W.W. Grainger (GWW) 10-K risk factor changes: FY2022 vs FY2021

Grainger’s business and operations have been and [removed: may continue to] [added: could in the future] be adversely affected by the global outbreak of the Coronavirus and its [removed: variants, including the Delta variant, the Omicron variant and any other] variants [removed: that may emerge] (COVID-19 [removed: pandemic) and may be adversely affected by] [added: pandemic), or] other global outbreaks of pandemic disease.

Additional effects from [removed: the COVID-19 pandemic] [added: global pandemics] on Grainger's business [added: could] include adverse impacts on transportation, including shipping delays and port disruptions, increased shipping costs, constraints on the availability of products, [added: inflation,] and labor [removed: shortages, which have impacted Grainger’s ability to hire employees to fill all open positions.][added: shortages.]

[removed: Some actions that Grainger has taken] [added: The transition] in [removed: response] [added: recent years] to [removed: the COVID-19 pandemic, including enabling] remote [added: and “hybrid”] working arrangements, may increase Grainger’s vulnerability to cybersecurity [removed: incidents] [added: incidents,] including breaches of information systems security, which could damage Grainger’s reputation and commercial relationships, disrupt operations, increase costs and/or decrease revenues, and expose Grainger to claims from customers, suppliers, financial institutions, regulators, payment card [removed: association,] [added: associations,] employees and others.

[removed: While Grainger attempts] [added: These adverse effects could result in product shortages, including certain PPE and cleaning supplies, and may impact the Company’s ability] to maintain sufficient inventory [removed: levels to meet quickly shifting customer demand patterns] and [removed: supplier lead time requirements, which may become extended due] to [removed: the pandemic demand increase, the Company cannot be certain it will be able to] accurately predict demand or lead times, which might cause it to be unable to service customer demand or expose it to risks of product shortages.

[removed: From time to time, product] [added: Addressing] shortages [removed: have also required] [added: may require] the Company to procure products from new suppliers or through brokers with whom it has a limited or no prior relationship.

The duration and ultimate impact of [removed: the COVID-19] [added: a global] pandemic on the Company’s business, results of operations and financial condition will depend on numerous evolving factors and future developments, which are highly uncertain and cannot be predicted at this time.

Such factors and developments may include the [added: extent and] geographic spread, severity and duration of the [removed: COVID-19] pandemic, including whether there are periods of increased [removed: COVID-19] cases, the [removed: further spread of the Delta variant, Omicron variant or the emergence of other new or more contagious variants that may render vaccines ineffective or less effective, disruption to Grainger’s operations resulting from employee illnesses or any inability to attract, retain or motivate employees, the development, availability and administration of effective treatment or vaccines and the willingness of individuals to receive a vaccine or otherwise comply with various mandates, the] extent and duration of the impact on the U.S. or global economy, including the pace and extent of recovery when the pandemic subsides, and the actions that have been or may be taken by various governmental authorities in response to the outbreak.

[removed: If] [added: In addition, if] the Company is unable to respond to and manage the impact of [removed: these] [added: governmental] mandates, [removed: requirement] [added: requirements] or [removed: events,] [added: other directives related to a pandemic,] the Company’s business and results of operations may [removed: continue to] be adversely affected.

Inflation could cause Grainger's operating and administrative expenses to grow more rapidly than net sales, which could result in lower gross margins and lower net [removed: earnings.][added: earnings*.*]

Market variables, such as inflation of product costs, labor rates and fuel, freight and energy costs, [added: as well as geopolitical events] could [removed: increase] potentially [removed: causing] [added: cause] the Company to be unable to manage its operating and administrative expenses in a way that would enable it to leverage its revenue growth into higher net earnings.

In addition, Grainger's inability to pass on [removed: such] increases in costs to customers in a timely manner, or at all, could cause Grainger's operating and administrative expenses to grow, which could result in lower gross profit margins and lower net earnings.

[removed: The] [added: Grainger’s logistics or supply chain network could be disrupted by the] occurrence [removed: of] [added: of:] one or more natural or human induced disasters, including earthquakes, [added: tsunamis,] storms, hurricanes, floods, fires, droughts, tornados and other extreme weather; pandemic diseases or viral contagions such as the COVID-19 pandemic; geopolitical events, such as war, civil unrest or terrorist attacks in a country in which Grainger operates or in which its suppliers are located; [added: disruptions in transport networks, including from transport providers or third party work stoppages related to labor strikes or lockouts;] and the imposition of measures that create barriers to or increase the costs associated with international [removed: trade could result in disruption of Grainger’s logistics or supply chain network.][added: trade.]

Economic, political and industry trends affect Grainger’s business [removed: environments.][added: environment.]

Many of these customers operate in markets that are subject to cyclical fluctuations resulting from market uncertainty, trade and tariff policies, costs of goods sold, currency exchange rates, [removed: central bank] interest rate fluctuations, economic downturns, recessions, foreign competition, offshoring of production, oil and natural gas prices, geopolitical developments, labor shortages, inflation, natural or human induced disasters, extreme weather, outbreaks of pandemic disease such as the COVID-19 pandemic, inflation, deflation, and a variety of other factors beyond Grainger’s control.

Products are purchased from more than [removed: 4,900] [added: 5,000] suppliers located in various countries around the world, not one of which accounted for more than 5% of total purchases.

These factors could include economic downturns, recessions, outbreaks of pandemic disease such as the COVID-19 pandemic [removed: (which from time to time has resulted in some shortages of PPE, cleaning supplies and] [added: or] other [removed: products),] [added: similar global pandemics,] natural or human induced disasters, extreme weather, geopolitical unrest, tariffs, new tariffs or tariff increases, trade issues and policies, detention orders or withhold release orders on imported products, labor problems or shortages experienced by Grainger’s suppliers or others in the supply chain, transportation availability, staffing and cost, shortage of raw materials, [added: supplier consolidation,] unilateral product cost increases by suppliers of products in short supply, inflation and other factors, any of which could adversely affect a supplier’s ability to manufacture or deliver products or could result in an increase in Grainger’s product costs.

This increases the risk of supply disruption due to the additional lead time [removed: required and] [added: required,] distances [removed: involved.][added: involved, and the range of potential consequences of various geopolitical risks.]

Some of Grainger’s products contain significant amounts of commodity-priced materials, such as steel, copper, petroleum derivatives, rare earth minerals, or other materials or inputs required to manufacture [removed: PPE and other pandemic-related] [added: certain] products and are subject to price changes based on fluctuations in the commodities market.

Grainger’s exposure to fluctuations in foreign currency rates results primarily from the translation exposure associated with the preparation of the Consolidated Financial [removed: Statements (Financial Statements),] [added: Statements,] as well as from transaction exposure associated with transactions in currencies other than an entity’s functional currency.

While the [added: Consolidated] Financial Statements are reported in U.S. dollars, the Financial Statements of Grainger’s subsidiaries outside the U.S. are prepared using the local currency as the functional currency and translated into U.S. dollars.

In addition, Grainger is exposed to foreign currency exchange rate risk with respect to the U.S. dollar relative to the local currencies of Grainger’s international subsidiaries, primarily the [added: Japanese yen,] Canadian dollar, [removed: euro,] [added: British] pound sterling, Mexican peso, [added: Chinese] renminbi and [removed: yen,] [added: euro,] arising from transactions in the normal course of business, such as sales and loans to wholly owned subsidiaries, sales to customers, purchases from suppliers, and bank loans and lines of credit denominated in foreign currencies.

These fluctuations in foreign currency exchange rates [removed: could] [added: has affected and may continue to] affect Grainger’s results of operations and impact reported net sales and net earnings.

This includes the ease of use of Grainger’s high-touch [removed: operations] [added: operations, eCommerce platforms] and delivery of products.

[added: As its eCommerce platforms have grown in recent years,] Grainger has increased, and expects to continue to increase, its investments in developing, managing and implementing technology information systems, software development and other capabilities to provide [removed: high-quality] [added: simplified customer interactions and to provide high-quality, user-friendly] service to its customers and [removed: simplify] [added: streamline] customer interactions.

Developing, [added: upgrading,] managing or implementing new [removed: technology] [added: technologies, business applications, strategies] and innovations may [added: require significant investment of resources by the Company, may] result in unexpected costs and disruptions to operations, may take longer than expected, may increase the Company’s vulnerability to cyber breaches, attacks or intrusions, and may not provide all anticipated benefits.

The inability to introduce new products and services and effectively integrate them into Grainger’s existing [removed: mix] [added: assortment] could have a negative impact on future sales growth and Grainger’s competitive position.

The trading prices and volumes of Grainger’s common stock may be subject to broad and unpredictable fluctuations due to changes in economic, political and market conditions, the financial results and business strategies of Grainger and its competitors, changes in expectations as to Grainger’s future financial or operating performance, including estimates by securities analysts and investors, the Company’s failure to meet the financial performance guidance or other forward-looking statements provided to the public, speculation, coverage or sentiment in the media or investment community or by groups of individual investors, changes in capital structure, share repurchase programs or dividend policies, [added: economic decline, political unrest or geopolitical conflict,] outbreak of pandemic disease such as the COVID-19 pandemic, and a number of other factors, including those discussed in this Item 1A.

Although Grainger’s information systems are protected with [removed: robust] backup and security systems, including physical and software safeguards and remote processing capabilities, information systems are still vulnerable to damage or interruption from natural or human induced disasters, extreme weather, power losses, telecommunication failures, user error, third party actions such as malicious computer programs, denial-of-service attacks and cybersecurity breaches, and other problems.

If successful, [removed: these attacks] [added: cyber-attacks] may expose Grainger to risk of loss or misuse of proprietary or confidential information or disruptions of business operations.

Grainger has been subject to unauthorized accesses of certain supplier and customer [removed: information] [added: information, including] in the [removed: past,] [added: last three years,] which it deemed immaterial to its business and operations individually and in the aggregate, and may be subject to other unauthorized accesses of its systems in the future.

While Grainger has instituted these and other safeguards for the protection of [removed: information,] [added: information and governance and oversight of its information security posture,] because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, Grainger may be unable to anticipate these techniques or implement adequate preventative measures.

Any breach of Grainger’s security measures or any breach, error or malfeasance of those of its third-party service providers could cause Grainger to incur significant costs to protect any customers, suppliers, [removed: employees, and other parties whose personal data is compromised and to make changes to its information systems and administrative processes to address security issues.]

In addition, although Grainger maintains insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber and information security risks, [added: depending on the nature, location and extent of any event,] such insurance coverage may be insufficient to cover all losses.

Loss of customer, supplier, employee or intellectual property or other business information or failure to comply with data privacy and security laws could disrupt operations, damage Grainger’s reputation and expose Grainger to claims from customers, suppliers, financial institutions, regulators, payment card associations, employees and others, any of which could have a material adverse effect on Grainger, [removed: its] [added: and] financial condition and results of operations.

[removed: In] [added: Grainger has experienced certain of these cybersecurity incidents in] each instance, Grainger provided notifications and adopted remedial measures.

[removed: While these incidents have not been deemed to be material to Grainger,] [added: However] there can be no assurance that a future breach or incident would not be material to Grainger’s operations and financial condition.

[removed: The Company's employee hiring and] retention also depends on the Company's ability to build and maintain a diverse and inclusive workplace culture that enables its employees to thrive.

Grainger’s results of operations could be adversely affected by increased costs due to [removed: increased] [added: generally higher wage rates,] competition for diverse talent, higher employee turnover, increased employee benefit costs, failure to successfully hire executives and key employees or the loss of executives and key employees.

[added: These efforts and programs could be difficult to achieve and costly to implement, and] Grainger’s [added: actual or perceived] failure to execute its ESG programs as planned could adversely affect the Company’s reputation, business and financial performance.

Grainger is subject to various domestic [removed: and foreign] [added: and foreign] laws, regulations and standards.

For example, Russia’s invasion of Ukraine and other geopolitical conflicts, as well as the related international response, has and may continue to exacerbate inflationary pressures, including causing increases in fuel and other energy costs.

Furthermore, in connection with Russia’s invasion of Ukraine, the U.S. and other countries have responded by imposing major, and potentially prolonged, economic sanctions and other responses.

Although Grainger's business has limited direct exposure in Russia and Ukraine, further escalation of geopolitical tensions could have a broader impact that expands into other markets where we do business, which could adversely affect Grainger’s business and/or supply chain, customers and/or suppliers in the broader region.

Similarly an increase in tensions across the Taiwan Straits and in overall relations with China, and the potential of various resulting actions and responses of the international community and other factors affecting trade in and from the region could disrupt the sourcing and manufacturing of products in the region.

It is not possible to predict whether these events will occur, or the broader consequences of these events if they did occur, which could include further instability, geopolitical shifts and adverse effects on the global economy or possible sanctions, embargoes or other trade barriers.

Grainger requires its suppliers and their sub-suppliers, for products sold in the U.S., Canada and Mexico, to comply with Grainger’s Supplier Code of Ethics, or other similar responsible sourcing standards, as a condition to doing business with Grainger.

Grainger’s Supplier Code of Ethics focuses on four main areas of ethical sourcing: human rights, labor (including prohibitions on child and forced labor), environment and anti-corruption.

