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Grainger Seeing ‘Benefits’ of Pricing Changes

CEO: Pricing moves not demand environment primary driver of 2017 sales growth.
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The strong demand environment was a "meaningful part" of Grainger's 2.8 percent sales increase in 2017 but not the majority of it, according to CEO DG Macpherson, who said the company's "own pricing and marketing actions" drove last year's growth.

"Certainly there are some demand tailwinds, which are great, but lot of this is just the changes we’ve made," Macpherson said on last week's earnings call with analysts. "We are now starting to see the benefits of that work."

The company's sales improved to $10.4 billion in 2017, though profit decreased 3.3 percent to $585.7 million. For the fourth quarter, sales increased 6.5 percent to $2.6 billion, while profit jumped to $151.1 million from $60.7 million the same quarter a year ago.

Much of the questioning for Macpherson and other Grainger execs on last week's call centered on the company's significant changes to its pricing structure in the U.S., a move that was highly scrutinized across distribution since being announced last year.

"Pricing has been a barrier to our growth both with large and mid-size customers. This was a very complex change that required a lot of work, lot of collaboration and great execution to pull off," Macpherson said.

"Turning to more specifics in the U.S., we’re continuing to see that our value proposition resonates with both large and mid-size customers when we remove pricing as a barrier. U.S. large customer volume increased 8 percent versus the prior year and 300 basis points sequentially."

The volume growth hasn't altered Grainger's revenue guidance for 2018, Macpherson said. The company will keep its projections of 3 to 7 percent sales growth for the year.

We've written extensively about Grainger's pricing initiative. For deeper coverage of the topic, click to purchase or download our special report, Grainger’s Web Pricing Initiative. The series, written by Lee Nyari, includes three articles:

  • Pt. 1: A ‘Suboptimal’ Solution?
  • Pt. 2: The Quest for Optimization
  • 6 Lessons for Other Distributors
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