Strategic focus driving business
forward; Company reaffirms full year 2024 guidance
ranges
First Quarter Highlights
- Delivered sales of $4.2
billion, up 3.5%, or 4.9% on a daily, organic constant
currency basis
- Achieved operating margin of 15.8%, down 80 basis
points
- Increased diluted EPS by $0.01
to $9.62
- Generated $661 million in
operating cash flow and returned $360
million to Grainger shareholders through dividends and share
repurchases
- Announced dividend increase of 10%
- Refreshed repurchase authorization for up to 5 million
shares of common stock
- Reaffirming FY 2024 guidance
CHICAGO, April 25,
2024 /PRNewswire/ -- Grainger (NYSE: GWW) today
reported results for the first quarter of 2024 with sales of
$4.2 billion, up 3.5%, or 4.9% on a
daily, organic constant currency basis, and diluted EPS of
$9.62, up 0.1% compared to the first
quarter of 2023.
"Our 2024 performance so far shows that the team is focusing on
what matters and living our purpose—We Keep the World Working®.
We've produced solid results amidst a slow, but steady demand
environment," said D.G. Macpherson, Chairman and CEO. "Looking to
the remainder of the year, we are well-positioned to achieve our
guidance outlook as we work to provide a flawless experience and
deliver tangible value for our customers."
2024 First Quarter Financial Summary
($ in millions,
except per share amounts)
|
Q1 2024 (1)
|
Q1 2023 (1)
|
Q1'24 vs.
Q1'23
|
Fav. /
(Unfav.)
|
Net
Salesc
|
$4,235
|
$4,091
|
3.5 %
|
Gross
Profit
|
$1,668
|
$1,634
|
2.1 %
|
Operating
Earnings
|
$669
|
$680
|
(1.6) %
|
Net Earnings
Attributable to W.W. Grainger, Inc.
|
$478
|
$488
|
(2.0) %
|
Diluted Earnings Per
Share
|
$9.62
|
$9.61
|
0.1 %
|
|
|
|
|
Gross Profit
Margin
|
39.4 %
|
39.9 %
|
(50) bps
|
Operating
Margin
|
15.8 %
|
16.6 %
|
(80) bps
|
Effective Tax
Rate
|
24.2 %
|
23.3 %
|
(90) bps
|
(1) Results
are consistent on a reported and adjusted basis.
|
Revenue
Sales in the quarter, on a reported and daily
basis, increased 3.5% compared to the first quarter of 2023.
Normalizing for the impact of foreign currency exchange and the
Company's 2023 divestiture of its subsidiary, E & R Industrial
Sales, Inc., sales on a daily, organic constant currency basis
increased 4.9% compared to the first quarter of 2023.
In the High-Touch Solutions - N.A. segment, daily sales were up
3.4% compared to the first quarter of 2023, with growth in all
geographies. In the Endless Assortment segment, daily sales were
up 3.7%, or 10.0% on a daily, constant currency basis,
compared to the first quarter of 2023. Revenue growth for the
segment was driven by core customers at Zoro and enterprise
customers at MonotaRO, partially offset by the continued decrease
in non-core customers at Zoro.
Gross Profit Margin
Gross profit margin for the first
quarter of 2024 was 39.4%, a 50-basis point decline from the first
quarter of 2023. The decrease was driven by declines in both
segments.
In the High-Touch Solutions - N.A. segment, gross profit margin
decreased by 60 basis points over the first quarter of 2023 due
primarily to negative price / cost spread partially offset by
sustained freight and supply chain efficiencies. In the
Endless Assortment segment, gross profit margin declined by 30
basis points from the first quarter of 2023 as continued freight
efficiencies at MonotaRO were offset by unfavorable product mix at
Zoro.
Earnings
Operating earnings for the first quarter of
2024 were $669 million, down 1.6%
compared to the first quarter of 2023. Operating margin in the
quarter was 15.8%, an 80-basis point decrease from the first
quarter of 2023 as continued investment in demand generating
activities in the High-Touch Solutions - N.A. segment was partially
offset by operating efficiencies at MonotaRO.
Diluted earnings per share of $9.62 in the first quarter of 2024, increased
0.1% compared to the first quarter of 2023. The decline in
operating earnings was offset by a lower share count in the current
year period.
