CHICAGO — Grainger (NYSE: GWW) today reported results for the 2017 first quarter ended March 31, 2017. Sales of $2.5 billion increased 1 percent versus $2.5 billion in the first quarter of 2016. There were 64 selling days in the 2017 first quarter, the same as the 2016 first quarter. Net earnings for the quarter of $175 million were down 6 percent versus $187 million in 2016. Earnings per share of $2.93 declined 2 percent versus $2.98 in 2016.
"Overall, the first quarter clearly fell short of our expectations, driven primarily by the stronger than anticipated customer response to our U.S. strategic pricing actions, with a greater volume of products sold at more competitive prices," said Chief Executive Officer DG Macpherson. "Based on the positive customer response thus far, we are pulling forward the remaining pricing actions originally scheduled for 2018 into the third quarter of this year. This decision requires a significant change to our earnings per share guidance for the year but should enable us to accelerate growth with existing customers and attract new customers sooner than planned.
"Our Zoro and MonotaRO businesses continued to perform very well. We continue to be challenged in Canada, although our service has improved. We will continue to aggressively take action to improve gross margins and reduce our cost structure in Canada with the expectation of hitting break-even by the end of 2017," Macpherson concluded.
Grainger's pricing actions, first described in November 2016, were primarily implemented in January and February of this year. The actions included:
- Adjusting list prices across the board to make it easier for large customers to consolidate their purchases;
- Introducing new web prices on about 450,000 SKUs to drive medium and large noncontract customer acquisition and growth;
- Negotiating large customer contracts with more competitive pricing for infrequently purchased items. Most large customers already receive very competitive pricing on routine items through their contracts.
Results from the first quarter pricing actions showed that customers with access to lower pricing bought more than company expectations. Although it is early, the data provided confidence that the pricing actions were successful. The decision to accelerate the pricing actions is expected to enable faster growth through share gain with existing customers and acquisition of new customers. Web pricing will be available on all SKUs in the 2017 third quarter.
The company lowered its 2017 sales and earnings per share guidance for the year and now expects sales growth of 1 to 4 percent and earnings per share of $10.00 to $11.30, which incorporates the effect of the pricing acceleration and a 1 percent reduction in sales from foreign exchange. The company's previous 2017 guidance, communicated on January 25, 2017, was sales growth of 2 to 6 percent and earnings per share of $11.30 to $12.40.
