Business supply firm W.W. Grainger adds Fremont location

0 Comments | Oakland Tribune, Jul 15, 2008 | by George Avalos

W.W. Grainger Inc. plans to do more than survive or dodge a dicey economy. The company is determined to prosper amid the sluggish times.

The distributor of hand tools, electric motors, light bulbs, janitorial items and other industrial and commercial supplies is expanding four of its East Bay locations and is adding a brand-new location in the area.

"Historically, Grainger has done well in times of a downturn in the economy," said Rick Haley, district manager for Grainger's Bay Area operations. "Being a maintenance, repair and industrial supply company, we are not as impacted by economic changes."

Lake Forest, Ill.-based Grainger is adding a new facility in Fremont that will open this fall. Over the last year, Grainger also has expanded existing facilities in Concord and Hayward. In recent months, the company has relocated its operations in San Leandro and Berkeley to larger facilities in the same cities.

The Fremont branch is Grainger's first location in the East Bay city and fills a gap between the company's existing operations in Hayward and Silicon Valley.

The moves also mean Grainger is adding jobs in the Bay Area.

"We will see some additional people brought on board with the opening of the new facility in Fremont," Haley said.

Grainger's existing Bay Area staff of 250 people will increase by roughly 15 percent in the coming months, Haley said. That means the company could add 35 to 40 employees in the Bay Area.

The company's business model means its customers typically are not using discretionary income to obtain supplies from Grainger.

"We are not impacted by the slow economy like a retailer might be," Haley said. "We provide the things that companies need to keep up and running day in and day out."

What's more, the tight economy also has prodded businesses to find ways to control their expenditures.

"In this economy, we see a lot of businesses that are trying to run more efficiently and make sure they are lean and mean as they can," said Debra Ceffalio, a spokeswoman for Grainger. "We have the inventory and the businesses don't have to carry it."

Grainger carries about 150,000 products in its catalog. It also offers 500,000 products at its Internet site. The physical locations also have plenty of inventory. The new Fremont site will stock about 20,000 items, Ceffalio said.

The company's profits and sales have risen lately. During its first quarter of 2008 that ended in March, Grainger posted profits of $114.2 million and revenues of $1.66 billion. Those results were 12 percent and 7 percent higher, respectively, than the same quarter the year before.

In 2007, Grainger reported profits of $420 million, up 85 percent from 2006, and revenues of $6.42 billion, up 38 percent from the prior year.

"We still expect profitability to improve this year," C. Stephen Tusa, an analyst with J.P. Morgan, wrote in a research note recently. "But the rate of expansion is uncertain in a tougher U.S. economy."

It will be increasingly difficult for Grainger to pass along to its customers its higher costs for raw materials, Tusa wrote. That's because of pricing actions expected to be taken by local competitors.

Despite the uncertainties, local business leaders welcomed Grainger's expansion mode. The broadening of the company's operations indicate that the East Bay remains attractive despite a string of job losses during 2008.

"The fundamentals are still there for this region," said Bruce Kern, executive director of the East Bay Economic Development Alliance. "We are still seeing business investment. We are seeing companies expand their facilities. I'm still bullish on the East Bay."

George Avalos covers jobs, economic development, commercial real estate, finance and oil companies. Reach him at 925-977-8477 or gavalos@bayareanewsgroup.com