Chicago, IL-based Grainger reported sales of $1.7 billion for the quarter ended March 31, 2008, up 7% from the prior-year first quarter. Profit for the quarter was up 12% to $114 million.
 
We are off to a strong start,” said CEO Richard L. Keyser. “We are encouraged by the market share gains achieved in a slowing economy.”
 
Daily sales increased 8% in January, 7% in February and 7% in March. For the quarter, sales were positively affected by foreign exchange, which contributed 1percentage point. Sales were negatively affected by 1percentage point due to the timing of Easter.
 
Grainger Branch-based segment
Sales in this segment, which includes branch-based businesses in the U.S., Mexico and China, increased 6% in the 2008 first quarter. Daily sales in this segment grew by 6% in January, 6% in February and 5% in March. A decline in the sales of seasonal products resulted in about a 1 percentage point reduction in the sales growth rate.
 
Consistent with total company results, sales for the quarter were negatively affected by approximately 1 percentage point due to the timing of the Easter holiday. Market expansion and product line expansion added 3 percentage points to overall growth in the quarter, with most of the contribution coming from product line expansion.
 
During the quarter, the company opened five new full service branches and closed one in the U.S., and opened one will-call express branch in China, bringing the total number of branches in the segment to 462.
 
Sales in the U.S. increased 6%, with growth coming from all customer end markets, except retail, which experienced a low single digit decline. The strongest growth came from sales to government customers. Sales growth in the top 25 metro markets outpaced the rest of the U.S.
 
The U.S. branch-based business added approximately 44,000 new products in the February 2008 catalog; these included fleet maintenance, power transmission and selected additions to existing product lines. The new catalog includes a total of 183,000 products. The company expects to add more products throughout the year.
 
Sales in Mexico were up 17% in the quarter versus the same period in 2007, negatively affected by 6%age points, due to the timing of the Easter holiday. In local currency, sales increased 15%. While sales benefited from the branches previously opened as part of the ongoing market expansion program, no new branches were opened in the first quarter. The business expects to add up to five branches in the second quarter.
 
In China, the company opened one new will-call express location in the quarter. Sales for this business were $1.4 million for the quarter.
 
Operating earnings for the quarter were up 10% in the Grainger Branch-based segment. Partially affecting this improvement were ongoing operating losses in China and more recent operating losses in Mexico due to market expansion. The operating earnings increase was the result of positive operating expense leverage from the 6% sales growth and a 0.1%age point increase in gross profit margins. This operating expense leverage was primarily attributable to payroll and other operating expenses, which grew at a slower rate than sales.
 
Acklands-Grainger Branch-based segment
Sales for the quarter were up 25% versus the 2007 first quarter. This includes a 2 percentage point negative impact, due to the timing of Easter. In local currency, sales were up 7%. On a daily basis, sales in local currency were up 5% in January, 6% in February and 10% in March. Strong sales to mining, oil and government customers were partially offset by weakness in the forestry sector. During the quarter, Acklands opened one branch, ending the quarter at 154 branches.
 
Operating earnings increased 30% for the 2008 first quarter, primarily the result of the strong sales and improved gross profit margins.
 
Lab Safety Supply (LSS)
Sales for the first quarter of 2008 were up 3% versus the 2007 first quarter. Daily sales were up 5% in January, 3% in February and 3% in March. Sales from the May 2007 McFeeley’s acquisition contributed 3 percentage points to the sales growth for the quarter; excluding the acquisition, the rest of the business was essentially flat.
 
Operating earnings increased 1% for the 2008 first quarter. Operating expenses grew faster than sales primarily due to a higher employment benefit expense related to increased medical claims.
 
W.W. Grainger, Inc. with 2007 sales of $6.4 billion, is a broad line supplier of facilities maintenance products serving businesses and institutions in Canada, China, Mexico and the U.S.