Grainger's (GWW) August Sales Up 4% On Cromwell Buyout

W.W. Grainger, Inc. (NYSE:GWW) sales increased 4% year over year for Aug 2016. The sales growth was mainly attributed to the positive contribution from the Cromwell acquisition (3 percentage points) and 1 percentage point increment from favorable foreign exchange. Sales improvement in August exceeded the prior-month increase of 3% and reversed from the decline of 2% recorded in the same period last year.

Excluding acquisitions and foreign exchange, organic daily sales were flat, consisting of a 1 percentage point contribution from sales of seasonal products, offset by a 1 percentage point decline in price. Organic volume was essentially flat. Aug 2016 had 23 selling days, two days more than last year.

Geographically, daily sales in the U.S. during August inched up 1%, aided by 1 percentage point from sales of seasonal products and 1 percentage point from intercompany sales to Zoro, offset by a 1 percentage point decline in price.

Among the end markets, the Government sales rose in high-single digits, followed by mid single-digits gain in Retail segment. Light Manufacturing was up in low-single digits. Commercial sales remained flat while Contractor sales were down in low-single digits. Further, Heavy Manufacturing contracted in mid-single digits. Natural Resources and Reseller dipped in the mid-teens.

Daily sales in Canada decreased 14% in terms of the U.S. dollar. In local currency, sales were down 16%. The drop was a result of an 18 percentage point decline in volume, partially offset by a 1 percentage point benefit from price and a 1 percentage point benefit from stronger sales of seasonal products.

Daily sales to all customer end markets declined in August. From a geographic standpoint, daily sales in Alberta plummeted about 25% in local currency, whereas sales in all other provinces in aggregate decreased 12% from the prior-year period.

Daily sales at Grainger’s other businesses, including operations in Asia, Europe and Latin America, surged 42% in August. This growth was driven by a positive contribution of 25 percentage points from Cromwell, 11 percentage points from volume and price, and a 6 percentage point benefit from foreign exchange.

Sales in Japan were hurt by a difference in the number of local selling days, reversing the benefit witnessed in July. Zoro, in the U.S., continued its strong growth and the business in Mexico grew in mid-teens in local currency. Sales growth for the Other Business was partially offset by lower sales in other Latin American businesses and at Fabory.

According to Grainger, daily sales gain in September has been trending in line with what was achieved in August. Sep 2016 will have 21 selling days, the same as last year.

Though, Grainger has made many important investments and taken several actions to restructure the business, the company continues to be affected by lower oil and gas prices, currency headwinds and weak macroeconomic conditions in Canada.

W.W. 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 components.

Grainger currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the same sector are Ashtead Group (LON:AHT) plc (OTC:ASHTY) , Hudson Technologies Inc. (NASDAQ:HDSN) and ACCO Brands Corporation (NYSE:ACCO) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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