Core Insights - W.W. Grainger reported $4.55 billion in revenue for the quarter ended June 2025, a year-over-year increase of 5.6% [1] - The company's EPS for the same period was $9.97, compared to $9.76 a year ago, with a slight EPS surprise of -0.3% against the consensus estimate of $10.00 [1] Financial Performance - Total reported growth was 5.1%, exceeding the five-analyst average estimate of 4.8% [4] - Net Sales for High-Touch Solutions N.A. were $3.54 billion, slightly below the average estimate of $3.55 billion, reflecting a year-over-year change of +2.5% [4] - Net Sales for Endless Assortment reached $929 million, surpassing the average estimate of $887.37 million, with a year-over-year change of +19.7% [4] - Net Sales for Other amounted to $81 million, in line with the average estimate of $81.42 million, showing a year-over-year change of +3.9% [4] Operating Earnings - Operating earnings for High-Touch Solutions N.A. were $589 million, below the average estimate of $609.17 million [4] - Operating earnings for Endless Assortment were $92 million, exceeding the average estimate of $76.73 million [4] - Operating losses for Other were reported at $-3 million, compared to the average estimate of $-1.05 million [4] Stock Performance - W.W. Grainger's shares returned -1% over the past month, while the Zacks S&P 500 composite increased by +2.3% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

PART I - FINANCIAL INFORMATION [Item 1: Financial Statements](index=3&type=section&id=Item%201%3A%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for W.W. Grainger, Inc. for the three and six months ended June 30, 2025, and 2024, including statements of earnings, comprehensive earnings, balance sheets, cash flows, and shareholders' equity, along with accompanying notes [Condensed Consolidated Statements of Earnings](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) Consolidated Earnings Summary (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $4,554 | $4,312 | $8,860 | $8,547 | | **Gross Profit** | $1,755 | $1,694 | $3,465 | $3,362 | | **Operating Earnings** | $678 | $649 | $1,350 | $1,318 | | **Net Earnings Attributable to W.W. Grainger, Inc.** | $482 | $470 | $961 | $948 | | **Diluted EPS** | $9.97 | $9.51 | $19.83 | $19.13 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Summary (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $597 | $1,036 | | Total current assets | $5,650 | $5,737 | | **Total assets** | **$8,937** | **$8,829** | | Total current liabilities | $2,002 | $2,305 | | Long-term debt | $2,341 | $2,279 | | **Total shareholders' equity** | **$4,083** | **$3,703** | | **Total liabilities and shareholders' equity** | **$8,937** | **$8,829** | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for Six Months Ended June 30 (in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,023 | $1,072 | | Net cash used in investing activities | $(283) | $(177) | | Net cash used in financing activities | $(1,201) | $(763) | | **Net change in cash and cash equivalents** | **$(439)** | **$109** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The company's two reportable segments are **High-Touch Solutions N.A. (HTSNA)** and **Endless Assortment (EA)**, which align with its go-to-market strategies[45](index=45&type=chunk) - In February 2025, Grainger repaid the full principal amount of **$500 million** for its 1.85% Senior Notes that matured[40](index=40&type=chunk) - In June 2025, the Endless Assortment segment's MonotaRO business entered into **¥9 billion** term loan agreements to fund distribution center expansion, maturing in 2035[43](index=43&type=chunk) [Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for the second quarter and first half of 2025, covering consolidated results, segment performance, liquidity, and capital resources, while noting continued global economic volatility and strategies to mitigate inflationary pressures and supply chain challenges, with both High-Touch Solutions N.A. and Endless Assortment segments contributing to sales growth [Results of Operations –Three Months Ended June 30, 2025](index=17&type=section&id=Results%20of%20Operations%20%E2%80%93Three%20Months%20Ended%20June%2030%2C%202025) Q2 2025 Financial Highlights vs. Q2 2024 | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $4,554M | $4,312M | 5.6% | | Gross Profit | $1,755M | $1,694M | 3.6% | | Operating Earnings | $678M | $649M | 4.5% | | Diluted EPS | $9.97 | $9.51 | 4.8% | - Net sales on a daily, constant currency basis increased by **5.1%** in Q2 2025 compared to the prior year period[63](index=63&type=chunk) - Gross profit margin decreased by **80 basis points** to **38.5%** in Q2 2025 from **39.3%** in Q2 2024[63](index=63&type=chunk)[65](index=65&type=chunk) [Segment Analysis – Q2 2025](index=18&type=section&id=Segment%20Analysis%20%E2%80%93%20Q2%202025) High-Touch Solutions N.A. (HTSNA) Q2 Performance (in millions) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $3,544 | $3,458 | 2.5% | | Operating Earnings | $589 | $591 | (0.3)% | - HTSNA sales growth of **3%** on a daily, constant currency basis was primarily driven by volume, while gross profit margin decreased **70 basis points** due to negative price-cost spread and LIFO inventory impacts[71](index=71&type=chunk)[72](index=72&type=chunk) Endless Assortment (EA) Q2 Performance (in millions) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $929 | $776 | 19.7% | | Operating Earnings | $92 | $61 | 50.8% | - EA net sales increased **16%** on a daily, constant currency basis, driven by repeat business and enterprise customer growth at MonotaRO, with gross profit margin increasing by **30 basis points**[76](index=76&type=chunk)[77](index=77&type=chunk) [Results of Operations – Six Months Ended June 30, 2025](index=21&type=section&id=Results%20of%20Operations%20%E2%80%93%20Six%20Months%20Ended%20June%2030%2C%202025) YTD 2025 Financial Highlights vs. YTD 2024 | Metric | YTD 2025 | YTD 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $8,860M | $8,547M | 3.7% | | Gross Profit | $3,465M | $3,362M | 3.1% | | Operating Earnings | $1,350M | $1,318M | 2.4% | | Diluted EPS | $19.83 | $19.13 | 3.7% | - For the first six months of 2025, net sales on a daily, constant currency basis increased by **4.7%** compared to the same period in 2024[80](index=80&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, the company had cash and cash equivalents of **$597 million** and total available liquidity of approximately **$1.8 billion**[105](index=105&type=chunk) - Net cash from operating activities decreased to **$1,023 million** for the first six months of 2025 from **$1,072 million** in the prior year, driven by unfavorable changes in working capital[106](index=106&type=chunk) - Net cash used in financing activities increased significantly to **$1,201 million**, primarily due to the **$500 million** repayment of Senior Notes[108](index=108&type=chunk) - Total debt as a percent of total capitalization decreased to **36.5%** as of June 30, 2025, from **42.9%** at December 31, 2024[110](index=110&type=chunk) [Item 3: Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that there have been no material changes to its primary market risk exposures, which include foreign currency exchange and interest rates, from those disclosed in its 2024 Form 10-K - There were no material changes to the Company's market risk from those described in the 2024 Form 10-K[122](index=122&type=chunk) [Item 4: Controls and Procedures](index=30&type=section&id=Item%204%3A%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[123](index=123&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[124](index=124&type=chunk) PART II - OTHER INFORMATION [Item 1: Legal Proceedings](index=31&type=section&id=Item%201%3A%20Legal%20Proceedings) This section refers to Note 7 of the financial statements for an update on the company's legal proceedings, including ongoing litigation involving KMCO, LLC - The company remains in litigation involving KMCO, LLC and cannot reasonably predict the timing, outcome, or potential loss related to these lawsuits[51](index=51&type=chunk)[127](index=127&type=chunk) [Item 1A: Risk Factors](index=31&type=section&id=Item%201A%3A%20Risk%20Factors) The company reports that there have been no material changes from the risk factors that were previously disclosed in its 2024 Annual Report on Form 10-K - There have been no material changes from the risk factors previously disclosed in the Company's 2024 Form 10-K[128](index=128&type=chunk) [Item 2: Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202%3A%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's repurchases of its common stock during the second quarter of 2025 under its publicly announced share repurchase program Issuer Purchases of Equity Securities – Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Apr. 1 – Apr. 30 | 95,367 | $976.31 | | May 1 – May 31 | 76,555 | $1,072.07 | | Jun. 1 – Jun. 30 | 48,872 | $1,053.04 | | **Total** | **220,794** | N/A | - As of June 30, 2025, **3,683,504 shares** may yet be purchased under the current repurchase program announced in April 2024[129](index=129&type=chunk) [Item 6: Exhibits](index=32&type=section&id=Item%206%3A%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, certifications by the CEO and CFO as required by the Sarbanes-Oxley Act, and XBRL data files - Exhibits filed include the By-laws of W.W. Grainger, Inc., and Certifications of the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[134](index=134&type=chunk)

Core Insights - W.W. Grainger, Inc. (GWW) reported Q2 2025 EPS of $9.97, missing the Zacks Consensus Estimate of $10.00, but showing a 2% year-over-year improvement [1][8] - Quarterly revenues increased by 5.6% year-over-year to $4.55 billion, surpassing the Zacks Consensus Estimate of $4.52 billion, with daily sales also rising by 5.6% [1][8] Segment Performance - The High-Touch Solutions N.A. segment's daily sales grew by 2.5% year-over-year, supported by growth across all geographies, slightly above the predicted growth of 2.2% [2] - The Endless Assortment segment saw a significant daily sales increase of 19.7%, outperforming the estimated growth of 11% [2] Margin Analysis - Cost of sales rose by 6.9% year-over-year to $2.8 billion, while gross profit increased by 3.6% to $1.75 billion, resulting in a gross margin of 38.5%, down from 39.3% in the prior year [3] - Operating income rose by 4.5% year-over-year to $678 million, with an operating margin of 14.9%, slightly down from 15.1% [3] Cash Flow and Balance Sheet - Cash and cash equivalents decreased to $0.6 billion at the end of Q2 2025, down from $1 billion at the end of 2024 [4] - Cash flow from operating activities was $377 million in Q2 2025, compared to $411 million in the same quarter last year [4] - Long-term debt increased to $2.34 billion as of June 30, 2025, from $2.28 billion at the end of 2024 [5] - The company returned $336 million to shareholders through dividends and share buybacks during the reported quarter [5] 2025 Outlook - GWW updated its 2025 net sales forecast to between $17.9 billion and $18.2 billion, up from the previous estimate of $17.6 billion to $18.1 billion, with anticipated sales growth of 4.4-5.9% [6] - Daily sales growth is now expected to be between 4.5% and 6%, revised from the earlier estimate of 4% to 6.5% [6] - EPS guidance has been adjusted to $38.50-$40.25, down from the previous range of $39.00-$41.50 [6] Stock Performance - Over the past year, GWW's shares have increased by 11.2%, while the industry has seen a growth of 16.6% [7]

