GRAINGER REPORTS RESULTS FOR THE FIRST QUARTER 2024
- Sales increased to $4.2 billion, up 3.5% compared to the first quarter of 2023.
- Operating margin stood at 15.8%, a decrease of 80 basis points from the first quarter of 2023.
- Diluted EPS reached $9.62, up 0.1% from the first quarter of 2023.
- Operating cash flow generated was $661 million, with $360 million returned to shareholders through dividends and share repurchases.
- The company announced a 10% dividend increase and refreshed repurchase authorization for up to 5 million shares of common stock.
- Gross profit margin was 39.4%, a 50-basis point decline from the first quarter of 2023.
- Grainger reaffirmed its FY 2024 guidance ranges, focusing on achieving sales growth, gross profit margin, operating margin, diluted EPS, and other financial metrics.
- Operating earnings decreased by 1.6% compared to the first quarter of 2023.
- Gross profit margin declined by 50 basis points due to decreases in both segments.
- Effective tax rate increased to 24.2% in the first quarter of 2024.
- The Company invested $119 million in capital expenditures during the quarter.
- The first quarter of 2024 saw a decrease in non-core customers at Zoro.
Insights
The slight uptick in sales growth to $4.2 billion, representing a 3.5% increase, is a positive signal for Grainger's market presence. However, this must be juxtaposed with the decline in operating earnings by 1.6% and a minor dip in net earnings by 2.0%. The reported gross profit margin contraction from 39.9% to 39.4% might concern investors, as it indicates potential pressure on pricing or cost management that could affect future profitability.
Furthermore, the diluted EPS increase of only $0.01 to $9.62, despite a lower share count, suggests only marginal growth in earnings and potential headwinds in operational efficiency or market growth. The 10% dividend increase and refreshed share repurchase authorization, however, demonstrate confidence in future cash flow and may be viewed as a shareholder-friendly move. These elements should be considered in the context of an investor's portfolio strategy, balancing the modest growth prospects against potential volatility in operating margins and profit margins.
Observing the segment performance, the growth in High-Touch Solutions - N.A. and Endless Assortment segments is commendable, especially considering the broader economic context. It's important to note the operating margin pressures and gross profit margin declines across both segments, as these could be indicative of macroeconomic challenges or increased competition affecting pricing flexibility.
From a market perspective, the reaffirmed guidance for FY 2024, with a sales growth range of 4.3% to 7.3% and stable guidance for gross profit and operating margins, may be considered cautiously optimistic. Investors should weigh the potential for stable growth against the backdrop of a demanding economic climate and the company's ability to maintain its competitive edge in terms of pricing and operational efficiency.
Strategic focus driving business forward; Company reaffirms full year 2024 guidance ranges
First Quarter Highlights
- Delivered sales of
$4.2 billion 3.5% , or4.9% on a daily, organic constant currency basis - Achieved operating margin of
15.8% , down 80 basis points - Increased diluted EPS by
$0.01 $9.62 - Generated
$661 million $360 million - Announced dividend increase of
10% - Refreshed repurchase authorization for up to 5 million shares of common stock
- Reaffirming FY 2024 guidance
"Our 2024 performance so far shows that the team is focusing on what matters and living our purpose—We Keep the World Working®. We've produced solid results amidst a slow, but steady demand environment," said D.G. Macpherson, Chairman and CEO. "Looking to the remainder of the year, we are well-positioned to achieve our guidance outlook as we work to provide a flawless experience and deliver tangible value for our customers."
2024 First Quarter Financial Summary
($ in millions, except per share amounts) | Q1 2024 (1) | Q1 2023 (1) | Q1'24 vs. Q1'23 |
Fav. / (Unfav.) | |||
Net Salesc | 3.5 % | ||
Gross Profit | 2.1 % | ||
Operating Earnings | (1.6) % | ||
Net Earnings Attributable to W.W. Grainger, Inc. | (2.0) % | ||
Diluted Earnings Per Share | 0.1 % | ||
Gross Profit Margin | 39.4 % | 39.9 % | (50) bps |
Operating Margin | 15.8 % | 16.6 % | (80) bps |
Effective Tax Rate | 24.2 % | 23.3 % | (90) bps |
(1) Results are consistent on a reported and adjusted basis. |
Revenue
Sales in the quarter, on a reported and daily basis, increased
In the High-Touch Solutions - N.A. segment, daily sales were up
Gross Profit Margin
Gross profit margin for the first quarter of 2024 was
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
Diluted earnings per share of
Tax Rate
The first quarter 2024 effective tax rate was
Cash Flow
During the first quarter of 2024, the Company generated
Guidance
The company is reaffirming the following guidance ranges as previously announced on February 2, 2024.
