Graybar Grows Double Digits in Q3

Last week Graybar announced that their Q3 performance generated $3.29 billion, which represented a 10.7% increase over 2024.

While the percentage increase was nominally behind Wesco’s EES performance, from a dollar perspective Graybar’s electrical revenue (excluding datacom and utility) exceeds Wesco.

Through nine months, Graybar’s total sales in its 100^th year, net, is $9.6 billion, putting them, potentially, on track to hit $13 billion in 2025!

A few interesting notes on Graybar’s performance, based upon their press release and their 10-Q:

• “Introduced Graybar STAR Centers to support contractors working on large, complex construction projects. Graybar’s first STAR Centers opened in Reno, Dallas, and Atlanta with a combined 500,000 square feet. The company plans to open additional STAR centers and expand in several cities over the next few quarters.”
  • This becomes interesting as it highlights that Graybar is allocating specific resources to a group of customers … large contractors with complex construction projects. Perhaps those projects relate to data centers? Pre-fab / modular initiatives? This highlights that specialized services for a defined class of customers can help win business.
• Graybar’s customer mix has adjusted somewhat with their Construction business now representing 61.7% of sales, up from 60.3% in 2024 for September (or 61.1% vs 60% over 9 months). CIG declined fractions of a point as did their Industrial and Utility business. The 1-2% change is more than likely due to the large projects … data center business!
• While sales increased 10.7%, gross margin increased only 7%. Their average gross margin declined from 20% to 19.4%. Graybar states that this is due to competitive pricing pressures. While this is understandable as not every company passed on tariff increases at the same rate, and Graybar may have had some contracts where pricing could not be adjusted, it is also probably due to large data center, and perhaps other, projects that, by nature are price sensitive. But, at the end of the day, the business is about gross margin and net profit dollars, not a high gross margin on lower dollar sales.
• Graybar’s SG&A increased only 5.4% and, as a percentage of sales, decreased to 13.6% for Q3. They are either managing expenses, gaining productivity through technology, increasing their project mix so not needing more warehouse staff, and/or increasing their sales / employee.
• Graybar “continue to see demand for our products and services, particularly in areas such as data centers, electrification and industrial automation, even as economic conditions cause ongoing uncertainty in the markets we serve.”
• The company completed its ERP upgrade which is enabling them to accelerate their Graybar Connect business transformation (and helps improve productivity, enable scalability, and facility throughput.) It is difficult to compare to net profit given that Graybar is an ESOP with dividend obligations.
• The company has $416.6M in cash on the books, up from $90.4 M at the end of 2024. This enables them to make investments and/or acquisitions and, with this amount of cash and no short-term borrowing, the financial ability to take on large customer receivables … which is what is needed to handle large customer projects.
• Dennis DeSousa announced that he will be retiring April 1, 2026.

Congratulations to Graybar on another strong quarter and the ability to capitalize upon its investments in technology to support the business and capture the data center opportunity.