Grainger does not control its suppliers and their sub-suppliers, and neither Grainger nor its suppliers or other partners may be able to uncover all instances of noncompliance with Grainger’s Supplier Code of Ethics and ethical and lawful business practices.

Even an isolated incident, or the aggregate effect of individually insignificant incidents, can erode trust and confidence, particularly if they result in adverse publicity, governmental investigations, product recalls, or litigation, and as a result, could tarnish Grainger’s brand and lead to adverse effects on Grainger’s business.

The foreign currency exchange rate is driven by a variety of macroeconomic factors and fiscal decisions of various governments and central banks, all of which Grainger has no control over.

The growth of Grainger’s eCommerce platforms exposes Grainger to additional risks which could adversely affect Grainger’s reputation, financial performance and operating results.

The successful execution of Grainger’s eCommerce growth strategy depends on a number of factors, including the Company’s investment in its eCommerce platforms, consumer preferences and purchasing trends, and the ability to deliver a seamless procurement experience across digital and also physical retail channels.

Grainger has also made significant investments in digital advertising and customer acquisition and retention efforts for its eCommerce channels, including through paid and non-paid advertising such as display advertising, search engine optimization, email and mobile “push” notifications.

If Grainger’s customer-facing technology systems are perceived as more difficult or less compelling for customers to use than those of the Company’s competitors, or if digital marketing efforts are unsuccessful or if Grainger is otherwise unsuccessful at realizing the benefits of these investments, its reputation, financial condition and operating results may be adversely affected.

In addition, the successful operation of Grainger’s eCommerce channels depends in part upon third parties and factors over which Grainger has limited or no control.

For example, Grainger relies in part on Internet search engines to drive traffic to its websites, and the reach of Grainger’s eCommerce channels is impacted by how and where its websites rank in both paid and unpaid search results.

Potential changes to search engine ranking rules could cause Grainger’s websites to place lower in search results and cause Grainger to incur increased advertising costs in order to increase its visibility.

Further, ongoing changes in the legal and regulatory requirements surrounding data privacy, online tracking technologies such as cookies, digital advertising and other eCommerce matters could require Grainger to modify its eCommerce strategy, incur significant additional costs to comply with such changes or otherwise adversely affect Grainger’s business, results of operations or financial condition.

Grainger also relies on email and other messaging services to promote its websites and product offerings, and changes in the Company’s current or prospective customers’ use of email or other messaging services or actions by third parties to block, restrict or charge for the delivery of such messages could adversely affect sales through Grainger’s eCommerce channels and the Company’s results of operations.

The inclusion of Grainger-branded products in the product assortment could subject Grainger to increased claims and litigation activity.

In addition, any insurance or indemnification rights, including against the manufacturer of such products, may be insufficient or unavailable to protect Grainger against potential loss exposures.

Grainger has a controlling ownership interest in MonotaRO, which is listed on the Tokyo Stock Exchange (TSE).

MonotaRO's disclosure and reporting obligations under TSE listing requirements and Japanese securities laws, including the timing of such obligations, may vary from Grainger's obligations under New York Stock Exchange listing requirements and U.S. securities laws.

MonotaRO's listed securities may be subject to the same volatility, price and securities litigation risks to which Grainger's common stock is subject.

Moreover, senior leadership, including Grainger's Chief Technology Officer and Chief Information Security Officer, present a cybersecurity briefing at every Audit Committee meeting, provide "cyber dashboard" reports for the Board material at each meeting, and at least annually brief the full Board of Directors.

employees, and other parties whose personal data is compromised and to make changes to its information systems and administrative processes to address security issues.

Grainger works with third party information security consultants to assess and enhance its policies and incident responses and to respond to breaches.

None of these incidents have been deemed to be material to Grainger and Grainger has neither incurred any material net expenses nor been penalized or paid any settlement amounts with respect to any cybersecurity breach in the last three years.

Grainger’s eCommerce channels are subject to risks related to online payment methods and other online transactions, including through purchasing platforms.

Grainger accepts a variety of payment methods via its eCommerce channels, including credit card, debit card, PayPal and other payment methods and other online transactions, including through its eProcurement technologies which communicate directly with Grainger.com and Grainger's other eCommerce channels.

While Grainger generally relies on third parties to facilitate eCommerce payments and payment processing services, Grainger may become subject to additional compliance requirements and regulations regarding these transactions, and may also suffer losses from online fraudulent transactions on its eCommerce channels.

In addition, Grainger must pay certain transaction fees relating to these transactions, which may increase over time and could have an impact on product margin, profitability and operating costs.

Grainger’s eCommerce channels may become subject to further rules and regulations, and changes in these rules and regulations, or their interpretation, could increase the cost of doing business.

The performance of Grainger’s stock price could impact Grainger’s use of equity-based compensation to attract and retain executives and other key employees.

The Company's employee hiring and

For example, the Company continues to monitor the Inflation Reduction Act of 2022 (IRA) and other similar regulatory developments to evaluate their potential impact on Grainger’s tax rate, financial statements and share repurchase program.

If environmental laws and regulations are either changed or adopted that impose significant operational restrictions or compliance requirements upon the Company or its suppliers, products,

The COVID-19 pandemic has disrupted and adversely affected Grainger’s business, including its business with customers and suppliers.

Among other things, Grainger experienced customer disruptions, including their ability or willingness to purchase products, delays in making purchasing decisions, and shifts in the types and quantities of products purchased.

These may recur during and beyond the COVID-19 pandemic.

Grainger has also experienced and may continue to experience supply chain disruptions, supplier inability to manufacture or deliver products to Grainger or meet the unprecedented demand for pandemic-related products, rapid shifts in the type, quantity or quality of products sold, and higher product costs as a result of inflation.

The potential for further disruptions from the COVID-19 pandemic, including closures of customer and supplier facilities remains.

The effects of the COVID-19 pandemic on Grainger also include restrictions on Grainger’s employees’ ability to visit customers and many of Grainger’s employees’ ability to work in offices or at facilities, as well as disruptions or temporary closures of the Company’s facilities, including distribution centers, branches, and support buildings.

In addition, Grainger’s remote working arrangements have required the Company to make adaptions to its controls and procedures that could impact their design or operating effectiveness.

The COVID-19 pandemic has also resulted in increased variable compensation, wage rates and employee healthcare costs, which adversely affect net earnings, and Grainger expects these trends to continue.

Furthermore, as a result of surges in demand and disruptions in supply chains, including in Asia and other locations, from time to time, the COVID-19 pandemic has resulted in shortages of certain PPE, cleaning supplies and other products.

These shortages have impacted and in the future may continue to impact Grainger's ability to obtain or deliver inventory to customers on a timely basis or at all.

This uncertainty caused Grainger to acquire excess inventory, which led to additional inventory carrying costs and inventory obsolescence, and similar results may occur in the future.

For example, in each of its first two fiscal quarters of 2021 as discussed in its corresponding Quarterly Reports on Form 10-Q, the Company had pandemic-related inventory adjustments in the U.S. business (part of High-Touch Solutions N.A.) on certain non-core SKUs, which were selling below cost based on then current market-relevant pricing.

Despite due diligence and product compliance protocols, the products from these sources may not be delivered on a timely basis or at all, or their quality may not be as represented, all of which could cause Grainger to incur costs, including the expense of procuring alternate products or recalling or replacing products in addition to reputational and other adverse impacts to Grainger’s business.

The Company is a federal contractor and part of its workforce is covered by vaccine mandates imposed under President Biden's September 9, 2021 executive order.

Complying with these requirements or other potential government mandates could disrupt the workforce and operations and impose additional compliance and other costs.

Other requirements, including health and safety measures such as social distancing and mask mandates and/or travel bans, import and export restrictions, pricing mandates, including disaster or emergency declaration pricing statutes, and mandatory directives that certain products be allocated or provided to certain customers, could also disrupt the Company’s business and impose costs.

For example, the outbreak of the COVID-19 pandemic has disrupted and may continue to disrupt the operations of the Company and its suppliers and customers.

Customer demand for certain products has also fluctuated as the pandemic has progressed, which has challenged Grainger's ability to anticipate and/or procure product to maintain inventory levels to meet that demand.

These factors have resulted in higher out-of-stock inventory positions in certain products as well as delays in delivering those products to the Company's distribution centers, branches or customers, and similar results may occur in the future.

For example, as a result of the COVID-19 pandemic, the Company has sold higher volumes of lower-margin pandemic-related products to larger, lower-margin customers, while non-pandemic sales have decreased.

Some actions that Grainger has taken in response to the COVID-19 pandemic, including enabling remote working arrangements, may increase Grainger’s vulnerability to cybersecurity incidents, including breaches of information systems security, which could damage Grainger’s reputation and commercial relationships, disrupt operations, increase costs and/or decrease revenues, and expose Grainger to claims from customers, suppliers, financial institutions, regulators, payment card association, employees and others.

In the past, Grainger has experienced certain cybersecurity incidents.

The following Management’s Discussion and Analysis [added: (MD&A)] of Financial Condition and Results of Operations [removed: (MD&A)] is intended to help the reader understand the results of operations and financial condition of W.W. Grainger, Inc. (Grainger or Company) as it is viewed by the Company.

*Percentage figures included in this section have not [removed: in all cases] been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding.

W.W. Grainger, Inc. is a broad [removed: line, business-to-business] [added: line] distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America (N.A.), Japan and the United Kingdom (U.K.).

The Company’s continued strategic priority for [removed: 2022] [added: 2023] is to relentlessly expand Grainger’s leadership position in the MRO space by being the go-to partner for people who build and run safe and productive operations.

Additionally, all Grainger businesses are focused on continuously improving customer experience, [added: productivity and] optimizing and scaling cost structures and investing in digital marketing, technology and supply chain infrastructure to ultimately deliver long-term returns for shareholders.

[removed: Further] [added: For further] discussion of the [added: Company's] risks and [removed: uncertainties posed by the COVID-19 pandemic,] [added: uncertainties,] see Part I, Item 1A: Risk Factors of this Form 10-K.

[removed: There were 254] [added: | (1) Daily] sales [added: are defined as the total net sales for the period divided by the number of U.S. selling] days in the [removed: full year 2021 versus 256 and] [added: period. There were] 255 [added: and 254] sales days in the full year [removed: of 2020] [added: 2022] and [removed: 2019,] [added: 2021,] respectively. [added: | | | | | | | | | | | |]

[added: | (1)] For further [removed: segment information,] [added: information regarding the Company's disaggregated revenue,] see Note [removed: 14] [added: 3] of the Notes to [added: the] Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

[added: |] For further [added: information regarding the Company's] business [removed: divestitures and liquidation information,] [added: divestitures,] see Note 2 of the Notes to [added: the] Consolidated Financial Statements in Part II, Item 8: Financial [removed: Data] [added: Statements] and Supplementary Data of this Form 10-K. [added: | | | | | | | | | | | | | | | | | | | | |]

| | | | For the Years Ended December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | [removed: | | | | | | | | | | | |]

| | | | | | | | | | | | | | | | [removed: | | | | | |] Percent Increase/(Decrease) from Prior Year | | | | | | As a Percent of Net Sales | | | | | | | | | [removed: | | | | | |]

| Net [removed: sales (1) | | | $ | 13,022 | |] [added: sales(1)] | | | $ | [removed: 11,797] [added: 15,228] | | | | | $ | [removed: 11,486 | | | | | 10.4 |] [added: 13,022] | [removed: %] | | | | [removed: 100.0] [added: 16.9] | | % | | | | 100.0 | | % | | | | 100.0 | | % |

| Other expense [removed: -] [added: –] net | | | [removed: 62 | | | | | | 72 | | | | | | 53] [added: 69] | | | | | | [removed: (12.8)] [added: 62] | | | | | | [removed: 0.5] [added: 10.6] | | | | | | [removed: 0.6] [added: 0.4] | | | | | | 0.5 | | |

| Noncontrolling interest | | | [removed: 71 | | | | | | 60] [added: 66] | | | | | | [removed: 46] [added: 71] | | | | | | [removed: 19.0] [added: (7.1)] | | | | | | [removed: 0.5] [added: 0.4] | | | | | | 0.5 | | | [removed: | | | 0.4 | | |]

| Net earnings attributable to W.W. Grainger, Inc. | | | $ | [removed: 1,043] [added: 1,547] | | | | | $ | [removed: 695] [added: 1,043] | | | | | [removed: $] [added: 48.4] | [removed: 849] | | | | | [removed: 50.0] [added: 10.2] | | | | | | 8.0 | | | [removed: | | | 5.9 | | | | | | 7.4 | | |]

| Diluted earnings per share: | | | $ | [removed: 19.84 | | | | | $ | 12.82] [added: 30.06] | | | | | $ | [removed: 15.32] [added: 19.84] | | | | | [removed: 54.8] [added: 51.5] | | % | | | | | | | | | | | | | [removed: | | | | | |]

[removed: | (1)] For further information regarding the Company's [removed: disaggregated revenue,] [added: debt instruments and available financing sources,] see Note [removed: 3] [added: 6] of the Notes to the Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. [removed: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

Net sales of [removed: $13,022] [added: $15,228] million for the year ended December 31, [removed: 2021] [added: 2022] increased [removed: $1,225] [added: $2,206] million, or [removed: 10.4%,] [added: 16.9%,] compared to the same period in [removed: 2020.][added: 2021.]

