The 2020 Mid-Year Economic Update_long

Grainger to Close Branches, Invest in Clean Energy

Distributor saw sales hampered by low oil prices, slow manufacturing growth.

Challenging market conditions around oil and gas and manufacturing drove down sales for Grainger in the fourth quarter and for 2015. But the Chicago, IL-based distributor still sees opportunity to invest in different elements of the business.

"The macroeconomic conditions faced by our industry in 2015 are well documented and largely understood," said Laura Brown, senior vice president of communications and investor relations, in a call to discuss the annual results.

Weak oil prices hampered sales to natural resources and heavy manufacturing customers in the U.S. and Canada. Brown noted that oil represented about a 150-basis-point drag on sales in the U.S. during the quarter.

In response to changing market conditions and customer behavior, the company said it would "continue to adjust the U.S. branch network in 2016." Plans are to close an additional 55 branches throughout the year, said Bill Chapman, senior director of investor relations.

As more customers go online to complete purchases, investment in online platforms and support will also need to grow. Grainger's other businesses reporting category saw fourth quarter growth of 41 percent, largely driven by its online businesses MonotaRO and Zoro.

In addition, the company's clean energy investment resulted in a $0.09 per share benefit for the year. And there's more opportunity to build on that growth, Chapman said. Earlier this month, Grainger entered into a second clean-energy investment that is expected to boost that benefit to $0.15 to $0.20 per share in 2016.

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