CHICAGO, Oct. 9 /PRNewswire-FirstCall/ -- Grainger, North America's
leading supplier of facilities maintenance products, today announced a multi-
year branch expansion program to increase its market presence in the United
States. The program will begin in three metropolitan markets, Atlanta, Denver
and Seattle, with larger branches and additional sales personnel. Over the
next three to five years, the company will assess and reinforce local
availability of products and sales coverage to increase service to customers
in 25 major metropolitan markets as well as in selected secondary markets.
Grainger expects to fund the first phase of the program by ongoing
productivity improvements that reduce the company's overall cost structure.
Grainger anticipates that the initial stage of this program will
accelerate sales growth and contribute to reaching its long-term goal of 7 to
10 percent. The branch expansion program will enhance Grainger's reputation
as the only national branch network capable of providing immediate local
availability of a broad array of facilities maintenance products. This
offering benefits all customers who want to reduce the overall costs of buying
facilities maintenance products.
Grainger's Chairman and Chief Executive Officer Richard L. Keyser said,
"Grainger's value to its customers lies in getting products to them quickly
and easily so they can maintain and repair their facilities. This program
enables us to have a greater breadth of products close to our customers,
saving them both time and money. We are adding new branches and sales
professionals in high potential markets. We are also expanding branches to
add more warehousing and merchandising space, relocating branches to put them
closer to our customers and closing some branches. Based on the results of
recent pilots, which tested elements of this program, we expect that this
strategy should drive annual sales growth in the initial markets by 10 to 15
percent per year through our planning horizon."
Product availability is key to helping customers reduce their inventory
and save money. Grainger's branches provide immediate local availability
across a broad product offering, and, as a result of the three-year $200
million investment in its supply chain, the company will be positioned to
provide next-day branch replenishment. The distribution centers also will
provide most of the next-day customer shipping, so that employees at branches
can focus on meeting customers' same-day needs.
Changing demographics and the need for comprehensive coverage require the
company to look at expanding, relocating or adding branches. Actions to
change Grainger's presence in three metropolitan markets are already underway
with plans to add three new branches, relocate or expand seven branches and
close two branches. The company also plans to add or expand branches in 12
secondary markets. Due to the anticipated sales growth for these targeted
markets, the return on this project is expected to exceed the company's cost
of capital and improve its return on invested capital (ROIC).
In the first phase, Grainger expects to add more than 300,000 additional
square feet, or approximately 50 percent more showroom and warehouse capacity.
The additional inventory in these new or expanded branches should total more
than $20 million; the company expects to hire close to 100 additional sales
professionals and branch associates to focus on customers' needs. Plans call
for capital expenditures of $25 to $30 million for the branch projects in
2004. The company expects to offset the incremental expenses of this initial
phase of the program with its ongoing productivity improvement programs;
without these actions, the program would negatively impact operating earnings
in 2004.
"Grainger's multi-channel model is what distinguishes us from our
competition," said Keyser. "No other company has as broad a product line with
tens of thousands of items immediately available all across the country." He
added, "It is our plan to focus on the major metropolitan areas while
selectively acting on market opportunities in secondary markets as we have
over the years." Keyser also noted, "We will augment our branch expansion
with an aggressive sales and marketing effort targeted to capture additional
market share."
While the company already is seeing growth in sales to large, national
accounts and government customers, the branch expansion should stimulate
additional growth from these customers through all channels including the
Internet. Adding, relocating and expanding branches will also help Grainger's
local customers, who rely more heavily on branches. Local customers are
intense users of the branch system and they should react positively to greater
inventory availability complemented by focused sales and marketing efforts.
This branch expansion program represents a systematic look at the
company's network on a market-by-market basis. Since 1998, the company has
focused on upgrading its logistics network and improving customer service.
For the past two years economic factors have negatively affected sales. Sales
growth from the first markets in the branch expansion program is expected to
add an incremental $20 to $30 million to annual sales in 2004.
W.W. Grainger, Inc. (NYSE: GWW), is the leading broad line supplier of
facilities maintenance products in North America. Grainger serves customers
through a network of nearly 600 branches, 17 distribution centers, and four
Web sites. Sales for 2002 were $4.6 billion. For more information, visit
Grainger online at www.grainger.com .
This document contains forward-looking statements under the federal
securities laws. The forward-looking statements relate to the company's
expected future sales and other financial results and business plans,
strategies, and objectives and are not historical facts. They are generally
identified by qualifiers such as "will," "expects," "anticipates," "goal,"
"should," "plans," "targeted," or similar expressions. There are risks and
uncertainties the outcome of which could cause the company's results to differ
materially from what is projected. The forward-looking statements 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.
SOURCE W.W. Grainger, Inc.