Grainger Full-Year Sales Top $13B; Accelerate in Q4

The MRO products giant's product mix continued to regulate with core product sales growth as pandemic-related sales waned.

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MRO products giant Grainger — No. 1 on Industrial Distribution's 2021 Big 50 List — reported its 2021 fourth quarter and full-year financial results on Feb. 3, and the figures showed double-digit gains with both sales and profit amid accelerating demand for the company's core product lines.

Lake Forest, IL-based Grainger posted total Q4 sales of $3.36 billion, up 14 percent year-over-year, with adjusted daily organic sales up 16.9 percent. The figures were driven by strong results in both the company's High-Touch North America segment, where total sales were up 14.7 percent (+16.3 percent organic), and Endless Assortment, where sales grew 13.4 percent (20.6 percent organic).

Grainger I StockiStockThe company's Q4 gross margin was 37.3 percent, up 240 basis points year-over-year and up from Q3's 37.1 percent. Q4 operating profit of $417 million surged 52 percent year-over-year on margin of 12.4 percent, while adjusted operating profit increased 41.2 percent on margin of 12.4 percent — up 240 basis points year-over-year. Grainger's Q4 net profit of $281 million jumped 68.3 percent year-over-year.

For the full-year, Grainger's 2021 sales totaled $13.02 billion, up 10 percent over 2020, with organic daily sales up 12.7 percent. Gross profit of $4.72 billion increased 11 percent on margin of 36.2 percent (+30 bps), while operating profit of $1.55 billion jumped 42 percent (+17 percent adjusted) on margin of 11.9 percent that was down 470 basis points, but up 30 bps on an adjusted basis. Total 2021 net profit of $1.043 billion jumped 50 percent (+23 percent adjusted).

"The second year of pandemic impacts brought a unique set of challenges in 2021. The Grainger team successfully navigated these challenges by helping our customers run their businesses effectively and stay safe," said DG Macpherson, Grainger's chairman and CEO. "The team's relentless focus on doing the right things, the right way, allowed us to deliver on our operational and financial expectations for the year."

High-touch Solutions - U.S.

In High-Touch Solutions - U.S.., Grainger's Q4 sales were driven by growth in core product lines, while pandemic-related sales continued to wane. Q4 pandemic-related sales decreased 11 percent year-over-year, while non-pandemic sales jumped 28 percent. In January, preliminary pandemic-related sales were flat, while non-pandemic sales grew 20 percent. Total January preliminary sales were up 16 percent.

In the U.S., Q4 daily sales grew 16.8 percent year-over-year; gross profit of 40.0 percent grew 260 bps; and operating margin of 14.4 percent grew 235 bps. In Canada, daily sales grew 12.2 percent; gross profit of 32.5 percent grew 100 bps; and operating margin of 1.4 percent grew 210 bps.

Q4 sales to large customers grew 16 percent year-over-year (+10 percent in Q3), while sales to mid-sized customers grew 25 percent (+19 percent in Q3).

Endless Assortment

In Endless Assortment, Grainger's Q4 sales of were driven by continued customer acquisition at both Zoro and MonotaRO, alongside strong enterprise growth at MonotaRO. Zoro's operating margin expanded 195 bps year-over-year, which Grainger said reflected continued freight efficiencies as B2B sales increased. Operating margin at MonotaRO dipped 35 bps, primarily due to gross profit headwinds related to product mix.

Within Endless Assortment, the company ended Q4 with 12,962 total registered users, up 16 percent year-over-year, with 52.3 percent of that count in MonotaRO. Meanwhile, the total number of active SKUs on Zoro U.S. ended Q4 at 8.7 million, up from 6.1 million a year earlier.

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Looking Forward

Grainger's initial 2022 full-year guidance showed the following:

  • Total sales of $14.1 billion to $14.5 billion, with daily sales growth of 7.5% to 10.5%
  • Gross profit margin of 36.8% to 37.3%, with 50-100 bps growth
  • Operating margin of 12.5% to 13.1%, with 65-125 bps growth
  • High-Touch Solutions N.A.: Revenue growth of 6.5% to 9.5%. Operating margin growth of 14.4% to 15.0%
  • Endless Assortment: Revenue growth of 14%. Operating margin growth of 7.5% to 8.2%

U.S. End Markets

By end market, Grainger's Q4 U.S. sales performance was as follows (vs. Q3):

  • Commercial: up high-30s (up mid-30s)
  • Heavy Manufacturing: up high-20s (up mid-20s)
  • Natural Resources: up mid-20s (up high-teens)
  • Transportation: up mid-20s (up low-20s)
  • Contractor: up low-20s (up mid-teens)
  • Wholesale: up low-20s (up low-20s)
  • Retail (including e-commerce): up mid-teens (up mid-single digits)
  • Light Manufacturing: Up mid-teens (up low-double digits)
  • Government: up low-single digits (down mid-single digits)
  • Healthcare: down mid-single digits (down mid-single digits)
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