Grainger COO says Feb sales soften

By Ben Klayman

CHICAGO (Reuters) - W.W. Grainger Inc (GWW.N: Quote, Profile, Research, Stock Buzz) saw February sales soften, but not enough to make the building maintenance supply company cut its full-year financial forecast, the chief operating officer said on Monday.

"February is softening a little bit, but not dramatically," James Ryan, who is also president, said at the Reuters Manufacturing Summit.

"Our business is still strong," he added, saying concerns about slowing sales in Grainger's most recent quarter were "overemphasized."

Many view Grainger, which sells such items as lighting, motors and janitorial supplies needed by contractors and building managers, as a proxy for the U.S. economy because of its breadth of products. Some investors have voiced fears the economy is sliding into recession.

"We are seeing slowing in some geographies," Ryan said at the summit in Chicago. "2008 is going to be tougher than 2007 for sure, but there are some things we are doing in our business that work even in a down economy."

Last month, Grainger reported a stronger-than-expected fourth-quarter profit, but its shares fell as investors worried about slowing sales in December.

However, earlier this month, the Chicago area-based company posted an 8 percent sales gain in January, in line with its forecast for a 2008 revenue increase in the range of 7 to 10 percent. Ryan said on Monday it would be "premature" to change an outlook the company recently affirmed.

Ryan also said Grainger's small sales in China, which totaled almost $3 million last year, are picking up steam and will finish higher this year. Of last year's total, $1.3 million was recorded in the fourth quarter.

"Our growth (in China) picked up more in the second half than it did in the first half," he said. "It's accelerating and we expect it to accelerate."

MEETING THE FEDS

Ryan added that Grainger expects to meet with U.S. Justice Department officials to discuss concerns over a government contract "within the next month or so."

"There's a difference of opinion somewhere between how we're complying to that contract. We absolutely believe we're in full compliance," he said. "When the Justice Department is ready, we'll sit down with them and talk about where they believe the discrepancies are."

Asked when the meeting would occur, Ryan replied, "probably sometime within the next month or so."

Grainger disclosed early this month that the Justice Department had informed it of concerns it had potentially overcharged government customers.

Grainger shares closed on Monday up $1.16 or 1.6 percent, at $75.93 on the New York Stock Exchange.  Continued...