10-QPeriod: Q1 FY2021

W.W. GRAINGER, INC. Quarterly Report for Q1 Ended Mar 31, 2021

Filed April 30, 2021For Securities:GWW

Summary

W.W. Grainger, Inc. (GWW) reported solid first-quarter 2021 results, demonstrating resilience and recovery in a dynamic economic environment. Net sales saw a modest increase of 2.8% to $3.08 billion, driven by volume growth in both the High-Touch Solutions (N.A.) and Endless Assortment segments. While gross profit margin experienced a slight decline due to inventory adjustments related to pandemic-driven products, overall operating earnings surged by 125.5% to $358 million, significantly boosted by a substantial reduction in selling, general, and administrative (SG&A) expenses. This cost management, coupled with a rebound in non-pandemic related sales, led to a strong 37.5% increase in net earnings attributable to W.W. Grainger, Inc., reaching $238 million. Investors should note the strategic shift with new reporting segments: High-Touch Solutions (N.A.) and Endless Assortment, reflecting the company's go-to-market strategies. The company also continues to manage its portfolio, having divested certain businesses. Despite ongoing market uncertainties and the lingering effects of the COVID-19 pandemic, Grainger's financial position remains robust, supported by strong operating cash flow and substantial liquidity. The company also continued its commitment to returning value to shareholders, with cash dividends paid and treasury stock repurchases.

Financial Highlights

51 data points
Beta

Revenue

$3.08B

35.4% Gross Margin

Net Income

$238.00M

7.7% Net Margin

EPS (Diluted)

$4.48

Total Assets

$6.33B

Cash & Equivalents

$562.00M

Free Cash Flow

$221.00M

Financial Statements
Beta
Revenue$3.08B
Cost of Revenue$1.99B
Gross Profit$1.09B
SG&A Expenses$735.00M
Operating Income$358.00M
Net Income$238.00M
EPS (Basic)$4.51
EPS (Diluted)$4.48
Shares Outstanding (Basic)52.30M
Shares Outstanding (Diluted)52.60M

Key Highlights

  • 1Net sales increased by 2.8% to $3.08 billion, driven by volume growth across key business segments.
  • 2Operating earnings surged by 125.5% to $358 million, primarily due to a significant reduction in SG&A expenses.
  • 3Net earnings attributable to W.W. Grainger, Inc. rose by 37.5% to $238 million, reflecting improved profitability.
  • 4The company reported a substantial decrease in SG&A expenses by 23.6%, indicating effective cost management.
  • 5The Endless Assortment segment showed robust growth with a 25.4% increase in net sales.
  • 6Grainger maintained strong operating cash flow of $294 million, demonstrating operational efficiency.
  • 7The company declared a quarterly dividend of $1.62 per share, signaling continued commitment to shareholder returns.

Frequently Asked Questions

The significant increase in operating earnings was primarily driven by a substantial reduction in Selling, General, and Administrative (SG&A) expenses, which decreased by 23.6% compared to the prior year. This was partially offset by a slight decrease in gross profit margin, which was impacted by inventory adjustments related to pandemic-driven products.

The 'High-Touch Solutions (N.A.)' segment saw a 1.8% increase in net sales, driven by price, customer mix, and volume, with a slight decrease in operating earnings due to lower gross profit. The 'Endless Assortment' segment performed strongly, with net sales increasing by 25.4% and operating earnings growing by 58%, fueled by continued customer acquisition and improved discounting strategies. The 'Other' segment experienced a significant decrease in net sales due to divestitures.

Grainger maintains a strong liquidity position with $562 million in cash and cash equivalents and approximately $1.8 billion in available liquidity as of March 31, 2021. The company expects this to be sufficient to meet its liquidity needs for the next twelve months, assuming no prolonged significant impact from the COVID-19 pandemic. They plan to continue investing in the business and returning cash to shareholders through dividends and share repurchases.

The company is involved in various legal and administrative proceedings. Notably, there are product liability-related lawsuits concerning an explosion at a KMCO chemical refinery. While the company is investigating these claims and intends to contest them vigorously, management believes that the ultimate resolution of these matters, individually or in aggregate, will not have a material adverse effect on its consolidated financial condition or results of operations. Similar assurances are provided for asbestos and silica litigation.