W.W. Grainger Lowers Guidance Amid Demand Pressure
October 18 2016 - 9:09AM
Dow Jones News
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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