This consisted of increased [removed: volume, which includes product mix, of 10.1%,] price, which includes customer mix, of [removed: 2.3%] [added: 10.6%] and [removed: foreign exchange] [added: increased volume, which includes product mix,] of [removed: 0.3%,] [added: 8.7%,] partially offset by [removed: the impact of the business divestitures in the prior year] [added: unfavorable foreign exchange] of [removed: 1.4%.][added: 0.2%.]

Gross profit of [removed: $4,720] [added: $5,849] million for the year ended December 31, [removed: 2021] [added: 2022] increased [removed: $482] [added: $1,129] million, or [removed: 11%,] [added: 24%,] compared to the same period in [removed: 2020.][added: 2021.]

Gross profit margin of [removed: 36.2%] [added: 29.3%] increased [removed: 0.3] [added: 1.0] percentage point compared to the same period in [removed: 2020.][added: 2021.]

The increase was primarily [removed: driven by price realization and] [added: due to] favorable product [removed: mix, partially offset by unfavorable pandemic-related inventory adjustments] [added: mix] and [removed: product cost inflation in the] [added: lapping of prior] year [removed: ended December 31, 2021.][added: pandemic-related inventory adjustments.]

[removed: SG&A] [added: Operating earnings] of [removed: $3,173] [added: $223] million for the year ended December 31, [removed: 2021] [added: 2022] decreased [removed: $46] [added: $9] million, or [removed: 1%,] [added: 4%,] compared to the same period in [removed: 2020.][added: 2021.]

Operating earnings of [removed: $1,547] [added: $9] million for the year ended December 31, [removed: 2021] [added: 2022] increased [removed: $528] [added: $28] million, or [removed: 52%,] [added: 145%,] compared to the same period in [removed: 2020.][added: 2021.]

The increase was driven by higher gross profit [removed: dollars and lower] [added: dollars, partially offset by higher] SG&A.

Other [removed: expense,] [added: expense –] net of [removed: $62] [added: $69] million for the year ended December 31, [removed: 2021 decreased $10] [added: 2022 increased $7] million, or [removed: 13%,] [added: 11%,] compared to the same period in [removed: 2020.][added: 2021.]

Income taxes of [removed: $371] [added: $533] million for the year ended December 31, [removed: 2021] [added: 2022] increased [removed: $179] [added: $162] million, or [removed: 93%,] [added: 44%,] compared to the same period in [removed: 2020.][added: 2021.]

The increase was primarily driven by higher taxable operating earnings [removed: in 2021 and the absence of the tax impacts from] [added: for] the [removed: Company's investment in Fabory.][added: full year 2022.]

Grainger's effective tax rates were [removed: 25.0%] [added: 24.8%] and [removed: 20.3%] [added: 25.0%] for the twelve months ended December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] respectively.

Net earnings of [removed: $1,043] [added: $1,547] million attributable to W.W. Grainger, Inc. for the year ended December 31, [removed: 2021] [added: 2022] increased [removed: $348] [added: $504] million, or [removed: 50%,] [added: 48%,] compared to the same period in [removed: 2020.][added: 2021.]

Diluted earnings per share was [removed: $19.84] [added: $30.06] for the year ended December 31, [removed: 2021,] [added: 2022,] an increase of [removed: 55%] [added: 52%] compared to [removed: $12.82] [added: $19.84] for the same period in [removed: 2020.][added: 2021.]

The increase was primarily due to higher net earnings in [removed: 2021.][added: 2022.]

Net sales of [removed: $11,797] [added: $12,182] million for the year ended December 31, [removed: 2020] [added: 2022] increased [removed: $311] [added: $1,996] million, or [removed: 2.7%,] [added: 19.6%,] compared to the same period in [removed: 2019.][added: 2021.]

Gross profit of [removed: $4,238] [added: $4,951] million for the year ended December 31, [removed: 2020 decreased $159] [added: 2022 increased $1,045] million, or [removed: 4%,] [added: 27%,] compared to the same period in [removed: 2019.][added: 2021.]

Gross profit margin of [removed: 35.9% decreased 2.4] [added: 38.4% increased 2.2] percentage points compared to the same period in [removed: 2019.][added: 2021.]

SG&A of [removed: $3,219] [added: $3,634] million for the year ended December 31, [removed: 2020] [added: 2022] increased [removed: $84] [added: $461] million, or [removed: 3%,] [added: 15%,] compared to the same period in [removed: 2019.][added: 2021.]

Operating earnings of [removed: $1,019] [added: $2,215] million for the year ended December 31, [removed: 2020 decreased $243] [added: 2022 increased $668] million, or [removed: 19%,] [added: 43%,] compared to [removed: $1,262 million for] the same period in [removed: 2019.][added: 2021.]

[removed: Other expense, net] [added: SG&A] of [removed: $72] [added: $2,968] million for the year ended December 31, [removed: 2020] [added: 2022] increased [removed: $19] [added: $396] million, or [removed: 35%,] [added: 15%,] compared to the same period in [removed: 2019.][added: 2021.]

[removed: Income taxes] [added: Net sales] of [removed: $192] [added: $259] million for the year ended December 31, [removed: 2020] [added: 2022] decreased [removed: $122] [added: $1] million, or [removed: 39%,] [added: 0.2%,] compared to the same period in [removed: 2019.][added: 2021.]

[removed: Net] [added: The Company's adjusted net] earnings [removed: of $695 million] attributable to W.W. [removed: Grainger,] [added: Grainger] Inc. for the [added: full] year [removed: ended December 31, 2020 decreased $154] [added: 2022 was $1,526] million, [added: an increase of $483 million,] or [removed: 18%,] [added: 46%,] compared to the same period in [removed: 2019.][added: 2021.]

This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.

Strategic Priorities

Recent Events

*Inflation Reduction Act of 2022*

In August 2022, the Inflation Reduction Act of 2022 (IRA) was signed into United States (U.S.) law.

Under the IRA, there is a new 15% corporate minimum tax and a new 1% excise tax on net stock repurchases, effective after December 31, 2022.

In addition, the IRA contains provisions relating to climate change, energy and health care.

Based on Grainger's current analysis of the provisions, the Company does not anticipate compliance with the IRA will result in a material impact to the Consolidated Financial Statements.

*Inflationary Cost Environment and Macroeconomic Pressures*

In combination with the economic recovery of the ongoing COVID-19 pandemic, the global economy continues to experience volatile disruptions including to the commodity, labor and transportation markets.

These disruptions have contributed to an inflationary environment which has affected, and may continue to affect, the price and availability of certain products and services necessary for the Company's operations.

Such disruptions have impacted, and may continue to impact, the Company's business, financial condition and results of operations.

As a result of continued inflation, the Company has implemented strategies designed to mitigate certain adverse effects of higher costs while also remaining market price competitive.

The Company continues to monitor economic conditions in the U.S. and globally, and the impact of macroeconomic pressures, including rising interest rates, fluctuating currency exchange rates and recession fears, on the Company’s business, customers, suppliers and other third parties.

Historically, the Company’s broad and diverse

customer base and the nondiscretionary nature of the Company’s products to its customers has helped it perform well in the industrial MRO market in recessionary periods.

The full extent and impact of these conditions are uncertain and cannot be predicted at this time.

*Geopolitical Events*

In February 2022, Russia invaded Ukraine.

In response to the conflict, the U.S. and other countries have implemented economic and other sanctions.

While Grainger has limited direct exposure in Russia and Ukraine, the Company continues to monitor any broader impact on the global economy, including with respect to inflation, supply chains and fuel prices.

The full impact of the conflict on the Company’s business and financial results remains uncertain and will depend on the severity and duration of the conflict and its impact on global and regional economic conditions.

The Company does not currently expect significant disruption to its overall business resulting from these events.

| | | | 2022 | | | | | | 2021 | | | | | | 2022 | | | | | | 2021 | | | | | | | | |

| Cost of goods sold | | | 9,379 | | | | | | 8,302 | | | | | | 13.0 | | | | | | 61.6 | | | | | | 63.8 | | |

| Gross profit | | | 5,849 | | | | | | 4,720 | | | | | | 23.9 | | | | | | 38.4 | | | | | | 36.2 | | |

| Selling, general and administrative expenses | | | 3,634 | | | | | | 3,173 | | | | | | 14.5 | | | | | | 23.9 | | | | | | 24.4 | | |

| Operating earnings | | | 2,215 | | | | | | 1,547 | | | | | | 43.2 | | | | | | 14.5 | | | | | | 11.9 | | |

| Income tax provision | | | 533 | | | | | | 371 | | | | | | 43.8 | | | | | | 3.5 | | | | | | 2.8 | | |

| Net earnings | | | 1,613 | | | | | | 1,114 | | | | | | 44.8 | | | | | | 10.6 | | | | | | 8.6 | | |

The following table is included as an aid to understanding the changes in Grainger's total net sales and daily sales from the prior period to the most recent period (in millions of dollars):

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | 2022 | | | | | | 2021 | | |

| Net Sales | | | $ | 15,228 | | | | | $ | 13,022 | |

| $ Change from prior-year period | | | 2,206 | | | | | | 1,225 | | |

| % Change from prior-year period | | | 16.9 | | % | | | | 10.4 | | % |

| | | | | | | | | | | | |

| Daily sales(1) | | | $ | 59.7 | | | | | $ | 51.3 | |

| $ Change from prior-year period | | | 8.4 | | | | | | 5.2 | | |

Strategic Priorities and Impact of the COVID-19 Pandemic

The Company continues to adhere to its purpose to keep the world working while using its core principles as the framework for expanding Grainger’s leadership position and ensuring Grainger is the go-to-partner for building and running safe, sustainable and productive operations.

However, the Company’s business plans to achieve these strategic priorities continue to be affected by the impact of the COVID-19 pandemic.

The COVID-19 pandemic caused significant disruptions in the U.S. and global markets, and the full extent of the impacts will depend on several uncertain and unpredictable developments including any continued spread of the virus and its variants, the availability and effectiveness of treatments and vaccines, imposition of protective public safety measures and the overall impact of government measures to combat the spread of the virus.

While the ongoing recovery from the COVID-19 pandemic has fluctuated throughout the year, it has been accompanied by a resurgence in demand as industries return to regular operations, which continues to disrupt supply chains, transportation efficiency, raw materials and labor availability.

Grainger’s businesses and its major facilities have remained operational as customers rely on Grainger’s products and services to keep their businesses up and running.

The Company continues to monitor and refine its product assortment and inventory availability and remains committed to serving customers and supporting team members.

As the pandemic continues to impact global markets and the needs of customers, team members, suppliers and communities continue to change, the Company’s efforts and business plan will evolve accordingly.

The Company continues to leverage a dedicated cross-functional task force to understand and implement guidance from government agencies and health officials to meet requirements from federal, state and local authorities and may take further actions in the best interests of its team members, customers, suppliers and shareholders.

The Company qualified for certain government assistance programs that partially offset related expenses in Canada and the U.K. The amounts received were not material to the Consolidated Financial Statements for the year ended December 31, 2021.

The Company cannot reasonably estimate the full extent to which the COVID-19 pandemic will continue to impact its business and financial results.

Grainger is focused on servicing customers and communities in addressing the pandemic and providing products to assist in the ongoing recovery, supporting the needs and safety of team members and ensuring the Company continues to operate with a strong financial position.

Matters Affecting Comparability

Effective January 1, 2021, Grainger's two reportable segments are High-Touch Solutions N.A. and Endless Assortment.

On March 8, 2021, Grainger provided investors with segment summary historical financial information and segment historical data that is consistent with its new reportable segment structure and reflective of its updated intersegment accounting policies.

In November 2020, consistent with the Company's strategic focus on broad line MRO distribution in key markets, Grainger commenced the liquidation of Zoro Tools Europe (ZTE) in Germany.

In August 2020, Grainger divested the China high-touch solutions business (China) and in June 2020, divested the Fabory high-touch solutions business.

Accordingly, the Company’s operating results include Fabory, China and ZTE through the respective dates of divestiture or liquidation.

In mid-February 2020, the Company began experiencing elevated levels of COVID-19 pandemic-related product sales (e.g., PPE and safety products) due to higher customer demand in response to the COVID-19 pandemic, while non-pandemic sales decreased.

Conversely, as the COVID-19 pandemic progressed throughout 2020 and through 2021, the Company has seen pandemic-related sales soften and non-pandemic sales grow, as mix returns to more normalized levels.

This shift between pandemic and core, non-pandemic product mix impacted gross margin as pandemic-related product sales are generally lower-margin.

