Summary
W.W. Grainger, Inc. (GWW) reported a decrease in net sales and net earnings for the third quarter of 2015 compared to the same period in 2014. Net sales declined by 1% to $2.53 billion, impacted by weaker performance in the natural resources, contractor, and reseller segments, partly offset by growth in light manufacturing and government sectors. Net earnings attributable to the company fell by 17% to $192 million, leading to a diluted EPS of $2.92, down from $3.30 in the prior year's quarter. The company's financial position was influenced by the acquisition of Cromwell Group in the UK, which contributed to an increase in goodwill and intangible assets, and a significant rise in long-term debt due to the issuance of $1 billion in Senior Notes to fund strategic initiatives, including share repurchases. While operating expenses saw a slight increase due to restructuring costs and growth investments, overall profitability was pressured by lower gross profit margins driven by price deflation and a shift towards lower-margin customer segments. Management has revised its full-year 2015 guidance downwards, reflecting continued economic weakness.
Financial Highlights
52 data points| Revenue | $2.53B |
| Cost of Revenue | $1.47B |
| Gross Profit | $1.06B |
| SG&A Expenses | $721.15M |
| Operating Income | $340.73M |
| Interest Expense | $13.90M |
| Net Income | $192.20M |
| EPS (Basic) | $2.94 |
| EPS (Diluted) | $2.92 |
| Shares Outstanding (Basic) | 64.72M |
| Shares Outstanding (Diluted) | 65.29M |
Key Highlights
- 1Net sales for Q3 2015 decreased 1% year-over-year to $2.53 billion, driven by declines in key customer segments like natural resources and heavy manufacturing.
- 2Net earnings attributable to W.W. Grainger, Inc. decreased by 17% to $192 million for the quarter, resulting in diluted EPS of $2.92, down from $3.30 in Q3 2014.
- 3Gross profit margin declined by 1.1 percentage points to 41.9% due to price deflation, higher growth in lower-margin customer segments, and reduced supplier rebates.
- 4Operating expenses increased slightly by 1% to $721 million, including $11 million in restructuring costs related to branch closures.
- 5The company completed the acquisition of Cromwell Group (Holdings) Limited in the UK for approximately $476 million, adding goodwill and intangibles of about $353 million.
- 6Long-term debt significantly increased due to the issuance of $1 billion in 4.60% Senior Notes in June 2015, intended to fund strategic initiatives like share repurchases.
- 7Full-year 2015 sales growth guidance was revised downwards to a range of -0.5% to 0.5%, and EPS guidance was lowered to $11.60-$11.80.