GRAINGER REPORTS RESULTS FOR THE FOURTH QUARTER AND FULL YEAR 2022
Successful execution of strategic initiatives fuels strong results;
Company issues 2023 guidance, including 7% to 11% sales growth
Fourth Quarter 2022 Financial Highlights
-
Delivered sales of
$3.8 billion , up 13.2%, or 17.2% on a daily, constant currency basis - Achieved reported operating margin of 14.3%, up 190 basis points, or 13.8% on an adjusted basis, up 135 basis points
-
Generated diluted EPS of
$7.54 on a reported basis, up 38.6%, or$7.14 on an adjusted basis, up 31.3%
Full Year 2022 Financial Highlights
-
Grew sales to
$15.2 billion , up 16.9%, or 19.3% on a daily, constant currency basis - Realized reported operating margin of 14.5%, up 265 basis points, or 14.4% on an adjusted basis, up 255 basis points
-
Delivered diluted EPS of
$30.06 on a reported basis, up 51.5%, or$29.66 on an adjusted basis, up 49.5% -
Produced
$1.3 billion in operating cash flow and returned$949 million to Grainger shareholders through dividends and share repurchases
"Our strong 2022 performance was driven by the team's focused execution against our long-term strategy in a robust demand market. Both our High-Touch Solutions and Endless Assortment segments delivered above expectations by remaining committed to our purpose, We Keep the World Working®," said
2022 Financial Summary
($ in millions) |
Q4 2022 |
Q4 2022 |
FY 2022 |
FY 2022 |
||||
Change v. Prior (Fav. |
Change v. Prior (Fav. |
|||||||
|
Reported |
Adjusted( 1) |
Reported |
Adjusted( 1) |
Reported |
Adjusted( 1) |
Reported |
Adjusted( 1) |
|
|
|
13.2 % |
13.2 % |
|
|
16.9 % |
16.9 % |
Gross Profit |
|
|
20.2 % |
20.2 % |
|
|
23.9 % |
23.9 % |
Operating Earnings |
|
|
30.4 % |
25.5 % |
|
|
43.2 % |
41.9 % |
Net Earnings |
|
|
36.0 % |
28.8 % |
|
|
48.4 % |
46.4 % |
Diluted EPS |
|
|
38.6 % |
31.3 % |
|
|
51.5 % |
49.5 % |
|
|
|
|
|
|
|
|
|
Gross Profit % |
39.6 % |
39.6 % |
230 bps |
230 bps |
38.4 % |
38.4 % |
215 bps |
215 bps |
Operating Margin |
14.3 % |
13.8 % |
190 bps |
135 bps |
14.5 % |
14.4 % |
265 bps |
255 bps |
Tax Rate |
24.3 % |
25.3 % |
50 bps |
(50) bps |
24.8 % |
25.1 % |
20 bps |
(10) bps |
(1) |
Results exclude the divestiture of Cromwell's enterprise software business completed in the fourth quarter of 2022. Reconciliations of the adjusted measures reflected in this table to the most directly comparable GAAP measures are provided in the supplemental information of this release. |
Sales
For the fourth quarter of 2022, total Company sales on a reported and daily basis increased 13.2% as compared to the fourth quarter of 2021. Normalizing for the Japanese Yen's depreciation, sales on a daily, constant currency basis were up 17.2% compared to the fourth quarter of 2021.
In the
For the full year 2022, total Company sales increased 16.9% versus the full year 2021. Daily sales on a constant currency basis increased 19.3% versus the prior year.
Gross Profit Margin
For the fourth quarter of 2022, total Company gross profit margin was 39.6%, up 230 basis points compared to 37.3% in the fourth quarter of 2021.
In the
For the full year 2022, total Company gross profit margin was 38.4%, up 215 basis points versus the prior year. The increase in gross profit margin was primarily driven by improved product mix and price / cost favorability as well as lapping the
Earnings
For the fourth quarter of 2022, reported operating earnings for the total company were
Diluted earnings per share for the fourth quarter of 2022 were
For the full year 2022, reported operating earnings for the total Company of
Diluted earnings per share of
Tax Rate
For the fourth quarter of 2022, the tax rate was 24.3% compared to 24.8% in the fourth quarter of 2021. On an adjusted basis, the tax rate was 25.3% compared to 24.8% in the prior year quarter. The variance was driven primarily by a decrease in stock compensation tax benefit as compared to the fourth quarter of 2021.
For the full year 2022, the reported tax rate was 24.8% versus 25.0% in 2021. On an adjusted basis, the full year tax rate was 25.1% versus 25.0% in the prior year.
