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Grainger's (GWW) April Sales Up 4% on Cromwell Acquisition

The leading broad line supplier of maintenance, repair and operating (MRO) products W.W. Grainger, Inc. GWW reported a 4% year-over-year increase in sales in Apr 2016. The figure exceeded the growth rate of 1% achieved in the prior month as well as the comparable year-ago period.

Apr 2016 had 21 selling days compared with 22 selling days in Apr 2015. The sales upside last month was mainly attributed to positive contribution from the Cromwell acquisition (4 percentage points). Excluding acquisition-related impact, organic daily sales were flat, driven by a 1 percentage point increase in volume and a 1 percentage point benefit from the timing of the Easter holiday, offset by a 2 percentage point price decline. Foreign exchange for the month was negligible.

Geographically, daily sales in the U.S. during April dipped 1%, which included a three percentage point decline in price, partially offset by a one percentage point benefit from the timing of the Easter holiday and a one percentage point contribution from intercompany sales to Zoro.

Among the end markets, the Government, Light Manufacturing and Retail segments witnessed growth in the low-single digits. However, Commercial witnessed a low-single digit decline, followed by Heavy Manufacturing which was down in the mid-single digits. Further, Contractor sales declined in the high-single digits, and Reseller and Natural Resources were down in the mid-teens.

Daily sales in Canada plunged 14% in terms of the U.S. dollar. In local currency, sales tumbled 13%. Additionally, the decline was a result of a 13 percentage point decrease in volume and a 1 percentage point decline in price, partially offset by a 1 percentage point benefit from the timing of the Easter holiday.

Daily sales to all customer end markets declined. From a geographic standpoint, daily sales in Alberta fell about 30% in local currency, whereas sales in all other provinces in aggregate were down 10% from the prior-year period. The SAP deployment in February did not have a material impact on April sales.

Daily sales at Grainger’s other businesses, including operations in Asia, Europe and Latin America, surged 56% in April due to a contribution of 32 percentage points from the Cromwell acquisition and 22 percentage points from volume and price, and a 2 percentage point benefit from foreign exchange. Sales in MonotaRO in Japan and Zoro in the U.S. contributed to the majority of 22% growth.

According to Grainger, daily sales gain in May will be softer than April. May 2016 will have 21 selling days, 1 more than last year.

Grainger remains optimistic about strong growth in single channel businesses. However, it will continue to see price and gross margin pressure, primarily owing to the low inflation economic environment and faster growth from lower gross margin customers. Despite the current short-term uncertainty, Grainger will continue to invest in the business to drive long-term results.

W.W. Grainger is a leading North American distributor of 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 currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the sector include Neff Corp. NEFF, Ashtead Group plc ASHTY and Avery Dennison Corporation AVY. While Neff Corp. sports a Zacks Rank #1 (Strong Buy), Ashtead Group and Avery Dennison carry a Zacks Rank #2 (Buy).

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