Tax Rate
The first quarter 2024 effective tax rate was
24.2%, compared to 23.3% in the first quarter of 2023. The increase
in the effective tax rate was primarily due to decreased stock
compensation tax benefit.
Cash Flow
During the first quarter of 2024, the
Company generated $661 million of
cash flow from operating activities, as solid net earnings were
further aided by the favorable timing of working capital. The
Company invested $119 million in
capital expenditures, resulting in free cash flow of $542 million. During the quarter, the Company
returned $360 million to Grainger
shareholders through dividends and share repurchases.
Guidance
The company is reaffirming the following
guidance ranges as previously announced on February 2, 2024.
Total
Company(1)
|
FY 2024 Guidance
Range
(reaffirmed April
25, 2024)
|
Net Sales
|
$17.2 - $17.7
billion
|
Sales
Growth
|
4.3% - 7.3%
|
Daily,
organic, constant currency sales growth
|
4.0% - 7.0%
|
Gross Profit
Margin
|
39.1% -
39.4%
|
Operating
Margin
|
15.3% -
15.8%
|
Diluted Earnings per
Share
|
$38.00 -
$40.50
|
Operating Cash
Flow
|
$1.9 - $2.1
billion
|
CapEx (cash
basis)
|
$0.4 - $0.5
billion
|
Share
Buyback
|
$0.9 - $1.1
billion
|
Effective Tax
Rate
|
~24.0%
|
|
|
Segment Operating
Margin
|
|
High-Touch Solutions -
N.A.
|
17.4% -
17.9%
|
Endless
Assortment
|
7.3% - 7.8%
|
(1) Guidance
provided is on an adjusted basis. Daily, organic constant currency
sales growth is adjusted for the impact of two additional selling
days in 2024 as compared to 2023, the sale of the Company's
divested E & R Industrial Sales, Inc. subsidiary completed
in the fourth quarter of 2023, and changes in foreign exchange. The
Company does not reconcile forward-looking non GAAP financial
measures. For further details see the supplemental information of
this release.
|
Webcast
The Company will conduct a live conference
call and webcast at 11:00 a.m. ET on
Thursday, April 25, 2024, to discuss the first quarter
results. The webcast will be hosted by D.G. Macpherson, Chairman
and CEO, and Deidra Merriwether,
Senior Vice President and CFO, and can be accessed at
invest.grainger.com. For those unable to participate in the live
event, a webcast replay will be available for 90 days at
invest.grainger.com.
About Grainger
W.W. Grainger, Inc., is a leading broad
line distributor with operations primarily in North America, Japan and the United
Kingdom. At Grainger, We Keep the World Working® by serving
more than 4.5 million customers worldwide with products delivered
through innovative technology and deep customer relationships. With
2023 sales of $16.5 billion, the
Company operates two business models. In the High-Touch Solutions
segment, Grainger offers approximately 2 million maintenance,
repair and operating (MRO) products and services, including
technical support and inventory management. In the Endless
Assortment segment, Zoro.com offers customers access to more than
13 million products, and MonotaRO.com offers more than 22 million
products. For more information, visit www.grainger.com.
Visit invest.grainger.com to view information about the
Company, including a supplement regarding 2024 first quarter
results. Additional Company information can be found on the
Grainger Investor Relations website which includes the Company
Snapshot and ESG report.
Safe Harbor Statement
All statements in this communication, other than those relating
to historical facts, are "forward-looking statements."
