Summary
W.W. Grainger, Inc. reported a challenging second quarter and first half of 2009, reflecting the broader economic downturn. Net sales for the three months ended June 30, 2009, decreased by 12.7% to $1.53 billion compared to the prior year, driven by an 18% decline in volume, partially offset by a 6% increase from pricing. The company saw declines across most customer sectors, with heavy manufacturing experiencing a nearly 30% drop, while government sales showed a slight increase. Despite lower sales, Grainger managed to improve its gross profit margin by 0.6 percentage points due to positive inflation recovery, though operating expenses decreased at a slower rate than sales, leading to a 16.7% decline in operating earnings. Net earnings for the quarter fell 18.3% to $92.5 million, resulting in diluted EPS of $1.21, down from $1.42 in the prior year. The company is focusing on increasing market share during this downturn and has announced workforce reductions to manage costs.
Financial Highlights
49 data points| Revenue | $1.53B |
| Cost of Revenue | $908.29M |
| Gross Profit | $624.97M |
| SG&A Expenses | $471.04M |
| Operating Income | $153.93M |
| Interest Expense | $2.32M |
| Net Income | $92.47M |
| EPS (Basic) | $1.23 |
| EPS (Diluted) | $1.21 |
| Shares Outstanding (Basic) | 73.44M |
| Shares Outstanding (Diluted) | 74.56M |
Key Highlights
- 1Net sales declined 12.7% year-over-year for the second quarter of 2009, reaching $1.53 billion, primarily due to an 18% decrease in sales volume, indicating a significant impact from the economic recession.
- 2Despite the sales decline, gross profit margin improved by 0.6 percentage points to 40.8% for the quarter, attributed to successful inflation recovery initiatives.
- 3Operating earnings decreased by 16.7% to $153.9 million, as operating expenses did not decline as sharply as sales, even with cost-saving measures like job reductions.
- 4Net earnings for the quarter were $92.5 million, a 18.3% decrease from the prior year, leading to diluted EPS of $1.21, down from $1.42.
- 5The company is actively managing costs, including workforce reductions of 300-400 employees, and plans to leverage its financial strength to gain market share during the economic downturn.
- 6Sales to the government sector were an exception, showing an increase in the low single digits, while heavy manufacturing customer segments saw declines of nearly 30%.
- 7Cash flow from operations significantly improved to $232.6 million for the first six months of 2009, up from $118.7 million in the prior year, bolstered by effective management of working capital and non-cash expenses.