Core Viewpoint - The company, Grainger (GWW.US), experienced a nearly 10% decline in stock price, approaching its year-to-date low, closing at $940.82, following its second-quarter earnings report which showed mixed results compared to analyst expectations [1] Financial Performance - Adjusted diluted earnings per share for the second quarter were $9.97, an increase from $9.76 in the same period last year, but below the analyst expectation of $10.07 [1] - Quarterly net sales reached $4.55 billion, up from $4.31 billion year-over-year, exceeding the analyst forecast of $4.53 billion [1] Future Guidance - The company revised its 2025 diluted earnings per share guidance to a range of $38.50 to $40.25, down from the previous estimate of $39 to $41.50, while analysts had expected $40.46 [1] - Projected net sales for 2025 are now estimated to be between $17.9 billion and $18.2 billion, slightly up from the prior outlook of $17.6 billion to $18.1 billion, aligning with the analyst expectation of $17.92 billion [1]

Financial Data and Key Metrics Changes - Total company reported sales for the quarter were nearly $4,600,000,000, up 5.6% or 5.1% on a daily constant currency basis [10] - Operating margins for the company were 14.9%, and diluted EPS finished the quarter at $9.97, up $0.21 or 2.2% compared to the prior year [13] - Operating cash flow came in at $377 million, allowing the company to return a total of $336,000,000 to shareholders through dividends and share repurchases [10][13] Business Line Data and Key Metrics Changes - The High-tech Solutions segment saw sales up 2.5% on a reported basis, driven by volume growth and modest price inflation, with a gross profit margin of 41%, down 70 basis points year-over-year [14] - The Endless Assortment segment experienced a sales increase of 19.7% or 16.3% on a daily constant currency basis, with Zoro U.S. up 20% and MonotaRO achieving 16.4% growth [17] - Operating margins for the Endless Assortment segment increased by 200 basis points to 9.9%, with MonotaRO's margins at 13.2% [18] Market Data and Key Metrics Changes - The MRO market remained muted but was softer than expected, with strong performance from contractor and healthcare customers helping to offset slower growth in other areas [14] - Preliminary total company July sales were up slightly north of 6% on a daily constant currency basis, with expectations for total company sales for the third quarter to be up north of 5% [26] Company Strategy and Development Direction - The company is focused on helping customers drive efficiencies, lower purchasing costs, and improve inventory management, especially in uncertain times [6][7] - Strategic investments in product information and digital capabilities are enhancing the company's supply chain and customer service [9] - The company is committed to maintaining price competitiveness and achieving price-cost neutrality over time [23] Management's Comments on Operating Environment and Future Outlook - Management noted that the external environment continues to present uncertainty, but the company remains confident in its ability to deliver value [6][10] - The company updated its earnings outlook for 2025, reflecting tariff-related price-cost timing headwinds and a current full-year estimate for LIFO valuation impact [24] - Management expects gross margin to recover over time as pricing actions take effect and as the company works towards price-cost neutrality [23][25] Other Important Information - The company is adjusting its sales outlook to reflect the latest FX rates and pricing actions, with gross margin now expected to be between 38.6% and 38.9% [25] - The company plans to continue optimizing Zoro's assortment, with a reduction of 1,100,000 SKUs in the quarter to improve customer experience [19][20] Q&A Session Summary Question: Impact of LIFO accounting on operating income - Management indicated that if the company were on FIFO, the second half outlook would not have included the negative impacts of LIFO, but underlying operations would remain similar [30] Question: Progression from Q3 to Q4 - Management expects revenue trends to follow normal seasonality, with improvements in gross margins anticipated due to pricing changes [31][33] Question: Decision-making process for pricing actions - Management decided to keep price increases on a normal schedule to maintain customer stability, despite being slightly upside down in price-cost [39] Question: Zoro's pricing optimization and SKU reduction - Management stated that the pricing decision has been in the works for about a year, aimed at