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GWW > SEC Filings for GWW > Form 10-Q on 1-May-2014All Recent SEC Filings

Show all filings for GRAINGER W W INC

Form 10-Q for GRAINGER W W INC


Quarterly Report

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

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 a 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 more than 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 2014:
                                     2014 Forecasted Growth
                                     United States    Canada
GDP                                      2.4%          2.2%
Industrial Production                    3.1%          3.0%
Exports                                  4.1%          3.6%
Business Investment                      6.0%          4.6%
Business Inventory                       3.1%           -
Source: Global Insight (April 2014)

According to the Federal Reserve, overall industrial production increased 3.8% from March 2013 to March 2014. This improvement positively affected Grainger's sales growth for the three months of 2014. In addition, 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 0.6% in manufacturing employment levels from March 2013 to March 2014. According to the Federal Reserve, manufacturing output increased 2.8% from March 2013 to March 2014. 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 for the first quarter of 2014.

While full year 2014 forecasted growth for Canada is positive, in the first quarter of 2014, the Canadian economy experienced pressure as the Canadian dollar was negatively impacted by a broad based decline in commodity prices with energy, metals and agricultural prices all lower with few exceptions, according to Scotiabank. These factors, along with lower than expected job growth, impacted the Canadian business, which is heavily dependent on the natural resources sector.

On April 16, 2014, Grainger reiterated its full year guidance of 5 to 9 percent sales growth and earnings per share of $12.10 to $12.85.

W.W. Grainger, Inc. and Subsidiaries

Matters Affecting Comparability
There were 63 sales days in the first quarter of 2014 and 2013. Results in the first quarter of 2014 did not include the impact of Good Friday, while results in the first quarter of 2013 did, due to the timing of the holiday. Grainger completed the E&R Industrial and Safety Solutions acquisitions as well as the divestiture of the four direct marketing brands in the second half of 2013, all of which were immaterial individually and in the aggregate.

Results of Operations - Three Months Ended March 31, 2014 The following table is included as an aid to understanding the changes in Grainger's Condensed Consolidated Statements of Earnings:

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