Grainger (GWW) Shares Rise On Increase In May Sales

W.W. Grainger, Inc.’s (NYSE:GWW) sales inched up 1% year over year in May 2016. Sales in May came below the 4% rise recorded in the previous month. Shares of Grainger rose over 1%, a day after the company announced its May sales on Jun 13.

May 2016 had 21 selling days compared with 20 in May 2015. The sales upside was mainly attributed to positive contribution from the Cromwell acquisition (4 percentage points). Excluding acquisition-related impact, organic daily sales were down 3%, driven by a 1 percentage point decline in volume, a 1 percentage point decline in price and a 1 percentage point headwind from the wildfires in Alberta. Foreign exchange for the month was negligible.

Geographically, daily sales in the U.S. during April fell 3%, which included a three percentage point decline in volume and a 1 percentage point decline in price, partially offset by a one percentage point contribution from intercompany sales to Zoro.

Among the end markets, the Government, Light Manufacturing and Retail segments witnessed growth in the low-single digits. However, Commercial witnessed a low-single digit decline, followed by Heavy Manufacturing which was down in the mid-single digits. Further, Contractor sales dipped in the low-double digits. Reseller was down in the mid-teens and Natural Resources was down in the high teens.

Daily sales in Canada plunged 20% in terms of the U.S. dollar. In local currency, sales fell 15%. Additionally, the decline was a result of a 12 percentage point decrease in volume and a 4 percentage point headwind from the fires in Alberta, partially offset by a 1 percentage point benefit from increased sales of seasonal products.

Daily sales to all customer end markets except Government declined. From a geographic standpoint, daily sales in Alberta dipped about 25% in local currency, whereas sales in all other provinces in aggregate were down 11% from the prior-year period.

Daily sales at Grainger’s other businesses, including operations in Asia, Europe and Latin America, surged 44% in May due to a contribution of 29 percentage points from the Cromwell acquisition and 14 percentage points from volume and price, and a 1 percentage point benefit from foreign exchange. Sales in MonotaRO in Japan and Zoro in the U.S. continued to grow at a double-digit rate. In addition, the business in Mexico grew double digits in local currency.

According to Grainger, daily sales gain in June will be about the same as the sales results reported for May. Jun 2016 will have 22 selling days, the same as last year.

Grainger remains optimistic about strong growth in single-channel businesses. However, it will continue to see pressure on price and gross margin, primarily owing to the low-inflation economic environment and faster growth from lower gross margin customers. Despite the current short-term uncertainty, Grainger will continue to invest in the business to drive long-term results.

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 #3 (Hold).

Some better-ranked stocks in the sector include Ashtead Group (LON:AHT) plc (OTC:ASHTY) , Neff Corp. (NYSE:NEFF) and Harsco Corp. (NYSE:HSC) . While Ashtead Group and Neff Corp. sport a Zacks Rank #1 (Strong Buy), Harsco carries a Zacks Rank #2 (Buy).


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