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | 2021 | | | | | | 2020 | | | | | | 2019 | | | | | | 2021 | | | | | | 2021 | | | | | | 2020 | | | | | | 2019 | | |

| Cost of goods sold | | | 8,302 | | | | | | 7,559 | | | | | | 7,089 | | | | | | 9.8 | | | | | | 63.8 | | | | | | 64.1 | | | | | | 61.7 | | |

| Gross profit | | | 4,720 | | | | | | 4,238 | | | | | | 4,397 | | | | | | 11.4 | | | | | | 36.2 | | | | | | 35.9 | | | | | | 38.3 | | |

| SG&A | | | 3,173 | | | | | | 3,219 | | | | | | 3,135 | | | | | | (1.4) | | | | | | 24.4 | | | | | | 27.3 | | | | | | 27.3 | | |

| Operating earnings | | | 1,547 | | | | | | 1,019 | | | | | | 1,262 | | | | | | 51.8 | | | | | | 11.9 | | | | | | 8.6 | | | | | | 11.0 | | |

| Income tax provision | | | 371 | | | | | | 192 | | | | | | 314 | | | | | | 92.7 | | | | | | 2.8 | | | | | | 1.6 | | | | | | 2.7 | | |

| Net earnings | | | 1,114 | | | | | | 755 | | | | | | 895 | | | | | | 47.5 | | | | | | 8.6 | | | | | | 6.4 | | | | | | 7.8 | | |

*2021 Compared to 2020*

On a daily basis, net sales increased 11.3%, primarily driven by improved core, non-pandemic related product sales volume as product mix continued to revert to more normalized levels in the year ended December 31, 2021.

The decrease was the result of impairment charges and losses related to the divested Fabory business in the first half of 2020, partially offset by increased SG&A due to higher wages, variable compensation and marketing expenses in 2021.

The decrease was primarily driven by lower interest expense in 2021 due to the increase in indebtedness as a proactive measure to preserve financial flexibility during pandemic uncertainty in the first half of 2020.

In the first quarter of 2020, the Company impaired and reorganized its holdings in Fabory.

In the second quarter of 2020, the Company divested its interest in Fabory.

*2020 Compared to 2019*

On a daily basis, net sales increased 2.3%, primarily due to strong pandemic-related sales volume mainly to large government and healthcare customers, partially offset by volume declines of non-pandemic related products across most industries.

This consisted of increased volume, which includes product mix, of 3.7% and foreign exchange of 0.1%, partially offset by the impact of the business divestitures and price, including customer mix, of 1.3% and 0.2%, respectively.

The decrease was primarily driven by lower margins from COVID-19 pandemic-related product sales in the high-touch solutions businesses and business unit mix due to growth in the lower margin endless assortment businesses.

For the fiscal year ended December 31, [removed: 2021,] [added: 2022,] approximately [removed: 21%] [added: 18%] of the Company's net sales were denominated in a currency other than the Company's functional U.S. dollar currency.

A hypothetical 10% change in the relative value of the U.S. dollar would not materially impact the Company's net earnings for [removed: 2021.][added: 2022.]

The annualized effect of a [removed: 0.1] [added: hypothetical 1] percentage point increase in interest rates on Grainger’s variable-rate debt obligations [removed: did] [added: would] not [removed: have a material] [added: materially] impact [removed: on] the Company's net earnings for [removed: 2021.][added: 2022.]

For [removed: long-term] debt and derivative instrument information, see Note 6 and Note 12 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.

*Commodity Price [removed: Risk*][added: Risks*]

W.W. Grainger, Inc., incorporated in the State of Illinois in 1928, is a broad line, [removed: business-to-business] distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America (N.A.), Japan and the United Kingdom (U.K.).

Grainger's [added: strategic] framework, “The Grainger Edge,” uniquely defines the Company by asserting why it exists, how it serves customers and how team members work together to achieve its objectives.

Grainger’s purpose is [removed: to keep] [added: We Keep] the [removed: world working,] [added: World Working®,] which in turn allows customers to focus on the core of their businesses and do what they do best.

[removed: Effective January 1, 2021,] Grainger's two reportable segments are High-Touch Solutions N.A. and Endless Assortment.

For further segment information, see Part II, Item 7: Management’s Discussion and Analysis [added: (MD&A)] of Financial Condition and Results of Operations [removed: (MD&A)] and Note 14 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.

The Endless Assortment segment includes the Company’s Zoro Tools, Inc. (Zoro) and MonotaRO Co., Ltd. (MonotaRO) online channels which operate predominately in the [removed: U.S., U.K.] [added: U.S.] and Japan.

[removed: ][added: ]

No single end customer accounted for more than [removed: 3%] [added: 4%] of total sales for the year ended December 31, [removed: 2021.][added: 2022.]

In the High-Touch Solutions N.A. segment, customers are typically [added: mid-size and] large [removed: enterprises] [added: businesses] with [removed: multi-faceted] [added: complex] purchasing [added: operations] and [removed: processing complexities.][added: processes.]

[removed: Customers] [added: Many customers] served in this segment expect product and service depth and are focused on total cost of procurement.

[removed: For customers with] [added: Customers in this segment utilize] sophisticated electronic purchasing [removed: platforms, the segment utilizes eProcurement technology] [added: platforms] that [removed: allows these systems to] communicate directly with [removed: Grainger.com.][added: Grainger.com through eProcurement technology.]

In the Endless Assortment segment, customers are typically smaller [added: and mid-size] businesses with [removed: straight-forward product] [added: less complex purchasing operations] and [removed: service needs.][added: processes.]

No single product category comprised more than [removed: 18%] [added: 20%] of the Company's sales for the year ended December 31, [removed: 2021.][added: 2022.]

[removed: Collectively in the U.S. and U.K.,] Zoro offers [removed: approximately 10] [added: more than 11] million products and MonotaRO provides access to more than 20 million products, primarily through its websites and catalogs.

In the large and fragmented MRO industry, Grainger holds an advantaged position with its supply chain infrastructure and [added: a] broad in-stock product offering.

[removed: Approximately] [added: More than] 5,000 suppliers worldwide provide Grainger businesses with more than [removed: 1.5] [added: 1.4] million products stocked in Distribution Centers (DCs) and branches globally.

No single supplier comprised more than 5% of Grainger's total purchases for the year ended December 31, [removed: 2021.][added: 2022.]

Automation in the DCs allows [removed: most] orders to ship complete with next-day delivery and [added: also] replenish branches that provide same-day availability to customers.

[removed: Additionally,] Grainger offers comprehensive inventory management through its KeepStock® program that includes vendor-managed inventory, customer-managed inventory and onsite vending machines.

Zoro leverages the High-Touch Solution N.A.'s [removed: DCs] [added: DC network] and third-party drop shipments to deliver [removed: products] [added: seamless service and product fulfillment] to customers.

Approximately [removed: 19%] [added: 20%] of [removed: 2021] [added: 2022] sales were private label MRO items bearing Grainger’s registered trademarks, including DAYTON®, SPEEDAIRE®, AIR HANDLER®, TOUGH GUY®, WESTWARD®, CONDOR® and LUMAPRO®.

In addition to Grainger’s [removed: U.S.-based] [added: U.S. based] operations, which in [removed: 2021] [added: 2022] generated approximately [removed: 79%] [added: 82%] of its consolidated net sales, Grainger operates its business principally through wholly owned subsidiaries in Canada, Mexico and the U.K., and through its majority-owned subsidiary in Japan.

In [removed: 2021,] [added: 2022,] compliance with the applicable laws, regulations and standards did not have a material effect on capital expenditures, earnings or competitive position.

Building on its strong foundation while evolving a framework to address [added: the] future [removed: challenges] is critical to Grainger’s continued success.

As of December 31, [removed: 2021,] [added: 2022,] Grainger had [removed: approximately 24,200] [added: more than 26,000] team members worldwide, of whom approximately [removed: 22,700] [added: 23,000] were full-time and [removed: 1,500] [added: 3,000] were part-time or temporary.

Approximately 86% of these team members resided in [removed: North America, 8% in Asia and 6% in Europe.]

Grainger’s [added: purpose-driven] culture and principles help the Company attract, retain, motivate and develop its workforce and [removed: help] drive team member engagement.

The results from engagement surveys are used to [removed: identify and then implement] [added: inform] programs and processes designed [added: and implemented] to enhance the inclusive culture Grainger aspires to achieve.

To that end, the Company requires each of its locations to perform regular safety audits to confirm proper safety policies, programs, procedures and training are in [removed: place.][added: place and operating effectively.]

In [removed: 2021,] [added: 2022,] the Company’s Occupational Safety and Health Administration (OSHA) Total Recordable Incident Rate in the U.S. was [removed: 1.2] [added: 1.3] and the Company’s Lost Time Incident Rate in the U.S. was [removed: 0.3] [added: 0.4] based upon the number of incidents per 100 team members (or per 200,000 work hours).

Grainger believes a diverse talent [removed: pipeline] [added: pool] is essential to live its principles, foster innovation, build high-performing teams and drive business results.

The Company’s Board of Directors is comprised of approximately [removed: 31%] [added: 33%] female and [removed: 31%] [added: 25%] racially and ethnically diverse directors.

As of December 31, [removed: 2021,] [added: 2022,] within Grainger’s U.S. workforce, approximately 39% of team members were women and approximately [removed: 37%] [added: 39%] of team members were racially and ethnically diverse.

As part of its efforts in these areas, the Company offers competitive compensation and benefits to meet the diverse needs of team members and support their [added: physical and mental] health and well-being, financial future and work-life balance.

[removed: Grainger makes] [added: Such reports and other information filed with the SEC are] available free of [removed: charge, through its website, http://www.invest.grainger.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports] [added: charge] as soon as reasonably practicable after these materials are electronically filed with, or furnished to, the [removed: U.S. Securities] [added: SEC on the Company's website at www.grainger.com,] and [removed: Exchange Commission (SEC).][added: its investor relations website, invest.grainger.com.]

The content of [removed: Grainger’s] [added: the Company's] website [added: and investor relations website] is not incorporated by reference into this Form 10-K or in any other report or document filed with the SEC, and any references to Grainger’s website [added: and investor relations website] are intended to be inactive textual references only.

The SEC also maintains a website at [removed: http://www.sec.gov] [added: www.sec.gov] that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Following is information about the [removed: Executive Officers] [added: executive officers] of Grainger, including age, as of January 31, [removed: 2022.][added: 2023.]

| Kathleen S. Carroll [removed: (53)] [added: (54)] | | | Senior Vice President and Chief Human Resources Officer, a position assumed in December 2018. Previously, Ms. Carroll served as Executive Vice President, Chief Human Resources Officer of First Midwest Bancorp, Inc., a diversified financial services company, from 2017 to 2018. Prior to that role, Ms. Carroll was employed at Aon Corporation, a global insurance brokerage and consulting company, between 2006 and 2017 in various human resources roles, culminating in her position as Vice President, Global Head of Talent Acquisition. | | |

| D.G. Macpherson [removed: (54)] [added: (55)] | | | Chairman of the Board, a position assumed in October 2017, and Chief Executive Officer, a position assumed in October 2016 at which time he was also appointed to the Board of Directors. Previously, Mr. Macpherson served as Chief Operating Officer, a position assumed in 2015, Senior Vice President and Group President, Global Supply Chain and International, a position assumed in 2013, Senior Vice President and President, Global Supply Chain and Corporate Strategy, a position assumed in 2012, and Senior Vice President, Global Supply Chain, a position assumed in 2008. Prior to Grainger, Mr. Macpherson served as Partner and Managing Director at Boston Consulting Group, a global management consulting firm. | | |

Other businesses is primarily comprised of the Company's Cromwell business in the U.K. and a wholly owned captive insurance entity.

Customers served in this segment have straight-forward product and service needs.

Products and Services

The high-touch solutions businesses offer more than 2 million products and several services, such as technical support and inventory management.

Additionally,

North America, 8% in Asia and 6% in Europe.

Grainger's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), are filed with the U.S. Securities and Exchange Commission (SEC).

This includes press releases and other information about financial performance, information on environmental, social and governance matters, and details related to the Company’s annual meeting of shareholders.

| Nancy L. Berardinelli-Krantz (45) | | | Senior Vice President and Chief Legal Officer, a position assumed in January 2023 after John L. Howard stepped down as General Counsel(1). Previously, Ms. Berardinelli-Krantz served in roles of increasing responsibility at Eaton Corporation (Eaton), a power management company, from 2011-2015 and again from 2017-2022. Her most recent position was Senior Vice President and Deputy Chief Legal Officer. After her return to Eaton, her other positions were: Senior Vice President and General Counsel, Digital, Innovation and Technology; Senior Vice President, Ethics and Compliance; and Vice President and Chief Counsel, Litigation. Ms. Berardinelli-Krantz held various positions of senior leadership at The Goodyear Tire & Rubber Company and worked for the international law firm of Jones Day. Ms. Berardinelli-Krantz is a veteran of the United States Army and Judge Advocate General’s Corps, where she served as a trial attorney in Fort Hood, Texas, and for the Contract Appeals Division in Washington, D.C. She also served as a trial defense counsel in Baghdad, Iraq. | | |

| | | | | | |

| --- | --- | --- | --- | --- | --- |

| | | | | | |

| (1) As previously disclosed on the Company's Current Report on Form 8-K filed with the SEC on December 15, 2022, Mr. Howard stepped down as the Company's General Counsel on January 30, 2023. He will continue as Senior Vice President until July 31, 2023 and as an active employee for six months thereafter. | | | | | |

Other businesses is comprised of smaller international high-touch solutions businesses primarily in the U.K., as well as the Fabory and China businesses in the periods prior to their divestitures in the second and third quarter of 2020, respectively.

