Grainger – Grainger Reports Results for the First Quarter 2024

Strategic focus driving business forward;Company reaffirms full year 2024 guidance ranges

First Quarter Highlights

• Delivered sales of $4.2 billion, up 3.5%, or 4.9% on a daily, organic constant currency basis
• Achieved operating margin of 15.8%, down 80 basis points
• Increased diluted EPS by $0.01 to $9.62
• Generated $661 million in operating cash flow and returned $360 million to Grainger shareholders through dividends and share repurchases
• Announced dividend increase of 10%
• Refreshed repurchase authorization for up to 5 million shares of common stock
• Reaffirming FY 2024 guidance

CHICAGO, April 25, 2024 /PRNewswire/ — Grainger (NYSE: GWW) today reported results for the first quarter of 2024 with sales of $4.2 billion, up 3.5%, or 4.9% on a daily, organic constant currency basis, and diluted EPS of $9.62, up 0.1% compared to the first quarter of 2023. 

“Our 2024 performance so far shows that the team is focusing on what matters and living our purpose—We Keep the World Working®. We’ve produced solid results amidst a slow, but steady demand environment,” said D.G. Macpherson, Chairman and CEO. “Looking to the remainder of the year, we are well-positioned to achieve our guidance outlook as we work to provide a flawless experience and deliver tangible value for our customers.”

2024 First Quarter Financial Summary

Revenue

Sales in the quarter, on a reported and daily basis, increased 3.5% compared to the first quarter of 2023. Normalizing for the impact of foreign currency exchange and the Company’s 2023 divestiture of its subsidiary, E & R Industrial Sales, Inc., sales on a daily, organic constant currency basis increased 4.9% compared to the first quarter of 2023.

In the High-Touch Solutions – N.A. segment, daily sales were up 3.4% compared to the first quarter of 2023, with growth in all geographies. In the Endless Assortment segment, daily sales were up 3.7%, or 10.0% on a daily, constant currency basis, compared to the first quarter of 2023. Revenue growth for the segment was driven by core customers at Zoro and enterprise customers at MonotaRO, partially offset by the continued decrease in non-core customers at Zoro.

Gross Profit Margin

Gross profit margin for the first quarter of 2024 was 39.4%, a 50-basis point decline from the first quarter of 2023. The decrease was driven by declines in both segments.

In the High-Touch Solutions – N.A. segment, gross profit margin decreased by 60 basis points over the first quarter of 2023 due primarily to negative price / cost spread partially offset by sustained freight and supply chain efficiencies.  In the Endless Assortment segment, gross profit margin declined by 30 basis points from the first quarter of 2023 as continued freight efficiencies at MonotaRO were offset by unfavorable product mix at Zoro.

Earnings

Operating earnings for the first quarter of 2024 were $669 million, down 1.6% compared to the first quarter of 2023. Operating margin in the quarter was 15.8%, an 80-basis point decrease from the first quarter of 2023 as continued investment in demand generating activities in the High-Touch Solutions – N.A. segment was partially offset by operating efficiencies at MonotaRO.

Diluted earnings per share of $9.62 in the first quarter of 2024, increased 0.1% compared to the first quarter of 2023. The decline in operating earnings was offset by a lower share count in the current year period.

Tax Rate

The first quarter 2024 effective tax rate was 24.2%, compared to 23.3% in the first quarter of 2023. The increase in the effective tax rate was primarily due to decreased stock compensation tax benefit.

Cash Flow

During the first quarter of 2024, the Company generated $661 million of cash flow from operating activities, as solid net earnings were further aided by the favorable timing of working capital. The Company invested $119 million in capital expenditures, resulting in free cash flow of $542 million. During the quarter, the Company returned $360 million to Grainger shareholders through dividends and share repurchases.

Guidance

The company is reaffirming the following guidance ranges as previously announced on February 2, 2024.

⁽¹⁾ Guidance provided is on an adjusted basis. Daily, organic constant currency sales growth is adjusted for the impact of two additional selling days in 2024 as compared to 2023, the sale of the Company’s divested E & R Industrial Sales, Inc. subsidiary completed in the fourth quarter of 2023, and changes in foreign exchange. The Company does not reconcile forward-looking non GAAP financial measures. For further details see the supplemental information of this release.