improving customer experience by eliminating low-volume items [41][42] Question: Customer reliance on Grainger during disruptions - Management noted that the current disruption is less about supply and more about market demand, with confidence in passing prices through to customers [48][49] Question: Gross margin pressures - Management clarified that the majority of the gross margin pressure is due to LIFO impacts, with price-cost timing being a smaller factor [51][73] Question: Future pricing and tariff impacts - Management expressed uncertainty about the impact of new tariffs but indicated that the current announcements would not have a significant effect [76] Question: Long-term strategic goals related to pricing - Management emphasized that long-term strategy focuses on providing exceptional service and building customer loyalty rather than solely on pricing [82] Question: Dynamics within government customers - Management reported stability in government contracts, with military business performing well while non-military federal business has struggled [123]

Financial Data and Key Metrics Changes - Total company reported sales for the quarter were nearly $4,600,000,000, up 5.6% or 5.1% on a daily constant currency basis [8][11] - Operating margins for the company were 14.9%, down 50 basis points compared to 2024 [11] - Diluted EPS finished the quarter at $9.97, up $0.21 or 2.2% compared to the prior year period [11] - Operating cash flow came in at $377 million, allowing the company to return a total of $336,000,000 to shareholders through dividends and share repurchases [8] Business Line Data and Key Metrics Changes - High-tech Solutions segment sales were up 2.5% on a reported basis or up 2.8% on a daily constant currency basis, driven by volume growth and modest price inflation [12] - Endless assortment segment sales increased 19.7% or 16.3% on a daily constant currency basis, with Zoro U.S. up 20% and MonotaRO achieving 16.4% growth [15] - Operating margins for the endless assortment segment increased by 200 basis points to 9.9% [15] Market Data and Key Metrics Changes - The MRO market remained muted but was softer than expected, with strong performance from contractor and healthcare customers helping offset slower growth in other areas [12] - Preliminary total company July sales were up slightly north of 6% on a daily constant currency basis, aided by softer comps in the prior year period [23] Company Strategy and Development Direction - The company is focused on helping customers drive efficiencies, lower purchasing costs, and improve inventory management [5][6] - Strategic investments in product information and digital capabilities are enhancing the company's supply chain [7] - The company is committed to supporting local communities with emergency response and recovery efforts [7] Management's Comments on Operating Environment and Future Outlook - The external environment continues to present uncertainty, but the company remains confident in its ability to deliver value [5][8] - The company anticipates continued LIFO headwinds and further price cost timing pressures impacting performance in the back half of the year [9] - The updated outlook for 2025 reflects a lower gross margin guide, now expected to be between 38.6% and 38.9% [22] Other Important Information - The company is adjusting its sales outlook to reflect the latest FX rates and pricing actions, with total company sales for the third quarter expected to be up north of 5% on a daily constant currency basis [22][23] - The company plans to continue optimizing Zoro's assortment, with a net SKU decline of 1,100,000 in the quarter [17] Q&A Session Summary Question: Impact of LIFO accounting on operating income - Management noted that if the company were on FIFO, the second half outlook would not have included the negative impacts of LIFO, but underlying operations would remain similar [28] Question: Progression from Q3 to Q4 - Management indicated that pricing will continue to build with the September pricing change, leading to improved gross margins in Q4 [30] Question: Decision-making process for pricing actions - Management decided to keep price increases on a normal schedule for customer stability, despite being slightly upside down in price cost [37] Question: Zoro's pricing optimization and SKU reduction - The pricing decision has been in the works for about a year, focusing on improving customer experience by eliminating low-volume items [40] Question: Customer demand and market dynamics - Management acknowledged that while market demand is expected to be muted, they feel confident in their ability to realize prices despite lower market demand [113] Question: Government customer dynamics - Management reported stability in government contracts, with no significant cancellations impacting the business [120]

Core Viewpoint - The stock of Grainger (GWW.US) fell nearly 10%, approaching its year-to-date low, following mixed earnings results and revised guidance for 2025 [1] Financial Performance - The adjusted diluted earnings per share for the second quarter were $9.97, an increase from $9.76 in the same period last year, but below the analyst expectation of $10.07 [1] - Quarterly net sales reached $4.55 billion, up from $4.31 billion year-over-year, exceeding the analyst forecast of $4.53 billion [1] Future Guidance - The company now expects diluted earnings per share for 2025 to be between $38.50 and $40.25, revised down from a previous range of $39 to $41.50, while analysts had anticipated $40.46 [1] - Projected net sales for 2025 are estimated to be between $17.9 billion and $18.2 billion, slightly increased from the prior outlook of $17.6 billion to $18.1 billion, aligning with the analyst expectation of $17.92 billion [1]

