W.W. Grainger, Inc. (NYSE:GWW) Q1 2018 Earnings Conference Call - Final Transcript
Apr 19, 2018 • 11:00 am ET
Greetings, and welcome to the W.W. Grainger First Quarter 2018 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Laura Brown, SVP of Communications and IR for W.W. Grainger. Thank you, Ms. Brown. You may begin.
Thank you. Good morning, everyone. This is Laura Brown. Welcome to Grainger's Q1 earnings call. With me are D. G. Macpherson, Chairman and CEO and Tom Okray, who will assume the CFO role on May 2nd.
(Forward-Looking Cautionary Statements)
After that, we will open the call for questions. D. G. to you.
D. G. Macpherson
Thank you, Laura. Good morning, thanks for joining us, everyone. Earlier this month, we announced that we had concluded our CFO search. And I'm excited to welcome Tom Okray to Grainger. Tom brings great combination of finance and operations experience with him. He knows our industry well and we're glad to him as part of team.
So moving on to the quarter. The momentum that we saw in the fourth quarter of 2017 continued into the first quarter of 2018. In the US, the volume response to our pricing reset was strong; the demand environment continued to improve. We estimate market growth in the quarter was closer to 4% versus our expectations for 2% to 3% growth for the year. What's encouraging is we're strengthening relationships with both large and mid-sized customers, the pricing reset is allowing us to re-establish trust and gain share by focusing on creating value for our customers.
In Canada, our actions related to the turnaround led to gross profit and operating earnings improvement, and our business model reset is on track. Finally, our single channel online and our international businesses expanded operating earnings in the quarter. All this resulted in performance that was better than our expectations. We're raising our full-year guidance based on our performance in the first quarter and our confidence moving forward.
On Slide four, let's take a look at our results. Q1, 2018 reported results included restructuring charges of $8 million and an $0.11 negative impact to EPS. This morning's call will focus on adjusted results, which exclude the items outlined in our press release. Total Company sales in the quarter were up 9%. Volume was up 8%. We had positive seasonal sales of 1%, mostly in the U.S., offset by 1% decline due to our Techni-Tool divestiture last July. Price was down 1% in the quarter and we have currency favorability of 2% in the quarter driven by strengthening of almost all international currencies in the markets that we participate.
Our normalized gross profit rate declined 30 basis points after adjusting for the revenue recognition, accounting change and a benefit from the timing of our national sales meeting. GP rate was better than expected, driven by U.S. mix, price cost spreads and some Canada price increases, which I'll describe in a bit. We