No Improvement in GWW’s Top-line

W.W. Grainger Inc.’s (GWW - Analyst Report) sales for the month of August were down 13% compared to last year. This was slightly narrower compared to the 14% decline in July. The company continues to witness weak demand in all its end-markets and geographies. The economic slowdown is driving Grainger’s customers to idle or close facilities and delay purchases, thereby affecting the company’s top-line growth.
 
Grainger witnessed a 14% decline in U.S. sales, same as in July. Sales were down in all the end-markets. After increasing marginally in the second quarter, sales to the government segment declined in single digits in the first two months of the third quarter, reflecting weakness among state agencies owing to budget cuts.
 
In the Canadian (Acklands-Grainger) division, sales were down 8%, an improvement compared to the 19% decline in the month of July. Sales were down 5% in local currency due to continued weakness in the forestry and mining industries, which was partially offset by growth in the construction, utility and mining markets.
 
Sales from Grainger’s other businesses increased 16% in August, compared to 5% growth witnessed in the previous month. This was driven by driven by sales growth in Puerto Rico, China and Panama, along with the incremental sales from India. Sales in Mexico fell 20% due to the unfavorable impact of foreign exchange translation. Mexican sales were up 3% in local currency.
 
Grainger anticipates higher sales in September, compared to that in July and August. However, the monthly sales are expected to be lower compared to the prior-year level. We forecast an 11% decline in sales for the full year.
 
We maintain our Hold recommendation on Grainger.

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