Q2 2025 Financial Performance - Sales increased by 5.6% to $4.554 billion compared to $4.312 billion in Q2 2024[22] - Daily sales also increased by 5.6%, reaching $71.2 million compared to $67.4 million in Q2 2024[22] - Diluted EPS increased by 2.2% to $9.97 compared to $9.76 in the prior year[22] - Operating margin decreased by 50 bps to 14.9%[22] Segment Performance - High-Touch Solutions N.A sales increased by 2.5% to $3.544 billion[27] - Endless Assortment sales increased by 19.7% to $929 million, with daily, constant currency sales up 16.3%[31] - Zoro U.S daily sales grew by 20.0%[34] Full Year 2025 Guidance Update - Sales guidance updated to $17.9 - $18.2 billion, representing a 4.4% to 5.9% increase[43] - Gross profit margin guidance revised to 38.6% - 38.9%, a decrease of 80 to 50 bps[43] - Operating margin guidance adjusted to 14.7% - 15.1%, a decrease of 80 to 40 bps[43] - EPS (diluted) guidance updated to $38.50 - $40.25, representing a (1.2%) to 3.3% change[43] Tariff-Related Actions - The company expects to achieve price/cost neutrality over time despite tariff-related challenges[40] - Additional pricing actions are planned to mitigate incremental costs while maintaining a competitive assortment[40]

Company Performance - W.W. Grainger reported quarterly earnings of $9.97 per share, missing the Zacks Consensus Estimate of $10 per share, but showing an increase from $9.76 per share a year ago, representing an earnings surprise of -0.30% [1] - The company posted revenues of $4.55 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.78% and increasing from $4.31 billion year-over-year [2] - Over the last four quarters, W.W. Grainger has surpassed consensus EPS estimates just once and topped consensus revenue estimates only once [2] Stock Outlook - W.W. Grainger shares have underperformed the market, losing about 1.4% since the beginning of the year compared to the S&P 500's gain of 7.8% [3] - The current consensus EPS estimate for the coming quarter is $10.63 on revenues of $4.63 billion, and for the current fiscal year, it is $40.47 on revenues of $17.96 billion [7] Industry Context - The Industrial Services industry, to which W.W. Grainger belongs, is currently in the top 5% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact W.W. Grainger's stock performance [5]

[Executive Summary: Second Quarter Highlights](index=1&type=section&id=Executive%20Summary%3A%20Second%20Quarter%20Highlights) Grainger delivered solid Q2 2025 financial performance with increased sales and adjusted diluted EPS, generating strong operating cash flow and shareholder returns, despite tariff-related headwinds [Q2 2025 Performance Overview](index=1&type=section&id=Q2%202025%20Performance%20Overview) Grainger reported solid results for the second quarter of 2025, with sales increasing by 5.6% to $4.6 billion and adjusted diluted EPS growing by 2.2% to $9.97, while generating $377 million in operating cash flow and returning $336 million to shareholders Q2 2025 Key Financial Metrics | Metric | Q2 2025 | YoY Change (Reported) | YoY Change (Adjusted) | | :-------------------------------- | :------ | :-------------------- | :-------------------- | | Sales ($ billion) | $4.6 | 5.6% | 5.1% (daily, constant currency) | | Operating Margin (%) | 14.9% | -20 bps | -50 bps | | Diluted EPS ($) | $9.97 | 4.8% | 2.2% | | Operating Cash Flow ($ million) | $377 | N/A | N/A | | Shareholder Returns ($ million) | $336 | N/A | N/A | [CEO Commentary](index=1&type=section&id=CEO%20Commentary) Chairman and CEO D.G. Macpherson noted that Q2 results were largely in-line with expectations, despite impacts from tariff-related factors, emphasizing the company's focus on customers, service, and innovation to create value amidst macroeconomic uncertainty - Performance was largely **in-line with communicated expectations**, though impacted by **tariff-related factors**[4](index=4&type=chunk) - The company remains **focused on customers, fostering relationships, providing exceptional service, and driving innovation** through differentiated capabilities[4](index=4&type=chunk) [Second Quarter 2025 Financial Results](index=2&type=section&id=Second%20Quarter%202025%20Financial%20Results) Grainger's Q2 2025 financial results detail net sales growth, changes in gross profit and operating margins, earnings performance, tax rates, and cash flow generation [Overall Financial Summary](index=2&type=section&id=Overall%20Financial%20Summary) Grainger's second quarter 2025 financial summary shows an increase in net sales and operating earnings, but a decrease in gross profit margin and operating margin compared to Q2 2024 Q2 2025 vs. Q2 2024 Financial Summary (Reported and Adjusted) | ($ in millions, except per share amounts) | Q2 2025 Reported | Q2 2025 Adjusted | Q2 2024 Reported | Q2 2024 Adjusted | Q2'25 vs. Q2'24 Reported Fav. / (Unfav.) | Q2'25 vs. Q2'24 Adjusted Fav. / (Unfav.) | | :---------------------------------------- | :--------------- | :--------------- | :--------------- | :--------------- | :-------------------------------------- | :------------------------------------- | | Net