For further business divestitures and liquidation information, see Note 2 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.

Products

Collectively, this segment offers more than 2 million products.

The Company has a proactive response to the coronavirus (COVID-19) pandemic via a task force that helps to ensure the Company’s actions around team members and facilities meet the rigorous guidelines from the Center for Disease Control and World Health Organization, as well as maintaining compliance with state and local health guidelines.

To further support team members' well-being, the Company enhanced its benefit offerings to provide greater access to mental, financial and physical health resources.

| John L. Howard (64) | | | Senior Vice President and General Counsel, a position assumed in January 2000. Previously, Mr. Howard served in several roles of increasing responsibility at Tenneco, Inc., a global conglomerate. Prior to those roles, Mr. Howard held a variety of legal positions in the federal government, including Associate Deputy Attorney General in the U.S. Department of Justice and in The White House as Counsel to the Vice President. | | |

For the fiscal year ended December 31, [removed: 2021][added: 2022]

The aggregate market value of the voting common equity held by non-affiliates of the registrant was [removed: $20,483,168,550] [added: $20,641,746,573] as of the close of trading as reported on the New York Stock Exchange on June 30, [removed: 2021.][added: 2022.]

The registrant had [removed: 51,107,898] [added: 50,199,270] shares of the Company’s Common Stock outstanding as of February [removed: 11, 2022.][added: 15, 2023.]

Portions of the registrant's definitive proxy statement to be filed in connection with the annual meeting of shareholders to be held on April [removed: 27, 2022,] [added: 26, 2023,] are incorporated by reference into Part III of this Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2021] [added: 2022] (Form 10-K) where indicated.

| Item 1: | | | BUSINESS | | | | | | | | | | | | | | | [removed: [3](#ibfd9dc13381848669a4fb6062fd416bc_13)] [added: [4](#i553f5ed0f5a94ebeacecf7c5e3d1081a_13)] | | |

| Item 1A: | | | RISK FACTORS | | | | | | | | | | | | | | | [removed: [10](#ibfd9dc13381848669a4fb6062fd416bc_19)] [added: [12](#i553f5ed0f5a94ebeacecf7c5e3d1081a_19)] | | |

| Item 1B: | | | UNRESOLVED STAFF COMMENTS | | | | | | | | | | | | | | | [removed: [19](#ibfd9dc13381848669a4fb6062fd416bc_22)] [added: [21](#i553f5ed0f5a94ebeacecf7c5e3d1081a_22)] | | |

| Item 2: | | | PROPERTIES | | | | | | | | | | | | | | | [removed: [20](#ibfd9dc13381848669a4fb6062fd416bc_28)] [added: [22](#i553f5ed0f5a94ebeacecf7c5e3d1081a_25)] | | |

| Item 3: | | | LEGAL PROCEEDINGS | | | | | | | | | | | | | | | [removed: [20](#ibfd9dc13381848669a4fb6062fd416bc_28)] [added: [22](#i553f5ed0f5a94ebeacecf7c5e3d1081a_28)] | | |

| Item 4: | | | MINE SAFETY DISCLOSURES | | | | | | | | | | | | | | | [removed: [20](#ibfd9dc13381848669a4fb6062fd416bc_31)] [added: [22](#i553f5ed0f5a94ebeacecf7c5e3d1081a_31)] | | |

| Item 5: | | | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER | | | | | | | | | | | | | | | [removed: [21](#ibfd9dc13381848669a4fb6062fd416bc_37)] [added: [23](#i553f5ed0f5a94ebeacecf7c5e3d1081a_37)] | | |

| Item 6: | | | RESERVED | | | | | | | | | | | | | | | [removed: [22](#ibfd9dc13381848669a4fb6062fd416bc_40)] [added: [24](#i553f5ed0f5a94ebeacecf7c5e3d1081a_40)] | | |

| Item 7: | | | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL | | | | | | | | | | | | | | | [removed: [23](#ibfd9dc13381848669a4fb6062fd416bc_43)] [added: [25](#i553f5ed0f5a94ebeacecf7c5e3d1081a_43)] | | |

| Item 7A: | | | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | | | | | | | | | | | | | | | [removed: [36](#ibfd9dc13381848669a4fb6062fd416bc_64)] [added: [35](#i553f5ed0f5a94ebeacecf7c5e3d1081a_64)] | | |

| Item 8: | | | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | | | | | | | | | | | | | | | [removed: [37](#ibfd9dc13381848669a4fb6062fd416bc_67)] [added: [36](#i553f5ed0f5a94ebeacecf7c5e3d1081a_67)] | | |

| Item 9: | | | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS | | | | | | | | | | | | | | | [removed: [67](#ibfd9dc13381848669a4fb6062fd416bc_70)] [added: [66](#i553f5ed0f5a94ebeacecf7c5e3d1081a_154)] | | |

| Item 9A: | | | CONTROLS AND PROCEDURES | | | | | | | | | | | | | | | [removed: [67](#ibfd9dc13381848669a4fb6062fd416bc_73)] [added: [66](#i553f5ed0f5a94ebeacecf7c5e3d1081a_157)] | | |

| Item 9B: | | | OTHER INFORMATION | | | | | | | | | | | | | | | [removed: [69](#ibfd9dc13381848669a4fb6062fd416bc_76)] [added: [68](#i553f5ed0f5a94ebeacecf7c5e3d1081a_166)] | | |

| Item 9C: | | | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | | | | | | | | | | | | | | | [removed: [69](#ibfd9dc13381848669a4fb6062fd416bc_2748779071463)] [added: [68](#i553f5ed0f5a94ebeacecf7c5e3d1081a_169)] | | |

| Item 10: | | | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | | | | | | | | | | | | | | | [removed: [70](#ibfd9dc13381848669a4fb6062fd416bc_82)] [added: [69](#i553f5ed0f5a94ebeacecf7c5e3d1081a_175)] | | |

| Item 11: | | | EXECUTIVE COMPENSATION | | | | | | | | | | | | | | | [removed: [70](#ibfd9dc13381848669a4fb6062fd416bc_85)] [added: [69](#i553f5ed0f5a94ebeacecf7c5e3d1081a_178)] | | |

| Item 12: | | | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND | | | | | | | | | | | | | | | [removed: [70](#ibfd9dc13381848669a4fb6062fd416bc_88)] [added: [69](#i553f5ed0f5a94ebeacecf7c5e3d1081a_181)] | | |

| Item 13: | | | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR | | | | | | | | | | | | | | | [removed: [70](#ibfd9dc13381848669a4fb6062fd416bc_91)] [added: [69](#i553f5ed0f5a94ebeacecf7c5e3d1081a_184)] | | |

| Item 14: | | | PRINCIPAL ACCOUNTANT FEES AND SERVICES | | | | | | | | | | | | | | | [removed: [70](#ibfd9dc13381848669a4fb6062fd416bc_94)] [added: [69](#i553f5ed0f5a94ebeacecf7c5e3d1081a_187)] | | |

| Item 15: | | | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | | | | | | | | | | | | | | | [removed: [71](#ibfd9dc13381848669a4fb6062fd416bc_100)] [added: [70](#i553f5ed0f5a94ebeacecf7c5e3d1081a_193)] | | |

| Item 16: | | | FORM 10-K SUMMARY | | | | | | | | | | | | | | | [removed: [74](#ibfd9dc13381848669a4fb6062fd416bc_103)] [added: [74](#i553f5ed0f5a94ebeacecf7c5e3d1081a_199)] | | |

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that require a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §2401.10D-1(b).

The registrant's definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

| Signatures | | | | | | | | | | | | | | | | | | [74](#i553f5ed0f5a94ebeacecf7c5e3d1081a_202) | | |

Forward-Looking Statements

From time to time in this Annual Report on Form 10-K as well as in other written reports, communications and verbal statements, Grainger makes forward-looking statements that are not historical in nature but concern forecasts of future results, business plans, analyses, prospects, strategies, objectives and other matters that may be deemed to be “forward-looking statements” under the federal securities laws.

Forward-looking statements can generally be identified by their use of terms such as “anticipate,” “estimate,” “believe,” “expect,” “could,” “forecast,” “may,” “intend,” “plan,” “predict,” “project,” “will” or “would” and similar terms and phrases, including references to assumptions.

The Company cannot guarantee that any forward-looking statement will be realized and achievement of future results is subject to risks and uncertainties, many of which are beyond the Company’s control, which could cause the Company’s results to differ materially from those that are presented.

Important factors that could cause actual results to differ materially from those presented or implied in the forward-looking statements include, without limitation: inflation, higher product costs or other expenses, including operational and administrative expenses; the impact of macroeconomic pressures and geopolitical trends, changes and events, including the impact of Russia’s invasion of Ukraine on the global economy, tensions across the Taiwan Straits and in overall relations with China, and the ramifications of these and other events; a major loss of customers; loss or disruption of sources of supply; the unknown duration and health, economic, operational and financial impacts of the global outbreak of the coronavirus disease 2019 and its variants (COVID-19); changes in customer or product mix; increased competitive pricing pressures; changes in third party practices regarding digital advertising; failure to enter into or sustain contractual arrangements on a satisfactory basis with group purchasing organizations; failure to develop, manage or implement new technology initiatives or business strategies, including with respect to the Company’s eCommerce platforms; failure to adequately protect intellectual property or successfully defend against infringement claims; fluctuations or declines in the Company's gross profit margin; the Company’s responses to market pressures; the outcome of pending and future litigation or governmental or regulatory proceedings, including with respect to wage and hour, anti-bribery and corruption, environmental, regulations related to advertising, marketing and the Internet, consumer protection, pricing (including disaster or emergency declaration pricing statutes), product liability, compliance or safety, trade and export compliance, general commercial disputes, or privacy and cybersecurity matters; investigations, inquiries, audits and changes in laws and regulations; failure to comply with laws, regulations and standards, including new or stricter environmental laws or regulations; government contract matters; disruption or breaches of information technology or data security systems involving the Company or third parties on which the Company depends; general industry, economic, market or political conditions; general global economic conditions including tariffs and trade issues and policies; currency exchange rate fluctuations; market volatility, including price and trading volume volatility or price declines of the Company’s common stock; commodity price volatility; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; outbreaks of pandemic disease or viral contagions such as the COVID-19 pandemic; natural or human induced disasters, extreme weather and other catastrophes or conditions; effects of climate change; failure to execute on our efforts and programs related to environmental, social and governance matters; competition for, or failure to attract, retain, train, motivate and develop executives and key employees; loss of key members of management or key employees; changes in effective tax rates; changes in credit ratings or outlook; the Company’s incurrence of indebtedness or failure to comply with restrictions and obligations under its debt agreements and instruments and other factors identified under Part I, Item 1A: Risk Factors and elsewhere in this Form 10-K.

Caution should be taken not to place undue reliance on the Company’s forward-looking statements and the Company undertakes no obligation to update or revise any of its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

The registrant's definitive 2021 proxy statement will be filed on or about March 17, 2022.

| Signatures | | | | | | | | | | | | | | | | | | [75](#ibfd9dc13381848669a4fb6062fd416bc_211) | | |

As of December 31, [removed: 2021,] [added: 2022,] Grainger’s owned and leased facilities totaled approximately [removed: 29.2] [added: 30.3] million square feet.

Grainger owns and leases facilities primarily in the U.S., Japan, [removed: Canada (5), Mexico (6),] [added: Canada(5), Mexico(6),] Puerto [removed: Rico (7)] [added: Rico(7)] and the [removed: U.K. (8)] [added: U.K.(8)] The Company's corporate headquarters is located in Lake Forest, Illinois and other general offices are located in the Chicago Metropolitan area.

| Location | | | | | | Facility and [removed: Use (9)] [added: Use(9)] | | | | | | Size in Square Feet (in thousands) | | | | | | Segment | | |

| [removed: U.S. (1)] [added: U.S.(1)] | | | | | | DCs | | | | | | [removed: 9,132] [added: 10,368] | | | | | | High-Touch Solutions N.A. | | |

| [removed: U.S. (2)] [added: U.S.(2)] | | | | | | Branch Locations | | | | | | [removed: 6,407] [added: 6,325] | | | | | | High-Touch Solutions N.A. | | |

| [removed: U.S. (3)] [added: U.S.(4)] | | | | | | Other Facilities | | | | | | [removed: 4,805] [added: 3,638] | | | | | | High-Touch Solutions N.A. | | |

| [removed: Japan (4)] [added: Japan(3)] | | | | | | DCs | | | | | | [removed: 3,718] [added: 3,924] | | | | | | Endless Assortment | | |

[removed: (1)] [added: (3)] Consists of [removed: 16] [added: seven] DCs that range in size from approximately [removed: 55,000] [added: 11,000] to [removed: 1.5] [added: 2] million square feet.