Forward-looking statements can generally be identified by their use
of terms such as "believe," "could," "future," "guidance," "may,"
"predict," "prospects," "will," or "would," and similar terms and
phrases, including references to assumptions. Forward-looking
statements are not guarantees of future performance and are subject
to a number of assumptions, risks and uncertainties, many of which
are beyond our control, which could cause actual results to differ
materially from such statements. Forward-looking statements
include, but are not limited to, statements about future strategic
plans and future financial and operating results. Important factors
that could cause actual results to differ materially from those
presented or implied in the forward-looking statements include,
without limitation: inflation, higher product costs or other
expenses, including operational and administrative expenses; the
impact of macroeconomic pressures and geopolitical trends, changes
and events; a major loss of customers; loss or disruption of
sources of supply; changes in customer or product mix; increased
competitive pricing pressures; changes in third party practices
regarding digital advertising; failure to enter into or sustain
contractual arrangements on a satisfactory basis with group
purchasing organizations; failure to develop, manage or implement
new technology initiatives or business strategies, including with
respect to Grainger's eCommerce platforms; failure to adequately
protect intellectual property or successfully defend against
infringement claims; fluctuations or declines in Grainger's gross
profit margin; Grainger's responses to market pressures; the
outcome of pending and future litigation or governmental or
regulatory proceedings, including with respect to wage and hour,
anti-bribery and corruption, environmental, regulations related to
advertising, marketing and the Internet, consumer protection,
pricing (including disaster or emergency declaration pricing
statutes), product liability, compliance or safety, trade and
export compliance, general commercial disputes, or privacy and
cybersecurity matters; investigations, inquiries, audits and
changes in laws and regulations; failure to comply with laws,
regulations and standards, including new or stricter environmental
laws or regulations; government contract matters; the impact of any
government shutdown; disruption or breaches of information
technology or data security systems involving Grainger or third
parties on which Grainger depends; general industry, economic,
market or political conditions; general global economic conditions
including tariffs and trade issues and policies; foreign currency
exchange rate fluctuations; market volatility, including price and
trading volume volatility or price declines of Grainger's common
stock; commodity price volatility; facilities disruptions or
shutdowns; higher fuel costs or disruptions in transportation
services; outbreaks of pandemic disease or viral contagions;
natural or human induced disasters, extreme weather and other
catastrophes or conditions; effects of climate change; failure to
execute on our efforts and programs related to environmental,
social and governance matters; competition for, or failure to
attract, retain, train, motivate and develop executives and key
employees; loss of key members of management or key employees; loss
of operational flexibility and potential for work stoppages or
slowdowns if employees unionize or join a collective bargaining
arrangement; changes in effective tax rates; changes in credit
ratings or outlook; Grainger's incurrence of indebtedness or
failure to comply with restrictions and obligations under its debt
agreements and instruments; and other factors that can be found in
our filings with the Securities and Exchange Commission, including
our most recent periodic reports filed on Form 10-K and Form 10-Q,
which are available on our Investor Relations website.
Forward-looking statements are given only as of the date of this
communication and we disclaim any obligation to update or revise
any forward-looking statement, whether as a result of new
information, future events or otherwise, except as required by
law.
W.W. Grainger, Inc.
and Subsidiaries
CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS
(In millions of
dollars, except for share and per share amounts)
(Unaudited)
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2024
|
|
2023
|
Net sales
|
$
4,235
|
|
$
4,091
|
Cost of goods sold
|
2,567
|
|
2,457
|
Gross
profit
|
1,668
|
|
1,634
|
Selling, general and
administrative expenses
|
999
|
|
954
|
Operating
earnings
|
669
|
|
680
|
Other (income) expense:
|
|
|
|
Interest
expense – net
|
21
|
|
24
|
Other –
net
|
(7)
|
|
(6)
|
Total other
expense – net
|
14
|
|
18
|
Earnings before
income taxes
|
655
|
|
662
|
Income tax
provision
|
158
|
|
154
|
Net
earnings
|
497
|
|
508
|
Less net earnings
attributable to noncontrolling interest
|
19
|
|
20
|
Net earnings
attributable to W.W. Grainger, Inc.
|
$
478
|
|
$
488
|
|
|
|
|
Earnings per
share:
|
|
|
|
Basic
|
$
9.65
|
|
$
9.66
|
Diluted
|
$
9.62
|
|
$
9.61
|
Weighted average number
of shares outstanding:
|
|
|
|
Basic
|
49.2
|
|
50.2
|
Diluted
|
49.4
|
|
50.5
|
W.W. Grainger, Inc.
