01—Abstract
Summary
Summary of the 10-Q filed April 25, 2024. Cited figures are marked; the original filing is the authoritative source.
W.W.
Grainger, Inc. reported mixed results for the first quarter of 2024. While net sales saw a modest increase of 3.5% year-over-year to $4.24 billiona, driven by growth in both its High-Touch Solutions N.A. and Endless Assortment segments, net earnings attributable to the company declined by 2.0% to $478 million. This decline was primarily due to a higher cost of goods sold and increased selling, general, and administrative expenses, which more than offset the growth in gross profit.
Diluted earnings per share remained relatively flat at $9.62 compared to $9.61b in the prior year. Despite the slight dip in profitability, the company demonstrated strong operating cash flow generation, increasing to $661 million from $454 million in the prior year, largely attributed to improved working capital management.
The company also continued its commitment to returning capital to shareholders, with significant outflows for share repurchases and dividends. Grainger maintains a solid liquidity position and investment-grade credit ratings, indicating financial stability amidst ongoing macroeconomic uncertainties.
02—Key points
Key Highlights
- Net sales increased by 3.5% to $4.24 billion for Q1 2024, driven by growth in both High-Touch Solutions N.A. and Endless Assortment segments.
- Net earnings attributable to W.W. Grainger, Inc. decreased by 2.0% to $478 million, impacted by higher cost of goods sold and SG&A expenses.
- Diluted EPS was $9.62, a slight increase from $9.61 in the prior year's comparable quarter.
- Operating cash flow saw a substantial increase, rising to $661 million from $454 million in Q1 2023, driven by favorable working capital changes.
- The company repurchased approximately $268 million of treasury stock and paid $105 million in cash dividends during the quarter.
- Inventory levels decreased year-over-year, contributing positively to working capital management.
- The company maintained its investment-grade credit ratings from Moody's and S&P.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, W.W. Grainger kept $0.11.
- Revenue$4.24B100.0%
- Cost of revenue−$2.57B60.6%
- Gross profit$1.67B39.4%
- Operating costs−$999.0M23.6%
- Operating income$669.0M15.8%
- Interest, other & tax−$191.0M4.5%
- Net income$478.0M11.3%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed April 25, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $4.24B$4.09B | +3.5% |
| Cost of Revenue | $2.57B$2.46B | +4.5% |
| Gross Profit | $1.67B$1.63B | +2.1% |
| SG&A Expenses | $999.00M$954.00M | +4.7% |
| Operating Income | $669.00M$680.00M | −1.6% |
| Net Income | $478.00M$488.00M | −2.0% |
| EPS (Basic) | $9.65$9.66 | −0.1% |
| EPS (Diluted) | $9.62$9.61 | +0.1% |
| Shares Outstanding (Basic) | 49.20M50.20M | −2.0% |
| Shares Outstanding (Diluted) | 49.40M50.50M | −2.2% |
05—Questions
Frequently Asked Questions
What was the primary driver for the decrease in net earnings despite an increase in net sales?
While net sales increased, net earnings attributable to W.W. Grainger, Inc. decreased by 2.0% due to a higher cost of goods sold (up 4.5%) and an increase in selling, general, and administrative expenses (up 4.7%). These increases collectively outweighed the 2.1% rise in gross profit, leading to a 1.6% decrease in operating earnings.
How did the company manage its cash flow and liquidity during the quarter?
The company generated strong operating cash flow, increasing to $661 million from $454 million in the prior year. This improvement was primarily driven by favorable working capital changes, including effective inventory management and timing of cash payments. Grainger ended the quarter with $804 million in cash and cash equivalents and maintains approximately $2.1 billion in available liquidity, indicating a strong position to meet its obligations.
What is the outlook for the company given the current macroeconomic environment?
Grainger acknowledges the volatile macroeconomic environment, including inflation and geopolitical events, which may continue to affect its business. However, the company historically benefits from the nondiscretionary nature of its MRO products and its broad customer base, which have provided resilience during economic downturns. The company continues to monitor conditions and implement strategies to mitigate adverse effects while remaining competitive.
How is the company returning capital to shareholders?
W.W. Grainger, Inc. actively returns capital to shareholders through share repurchases and cash dividends. In the first quarter of 2024, the company repurchased approximately $268 million of treasury stock and paid $105 million in cash dividends. On April 24, 2024, the Board of Directors declared a quarterly dividend of $2.05 per share.
06—Continue