Grainger Sales Up 6% to $5.9B in 2006

W.W. Grainger reported sales of $5.9 billion for fiscal 2006, up 6% versus 2005, and 7% on a daily basis. Profit for the year increased 11% to $383 million, as compared with $346 million in 2005.

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Sales in the fourth quarter were $1.5 billion, up 5% from the prior-year fourth quarter. Daily sales increased 5% in October, 6% in November and 5% in December. Income was $99 million, down 5% from last year.

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In 2006, Grainger installed SAP across most of the U.S. branch-based business.

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Branch-Based Segment
Sales in this segment in the U.S., Mexico and China, increased 5% in the fourth quarter. Of the 5% growth, an estimated 3 percentage points came from the company's two growth initiatives in the U.S., market expansion and product line expansion.

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Sales growth was reduced by about 2 percentage points due to the wind-down of contracts with integrated-supply and automotive customers. The company expects the wind-down to have a 1 percentage point negative effect on sales in 2007.

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During the quarter, the company opened one new will-call express branch in the U.S. and one in Mexico, brining the total number of branches to 438.

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Sales in the U.S. increased 5%, with the strongest growth from government customers followed by the heavy manufacturing and commercial markets. Offsetting the growth was a decline in the sales of seasonal products related to milder weather across much of the country during the quarter. The decline reduced sales in the U.S. by about 1 percentage point.

Sales in Mexico were up 21% in the quarter versus the same period in 2005. In local currency, sales rose 23%. Sales benefited from a strong economy, an expanded telesales operation, new branches in Santa Catarina and Chihuahua and an expanded branch in Tijuana.

In China, the company opened a master branch and a will-call express in the 2006 third quarter and plans to open additional express locations within the greater Shanghai metropolitan area, as well as add more sales people to drive sales growth in 2007. Sales in the Chinese start-up were less than $1 million for the year 2006.

Market Expansion
Fourth quarter sales growth for the market expansion program was softer than in earlier quarters. For 2006, the market expansion program contributed about $235 million in cumulative incremental sales. The program had an $8.6 million operating loss compared to a $16.1 million loss in 2005.

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As a result of repositioning and relocating branches under the market expansion program, the company sold four branches for a gain of $3.4 million. For the full year, the company sold 10 branches for a gain of $11.1 million, most in conjunction with the market expansion program.

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Product Expansion
Products added in 2006 for the product line expansion program contributed about 2 percentage points to growth in the branch-based segment. In 2007, the company plans to add about 25,000 products to supplement the plumbing, fastener, material handling and security product lines.

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Acklands-Grainger
Sales for the quarter were up 5% versus the 2005 quarter, up 2% in local currency. Results benefited from strong sales to the oil, gas and mining industries, partially offset by weak sales in the forestry and paper industries.

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During the quarter, the company closed five branches, ending the year at 155 branches.

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Lab Safety Supply
Sales for the fourth quarter were up 9% versus the 2005 quarter. Sales from the Professional Inspection Equipment and Construction Book Express acquisition in November 2006 contributed 2 percentage points to the sales growth and sales from the Rand Material Equipment acquisition in January 2006 contributed 5 percentage points.

Daily Sales Growth by Segment  ; - Excel File
Grainger News Release & Link to Grainger Podcast

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