Facility maintenance and related products provider W.W. Grainger, Inc. (GWW), Tuesday reported a drop in fourth quarter profit, hurt by charges related to headcount reduction, notwithstanding a 3% growth in quarterly sales. Acquisitions, foreign exchange benefit and price increases helped quarterly sales, offset partially by volume declines. Both earnings and sales came in above estimates. Taking cue from the stronger December and January sales, Grainger raised its full year 2010 earnings guidance from the prior forecast level.
Net earnings of Lake Forest, Illinois-based Grainger dropped 10% to $97.36 million from $107.92 million in the same quarter a year ago. On a per share basis, earnings were down 7% to $1.27 from $1.37 in 2008.
On average, 14 analysts polled by Thomson Reuters expected earnings of $1.24 per share for the quarter. Analysts' estimate typically exclude one-time items.
Earnings reflect a 1 cent per share reduction related to the adoption of FSP 03-6-1 in the fourth quarter of 2009 and 2 cents in the 2008 quarter.
During the quarter, Grainger continued to lower its cost structure by closing 12 branches, including 6 Will Call Express locations and with headcount reduction. Along with other asset write-down, the closure resulted in asset impairment charges of $9 million or 7 cents per share, while recording $7.5 million or 5 cents per share in severance costs related to reduction of 200 positions in the fourth quarter.
Grainger's sales increased 3% to $1.63 billion from $1.59 billion in the year-ago quarter, beating Street estimates of $1.59 billion.
Sequentially, in the third quarter, W.W. Grainger posted higher profit benefited by a one-time gain. Sales, however, fell 14% from last year. Net income available to common shareholders was $141.2 million and net sales was $1.59 billion.
Daily sales decreased 3% in October, increased 2% in November and increased 11% in December.
Sales for the United States segment dropped 2% during the quarter, with daily sales dropped 7% in October, down 3% in November and up 5% in December. Acquisitions and the timing of the Christmas holiday accounted for 3% points of the sales growth in December.
Sales for the Acklands-Grainger business in the quarter were up 11% compared to the 2008 fourth quarter in U.S. Dollars.
Sales for the other businesses, which now include Japan, Mexico, India, Puerto Rico, China, and Panama, were up 214% from the prior year quarter, reflecting acquisition of the businesses in India and Japan, along with contributions from Mexico and China.
Product line expansion contributed $260 million in sales for the quarter versus $185 million in the 2008 fourth quarter. Products added over the last four years resulted in $934 million in sales in 2009.
Operating earnings for the quarter were $165.36 million, compared to $180.56 million in the year-earlier quarter. Costs of merchandise sold increased to $949.62 million from $912.59 million in the prior-year quarter. ]Amongst others in the industry, WESCO International Inc. (WCC), a provider of electrical MRO products, in its third quarter, reported an earnings that dropped to $33.6 million or $0.79 per share from $63.7 million or $1.48 per share a year ago. Quarterly net sales were $1.15 billion, down 29.2% from $1.63 billion in the same quarter last year.
Another player, Applied Industrial Technologies, Inc. (AIT), in its second quarter, reported a decrease in net profit, hurt primarily by lower net sales. Net earnings were $10.49 million or $0.24 per share and sales $446.25 million for the quarter.
For the full year 2009, net earnings of Grainger decreased to $430.77 million or $5.62 per share from $475.36 million or $5.97 per share a year ago. Net sales dropped to $6.22 billion from $6.85 billion in the prior year.
Reported 2008 EPS were $6.04, which was restated after adopting FSP 03-6-1 on January 1, 2009, resulting in a 7 cent reduction in EPS in 2008 and 6 cents in 2009.
Looking ahead, Grainger raised its 2010 earnings forecast to a new range of $5.40 to $5.90 per share from the prior range of $5.30 to $5.80 per share. The Street currently expects earnings of $5.87 per share, with estimates ranging between $5.40 and $6.59 per share.
Sales growth for the year is now expected to range from 6% to 10%, compared to the earlier sales forecast in the range of 4% to 9%.
Jim Ryan CEO said, "We remain cautiously optimistic about the economy and are executing on the things we can control like our customer service and high product availability. As a result, we are well positioned for continued share gain, particularly as many competitors have been forced to reduce inventories."
Effective first quarter of 2009, the company will also have two reportable business segments, the United States and Canada, which represent approximately 98% of full year company sales.
On October 12, 2009, brokerage BB&T Capital Mkts upgraded Grainger shares to 'Buy' from 'Hold,' with a mean target of $112.00.
GWW is currently trading at $99.96, down $0.98 or 0.97%, on a volume of 1.42 million shares. In the last 52-week period, the stock traded in a range of $59.95 to $102.54, with a three-month average volume of 0.69 million shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.