Grainger profits tumble in Q2
Grainger reported net earnings for the second quarter of $98 million were down 43 percent versus $173 million in 2016.
Earnings per share of $1.67 declined 40 percent versus $2.79 in 2016.
Sales of $2.6 billion increased 2 percent versus $2.6 billion in the second quarter of 2016.
"The second quarter was in line with our expectations, as we saw continued volume growth from our strategic pricing initiatives in the United States. We remain on schedule to roll out web prices on our entire assortment on Aug. 1," said chief executive officer DG Macpherson. "Outside the United States, we took aggressive action to streamline our portfolio and focus on profitable businesses, as we announced the wind-down of the business in Colombia and previously announced the closing of 59 branches in Canada this year. Based on our confidence from what we are seeing, we are reiterating our guidance for the year," Macpherson concluded.
The company reiterated its 2017 sales and earnings per share guidance of sales growth of 1 to 4 percent and adjusted earnings per share of $10.00 to $11.30.
In the U.S. segment, gains from the sale of assets were essentially offset by restructuring costs. The Canadian business announced plans to close 59 branches in 2017 as part of restructuring to return to profitable growth. The company also announced the wind-down of its business in Colombia. In total, the restructuring items represented $1.07 per share in charges. Excluding restructuring, net earnings decreased 10 percent and earnings per share decreased 5 percent.
Sales for the U.S. segment were up 1 percent versus the 2016 second quarter. The increase was driven by a 5 percentage point increase from volume and 1 percentage point from intercompany sales, partially offset by a 4 percentage point decline in price and a 1 percentage point decline from the timing of the Easter holiday. Sales to customers in the Retail and Natural Resources end markets led the sales performance in the quarter.
Operating earnings for the U.S. segment declined 11 percent in the quarter driven by lower gross profit and higher operating expenses. Gross profit margins for the quarter declined 1.3 percentage points driven by the strategic price initiatives. In the 2017 second quarter, operating expenses were up 4 percent, which included a $13 million benefit from the gain on sale of branches and $14 million of restructuring charges.
Second quarter 2017 sales for the Canada segment decreased 3 percent in U.S. dollars and increased 2 percent in local currency. The 2 percent increase consisted of 2 percentage points from volume and a 2 percentage point benefit from the favorable comparison related to the Alberta wildfires in 2016, partially offset by 1 percentage point from lower price and a 1 percentage point decline from the timing of the Easter holiday.
The business in Canada posted a $28 million operating loss in the 2017 second quarter versus a $28 million operating loss in the prior year. Current year performance was primarily driven by improved gross margin offset by lower sales and restructuring charges. The gross profit margin in Canada increased 4.1 percentage points versus the prior year largely due to a favorable comparison related to an inventory reserve adjustment in the prior year. Operating expenses increased 8 percent. The 2017 second quarter contained $20 million of restructuring charges related to facility and headcount reductions.
Sales for the Other Businesses increased 11 percent versus the prior year, consisting of 14 percentage points of growth from volume and price, partially offset by a 3 percentage point decline from foreign exchange, primarily attributable to weakness in the British pound. The performance was driven by 23 percent sales growth for the single channel online businesses.
The Other Businesses posted an operating loss of $14 million in the 2017 second quarter versus $30 million of operating earnings in the prior year. This performance included the charges from the wind-down of the business in Colombia and was partially offset by strong results from Zoro in the United States and MonotaRO in Japan. Excluding restructuring, operating earnings for the Other Businesses were $27 million.
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