Chicago-based Grainger (NYSE: GWW), No. 2 on MDM’s list of the top 40 industrial distributors, reported first-quarter sales of $2.3 billion, an increase of 4 percent compared to the prior-year quarter. Profit increased 13 percent to $211.8 million.

Sales increased 6 percent on a daily basis and consisted of 3 percentage points from volume, 2 percentage points from price, 1 percentage point from acquisitions and 1 percentage point from higher sales of seasonal products, partially offset by a 1 percentage point reduction from foreign exchange.

Sales in March were affected by the timing of the Easter holiday, which reduced daily sales growth by 2 percentage points and reduced sales growth for the company's reportable business segments. In addition, uncertainty in the U.S. surrounding sequestration contributed to a decline in sales to the government end market, which represented 15 percent of sales for the U.S. segment.

"We are encouraged by the solid start to the year, despite facing difficult comparisons with 2012," said Jim Ryan chairman, president and CEO. "Over the balance of the year, we will invest in e-commerce, our sales force, our distribution center network and our enterprise systems that will provide value to our customers and help us gain additional market share longer term," Ryan said.

Quarterly Segment Sales
Sales for the U.S. segment increased 4 percent, 6 percent on a daily basis versus the prior year. The 6 percent daily sales growth was driven by 3 percentage points from price, 2 percentage points from volume and 1 percentage point from acquisitions. Daily sales increased 7 percent in January, 7 percent in February and 4 percent in March. The sales increase for the quarter in the U.S. was led by solid growth in the light and heavy manufacturing, natural resources, commercial and contractor end markets.

Operating earnings for the U.S. segment increased 11 percent, driven by the 4 percent sales growth, higher gross profit margins and positive expense leverage. Gross profit margins for the quarter increased 0.8 percentage points driven by price inflation exceeding product cost inflation and strong growth of private label products, partially offset by negative selling mix.  

Sales at Acklands-Grainger increased 4 percent, 5 percent on a daily basis. The 5 percent daily sales growth consisted of 8 percentage points from volume, partially offset by a 2 percentage point decline from the timing of the Easter holiday and 1 percentage point decline from foreign exchange. In local currency, sales increased 5 percent, 6 percent on a daily basis. Daily sales in local currency increased 8 percent in January, 8 percent in February and 3 percent in March. The sales increase for the quarter in Canada was led by strong growth to customers in the construction, commercial, forestry, oil and gas and light manufacturing end markets.

Operating earnings in Canada increased 11 percent in the 2013 first quarter, in both U.S. dollars and local currency. The improvement in operating performance was primarily driven by higher sales and positive expense leverage. Gross profit margins were essentially flat versus the prior year.

Sales for the Other Businesses, which includes operations primarily in Asia, Europe and Latin America, increased 4 percent, 5 percent on a daily basis, versus the prior year. The daily sales growth consisted of 6 percentage points from volume and price and 4 percentage points from acquisitions, partially offset by a 5 percentage point decline from unfavorable foreign exchange. The sales increase was primarily due to strong revenue growth in Japan and incremental sales from the business in Brazil acquired in April 2012. 

Operating earnings for the Other Businesses were $8 million versus $11 million in the 2012 first quarter. The decline in earnings performance for the quarter versus the prior year was driven by operating losses in Brazil, coupled with lower earnings in some of the smaller businesses in Asia and Latin America. The earnings decline was partially offset by strong earnings growth in Japan and operating earnings growth in Europe related to lower expenses from restructuring actions taken in the 2012 fourth quarter.