W.W. Grainger (GWW - Analyst Report) has delivered a 6% year-over-year sales growth in October 2012. The growth, however, trailed the levels attained in September (9%) and August (10%) this year.
The growth in October sales stemmed from higher prices (4%) and volumes (1%). Higher sales of hurricane related products (1%) resulting from the storm in Northeast U.S also contributed to the growth.
Geographically, daily sales in the U.S. rose 4%. By end markets, Light Manufacturing revenues went up in low double-digits. Heavy Manufacturing revenues increased in the high single-digits while Government and Retail sales went up in the low single-digits. Commercial revenues increased in the mid single-digits. However, Contractor and Reseller sales went down by low single-digits. In addition, Natural Resources declined by mid single-digits.
Canada saw an improvement of 16%, driven by an 8 percentage point growth in volume, a 2 percentage point increase in price, favorable currency impact of 4 percentage points and a 2 percentage points contribution from higher sales of seasonal products due to severe weather in Western Canada. In local currency, sales increased 12%, driven by growth in the Commercial, Construction, Utilities, Oil and Gas and Forestry end markets.
Daily sales at the company's Other businesses, which include operations in Asia, Europe and Latin America, increased 12%, driven by higher volume (10%), acquisitions (4%), partly offset by unfavorable impacts of foreign currency translation (2%).
October 2012 had 23 selling days, 2 more days compared with last year. Looking forward, fiscal 2012 will have 64 selling days, one day more than the prior-year.
Daily sales growth in November is currently trending above the 6% level attained in October, boosted by higher sales in generators, heaters, electrical and assorted product categories supplied to the customers as recovery effort from the storm in Northeast U.S. However, Grainger expects timing of the holidays (Christmas and New Year’s Day) to have a negative impact on sales in the fourth quarter.
Grainger aims at expanding its product portfolio along with increasing its share in the private label business. Additionally, it focuses on expansion programs for strengthening its businesses across its operating regions, mainly in Asia and Latin America.
However, the recent slowdown in the sales growth rate is a concern. Moreover, margins are expected to remain under pressure due to Grainger’s accelerated investments in product line expansion, sales force expansion, e-commerce, inventory services, distribution centers and international expansion.
Grainger, which belongs to the industry equipment wholesale industry, retains a Zacks #4 Rank (Sell). WESCO International Inc. (WCC - Analyst Report) is a Zacks #3 Rank (Hold) stock in the same industry. We have a long-term Neutral recommendation on Grainger.