Focused execution delivers solid quarter
and record full year earnings;
Company issues
2024 guidance, including 4% to 7% sales growth
Fourth Quarter 2023 Highlights
- Delivered sales of $4.0
billion, up 5.1%, or 5.5% on a daily, organic constant
currency basis
- Achieved reported operating margin of 13.9%, down 40 basis
points, or 14.6% on an adjusted basis, up 80 basis points
- Increased diluted EPS by 4.7% to $7.89 on a reported basis, or by 16.7% to
$8.33 on an adjusted basis
- Announced plans to open a new 1.2 million square-foot
distribution center near Houston,
Texas in 2026
Full Year 2023 Highlights
- Grew sales to $16.5 billion,
up 8.2%, or 9.5% on a daily, organic constant currency
basis
- Realized reported operating margin of 15.6%, up 110 basis
points, or 15.7% on an adjusted basis, up 130 basis points
- Increased diluted EPS by 20.5% to $36.23 on a reported basis, or by 23.6% to
$36.67 on an adjusted basis
- Produced $2.0 billion in
operating cash flow and returned $1.2
billion to Grainger shareholders through dividends and share
repurchases
CHICAGO, Feb. 2, 2024
/PRNewswire/ -- Grainger (NYSE: GWW) today reported results
for the fourth quarter and full year 2023. Sales of $4.0 billion in the fourth quarter 2023 increased
5.1%, or 5.5% on a daily, organic constant currency basis versus
the fourth quarter of 2022. For the full year, sales of
$16.5 billion increased 8.2%, or 9.5%
on a daily, organic constant currency basis compared to the prior
year.
"Our strong 2023 performance was driven by the team's focused
execution against our long-term strategy in a normalizing demand
market. We strengthened our advantage in both our High-Touch
Solutions and Endless Assortment segments and achieved record
annual sales and earnings by remaining committed to our purpose, We
Keep the World Working®," said D.G. Macpherson, Chairman and CEO.
"As we look to 2024, we remain dedicated to delivering tangible
value for customers, strong results for shareholders, and an
engaging culture for team members."
2023 Financial Summary
($ in
millions)
|
Q4
2023
|
Q4
2023
|
FY
2023
|
FY
2023
|
Change vs.
Prior
(Fav. vs.
(Unfav.))
|
Change vs.
Prior
(Fav. vs.
(Unfav.))
|
|
Reported
|
Adjusted(1)
|
Reported
|
Adjusted(1)
|
Reported
|
Adjusted(1)
|
Reported
|
Adjusted(1)
|
Net
Sales
|
$3,997
|
$3,997
|
5.1 %
|
5.1 %
|
$16,478
|
$16,478
|
8.2 %
|
8.2 %
|
Gross
Profit
|
$1,563
|
$1,563
|
3.8 %
|
3.8 %
|
$6,496
|
$6,496
|
11.1 %
|
11.1 %
|
Operating
Earnings
|
$557
|
$583
|
2.4 %
|
11.5 %
|
$2,565
|
$2,591
|
15.8 %
|
18.1 %
|
Net
Earnings
|
$395
|
$417
|
2.9 %
|
14.5 %
|
$1,829
|
$1,851
|
18.2 %
|
21.2 %
|
Diluted
EPS
|
$7.89
|
$8.33
|
4.7 %
|
16.7 %
|
$36.23
|
$36.67
|
20.5 %
|
23.6 %
|
|
|
|
|
|
|
|
|
|
Gross Profit
%
|
39.1 %
|
39.1 %
|
(50) bps
|
(50) bps
|
39.4 %
|
39.4 %
|
100 bps
|
100 bps
|
Operating
Margin
|
13.9 %
|
14.6 %
|
(40) bps
|
80 bps
|
15.6 %
|
15.7 %
|
110 bps
|
130 bps
|
Tax
Rate
|
23.8 %
|
23.5 %
|
50 bps
|
180 bps
|
23.9 %
|
23.8 %
|
90 bps
|
130 bps
|
|
|
(1)
|
Results exclude the
loss related to the Company's divestiture of its subsidiary, E
& R Industrial Sales, Inc., completed in the fourth quarter of
2023. Prior year results exclude a gain of $21M on the divestiture
of Cromwell's enterprise software business completed in the fourth
quarter of 2022. See the supplemental information of this release
for reconciliation of any adjusted and non-GAAP financial
measures.
