Grainger's November Sales Up 14% - Analyst Blog

W.W. Grainger Inc. (GWW) reported November sales growth of 14% year over year. Monthly sales have gradually dropped from the high figures of July, August and September that saw sales climbing 21%, 20% and 18%, respectively. However, growth in November was a tad above the 11% growth in October, which was the lowest point thus far in fiscal 2010.

November had 21 selling days in 2010 compared with 20 days in 2009. December 2010 will have 21 selling days, one less than in December 2009. Acquisitions made by Grainger contributed two percentage points to the growth with favorable foreign exchange adding another percentage point. Excluding the impacts of acquisitions and foreign currency exchange rates, daily sales increased 11% during the month. Cleanup of oil spill related sales contributed two percentage points of growth for the month.

Geographically, daily sales in the United States rose 10% with a two percentage point contribution from sales related to the oil spill clean up in the Gulf of Mexico. Canada saw a jump of 28% (a 23% increase in local currency) driven by continued strength in the oil and gas, manufacturing, agriculture and mining, and forestry sectors, while sales from the Canadian government declined. Daily sales for the company's Other Businesses segment, which includes operations in Japan, Mexico, India, Puerto Rico, China and Panama, rose sharply by 40%.

Thus far in December 2010, the company stated that the daily year-over-year percentage growth is tracking consistently with the 14% growth rate recorded in November with a higher mix of sales for products related to the oil spill clean up than observed in November.

The fourth quarter will have 63 selling days versus 64 selling days in 2009. Grainger expects a higher proportion of sales from large customers including sales related to the oil spill clean up and increased sales to customers from the oil and gas sector in Canada.

For the fiscal fourth quarter, the company expects EPS in a band $1.49 to $1.69. Grainger forecasts fiscal 2010 EPS in the range of $6.50 and $6.70 and for 2011 in the range of $7.15 and $7.90. The Zacks Consensus Estimates for the fourth quarter, fiscal 2010 and fiscal 2011 currently stand at $1.65, $6.66 and $7.66, respectively, all within the company's targeted ranges.

Grainger remains focused on expanding its product offering and has the financial wherewithal to further invest in growth opportunities, increase dividends and reinvest capital through share repurchases. Gradually improving economic activity, market share gains, benefits from growth investments, share repurchases and acquisition accretion should lead to strong earnings growth in 2010 and 2011. We maintain an Outperform rating on the stock.

Based in Lake Forest, Illinois, Grainger is a distributor of facilities maintenance and other related products and services. The company distributes material handling equipment, safety and security supplies, lighting and electrical products, power and hand tools, pumps and plumbing supplies, cleaning and maintenance supplies, forestry and agriculture equipment, building and home inspection supplies, vehicle and fleet components, and various aftermarket components. Grainger competes with Applied Industrial Technologies Inc. (AIT) and WESCO International Inc. (WCC).

 
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