Sales | $4,554 | $4,554 | $4,312 | $4,312 | 5.6% | 5.6% | | Gross Profit | $1,755 | $1,755 | $1,694 | $1,694 | 3.6% | 3.6% | | Operating Earnings | $678 | $678 | $649 | $665 | 4.5% | 2.0% | | Net Earnings Attributable to W.W. Grainger, Inc. | $482 | $482 | $470 | $482 | 2.6% | —% | | Diluted Earnings Per Share | $9.97 | $9.97 | $9.51 | $9.76 | 4.8% | 2.2% | | Gross Profit Margin (%) | 38.5% | 38.5% | 39.3% | 39.3% | (80) bps | (80) bps | | Operating Margin (%) | 14.9% | 14.9% | 15.1% | 15.4% | (20) bps | (50) bps | | Effective Tax Rate (%) | 23.2% | 23.2% | 22.9% | 22.9% | (30) bps | (30) bps | [Revenue Performance](index=2&type=section&id=Revenue%20Performance) Total company sales increased by 5.6% (5.1% on a daily, constant currency basis) in Q2 2025, with the Endless Assortment segment showing strong growth that significantly outpaced the High-Touch Solutions - N.A. segment - Total sales increased **5.6%** compared to Q2 2024, or **5.1%** on a daily, constant currency basis[7](index=7&type=chunk) Q2 2025 Sales Growth by Segment | Segment | Q2 2025 Sales Growth (Reported) | Q2 2025 Sales Growth (Daily, Constant Currency) | | :-------------------------- | :------------------------------ | :---------------------------------------------- | | High-Touch Solutions - N.A. | 2.5% | 2.8% | | Endless Assortment | 19.7% | 16.3% | - Endless Assortment segment growth was driven by strong performance at both **MonotaRO** and **Zoro**[8](index=8&type=chunk) [Gross Profit Margin](index=2&type=section&id=Gross%20Profit%20Margin) The company's gross profit margin decreased by 80 basis points to 38.5% in Q2 2025, primarily due to headwinds in the High-Touch Solutions - N.A. segment, partially offset by improvements in the Endless Assortment segment - Gross profit margin was **38.5%** in Q2 2025, an **80 basis point decrease** from Q2 2024[9](index=9&type=chunk) - High-Touch Solutions - N.A. segment gross profit margin decreased by **70 basis points** due to tariff-related inflation causing unfavorable price/cost timing and LIFO inventory valuation headwinds[10](index=10&type=chunk) - Endless Assortment segment gross profit margin increased by **30 basis points**, primarily due to margin improvement at **Zoro**[10](index=10&type=chunk) [Earnings Performance](index=3&type=section&id=Earnings%20Performance) Operating earnings increased by 4.5% on a reported basis, but operating margin declined, while diluted EPS also saw an increase, primarily driven by fewer shares outstanding Q2 2025 Earnings Performance | Metric | Q2 2025 | YoY Change (Reported) | YoY Change (Adjusted) | | :-------------------- | :------ | :-------------------- | :-------------------- | | Operating Earnings ($ million) | $678 | 4.5% | 2.0% | | Operating Margin (%) | 14.9% | -20 bps | -50 bps | | Diluted EPS ($) | $9.97 | 4.8% | 2.2% | - Unfavorable gross margin in High-Touch Solutions - N.A. was partially offset by **strong expense leverage** in Endless Assortment[11](index=11&type=chunk) - The increase in diluted EPS was primarily driven by **fewer shares outstanding**[12](index=12&type=chunk) [Tax Rate](index=3&type=section&id=Tax%20Rate) The effective tax rate for Q2 2025 was 23.2%, a slight increase compared to 22.9% in the prior year quarter, remaining consistent on both reported and adjusted bases Effective Tax Rate Comparison | Metric | Q2 2025 | Q2 2024 | | :---------------- | :------ | :------ | | Effective Tax Rate (%) | 23.2% | 22.9% | [Cash Flow](index=3&type=section&id=Cash%20Flow) Grainger generated $377 million in operating cash flow and $202 million in free cash flow during Q2 2025, investing $175 million in capital expenditures and returning $336 million to shareholders through dividends and share repurchases Q2 2025 Cash Flow Summary | Metric | Q2 2025 | | :-------------------------- | :------ | | Operating Cash Flow ($ million) | $377 | | Capital Expenditures ($ million) | $175 | | Free Cash Flow ($ million) | $202 | | Shareholder Returns ($ million) | $336 | - Net earnings were partially offset by **unfavorable working capital** in operating activities[14](index=14&type=chunk) [Full Year 2025 Guidance Update](index=4&type=section&id=Full%20Year%202025%20Guidance%20Update) Grainger updated its full-year 2025 guidance, reflecting tariff impacts with a revised net sales range, lower adjusted diluted EPS, and adjustments to margins, CapEx, and share buyback [Revised Guidance Overview](index=4&type=section&id=Revised%20Guidance%20Overview) Grainger updated its full-year 2025 guidance to reflect anticipated headwinds from certain known tariff impacts, including a higher net sales range but a lower adjusted diluted EPS range, along with adjustments to gross profit margin, operating margin, CapEx, and share buyback - Guidance ranges were updated to reflect anticipated headwinds from **certain known tariff impacts**[15](index=15&type=chunk) Full Year 2025 Guidance Comparison | Metric | Previous 2025 Guidance Range (as of May 1, 2025) | Updated 2025 Guidance Range (as of August 1, 2025) | | :-------------------------------- | :----------------------------------------------- | :--------------------------------------------- | | Net Sales ($ billion) | $17.6 - $18.1 | $17.9 - $18.2 | | Sales growth (%) | 2.7% - 5.2% | 4.4% - 5.9% | | Daily, constant