Industrial and MRO supplies distribution giant Grainger reported its 2023 third quarter financial results on Oct. 26, which showed another solid quarter for the company, albeit with expectedly slower sales figures than earlier in the year.

With $15.2 billion in 2022 revenue, Grainger appeared on nine of MDM’s 2023 Top Distributors Lists (of 17), including No. 1 for Industrial Distributors (for an eighth straight year) and No. 1 in MRO.

Chicago-based Grainger posted total 3Q23 sales of $4.21 billion, up 6.7% year-over-year and up 8.7% on a daily, constant currency basis. That compares with 9.0%/10.1% growth in 2Q and 1Q’s 12.2%/14.5% in 1Q.

In an initial view of Grainger’s 3Q23 financials, Baird’s Industrial Distribution Equity Research unit noted: “Net, solid results continue for GWW with a combination of good execution and company-specific initiatives driving share gains.”

Grainger’s 3Q23 gross profit margin of 39.3% matched 2Q’s and was up 80 basis points year-over-year. The company’s 3Q23 operating profit of $667 million was up 10.7% year-over-year and narrowly ahead of 2Q’s $661 million, while 3Q operating margin of 15.9% ticked up 10 bps from 2Q and 60 bps year-over-year.

Grainger posted a 3Q23 net profit of $476 million, narrowly topping 2Q’s $470 million and up 11.9% year-over-year.

“The team continues to drive value for customers and serve them well amidst a reasonably steady demand environment,” Grainger Chairman and CEO D.G. Macpherson said in the company’s earnings release. “By executing on our strategy, we saw additional share gain and continued profitability leading to another quarter of strong performance,” said D.G. Macpherson, Chairman and CEO. “As we look to the final quarter of 2023, we remain focused on providing a flawless experience for customers and positioning the business for long-term, profitable growth.”

Premium: The State of Grainger’s Footprint – What’s Changed and What Hasn’t (Aug. 28)

By business segment in 3Q23

High-Touch Solutions-North America: Total sales of $3.40 billion were up 7.0% year-over-year (up 9.9% in 2Q). The company noted solid volume growth in all geographies and positive, but decelerating year-over-year price contribution. Gross margin of 41.7% grew 110 bps year-over-year, while operating profit of $612 million improved 11.4% year-over-year as margin expanded 70 bps.

Endless Assortment: Total sales of $732 million were up 4.3% year-over-year (up 4.5% in 2Q), with daily sales up 9.2%. The company said revenue growth was driven by new customer acquisition across the segment, as well as enterprise customer growth at MonotaRO, partially offset by declining sales to non-core, consumer-like customers and slower overall market demand at Zoro. Gross margin of 39.3% fell 20 bps year-over-year, while operating profit of $55 million slid 4.3% as margin fell 50 bps.

Outlook

Looking forward, Grainger now expects 2023 net sales of between $16.4 billion and $16.6 billion, lowering the top end of that range from $16.8 billion seen in the company’s 2Q earnings report. Grainger likewise lowered the top end of its sales growth percentage outlook to range of 8.0%-9.1%, down from 8.0%-10.6% in 2Q. Grainger raised the lower end of its gross margin range to 39.3%-39.4%, up from 39.1%-39.4% issued in 2Q. It also raised the lower end of its operating margin range to 15.6%-15.7%, up from 15.2%-15.7% in 2Q.

Other 3Q Grainger Notes

During 3Q, Grainger’s announced July 12 that it plans to open a new 500,000-square-foot distribution center in Gresham, Oregon sometime in 2025 and boost the company’s capacity in the Pacific Northwest. The company broke ground on that project on Aug. 17. Also in 3Q, Grainger released its 12th annual ESG report on July 10.

On Sept. 6, Grainger announced the passing of strategic advisor and former Senior Vice President and Chief Human Resources Officer Kathleen Carrol. On Sept. 12, the company announced the appointment of 17-year company veteran Matt Fortin as its new CHRO.

Also in 3Q, Grainger released its 12th annual ESG report on July 10, and the Power Transmission Distributors Association announced Aug. 29 that Grainger had joined the group as a new member.