Grainger Sets Growth Course and Provides Peek Into Expansion Strategy

W.W. Grainger Inc., Lake Forest, Ill., has set aggressive growth goals for 2004 on several fronts. At the Grainger Analysts Meeting held Dec. 15 in Boston, company executives said they expect revenue growth of 5 to 10 percent in 2004 through gaining market share. They also outlined the company’s plan to double the size of many of its branch locations.

Sales for 2003 are expected to be flat versus 2002’s $4.64 billion, although November 2003 daily sales were up 4 percent versus November 2002. Ogden Loux, senior vice president of finance and CFO, said the company expects its annual sales to climb to $7 billion by 2007.

Richard Keyser, chairman and CEO, said several key economic and global trends affect the end markets that Grainger serves. Productivity is at the top of customer concerns, and the company must provide products and services to help customers become more productive, he said.

“The push for productivity directly affects the facilities maintenance industry,” he said. “The fewer the number of people in a building, the less maintenance is required and fewer products are purchased. To grow sales in light of these trends, the company is dedicating its resources to those tools and services that save customers time and money. This includes infrastructure investments and a new sales approach designed to aggressively capture market share.”

Keyser also said Grainger has been diversifying its customer base since the late 1990s to lessen its dependence on manufacturing, a business sector hit hard by the flight of factories overseas. Today, less than one-third of the company’s sales come from manufacturing. About 17 percent of sales now comes from government accounts, while 19 percent comes from commercial customers.

Along with completing its national network of eight redistribution centers next year, accelerating completion of its new ERP computer system and replacing existing legacy computer systems by 2005, Grainger has a major branch expansion effort underway aimed at winning the business of local customers for facilities maintenance supplies in the 25 largest markets in the United States. These markets account for approximately half of the $120 billion market for facilities maintenance supplies, said James Ryan, executive vice president, marketing and sales.

Grainger plans to build new branches that are in many cases double the size of existing locations, and expand older facilities, because it has found in several pilot programs that larger branches generate twice the sales per square foot of smaller branches.

“Going forward, you can expect us to open or expand buildings to average between 20,000 and 40,000 square feet that will have larger, well-merchandised showrooms,” said Ryan.

He added that in 30 of the company’s branches already operating at this size, there has been a 20 percent increase in showroom sales. Showrooms in the new branches will be bigger, too. Ryan said while Grainger’s current showrooms average 1,400 square feet, showrooms in the new branches will be between 2,000 and 7,500 square feet.

He said when Grainger tested the big-branch strategy in Atlanta with a new facility, sales to local customers increased 60 percent, and the active account base in the market increased 40 percent over existing locations.