CHICAGO, January 31, 2000 – W.W. Grainger, Inc. (NYSE: GWW) today reported results for the fourth quarter and year ended December 31, 1999. For the year 1999, earnings per diluted share declined 21 percent to $1.92 versus $2.44 in 1998. Net earnings for 1999 were $180.7 million, down 24 percent compared to $238.5 million for the prior year. Sales increased 4 percent in 1999 to $4,533.9 million versus $4,341.3 million in 1998.
For the 1999 fourth quarter, earnings per diluted share were $0.30 versus $0.69 in the fourth quarter of 1998, a 57 percent decline. Fourth quarter net earnings were $28.2 million, compared to $66.0 million in the prior year quarter. Sales increased 7 percent in the fourth quarter to $1,121.4 million versus $1,045.2 million in the prior year quarter.
“Our earnings are in line with the guidance we provided in a press release earlier this month,” said Grainger’s Chairman and Chief Executive Officer, Richard L. Keyser. “Although we are disappointed by these results, Grainger faced a particularly difficult year due to the installation of the new Enterprise Resource Planning (ERP) system. We also continued to invest heavily in implementing our digital strategy.”
Sales growth in the fourth quarter was attributable to strong performances from Grainger Integrated Supply, Acklands-Grainger Inc. (Canada), and Grainger S.A. de C.V. (Mexico). Fourth quarter sales of $42.3 million through the Internet for Grainger showed an 820 percent increase. Grainger also estimates that $15 million of sales in the quarter were related to concerns about Y2K.
In the fourth quarter Grainger recorded an adjustment to inventory following the physical inventory count conducted in October. During 1999, the Company installed a new ERP system and, as a result of problems with the installation, experienced substantial systems and transaction processing disruptions including system slowdowns and outages. The transaction processing failures during the systems installation resulted in an inventory shrinkage adjustment that exceeded expectation.
The Company experienced no material disruptions with the new ERP system during the fourth quarter. Related operating expenses, however, were substantially higher in 1999 than in 1998. These higher costs were largely attributable to the installation of the new system, the cost of taking the inventory count, and the replacement of all personal computers in the field locations for Grainger’s U.S. Branch-based business.
Ongoing investments in Grainger’s Web-based businesses were $44.4 million for the year. During 1999, the Company launched OrderZone.com, FindMRO.com, and Grainger Auction. In 1999, the Company processed sales of $102 million through the Internet and ended the year with an annualized run rate of more than $200 million. Total Internet spending in the year 2000 is expected to range between $110 and $120 million.
W.W. Grainger, Inc. (GWW), with 1999 sales of $4.5 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 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.