MRO products giant Grainger reported its 2021 third quarter financial results on Oct. 29, and the figures show continued double-digit gains with both sales and profit amid robust demand for the company's core product lines.

Lake Forest, IL-based Grainger posted total Q3 sales of $3.37 billion, up 11.7 percent year-over-year and up 5.0 percent from Q2. Q3 daily organic sales were up 11.9 percent, driven by strong performance in both Grainger's High-Touch Solutions N.A. and Endless Assortment segments.

In High-Touch, daily sales grew 12.0 percent in Q3, which Grainger attributed to strong recovery in core, non-pandemic product growth, while pandemic-related product sales remained elevated. In Endless Assortment, daily sales grew 12.7 percent overall and were up 14.9 percent on a daily basis.

The company's Q3 gross margin was 37.1 percent, up 145 basis points year-over-year and up from 35.0 percent in Q2, driven by solid expansion in both business segments. High-Touch Solutions gross margin grew by 140 basis points year-over-year, driven by expansion in the US and strong price realization that contributed to above neutral price/cost spread. Endless Assortment grew by 115 basis points, powered by 375 points of growth in Zoro U.S., which Grainger attributed to pricing actions and freight efficiencies.

Grainger's Q3 operating profit was $438 million, up 16 percent year-over-year and up 30.5 percent from Q2, as Q3 operating margin of 13.0 percent increased 45 basis points from a year earlier.

The company's Q3 net profit was $297 million, up 24 percent year-over-year and up 32 percent from Q2.

"During the third quarter, I spent significant time with customers. They consistently commended Grainger on our ability to fulfill orders and deliver products faster than others, and they valued our teams' commitment to servicing their business needs," said DG Macpherson, Grainger's chairman and CEO. "Demand for core products was very strong throughout the quarter, and Grainger gained share and expanded margins in both segments. Despite the current market and supply chain uncertainties, we are confident in our ability to deliver solid performance in the fourth quarter and into 2022."

Looking forward, Grainger is still expecting full-year 2021 sales of $12.7 to $13.0 billion on daily sales growth of 8.5 to 11.0 percent and organic growth of 10.0 to 12.5 percent — unchanged from its Q2 and Q1 reports. The company expects full-year gross margin of 36.1 to 36.6 percent on operating margin of 11.8 to 12.4 percent — also unchanged.

High-touch Solutions N.A.

In High-Touch Solutions N.A., Grainger's Q3 sales of $2.66 billion grew 12.0 percent year-over-year; gross margin of 39.4 percent grew 140 basis points; and operating profit of $387 million grew 16.0 percent on margin of 14.5 percent.

In the US, total sales were up 12.0 percent, with non-pandemic sales up 22 percent and pandemic-related sales down 15 percent. Grainger says that trend has continued into October, estimating that October non-pandemic sales will be up about 24 percent and pandemic-related sales will be down about 11 percent, with total October US sales forecasted up 15 percent.

Other notes from High-Touch Solutions - US in Q3:

--Sales to large customers grew 10 percent year-over-year, compared to 3 percent growth a year earlier and 9 percent growth in Q2

--Sales to mid-sized customers grew 19 percent year-over-year, compared to 6 percent growth a year earlier and 28 percent growth in Q2

Endless Assortment

In Endless Assortment, Grainger's Q3 sales of $646 million grew 12.7 percent year-over-year; gross margin of 28.5 percent grew 115 basis points; and operating profit of $59 million grew 23.8 percent on margin of 9.1 percent.

Within Endless Assortment

--MonotaRO daily sales jumped 14.0 percent to $423 million; gross margin of 25.8 percent fell 30 basis points; and operating margin of 12.0 percent fell 65 points.

--Zoro U.S. daily sales grew 11.9 percent to $217 million, gross margin of 33.9 percent jumped 375 basis points; and operating margin of 5.3 percent jumped 325 points.

--Total registered users across both platforms increased16.1 percent year-over-year to 12.46 million, with 51.9 percent of that in MonotoaRO.

--Zoro achieved its 8 million total SKU count goal in Q3, scaling up considerably from 4.8 million in Q3 2020.

End Markets

By end market, Grainger's Q3 sales performance was as follows (vs. Q2):

--Commercial (hospitality, restaurants, business services): +mid-30s (+high-30s)

--Heavy manufacturing: +mid-20s (+high-20s)

--Transportation: +low-20s (+mid-teens)

--Wholesale: +low-20s (+mid-teens)

--Natural resources: +high-teens (+high-teens)

--Contractor: +mid-teens (+high-teens)

--Light manufacturing: +low-double digits (+high-single digits)

--Retail (including e-commerce): +mid-single digits (+mid-teens)

--Government: down mid-single digits (down low-single digits)

--Healthcare: down mid-single digits (down high-20s)

Source: Industrial Distribution