Summary
W.W. Grainger, Inc. reported a mixed financial performance for the second quarter and first half of 2016. While net sales saw a modest increase of 2% for both periods, reaching $2.56 billion and $5.07 billion respectively, profitability declined significantly. Net earnings attributable to W.W. Grainger, Inc. fell by 22% to $173 million for the quarter and 17% to $359 million for the first half. This decline is primarily attributed to a decrease in gross profit margin, impacted by price deflation exceeding cost deflation and unfavorable customer mix, along with increased operating expenses due to acquisitions and restructuring costs. Diluted earnings per share also saw a considerable decrease. The company revised its full-year 2016 guidance downwards for both sales growth and earnings per share, citing lower-than-expected volumes. Geographically, the United States segment experienced a 3% decrease in daily sales for the quarter and a 1% decrease for the half, impacted by weakness in natural resources, reseller, and contractor sectors. The Canadian segment faced a more significant decline, with net sales down 19% for the quarter and 21% for the half, affected by a weak economic environment, wildfires, and the SAP system implementation. The 'Other Businesses' segment, which includes the acquisition of Cromwell, showed strong growth, contributing significantly to overall net sales. Despite the profit decline, the company continues its share repurchase program and declared a quarterly dividend.
Financial Highlights
52 data points| Revenue | $2.56B |
| Cost of Revenue | $1.52B |
| Gross Profit | $1.04B |
| SG&A Expenses | $734.47M |
| Operating Income | $305.59M |
| Interest Expense | $16.81M |
| Net Income | $172.68M |
| EPS (Basic) | $2.81 |
| EPS (Diluted) | $2.79 |
| Shares Outstanding (Basic) | 60.89M |
| Shares Outstanding (Diluted) | 61.30M |
Key Highlights
- 1Net sales increased by 2% for both the three and six months ended June 30, 2016, reaching $2.56 billion and $5.07 billion, respectively.
- 2Net earnings attributable to W.W. Grainger, Inc. declined significantly, down 22% to $173 million for the quarter and 17% to $359 million for the first half.
- 3Gross profit margin decreased by 2.0 percentage points for the quarter (40.6% vs. 42.6%) and 2.6 percentage points for the six months (41.1% vs. 43.7%), driven by price deflation and unfavorable customer mix.
- 4The Canadian segment experienced a substantial decline in net sales, down 19% for the quarter and 21% for the six months, impacted by economic weakness and operational disruptions.
- 5The company revised its full-year 2016 guidance downwards, with sales growth revised to 1-4% and EPS guidance revised to $11.20-$12.20.
- 6The company repurchased 1,033,606 shares of common stock during the second quarter under its share repurchase program.
- 7eCommerce sales continued to grow, representing 46% of total sales for both the quarter and the six-month period, up from 42% and 39% respectively in the prior year.