|
Sales
For the fourth quarter of 2023, total Company sales on a
reported and daily basis increased 5.1% compared to the fourth
quarter of 2022. Normalizing for the impact of foreign currency
exchange and the divestiture of the Company's subsidiary, E & R
Industrial Sales, Inc., sales on a daily, organic constant currency
basis were up 5.5% versus the fourth quarter of 2022.
In the High-Touch Solutions N.A. segment, sales were up 4.7%
versus the fourth quarter of 2022 driven by continued volume growth
across all geographies. Growth was consistent on a reported and
daily, organic constant currency basis. In the Endless Assortment
segment, sales were up 6.0%, or 8.2% on a daily, constant currency
basis versus the fourth quarter of 2022. Growth was driven by B2B
customers across the segment as well as enterprise customer growth
at MonotaRO, which was partially offset by declining sales to
non-core, consumer-like customers at Zoro.
For the full year 2023, total Company sales increased 8.2%
versus the full year 2022. Daily sales on an organic, constant
currency basis increased 9.5% versus the prior year driven by
growth in both segments.
Gross Profit Margin
For the fourth quarter of 2023, total Company gross profit
margin was 39.1%, down 50 basis points compared to the fourth
quarter of 2022. Both segments contributed to the decline.
In the High-Touch Solutions N.A. segment, gross margin declined
by 50 basis points compared to the fourth quarter of 2022 due to
negative price / cost spread and year-end inventory cost
adjustments, which were partially offset by sustained freight and
supply chain efficiencies. In the Endless Assortment segment, gross
margin declined by 60 basis points versus the fourth quarter of
2022 driven by unfavorable product mix at Zoro, which was partially
offset by freight efficiencies at MonotaRO.
For the full year 2023, total Company gross profit margin was
39.4%, up 100 basis points versus the prior year. The increase in
gross profit margin was primarily driven by freight and supply
chain efficiencies as well as favorable product mix, which was
partially offset by negative price / cost
spread.
Earnings
For the fourth quarter of 2023, reported operating earnings for
the total Company were $557 million,
up 2.4% over the fourth quarter of 2022. Reported operating margin
was 13.9%, a 40 basis point decrease compared to the fourth quarter
of 2022. On an adjusted basis, which excludes any gains and losses
from divestitures, operating earnings for the quarter were
$583 million, up 11.5% over the
fourth quarter of 2022. Adjusted operating margin was 14.6%, an 80
basis point increase over the fourth quarter of 2022. The increase
in adjusted operating margin was driven by strong SG&A leverage
aided by the absence of one-time costs in the prior year, which was
partially offset by gross profit margin decline.
Diluted EPS for the fourth quarter of 2023 was $7.89 on a reported basis, up 4.7% versus the
fourth quarter of 2022. On an adjusted basis, diluted EPS was
$8.33, up 16.7% versus the fourth
quarter of 2022. The increase in earnings per share was primarily
due to strong operating performance in the quarter.
For the full year 2023, reported operating earnings for the
total Company of $2.6 billion were up
15.8% versus the prior year, and resulted in reported operating
margin of 15.6%, an increase of 110 basis points over prior year.
On an adjusted basis, 2023 operating earnings of $2.6 billion were up 18.1% versus the prior year,
and resulted in adjusted operating margin of 15.7%, an increase of
130 basis points compared to 2022 which includes 30 basis points of
SG&A leverage.
Diluted EPS for the full year 2023 was $36.23 on a reported basis, up 20.5% versus 2022.
On an adjusted basis, 2023 diluted EPS was $36.67, up 23.6% versus the prior year. The
increase in earnings per share was due primarily to the strong
operating performance in the year coupled with a lower share
count.
