MRO products distribution giant Grainger — No. 1 on Industrial Distribution's 2019 Big 50 List — reported its 2019 fourth quarter and full-year financial results on Thursday, showing that sales expectedly slowed during the last three months of the year amid an industry-wide slowdown in demand.
The Lake Forest, IL-based company posted Q4 total sales of $2.85 billion, up 3.0 percent year-over-year (YoY), with daily sales up approximately that same amount, driven by a 3.5 percentage point rise in volume. Comparatively, Grainger had Q3 sales $2.95 billion (up 4.1 percent YoY) and net profit of $233 million.
Q4 operating profit of $181 million was down 37 percent YoY, though adjusted operating profit of $307 million was down only 1 percent. Q4 gross profit margin of 38.0 percent was down 60 basis points YoY. Q4 net profit of $103 million was less than half of a year earlier ($209 million), though Q4 included a $120 million write-down of of the remaining assets of the recently-acquired Cromwell business.
Geographically, Grainger's Q4 US sales (76.1 percent of total) increased 2.4 percent YoY; Other Business sales (24.0 percent of total) increased 9.8 percent; and Canada sales (4.5 percent of total) decreased 11.0 percent.
Grainger said Q4 sales by customer end market performed as follows:
- Retail: up Mid-Teens
- Commercial: up Mid-Single Digits
- Contractor: up Low-Single Digits
- Government: up Low-Single Digits
- Healthcare: up High-Single Digits
- Light Manufacturing: up Low-Single Digits
- Heavy Manufacturing: down Low-Single Digits
- Natural Resources: down Low-Single Digits
For the full year, Grainger's 2019 total sales of $11.49 billion increased 2.4 percent over 2018, with daily sales up approximately 3 percent. 2019 operating profit of $1.26 billion increased approximately 9 percent, while net profit of $849 million increased 8 percent. 2019 gross profit margin of 38.3 percent decreased 50 basis points from 2018.
"In 2019, we grew sales, operating earnings and EPS despite challenging and uncertain economic conditions," said DG Macpherson, Grainger's chairman and CEO. "Our sales growth in the US outperformed the market throughout the year, and our share gain accelerated in the fourth quarter, as our growth initiatives began to take hold. At our US endless assortment business, Zoro, we continued to invest in the business to ensure ongoing success. At the total company level, our strong expense control held SG&A stable and enabled our advertising, technology and Zoro investments. As we look to 2020, we will diligently manage expenses while continuing to invest in future growth. We are confident in our strategy and ability to execute moving forward."
Grainger — which earlier this month topped Fortune's "World's Most Admired Companies" list under the diversified wholesalers category for a seventh-straight year — is forecasting 2020 full-year sales growth 3.5 percent to 6.5 percent for a total of $11.9 to $12.2 billion, including 1.0 percent to 4.0 percent growth in the US.
