Grainger CEO Says US Branch Count Will Stay Put Through 2018

Grainger shed nearly 100 physical branches during 2017 — most of them outside the U.S. — but at Grainger Show 2018 earlier this week, chairman and CEO DG Macpherson said the company plans to keep its current branch count steady throughout this year.

As Grainger's sales improved throughout 2017 after a flat 2016 tied to an industrial recession, the company has undergone considerable physical downsizing over the past four years, particularly in the past two.

Grainger reduced its worldwide branch count by 98 in 2017 and 69 in 2016, following more modest cuts of 14 branches in 2015 and 29 in 2014. That followed a prolonged period of stability as the count hovered around 710 from 2011-2013.

Grainger ended 2017 with an even 500 branches — down 30 percent since the end of 2013, and down 25 percent in just the past two years.

In the U.S., the MRO products giant ended 2017 with 284 branches — the same it ended 2016 with. That followed steady cuts from a peak of 390 U.S. branches at the end of 2013. Meanwhile, Grainger has essentially cut its Canadian branch network in half since the end of 2014, going from 181 branches to 91 as of this past Dec. 31, as the company has been resetting its overall Acklands-Grainger business.

Speaking to a media roundtable at the company's annual Grainger Show this past Monday in Orlando, Grainger chairman and CEO DG Macpherson said the company has found its comfort spot with its U.S. branch count after these past four years of slimming down.

"We think that's kind of the right footprint for now," he said regarding that 284 figure. "We're pretty bullish about our branch network in terms of being a helpful part of the portfolio. It doesn't mean we're going to add hundreds of branches, but we do think it's pretty stable right now."

"This year it's going to be very stable," he added later.

Part of that overall downsizing was tied to the growth of Grainger's e-commerce, which is now north of 60 percent of its total business. Likewise with the industrial products market as a whole, as buyer preferences shift to online, it's resulted in less reliance on brick-and-mortar.

Macpherson touched on how in past years, some of the foot traffic Grainger's U.S. branches received would be from contractors during a break in their day who more-or-less were looking to have a conversation, whereas now that traffic is more purpose-driven. He said Grainger's 2017 strategic pricing actions — largely cutting product costs across the board — helped in that aspect, too.

"We've seen increased volume through those U.S. branches, Macpherson said. "We think most the traffic we have now — when you stand out and talk to them (customers) — it makes a lot of sense for who's in there."

Those pricing actions drove up volume that led to higher company sales throughout 2017. In Grainger's Q4 earnings report it posted Jan. 24, it said full-year 2017 sales of $10.42 billion, up 2.8 percent from 2016, while profit of $586 million fell 3.3 percent. In Q4, Grainger's sales of $2.63 billion jumped 6.5 percent year-over-year.

Grainger cut 56 branches alone during Q4 2017, with only two of those closures in the United States. In Q4 it closed 18 branches in Canada, 25 branches of its Netherlands-based Fabory business, seven U.K.-based Cromwell branches and four branches in Columbia.

Grainger ended 2017 with 31 distribution centers — down two from the end of 2016. It currently has 16 DCs in the U.S. and five in Canada.

More in Operations