(2) Consists of 246 branches, [removed: 45] [added: 49] onsite and [removed: three] [added: four] will-call express locations.

[removed: (3)] [added: (4)] Primarily consists of storage facilities, office space and customer service centers.

These facilities are [removed: both] owned and leased.

(6) In Mexico, Grainger has 16 branch locations and two DCs which total [removed: 712,000] [added: 649,000] square feet.

(8) In the U.K., Grainger has [removed: 43] [added: 37] branch locations, one DC and other facilities which total [removed: 806,000] [added: 751,000] square feet.

| | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | |

(1) Consists of 19 DCs that range in size from approximately 61,000 to 1.5 million square feet, including three leased facilities that primarily manage bulk products, that were previously disclosed in Other Facilities.

The remaining DCs are primarily owned.

These facilities are primarily owned.

(4) Consists of eight DCs that range in size from approximately 11,000 to 1.8 million square feet.

The approximate number of shareholders of record of Grainger’s common stock as of [removed: February 11, 2022,] [added: January 31, 2023,] was [removed: 553] [added: 531] with approximately [removed: 285,524] [added: 423,817] additional shareholders holding stock through nominees.

[removed: Issuer Purchases] [added: Purchases] of Equity Securities [removed: - Fourth Quarter][added: by the Issuer and Affiliated Purchasers]

(D)The difference of [removed: 830] [added: 845] shares between the Total Number of Shares Purchased and the Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs represents shares purchased by the administrator and record keeper of the W.W. Grainger, Inc. Retirement Savings Plan for the benefit of the team members who participate in the plan.

It covers the period commencing December 31, [removed: 2016] [added: 2017] and ending December 31, [removed: 2021.][added: 2022.]

The graph assumes that the value for the investment in Grainger common stock and in each index was $100 on December 31, [removed: 2016,] [added: 2017,] and that all dividends were reinvested.

[removed: ][added: ]

| | | | [removed: 2016 | | |] 2017 | | | 2018 | | | 2019 | | | 2020 | | | 2021 | | | [added: 2022 | | |]

| Dow Jones US Industrial Suppliers Total Stock Market Index | | | 100 | | | [removed: 112] [added: 96] | | | [removed: 103] [added: 126] | | | [removed: 137] [added: 149] | | | [removed: 171] [added: 192] | | | [removed: 233] [added: 157] | | |

| S&P 500 Stock Index | | | 100 | | | [removed: 122] [added: 92] | | | [removed: 116] [added: 122] | | | 153 | | | [removed: 181] [added: 209] | | | [removed: 233] [added: 184] | | |

The following table provides information relating to Grainger's repurchase of common stock during the three months ended December 31, 2022:

| Oct. 1 – Oct. 31 | | | 141,647 | | | $521.62 | | | 141,647 | | | 3,003,036 | | | shares | | |

| Nov. 1 – Nov. 30 | | | 131,768 | | | $595.88 | | | 131,722 | | | 2,871,314 | | | shares | | |

| Dec. 1 – Dec. 31 | | | 130,147 | | | $575.69 | | | 129,348 | | | 2,741,966 | | | shares | | |

| Total | | | 403,562 | | | | | | 402,717 | | | | | | | | |

| W.W. Grainger, Inc. | | | $ | 100 | | $ | 122 | | $ | 149 | | $ | 183 | | $ | 235 | | $ | 256 | |

| Oct. 1 – Oct. 31 | | | 138,985 | | | $423.80 | | | 138,890 | | | 4,121,591 | | | shares | | |

| Nov. 1 – Nov. 30 | | | 101,244 | | | $484.93 | | | 101,043 | | | 4,020,548 | | | shares | | |

| Dec. 1 – Dec. 31 | | | 134,893 | | | $502.16 | | | 134,359 | | | 3,886,189 | | | shares | | |

| Total | | | 375,122 | | | | | | 374,292 | | | | | | | | |

| W.W. Grainger, Inc. | | | $ | 100 | | $ | 104 | | $ | 127 | | $ | 155 | | $ | 191 | | $ | 246 | |

We have audited the accompanying consolidated balance sheets of W.W. Grainger, Inc. and Subsidiaries (the Company) as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] the related consolidated statements of earnings, comprehensive earnings, shareholders’ equity and cash flows for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February [removed: 23, 2022] [added: 21, 2023] expressed an unqualified opinion thereon.

| *Description of the Matter* | | | At December 31, [removed: 2021,] [added: 2022,] the goodwill balance of the Canada business reporting unit was [removed: $129] [added: $121] million. As discussed in Notes 1 and 5 of the financial statements, goodwill is tested at the reporting unit level annually during the fourth quarter and more frequently if impairment indicators exist. Auditing management’s annual goodwill impairment analysis is complex and highly judgmental due to certain assumptions that are significant to the analysis. Management performed an annual impairment analysis in the fourth quarter to evaluate changes in key assumptions and results since the last impairment test. The more subjective assumptions used in the analysis were projections of future revenue [removed: growth and] [added: growth,] operating [removed: expenditures] [added: expenditures, changes in working capital,] as well as the discount rate used, which are all affected by expectations about future market or economic conditions. | | |

| | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | |

| Net sales | | | $ | [removed: 13,022] [added: 15,228] | | | | | $ | [removed: 11,797] [added: 13,022] | | | | | $ | [removed: 11,486] [added: 11,797] | |

| Cost of goods sold | | | [removed: 8,302] [added: 9,379] | | | | | | [removed: 7,559] [added: 8,302] | | | | | | [removed: 7,089] [added: 7,559] | | |

| Gross profit | | | [removed: 4,720] [added: 5,849] | | | | | | [removed: 4,238] [added: 4,720] | | | | | | [removed: 4,397] [added: 4,238] | | |

| Selling, general and administrative expenses | | | [removed: 3,173] [added: 3,634] | | | | | | [removed: 3,219] [added: 3,173] | | | | | | [removed: 3,135] [added: 3,219] | | |

| Operating earnings | | | [removed: 1,547] [added: 2,215] | | | | | | [removed: 1,019] [added: 1,547] | | | | | | [removed: 1,262] [added: 1,019] | | |

| Interest expense – net | | | [removed: 87] [added: 93] | | | | | | [removed: 93] [added: 87] | | | | | | [removed: 79] [added: 93] | | |

| Other – net | | | [removed: (25)] [added: (24)] | | | | | | [removed: (21)] [added: (25)] | | | | | | [removed: (26)] [added: (21)] | | |

| Total other expense – net | | | [removed: 62] [added: 69] | | | | | | [removed: 72] [added: 62] | | | | | | [removed: 53] [added: 72] | | |

| Earnings before income taxes | | | [removed: 1,485] [added: 2,146] | | | | | | [removed: 947] [added: 1,485] | | | | | | [removed: 1,209] [added: 947] | | |

| Income tax provision | | | [removed: 371] [added: 533] | | | | | | [removed: 192] [added: 371] | | | | | | [removed: 314] [added: 192] | | |

| Net earnings | | | [removed: 1,114] [added: 1,613] | | | | | | [removed: 755] [added: 1,114] | | | | | | [removed: 895] [added: 755] | | |

| [removed: Less: Net] [added: Less net] earnings attributable to noncontrolling interest | | | [removed: 71] [added: 66] | | | | | | [removed: 60] [added: 71] | | | | | | [removed: 46] [added: 60] | | |

| Net earnings attributable to W.W. Grainger, Inc. | | | $ | [removed: 1,043] [added: 1,547] | | | | | $ | [removed: 695] [added: 1,043] | | | | | $ | [removed: 849] [added: 695] | |

| Basic | | | $ | [removed: 19.94] [added: 30.22] | | | | | $ | [removed: 12.88] [added: 19.94] | | | | | $ | [removed: 15.39] [added: 12.88] | |

| Diluted | | | $ | [removed: 19.84] [added: 30.06] | | | | | $ | [removed: 12.82] [added: 19.84] | | | | | $ | [removed: 15.32] [added: 12.82] | |

| Basic | | | [removed: 51.9] [added: 50.9] | | | | | | [removed: 53.5] [added: 51.9] | | | | | | [removed: 54.7] [added: 53.5] | | |

| Diluted | | | [removed: 52.2] [added: 51.1] | | | | | | [removed: 53.7] [added: 52.2] | | | | | | [removed: 54.9] [added: 53.7] | | |

| Net earnings | | | $ | [removed: 1,114] [added: 1,613] | | | | | $ | [removed: 755] [added: 1,114] | | | | | $ | [removed: 895] [added: 755] | |

| Foreign currency translation adjustments – net of reclassification to earnings (see Note 2 and Note 11) | | | [removed: (64)] [added: (101)] | | | | | | [removed: 83] [added: (64)] | | | | | | [removed: 26] [added: 83] | | |

| Postretirement benefit plan [removed: gains] (losses) [added: gains] – net of tax benefit (expense) of [added: $6,] $—, [removed: $(7),] and [removed: $2,] [added: $(7),] respectively (see Note 7 and Note 11) | | | [removed: —] [added: (17)] | | | | | | [removed: 22] [added: —] | | | | | | [removed: (6)] [added: 22] | | |

| Total other comprehensive earnings (losses) | | | [removed: (64)] [added: (118)] | | | | | | [removed: 105] [added: (64)] | | | | | | [removed: 20] [added: 105] | | |

| Comprehensive earnings – net of tax | | | [removed: 1,050] [added: 1,495] | | | | | | [removed: 860] [added: 1,050] | | | | | | [removed: 915] [added: 860] | | |

| [removed: Less: Comprehensive] [added: Less comprehensive] earnings (losses) attributable to noncontrolling interest | | | | | | | | | | | | | | | | | |

| Net earnings | | | [removed: 71] [added: 66] | | | | | | [removed: 60] [added: 71] | | | | | | [removed: 46] [added: 60] | | |

| Foreign currency translation adjustments | | | [removed: (29)] [added: (34)] | | | | | | [removed: 12] [added: (29)] | | | | | | [removed: 3] [added: 12] | | |

| Total comprehensive earnings (losses) attributable to noncontrolling interest | | | [removed: 42] [added: 32] | | | | | | [removed: 72] [added: 42] | | | | | | [removed: 49] [added: 72] | | |

| Comprehensive earnings attributable to W.W. Grainger, Inc. | | | $ | [removed: 1,008] [added: 1,463] | | | | | $ | [removed: 788] [added: 1,008] | | | | | $ | [removed: 866] [added: 788] | |

| Assets | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | |

| Cash and cash equivalents | | | $ | [removed: 241] [added: 325] | | | | | $ | [removed: 585] [added: 241] | |

| Accounts receivable (less allowance for credit losses of [removed: $30] [added: $36] and [removed: $27,] [added: $30,] respectively) | | | [removed: 1,754] [added: 2,133] | | | | | | [removed: 1,474] [added: 1,754] | | |

| Inventories – net | | | [removed: 1,870] [added: 2,253] | | | | | | [removed: 1,733] [added: 1,870] | | |

| Prepaid expenses and other current assets | | | [removed: 146] [added: 266] | | | | | | [removed: 127] [added: 146] | | |

| Total current assets | | | [removed: 4,011] [added: 4,977] | | | | | | [removed: 3,919] [added: 4,011] | | |

| Property, buildings and equipment – net | | | [removed: 1,424] [added: 1,461] | | | | | | [removed: 1,395] [added: 1,424] | | |

| Goodwill | | | [removed: 384] [added: 371] | | | | | | [removed: 391] [added: 384] | | |

February 21, 2023

| Current maturities | | | 35 | | | | | | — | | |

| Other non-current liabilities | | | 120 | | | | | | 87 | | |

| Net earnings | | | $ | 1,613 | | | | | $ | 1,114 | | | | | $ | 755 | |

| Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | | | | | | | | | | | | |

| Proceeds from short-term debt | | | 16 | | | | | | — | | | | | | 12 | | |

| Payments of short-term debt | | | (15) | | | | | | — | | | | | | (65) | | |

| Net earnings | | | — | | | — | | | 1,547 | | | — | | | — | | | 66 | | | 1,613 | | |

| Balance at December 31, 2022 | | | $ | 55 | | $ | 1,310 | | $ | 10,700 | | $ | (180) | | $ | (9,445) | | $ | 295 | | $ | 2,735 | |

The Company records a liability when a particular contingency is both probable and estimable.

If the probable loss cannot be reasonably estimated, no accrual is recorded, but the loss contingency and the reasons to the effect that it cannot be reasonably estimated are disclosed.

If a loss is reasonably possible, the Company will provide disclosure to that affect.

For further discussion on the Company's contingencies, see Notes 15 and 16.

In October 2022, the FASB amended Topic 848, updating the sunset date from December 31, 2022 to December 31, 2024.

For further discussion on the credit agreement modifications made to the revolving credit facility, see Note 6.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business *Entities about Government Assistance*.

In the fourth quarter of 2022, the Company recorded a gain of $21 million in SG&A as a result of the Cromwell subsidiary divestiture.

