Grainger profit exceeds second-quarter estimates

W.W. Grainger Inc., the Lake Forest-based building-maintenance supplies distributor, reported second-quarter profit that beat analysts' estimates as the company reduced costs.

Net income declined 18 percent to $92.5 million, or $1.21 a share, from $113.2 million, or $1.42, a year earlier, Grainger said today in a statement. Profit topped the average estimate of $1.17 a share in a Bloomberg survey of 13 analysts.

Chief Executive Officer Jim Ryan has limited travel and consulting expenses and eliminated merit pay increases. Grainger continues to add products and salespeople in an effort increase market share amid the global recession. The company said today it hasn't seen any pickup in demand.

"Grainger's margins have held up better than its competitors," John Baliotti, a New York-based analyst with FTN Equity Capital Markets Corp., said in an interview. "It was a strong quarter." Baliotti has a "buy" rating on the stock.

Gross profit margins, or profit remaining after deducting production costs, widened about 60 basis points from the year- earlier period to 40.8 percent amid price increases and cost reductions, Grainger said on a conference call.

Grainger rose 41 cents to $82.99 at 4:15 p.m. in New York Stock Exchange composite trading.

Grainger has added "modestly" to its sales force while eliminating 298 jobs in other areas since February, according to the statement. The company plans to cut a total of 400 non-sales jobs this year.

Sales for the quarter fell 13 percent to $1.53 billion, marking a third straight decline. The company said it is poised to cut more costs if necessary.

"The good news is that the steep decline that began in the 2008 fourth quarter has moderated for now and things have not gotten worse," Bill Chapman, director of investor relations, said today on a Webcast presentation.

Grainger had 18,334 workers at the end of 2008, according to its annual report.