Total Company(1) | FY 2024 Guidance Range (reaffirmed April 25, 2024) |
Net Sales | |
Sales Growth | |
Daily, organic, constant currency sales growth | |
Gross Profit Margin | |
Operating Margin | |
Diluted Earnings per Share | |
Operating Cash Flow | |
CapEx (cash basis) | |
Share Buyback | |
Effective Tax Rate | ~ |
Segment Operating Margin | |
High-Touch Solutions - N.A. | |
Endless Assortment |
(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.
About Grainger
W.W. Grainger, Inc., is a leading broad line distributor with operations primarily in
Visit invest.grainger.com to view information about the Company, including a supplement regarding 2024 first quarter results. Additional Company information can be found on the Grainger Investor Relations website which includes the Company Snapshot and ESG report.
Safe Harbor Statement
All statements in this communication, other than those relating to historical facts, are "forward-looking statements." Forward-looking statements can generally be identified by their use of terms such as "believe," "could," "future," "guidance," "may," "predict," "prospects," "will," or "would," and similar terms and phrases, including references to assumptions. Forward-looking statements are not guarantees of future performance and are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such statements. Forward-looking statements include, but are not limited to, statements about future strategic plans and future financial and operating results. Important factors that could cause actual results to differ materially from those presented or implied in the forward-looking statements include, without limitation: inflation, higher product costs or other expenses, including operational and administrative expenses; the impact of macroeconomic pressures and geopolitical trends, changes and events; a major loss of customers; loss or disruption of sources of supply; changes in customer or product mix; increased competitive pricing pressures; changes in third party practices regarding digital advertising; failure to enter into or sustain contractual arrangements on a satisfactory basis with group purchasing organizations; failure to develop, manage or implement new technology initiatives or business strategies, including with respect to Grainger's eCommerce platforms; failure to adequately protect intellectual property or successfully defend against infringement claims; fluctuations or declines in Grainger's gross profit margin; Grainger's responses to market pressures; the outcome of pending and future litigation or governmental or regulatory proceedings, including with respect to wage and hour, anti-bribery and corruption, environmental, regulations related to advertising, marketing and the Internet, consumer protection, pricing (including disaster or emergency declaration pricing statutes), product liability, compliance or safety, trade and export compliance, general commercial disputes, or privacy and cybersecurity matters; investigations, inquiries, audits and changes in laws and regulations; failure to comply with laws, regulations and standards, including new or stricter environmental laws or regulations; government contract matters; the impact of any government shutdown; disruption or breaches of information technology or data security systems involving Grainger or third parties on which Grainger depends; general industry, economic, market or political conditions; general global economic conditions including tariffs and trade issues and policies; foreign currency exchange rate fluctuations; market volatility, including price and trading volume volatility or price declines of Grainger's common stock; commodity price volatility; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; outbreaks of pandemic disease or viral contagions; natural or human induced disasters, extreme weather and other catastrophes or conditions; effects of climate change; failure to execute on our efforts and programs related to environmental, social and governance matters; competition for, or failure to attract, retain, train, motivate and develop executives and key employees; loss of key members of management or key employees; loss of operational flexibility and potential for work stoppages or slowdowns if employees unionize or join a collective bargaining arrangement; changes in effective tax rates; changes in credit ratings or outlook; Grainger's incurrence of indebtedness or failure to comply with restrictions and obligations under its debt agreements and instruments; and other factors that can be found in our filings with the Securities and Exchange Commission, including our most recent periodic reports filed on Form 10-K and Form 10-Q, which are available on our Investor Relations website. Forward-looking statements are given only as of the date of this communication and we disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.