Webcast

The Company will conduct a live conference call and webcast at 11:00 a.m. ET on Thursday, April 25, 2024, to discuss the first quarter results. The webcast will be hosted by D.G. Macpherson, Chairman and CEO, and Deidra Merriwether, Senior Vice President and CFO, and can be accessed at invest.grainger.com. For those unable to participate in the live event, a webcast replay will be available for 90 days at invest.grainger.com.

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In millions of dollars, except for share and per share amounts)

(Unaudited)

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions of dollars)

(Unaudited)

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions of dollars)

(Unaudited)

(1) Certain reclassifications have been made to prior year amounts to conform to the current year presentation of Grainger’s Consolidated Statements of Cash Flows. The reclassifications had no impact on previously reported results including net cash provided by (used in) operating, investing and financing activities for the three months ended March 31, 2023.

SUPPLEMENTAL INFORMATION – RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES (Unaudited)

The Company supplements the reporting of financial information determined under U.S. generally accepted accounting principles (GAAP) with the non-GAAP financial measures as defined below. The Company believes these non-GAAP financial measures provide meaningful information to assist investors in understanding financial results and assessing prospects for future performance as they provide a better baseline for analyzing the ongoing performance of its business by excluding items that may not be indicative of core operating results.

Basis of presentation

The Company has a controlling ownership interest in MonotaRO, which is part of our Endless Assortment segment. MonotaRO’s results are fully consolidated, reflected in U.S. GAAP, and reported one-month in arrears. Results will differ from MonotaRO’s externally reported financials which follow Japanese GAAP.

Adjusted gross profit, adjusted SG&A, adjusted operating earnings, adjusted operating margin, adjusted net earnings, adjusted diluted EPS

Exclude certain non-recurring items, like restructuring charges, asset impairments, gains and losses associated with business divestitures and other non-recurring, infrequent or unusual gains and losses (together referred to as “non-GAAP adjustments”), from the Company’s most directly comparable reported U.S. GAAP figures (reported gross profit, SG&A, operating earnings, net earnings and EPS).The Company believes these non-GAAP adjustments provide meaningful information to assist investors in understanding financial results and assessing prospects for future performance as they provide a better baseline for analyzing the ongoing performance of its business by excluding items that may not be indicative of core operating results.

Free cash flow (FCF) 

Calculated using total cash provided by operating activities less capital expenditures. The Company believes the presentation of FCF allows investors to evaluate the capacity of the Company’s operations to generate free cash flow.

Daily sales 

Refers to sales for the period divided by the number of U.S. selling days for the period.

Daily, constant currency sales

Refers to the daily sales adjusted for changes in foreign currency exchange rates.

Daily, organic constant currency sales

Refers to daily sales excluding the sales of certain divested businesses in the comparable prior year period post date of divestiture and changes in foreign currency exchange rates.

Foreign currency exchange

Calculated by dividing current period local currency daily sales by current period average exchange rate and subtracting the current period local currency daily sales divided by the prior period average exchange rate.

U.S. selling days:

2023: Q1-64, Q2-64, Q3-63, Q4-63, FY-254
2024: Q1-64, Q2-64, Q3-64, Q4-64, FY-256
2025: Q1-63, Q2-64, Q3-64, Q4-64, FY-255

As non-GAAP financial measures are not standardized, it may not be possible to compare these measures with other companies’ non-GAAP measures having the same or similar names. These non-GAAP measures should not be considered in isolation or as a substitute for reported results. These non-GAAP measures reflect an additional way of viewing aspects of operations that, when viewed with GAAP results, provide a more complete understanding of the business. This press release also includes certain non-GAAP forward-looking information. The Company believes that a quantitative reconciliation of such forward-looking information to the most comparable financial measure calculated and presented in accordance with GAAP cannot be made available without unreasonable efforts. A reconciliation of these non-GAAP financial measures would require the Company to predict the timing and likelihood of future restructurings, asset impairments, and other charges. Neither of these forward-looking measures, nor their probable significance, can be quantified with a reasonable degree of accuracy. Accordingly, a reconciliation of the most directly comparable forward-looking GAAP measures is not provided.

The reconciliations provided below reconciles GAAP financial measures to non-GAAP financial measures used in this release: daily sales; daily, organic constant currency sales; free cash flow; adjusted operating margin; and adjustments reflected in the consolidated statements of earnings.

Sales growth for the three months ended March 31, 2024

(percent change compared to prior year period)

(unaudited)