W.W. Grainger Inc.
(GWW) recently reported a 14% year-over-year drop in July sales. The company is experiencing weak demand in nearly every end market as the economic slowdown is forcing most of its customers to idle or close facilities and delay purchases.

Grainger witnessed a 14% decline in US sales as demand remained weak across all end markets. After increasing marginally in the second quarter, sales to the government segment declined in mid-single digits for the month of July, reflecting weakness among state agencies owing to budget cuts.

In the Canadian (Acklands-Grainger) division, sales were down 19%. Sales were down 10% in local currency due to continued weakness in the forestry and mining industries, which was partially offset by growth in the construction and oil and gas markets.

However, sales of Grainger’s other businesses increased 5%, driven by growth in Puerto Rico, China and Panama, along with the incremental sales from India. Sales in Mexico fell 26%, primarily due to the unfavorable impact of foreign exchange translation. Mexican sales were down 3% in local currency.

Grainger anticipates similar sales trend for the month of August. Its sales trends generally correlate with industrial production. According to the company’s filings, Consensus Forecast-USA projected a decline in Industrial Production and GDP by 11% and 2.6%, respectively for the United States in 2009, and a 2.3% drop in GDP for Canada. Grainger expects continued weakness in sales and increased pricing pressure for the remainder of the year. We forecast an 11% decline in sales for the full year.

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