Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=229960
Story Retrieval Date: 7/29/2014 1:51:00 PM CST
W.W. Grainger/Eman Shurbaji/MEDILL
W.W. Grainger Inc., the Lake Forest, Ill. industrial supply company, reported quarterly profit rose 2 percent from the same time last year, beating expectations. The company attributed gains to strong online business in the U.S. and Japan.
In its first quarter ended March 31 Grainger earned $217 million, or $3.07 per diluted share, up from $212 million, or $2.94 per diluted share, in the same quarter last year. Analysts expected earnings of $2.96 per share.
Net sales were $2.39 billion, up 4.6 percent from $2.28 billion a year ago. Sales in the U.S., which accounted for 78 percent of total revenue for the quarter, showed a 7 percent increase to $1.9 billion.
Yet, the company’s gross operating margin decreased 20 basis points to 15.0 percent versus 15.2 percent in 2013, primarily due to lower performance in Canada.
Bill Chapman, senior director of investor relations, said in a conference call with analysts,
“Gross margins in Canada decreased primarily due to higher freight costs, along with the effect of unfavorable foreign exchange from products sourced in the U.S." Canadian inventory will be relocated to a new distribution center in Toronto.
For all of 2014, the company expects "minimal gross margin expansion" from 2013.
Analyst Eli Lustgarten of Longbow Research LLC said the report shows profits are not as high as they could be.
“Profitability remains under pressure and they made the quarter by managing expenses and reducing some discretionary expenses,” Lustgarten said in an interview.
The stock closed at $252.15, up $1.95.