W.W. Grainger Inc. grew overall sales slightly for the second quarter in a row, but online sales moved ahead by double digits, the company reported today.
“Our U.S. business had strong volume in the quarter driven by our strategic pricing initiatives and an improving demand environment,” says CEO DG Macpherson. “Our single-channel online businesses continued their strong sales growth and improved profitability.”
Online sales were up 17% for the quarter and helped lift overall sales in the company’s “Other” Business” segment by 11.4%, to $536.9 million from $481.9 million in the same quarter last year. Grainger, No. 32 in the new 2018 B2B E-Commerce 300, did not break out online sales in dollars. Its online businesses include Canada-based AcklandsGrainger.com, off-price U.S.-based Zoro.com and Japan-based MonotaRO.com.
The distributor of business and industrial products has lost nearly a fifth of its market value over the past year as investors grew concerned about its ability to profitably adapt to the digital age and competition from Amazon.com Inc. (No. 91). Earnings and margins in Q3, however, didn’t decline quite as much as analysts had feared.
But Grainger had to cut its revenue outlook for the year. It now expects sales growth of 1.5% to 2.5%, down from a previous projection of as much as 4%. Rival Fastenal Co. (No. 57) reported an 11.8% spike in sales when it disclosed third-quarter results last week. And Fastenal didn’t implement the massive price cuts that Grainger was forced to carry out to make its products more competitive with those elsewhere online.
The price reductions shaved 5 percentage points off Grainger’s U.S. sales growth. For now, that’s being offset by volume gains. But some question whether Grainger is taking Amazon seriously enough and fear it may need to make even more price cuts next year. It’s worth noting that Amazon Business expanded into the U.K. and Japan earlier this year, putting Grainger’s operations in those countries in the cross hairs of the e-commerce giant as well. Deane Dray, an analyst at global investment banker RBC Capital, has estimated Grainger would need a 5% boost in sales volume to counteract an additional 1.5 percentage point impact from price cuts.
For the third quarter ended Sept. 30, Grainger reported:
- Net sales of $2.64 billion, up 1.5% from $2.60 billion a year earlier.
- Gross profit of $1.02 billion, down 1.9% from $1.04 billion.
- Net earnings of $170.8 million, down 11.7% from $193.4 million.
For the nine months ended Sept 30, Grainger reported:
- Net sales of $7.79 billion, up 1.6% from $7.67 billion a year earlier.
- Gross profit of $3.08 billion, down 1.3% from $3.12 billion.
- Net earnings of $460.6 million, down 18.4% from $564.5 million.
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Bloomberg News contributed to this report.Favorite