Grainger Q2 Earnings … Industrial slowdown continues

It’s Q2 earning season, providing distributors (and manufacturers) with an opportunity to benchmark their performance, gain insights (or confirmation) on what they are seeing in the market and possibly learn a little from publicly held companies.  First up is Grainger whose results reaffirm that the industrial slowdown continues, albeit it is no longer in free fall.

Grainger typically provides ElectricalTrends readers with a snapshot into the industrial and institutional MRO markets (which more of a bend towards the industrial side of the business).  In reviewing their earnings we focus on their US performance.

Key insights include:

• Key investment areas – eCommerce (which many distributors are also doing), their supply chain (to reduce costs and be more efficient), on-site services (storeroom management services) and tools to make their sales organization more efficient (and presumably more productive.)
• Launched a new inside sales team of 275 people to focus on medium-sized customers (going more aggressively at a “different” customer segment, which frequently is the purview of independent distributors and could also be an indication of pressure from Amazon Business. Distributors should consider how they can “protect” this segment against a company that provides a broader product offering but potentially less expertise in the electrical material field.)
• Closed 27 US branches and incurred $6M in restructuring costs.
• eCommerce is 46% of sales, up 6 points from 2015.
• US organic sales declined 3% in the US, which, industrial distributors can empathize, or sympathize, with
  • Government and retail up low single-digits
  • Light manufacturing flat (0%)
  • Commercial down low single digits
  • Heavy manufacturing down mid single digits
  • Contractor down high single digits
  • Natural resources down mid teens
• June sales in US decreased 4% (before adjustments)
• Overall company sales were $2.6 billion for the quarter and 74% is in the US and the company is projecting a 2.5% growth by the end of the year (overall).
• US Gross margins declined 160 basis points to 41% (but plenty of distributors can only dream of such margins!)

Here’s an interesting chart from Grainger:

And click here if you’d like an interesting discussion of their operations and modes of business.