Tax Rate
For the fourth quarter of 2023, the reported effective tax rate
was 23.8% compared to 24.3% in the fourth quarter of 2022. On an
adjusted basis, the tax rate was 23.5% compared to 25.3% in the
prior year quarter. The variance for both the reported and adjusted
tax rates was driven primarily by an increase in tax benefits
related to stock compensation and higher income tax credits as
compared to the fourth quarter of 2022.
For the full year 2023, the reported effective tax rate was
23.9% versus 24.8% in 2022. On an adjusted basis, the full year
effective tax rate was 23.8% versus 25.1% in the prior year. The
variance for both the reported and adjusted tax rates was primarily
driven by tax benefits related to increased stock compensation as
compared to 2022.
Cash Flow
During the fourth quarter, the Company generated $604 million of cash flow from operating
activities as higher net earnings were further aided by favorable
working capital. The Company invested $127
million in capital expenditures, resulting in free cash flow
of $477 million. During the quarter,
the Company returned $437 million to
Grainger shareholders through dividends and share repurchases.
For the full year 2023, the Company generated $2.0 billion of cash flow from operating
activities as higher net earnings were further aided by favorable
working capital. As compared to 2022, operating cash flow increased
$698 million, up 52.4%. The Company
invested $445 million in capital
expenditures, resulting in free cash flow of $1.6 billion in 2023. During the year, the
Company returned $1.2 billion to
Grainger shareholders through dividends and share
repurchases.
2024 Company Guidance
The Company is providing the following outlook for 2024:
Total
Company(1)
|
2024 Guidance
Range
|
Net Sales
|
$17.2 - $17.7
billion
|
Sales
growth
|
4.3% - 7.3%
|
Daily, organic
constant currency sales growth
|
4.0% - 7.0%
|
Gross Profit
Margin
|
39.1% -
39.4%
|
Operating
Margin
|
15.3% -
15.8%
|
Diluted Earnings per
Share
|
$38.00 -
$40.50
|
Operating Cash
Flow
|
$1.9 - $2.1
billion
|
CapEx (cash
basis)
|
$0.4 - $0.5
billion
|
Share
Buyback
|
$0.9 - $1.1
billion
|
Tax Rate
|
~24.0%
|
|
|
Segment Operating
Margin
|
|
High-Touch Solutions
N.A.
|
17.4% -
17.9%
|
Endless
Assortment
|
7.3% - 7.8%
|
|
|
(1)
|
Guidance provided is on
an adjusted basis. Daily, organic constant currency sales growth is
adjusted for the impact of two additional selling days in 2024 as
compared to 2023, the sales of the Company's divested E & R
Industrial Sales, Inc. subsidiary in the prior year period, and
changes in foreign exchange. The Company does not reconcile
forward-looking non-GAAP financial measures. For further details
see the supplemental information of this release.
|
Webcast
Grainger will conduct a live conference call and webcast at
11:00 a.m. Eastern Standard Time on
Feb. 2, 2024, to discuss the fourth
quarter and full-year results. The webcast will be hosted by D.G.
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.
About Grainger
W.W. Grainger, Inc., is a leading broad line distributor with
operations primarily in North
America, Japan and the
United Kingdom. At Grainger, We
Keep the World Working® by serving more than 4.5 million customers
worldwide with products delivered through innovative technology and
deep customer relationships. With 2023 sales of $16.5 billion, the Company operates two business
models. In the High-Touch Solutions segment, Grainger offers
approximately 2 million maintenance, repair and operating (MRO)
products and services, including technical support and inventory
management. In the Endless Assortment segment, Zoro.com offers
customers access to more than 13 million products, and MonotaRO.com
offers more than 22 million products. For more information, visit
www.grainger.com.
Visit invest.grainger.com to view information about the
Company, including a supplement regarding 2023 fourth quarter
results. Additional Company information can be found on the
Grainger Investor Relations website which includes our Company
Snapshot and ESG report.
