Grainger anticipates 2010 growth

Following a 9 percent sales decline in 2009, Grainger is forecasting 6 percent to 10 percent sales growth in 2010.

In 2009, sales of $6.2 billion were down 9 percent versus 2008. Net earnings of $430 million decreased 9 percent versus $475 million in 2008. Earnings per share of $5.62 decreased 6 percent versus $5.97 in 2008.

"I am very proud of our employees and how they have successfully navigated this company through one of the most difficult economic times in our history," said chairman, president and CEO Jim Ryan. "The actions we took in 2009 to keep service levels and customer relationships strong are paying off. I am excited about the opportunity we have going forward to gain additional market share and create value for our shareholders by serving as the indispensable MRO partner to businesses and institutions."

Ryan added, "We are seeing some initial signs of improvement in the overall economy, although job growth is expected to lag the recovery. Stronger sales growth in December and January give us greater confidence to raise our 2010 sales growth guidance to a range of 6 to 10 percent and our earnings per share guidance to the new range of $5.40 to $5.90. We remain cautiously optimistic about the economy and are executing on the things we can control like our customer service and high product availability. As a result, we are well positioned for continued share gain, particularly as many competitors have been forced to reduce inventories." The company had previously issued 2010 guidance of 4 to 9 percent sales growth and earnings per share of $5.30 to $5.80.

For the 2009 fourth quarter, sales of $1.6 billion increased 3 percent versus the fourth quarter of 2008. Net earnings of $97 million decreased 10 percent versus $108 million in 2008. Earnings per share of $1.27 decreased 7 percent versus $1.37 in 2008. The effect of adopting FSP 03-6-1 was a 1 cent per share reduction in the fourth quarter of 2009 and 2 cents in the 2008 quarter.

During the quarter, the company continued to lower its cost structure by closing branches and reducing headcount. In total, 12 branches, including 6 Will Call Express locations, were closed. These closures, along with other asset write-downs, resulted in asset impairment charges of $9 million or 7 cents per share. In addition, the company reduced headcount by another 200 positions in the 2009 fourth quarter, incurring $7.5 million or 5 cents per share in severance cost. For the full year 2009, the company eliminated approximately 600positions and incurred $18 million in severance or 11 cents per share.

Sales for the United States segment decreased 2 percent in the 2009 fourth quarter. Sales to government and commercial customers increased versus the 2008 fourth quarter, while sales to resellers, contractors, manufacturing and retail customers declined.

Product line expansion contributed $260 million in sales for the fourth quarter versus $185 million in the 2008 fourth quarter. Products added over the last four years resulted in $934 million in sales in 2009.

Also contributing to segment performance in the quarter was ongoing work to integrate Lab Safety Supply with Grainger Industrial Supply. The company still expects this combination to deliver $70-$100 million in incremental revenue and $20-$30 million in cost savings by mid-2010. Through the end of 2009, the integration has generated $44 million of the additional revenue and $22 million of the cost savings.

Sales for the Acklands-Grainger business in the quarter were up 11 percent versus the 2008 fourth quarter in U.S. dollars. Sales performance in December benefited from some large customer orders and the incremental sales from an acquisition. From a customer sector standpoint, the 3 percent sales decline for the quarter was attributable to continued weakness among heavy manufacturing, contractor and forestry, partially offset by growth among utilities, government and agriculture and mining.

Sales for the other businesses, which now include Japan, Mexico, India, Puerto Rico, China, and Panama, were up 214 percent for the 2009 fourth quarter versus prior year. The sales increase was due primarily to the acquisition of the businesses in India and Japan, along with contributions from Mexico and China. Operating losses for other businesses were $3 million in both the 2009 and 2008 quarters.

Source: Industrial Supply Magazine