Grainger (NYSE: GWW) today reported results for the third quarter 2021 with sales of $3.4 billion, up 11.7% and up 11.9% on an organic, daily, constant currency basis compared to the third quarter 2020, driven by strong performance in both the High-Touch Solutions N.A. and Endless Assortment segments.
“During the third quarter, I spent significant time with customers. They consistently commended Grainger on our ability to fulfill orders and deliver products faster than others, and they valued our teams’ commitment to servicing their business needs,” said DG Macpherson, Chairman and Chief Executive Officer. “Demand for core products was very strong throughout the quarter, and Grainger gained share and expanded margins in both segments. Despite the current market and supply chain uncertainties, we are confident in our ability to deliver solid performance in the fourth quarter and into 2022.”
2021 Third Quarter Financial Summary
|($ in millions)||Q3 2021||Q3 2020||Q3Fav. (Unfav.) vs. Prior|
|Net Earnings Attributable to|
W.W. Grainger, Inc.
|Diluted Earnings Per Share||$5.65||$5.65||$4.41||$4.52||28%||25%|
|Gross Margin||37.1%||37.1%||35.6%||35.6%||145 bps||145 bps|
|Operating Margin||13.0%||13.0%||12.6%||12.4%||45 bps||65 bps|
|Tax Rate||25.5%||25.5%||29.3%||26.5%||380 bps||100 bps|
|(1)||Results exclude restructuring and income tax items as shown in the supplemental information of this release. Reconciliations of the adjusted measures reflected in this table to the most directly comparable GAAP measures are provided in the supplemental information of this release.|
Daily sales for the quarter increased 11.7% compared to the third quarter of 2020 with the same number of selling days. On an organic, constant currency basis, which excludes revenues from the divested China business from the prior year results, daily sales increased 11.9% as compared to the third quarter of 2020. Foreign exchange contributed a 0.1% favorable impact during the third quarter of 2021 compared to the third quarter of 2020.
In the High-Touch Solutions N.A. segment, daily sales were up 12.0% versus the prior year third quarter due primarily to a strong recovery in core, non-pandemic product growth, while pandemic product sales remained elevated. In the Endless Assortment segment, daily sales were up 12.7%, and up 14.9% on a daily, constant currency basis, versus the third quarter of 2020. The Endless Assortment revenue growth was solid, considering a very strong third quarter 2020 comparison at Zoro U.S. and a current challenging Japanese economy.
Gross margin for the third quarter of 2021 was 37.1%, a 145 basis point increase over the prior year quarter driven by solid margin expansion in both segments.
In the High-Touch Solutions N.A. segment, strong price realization contributed to above neutral price/cost spread in the third quarter 2021 and the company also continued to experience improved pandemic-product mix over the prior year. In the Endless Assortment segment, gross margin expanded by 115 basis points versus the prior year third quarter primarily due to pricing actions and freight efficiencies at Zoro U.S.
Reported and adjusted operating earnings for the third quarter of 2021 of $438 million were up 16% on a reported basis, and up 17% on an adjusted basis, versus the third quarter of 2020.
In the third quarter of 2021, reported and adjusted operating margin of 13.0% increased 45 basis points on a reported basis, and up 65 basis points on an adjusted basis, over the third quarter of 2020 on stronger margin in both segments.
Reported and adjusted earnings per share of $5.65 in the third quarter of 2021 increased 28% on a reported basis, and increased 25% on an adjusted basis, versus the third quarter of 2020. The increase in earnings per share was due primarily to higher operating earnings.
The third quarter 2021 reported tax rate was 25.5% versus 29.3% in the third quarter of 2020; the adjusted tax rates were 25.5% and 26.5% for the third quarter of 2021 and 2020, respectively. The variance in year over year reported tax rate was primarily driven by the absence of tax impacts of the Company’s investment in Fabory, which the Company divested in the second quarter of 2020.
Net cash provided by operating activities was $161 million and $311 million for the three months ended September 30, 2021 and 2020, respectively. The decrease in cash from operating activities is primarily the result of working capital investments. The company continued to build core, non-pandemic inventory levels to support customer demand. Lastly, distributions to shareholders through dividends and share repurchases during the quarter totaled $327 million.