W.W. Grainger, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (In millions of dollars, except for share and per share amounts) (Unaudited) | |||
Three Months Ended March 31, | |||
2024 | 2023 | ||
Net sales | $ 4,235 | $ 4,091 | |
Cost of goods sold | 2,567 | 2,457 | |
Gross profit | 1,668 | 1,634 | |
Selling, general and administrative expenses | 999 | 954 | |
Operating earnings | 669 | 680 | |
Other (income) expense: | |||
Interest expense – net | 21 | 24 | |
Other – net | (7) | (6) | |
Total other expense – net | 14 | 18 | |
Earnings before income taxes | 655 | 662 | |
Income tax provision | 158 | 154 | |
Net earnings | 497 | 508 | |
Less net earnings attributable to noncontrolling interest | 19 | 20 | |
Net earnings attributable to W.W. Grainger, Inc. | $ 478 | $ 488 | |
Earnings per share: | |||
Basic | $ 9.65 | $ 9.66 | |
Diluted | $ 9.62 | $ 9.61 | |
Weighted average number of shares outstanding: | |||
Basic | 49.2 | 50.2 | |
Diluted | 49.4 | 50.5 | |
W.W. Grainger, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (In millions of dollars) (Unaudited) | |||
As of | |||
(Unaudited) | |||
Assets | March 31, 2024 | December 31, 2023 | |
Current assets | |||
Cash and cash equivalents | $ 804 | $ 660 | |
Accounts receivable (less allowances for credit losses of | 2,330 | 2,192 | |
Inventories – net | 2,178 | 2,266 | |
Prepaid expenses and other current assets | 228 | 156 | |
Total current assets | 5,540 | 5,274 | |
Property, buildings and equipment – net | 1,667 | 1,658 | |
Goodwill | 364 | 370 | |
Intangibles – net | 236 | 234 | |
Operating lease right-of-use | 408 | 429 | |
Other assets | 185 | 182 | |
Total assets | $ 8,400 | $ 8,147 | |
Liabilities and Shareholders' Equity | |||
Current liabilities | |||
Current maturities | $ 501 | $ 34 | |
Trade accounts payable | 1,133 | 954 | |
Accrued compensation and benefits | 235 | 327 | |
Operating lease liability | 71 | 71 | |
Accrued expenses | 444 | 397 | |
Income taxes payable | 144 | 48 | |
Total current liabilities | 2,528 | 1,831 | |
Long-term debt | 1,783 | 2,266 | |
Long-term operating lease liability | 359 | 381 | |
Deferred income taxes and tax uncertainties | 101 | 104 | |
Other non-current liabilities | 120 | 124 | |
Shareholders' equity | 3,509 | 3,441 | |
Total liabilities and shareholders' equity | $ 8,400 | $ 8,147 | |
W.W. Grainger, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions of dollars) (Unaudited) | |||
Three Months Ended March 31, | |||
2024 | 2023 | ||
Cash flows from operating activities: | |||
Net earnings | $ 497 | $ 508 | |
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||
Provision for credit losses | 6 | 4 | |
Deferred income taxes and tax uncertainties | (2) | 10 | |
Depreciation and amortization | 56 | 50 | |
Non-cash lease expense | 21 | 17 | |
Stock-based compensation | 11 | 12 | |
Change in operating assets and liabilities: | |||
Accounts receivable | (163) | (162) | |
Inventories | 76 | 4 | |
Prepaid expenses and other assets | (85) | 74 | |
Trade accounts payable | 202 | 53 | |
Operating lease liabilities | (23) | (21) | |
Accrued liabilities | (35) | (193) | |
Income taxes – net | 107 | 102 | |
Other non-current liabilities | (7) | (4) | |
Net cash provided by operating activities | 661 | 454 | |
Cash flows from investing activities: | |||
Capital expenditures | (119) | (98) | |
Proceeds from sale of assets | 1 | 2 | |
Net cash used in investing activities | (118) | (96) | |
Cash flows from financing activities: | |||
Proceeds from debt | 1 | 6 | |
Payments of debt | (17) | (18) | |
Proceeds from stock options exercised | 9 | 23 | |
Payments for employee taxes withheld from stock awards | (10) | (3) | |
Purchases of treasury stock | (268) | (142) | |
Cash dividends paid | (105) | (87) | |
Other – net | (1) | (3) | |
Net cash used in financing activities | (391) | (224) | |
Exchange rate effect on cash and cash equivalents | (8) | 2 | |
Net change in cash and cash equivalents | 144 | 136 | |
Cash and cash equivalents at beginning of period | 660 | 325 | |
Cash and cash equivalents at end of period | $ 804 | $ 461 | |
(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
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
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
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
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.
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) | |||
Q1 2024 | |||
Total Company | High-Touch Solutions - N.A. | Endless Assortment | |
Reported sales | 3.5 % | 3.4 % | 3.7 % |
Day impact | — % | — % | — % |
Daily sales(1) | 3.5 % | 3.4 % | 3.7 % |
Business divestiture(2) | 0.5 % | 0.6 % | — % |
Foreign currency exchange(3) | 0.9 % | (0.2) % | 6.3 % |
Daily, organic constant currency sales | 4.9 % | 3.8 % | 10.0 % |
(1) | Based on |
(2) | Reflects the divestiture of Grainger's subsidiary, E & R Industrial Sales, Inc., completed in the fourth quarter of 2023. |
(3) | Excludes the impact of year-over-year foreign currency exchange rate fluctuations. |
Free cash flow (FCF) for the three months ended March 31, 2024 (in millions of dollars) (unaudited) | |
Q1 2024 | |
Net cash flows provided by operating activities | $ 661 |
Capital expenditures | (119) |
Free cash flow | $ 542 |
View original content:https://www.prnewswire.com/news-releases/grainger-reports-results-for-the-first-quarter-2024-302126722.html
SOURCE W.W. Grainger, Inc.
FAQ
What were Grainger's first-quarter 2024 sales figures?
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What were Grainger's diluted earnings per share (EPS) for the first quarter of 2024?
Did Grainger provide any guidance for the full year 2024?
How much cash flow did Grainger generate from operating activities in the first quarter of 2024?