Cash Flow
Operating cash flow for the quarter was
For the full year 2022, the Company generated operating cash flow of
In 2022, the Company invested
2023 Company Guidance
The Company is providing the following outlook for 2023:
|
2023 |
|
|
Sales growth |
6.6% - 10.6% |
Daily sales growth |
7.0% - 11.0% |
Gross Profit Margin |
38.1% - 38.3% |
Operating Margin |
14.4% - 14.9% |
Diluted Earnings per Share |
|
Operating Cash Flow |
|
CapEx (cash basis) |
|
Share Buyback |
|
Tax Rate |
~25.0% |
|
|
Segment Operating Margin |
|
|
16.3% - 16.8% |
Endless Assortment |
8.6% - 9.0% |
(1) |
Guidance provided is on an adjusted basis. Daily sales growth adjusted for the impact of one less selling day in 2023 as compared to 2022. 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
About Grainger
Visit invest.grainger.com to view information about the Company, including a supplement regarding 2022 fourth quarter results.
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, including the impact of
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) |
|||||||
|
|||||||
|
Three Months Ended |
|
Twelve Months Ended |
||||
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net sales |
$ 3,802 |
|
$ 3,359 |
|
$ 15,228 |
|
$ 13,022 |
Cost of goods sold |
2,296 |
|
2,106 |
|
9,379 |
|
8,302 |
Gross profit |
1,506 |
|
1,253 |
|
5,849 |
|
4,720 |
Selling, general and administrative expenses |
962 |
|
836 |
|
3,634 |
|
3,173 |
Operating earnings |
544 |
|
417 |
|
2,215 |
|
1,547 |
Other (income) expense: |
|
|
|
|
|
|
|
Interest expense – net |
23 |
|
22 |
|
93 |
|
87 |
Other – net |
(4) |
|
(6) |
|
(24) |
|
(25) |
Total other expense – net |
19 |
|
16 |
|
69 |
|
62 |
Earnings before income taxes |
525 |
|
401 |
|
2,146 |
|
1,485 |
Income tax provision |
128 |
|
100 |
|
533 |
|
371 |
Net earnings |
397 |
|
301 |
|
1,613 |
|
1,114 |
Less net earnings attributable to noncontrolling |
13 |
|
18 |
|
66 |
|
71 |
Net earnings attributable to |
$ 384 |
|
$ 283 |
|
$ 1,547 |
|
$ 1,043 |
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
Basic |
$ 7.58 |
|
$ 5.47 |
|
$ 30.22 |
|
$ 19.94 |
Diluted |
$ 7.54 |
|
$ 5.44 |
|
$ 30.06 |
|
$ 19.84 |
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
Basic |
50.4 |
|
51.4 |
|
50.9 |
|
51.9 |
Diluted |
50.7 |
|
51.7 |
|
51.1 |
|
52.2 |
Diluted Earnings Per Share |
|
|
|
|
|
|
|
Net earnings as reported |
$ 384 |
|
$ 283 |
|
$ 1,547 |
|
$ 1,043 |
Earnings allocated to participating securities |
(2) |
|
(2) |
|
(10) |
|
(8) |
Net earnings available to common shareholders |
$ 382 |
|
$ 281 |
|
$ 1,537 |
|
$ 1,035 |
Weighted average shares adjusted for dilutive |
50.7 |
|
51.7 |
|
51.1 |
|
52.2 |
Diluted earnings per share |
$ 7.54 |
|
$ 5.44 |
|
$ 30.06 |
|
$ 19.84 |
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||
|
|||
|
(Unaudited) |
|
|
Assets |
|
|
|
Cash and cash equivalents |
$ 325 |
|
$ 241 |
Accounts receivable – net (1) |
2,133 |
|
1,754 |
Inventories – net (2) |
2,253 |
|
1,870 |
Prepaid expenses and other current assets |
266 |
|
146 |
Total current assets |
4,977 |
|
4,011 |
Property, buildings and equipment – net |
1,461 |
|
1,424 |
|
371 |
|
384 |
Intangibles – net |
232 |
|
238 |
Operating lease right-of-use |
367 |
|
393 |
Other assets |
180 |
|
142 |
Total assets |
$ 7,588 |
|
$ 6,592 |
Liabilities and Shareholders' Equity |
|
|
|
Current maturities |
35 |
|
— |
Trade accounts payable (2) |
1,047 |
|
816 |
Accrued compensation and benefits |
334 |
|
319 |
Operating lease liability |
68 |
|
66 |
Accrued expenses |
474 |
|
290 |
Income taxes payable |
52 |
|
37 |
Total current liabilities |
2,010 |
|
1,528 |
Long-term debt |
