Grainger Boosted by Acquisitions

W.W. Grainger Inc. (GWW - Analyst Report) reported a 3% year-over-year drop in October sales. (October this year had one less selling day compared to October 2008.) The company benefited from a 2% positive contribution from the businesses in Japan and India, 1% from the acquisition of Imperial Supplies and 2% from favorable foreign currency translation. Excluding the impact of acquisitions and currency exchange, Grainger’s daily sales in October were down 8% from last year.

The company witnessed a 7% decline in daily sales in the U.S., as demand remained weak across all end markets. These results include sales from Imperial Supplies, which the company acquired in mid-October. Excluding this acquisition, U.S. daily sales were down 8%.

In the Canadian (Acklands-Grainger) division, daily sales were up 5% due to favorable foreign exchange. However, the division’s daily sales were down 7% in local currency due to continued weakness in the Canadian economy.

Sales of Grainger’s other businesses increased 177%, primarily driven by incremental sales from acquisitions in Japan and India, along with sales growth in Mexico, Puerto Rico, China and Panama.

Grainger anticipates November sales to be flat or up modestly from last year’s level. The company expects sales to be in a range of down 2% to up 1% for the fourth quarter. Full-year sales are expected to come in 9% to 10% below the 2008 level. The company forecasts fourth quarter EPS of $1.13-$1.23 and full-year EPS of $5.10-$5.20.

Further, Grainger provide guidance for 2010. The company is forecasts 2010 revenue to be up 4%-9% year-over-year. Earnings for 2010 are anticipated in the range of $5.30 to $5.80 per share. Grainger expects a 3% sales contribution and 5 cents per share of earnings growth from acquisitions made in 2009.

Acquisition

Grainger announced an all-cash acquisition of Alliance Energy Solutions. The company expects the acquisition to be accretive to earnings by approximately 1-2 cents per share in 2010.

Alliance Energy Solutions is a provider of turn-key energy-efficient retrofits. Grainger said that this is its first service-based acquisition in the U.S. With this acquisition, Grainger can provide value added services to complement its deep product line around lighting products. The company did not disclose other terms of the deal.