and Subsidiaries
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In millions of
dollars)
(Unaudited)
|
|
|
As of
|
|
(Unaudited)
|
|
|
Assets
|
March 31,
2024
|
|
December 31,
2023
|
Current
assets
|
|
|
|
Cash and
cash equivalents
|
$
804
|
|
$
660
|
Accounts
receivable (less allowances for credit losses of $36 and $35,
respectively)
|
2,330
|
|
2,192
|
Inventories – net
|
2,178
|
|
2,266
|
Prepaid
expenses and other current assets
|
228
|
|
156
|
Total current
assets
|
5,540
|
|
5,274
|
Property, buildings and
equipment – net
|
1,667
|
|
1,658
|
Goodwill
|
364
|
|
370
|
Intangibles –
net
|
236
|
|
234
|
Operating lease
right-of-use
|
408
|
|
429
|
Other assets
|
185
|
|
182
|
Total
assets
|
$
8,400
|
|
$
8,147
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Current
liabilities
|
|
|
|
Current
maturities
|
$
501
|
|
$
34
|
Trade
accounts payable
|
1,133
|
|
954
|
Accrued
compensation and benefits
|
235
|
|
327
|
Operating
lease liability
|
71
|
|
71
|
Accrued
expenses
|
444
|
|
397
|
Income
taxes payable
|
144
|
|
48
|
Total current
liabilities
|
2,528
|
|
1,831
|
Long-term
debt
|
1,783
|
|
2,266
|
Long-term operating
lease liability
|
359
|
|
381
|
Deferred income taxes
and tax uncertainties
|
101
|
|
104
|
Other non-current
liabilities
|
120
|
|
124
|
Shareholders'
equity
|
3,509
|
|
3,441
|
Total liabilities and
shareholders' equity
|
$
8,400
|
|
$
8,147
|
W.W. Grainger, Inc.
and Subsidiaries
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of
dollars)
(Unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2024
|
|
2023
|
Cash flows from
operating activities:
|
|
|
|
Net
earnings
|
$
497
|
|
$
508
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
Provision for credit
losses
|
6
|
|
4
|
Deferred income taxes
and tax uncertainties
|
(2)
|
|
10
|
Depreciation and
amortization
|
56
|
|
50
|
Non-cash lease
expense
|
21
|
|
17
|
Stock-based
compensation
|
11
|
|
12
|
Change in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
(163)
|
|
(162)
|
Inventories
|
76
|
|
4
|
Prepaid expenses and
other assets
|
(85)
|
|
74
|
Trade accounts
payable
|
202
|
|
53
|
Operating lease
liabilities
|
(23)
|
|
(21)
|
Accrued
liabilities
|
(35)
|
|
(193)
|
Income taxes –
net
|
107
|
|
102
|
Other non-current
liabilities
|
(7)
|
|
(4)
|
Net cash provided by
operating activities
|
661
|
|
454
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(119)
|
|
(98)
|
Proceeds from sale of
assets
|
1
|
|
2
|
Net cash used in
investing activities
|
(118)
|
|
(96)
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from
debt
|
1
|
|
6
|
Payments of
debt
|
(17)
|
|
(18)
|
Proceeds from stock
options exercised
|
9
|
|
23
|
Payments for employee
taxes withheld from stock awards
|
(10)
|
|
(3)
|
Purchases of treasury
stock
|
(268)
|
|
(142)
|
Cash dividends
paid
|
(105)
|
|
(87)
|
Other – net
|
(1)
|
|
(3)
|
Net cash used in
financing activities
|
(391)
|
|
(224)
|
Exchange rate effect on
cash and cash equivalents
|
(8)
|
|
2
|
Net change in cash and
cash equivalents
|
144
|
|
136
|
Cash and cash
equivalents at beginning of period
|
660
|
|
325
|
Cash and cash
equivalents at end of period
|
$
804
|
|
$
461
|
(1)
|
Certain
reclassifications have been made to prior year amounts to conform
to the current year presentation of Grainger's Consolidated
Statements of Cash Flows. The reclassifications had no impact on
previously reported results including net cash provided by (used
in) operating, investing and financing activities for the three
months ended March 31, 2023.
|
SUPPLEMENTAL INFORMATION - RECONCILIATION OF
GAAP TO NON-GAAP
FINANCIAL MEASURES (Unaudited)
The Company supplements the reporting of financial information
determined under U.S. generally accepted accounting principles
(GAAP) with the non-GAAP financial measures as defined below. The
Company believes these non-GAAP financial measures provide
meaningful information to assist investors in understanding
financial results and assessing prospects for future performance as
they provide a better baseline for analyzing the ongoing
performance of its business by excluding items that may not be
indicative of core operating results.
Basis of presentation
The Company has a controlling ownership interest in MonotaRO, which
is part of our Endless Assortment segment. MonotaRO's results are
fully consolidated, reflected in U.S. GAAP, and reported one-month
in arrears. Results will differ from MonotaRO's externally reported
financials which follow Japanese GAAP.
