CHICAGO, July 15 /PRNewswire/ -- W.W. Grainger, Inc. (NYSE: GWW), the leading provider of maintenance, repair, and operating (MRO) supplies in North America, today reported results for the second quarter and six months ended June 30, 1999. Sales increased 2.4 percent to $1,146.2 million for the second quarter of 1999 versus $1,119.0 million for the second quarter of 1998. Net earnings for the second quarter of 1999 were down 14.7 percent to $50.6 million, compared to $59.3 million for the prior year quarter. Earnings per fully diluted share were $0.53 versus $0.60 in the comparable quarter in 1998, an 11.7 percent decline.
For the 1999 first half, sales increased 2.8 percent to $2,237.0 million, up from $2,176.1 million for the 1998 first half. Net earnings were $106.8 million, compared to $116.4 million for the first half of 1998. Earnings per fully diluted share were $1.13 per share versus $1.18 for the 1998 first half, a 4.2 percent decline.
"We were disappointed that, despite reaching record sales, our earnings fell short. Higher costs and service interruptions related to our new systems installation, were largely responsible for the decline, reducing earnings by $0.07 per share," said Grainger Chairman and CEO Richard L. Keyser. "As the Company expanded the number of sites on its new business enterprise system, costs such as premium freight, installation-related expenditures, and additional headcount for service grew, particularly late in June."
Keyser added, "While addressing these challenges, we also made progress on our strategic restructuring to customer-focused business units, and we are on track in our Internet strategy."
The Company's industry-leading, business-to-business Internet initiative gained significant momentum during the quarter, with sales through Grainger.com reaching $19.0 million, an 88 percent increase over Internet sales of $10.1 million in the first quarter of 1999, and a 526 percent increase over the second quarter of 1998. Based on the accelerated volume of Internet business, the Company now estimates its annualized Internet sales run rate at $90 million, up from $70 million announced at the end of April 1999.
In addition to Grainger.com, on May 15, 1999, the Company launched OrderZone.com, the first multi-supplier Internet marketplace, which provides a complementary mix of industrial products to customers. Also during the quarter, the Company entered into several alliances with technology partners including Ariba, Inc., Commerce One, Inc., PSDI, and SAP AG, in support of its strategy to provide specialized Internet solutions to large businesses.
"We are also pleased to report progress in other newer business units such as Grainger Integrated Supply, our outsourcing unit, which experienced 37 percent growth in average daily sales during the second quarter," added Keyser. "Our transition to customer-focused business units, while slower than desired, is clearly moving in the right direction."
Earnings for the quarter reflected continuing investments in the Company's newer businesses including the Internet initiatives. In addition, service interruptions from the installation of the Company's new business enterprise system accounted for a $10 million loss in sales, while related costs added $7.5 million to expenses in the quarter. The Company continues to work toward full implementation of the new system, which will provide for system integration across the Company.
W.W. Grainger, Inc. (GWW), with 1998 sales of $4.3 billion, is the leading North American provider of maintenance, repair, and operating (MRO) supplies, services, and related information to businesses and institutions. GWW shares are traded on the New York and Chicago stock exchanges. For more information, visit Grainger on-line at http://www.grainger.com .
This document contains statements that are not historical facts and are forward-looking. The forward-looking statements are based on the Company's current expectations and some of them are subject to risks and uncertainties the outcome of which could result in actual future performance being materially different from the performance indicated. They should be read in conjunction with the Company's most recent annual report, as well as the Company's Form 10-K and other reports filed with the Securities and Exchange Commission, containing a discussion of the Company's business and of various factors that may affect it.
Earnings per share and the average number of shares outstanding reflect the 2-for-1 stock split effective at the close of business on May 11, 1998.
(Supplemental financial information concerning the Quarter and First Half ended June 30, 1999 is available upon request. Contact Bill Chapman, Investor Relations Manager, 847-535-0881.)