Industrial tools provider Grainger announced that its board has approved the purchase of $3 billion of its common stock over the next three years.
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The share repurchase will be financed with a combination of cash and the issuance of new, permanent debt.
In addition, the Board increased the repurchase authorization to 15 million shares. This replaces a prior program of 10 million shares approved in April 2014.
Grainger reported results for the 2015 first quarter ended March 31, 2015. Sales of $2.4 billion increased 2 percent versus $2.4 billion in the first quarter of 2014. There were 63 selling days in the 2015 first quarter, the same number as the 2014 first quarter.
Net earnings for the quarter declined 3 percent to $211 million versus $217 million in 2014. Earnings per share of $3.07 were flat versus 2014.
"This was a challenging quarter. Our results were affected by continued headwinds from the strong U.S. dollar and weakness in the oil and gas sector in North America.
"We remain encouraged by the growth achieved with large customers in our U.S. multichannel business and the customer acquisition strategy that is fueling our single channel online businesses," said Chairman, President and Chief Executive Officer Jim Ryan.
Ryan added, "Given the opportunity for share gain and the solid progress we are making with our productivity initiatives, we continued to invest in growth and infrastructure programs. This included the addition of 80 sales representatives, more inventory management installations and expanding our supply chain."
"Earlier today, we announced plans to permanently change our capital structure by taking on debt and buying back $3 billion in stock over the next three years. This change reflects our confidence in the business and our strategy," Ryan concluded.
The company is expected to buy back an incremental $1 billion of stock in 2015, beyond the $400 million previously announced. The incremental share repurchases in 2015 are expected to be accretive to 2015 earnings in the range of $0.08 to $0.12 per share. The company also plans to add approximately 400 new sales representatives in 2015, double the original number announced in late 2014.
To reflect these changes and the expectation of slower macroeconomic growth, Grainger updated its 2015 guidance. The company now expects 1 to 4 percent sales growth and earnings per share of $12.25 to $12.95. The company's previous 2015 guidance, issued on January 26, 2015, included 3 to 7 percent sales growth and earnings per share of $12.60 to $13.60. ■