Grainger’s Gloomy Forecast

Company lowers outlook as slow-growth environment persists.
Eric-Smith-84x84

After three quarters of slow growth – including the most recent earnings report that showed sales improved just 3 percent while profit decreased 3 percent – Grainger doesn't have high hopes for a strong finish to 2016.

"We continue to operate in a challenging economic environment," said CEO DG Macpherson. "We expect fourth quarter demand to remain challenged, and as a result, we have narrowed our guidance and lowered the midpoint for the full year."

The company now expects 2016 sales growth of 1.5 to 2.5 percent, according to Bill Chapman, senior director of investor relations, speaking on this week's earnings call with analysts.

"For the full year, our guidance is lowered to reflect year-to-date performance and the expectation of continued modest sales growth in the fourth quarter," he said.

Grainger's lowered forecast is "another bad omen" for the industrial sector, according to a Bloomberg article.

"Because Grainger supplies the construction, industrial and commercial sectors, its results are watched as a potential harbinger of what's to come when its customers report their own earnings," writes the article's author, Brooke Sutherland. "If the takeaway from the second quarter was that things in the industrial economy might get a bit worse before they get better, it now appears that the getting-better portion of this process will be pushed even further into the future."

Grainger's less-than-enthusiastic outlook for the remainder of the year is in line with the rest of the industry. Distributors said they saw 0.5 percent revenue growth in the third quarter, according to respondents to the third-quarter 2016 MDM-Baird Distribution Survey. While that's the first positive growth after three straight quarters of declines, it still fell short of respondents' 1.9 percent revenue growth for 3Q.

Looking more closely at industrial supply companies, the climate was even drearier last quarter. Companies in this sector combined to average -1.4 percent revenue growth in 3Q, and they forecasted -0.4 percent revenue growth in the fourth quarter and just 1 percent in 2017.

About the Author
Recommended Reading
Leave a Reply

Leave a Comment

Sign Up for the MDM Update Newsletter

The MDM update newsletter is your best source for news and trends in the wholesale distribution industry.

2

articles left

Want more Premium content from MDM?

Subscribe today and get:

  • New issues twice each month
  • Unlimited access to mdm.com, including 10+ years of archived data
  • Current trends analysis, market data and economic updates
  • Discounts on select store products and events

Subscribe to continue reading

MDM Premium Subscribers get:

  • Unlimited access to MDM.com
  • 1 year digital subscription, with new issues twice a month
  • Trends analysis, market data and quarterly economic updates
  • Deals on select store products and events

1

article
left

You have one free article remaining

Subscribe to MDM Premium to get unlimited access. Your subscription includes:

  • Two new issues a month
  • Access to 10+ years of archived data on mdm.com
  • Quarterly economic updates, trends analysis and market data
  • Store and event discounts

To continue reading, you must be an MDM Premium subscriber.

Join other distribution executives who use MDM Premium to optimize their business. Our insights and analysis help you enter the right new markets, turbocharge your sales and marketing efforts, identify business partners that help you scale, and stay ahead of your competitors.

Register for full access