GRAINGER REPORTS RESULTS FOR THE THIRD QUARTER 2022
Grainger reported strong third-quarter 2022 results with sales reaching $3.9 billion, reflecting a 16.9% increase year-over-year. The company expanded its gross margin by 145 basis points, achieving operating earnings of $603 million and diluted EPS of $8.27, up 46.4% from the previous year. Operating cash flow also improved, totaling $380 million. Due to positive performance, Grainger raised its full-year guidance, anticipating net sales between $15.1 billion and $15.2 billion.
- Sales increased by 16.9% year-over-year, totaling $3.9 billion.
- Gross profit margin expanded by 145 bps, reaching 38.5%.
- Operating earnings rose by 37.6%, amounting to $603 million.
- Diluted EPS grew to $8.27, a 46.4% increase year-over-year.
- Operating cash flow improved to $380 million, up $219 million from last year.
- Full-year 2022 guidance raised to $15.1 billion - $15.2 billion in net sales.
- None.
Focused execution driving strong results; Company raises full year 2022 guidance
Third Quarter Highlights
- Delivered sales of
$3.9 billion , up16.9% , compared to the third quarter of 2021 on a reported and daily basis; up20.3% on a daily, constant currency basis - Expanded gross margin by 145 bps compared to the third quarter of 2021
- Generated operating earnings of
$603 million , up37.6% , resulting in diluted EPS of$8.27 , an increase of46.4% versus the third quarter of 2021 - Produced
$380 million in operating cash flow and returned$286 million to shareholders through dividends and share repurchases - Recognized as one of Fortune 100 Best Workplaces for Women in 2022
- Increases full year 2022 guidance including total Company daily sales growth of
15.5% to16.5% and diluted EPS range of$29.10 to$29.70 .
CHICAGO, Oct. 28, 2022 /PRNewswire/ -- Grainger (NYSE: GWW) today reported results for the third quarter of 2022 with sales of
"The third quarter performance reflects our focused execution against our long-term strategy and ability to serve customers well in this demand environment," said D.G. Macpherson, Chairman and CEO. "Our teams are driving impressive results across both business segments and, after another quarter of strong performance, we are increasing our 2022 full year guidance. We remain on track to deliver an exceptional year."
2022 Third Quarter Financial Summary
($ in millions) | Q3 2022 (1) | Q3 2021 (1) | Q3 |
Fav. (Unfav.) vs. Prior | |||
Net Sales | 16.9 % | ||
Gross Profit | 21.5 % | ||
Operating Earnings | 37.6 % | ||
Net Earnings Attributable to | 43.4 % | ||
Diluted Earnings Per Share | 46.4 % | ||
Gross Profit Margin | 38.5 % | 37.1 % | 145 bps |
Operating Margin | 15.3 % | 13.0 % | 230 bps |
Tax Rate | 24.7 % | 25.5 % | 80 bps |
(1) Neither Q3 2022 nor Q3 2021 results contained any adjusting items, therefore separate adjusted results are not presented above. |
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 third quarter of 2022 was
In the High-Touch Solutions N.A. segment, gross margin expanded by 125 basis points over the prior year third quarter primarily due to improved product mix and favorable price/cost spread due largely to timing. This was partially offset by freight inflation. In the Endless Assortment segment, gross margin expanded by 130 basis points versus the prior year third quarter driven largely by freight efficiencies and favorable business unit mix.
Earnings
Operating earnings for the third quarter of 2022 of
Diluted earnings per share of
Tax Rate
The third quarter 2022 tax rate was
Cash Flow
Operating cash flow for the third quarter of 2022 was
Guidance
Given the strong third quarter results, the Company is raising its 2022 full year guidance expectations.
