W.W. Grainger, Chicago, IL, reported that its branch-based businesses had a 6.3% decline in sales in the third quarter ended Sept. 30, 2001 versus the 2000 third quarter. Operating earnings for the quarter were down 10.8% from the previous year.
Overall, the company reported a 16% increase in net earnings for the third quarter ended Sept. 30, versus the 2000 third quarter. Net earnings increased to $56.0 million from $48.1 million. Net earnings in the 2000 third quarter included a $3.2 million pretax gain related to the sale of investment securities. Excluding this prior period gain, net earnings for the quarter increased 21% and earnings per share were up 20%. Sales in the 2001 third quarter were down 6% to $1,199 million versus $1,273 million in the prior year third quarter, and the company's year-to-date sales are down 3%.
"Daily sales volume dropped off sharply following the Sept. 11 terrorist attacks,' said Richard L. Keyser, chairman and CEO. 'We are monitoring sales closely to see if there will be further deterioration and how this may affect us going forward."
For the nine months ended Sept. 30, 2001, net earnings were $113.0 million. These results include the non-recurring, after-tax charges of $38 million reported in the 2001 second quarter. The nine months ended Sept. 30, 2000, included a $29.3 million pretax gain related to the sales of investment securities. Excluding these unusual items, net earnings were $151.0 million versus $127.6 million, an increase of 18%. Sales decreased 3% to $3,644 million versus the 2000 period. The sales decline seen in the 2001 third quarter was led by a 6% decrease in sales for the branch-based businesses segment, a result of the overall weakness in the North American economy. This weakness was partially offset by strong growth in sales to federal, state, and local government accounts. Lower sales and flat operating expenses, partially offset by higher gross profit margins, contributed to an 11% decline in operating earnings.
Sales for the branch-based distribution businesses, which totaled 578 locations at the end of the quarter, were $1,074.3 million, down 6.3% from $1,146.4 million reported in the same quarter last year. Operating earnings were $95.5 million, down 10.8% from the $107.0 million reported in last year's third quarter.
Daily sales in the U.S. declined 6.5% primarily due to a slowdown in the economy. Sales to government accounts increased 14.5%, while other customer categories declined. Sales were helped by Grainger.com, which had sales of $85 million up 13% over third quarter 2000 sales of $75 million.
Sales processed through the company's Internet sites were $115 million for the quarter, up 15% over the $100 million processed in the third quarter of 2000. Grainger.com processed sales of $85 million, a 13% increase over the $75 million in the 2000 third quarter. "New functionality continues to drive incremental growth in sales processed through Grainger.com," Keyser said. "In September we added exploded parts diagrams and our hit-rate for parts jumped from an average of 11,000 per month to 105,000 in September.
"However, given the weakness in the economy, we now expect sales processed through Grainger.com to come in between $330 and $350 million for the year. While we are disappointed that the rate of growth slowed in September, we are pleased that the site is profitable at the operating earnings level."
Lab Safety and Integrated Supply
Sales for the company's remaining two segments, Lab Safety Supply and Other Businesses, were down 5% and up 4% respectively. Lab Safety Supply's sales results included Ben Meadows, an acquisition made in the 2001 first quarter. Lab Safety reported sales of $79.0 million for the quarter, down 5.1% from the $83.2 million posted in the third quarter of 2000. Operating