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]