Total Company(1) | Previous 2022 Guidance Range | Updated 2022 Guidance Range |
Net Sales | ||
Daily Growth | ||
Gross Profit Margin | ||
Operating Margin | ||
Diluted Earnings per Share | ||
Operating Cash Flow | ||
CapEx (cash basis) | ||
Share Repurchase | ||
Tax Rate | ~ | ~ |
Segment Operating Margin | ||
High-Touch Solutions N.A. | ||
Endless Assortment |
(1) Guidance provided is on an adjusted basis |
Webcast
The Company will conduct a live conference call and webcast at 11:00 a.m. ET on Friday, October 28, 2022, to discuss the third 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., with 2021 sales of
Visit invest.grainger.com to view information about the Company, including a supplement regarding 2022 third quarter results. Additional Company information can be found on the Grainger Investor Relations website which includes our 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 "anticipate," "estimate," "believe," "expect," "could," "forecast," "may," "intend," "plan," "predict," "project," "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: the unknown duration and health, economic, operational and financial impacts of the global outbreak of the coronavirus disease 2019 and its variants (COVID-19), as well as the impact of actions taken or contemplated by government authorities to mitigate the spread of COVID-19 (such as vaccine mandates, mask mandates, social distancing or other requirements) and to promote economic stability and recovery, on the Company's businesses, its employees, customers and suppliers, including disruption to Grainger's operations resulting from employee illnesses, the development, availability and usage of effective treatment or vaccines, changes in customers' product needs, the acquisition of excess inventory leading to additional inventory carrying costs and inventory obsolescence, raw material, inventory and labor shortages, continued strain on global supply chains, and diminished transportation availability and efficiency, disruption caused by business responses to the COVID-19 pandemic, including remote working arrangements, which may create increased vulnerability to cybersecurity incidents, including breaches of information systems security, adaptions to the Company's controls and procedures required by remote working arrangements, which could impact the design or operating effectiveness of such controls or procedures, and global or regional economic downturns or recessions, which could result in a decline in demand for the Company's products; inflation, higher product costs or other expenses, including operational expenses; the impact of Russia's invasion of Ukraine on the global economy; a major loss of customers; loss or disruption of sources of supply; changes in customer or product mix; increased competitive pricing pressures; 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; failure to adequately protect intellectual property or successfully defend against infringement claims; fluctuations or declines in the Company's gross profit margin; the Company'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, advertising and marketing, 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; disruption or breaches of information technology or data security systems involving the Company or third parties on which the Company depends; general industry, economic, market or political conditions; general global economic conditions including tariffs and trade issues and policies; currency exchange rate fluctuations; market volatility, including price and trading volume volatility or price declines of the Company's common stock; commodity price volatility; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; geopolitical events, including war or acts of terrorism; other pandemic diseases or viral contagions; natural or human induced disasters, extreme weather and other catastrophes or conditions; effects of climate change; competition for, or failure to attract, retain, train, motivate, and develop key employees; loss of key members of management or key employees; changes in effective tax rates; changes in credit ratings or outlook; the Company's incurrence of indebtedness 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 the Company undertakes no obligation to update or revise any of its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) | |||||||
Three Months Ended | Nine Months Ended | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Net sales | $ 3,942 | $ 3,372 | $ 11,426 | $ 9,663 | |||
Cost of goods sold | 2,423 | 2,122 | 7,083 | 6,196 | |||
Gross profit | 1,519 | 1,250 | 4,343 | 3,467 | |||
Selling, general and administrative expenses | 916 | 812 | 2,672 | 2,337 | |||
Operating earnings | 603 | 438 | 1,671 | 1,130 | |||
Other (income) expense: | |||||||
Interest expense – net | 25 | 22 | 70 | 65 | |||
Other – net | (9) | (6) | (20) | (19) | |||
Total other expense – net | 16 | 16 | 50 | 46 | |||
Earnings before income taxes | 587 | 422 | 1,621 | 1,084 | |||
Income tax provision | 145 | 107 | 405 | 271 | |||
Net earnings | 442 | 315 | 1,216 | 813 | |||
Less net earnings attributable to noncontrolling interest | 16 | 18 | 53 | 53 | |||
Net earnings attributable to W.W. Grainger, Inc. | $ 426 | $ 297 | $ 1,163 | $ 760 | |||
Earnings per share: | |||||||
Basic | $ 8.31 | $ 5.68 | $ 22.64 | $ 14.48 | |||
Diluted | $ 8.27 | $ 5.65 | $ 22.52 | $ 14.40 | |||
Weighted average number of shares outstanding: | |||||||
Basic | 50.8 | 51.8 | 51.0 | 52.1 | |||
Diluted | 51.1 | 52.1 | 51.3 | 52.4 | |||
Diluted Earnings Per Share | |||||||
Net earnings as reported | $ 426 | $ 297 | $ 1,163 | $ 760 | |||
Earnings allocated to participating securities | (4) | (2) | (9) | (6) | |||
Net earnings available to common shareholders | $ 422 | $ 295 | $ 1,154 | $ 754 | |||