As of December 31, 2022 and 2021, the Canada business reporting unit had goodwill of $121 million and $129 million, respectively.

| Balance at December 31, 2022 | | | | | | $ | 313 | | | | | $ | 58 | | | | | $ | — | | | | | $ | 371 | |

*Revolving Credit Facility*

In February 2020, the Company entered into a five\-year unsecured credit agreement.

In August 2022, the Company entered into a First Amendment (the Amendment) to its revolving credit facility.

The Amendment changes the benchmark rate for borrowings denominated in U.S. and foreign currencies from LIBOR to certain alternative benchmark rates.

This includes benchmark rates based on the Euro Interbank Offered Rate (EURIBOR) for borrowings denominated in Euros, the Canadian Dollar Offer Rate (CDOR) for borrowings denominated in Canadian dollars, the Sterling Overnight Index Average (SONIA) for borrowings denominated in sterling and Secured Overnight Financing Rate (SOFR) for borrowings denominated in U.S. dollars.

The Amendment also updates certain other provisions regarding successor interest rates to LIBOR.

The Company's foreign subsidiaries utilize various financing sources for working capital purposes and other operating needs.

These financing sources in aggregate were not material as of December 31, 2022 and 2021.

*Commercial Paper*

*Senior Notes*

In the years 2015-2020, Grainger issued $2.3 billion in unsecured long-term debt (senior notes) primarily to provide flexibility in funding general working capital needs, share repurchases and long-term cash requirements.

The Company incurred debt issuance costs related to the senior notes of approximately $29 million, representing underwriting fees and other expenses.

Grainger uses interest rate swaps to manage the risks associated with the 1.85% senior notes.

These swaps were designated for hedge accounting treatment as fair value hedges.

*Term Loan*

As of December 31, 2022 and 2021, the carrying amount of the term loan, including current maturities due within one year, was $69 million and $78 million, respectively.

| 2027 | | | | | | — | | |

| Total | | | | | | $ | 2,374 | |

| Benefits paid | | | (12) | | | | | | (11) | | |

The actuarial gains recognized during the plan year are primarily related to

| | | | 2022 | | | | | | 2021 | | |

February 23, 2022

| Long-term debt (less current maturities) | | | 2,362 | | | | | | 2,389 | | |

| Subtotal | | | 266 | | | | | | 538 | | | | | | 402 | | |

| Subtotal | | | (443) | | | | | | (170) | | | | | | (255) | | |

| Borrowings under lines of credit | | | — | | | | | | 12 | | | | | | 20 | | |

| Payments against lines of credit | | | — | | | | | | (65) | | | | | | (15) | | |

| Balance at January 1, 2019 | | | $ | 55 | | $ | 1,134 | | $ | 7,869 | | $ | (171) | | $ | (6,966) | | $ | 172 | | $ | 2,093 | |

| Net earnings | | | — | | | — | | | 849 | | | — | | | — | | | 46 | | | 895 | | |

| Capital contribution | | | — | | | 2 | | | — | | | — | | | — | | | — | | | 2 | | |

On March 8, 2021, the Company provided investors with segment summary historical financial information and segment historical data that is consistent with its new reportable segment structure and reflective of its updated intersegment accounting policies.

For further segment information, see Note 14.

During December 2021, MonotaRO entered into a lease for a new Distribution Center (DC), which the Company deemed significant and included in the Consolidated Financial Statements for the year ended December 31, 2021.

*Reclassifications*

Certain reclassifications have been made to prior year amounts in the Company's Consolidated Balance Sheets to conform with the current year presentation.

Reclassifications were made to separately present operating lease right-of-use assets and current and long-term lease obligations that were previously presented as Other assets, Accrued expenses and Other non-current liabilities, respectively.

The reclassifications had no effect on net earnings or cash flows for the years ended December 31, 2021, 2020, or 2019.

The Company accrues for costs relating to litigation claims and other contingent matters when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

In October 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-10, *Codification Improvements.* These amendments improve consistency by amending the codification to include all disclosure guidance in the appropriate disclosure sections and clarifies application of various provisions in the codification by amending and adding new headings, cross referencing to other guidance and refining or correcting terminology.

The effective date of this ASU was for fiscal years and interim periods beginning after December 15, 2020.

In January 2020, the FASB issued ASU 2020-01, *Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), Clarifying the Interactions between Topic 321, Topic 323 and Topic 815*.

This ASU simplifies the understanding and application of the codification topics by eliminating inconsistencies and providing clarifications.

In December 2019, the FASB issued ASU 2019-12, *Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.* This ASU clarifies and simplifies accounting for income taxes by eliminating certain exceptions for intra-period tax allocation principles, the methodology for calculating income tax rates in an interim period, and recognition of deferred taxes for outside basis differences in an investment, among other updates.

*Accounting Pronouncements Recently Issued*

During the first quarter of 2020, the Company recorded impairment charges in SG&A in connection with the impairment of Fabory’s long-lived assets, including property, buildings and equipment for approximately $24 million.

The Company divested Fabory during the second quarter of 2020.

In the second quarter of 2020, qualitative tests indicated the existence of impairment indicators for the Canada business given the slowdowns in global oil markets and the economic repercussions from the COVID-19 pandemic in Canada.

As such, a quantitative test was performed to evaluate whether any impairment of goodwill was necessary.

Based on the result of the quantitative test, the Company concluded there was no impairment of goodwill.

At December 31, 2021, the reporting unit's goodwill balance was $129 million.

| Balance at January 1, 2020 | | | | | | $ | 318 | | | | | $ | 52 | | | | | $ | 59 | | | | | $ | 429 | |

| Acquisition | | | | | | — | | | | | | 15 | | | | | | — | | | | | | 15 | | |

| Impairment | | | | | | — | | | | | | — | | | | | | (58) | | | | | | (58) | | |

During the first quarter of 2020, the Company recorded $58 million of impairment charges in SG&A, in connection with the impairment of Fabory's goodwill.

The impairment is presented in Other in the table above.

The Company divested the Fabory business during the second quarter of 2020.

Grainger's current business portfolio had no impairments to goodwill for the twelve months ended December 31, 2021, and December 31, 2020, respectively.

(1) In the years 2015-2017, Grainger issued $1.8 billion in long-term debt (Senior Notes).

Debt was issued as follows:

- In May 2017, $400 million payable in 30 years and carries a 4.20% interest rate, payable semiannually.

- In May 2016, $400 million payable in 30 years and carries a 3.75% interest rate, payable semiannually.

Grainger's management assessed the effectiveness of Grainger's internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

Based on its assessment under that framework and the criteria established therein, Grainger's management concluded that Grainger's internal control over financial reporting was effective as of December 31, [removed: 2021.][added: 2022.]

Ernst & Young LLP, an independent registered public accounting firm, has audited Grainger's internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] as stated in their report, which is included herein.

There were no changes to Grainger's internal control over financial reporting for the quarter ending December 31, [removed: 2021] [added: 2022] that have materially affected, or are reasonably likely to materially affect, Grainger's internal control over financial reporting.

We have audited W.W. Grainger, Inc. and Subsidiaries’ internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, W.W Grainger, Inc. and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] the related consolidated statements of earnings, comprehensive earnings, shareholders’ equity and cash flows for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] and the related notes and our report dated February [removed: 23, 2022] [added: 21, 2023] expressed an unqualified opinion thereon.

February 21, 2023

February 23, 2022

The information required by this item is incorporated by reference to Grainger's proxy statement relating to the annual meeting of shareholders to be held April [removed: 27, 2022,] [added: 26, 2023,] under the captions “Board Qualifications, Attributes, Skills and Background,” “Annual Election of Directors,” “Candidates for Board Membership,” “Director Nominees’ Experience and Qualifications,” “Audit Committee,” and “Board Affairs and Nominating [removed: Committee.”] [added: Committee,” and "Delinquent Section 16(a) Reports."] Information required by this item regarding executive officers of Grainger is set forth in Part I, Item 1, under the caption “Information about our Executive Officers.”

The information required by this item is incorporated by reference to [removed: Grainger's] [added: Grainger’s] proxy statement relating to the annual meeting of shareholders to be held April [removed: 27, 2022,] [added: 26, 2023,] under the captions “Director Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee,” “Report of the Compensation Committee of the [removed: Board”] [added: Board,” “CEO Pay Ratio,”] and [removed: "Independent Compensation Consultant."][added: “Pay Versus Performance Disclosure.”]

The information required by this item is incorporated by reference to Grainger's proxy statement relating to the annual meeting of shareholders to be held April [removed: 27, 2022,] [added: 26, 2023,] under the captions “Ownership of Grainger Stock” and “Equity Compensation Plans.”

The information required by this item is incorporated by reference to Grainger's proxy statement relating to the annual meeting of shareholders to be held April [removed: 27, 2022,] [added: 26, 2023,] under the captions “Director Independence,” [removed: "Annual] [added: “Annual] Election of [removed: Directors"] [added: Directors”] and “Transactions with Related Persons.”

The information required by this item is incorporated by reference to Grainger's proxy statement relating to the annual meeting of shareholders to be held April [removed: 27, 2022,] [added: 26, 2023,] under the caption “Audit Fees and Audit Committee Pre-Approval Policies and Procedures.”

| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PCAOB ID: | | | 42 | | | [removed: [37](#ibfd9dc13381848669a4fb6062fd416bc_1735)] [added: [36](#i553f5ed0f5a94ebeacecf7c5e3d1081a_70)] | | |

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | | | | | | [removed: [44](#ibfd9dc13381848669a4fb6062fd416bc_136)] [added: [43](#i553f5ed0f5a94ebeacecf7c5e3d1081a_88)] | | |

| EXHIBIT [removed: INDEX (1)] [added: INDEX(1)] | | | | | | | | |

| [removed: [4.2](http://www.sec.gov/Archives/edgar/data/277135/000110465915044837/a15-11230_5ex4d1.htm)] [added: [4.](http://www.sec.gov/Archives/edgar/data/277135/000110465915044837/a15-11230_5ex4d1.htm)[1](http://www.sec.gov/Archives/edgar/data/277135/000110465915044837/a15-11230_5ex4d1.htm)] | | | | | | Indenture, dated as of June 11, 2015, between W.W. Grainger, Inc. and U.S. Bank National Association, as trustee, incorporated by reference to Exhibit 4.1 to W.W. Grainger, Inc.’s Current Report on Form 8-K dated June 11, 2015. | | |

| [removed: [4.3](http://www.sec.gov/Archives/edgar/data/277135/000110465915044837/a15-11230_5ex4d2.htm)] [added: [4.](http://www.sec.gov/Archives/edgar/data/277135/000110465915044837/a15-11230_5ex4d2.htm)[2](http://www.sec.gov/Archives/edgar/data/277135/000110465915044837/a15-11230_5ex4d2.htm)] | | | | | | First Supplemental Indenture, dated as of June 11, 2015, between W.W. Grainger, Inc. and U.S. Bank National Association, as trustee, and Form of 4.60% Senior Notes due 2045, incorporated by reference to Exhibit 4.2 to W.W. Grainger, Inc.’s Current Report on Form 8-K dated June 11, 2015. | | |

| [removed: [4.4](http://www.sec.gov/Archives/edgar/data/277135/000110465916121315/a16-8597_3ex4d1.htm)] [added: [4.](http://www.sec.gov/Archives/edgar/data/277135/000110465916121315/a16-8597_3ex4d1.htm)[3](http://www.sec.gov/Archives/edgar/data/277135/000110465916121315/a16-8597_3ex4d1.htm)] | | | | | | Second Supplemental Indenture, dated as of May 16, 2016, between W.W. Grainger, Inc., and U.S. Bank National Association, as trustee, incorporated by reference to Exhibit 4.1 to W.W. Grainger, Inc.’s Current Report on Form 8-K dated May 16, 2016. | | |

| [removed: [4.5](http://www.sec.gov/Archives/edgar/data/277135/000110465917034230/a17-12594_3ex4d1.htm)] [added: [4.](http://www.sec.gov/Archives/edgar/data/277135/000110465917034230/a17-12594_3ex4d1.htm)[4](http://www.sec.gov/Archives/edgar/data/277135/000110465917034230/a17-12594_3ex4d1.htm)] | | | | | | Third Supplemental Indenture, dated as of May 22, 2017, between W.W. Grainger, Inc., and U.S. Bank National Association, as trustee, incorporated by reference to Exhibit 4.1 to W.W. Grainger, Inc.’s Current Report on Form 8-K dated May 22, 2017. | | |

| [removed: [4.6](http://www.sec.gov/Archives/edgar/data/277135/000110465916121315/a16-8597_3ex4d1.htm)] [added: [4.](http://www.sec.gov/Archives/edgar/data/277135/000110465916121315/a16-8597_3ex4d1.htm)[5](http://www.sec.gov/Archives/edgar/data/277135/000110465916121315/a16-8597_3ex4d1.htm)] | | | | | | Form of 3.75% Senior Notes due 2046 (included in Exhibit [removed: 4.4),] [added: 4.3),] incorporated by reference to Exhibit [removed: 4.2] [added: 4.1] to W.W. Grainger, Inc.’s Current Report on Form 8-K dated May 16, 2016. | | |