Safe Harbor Statement
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:
inflation, higher product costs or other expenses, including
operational and administrative expenses; the impact of
macroeconomic pressures and geopolitical trends, changes and
events; a major loss of customers; loss or disruption of sources of
supply; changes in customer or product mix; increased competitive
pricing pressures; changes in third party practices regarding
digital advertising; failure to enter into or sustain contractual
arrangements on a satisfactory basis with group purchasing
organizations; failure to develop, manage or implement new
technology initiatives or business strategies, including with
respect to Grainger's eCommerce platforms; failure to adequately
protect intellectual property or successfully defend against
infringement claims; fluctuations or declines in Grainger's gross
profit margin; Grainger'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, regulations related to
advertising, marketing and the Internet, 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, including new or stricter environmental
laws or regulations; government contract matters; the impact of any
government shutdown; disruption or breaches of information
technology or data security systems involving Grainger or third
parties on which Grainger 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 Grainger's common stock;
commodity price volatility; facilities disruptions or shutdowns;
higher fuel costs or disruptions in transportation services;
outbreaks of pandemic disease or viral contagions; natural or human
induced disasters, extreme weather and other catastrophes or
conditions; effects of climate change; failure to execute on our
efforts and programs related to environmental, social and
governance matters; competition for, or failure to attract, retain,
train, motivate and develop executives and key employees; loss of
key members of management or key employees; loss of operational
flexibility and potential for work stoppages or slowdowns if
employees unionize or join a collective bargaining arrangement;
changes in effective tax rates; changes in credit ratings or
outlook; Grainger's incurrence of indebtedness or failure to comply
with restrictions and obligations under its debt agreements and
instruments; 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. Forward-looking
statements are given only as of the date of this communication and
we disclaim any obligation to update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise, except as required by law.
W.W. Grainger, Inc.
and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS (In millions of dollars, except for per share
amounts)
(Unaudited)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net sales
|
$ 3,997
|
|
$ 3,802
|
|
$ 16,478
|
|
$
15,228
|
Cost of goods sold
|
2,434
|
|
2,296
|
|
9,982
|
|
9,379
|
Gross profit
|
1,563
|
|
1,506
|
|
6,496
|
|
5,849
|
Selling, general and
administrative expenses
|
1,006
|
|
962
|
|
3,931
|
|
3,634
|
Operating earnings
|
557
|
|
544
|
|
2,565
|
|
2,215
|
Other (income) expense:
|
|
|
|
|
|
|
|
Interest expense
– net
|
23
|
|
23
|
|
93
|
|
93
|
Other – net
|
(7)
|
|
(4)
|
|
(28)
|
|
(24)
|
Total other
expense – net
|
16
|
|
19
|
|
65
|
|
69
|
Earnings before income taxes
|
541
|
|
525
|
|
2,500
|
|
2,146
|
Income tax
provision
|
129
|
|
128
|
|
597
|
|
533
|
Net earnings
|
412
|
|
397
|
|
1,903
|
|
1,613
|
Less net earnings
attributable to noncontrolling interest
|
17
|
|
13
|
|
74
|
|
66
|
Net earnings
attributable to W.W. Grainger, Inc.
|
$ 395
|
|
$ 384
|
|
$
1,829
|
|
$ 1,547
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic
|
$ 7.93
|
|
$ 7.58
|
|
$
36.39
|
|
$ 30.22
|
Diluted
|
$ 7.89
|
|
$ 7.54
|
|
$
36.23
|
|
$ 30.06
|
Weighted average number
of shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
49.5
|
|
50.4
|
|
49.9
|
|
50.9
|
Diluted
|
49.7
|
|
50.7
|
|
50.1
|
|
51.1
|
W.W. Grainger, Inc.
