Grainger Sales Grow 12% in 2011 to $8.1B

Grainger (NYSE: GWW), Chicago, IL, No. 3 on MDM's list of the top 40 industrial distributors, reported sales for the year ended Dec. 31, 2011, were $8.1 billion, up 12 percent from 2010. Profit was $511 million.

"This was an exceptional year for Grainger," said President and CEO Jim Ryan. "We continue to see a long runway for growth and are investing aggressively in our proven growth drivers: product line expansion, sales force expansion, eCommerce, inventory services and international expansion." (Read more about Grainger’s growth drivers: Interview – Grainger U.S. President Mike Pulick)

In 2011, Grainger introduced more than 80,000 new products, transacted more than $2 billion in sales through eCommerce and added more than 1,300 net new jobs. (Read about Grainger’s eCommerce Evolution.)

For the 2011 fourth quarter, the company reported sales of $2.1 billion, an increase of 14 percent. Profit was $148 million.  

Grainger closed 27 branches in the U.S. in the fourth quarter, slightly more than the 25 announced in November.

Daily sales increased 16 percent in October, 15 percent in November and 10 percent in December. The 14 percent increase for the quarter included a 9 percentage point contribution from volume, 5 percentage points from acquisitions, 2 percentage points from price, partially offset by a 2 percentage point drag from product sales related to the 2010 oil spill in the Gulf of

U.S.
Sales for the U.S. segment increased 8 percent in the 2011 fourth quarter versus the prior year. The 8 percent sales growth for the quarter was driven primarily by 8 percent volume growth and 3 percentage points from price, partially offset by a 2 percentage point drag from the 2010 oil spill sales and 1 percentage point from lower sales of seasonal products due to the unusually warm weather in the 2011 fourth quarter.  

Daily sales were up 9 percent in October, up 9 percent in November and up 5 percent in December. Oil spill-related sales contributed a drag of 1, 2 and 3 percentage points to October, November and December, respectively.  

All U.S. customer end markets, except reseller due to the oil spill in 2010, posted sales growth versus the 2010 fourth quarter, led by a strong increase in the heavy manufacturing customer end market.

Quarterly operating earnings in the U.S. were up 5 percent versus the prior year, up 15 percent excluding the expenses related to the 2011 branch closures and the 2010 paid time off benefit. The growth in operating earnings was primarily driven by the 8 percent sales growth and improved gross profit margins. Gross profit margins for the quarter increased 170 basis points driven mainly by price increases exceeding cost increases, positive selling mix from a decline in sales of lower margin sourced products primarily attributable to the oil spill in 2010, and lower excess and obsolete inventory requirements.

Canada
Fourth quarter sales for Acklands-Grainger increased 13 percent, 14 percent in local currency. Volume growth during the quarter contributed 13 percentage points to the sales increase, while acquisitions completed during the last 12 months contributed 1 additional percentage point, partially offset by 1 percentage point from the negative impact of foreign exchange.  Daily sales in local currency were up 16 percent in October, up 15 percent in November and up 11 percent in December. The sales increase for the quarter in Canada was led by strong growth to customers in the construction, heavy manufacturing, agriculture and mining sectors of the economy.

Operating earnings in Canada increased 121 percent in the 2011 fourth quarter, up 123 percent in local currency. The improvement in operating performance was driven by the 13 percent sales increase, higher gross profit margins and operating expenses, which grew at a slower rate than sales. The improvement in the gross profit margin was primarily due to a combination of better mix from strong sales of private label products.

Operating expenses in Canada increased 1 percent, primarily the result of strong expense management coupled with some one-time expenditures in the 2010 fourth quarter related to the start up costs for the new distribution center in British Columbia.

Other Businesses
Sales for the Other Businesses, which includes operations in Europe, Japan, Mexico, India, Colombia, China, Puerto Rico, Panama and the Dominican Republic, increased 95 percent for the 2011 fourth quarter versus the prior year. This increase was primarily due to the incremental sales from the business in Europe (Fabory) acquired on August 31, 2011, combined with strong revenue growth in Japan and Mexico.

Excluding Fabory, sales for the Other Businesses increased 26 percent.  

Operating earnings for the Other Businesses were $5 million in both the 2011 and 2010 fourth quarters. Earnings performance for the quarter was primarily driven by strong earnings growth in Japan and Mexico, partially offset by operating losses in China, India and the recent start up in the Dominican Republic. In addition, Fabory had an operating loss for the quarter, primarily due to softer sales growth from the challenging economic climate in Europe. Excluding Fabory, operating earnings for the Other Businesses in the 2011 fourth quarter were $6 million.