WW Grainger, Chicago, IL, reported an 8% increase in sales for the second quarter ended June 30, 2006. Sales were $1.5 billion versus $1.4 billion in the 2005 second quarter. Profit was up 15% to $94 million.
“Based on some softening in certain segments of the North American economies, we now expect this year’s sales to grow by 7 to 9 percent,” said Grainger’s Chairman and CEO Richard L. Keyser.
Sales for the six months ended June 30, 2006, were $2.9 billion, up 7% versus the first six months of 2005. Net earnings increased 17% to $180 million versus $154 million in 2005.
Grainger Branch-based segment
Sales in this segment, which includes the U.S., Mexico and China, were $1.2 billion, up 8% in the 2006 second quarter. Of the 8% growth, an estimated 3 percentage points came from the company’s two ongoing major growth initiatives, market expansion and product-line expansion. Sales growth was reduced by about 2 percentage points due to the wind-down of low margin contracts with integrated supply and automotive-related customers.
Sales in the U.S. increased 8%, with strong growth in the government and heavy manufacturing sectors. In addition, sales for the quarter were positively affected by approximately 1 percentage point due to higher sales of seasonal products.
The market expansion program contributed approximately 2 percentage points to the segment’s growth. As part of enhancing Grainger’s presence in top metropolitan markets, the company completed 34 branch projects during the quarter: expanded 13 branches, relocated six branches, opened 11 new branches including one Grainger Express location and sold four branches. The majority of these projects were in Baltimore, Cincinnati, Kansas City, Miami, Philadelphia and Washington, D.C.
Results for the market expansion program were
- Atlanta, Denver, Seattle: Sales up 14%
- Four markets in Southern California: Sales up 14%
- Houston, St. Louis, Tampa: Sales up 15%
- Baltimore, Cincinnati, Kansas City, Miami, Philadelphia, Washington D.C.: Sales up 9%
Product-line expansion (fasteners and other facilities maintenance products added in 2006) contributed approximately 1 percentage point to the growth in the segment.
Sales in Mexico were up 16%in the quarter versus the same period in 2005 driven by its telesales operation, a new branch in Santa Catarina and an expanded presence in Tijuana. In local currency, sales were up 19%.
Acklands-Grainger Branch-based segment
Sales of $147 million for the quarter were up 13% versus the 2005 second quarter, up 2% in Canadian currency. Operating earnings of $3 million were down 32% for the 2006 second quarter, resulting from higher payroll, SAP-related costs and severance expenses related to a leadership change.
Lab Safety Supply (LSS)
Sales of $103 million for the quarter were up 6% versus the 2005 second quarter. The acquisition of the business of Rand Materials Handling Equipment Co. in January 2006 contributed 4% to the sales growth. Operating earnings were $14 million, down 1% for the 2006 second quarter. The decline was primarily due to integration costs for the Rand acquisition and higher employee health care costs.
W.W. Grainger, Inc., with 2005 sales of $5.5 billion, is a broad line supplier of facilities maintenance products serving businesses and institutions throughout North America. Grainger has 600 branches, 18 distribution centers and multiple Web sites.
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