Grainger(GWW) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1: Financial Statements 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 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 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 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 - 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] - In February 2025, Grainger repaid the full principal amount of $500 million for its 1.85% Senior Notes that matured[40] - 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] Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - Gross profit margin decreased by 80 basis points to 38.5% in Q2 2025 from 39.3% in Q2 2024[63][65] Segment Analysis – Q2 2025 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][72] 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][77] Results of Operations – Six Months Ended June 30, 2025 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] Liquidity and Capital Resources - 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] - 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] - Net cash used in financing activities increased significantly to $1,201 million, primarily due to the $500 million repayment of Senior Notes[108] - 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] Item 3: Quantitative and Qualitative Disclosures About Market Risk 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] Item 4: Controls and Procedures 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] - 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] PART II - OTHER INFORMATION Item 1: Legal Proceedings 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][127] Item 1A: Risk Factors 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] Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 6: Exhibits 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]