10-KPeriod: FY2016

W.W. GRAINGER, INC. Annual Report, Year Ended Dec 31, 2016

Filed February 28, 2017For Securities:GWW

Summary

W.W. Grainger, Inc. (GWW) reported net sales of $10.1 billion for the fiscal year ended December 30, 2016, a modest 2% increase over the prior year. However, the company experienced a significant 21% decline in net earnings attributable to W.W. Grainger, Inc., falling to $606 million from $769 million in 2015. This decline was attributed to several factors, including lower gross profit margins due to price deflation and an unfavorable customer mix, as well as increased operating expenses related to restructuring charges, goodwill and intangible asset impairments, and an adjustment for unclaimed property. The company is actively adapting to changing customer behaviors, particularly the migration towards online and electronic purchasing platforms, which now represent 46% of U.S. sales ($3.7 billion in 2016). To address these shifts and improve efficiency, Grainger continued its branch rationalization strategy, closing 55 branches in 2016. Investments in eCommerce capabilities, supply chain, and inventory management services remain a strategic focus to drive future growth and customer engagement. Despite challenges, Grainger reiterated its 2017 guidance for 2-6% sales growth and earnings per share between $11.30 and $12.40, signaling confidence in its strategic initiatives.

Financial Highlights

54 data points
Beta

Revenue

$10.14B

40.6% Gross Margin

Net Income

$606.00M

6.0% Net Margin

EPS (Diluted)

$9.87

Total Assets

$5.69B

Cash & Equivalents

$274.00M

Free Cash Flow

$740.00M

Financial Statements
Beta
Revenue$10.14B
Cost of Revenue$6.02B
Gross Profit$4.12B
SG&A Expenses$3.00B
Operating Income$1.11B
Interest Expense$76.00M
Net Income$606.00M
EPS (Basic)$9.94
EPS (Diluted)$9.87
Shares Outstanding (Basic)60.43M
Shares Outstanding (Diluted)60.84M

Key Highlights

  • 1Net sales reached $10.1 billion in 2016, a 2% increase year-over-year.
  • 2Net earnings saw a significant decrease of 21% to $606 million in 2016.
  • 3eCommerce sales in the U.S. grew by 12% to $3.7 billion, representing 46% of total U.S. revenue.
  • 4The company continued its restructuring efforts, closing 55 branches in 2016 to align with the shift towards online sales.
  • 5Gross profit margin declined to 40.6% in 2016 from 42.4% in 2015, impacted by price deflation and customer mix.
  • 6Operating expenses increased by 2% due to restructuring charges and impairment losses.
  • 7Grainger reiterated its 2017 guidance for 2-6% sales growth and EPS between $11.30 and $12.40.

Frequently Asked Questions

The primary drivers for the decrease in net earnings in 2016 were a decline in gross profit margin, primarily due to price deflation exceeding cost deflation and an unfavorable customer mix, along with an increase in operating expenses. These operating expenses included significant charges related to restructuring actions, goodwill and intangible asset impairments in the 'Other Businesses' segment, and an adjustment for unclaimed property.

Grainger is actively adapting by investing in its eCommerce capabilities. In 2016, eCommerce sales represented 46% of U.S. revenue. The company also continued its strategy of closing physical branches (55 in 2016) to improve efficiency and align with customer preferences. Investments in inventory management services like KeepStock® further support this shift.

Grainger has reiterated its 2017 guidance, expecting sales growth between 2% and 6%. The company also projects earnings per share to be in the range of $11.30 to $12.40. This outlook reflects continued investment in supply chain, eCommerce, and sales force productivity, as well as ongoing efforts to improve operational efficiency.

The Canadian business experienced a significant 18% decrease in net sales in 2016, largely driven by declines in the oil and gas sector and other end markets, compounded by the impact of an ERP system implementation. This resulted in operating losses for the segment in 2016, negatively impacting the company's overall consolidated performance.