W.W. Grainger Inc. reported moderate first-quarter growth in total and web-only sales, but it expects stronger growth ahead, president and CEO D.G. Macpherson said today.
D.G. Macpherson, chairman and CEO, W.W. Grainger Inc.
“Amid a slow but steady demand environment,” Grainger produced “solid results,” he said.
Grainger’s web-only Endless Assortment business — comprised of Zoro.com and Japan-based MonotaRo.com — posted a 3.7% sales increase to $751 million.
By comparison, Grainger’s High-Touch Solutions segment — which includes the full-service sales through Grainger.com and the company’s sales team — grew 3.4% to $3.405 billion. Grainger is a prominent distributor of maintenance, repair and operations (MRO) products that businesses need to operate their facilities.
Total net sales gained 3.5% to $4.235 billion.
B2B buyers drive Zoro’s growth
In the Endless Assortment business, Grainger said revenue was driven by Zoro’s core B2B buyers and MonotaRO’s enterprise customers but partially offset by the “continued decrease” in Zoro’s non-core or B2C customers.
Macpherson said on an earnings call today that Zoro has traditionally been effective at acquiring new customers but not as effective as MonotaRO at retaining them over the long term. He added that Grainger and Zoro compare notes with MonotaRO on how to build more repeat business.
“It’s a lot of marketing science, looking at what to present to customers after the first order, how to understand who those customers are, and presenting the right products and the right offers after we get that first order,” Macpherson said.
He added that total Endless Assortment sales were adversely affected by the lower value of the Japanese yen and noted that, on a daily, constant currency basis, the web-only division’s sales were up 10%.
The division’s gross profit increased 2.8% to $220 million, but its gross margin slipped to 29.3% from 29.6%. Grainger attributed the lower margin to an “unfavorable product mix” at Zoro, “which was partially offset by freight efficiencies at MonotaRO.”
Grainger said the Endless Assortment business unit ended Q1 with a 13% year-over year increase to 14.581 million registered customers, including 5.322 million at Zoro and 9.259 million at MonoraRO. The unit’s number of active SKUs increased 10% to 13.2 million.
Looking ahead, Grainger said its total company revenue guidance for this year is an expected growth rate range of 4.3% – 7.3% to total sales of $17.2 billion to $17.7 billion.
“We feel good about our ability to gain share, become more productive, and to make sure we entice customers in the long term,” Macpherson said.
Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.
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