Headwinds, Oil Continue To Hurt Grainger In August

Grainger noted volatility of oil prices and the strong U.S. dollar continues to hurt customer end markets, both organically and abroad.

Grainger – No. 3 on Industrial Distribution's 2015 Big 50 List – reported its sales information for the month of August on Monday, which had a familiar theme as foreign exchange continues to have a negative impact and the company's Canadian business showed declines.

For August, Grainger total sales declined 2 percent year-over-year, including a 3-percentage point decline from from unfavorable foreign exchange and a 1-point increase from acquisitions. Organic sales were flat, with a 1-point increase from volume, offset by a 1-point decline in price. August 2015 and August 2014 both had 21 selling days.

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Grainger said that for its U.S. customer end markets, sales performance was as follows:

  • Commercial, Light Manufacturing and Retail were up in the low single digits
  • Heavy Manufacturing, Contractor and Government were down in the low single digits
  • Resellers was down in the mid-single digits
  • Natural Resources was down in the high teens

"As a reminder, we have a high concentration of our business with large customers throughout our diversified customer base and these customers are experiencing the negative effects of declining oil prices, a stronger U.S. dollar and global macroeconomic weakness," said Bill Chapman, Grainger's Senior Director of Investor Relations in the company's monthly podcast. "These factors continue to create headwinds for a majority of customer end markets."

In Grainger's Canada business segment, sales declined 22 percent in U.S. currency and declined 7 percent in local currency. The company said sales in local currency declined as a result of a 19 percentage point decrease in volume, partially offset by a 7-point increase from the WFS acquisition (Sept. 2, 2014) and a 5-point benefit from price.

"The Canadian economy is highly correlated to the energy sector which remains a considerable headwind for the foreseeable future," Chapman said. 

Grainger's Canadian organic sales declined in all customer end markets except Mining and Forestry. Geographically, sales in Alberta declined 25 percent year-over-year, while sales in all other provinces in declined 7 percent to the prior year.

Grainger's sales in its Other Businesses segment increased 6 percent in August, including a 23 percentage point gain from volume and price, offset by a 17-point decline from foreign exchange. The company said the increase was mostly due to strong sales growth from its online business and Japan, and that Mexico had strong growth in local currency but this was offset by unfavorable foreign exchange.

Grainger closed on its $482 million acquisition of U.K.-based Cromwell Group on Sept. 1, for which results will be reported in Other Business beginning in September. Grainger said Cromwell sales for the fiscal year ending Aug. 31 are expected to be approximately $440 million.

Grainger will report its 2015 third quarter sales on Friday, Oct. 16. 

September will have 21 selling days, the same as last year. Grainger said September sales performance  is currently trending in line with August.