments, the United States and Canada, which represent approximately 99 percent of company sales. This new reporting reflects the integration of Lab Safety Supply with Grainger's U.S. branch-based business. The remaining operating units (Mexico, China, Panama and Puerto Rico) are included in other businesses and are not considered a segment.