and Subsidiaries CONDENSED CONSOLIDATED BALANCE
SHEETS (In millions of dollars)
(Unaudited)
|
|
|
As of
|
|
(Unaudited)
|
|
|
Assets
|
December 31,
2023
|
|
December 31,
2022
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
660
|
|
$
325
|
Accounts receivable
(less allowance for credit losses of $35
and $36, respectively)
|
2,192
|
|
2,133
|
Inventories –
net
|
2,266
|
|
2,253
|
Prepaid expenses and
other current assets
|
156
|
|
266
|
Total current
assets
|
5,274
|
|
4,977
|
Property, buildings and
equipment – net
|
1,658
|
|
1,461
|
Goodwill
|
370
|
|
371
|
Intangibles –
net
|
234
|
|
232
|
Operating lease
right-of-use
|
429
|
|
367
|
Other assets
|
182
|
|
180
|
Total
assets
|
$
8,147
|
|
$
7,588
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Current
liabilities
|
|
|
|
Current
maturities
|
34
|
|
35
|
Trade accounts
payable
|
954
|
|
1,047
|
Accrued compensation
and benefits
|
327
|
|
334
|
Operating lease
liability
|
71
|
|
68
|
Accrued
expenses
|
397
|
|
474
|
Income taxes
payable
|
48
|
|
52
|
Total current
liabilities
|
1,831
|
|
2,010
|
Long-term
debt
|
2,266
|
|
2,284
|
Long-term operating
lease liability
|
381
|
|
318
|
Deferred income taxes
and tax uncertainties
|
104
|
|
121
|
Other non-current
liabilities
|
124
|
|
120
|
Shareholders'
equity
|
3,441
|
|
2,735
|
Total liabilities and
shareholders' equity
|
$
8,147
|
|
$
7,588
|
W.W. Grainger, Inc.
and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (In millions of dollars)
(Unaudited)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2023
|
|
2022(1)
|
|
2023
|
|
2022(1)
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net
earnings
|
$
412
|
|
$
397
|
|
$
1,903
|
|
$
1,613
|
Adjustments to
reconcile net earnings to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
Provision for credit
losses
|
8
|
|
6
|
|
23
|
|
19
|
Deferred income taxes
and tax uncertainties
|
(29)
|
|
(12)
|
|
(9)
|
|
8
|
Depreciation and
amortization
|
57
|
|
51
|
|
214
|
|
205
|
Non-cash lease
expense
|
26
|
|
21
|
|
76
|
|
70
|
Net losses (gains)
from sales of assets and business
divestitures
|
21
|
|
(15)
|
|
17
|
|
(14)
|
Stock-based
compensation
|
13
|
|
10
|
|
62
|
|
48
|
Change in operating
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
253
|
|
51
|
|
(98)
|
|
(436)
|
Inventories
|
(58)
|
|
(159)
|
|
(16)
|
|
(412)
|
Prepaid expenses and
other assets
|
(3)
|
|
(119)
|
|
101
|
|
(158)
|
Trade accounts
payable
|
(120)
|
|
(36)
|
|
(65)
|
|
225
|
Operating lease
liabilities
|
(23)
|
|
(21)
|
|
(88)
|
|
(76)
|
Accrued
liabilities
|
(5)
|
|
156
|
|
(91)
|
|
218
|
Income taxes –
net
|
30
|
|
34
|
|
(4)
|
|
42
|
Other non-current
liabilities
|
22
|
|
(4)
|
|
6
|
|
(19)
|
Net cash provided by
operating activities
|
604
|
|
360
|
|
2,031
|
|
1,333
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
(127)
|
|
(48)
|
|
(445)
|
|
(256)
|
Proceeds from sale of
assets and business divestitures
|
10
|
|
21
|
|
21
|
|
28
|
Other – net
|
2
|
|
(24)
|
|
2
|
|
(35)
|
Net cash used in
investing activities
|
(115)
|
|
(51)
|
|
(422)
|
|
(263)
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Proceeds from
debt
|
—
|
|
15
|
|
7
|
|
16
|
Payments of
debt
|
—
|
|
(15)
|
|
(37)
|
|
(15)
|
Proceeds from stock
options exercised
|
5
|
|
5
|
|
34
|
|
26
|
Payments for employee
taxes withheld from stock
awards
|
(5)
|
|
(1)
|
|
(37)
|
|
(23)
|
Purchases of treasury
stock
|
(344)
|
|
(220)
|
|
(850)
|
|
(603)
|
Cash dividends
paid
|
(92)
|
|
(85)
|
|
(392)
|
|
(370)
|
Other – net
|
(3)
|
|
(3)
|
|
(3)
|
|
(3)
|
Net cash used in
financing activities
|
(439)
|
|
(304)
|
|
(1,278)
|
|
(972)
|
Exchange rate effect on
cash and cash equivalents
|
9
|
|
5
|
|
4
|
|
(14)
|
Net change in cash and
cash equivalents
|
59
|
|
10
|
|
335
|
|
84
|
Cash and cash
equivalents at beginning of period
|
601
|
|
315
|
|
325
|
|
241
|
Cash and cash
equivalents at end of period
|
$
660
|
|
$
325
|
|
$
660
|
|
$
325
|
|
|
(1)
|
Certain
reclassifications have been made to prior year amounts to conform
to the current year presentation of Grainger's Consolidated
Statements of Cash Flows. The reclassifications had no impact on
previously reported results including net cash provided by (used
in) operating, investing and financing activities for the three and
twelve months ended December 31, 2022.
