Grainger profit tops estimates on cost reductions

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

Net income climbed to $144.6 million, or $1.88 a share, from $140 million, or $1.77, a year earlier, the company said today in a statement. Excluding an investment gain, profit was $1.51 a share, beating the $1.34 average estimate of 15 analysts surveyed by Bloomberg.

Grainger plans to cut as many as 400 jobs this year and will offer almost 300,000 products in its 2010 catalog, up from 233,000 this year, to keep customers. Sales fell 14 percent to $1.59 billion, and Grainger said it isn't seeing "a catalyst for a sustained economic turnaround" in major markets.

"The market continues to look at Grainger as a boring defensive distributor," Hamzah Mazari, a Credit Suisse analyst in New York, said in a report Oct. 12. "That perception is no longer valid given a new market expansion program," more products and no pull-back on inventory and service levels during the slump, said Mazari, who rates the stock "outperform."

The company posted a gain of 37 cents a share from a step- up of its investment in MonotaRO Co. after Grainger became a majority owner in September.

Separately, Grainger said it acquired Imperial Supplies LLC from American Capital Ltd. for an undisclosed price. Grainger said the all-cash purchase will boost earnings by 3 cents to 5 cents a share in 2010.

Grainger rose $3.69, or 3.9 percent, to $98 at 8:11 a.m. in trading before the opening of the New York Stock Exchange. The shares gained 20 percent this year through yesterday.