Grainger (-13%) at five-month low after slight top-line miss, lack of operating margin in US; mgmt sees FY18 at high end of prior guidance -- call notes
- Sales up 7% (missed by 0.4%); volume up 7%; price up 1%; FX and hurricanes each had -40 bps impact; Normalized gross margin of 38.6%, flat Y/Y.
- Expects volume stabilization in coming quarters and in FY19
- EPS growth of 44% driven by both operating performance and below-the-line items
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Tracking toward high end of all metrics for FY18 guidance
- Wants pto get away from giving guidance on a quarterly basis -- will likely give annual guidance but not update it quarterly next year
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Tariff exposure -- Directly sourced from China: 20% of US segment COGS; 50% of that is China product subject to tariffs; incremental tariffs of 25% -> increase in US cost of ~2%
- Will pass on higher costs to customers; mitigate via alternate sourcing or higher prices
- Causing weakness: Lack of operating leverage in the US (margin +20 bps to 15.1%); outlook is much better when sales will be growing 2x op-ex
- Stable gross margin in FY19? Shooting for as close to flat as possible but will give guidance in January.