Grainger Q2 Revenue Jumps 5.6%

Core Insights - W.W. Grainger reported Q2 2025 sales of $4.55 billion, exceeding analyst estimates of $4.53 billion, while earnings per share (EPS) were $9.97, slightly below expectations of $10.07 [1][2] - The company revised its full-year 2025 adjusted EPS and margin outlook downward, despite strong growth in its Endless Assortment segment, which saw a 19.7% year-over-year sales increase [1][14] Financial Performance - Revenue (GAAP) increased by 5.6% year-over-year, driven primarily by the Endless Assortment unit [2][5] - Gross profit margin decreased to 38.5%, and operating margin fell to 14.9%, attributed to higher costs from U.S. tariffs on imports [2][7] - Free cash flow was reported at $202 million, reflecting increased capital expenditures [2][8] Business Overview - W.W. Grainger operates as a major distributor of industrial supplies and MRO solutions, serving over 4.5 million clients globally [3] - The company employs a dual model: High-Touch Solutions for complex procurement and the Endless Assortment platform for simpler transactions [3][4] Segment Performance - The Endless Assortment segment, including Zoro and MonotaRO, experienced significant growth, with sales up 19.7% [5][10] - High-Touch Solutions North America saw slower growth at 2.5%, with profitability impacted by tariff-related inflation [6][11] Strategic Focus - The company emphasizes technology-driven enhancements and supply chain resilience, with ongoing investments in eProcurement tools [4][12] - Management highlighted the importance of managing input costs and adapting pricing strategies to maintain profitability [4][12] Guidance and Future Outlook - Full-year 2025 adjusted diluted EPS is now expected to range from $38.50 to $40.25, down from previous estimates [14] - Sales growth outlook for 2025 has been raised to 4.4% to 5.9%, indicating continued top-line momentum despite lower profitability expectations [14][15] - Capital spending is projected to increase to $0.55 billion to $0.65 billion for fiscal 2025 [16]