Despite delivering a 1% rise in sales to $2.5 billion, Grainger said the start of the year had fallen short of expectations.
Net earnings for Q1 2017 (ended 31 March) were down 6% to $175m (2016: $187m).
Grainger is a broad line supplier of maintenance, repair and operating products, with operations in Europe, Asia and Latin America. It owns Fabory and Cromwell.
“Overall, the first quarter clearly fell short of our expectations, driven primarily by the stronger than anticipated customer response to our U.S. strategic pricing actions, with a greater volume of products sold at more competitive prices,” said CEO DG Macpherson. “Based on the positive customer response thus far, we are pulling forward the remaining pricing actions originally scheduled for 2018 into the third quarter of this year. This decision requires a significant change to our earnings per share guidance for the year but should enable us to accelerate growth with existing customers and attract new customers sooner than planned.
“Our Zoro [industrial tool & MRO supplier] and MonotaRO [MRO supplier in Japan] businesses continued to perform very well. We continue to be challenged in Canada, although our service has improved. We will continue to aggressively take action to improve gross margins and reduce our cost structure in Canada with the expectation of hitting break-even by the end of 2017.”
Grainger’s aforementioned pricing actions were primarily implemented in January and February, including:
- Adjusting list prices across the board to make it easier for large customers to consolidate their purchases;
- Introducing new web prices on about 450,000 SKUs to drive medium and large noncontract customer acquisition and growth;
- Negotiating large customer contracts with more competitive pricing for infrequently purchased items. Most large customers already receive very competitive pricing on routine items through their contracts.
Results from the first quarter pricing actions showed that customers with access to lower pricing bought more than company expectations. Although it is early, the data provided confidence that the pricing actions were successful, Grainger said. The decision to accelerate the pricing actions is expected to enable faster growth through share gain with existing customers and acquisition of new customers. Web pricing will be available on all SKUs in the 2017 third quarter.