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Grainger November Sales Fall 3% Due to Multiple Headwinds

Zacks Equity Research

W.W. Grainger, Inc. GWW reported a 3% drop in sales in November, attributable to the cumulative effect of a 1 percentage point decline in volume, 1% decline in price and 1 percentage point (pp) decline from lower sales of seasonal products due to a warmer month. The company had reported flat sales in Oct 2016.

The month had 21 selling days, one more than the previous year.  Daily sales in the U.S. dipped 3% due to 2 pp decline in volume, 1 pp decline in price, and 1 pp decline from lower sales of seasonal product, partially mitigated by 1 pp contribution from intercompany sales to Zoro. Sales to Government and Light Manufacturing were up in low-single digits while sales to commercial were down in low-single digits. However, Commercial was down in low-single digits, Heavy Manufacturing was down in the mid-single digits, Contractors was down in the high-single digits. Sales to resellers and Natural Resources fared worse, being down in low-double digits.

In Canada, sales slumped 17% both in the U.S. currency and local currency affected by a 13 pp decline in volume and 4 pp decline in price. Daily sales to all customer end markets were down.  Daily sales in Alberta plunged 25% in local currency while sales in all other provinces in aggregate were down 13% on a year-over-year basis.

On the contrary, sales in other businesses increased 6% in the U.S currency and 7% in local currency, driven by positive volume (7%) offset by 1% decline in foreign exchange. Continued strong performance from MonotaRO in Japan and Zoro in the U.S. was primarily responsible for the growth, partially neutralized by sales declines at Cromwell and Fabory.
 

GRAINGER W W Price
 

GRAINGER W W Price | GRAINGER W W Quote

Grainger stated that so far daily sales performance in December is trending better than November’s results at flat compared to prior year. December will have 21 selling days in 2016, one less than last year. The company cautioned that potential shutdowns at customer facilities in late December could impact sales during the month. Fourth-quarter 2016 will have 63 selling days, one less than fourth-quarter 2015.

For fourth-quarter 2016, Grainger is projecting sales growth of -1% to 3% while earnings per share will range between $2.27 and $2.57. Due to weak demand in the fourth quarter, the company guided sales growth in the range of 1.5% to 2.5% for 2016 and earnings per share guidance in the range of $11.40 to $11.70.

So far this year, Grainger’s monthly sales growth has ranged between -3% and 4%. Despite the weak sales growth, a look at Grainger’s price performance in the past six months reveals that the company has outperformed the Zacks Categorized Industrial Services Industry. Grainger’s shares have gained 7.78% year to date, outpacing the 7.53% rise of the industry. The price performance is backed by the company’s focus on restructuring, growth in eCommerce channel and successful acquisitions.



Zacks Rank & Key Picks

Grainger currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector include HD Supply Holdings, Inc. HDS, Ashtead Group plc ASHTY and Hudson Technologies Inc. HDSN. HD Supply Holdings delivered an average positive earnings surprise of 4.71% in the last four quarters. The company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hudson Technologies also carries Zacks Rank #2 and has delivered an average positive earnings surprise of 20.71% in the past four quarters. Ashtead Group, another Zacks Rank #2 stock, has an average positive earnings surprise of 10.10% in the past four quarters.

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