Weighted average shares adjusted for dilutive securities | 51.1 | 52.1 | 51.3 | 52.4 | |||
Diluted earnings per share | $ 8.27 | $ 5.65 | $ 22.52 | $ 14.40 | |||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||
(Unaudited) | |||
Assets | September 30, 2022 | December 31, 2021 | |
Cash and cash equivalents | $ 315 | $ 241 | |
Accounts receivable – net(1) | 2,158 | 1,754 | |
Inventories – net(2) | 2,071 | 1,870 | |
Prepaid expenses and other current assets | 142 | 146 | |
Total current assets | 4,686 | 4,011 | |
Property, buildings and equipment – net | 1,409 | 1,424 | |
Goodwill | 363 | 384 | |
Intangibles – net | 222 | 238 | |
Operating lease right-of-use | 360 | 393 | |
Other assets | 161 | 142 | |
Total assets | $ 7,201 | $ 6,592 | |
Liabilities and Shareholders' Equity | |||
Current maturities of long-term debt | $ 16 | $ — | |
Trade accounts payable(2) | 1,038 | 816 | |
Accrued compensation and benefits | 307 | 319 | |
Operating lease liability | 67 | 66 | |
Accrued expenses | 332 | 290 | |
Income taxes payable | 25 | 37 | |
Total current liabilities | 1,785 | 1,528 | |
Long-term debt | 2,294 | 2,362 | |
Long-term operating lease liability | 305 | 334 | |
Deferred income taxes and tax uncertainties | 135 | 121 | |
Other non-current liabilities | 120 | 87 | |
Shareholders' equity(3) | 2,562 | 2,160 | |
Total liabilities and shareholders' equity | $ 7,201 | $ 6,592 | |
(1) Increased |
(2) Increased |
(3) Common stock outstanding as of September 30, 2022 was 50,630,970 compared with 51,220,205 shares at |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | |||||||
Three Months Ended | Nine Months Ended | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Cash flows from operating activities: | |||||||
Net earnings | $ 442 | $ 315 | $ 1,216 | $ 813 | |||
Adjustments to reconcile net earnings to net cash | |||||||
Provision for credit losses | 5 | 4 | 13 | 12 | |||
Deferred income taxes and tax uncertainties | 5 | 1 | 20 | (7) | |||
Depreciation and amortization | 52 | 45 | 159 | 137 | |||
Net (gains) losses from sale or redemption of | (1) | 1 | 1 | (3) | |||
Stock-based compensation | 11 | 8 | 38 | 33 | |||
Change in operating assets and liabilities: | |||||||
Accounts receivable | (89) | (118) | (487) | (298) | |||
Inventories | (104) | (86) | (253) | (64) | |||
Prepaid expenses and other assets | 11 | 7 | (39) | (1) | |||
Trade accounts payable | (2) | (11) | 261 | 167 | |||
Accrued liabilities | 59 | (6) | 51 | (13) | |||
Income taxes - net | (2) | 8 | 8 | (42) | |||
Other non-current liabilities | (7) | (7) | (15) | (10) | |||
Net cash provided by operating activities | 380 | 161 | 973 | 724 | |||
Cash flows from investing activities: | |||||||
Additions to property, buildings, equipment and | (45) | (50) | (208) | (197) | |||
Proceeds from sale or redemption of assets | 5 | — | 7 | 17 | |||
Other – net | — | — | (11) | — | |||
Net cash used in investing activities | (40) | (50) | (212) | (180) | |||
Cash flows from financing activities: | |||||||
Borrowings under lines of credit | 1 | — | 1 | — | |||
Payments of long-term debt | — | — | — | (8) | |||
Proceeds from stock options exercised | 6 | 1 | 21 | 31 | |||
Payments for employee taxes withheld from stock | (3) | (1) | (22) | (29) | |||
Purchases of treasury stock | (184) | (242) | (383) | (525) | |||
Cash dividends paid | (102) | (85) | (285) | (261) | |||
Other – net | 2 | — | — | 2 | |||
Net cash used in financing activities | (280) | (327) | (668) | (790) | |||
Exchange rate effect on cash and cash equivalents | (7) | (3) | (19) | (11) | |||
Net change in cash and cash equivalents | 53 | (219) | 74 | (257) | |||
Cash and cash equivalents at beginning of period | 262 | 547 | 241 | 585 | |||
Cash and cash equivalents at end of period | $ 315 | $ 328 | $ 315 | $ 328 | |||
SUPPLEMENTAL INFORMATION - CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (Unaudited)
The Company supplemented the reporting of financial information determined under U.S. generally accepted accounting principles (GAAP) with the non-GAAP financial measures of daily sales and daily, constant currency sales. The Company believes that these non-GAAP measures provide meaningful information to assist shareholders in understanding financial results and assessing prospects for future performance. Management believes daily sales and daily, constant currency sales are important indicators of operations because they exclude items that may not be indicative of our core operating results, and provide a better baseline for analyzing trends in our underlying businesses. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported results. These non-GAAP financial measures reflect an additional way of viewing aspects of operations that, when viewed with GAAP results, provide a more complete understanding of the business. The Company strongly encourages investors and shareholders to review Company financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
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 reconciliation provided below reconciles GAAP financial measures to the non-GAAP financial measures: daily sales and daily, constant currency sales.
Three Months Ended September 30, 2022 | |||||
Total Company | High-Touch | Endless | |||
Reported sales | 16.9 % | 19.4 % | 8.6 % | ||
Day impact | — | — | — | ||
Daily sales | 16.9 % | 19.4 % | 8.6 % | ||
Foreign exchange1 | 3.4 | 0.2 | 15.1 | ||
Daily, constant currency sales | 20.3 % | 19.6 % | 23.7 % | ||
(1) Foreign exchange is calculated by the difference of local currency sales at the current year average rate and at the prior year average rate for |
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SOURCE W.W. Grainger, Inc.
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