10-QPeriod: Q3 FY2021

W.W. GRAINGER, INC. Quarterly Report for Q3 Ended Sep 30, 2021

Filed October 29, 2021For Securities:GWW

Summary

W.W. Grainger, Inc. (GWW) reported a strong third quarter of 2021, demonstrating robust growth in net sales and operating earnings. Net sales increased by 11.7% year-over-year, driven by volume increases in both the High-Touch Solutions N.A. and Endless Assortment segments. This growth was fueled by a rebound in core, non-pandemic product sales as economic activity normalized, while demand for pandemic-related products began to taper. The company also saw an improvement in gross profit margin, largely due to better price realization and a favorable shift in product mix towards higher-margin items. The company's operational efficiency is evident in the significant increase in operating earnings, up 15.6% compared to the prior year's quarter, even with increased investments in wages, variable compensation, and marketing. For the nine-month period, net sales grew by 9.1%, and operating earnings saw a substantial increase of 52.0%, significantly boosted by the absence of prior year restructuring and impairment charges. Grainger maintains a strong liquidity position, with ample available credit facilities to support ongoing investments and shareholder returns through dividends and share repurchases.

Financial Highlights

51 data points
Beta

Revenue

$3.37B

37.1% Gross Margin

Net Income

$297.00M

8.8% Net Margin

EPS (Diluted)

$5.65

Total Assets

$6.39B

Cash & Equivalents

$328.00M

Free Cash Flow

$111.00M

Financial Statements
Beta
Revenue$3.37B
Cost of Revenue$2.12B
Gross Profit$1.25B
SG&A Expenses$812.00M
Operating Income$438.00M
Net Income$297.00M
EPS (Basic)$5.68
EPS (Diluted)$5.65
Shares Outstanding (Basic)51.80M
Shares Outstanding (Diluted)52.10M

Key Highlights

  • 1Net sales for the third quarter of 2021 increased by 11.7% to $3.37 billion, compared to $3.02 billion in the same quarter of 2020.
  • 2Gross profit margin improved to 37.1% in Q3 2021, up from 35.6% in Q3 2020, driven by price realization and a favorable product mix.
  • 3Operating earnings saw a significant increase of 15.6% to $438 million in Q3 2021, compared to $380 million in Q3 2020.
  • 4For the nine months ended September 30, 2021, net sales increased 9.1% to $9.66 billion, and operating earnings surged 52.0% to $1.13 billion.
  • 5The High-Touch Solutions N.A. segment remains the largest contributor, with net sales up 12.0% in Q3 2021.
  • 6The Endless Assortment segment also showed strong performance, with net sales increasing by 12.7% in Q3 2021, driven by customer acquisition.
  • 7The company maintained strong liquidity with approximately $1.8 billion in available liquidity as of September 30, 2021.

Frequently Asked Questions

The increase in net sales was primarily driven by volume increases in both the High-Touch Solutions N.A. and Endless Assortment segments. This growth was supported by a significant increase in core, non-pandemic product sales as the economy improved, while demand for pandemic-related products continued to decrease, returning the product mix to near pre-pandemic levels.

Profitability improved significantly. Gross profit increased by 16.3% and the gross profit margin expanded by 1.5 percentage points to 37.1%. Operating earnings rose by 15.6% to $438 million, and net earnings attributable to W.W. Grainger, Inc. increased by 23.7% to $297 million. These improvements were attributed to price realization, higher sales volumes of core products, and effective cost management.

Grainger's management acknowledges that the COVID-19 pandemic continues to impact its business, supply chains, and labor availability. However, the company is focused on servicing customers, supporting employee safety, and maintaining a strong financial position. The recovery in core, non-pandemic sales and effective management of operational costs suggest resilience, but the company cannot predict the full extent of future impacts.

Grainger maintains a debt ratio and liquidity position that provides flexibility. As of September 30, 2021, the company had $328 million in cash and cash equivalents and approximately $1.8 billion in available liquidity. The company expects its current cash, cash equivalents, marketable securities, and credit facilities to be sufficient for its liquidity needs over the next twelve months. It plans to fund investments and shareholder returns through cash flows and available liquidity.