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GWW > SEC Filings for GWW > Form 10-Q on 1-Aug-2013All Recent SEC Filings

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Form 10-Q for GRAINGER W W INC


1-Aug-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

General
Grainger is a broad-line distributor of maintenance, repair and operating supplies, and other related products and services used by businesses and institutions. Grainger's operations are primarily in the United States and Canada, with an expanding presence in Europe, Asia and Latin America. Grainger uses a multichannel business model to provide customers with a range of options for finding and purchasing products utilizing sales representatives, catalogs and direct marketing materials and eCommerce. Grainger serves approximately 2 million customers worldwide through a network of highly integrated branches, distribution centers, multiple websites and export services.

Business Environment
Given Grainger's large number of customers and the diverse industries it serves,
several economic factors and industry trends tend to shape Grainger's business
environment. The overall economy and leading economic indicators provide general
insight into projecting Grainger's growth. Grainger's sales in the United States
and Canada tend to positively correlate with Gross Domestic Product (GDP),
Industrial Production, Exports, and Business Investment. In the United States,
sales also tend to positively correlate with Business Inventory. The table below
provides these estimated indicators for 2013:

                                    2013 Forecasted Growth
                                    United States    Canada
GDP                                     1.6%          1.7%
Industrial Production                   2.5%          1.1%
Exports                                 1.8%          2.0%
Business Investment                     5.2%          2.4%
Business Inventory                      3.0%           -
Source: Global Insight (July 2013)

According to the Federal Reserve, overall industrial production increased 2.0% from June 2012 to June 2013. This improvement positively affected Grainger's sales growth for the six months of 2013. In addition, according to Bloomberg, crude oil prices have increased from $82 to $96 per barrel, or a 17% increase from June 2012 to June 2013. As oil production represents a large segment of the Canadian economy, fluctuations in crude oil prices can have a significant impact on the sales and business conditions in Grainger's Canadian business.

The light and heavy manufacturing customer end-markets have historically correlated with manufacturing employment levels and manufacturing output. The United States Department of Labor reported an increase of 0.2% in manufacturing employment levels from June 2012 to June 2013. According to the Federal Reserve, manufacturing output increased 2.1% from June 2012 to June 2013. Grainger's heavy and light manufacturing customer end-markets outperformed these indicators as sales to these customer end-markets increased in the mid-single digits and high single digits, respectively, for the six months of 2013.

Outlook
On July 17, 2013, Grainger revised the 2013 sales growth guidance from a range of 5 to 9 percent to a range of 5 to 8 percent and also revised the 2013 earnings per share guidance from a range of $11.30 to $12.00 to a range of $11.40 to $12.00. These revised estimates reflect performance in the first half of the year and expectations for the second half of the year.


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