currency sales growth (%) | 4.0% - 6.5% | 4.5% - 6.0% | | Gross Profit Margin (%) | 39.1% - 39.4% | 38.6% - 38.9% | | Operating Margin (%) | 15.1% - 15.5% | 14.7% - 15.1% | | Diluted Earnings per Share ($) | $39.00 - $41.50 | $38.50 - $40.25 | | Operating Cash Flow ($ billion) | $2.05 - $2.25 | $2.05 - $2.25 | | CapEx (cash basis) ($ billion) | $0.45 - $0.55 | $0.55 - $0.65 | | Share Buyback ($ billion) | $1.15 - $1.25 | $1.05 - $1.15 | | Effective Tax Rate (%) | ~23.8% | ~23.8% | | Segment Operating Margin (High-Touch Solutions - N.A.) (%) | 17.0% - 17.4% | 16.5% - 16.9% | | Segment Operating Margin (Endless Assortment) (%) | 8.5% - 9.0% | 9.2% - 9.6% | [Company Information](index=4&type=section&id=Company%20Information) This section provides an overview of Grainger's business, details for the Q2 results webcast, a safe harbor statement regarding forward-looking information, and contact details [About Grainger](index=4&type=section&id=About%20Grainger) W.W. Grainger, Inc. is a leading broad line distributor primarily operating in North America, Japan, and the United Kingdom, serving over 4.5 million customers with MRO products and solutions, and reported $17.2 billion in revenue for 2024 - Grainger is a leading broad line distributor with operations primarily in **North America, Japan, and the United Kingdom**[18](index=18&type=chunk) - The company serves over **4.5 million customers** worldwide with maintenance, repair, and operating (MRO) products and value-added solutions[18](index=18&type=chunk) - Grainger reported **$17.2 billion in revenue** for 2024[18](index=18&type=chunk) [Webcast Information](index=4&type=section&id=Webcast%20Information) Grainger will host a live conference call and webcast on August 1, 2025, at 11:00 a.m. ET to discuss the second quarter results, with a replay available for 90 days - A live conference call and webcast for Q2 results will be held on **Friday, August 1, 2025, at 11:00 a.m. ET**, accessible at invest.grainger.com[17](index=17&type=chunk) - A webcast replay will be available for **90 days**[17](index=17&type=chunk) [Safe Harbor Statement](index=5&type=section&id=Safe%20Harbor%20Statement) The document includes a safe harbor statement, indicating that all forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, and Grainger disclaims any obligation to update these statements - All statements other than historical facts are **forward-looking** and subject to **risks and uncertainties** beyond Grainger's control[19](index=19&type=chunk) - Important factors that could cause actual results to differ include **inflation, customer loss, supply disruptions, competitive pressures, technological failures, and changes in economic or regulatory conditions**[19](index=19&type=chunk) - Grainger disclaims any obligation to update or revise any forward-looking statement, except as required by law[19](index=19&type=chunk) [Contacts](index=6&type=section&id=Contacts) Contact information for media and investor relations is provided for inquiries regarding the company - Media inquiries can be directed to **Erin Ptacek or Robb Kristopher** at Media_Inquiries@grainger.com[21](index=21&type=chunk) - Investor relations inquiries can be directed to **Kyle Bland or Kevin Byrne** at InvestorRelations@grainger.com[21](index=21&type=chunk) [Condensed Consolidated Financial Statements](index=7&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents Grainger's condensed consolidated statements of earnings, balance sheets, and cash flows for the specified periods, detailing financial performance and position [Condensed Consolidated Statements of Earnings](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) The condensed consolidated statements of earnings show Grainger's financial performance for the three and six months ended June 30, 2025, detailing net sales, gross profit, operating earnings, and net earnings Condensed Consolidated Statements of Earnings | (In millions of dollars, except for share and per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $4,554 | $4,312 | $8,860 | $8,547 | | Cost of goods sold | 2,799 | 2,618 | 5,395 | 5,185 | | Gross profit | 1,755 | 1,694 | 3,465 | 3,362 | | Selling, general and administrative expenses | 1,077 | 1,045 | 2,115 | 2,044 | | Operating earnings | 678 | 649 | 1,350 | 1,318 | | Earnings before income taxes | 661 | 636 | 1,318 | 1,291 | | Income tax provision | 153 | 146 | 310 | 304 | | Net earnings | 508 | 490 | 1,008 | 987 | | Net earnings attributable to W.W. Grainger, Inc. | $482 | $470 | $961 | $948 | | Diluted Earnings per share | $9.97 | $9.51 | $19.83 | $19.13 | [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets present Grainger's financial position as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and shareholders' equity Condensed Consolidated Balance Sheets | (In millions of dollars) | As of June 30, 2025 | As of December 31, 2024 | | :------------------------------------ | :------------------ | :---------------------- | | **Assets** | | | | Cash and cash equivalents | $597 | $1,036 | | Total current assets | 5,650 | 5,737 | | Property, buildings and equipment – net | 2,107 | 1,927 | | Total assets | $8,937 | $8,829 | | **Liabilities and Shareholders' Equity** | | | | Total current liabilities | $2,002 | $2,305 | | Long-term debt | 2,341 | 2,279 | | Shareholders' equity | 4,083 | 3,703 | | Total liabilities and