Grainger Raises Outlook Again After 2Q Sales Jump 20%

Sales outpaced that of 1Q at the industrial distribution giant, despite slowing throughout the quarter.
Credit: Mike Hockett

Grainger doesn’t appear to be worried about a pending economic slowdown. Like it did after its 2022 first quarter, the industrial supplies distribution giant again raised its full-year outlook when reporting its 2Q results on July 29, injecting optimism into the market as distributors eye numerous economic red flags.

For the April-June period, Grainger reported sales of $3.84 billion, up 19.6% year-over-year and up 22% on a daily, constant-currency basis. That 19.6% growth outpaced 1Q’s 18.2%, showing that the company’s sales actually accelerated in a quarter where other industrial distributors and manufacturers noted signs of softness, especially in June.

Grainger wasn’t immune to that softness, as 2Q daily sales growth was 21% in April, 20% in May and 17.9% in June, but 17.9% is an impressive total for any distributor to carry into the second half of the year that figures to be considerably more challenging.

Credit: Mike Hockett

The company said daily sales in its High-Touch Solutions N.A. segment were up 22.2% year-over-year due to both strong price realization and volume growth across all geographies. In its Endless Assortment segment, daily sales were up 11.4%, or 21.1% on a daily, constant-currency basis, which Grainger said reflects the significant impact of the depreciating Japanese Yen. New customer acquisition at both Zoro and MonotaRO continued to drive Endless Assortment revenue growth, along with strong repeat and enterprise customer growth at MonotaRO.

Lake Forest, Illinois-based Grainger’s 2Q gross margin was 37.6%, up 255 basis points year-over-year and down narrowly from 1Q’s 37.9%. The company’s 2Q operating profit of $534 million surged 59.9% year-over-year and was identical to 1Q’s total, while 2Q operating margin of 13.9% grew 350 basis points year-over-year and trailed 1Q’s 14.6%.

2Q’s gross margin benefited from a lap of a 2021 $63 million pandemic product inventory adjustment in High-Touch Solutions N.A. Gross margin in High-Touch Solutions N.A. grew by 275 basis points year-over-year primarily due to that lapped inventory adjustment, as gross margin increased 25 basis points when that is excluded. Gross margin in Endless Assortment grew 100 basis points year-over-year, which Grainger said was largely driven by freight efficiencies as average order value increased.

Grainger had a 2Q net profit of $371 million, up 65% year-over-year and topping 1Q’s $366 million.

“Our second quarter results reflect the team’s continued commitment to serving customers extraordinarily well in this strong demand environment,” said DG Macpherson, Grainger chairman and CEO. “Our execution on our strategic initiatives is driving sustained growth and share gain across the business. After another quarter that exceeded expectations, we are increasing our 2022 outlook and remain well-positioned to deliver an exceptionally strong year.”

Looking forward, Grainger has updated its full-year 2022 guidance to include projected sales of $15 billion to $15.2 billion, up from the $14.5 billion to $14.9 billion given in its 1Q earnings report. The new total would represent growth of 15.4% to 16.9% compared to 2021. The company’s new gross margin guidance is for 37.2% to 37.5%, up from the 36.8% to 37.3% given after 1Q, while operating margin is now forecasted for 13.6% to 14%, up from 13% to 13.6% given after 1Q.

Here’s how Grainger’s 2Q revenue fared by U.S. business end market:

  • Natural Resources: up mid-thirties
  • Heavy Manufacturing: up low-thirties
  • Transportation: up low-thirties
  • Light Manufacturing: up high-twenties
  • Wholesale: up high-twenties
  • Commercial: up mid-twenties
  • Contractor: up low-twenties
  • Government: up high-teens
  • Healthcare: up low-double digits
  • Retail (includes eCommerce businesses): up mid-single digits

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