The company is reaffirming the guidance ranges previously provided for 2021. Given the solid results of the third quarter, the company expects revenue to finish the year near the midpoint and expects all other metrics to fall between the low end and the midpoint of the range.
|Total Company||2021 Guidance Range|
|Net Sales||$12.7 – 13.0 billion|
|Daily growth||8.5 – 11.0%|
|Organic, daily growth||10.0 – 12.5%|
|Gross Profit Margin||36.1 – 36.6%|
|Operating Margin||11.8 – 12.4%|
|Earnings per Share (EPS)||$19.00 – 20.50|
|Tax Rate||25.0 – 26.0%|
Grainger will conduct a live conference call and webcast at 11:00 a.m. ET on October 29, 2021 to discuss the third quarter results. The webcast will be hosted by DG Macpherson, Chairman and CEO, and Deidra Merriwether, Senior Vice President and CFO, and can be accessed at invest.grainger.com. For those unable to participate in the live event, a webcast replay will be available for 90 days at invest.grainger.com.
W.W. Grainger, Inc., with 2020 sales of $11.8 billion, is North America’s leading broad line supplier of maintenance, repair and operating (MRO) products, with operations primarily in North America (N.A.), Japan and the United Kingdom.
Visit invest.grainger.com to view information about the company, including a supplement regarding 2021 third quarter results. Additional company information can be found on the Grainger Investor Relations website which includes our Fact Book and Corporate Responsibility report.
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All statements in this communication, other than those relating to historical facts, are “forward-looking statements.” Forward-looking statements can generally be identified by their use of terms such as “anticipate,” “estimate,” “believe,” “expect,” “could,” “forecast,” “may,” “intend,” “plan,” “predict,” “project” “will” or “would” and similar terms and phrases, including references to assumptions. Forward-looking statements are not guarantees of future performance and are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such statements. Forward-looking statements include, but are not limited to, statements about future strategic plans and future financial and operating results. Important factors that could cause actual results to differ materially from those presented or implied in the forward-looking statements include, without limitation: the unknown duration and health, economic, operational and financial impacts of the global outbreak of the coronavirus disease 2019 and its variants, including the Delta variant and any other variants that may emerge (COVID-19), as well as the impact of actions taken or contemplated by government authorities to mitigate the spread of COVID-19 (such as vaccine mandates for certain Federal contractors and anticipated Occupational Health and Safety Administration safety directives, mask mandates, social distancing or other requirements) and to promote economic stability and recovery, on the company’s businesses, its employees, customers and suppliers, including disruption to Grainger’s operations resulting from employee illnesses, the development, availability and usage of effective treatment or vaccines, changes in customers’ product needs, the acquisition of excess inventory leading to additional inventory carrying costs and inventory obsolescence, raw material, inventory and labor shortages, continued strain on global supply chains, and diminished transportation availability and efficiency, disruption caused by business responses to the COVID-19 pandemic, including working remote arrangements, which may create increased vulnerability to cybersecurity incidents, including breaches of information systems security, adaptions to the company’s controls and procedures required by working remote arrangements, including financial reporting processes, which could impact the design or operating effectiveness of such controls or procedures, and global or regional economic downturns or recessions, which could result in a decline in demand for the company’s products; higher product costs or other expenses; a major loss of customers; loss or disruption of sources of supply; changes in customer or product mix; increased competitive pricing pressures; failure to sustain contractual arrangements on a satisfactory basis with group purchasing organizations; failure to develop or implement new technology initiatives or business strategies; failure to adequately protect intellectual property or successfully defend against infringement claims; fluctuations or declines in the company’s gross profit percentage; the company’s responses to market pressures; the outcome of pending and future litigation or governmental or regulatory proceedings, including with respect to wage and hour, anti-bribery and corruption, environmental, advertising and marketing, consumer protection, pricing (including disaster or emergency declaration pricing statutes), product liability, compliance or safety, trade and export compliance, general commercial disputes, or privacy and cybersecurity matters; investigations, inquiries, audits and changes in laws and regulations; failure to comply with laws, regulations and standards; government contract matters; disruption of information technology or data security systems involving the company or third parties on which the company depends; general industry, economic, market or political conditions; general global economic conditions including tariffs and trade issues and policies; currency exchange rate fluctuations; market volatility, including price and trading volume volatility or price declines of the company’s common stock; commodity price volatility; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; other pandemic diseases or viral contagions; natural or human induced disasters, extreme weather and other catastrophes or conditions; failure to attract, retain, train, motivate, develop and transition key employees; loss of key members of management or key employees; changes in effective tax rates; changes in credit ratings or outlook; the company’s incurrence of indebtedness and other factors that can be found in our filings with the Securities and Exchange Commission, including our most recent periodic reports filed on Form 10-K and Form 10-Q, which are available on our Investor Relations website. 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Republished from the Grainger Corporate News Website as first published on /PRNewsWire/