shareholders' equity | $8,937 | $8,829 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows outline Grainger's cash movements for the three and six months ended June 30, 2025, across operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows | (In millions of dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $377 | $411 | $1,023 | $1,072 | | Net cash used in investing activities | (158) | (59) | (283) | (177) | | Net cash used in financing activities | (303) | (372) | (1,201) | (763) | | Net change in cash and cash equivalents | (69) | (35) | (439) | 109 | | Cash and cash equivalents at end of period | $597 | $769 | $597 | $769 | [Supplemental Information: GAAP to Non-GAAP Reconciliations](index=10&type=section&id=Supplemental%20Information%3A%20GAAP%20to%20Non-GAAP%20Reconciliations) This section provides definitions for non-GAAP financial measures and reconciliations for sales growth, free cash flow, and income statement adjustments [Non-GAAP Financial Measures Definitions](index=10&type=section&id=Non-GAAP%20Financial%20Measures%20Definitions) This section defines various non-GAAP financial measures used by Grainger, such as adjusted gross profit, operating earnings, diluted EPS, free cash flow, and different sales growth metrics, explaining their purpose in providing a clearer view of core operating results - Non-GAAP measures provide meaningful information to investors by excluding **non-recurring items** like restructuring charges, asset impairments, and business divestiture gains/losses[28](index=28&type=chunk)[30](index=30&type=chunk) - Free cash flow (FCF) is calculated as total cash provided by operating activities less **capital expenditures**[31](index=31&type=chunk) - Daily sales, daily constant currency sales, and daily organic constant currency sales are defined to adjust for **selling days, foreign currency exchange rates, and divested businesses**, respectively[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) [Sales Growth Reconciliation](index=12&type=section&id=Sales%20Growth%20Reconciliation) The sales growth reconciliation details the impact of foreign currency exchange on reported sales growth for the total company and its segments, showing the conversion to daily, constant currency sales growth Sales Growth Reconciliation by Segment (Q2 2025) | | Total Company | High-Touch Solutions - N.A. | Endless Assortment | | :-------------------------- | :------------ | :-------------------------- | :----------------- | | Reported sales (%) | 5.6% | 2.5% | 19.7% | | Daily impact (%) | —% | —% | —% | | Daily sales (%) | 5.6% | 2.5% | 19.7% | | Foreign currency exchange (%) | (0.5)% | 0.3% | (3.4)% | | Daily, constant currency sales (%) | 5.1% | 2.8% | 16.3% | - There were **64 selling days** in both Q2 2025 and Q2 2024[37](index=37&type=chunk) [Free Cash Flow Reconciliation](index=12&type=section&id=Free%20Cash%20Flow%20Reconciliation) This reconciliation shows the calculation of free cash flow for Q2 2025, starting from net cash flows provided by operating activities and subtracting capital expenditures Free Cash Flow Reconciliation (Q2 2025) | (in millions of dollars) | Q2 2025 | | :------------------------------------ | :------ | | Net cash flows provided by operating activities | $377 | | Capital expenditures | (175) | | Free cash flow | $202 | [Income Statement Adjustments Reconciliation](index=13&type=section&id=Income%20Statement%20Adjustments%20Reconciliation) This section provides a detailed reconciliation of GAAP to adjusted non-GAAP income statement figures for Q2 2025 and Q2 2024, highlighting adjustments primarily related to restructuring costs incurred in the prior year Q2 2025 Income Statement Adjustments Reconciliation **Q2 2025 (in millions of dollars):** | Metric | Reported | Adjustment | Adjusted | % of Net sales (Reported) | % of Net sales (Adjusted) | Y/Y (Reported) | Y/Y (Adjusted) | | :-------------------------------- | :------- | :--------- | :------- | :------------------------ | :------------------------ | :------------- | :------------- | | SG&A | $1,077 | — | $1,077 | 23.6 % | 23.6 % | 3.1 % | 4.7 % | | Operating earnings | 678 | — | 678 | 14.9 | 14.9 | 4.5 | 2.0 | | Net earnings attributable to W.W. Grainger, Inc. | $482 | — | $482 | 10.6 % | 10.6 % | 2.6 % | — % | | Diluted earnings per share | $9.97 | — | $9.97 | | | 4.8 % | 2.2 % | **Q2 2024 (in millions of dollars):** | Metric | Reported | Adjustment | Adjusted | % of Net sales (Reported) | % of Net sales (Adjusted) | Y/Y (Reported) | Y/Y (Adjusted) | | :-------------------------------- | :------- | :--------- | :------- | :------------------------ | :------------------------ | :------------- | :------------- | | SG&A | $1,045 | $(16) | $1,029 | 24.2 % | 23.9 % | 6.3 % | 4.7 % | | Operating earnings | 649 | 16 | 665 | 15.1 | 15.4 | (1.8) | 0.6 | | Net earnings attributable to W.W. Grainger, Inc. | $470 | 12 | $482 | 10.9 % | 11.2 % | — % | 2.6 % | | Diluted earnings per share | $9.51 | 0.25 | $9.76 | | | 2.5 % | 5.2 % | - Adjustments for Q2 2024 reflect **restructuring costs of $15 million** in Grainger's HTS-N.A. segment and **$1 million** in Other businesses; no non-GAAP adjustments were made for Q2 2025[40](index=40&type=chunk) - The reported and adjusted effective tax rates were **23.2% for Q2 2025** and **22.9% for Q2 2024**, with a tax benefit related to 2024 restructuring costs[40](index=40&type=chunk)