Grainger, Chicago, IL, sales rose 6% for the third quarter ended Sept. 30, 2006, to $1.5 billion versus $1.4 billion in the 2005 third quarter. Daily sales increased by 8%. Net earnings were up 19% to $104.5 million.
Sales for the nine months ended Sept. 30, 2006, were $4.4 billion, up 7% versus the first nine months of 2005. Net earnings increased to $284.5 million versus $242.5 million in 2005.
Grainger Branch-based segment Sales in this segment, which includes branch-based businesses in the U.S., Mexico and China, increased 6% in the 2006 third quarter ﾖ 7% on a daily basis for the quarter. Of the 7% growth, an estimated 4 percentage points came from the company's two growth initiatives in the U.S., market expansion and product line expansion.
Sales growth was reduced by approximately 2 percentage points due to the wind-down of low margin contracts with integrated-supply and automotive customers, also in the U.S.
During the quarter, the company opened one new branch in the U.S. and two facilities in China, while closing one branch in the U.S., bringing the total number of branches to 436.
Daily sales in the U.S. increased 7%, with approximately 1 percentage point of that growth coming from higher sales of seasonal products. The strongest sales growth came from government, manufacturing and commercial customers. Offsetting the growth was the absence of any hurricane-related sales, which contributed about $8 million in the third quarter of 2005.
The market expansion program contributed about 2 percentage points to the segment's daily sales growth. Because the hurricane-related sales affected four of the metro markets (Atlanta, Houston, Tampa and Miami) in 2005, those cities had tougher comparisons in the 2006 third quarter. Results for the market expansion program were: Atlanta, Denver & Seattle, 8% daily sales increase; Southern California, 12% daily sales jump (95% complete); Houston, St. Louis, Tampa, 15% daily sales increase (85% complete); Baltimore, Cincinnati, Kansas City, Miami, Philadelphia & Washington D.C., 10% daily sales increase (85% complete).
Product line expansion (31,000 fasteners and 10,000 other facilities maintenance products added to the U.S. catalog in 2006) contributed approximately 2 percentage points to the growth in the segment. Sales for the program are stronger than the company had expected.
Daily sales in Mexico were up 23% in the quarter versus the same period in 2005. In local currency, daily sales rose 25%. Sales benefited from a strong economy, an expanded telesales operation, a new branch in Santa Catarina and an expanded branch presence in Tijuana.
During the third quarter, the company opened its first distribution facilities in Shanghai, China, a 120,000-square foot master branch and a will-call express location. Sales in China were insignificant in the third quarter 2006, while start-up costs reduced operating earnings in the quarter by $1.7 million.
Acklands-Grainger Branch-based segment Sales for the quarter were up 14% versus the 2005 third quarter, 15% on a daily sales basis. In local currency, daily sales were up 8%. Results benefited from strong sales to the oil, gas and mining industries, partially offset by weak sales in the forestry industry. During the quarter, the company opened one branch and closed three branches, ending the quarter at 160 branches.
The company has decided to postpone the start of Canada's SAP project until 2008, allowing for process standardization and improvement across the business prior to the implementation.
Lab Safety Supply (LSS) Sales for the quarter were up 7% versus the