Grainger Posts Double-Digit Drop in 1Q Sales, Profit

Grainger, Chicago, IL, reported first quarter sales of $1.5 billion, down 12% from first quarter 2008. Profit decreased 16% to $96 million.
 
As part of cost reduction plans announced in February, the company reduced headcount by 200 employees and incurred severance expense of $5 million in the first quarter. The company is on track to meet headcount reductions of 300-400 this year.
 
"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 Jim Ryan, president and CEO. "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.
 
Daily sales for the company decreased 9% in January, 10% in February and 12% in March. For the quarter, sales were negatively affected by foreign exchange, which contributed approximately 2percentage points to the decline. Price contributed a positive 6% while volume was down 14%.
 
Effective with the first quarter, the company has two reportable business segments, the United States and Canada, which represent approximately 99% of company sales. The remaining operating units (Mexico, China, Panama and Puerto Rico) are included in other businesses and are not considered a segment.
 
United States
Sales for the United States segment decreased 10% in the 2009 first quarter. Daily sales declined by 9% in January, 9% in February and 10% in March. Progress integrating the Lab Safety Supply and the U.S. branch-based business included adding 27,000 Lab products to grainger.com and executing on purchasing synergies. Product line expansion contributed $195 million in sales for the first quarter versus $137 million in the first quarter 2008.
 
Daily sales by customer segment in the U.S. decreased 10%, with declines in all customer end markets except government, which was flat. Heavy manufacturing declined approximately 25%, with most other segments declining in the low teens.
 
 
Operating earnings for the quarter were down 11% in the United States. The operating earnings decrease was the result of lower sales, partially offset by positive price leverage and reduced spending on payroll and discretionary spending.
 
Canada
Sales for the Acklands-Grainger business in the quarter were down 19% versus the 2008 first quarter, flat in local currency. On a daily basis, sales in local currency were up 7% in January, up 1% in February and down 2% in March. The Canadian economy continues to slow especially in the forestry, manufacturing, transportation and mining industries. Sales growth has slowed though remained positive to prior year in most provinces for the quarter, particularly among government and oil and gas customers.
 
Other businesses
Sales for the other businesses, which include Mexico, China, Puerto Rico and Panama, were down 8% versus prior year. Daily sales in Mexico were down 23% in the quarter, up 3% in local currency. In China, sales increased 89% versus a year ago.
 
W.W. Grainger, Inc. is a broad line supplier of facilities maintenance products.