W.W. Grainger Q1 profit rises 9%, beats estimates

W.W. Grainger (NYSE: GWW) reported a 9% jump in earnings for the first quarter of 2019 driven by higher sales, and selling, general and administration leverage. The bottom line exceeded analysts’ expectations while the top line missed consensus estimates. The company reiterated its 2019 sales and earnings guidance.

Net income grew 9% to $253 million and earnings increased 10% to $4.48 per share. Adjusted earnings inched up by 8% to $4.51 per share.

Net sales were $2.8 billion, up 1% from last year and up 3% daily. On a constant currency basis, sales increased by 4% daily and 4.5% after normalizing for the change in accounting estimate in the prior-year quarter. The latest quarter had one less selling day than the prior year period.

Sales were composed of a 3.0 percentage point increase in volume and a 1.5 percentage point increase from price. Sales performance was softer-than-expected largely due to a weaker demand environment.

Looking ahead into the full year 2019, the company reiterated its net sales growth outlook in the range of 4% to 8.5% and operating margin estimate in the range of 12.2% to 13%. Net sales are still anticipated to be in the range of $11.7 billion to $12.2 billion and earnings are predicted to be in the range of $17.10 to $18.70 per share.

For fiscal 2019, the company still predicts a gross profit margin in the range of 38.1% to 38.7% and the tax rate in the range of 24.5% to 27.5%. Grainger remained in its ability to gain share and generate selling, general and administration leverage in 2019.

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For the first quarter, sales for the US segment rose by 2%, driven by volume growth, price inflation, and Intercompany sales growth. Sales from Other Businesses grew 8%, on growth from price and volume. The performance in Other Businesses was driven by 22% daily sales growth for the endless assortment businesses.

Sales for Canada decreased by 25%, due to a dip in volume. Gross margin dropped by 125 basis points while operating margin improved by 240 basis points due to lower SG&A expenses.

Shares of Grainger ended Thursday’s regular session down 0.05% at $308.18 on the NYSE. The stock has risen over 9% in the year so far and over 6% in the past year.

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