|
SUPPLEMENTAL INFORMATION - RECONCILIATION OF
GAAP TO NON-GAAP
FINANCIAL MEASURES
(Unaudited)
The Company supplements the reporting of financial information
determined under U.S. generally accepted accounting principles
(GAAP) with the non-GAAP financial measures as defined below. The
Company believes these non-GAAP financial measures provide
meaningful information to assist investors in understanding
financial results and assessing prospects for future performance as
they provide a better baseline for analyzing the ongoing
performance of its business by excluding items that may not be
indicative of core operating results.
Basis of presentation
The Company has a controlling ownership interest in MonotaRO, which
is part of our Endless Assortment segment. MonotaRO's results are
fully consolidated, reflected in U.S. GAAP, and reported one-month
in arrears. Results will differ from MonotaRO's externally reported
financials which follow Japanese GAAP.
Adjusted gross profit, adjusted SG&A, adjusted operating
earnings, adjusted operating margin, adjusted net earnings,
adjusted diluted EPS
Exclude certain non-recurring items, like restructuring charges,
asset impairments, gains and losses associated with business
divestitures and other non-recurring, infrequent or unusual gains
and losses (together referred to as "non-GAAP adjustments"), from
the Company's most directly comparable reported U.S. GAAP figures
(reported gross profit, SG&A, operating earnings, net earnings
and EPS).The Company believes these non-GAAP adjustments provide
meaningful information to assist investors in understanding
financial results and assessing prospects for future performance as
they provide a better baseline for analyzing the ongoing
performance of its business by excluding items that may not be
indicative of core operating results.
Free cash flow (FCF)
Calculated using total cash provided by operating activities less
capital expenditures. The Company believes the presentation of FCF
allows investors to evaluate the capacity of the Company's
operations to generate free cash flow.
Daily sales
Refers to sales for the period divided by the number of U.S.
selling days for the period.
Daily, constant currency sales
Refers to the daily sales adjusted for changes in foreign currency
exchange rates.
Daily, organic constant currency sales
Refers to daily sales excluding the sales of certain divested
businesses in the comparable prior year period post date of
divestiture and changes in foreign currency exchange rates.
Foreign currency exchange
Calculated by dividing current period local currency daily sales by
current period average exchange rate and subtracting the current
period local currency daily sales divided by the prior period
average exchange rate.
U.S. selling days:
2022: Q1-64, Q2-64, Q3-64, Q4-63, FY-255
2023: Q1-64, Q2-64, Q3-63, Q4-63, FY-254
2024: Q1-64, Q2-64, Q3-64, Q4-64, FY-256
As non-GAAP financial measures are not standardized, it may not
be possible to compare these measures with other companies'
non-GAAP measures having the same or similar names. These non-GAAP
measures should not be considered in isolation or as a substitute
for reported results. These non-GAAP measures reflect an additional
way of viewing aspects of operations that, when viewed with GAAP
results, provide a more complete understanding of the business.
This press release also includes certain non-GAAP forward-looking
information. The Company believes that a quantitative
reconciliation of such forward-looking information to the most
comparable financial measure calculated and presented in accordance
with GAAP cannot be made available without unreasonable efforts. A
reconciliation of these non-GAAP financial measures would require
the Company to predict the timing and likelihood of future
restructurings, asset impairments, and other charges. Neither of
these forward-looking measures, nor their probable significance,
can be quantified with a reasonable degree of accuracy.