2,284 |
|
2,362 |
Long-term operating lease liability |
318 |
|
334 |
Deferred income taxes and tax uncertainties |
121 |
|
121 |
Other non-current liabilities |
120 |
|
87 |
Shareholders' equity |
2,735 |
|
2,160 |
Total liabilities and shareholders' equity |
$ 7,588 |
|
$ 6,592 |
(1) Increased |
(2) Increased |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
|||||||
|
|||||||
|
Three Months Ended |
|
Twelve Months Ended |
||||
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net earnings |
$ 397 |
|
$ 301 |
|
$ 1,613 |
|
$ 1,114 |
Adjustments to reconcile net earnings to net cash |
|
|
|
|
|
|
|
Provision for credit losses |
6 |
|
6 |
|
19 |
|
18 |
Deferred income taxes and tax uncertainties |
(12) |
|
34 |
|
8 |
|
27 |
Depreciation and amortization |
58 |
|
48 |
|
217 |
|
185 |
Impairment of assets |
7 |
|
— |
|
7 |
|
— |
Net (gains) losses from sales of assets and |
(15) |
|
(3) |
|
(14) |
|
(6) |
Stock-based compensation |
10 |
|
9 |
|
48 |
|
42 |
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
51 |
|
(26) |
|
(436) |
|
(324) |
Inventories |
(159) |
|
(88) |
|
(412) |
|
(152) |
Prepaid expenses and other assets |
(119) |
|
(14) |
|
(158) |
|
(15) |
Trade accounts payable |
(36) |
|
(113) |
|
225 |
|
54 |
Accrued liabilities |
149 |
|
56 |
|
200 |
|
43 |
Income taxes – net |
34 |
|
16 |
|
42 |
|
(26) |
Other non-current liabilities |
(11) |
|
(13) |
|
(26) |
|
(23) |
Net cash provided by operating activities |
360 |
|
213 |
|
1,333 |
|
937 |
Cash flows from investing activities: |
|
|
|
|
|
|
|
Additions to property, buildings, equipment and |
(48) |
|
(58) |
|
(256) |
|
(255) |
Proceeds from sale or redemption of assets |
21 |
|
12 |
|
28 |
|
29 |
Other – net |
(24) |
|
— |
|
(35) |
|
— |
Net cash used in investing activities |
(51) |
|
(46) |
|
(263) |
|
(226) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
Proceeds from short-term debt |
15 |
|
— |
|
16 |
|
— |
Payments of short-term debt |
(15) |
|
— |
|
(15) |
|
— |
Payments of long-term debt |
— |
|
— |
|
— |
|
(8) |
Proceeds from stock options exercised |
5 |
|
17 |
|
26 |
|
48 |
Payments for employee taxes withheld from stock |
(1) |
|
(1) |
|
(23) |
|
(30) |
Purchases of treasury stock |
(220) |
|
(170) |
|
(603) |
|
(695) |
Cash dividends paid |
(85) |
|
(96) |
|
(370) |
|
(357) |
Other – net |
(3) |
|
1 |
|
(3) |
|
3 |
Net cash used in financing activities |
(304) |
|
(249) |
|
(972) |
|
(1,039) |
Exchange rate effect on cash and cash equivalents |
5 |
|
(5) |
|
(14) |
|
(16) |
Net change in cash and cash equivalents |
10 |
|
(87) |
|
84 |
|
(344) |
Cash and cash equivalents at beginning of year |
315 |
|
328 |
|
241 |
|
585 |
Cash and cash equivalents at end of period |
$ 325 |
|
$ 241 |
|
$ 325 |
|
$ 241 |
SUPPLEMENTAL INFORMATION - CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (Unaudited)
(In millions of dollars, except for per share amounts)
The Company supplemented the reporting of financial information determined under
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 potential future, material events such as restructurings, asset impairments, M&A activity and other non-recurring, infrequent or unusual gains and losses. Neither 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 reconciliation provided below reconciles GAAP financial measures to the non-GAAP financial measures: daily sales; daily, constant currency sales; adjusted SG&A; adjusted SG&A margin; adjusted gross profit; adjusted gross profit margin; adjusted operating earnings; adjusted operating margin; adjusted net earnings; adjusted diluted earnings per share; and adjusted effective tax rate.
