W.W. Grainger, Chicago, reported sales in the 2001 quarter were down 4 percent to $1,225 million versus $1,272 million in the prior year second quarter. The sales decline versus the prior year was the result of lower sales for the branch-based distribution businesses, flat sales for Lab Safety Supply, and a 4 percent increase for the otherﾠbusinesses.
Net earnings for the second quarter were $14.8 million, including previously announced, non-recurring, after-tax charges of $38 million. Excluding unusual items from both the 2001 and 2000 second quarters, net earnings increased 32 percent to $52.8 million from $40.1 million. In the 2000 second quarter, the company's results of $55.7 million included a gain of $26 million related to sales of investment securities.
For the six months ended Jun. 30, sales decreased 2 percent to $2,444 million versus the 2000 period. Including restructuring charges, net earnings were $57.0 million, down 41 percent.
Daily sales in the U.S. declined approximately 4 percent due to the slowdown in the economy. Sales to government accounts increased by 16 percent while other customer categories declined.
Daily sales in Canada decreased 0.7% during the quarter due to an unfavorable exchange rate. In local currency, this business had an increase of 3.3 percent driven by the oil and gas and selected forestry sectors, along with improved sales to large accounts. The Mexican operation had an 18-percent decline in sales, which the company attributed to continued weakness in the automotive and electronics manufacturing industries and a slowdown in the Mexican economy.
On Apr. 23, Grainger said it would discontinue the operations of Material Logic, its collection of digital businesses, with the exception of FindMRO.com, and took a non-recurring charge of $40 million. FindMRO.com was then reestablished as a separate operating unit, then added to Grainger's branch-based business as of Jun. 1. Beginning with the third quarter, Grainger's digital segment ceases operations.
'The weakness in the North American economy hurt most of the end markets we serve,' said Richard L. Keyser, Grainger's chairman and CEO. 'As a result, sales for the quarter were down 4 percent. However, better gross margins, a leaner cost structure, and the elimination of unprofitable business more than offset the sales decline and contributed to improved operating earnings. Our initial forecast assumed a stronger economy and sales growth of 3 to 7 percent.'
Sales processed through the company's Internet sites were $110 million for the quarter, up 37 percent over the $80 million processed in the second quarter of 2000. Sales processed through Grainger.com of $85 million benefited from new functionality added to the site during the quarter. Keyser said, 'We have seen improvement in the Grainger.com run rate as customers use the new tools we've added to our Web site. To reach our $400 million goal for this important channel in 2001, we need to see continued acceleration.'