Adjusted gross profit, adjusted SG&A, adjusted operating
earnings, adjusted operating margin, adjusted net earnings,
adjusted diluted EPS
Exclude certain non-recurring items, like restructuring charges,
asset impairments, gains and losses associated with business
divestitures and other non-recurring, infrequent or unusual gains
and losses (together referred to as "non-GAAP adjustments"), from
the Company's most directly comparable reported U.S. GAAP figures
(reported gross profit, SG&A, operating earnings, net earnings
and EPS).The Company believes these non-GAAP adjustments provide
meaningful information to assist investors in understanding
financial results and assessing prospects for future performance as
they provide a better baseline for analyzing the ongoing
performance of its business by excluding items that may not be
indicative of core operating results.
Free cash flow (FCF)
Calculated using total cash provided by operating activities less
capital expenditures. The Company believes the presentation of FCF
allows investors to evaluate the capacity of the Company's
operations to generate free cash flow.
Daily sales
Refers to sales for the period divided by the number of U.S.
selling days for the period.
Daily, constant currency sales
Refers to the daily sales adjusted for changes in foreign currency
exchange rates.
Daily, organic constant currency sales
Refers to daily sales excluding the sales of certain divested
businesses in the comparable prior year period post date of
divestiture and changes in foreign currency exchange rates.
Foreign currency exchange
Calculated by dividing current period local currency daily sales by
current period average exchange rate and subtracting the current
period local currency daily sales divided by the prior period
average exchange rate.
U.S. selling days:
2023: Q1-64, Q2-64, Q3-63, Q4-63, FY-254
2024: Q1-64, Q2-64, Q3-64, Q4-64, FY-256
2025: Q1-63, Q2-64, Q3-64, Q4-64, FY-255
As non-GAAP financial measures are not standardized, it may not
be possible to compare these measures with other companies'
non-GAAP measures having the same or similar names. These non-GAAP
measures should not be considered in isolation or as a substitute
for reported results. These non-GAAP measures reflect an additional
way of viewing aspects of operations that, when viewed with GAAP
results, provide a more complete understanding of the business.
This press release also includes certain non-GAAP forward-looking
information. The Company believes that a quantitative
reconciliation of such forward-looking information to the most
comparable financial measure calculated and presented in accordance
with GAAP cannot be made available without unreasonable efforts. A
reconciliation of these non-GAAP financial measures would require
the Company to predict the timing and likelihood of future
restructurings, asset impairments, and other charges. Neither of
these forward-looking measures, nor their probable significance,
can be quantified with a reasonable degree of accuracy.
Accordingly, a reconciliation of the most directly comparable
forward-looking GAAP measures is not provided.
The reconciliations provided below reconciles GAAP financial
measures to non-GAAP financial measures used in this release: daily
sales; daily, organic constant currency sales; free cash flow;
adjusted operating margin; and adjustments reflected in the
consolidated statements of earnings.
Sales growth for the
three months ended March 31, 2024
(percent change
compared to prior year period)
(unaudited)
|
|
Q1
2024
|
|
Total
Company
|
High-Touch Solutions
- N.A.
|
Endless
Assortment
|
Reported
sales
|
3.5 %
|
3.4 %
|
3.7 %
|
Day impact
|
— %
|
— %
|
— %
|
Daily
sales(1)
|
3.5 %
|
3.4 %
|
3.7 %
|
Business
divestiture(2)
|
0.5 %
|
0.6 %
|
— %
|
Foreign currency
exchange(3)
|
0.9 %
|
(0.2) %
|
6.3 %
|
Daily, organic constant
currency sales
|
4.9 %
|
3.8 %
|
10.0 %
|
|
|
(1)
|
Based on U.S. selling
days, there were 64 selling days in Q1 2024 and Q1 2023.
|
(2)
|
Reflects the
divestiture of Grainger's subsidiary, E & R Industrial Sales,
Inc., completed in the fourth quarter of 2023.
|
(3)
|
Excludes the impact of
year-over-year foreign currency exchange rate
fluctuations.
|
Free cash flow (FCF)
for the three months ended March 31, 2024
(in millions of
dollars)
(unaudited)
|
|
Q1
2024
|
Net cash flows provided
by operating activities
|
$
661
|
Capital
expenditures
|
(119)
|
Free cash
flow
|
$
542
|
View original
content:https://www.prnewswire.com/news-releases/grainger-reports-results-for-the-first-quarter-2024-302126722.html
SOURCE W.W. Grainger, Inc.