Accordingly, a reconciliation of the most directly comparable
forward-looking GAAP measures is not provided.
The reconciliations provided below reconciles GAAP financial
measures to non-GAAP financial measures used in this release: daily
sales; daily, organic constant currency sales; free cash flow;
adjusted operating margin; and adjustments reflected in the
consolidated statements of earnings.
Sales growth for the
three and twelve months ended December 31, 2023 (percent
change compared to prior year
period) (unaudited)
|
|
|
Total
Company
|
|
High-Touch Solutions
- N.A.
|
|
Endless
Assortment
|
|
Q4
2023
|
|
FY
2023
|
|
Q4
2023
|
|
FY
2023
|
|
Q4
2023
|
|
FY
2023
|
Reported
sales
|
5.1 %
|
|
8.2 %
|
|
4.7 %
|
|
8.9 %
|
|
6.0 %
|
|
4.7 %
|
Daily
impact
|
— %
|
|
0.4 %
|
|
— %
|
|
0.4 %
|
|
— %
|
|
0.4 %
|
Daily
sales(1)
|
5.1 %
|
|
8.6 %
|
|
4.7 %
|
|
9.3 %
|
|
6.0 %
|
|
5.1 %
|
Business
divestiture(2)
|
0.2 %
|
|
— %
|
|
0.2 %
|
|
0.1 %
|
|
— %
|
|
— %
|
Foreign currency
exchange(3)
|
0.2 %
|
|
0.9 %
|
|
(0.2) %
|
|
— %
|
|
2.2 %
|
|
5.3 %
|
Daily, organic
constant
currency sales
|
5.5 %
|
|
9.5 %
|
|
4.7 %
|
|
9.4 %
|
|
8.2 %
|
|
10.4 %
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Based on U.S. selling
days, there were 63 selling days in Q4 2023 and Q4 2022; there were
254 and 255 selling days in 2023 and 2022, respectively.
|
(2)
|
Reflects the
divestiture of Grainger's subsidiary, E & R Industrial Sales,
Inc., in the fourth quarter of 2023.
|
(3)
|
Excludes the impact of
year-over-year foreign currency exchange rate
fluctuations.
|
Free cash flow (FCF)
for the three and twelve months ended December 31,
2023 (in millions of
dollars) (unaudited)
|
|
|
Q4
2023
|
|
FY
2023
|
Net cash flows provided
by operating activities
|
$
604
|
|
$
2,031
|
Capital
expenditures
|
(127)
|
|
(445)
|
Free cash
flow
|
$
477
|
|
$
1,586
|
Income statement
adjustments for the three and twelve months ended December 31,
2023 (in millions of
dollars) (unaudited)
|
|
|
Q4
2023
|
|
Reported
|
|
Adjusted(4)
|
|
Reported
|
|
Adjusted
|
|
Reported
|
|
Business
Divestiture(1)
|
|
Adjusted
|
|
% of Net
sales
|
|
Y/Y(2)
|
Earnings
reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
|
$ 1,006
|
|
$
(26)
|
|
$
980
|
|
25.2 %
|
|
24.5 %
|
|
4.5 %
|
|
(0.3) %
|
Operating
earnings
|
557
|
|
26
|
|
583
|
|
13.9
|
|
14.6
|
|
2.4
|
|
11.5
|
Other expense —
net
|
(16)
|
|
—
|
|
(16)
|
|
0.4
|
|
0.5
|
|
(16.7)
|
|
(16.7)
|
Earnings before
income
taxes
|
541
|
|
26
|
|
567
|
|
13.5
|
|
14.1
|
|
3.0
|
|
12.5
|
Income tax
provision(3)
|
(129)
|
|
(4)
|
|
(133)
|
|
3.2
|
|
3.3
|
|
1.2
|
|
4.7
|
Net earnings
|
412
|
|
22
|
|
434
|
|
10.3
|
|
10.8
|
|
3.6
|
|
15.1
|
Noncontrolling
interest(5)
|
(17)
|
|
—
|
|
(17)
|
|
0.4
|
|
0.4
|
|
32.1
|
|
32.1
|
Net earnings
attributable to
W.W. Grainger, Inc.
