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W.W. Grainger, Inc. (GWW - Analyst Report) reported a 5% year-over-year increase in sales in May 2013. The gain has decreased from the prior-month’s increase of 8% and is also below the growth (of 13%) achieved in the same period last year.

May 2013 had 22 selling days, the same as last year. The gain in May sales stemmed from higher volumes (3%), prices (2%) and acquisitions (1%), partly offset by a 1% decline from foreign exchange.

Geographically, daily sales in the U.S. rose 6%, helped by higher volume (3%), favorable pricing (2%) and acquisitions (1%). Light manufacturing sales rose in the high-single digits, followed by heavy manufacturing, natural resources, contractor and commercial in the mid-single digits. Retail sales remained flat.

Government sales were up in the low single digits while reseller was down in the low single digits. May represented the 41st consecutive month of sales gain in the heavy and light manufacturing end markets, driven by several new contracts in the manufacturing space.

Canada saw a 1% gain in sales, driven by a 2 % rise in volume, partly offset by an unfavorable currency impact of 1%. Volume was negatively affected by weak global demand for Canadian exports and extended road closures because of adverse weather conditions which disrupted customer shipments.

Daily sales at Grainger’s other businesses, which include operations in Asia, Europe and Latin America, increased 4%, driven by higher volume and favorable pricing (10%), partly offset by unfavorable foreign currency translation (6%).

According to Grainger, daily sales gain in June is trending in line with that achieved in May.

Grainger, which belongs to the industrial services industry along with Hudson Technologies Inc. (HDSN - Snapshot Report), Codexis, Inc. and Harsco Corporation (HSC - Snapshot Report), reported first-quarter 2013 earnings of $2.94 per share, up 14% from $2.57 a year ago and ahead of the Zacks Consensus Estimate of $2.73. Total revenue was $2.28 billion, up 4% from $2.19 billion in the year-ago period, but missed the Zacks Consensus Estimate of $2.3 million.

Grainger increased its earnings guidance in the range of $11.30-$12.00 per share for fiscal 2013, up from the prior guidance of $10.85-$12.00 per share. The company also increased its sales growth guidance to a new range of 5% to 9%, up from the prior projection of 3% to 9%.

Grainger expects to increase its product count from 413,000 to 500,000 products by 2015. The company continues to expand its businesses across its operating regions, mainly in Asia and Latin America. Grainger also continues to invest in e-commerce, as it is reportedly growing nearly two fold compared to other channels and is deemed to be its most profitable channel.

However, the recent slowdown in sales is a matter of concern. Grainger has increased its investment spending for 2013 to $160 million from the previous projection of $135 million. Even though these initiatives will lead to additional share gains in the future, it will weigh on margins in the short term.

Lake Forest, Ill.-based Grainger is a leading North American distributor of material handling equipment, safety and security supplies, lighting and electrical products, power and hand tools, pumps and plumbing supplies, cleaning and maintenance supplies, forestry and agriculture equipment, building and home inspection supplies, vehicle and fleet components, and various aftermarket components.

Grainger currently retains a short-term Zacks Rank #2 (Buy).
 

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