W.W. Grainger Inc., the prominent distributor of maintenance, repair and operations (MRO) products, reported gains in digital as well as total sales for the third quarter but is still facing market uncertainty related to the pandemic, executives said today.
“In the third quarter, we captured significant market share,” D.G. Macpherson, chairman and CEO, said as Grainger announced a 2.4% year-over-year Q3 increase in total sales to $3.02 billion, following a 1.9% decline in the prior quarter.
A gain in MRO market share
In Grainger’s core U.S. market, it gained market share even as the overall U.S. MRO market declined by 5% or 6%, CEO D.G. Macpherson said on a conference call today with investment analysts. Grainger notes on its website that it has a U.S. MRO market share of 6%.
Macpherson also noted other year-over-year third-quarter gains for Grainger, including: a 6% increase in its number of midsized customers, a 43% hike in pandemic-related sales of such products as masks and gloves, a 7% increase in non-pandemic MRO sales, and a sales increase of “about 20%” in its “endless assortment” ecommerce operations Zoro.com and MonotaRO.com. Macpherson noted that the pandemic-related product sales are cutting into Grainger’s profit margins, and that, with the ongoing state of the pandemic, it was too soon to say how long the current mix of product sales would continue.
He added that Zoro.com recently added 1.5 million SKUs, bringing its total to 5 million, and noted that the new SKUs have made Zoro more productive. In addition, he said, analytics data on Zoro’s customer activity has been showing an increase in the number of new customers who are returning to place multiple orders. “Getting people to repeat is key,” he said.
Grainger didn’t break out figures on electronic sales, but Macpherson noted that the company saw more growth through its digital channels while also showing gains in its “high-touch” sales supported by sales reps.
An uptick in BTC sales
Executives added that Grainger has seen an uptick in business-to-consumer customers, particularly as its traditional B2B buyers are working from home and placing online orders for their personal use as well as for their business operations.
Although the company doesn’t break out ecommerce figures in its quarterly reports, in the annual 10K financial statement it filed with the U.S. Securities and Exchange Commission for its 2019 fiscal year, Grainger noted the following shares of total orders from its three groupings of digital channels: websites, including its full-service flagship Grainger.com, 30%; EDI and e-procurement, 25%; and its KeepStock inventory management services, 16%. That comes to 71% of orders through its digital channels, with the remaining 29% received through its physical branch network and via the telephone. The company reported total 2019 sales of $11.5 billion, with the 71% digital share amounting to $8.2 billion.
For the third quarter ended Sept. 30, 2020, Grainger reported:
- Total net sales increased 2.4% year over year to $3.02 billion. Grainger noted that total sales increased by 4.6% excluding its Grainger China and Netherlands-based Fabory operations, which it divested earlier this year. Figuring a 71% digital share of sales, it Q3 digital sales came in at $2.14 billion;
- Gross profit declined by 2.3% to $1.07 billion, resulting in a gross profit margin of 35.6%, down from 37.3%;
- Net earnings increased by 3.0% to $240 million.
For the nine months ended Sept. 30, Grainger reported:
- Total net sales increased by 2.5% year over year to $8.86 billion, putting its 71% digital share at $6.29 billion;
- Gross profit declined by 3.1% to $3.21 billion, resulting in a gross profit margin of 36.3%, down from 38.4%;
- Net earnings declined by 29.4% to $527 million, as Grainger absorbed a $233 million increase in expenses.
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