By Anne Steele 
 

W.W. Grainger Inc. narrowed its guidance for the year--lowering the midpoint of its outlook--though it posted an unexpected rise in adjusted profit in the latest quarter as the company continued to trim expenses amid a slide in sales.

Chief Executive D.G. Macpherson said the maintenance, repair and operating supply distributor continued to effectively manage costs in what he called a "low-growth environment." He said the company expects fourth quarter demand to remain challenged.

For 2016, the company now expects per-share earnings of $11.40 to $11.70 and sales to grow 1.5% to 2.5%. It had previously guided for earnings of $11.20 to $12.20 on 1% to 4% sales growth.

In the quarter ended Sept. 30, organic sales, which exclude foreign-exchange fluctuations and acquisitions, were flat, as a 1 percentage point reduction in price weighed on a 1 percentage point volume lift from seasonal products.

Sales in its U.S. segment, which account for more than three-quarters of total sales, slipped 0.6% to $2.03 billion, dragged by lower pricing and volume, despite strong sales to government and retail customers.

Canadian sales tumbled 16% to $179.3 million, also hurt by volume and price decreases. The company's 2015 acquisition of England's Cromwell Group drove a 36% surge in sales in its other business segment.

In all for the period, Grainger reported a profit of $185.9 million, or $3.05 a share, versus $192.2 million, or $2.92 a share, a year earlier.

Excluding charges related to restructuring in the U.S. and Canada, among other items, earnings grew to $3.06 a share from $3.03 a share a year before. Analysts polled by Thomson Reuters were looking for an adjusted $2.99 a share. Revenue improved 2.5% to $2.6 billion, edging in above analyst expectations for $2.59 billion.

The company's gross margin declined to 40% from 41.9% a year ago, mostly owing to unfavorable customer mix and price deflation exceeding product cost deflation. Operating expenses were 1% lower thanks to lower payroll and benefits costs.

Grainger shares, inactive premarket, have risen 5.9% so far this year.

 

Write to Anne Steele at anne.steele@wsj.com

 

(END) Dow Jones Newswires

October 18, 2016 08:54 ET (12:54 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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