|
$
395
|
|
$
22
|
|
$
417
|
|
9.9 %
|
|
10.4 %
|
|
2.9 %
|
|
14.5 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share:
|
$
7.89
|
|
$
0.44
|
|
$ 8.33
|
|
|
|
|
|
4.7 %
|
|
16.7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflects the $26
million pre-tax and $22 million after-tax loss on the divestiture
of Grainger's subsidiary, E & R Industrial Sales, Inc.,
reported in the HTS-N.A. segment completed in the fourth quarter of
2023.
|
(2)
|
For prior year
financial information regarding Grainger's non-GAAP measures,
including reconciliations to the most directly comparable GAAP
measures, refer to the Company's Form 8-K filed with the SEC on
February 2, 2023.
|
(3)
|
Reported and adjusted
effective tax rates were 23.8% and 23.5% for the fourth quarter
December 31, 2023.
|
(4)
|
Calculated on the basis
of reported net sales for the fourth quarter December 31,
2023.
|
(5)
|
The Company has a
controlling ownership interest in MonotaRO, with the residual
representing noncontrolling interest.
|
|
FY
2023
|
|
Reported
|
|
Adjusted(4)
|
|
Reported
|
|
Adjusted
|
|
Reported
|
|
Business
Divestiture(1)
|
|
Adjusted
|
|
% of Net
sales
|
|
Y/Y(2)
|
Earnings
reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
|
$ 3,931
|
|
$
(26)
|
|
$ 3,905
|
|
23.8 %
|
|
23.7 %
|
|
8.2 %
|
|
6.8 %
|
Operating
earnings
|
2,565
|
|
26
|
|
2,591
|
|
15.6
|
|
15.7
|
|
15.8
|
|
18.1
|
Other expense —
net
|
(65)
|
|
—
|
|
(65)
|
|
0.4
|
|
0.4
|
|
(5.5)
|
|
(5.5)
|
Earnings before
income
taxes
|
2,500
|
|
26
|
|
2,526
|
|
15.2
|
|
15.3
|
|
16.5
|
|
18.9
|
Income tax
provision(3)
|
(597)
|
|
(4)
|
|
(601)
|
|
3.6
|
|
3.6
|
|
12.0
|
|
12.9
|
Net earnings
|
1,903
|
|
22
|
|
1,925
|
|
11.6
|
|
11.7
|
|
18.0
|
|
20.9
|
Noncontrolling
interest(5)
|
(74)
|
|
—
|
|
(74)
|
|
0.5
|
|
0.5
|
|
12.5
|
|
12.5
|
Net earnings
attributable
to W.W. Grainger, Inc.
|
$ 1,829
|
|
$
22
|
|
$ 1,851
|
|
11.1 %
|
|
11.2 %
|
|
18.2 %
|
|
21.2 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share:
|
$ 36.23
|
|
$
0.44
|
|
$ 36.67
|
|
|
|
|
|
20.5 %
|
|
23.6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflects the $26M
pre-tax and $22M after-tax loss on the divestiture of Grainger's
subsidiary, E & R Industrial Sales, Inc., reported in the
HTS-N.A. segment completed in the fourth quarter of
2023.
|
(2)
|
For prior year
financial information regarding Grainger's non-GAAP measures,
including reconciliations to the most directly comparable GAAP
measures, refer to the Company's Form 8-K filed with the SEC on
February 2, 2023.
|
(3)
|
Reported and adjusted
effective tax rates were 23.9% and 23.8% for December 31,
2023.
|
(4)
|
Calculated on the basis
of reported net sales for December 31, 2023.
|
(5)
|
The Company has a
controlling ownership interest in MonotaRO, with the residual
representing noncontrolling interest.
|
View original
content:https://www.prnewswire.com/news-releases/grainger-reports-results-for-the-fourth-quarter-and-full-year-2023-302051460.html
SOURCE W.W. Grainger, Inc.