Daily Sales vs. Prior Period |
||||||||||
|
|
|
High-Touch Solutions |
|
Endless Assortment |
|||||
|
Q4 2022 |
|
FY 2022 |
|
Q4 2022 |
|
FY 2022 |
|
Q4 2022 |
FY 2022 |
Reported sales |
13.2 % |
|
16.9 % |
|
16.8 % |
|
19.6 % |
|
0.9 % |
8.2 % |
Daily impact(1) |
— |
|
(0.4) |
|
— |
|
(0.5) |
|
— |
(0.5) |
Daily sales |
13.2 % |
|
16.5 % |
|
16.8 % |
|
19.1 % |
|
0.9 % |
7.7 % |
Foreign exchange(2) |
(4.0) % |
|
(2.8) % |
|
(0.4) % |
|
(0.2) % |
|
(17.3) % |
(12.4) % |
Daily, constant currency |
17.2 % |
|
19.3 % |
|
17.2 % |
|
19.3 % |
|
18.2 % |
20.1 % |
(1) Daily sales are defined as the total net sales for the period divided by the number of |
(2) Foreign exchange is calculated by the difference of local currency sales at the current year average rate and at the prior year average rate for the period. |
SUPPLEMENTAL INFORMATION - CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS |
|||||||||||
|
|||||||||||
In millions |
Three Months Ended |
|
Twelve Months Ended |
||||||||
|
2022 |
SG&A |
|
2021 |
SG&A |
|
2022 |
SG&A |
|
2021 |
SG&A |
Reported SG&A |
|
25.3 % |
|
|
24.9 % |
|
|
23.9 % |
|
|
24.4 % |
Business divestiture(1) |
21 |
0.5 |
|
|
— |
|
21 |
0.1 |
|
|
— |
Adjusted SG&A |
|
25.8 % |
|
|
24.9 % |
|
|
24.0 % |
|
|
24.4 % |
(1) Reflects the divestiture of Cromwell's enterprise software business completed in the fourth quarter of 2022. |
In millions |
Three Months Ended |
|
Twelve Months Ended |
||||||||
|
2022 |
Operating |
|
2021 |
Operating |
|
2022 |
Operating |
|
2021 |
Operating |
Reported operating earnings |
|
14.3 % |
|
|
12.4 % |
|
|
14.5 % |
|
|
11.9 % |
Business divestiture(1) |
(21) |
(0.5) |
|
|
— |
|
(21) |
(0.1) |
|
|
— |
Adjusted operating earnings |
|
13.8 % |
|
|
12.4 % |
|
|
14.4 % |
|
|
11.9 % |
(1) Reflects the divestiture of Cromwell's enterprise software business completed in the fourth quarter of 2022. |
In millions |
Three Months Ended |
|
|
Twelve Months Ended |
|
||||
|
2022 |
|
2021 |
% |
|
2022 |
|
2021 |
% |
Reported net earnings |
$ 384 |
|
$ 283 |
36.0 % |
|
$ 1,547 |
|
$ 1,043 |
48.4 % |
Business divestiture(1) |
(21) |
|
|
|
|
(21) |
|
|
|
Adjusted net earnings |
$ 363 |
|
$ 283 |
28.8 % |
|
$ 1,526 |
|
$ 1,043 |
46.4 % |
|
|
|
|
|
|
|
|
|
|
Reported diluted earnings per share |
$ 7.54 |
|
$ 5.44 |
38.6 % |
|
$ 30.06 |
|
$ 19.84 |
51.5 % |
Business divestiture(1) |
(0.40) |
|
|
|
|
(0.40) |
|
|
|
Adjusted diluted earnings per share |
$ 7.14 |
|
$ 5.44 |
31.3 % |
|
$ 29.66 |
|
$ 19.84 |
49.5 % |
(1) Reflects the divestiture of Cromwell's enterprise software business completed in the fourth quarter of 2022. |
SUPPLEMENTAL INFORMATION - CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS |
|||||||||||
|
|||||||||||
|
Three Months Ended |
|
Twelve Months Ended |
||||||||
|
2022 |
|
2021 |
|
Bps |
|
2022 |
|
2021 |
|
Bps |
Effective tax rate reported |
24.3 % |
|
24.8 % |
|
50 |
|
24.8 % |
|
25.0 % |
|
20 |
Business divestiture(1) |
1.0 |
|
|
|
|
|
0.3 |
|
|
|
|
Effective tax rate adjusted |
25.3 % |
|
24.8 % |
|
(50) |
|
25.1 % |
|
25.0 % |
|
(10) |
(1) Reflects the divestiture of Cromwell's enterprise software business completed in the fourth quarter of 2022. There were no corresponding taxes related to the divestiture. |
View original content:https://www.prnewswire.com/news-releases/grainger-reports-results-for-the-fourth-quarter-and-full-year-2022-301736962.html
SOURCE