Grainger 2013 sales up 5 percent
Grainger reported 2013 sales of $9.4 billion increased 5 percent versus $9.0 billion in 2012.
Reported net earnings of $797 million increased 16 percent versus $690 million in 2012. Reported earnings per share of $11.13 increased 17 percent versus $9.52 in 2012.
"Despite a sluggish economic environment and aggressive investments in growth and infrastructure, this was another record year for Grainger," said chairman, president and chief executive officer Jim Ryan. "We made significant investments aimed directly at increasing our scale and accelerating share gains in the large and highly fragmented MRO market. Going forward, we will continue to invest in areas such as eCommerce, sales force expansion, inventory management solutions and distribution centers in order to drive market share growth and deliver solid returns," Ryan added.
"As evidenced by the restructuring in the quarter, we have some areas of the business that are not performing to our expectations. We are committed to improving the results and are taking the appropriate steps to strengthen the performance of these businesses," Ryan concluded.
During 2013, the company invested $132 million to drive growth and scale, primarily in the United States, and reached the following milestones:
- eCommerce: Grainger surpassed $3 billion in eCommerce sales in 2013, representing 33 percent of total company sales. eCommerce represents the fastest growing and most profitable channel in the business.
- Sales Force Expansion: In the United States, Grainger added 180 new sales representatives in 2013. Since 2009, Grainger has added 930 new U.S. sales representatives who, in aggregate, contributed approximately 1 percentage point of company sales growth in 2013. In general, sales to customers with a sales representative grow at twice the rate of customers that are not covered.
- Inventory Management: Total U.S. KeepStock installations, including vendor managed inventory, customer managed inventory and vending machines, grew 38 percent, ending the year at approximately 55,000 installations. Sales to customers with a KeepStock installation grow at twice the rate of non-KeepStock customers.
- Product Line Expansion: In the Grainger U.S. business, Grainger.com added more than 300,000 new products, bringing the total number of products to more than 1.2 million products online. In Canada, Acklands-Grainger announced the addition of 200,000 products to its online offering.
- Distribution Network: The company opened a 1 million square-foot automated distribution center in Illinois that serves as the company's new central stocking facility. Grainger also began construction on a 500,000 square-foot distribution center in the Toronto area.
- Single Channel Online Model: MonotaRO, the online business in Japan, grew nearly 20 percent in local currency in 2013 and was named to the Forbes Asia "Best Under A Billion" list, which highlights 200 of the best small and mid-sized companies in Asia Pacific. Revenue for the company's other online business, Zoro Tools, grew more than 150 percent in 2013.
2013 Fourth Quarter
Sales for the 2013 fourth quarter of $2.4 billion increased 7 percent versus $2.2 billion in the 2012 fourth quarter. Net earnings of $157 million were essentially flat versus $156 million in 2012. Fourth quarter earnings per share of $2.20 increased 1 percent versus $2.17 in 2012.
The 7 percent sales growth for the quarter consisted of 5 percentage points from volume, 4 percentage points from acquisitions and 1 percentage point from sales of seasonal products, partially offset by 2 percentage points decline from unfavorable foreign exchange and 1 percentage point from sales related to Hurricane Sandy in 2012.
United States
Sales in the United States segment increased 10 percent in the 2013 fourth quarter versus the prior year, driven by 5 percentage points from volume, 6 percentage points from sales from the E&R Industrial, Techni-Tool and Safety Solutions acquisitions and 1 percentage point from sales of seasonal products, partially offset by a 1 percentage point decline from price and 1 percentage point from unfavorable comparison to sales related to Hurricane Sandy in 2012. Strong sales growth to customers in the manufacturing, retail, natural resources and commercial customer end markets contributed to the sales increase in the quarter.
Operating earnings for the United States segment increased 6 percent in the quarter driven by the 10 percent sales growth and positive expense leverage, partially offset by lower gross profit margins. Positive expense leverage was driven by the 10 percent sales growth versus a 5 percent increase in operating expenses including $28 million in incremental growth-related spending. Gross profit margins for the quarter decreased 180 basis points driven by lower gross margins from the acquired businesses, which accounted for approximately two-thirds of the decrease, and faster growth with lower margin customers. Excluding the charges for the United States segment in the 2013 and 2012 fourth quarters, operating earnings increased 7 percent for the 2013 fourth quarter.
Canada
Sales in the 2013 fourth quarter at Acklands-Grainger decreased 3 percent and increased 3 percent in local currency. The 3 percent sales decline consisted of 3 percentage points increase from volume offset by a 6 percentage points decline from unfavorable foreign exchange. The sales increase in Canada was led by growth to customers in the commercial, transportation, light manufacturing and forestry end markets.
Operating earnings in Canada decreased 10 percent in the 2013 fourth quarter, down 5 percent in local currency. This decrease was driven by lower gross profit margins, unfavorable foreign exchange and negative expense leverage. The gross profit margin in Canada declined 20 basis points versus the prior year. The decline was primarily due to product cost inflation exceeding price inflation driven by unfavorable foreign exchange. Contributing to the lower operating performance was approximately $2 million in incremental spending related to IT system investments.
Other Businesses
Sales for the Other Businesses, which includes operations primarily in Asia, Europe and Latin America, increased 3 percent for the 2013 fourth quarter versus the prior year. This performance consisted of 11 percentage points of growth from volume and price, partially offset by an 8 percentage point decline from unfavorable foreign exchange. Sales growth in the Other Businesses was driven by Zoro Tools and the business in Mexico. Strong sales growth in Japan was offset by the weakness in the Japanese yen versus the U.S. dollar.
The Other Businesses posted a $20 million operating loss in the 2013 fourth quarter versus a $10 million operating loss in the 2012 fourth quarter.
INDUSTRIAL SUPPLY MAGAZINE
The March/April issue of Industrial Supply magazine features an in-depth cover story about Joyce Lansdale and Vallen. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and David Kahle, as well as interviews with numerous product and distribution industry experts.
