W.W. Grainger Inc. (GWW) reported October sales growth of 16% year over year, the highest so far in 2011, continuing with its double-digit growth stint.
Acquisitions added 5 percentage points to growth. Organic sales increased 11% with higher volume contributing 9 percentage points and pricing adding 3 percentage points. However, a 1-percentage point dip from oil spill related sales in the Gulf of Mexico in 2010 was a partial offset.
Geographically, daily sales in the United States increased 9%, while Canada saw a jump of 16%. Daily sales at the company's Other businesses, which include operations in Japan, Mexico, India, Puerto Rico, China and Panama, increased a whopping 110%.
The month of October had 21 selling days, same as October 2010. The fourth quarter will have the same number of selling days (63) as the corresponding period in 2010.
Robust October sales came on the back of solid third-quarter numbers. Grainger recorded $2.11 billion in sales in the third quarter 2011, up 11.3% year over year and ahead of the Zacks Consensus Estimate of $2.09 billion. The outperformance was driven by strong sales across all segments. Volume growth and favorable pricing coupled with congenial foreign exchange rates and acquisitions contributed to the growth.
During its earnings call, the company raised its full year sales growth target to the range of 9% to 10% from the earlier band of 7% to 10%. The company also guided 2011 earnings between $8.40 and $8.70 per share, up from the prior forecast of $8.10 to $8.60 per share.
Grainger has been delivering consistent, double-digit sales growth so far in the year. Initiatives like E-Commerce, inventory management services and sales force expansion are bearing fruit. Grainger remains focused on expanding its product offerings and growing the share of its private label products.
The company expects to roll out almost 500,000 products going forward. The continued success of this program is expected to drive sales growth in 2011 and beyond.
Besides, Grainger is currently on an expansion spree to strengthen its business across each of its operating regions including North America, Canada, Asia and Latin America. The acquisition of Fabory Group, a leading European distributor of fasteners and related maintenance, repair and overhaul (MRO) products, marks the company’s entry in the world's largest MRO market.
We retain our Neutral recommendation on W.W. Grainger. Shares of Grainger presently retain a Zacks #1 Rank (short-term Buy recommendation).
Illinois-based Grainger is a leading North American distributor of material handling equipment including safety and security supplies, lighting and electrical products, power and hand tools, pumps and plumbing supplies, etc. The company’s services comprise inventory management and energy efficiency solutions. The company competes with Applied Industrial Technologies Inc. (AIT) and WESCO International Inc. (WCC).
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