| [removed: [4.7](http://www.sec.gov/Archives/edgar/data/277135/000110465917034230/a17-12594_3ex4d1.htm)] [added: [4.](http://www.sec.gov/Archives/edgar/data/277135/000110465917034230/a17-12594_3ex4d1.htm)[6](http://www.sec.gov/Archives/edgar/data/277135/000110465917034230/a17-12594_3ex4d1.htm)] | | | | | | Form of 4.20% Senior Notes due 2047 (included in Exhibit [removed: 4.5),] [added: 4.4),] incorporated by reference to Exhibit [removed: 4.2] [added: 4.1] to W.W. Grainger, Inc.’s Current Report on Form 8-K dated May 22, 2017. | | |

| [removed: [4.8](https://www.sec.gov/Archives/edgar/data/277135/000027713522000012/exhibit48toformdescription.htm)] [added: [4.](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit47toformdescription.htm)[7](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit47toformdescription.htm)] | | | | | | Description of Registrant's Securities Pursuant to Section 12 of the Securities Exchange Act of 1934. | | |

| [removed: [4.9](http://www.sec.gov/Archives/edgar/data/277135/000110465920025418/tm208239d5_ex4-1.htm)] [added: [4.](http://www.sec.gov/Archives/edgar/data/277135/000110465920025418/tm208239d5_ex4-1.htm)[8](http://www.sec.gov/Archives/edgar/data/277135/000110465920025418/tm208239d5_ex4-1.htm)] | | | | | | Fourth Supplemental Indenture, dated as of February 26, 2020, between W.W. Grainger, Inc., and U.S. Bank National Association, as trustee incorporated by reference to Exhibit 4.1 to W.W. Grainger, Inc.'s Current Report on Form 8-K dated February 21, 2020. | | |

| [removed: [4.10](http://www.sec.gov/Archives/edgar/data/277135/000110465920025418/tm208239d5_ex4-1.htm)] [added: [4.](http://www.sec.gov/Archives/edgar/data/277135/000110465920025418/tm208239d5_ex4-1.htm)[9](http://www.sec.gov/Archives/edgar/data/277135/000110465920025418/tm208239d5_ex4-1.htm)] | | | | | | Form of 1.85% Senior Notes due 2025 (included in Exhibit [removed: 4.1),] [added: 4.8),] incorporated by reference to Exhibit [removed: 4.2] [added: 4.1] to W.W. Grainger, Inc.'s Current Report on Form 8-K dated February 21, 2020. | | |

| [removed: [10.10](http://www.sec.gov/Archives/edgar/data/277135/000027713506000031/ex10d2005incplanamend072606.htm)] [added: [10.10](https://www.sec.gov/Archives/edgar/data/277135/000104746910002108/a2196890zdef14a.htm#Appendix_B)] | | | | | | 2010 Incentive Plan, incorporated by reference to [removed: Exhibit] [added: Appendix] B of W.W. Grainger, Inc.’s Proxy Statement dated March 12, 2010.* | | |

| [removed: [10.13](https://www.sec.gov/Archives/edgar/data/277135/000027713522000012/exhibit10132022companymana.htm)] [added: [10.13](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit10132022companymana.htm)] | | | | | | Summary Description of the Company Management Incentive Program.* | | |

| [removed: [10.33](http://www.sec.gov/Archives/edgar/data/277135/000027713520000014/gww-2020033120incentiv101.htm)] [added: [10.3](http://www.sec.gov/Archives/edgar/data/277135/000027713520000014/gww-2020033120incentiv101.htm)[4](http://www.sec.gov/Archives/edgar/data/277135/000027713520000014/gww-2020033120incentiv101.htm)] | | | | | | Form of 2020 W.W. Grainger, Inc. 2015 Incentive Plan Restricted Stock Unit Agreement between W.W. Grainger, Inc. and certain of its executive officers, incorporated by reference to Exhibit 10.1 to W.W. Grainger, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.* | | |

| [removed: [10.34](http://www.sec.gov/Archives/edgar/data/277135/000027713520000014/gww-2020033120incentiv102.htm)] [added: [10.3](http://www.sec.gov/Archives/edgar/data/277135/000027713520000014/gww-2020033120incentiv102.htm)[5](http://www.sec.gov/Archives/edgar/data/277135/000027713520000014/gww-2020033120incentiv102.htm)] | | | | | | Form of 2020 W.W. Grainger, Inc. 2015 Incentive Plan Performance Stock Unit Agreement between W.W. Grainger, Inc. and certain of its executive officers, incorporated by reference to Exhibit 10.2 to W.W. Grainger, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.* | | |

| [removed: [10.35](https://www.sec.gov/Archives/edgar/data/277135/000027713522000012/exhibit1035tothe2021xformp.htm)] [added: [10.42](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit1042-formofpsuagree.htm)] | | | | | | [removed: 2022] [added: 2023] Form of W.W. Grainger, Inc. [removed: 2015] [added: 2022] Incentive Plan Performance Stock Unit [added: Award] Agreement between W.W. Grainger, Inc. and certain of its executive officers.* | | |

| [removed: [10.36](https://www.sec.gov/Archives/edgar/data/277135/000027713521000007/exhibit10392015incentivepl.htm)] [added: [10.3](https://www.sec.gov/Archives/edgar/data/277135/000027713522000012/exhibit1035tothe2021xformp.htm)[6](https://www.sec.gov/Archives/edgar/data/277135/000027713522000012/exhibit1035tothe2021xformp.htm)] | | | | | | [added: 2022 Form of] W.W. Grainger, Inc. [removed: –] 2015 Incentive Plan [removed: CFO Transition –Restricted] [added: Performance] Stock Unit Agreement between W.W. Grainger, Inc. and [removed: Robert F. O’Keef, Jr. dated January 4, 2021,] [added: certain of its executive officers] incorporated by reference to Exhibit [removed: 10.39] [added: 10.35] to W.W. Grainger, [removed: Inc.’s] [added: Inc.'s] Annual Report on Form 10-K for the year ended December 31, [removed: 2020.*] [added: 2021.*] | | |

| [removed: [21](https://www.sec.gov/Archives/edgar/data/277135/000027713522000012/exhibit21tothe2021subsidia.htm)] [added: [21](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit21tothe2022subsidia.htm)] | | | | | | Subsidiaries of Grainger. | | |

| [removed: [23](https://www.sec.gov/Archives/edgar/data/277135/000027713522000012/exhibit23consent2021.htm)] [added: [23](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit23consent2022.htm)] | | | | | | Consent of Independent Registered Public Accounting Firm. | | |

| [removed: [31.1](https://www.sec.gov/Archives/edgar/data/277135/000027713522000012/gww-20211231xex311.htm)] [added: [31.1](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/gww-20221231xex311.htm)] | | | | | | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | |

| [removed: [31.2](https://www.sec.gov/Archives/edgar/data/277135/000027713522000012/gww-20211231xex312.htm)] [added: [31.2](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/gww-20221231xex312.htm)] | | | | | | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | |

| [removed: [32](https://www.sec.gov/Archives/edgar/data/277135/000027713522000012/gww-20211231xex32.htm)] [added: [32](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/gww-20221231xex32.htm)] | | | | | | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | |

| CONSOLIDATED STATEMENTS OF EARNINGS FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020 | | | | | | [38](#i553f5ed0f5a94ebeacecf7c5e3d1081a_73) | | |

| CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020 | | | | | | [39](#i553f5ed0f5a94ebeacecf7c5e3d1081a_76) | | |

| CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2022 AND 2021 | | | | | | [40](#i553f5ed0f5a94ebeacecf7c5e3d1081a_79) | | |

| CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020 | | | | | | [41](#i553f5ed0f5a94ebeacecf7c5e3d1081a_82) | | |

| CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020 | | | | | | [42](#i553f5ed0f5a94ebeacecf7c5e3d1081a_85) | | |

| [10.9](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit109summarydescripti.htm) | | | | | | Summary Description of the Directors Compensation Program.* | | |

| [10.](https://www.sec.gov/Archives/edgar/data/277135/000027713522000034/gww8kex101.htm)[3](https://www.sec.gov/Archives/edgar/data/277135/000027713522000034/gww8kex101.htm)[3](https://www.sec.gov/Archives/edgar/data/277135/000027713522000034/gww8kex101.htm) | | | | | | First Amendment to Credit Agreement, dated as of August 29, 2022, by and among W.W. Grainger, Inc., the lenders party thereto and JPMorgan Chase, N.A., as Administrative Agent, incorporated by reference to Exhibit 10.1 to W.W. Grainger, Inc.’s Current Report on Form 8 K dated August 30, 2022. | | |

| [10.3](https://www.sec.gov/Archives/edgar/data/277135/000027713522000022/gww-20220630xex101.htm)[7](https://www.sec.gov/Archives/edgar/data/277135/000027713522000022/gww-20220630xex101.htm) | | | | | | 2022 Form of W.W. Grainger, Inc. 2022 Incentive Plan Restricted Stock Unit Award Agreement between W.W. Grainger, Inc. and certain of its executive officers, incorporated by reference to Exhibit 10.1 to W.W. Grainger, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.* | | |

| [10.3](https://www.sec.gov/Archives/edgar/data/277135/000027713522000022/gww-20220630xex102.htm)[8](https://www.sec.gov/Archives/edgar/data/277135/000027713522000022/gww-20220630xex102.htm) | | | | | | 2022 Form of W.W. Grainger, Inc. 2022 Incentive Plan Performance Stock Unit Award Agreement between W.W. Grainger, Inc. and certain of its executive officers, incorporated by reference to Exhibit 10.2 to W.W. Grainger, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.* | | |

| [10.3](https://www.sec.gov/Archives/edgar/data/277135/000110465922034677/tm223362-1_def14a.htm#tAPC)[9](https://www.sec.gov/Archives/edgar/data/277135/000110465922034677/tm223362-1_def14a.htm#tAPC) | | | | | | W.W. Grainger, Inc. 2022 Incentive Plan, incorporated by reference to Appendix C of the Company's Definitive Proxy Statement on Schedule 14A filed on March 17, 2022.* | | |

| [10.40](https://www.sec.gov/Archives/edgar/data/277135/000027713522000043/gww-20220930xex101.htm) | | | | | | Compensation Continuation - Severance Policy Guidance, incorporated by reference to Exhibit 10.1 to W.W. Grainger, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022.* | | |

| [10.41](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit1041-formofrsuagree.htm) | | | | | | 2023 Form of W.W. Grainger, Inc. 2022 Incentive Plan Restricted Stock Unit Award Agreement between W.W. Grainger, Inc. and certain of its executive officers.* | | |

| [10.43](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit1043shareholderagre.htm) | | | | | | Shareholder Agreement, Dated as of February 17, 2023, by and among W.W. Grainger, Inc. and MonotaRO Co., Ltd. | | |

| | | | | | | | | |

December 31, 2021, 2020 and 2019

| CONSOLIDATED STATEMENTS OF EARNINGS | | | | | | [39](#ibfd9dc13381848669a4fb6062fd416bc_121) | | |

| CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS | | | | | | [40](#ibfd9dc13381848669a4fb6062fd416bc_124) | | |

| CONSOLIDATED BALANCE SHEETS | | | | | | [41](#ibfd9dc13381848669a4fb6062fd416bc_127) | | |

| CONSOLIDATED STATEMENTS OF CASH FLOWS | | | | | | [42](#ibfd9dc13381848669a4fb6062fd416bc_130) | | |

| CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY | | | | | | [43](#ibfd9dc13381848669a4fb6062fd416bc_133) | | |

| 4.1 | | | | | | No instruments which define the rights of holders of W.W. Grainger, Inc.’s Industrial Development Revenue Bonds are filed herewith, pursuant to the exemption contained in Regulation S-K, Item 601(b)(4)(iii). W.W. Grainger, Inc. hereby agrees to furnish to the SEC, upon request, a copy of any such instrument. | | |

| [10.9](http://www.sec.gov/Archives/edgar/data/277135/000027713520000007/exhibit109summarydescr.htm) | | | | | | Summary Description of the Directors Compensation Program incorporated by reference to Exhibit 10.9 to W.W. Grainger, inc.'s Annual Report on Form 10-K for the year ended December 31, 2019.* | | |

| (1) Certain instruments defining the rights of holders of long-term debt securities of the Registrant are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The Registrant hereby undertakes to furnish to the SEC, upon request, copies of any such instruments. | | | | | | | | |

DATE: February [removed: 23, 2022][added: 21, 2023]

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant on February [removed: 23, 2022,] [added: 21, 2023,] in the capacities indicated.

| (Principal Executive Officer) | | | | | | /s/ [removed: V. Ann Hailey] [added: Katherine D. Jaspon] | | |

| [added: /s/ D.G. Macpherson] | | | | | | [added: /s/] V. Ann [removed: Hailey] [added: Hailey] | | |

| Senior Vice President | | | | | | /s/ [removed: Katherine D. Jaspon] [added: Stuart L. Levenick] | | |

| and Chief Financial Officer | | | | | | [removed: Katherine D. Jaspon] [added: Stuart L. Levenick] | | |

| [added: /s/ Laurie R. Thomson] | | | | | | /s/ Neil S. Novich | | |

| [added: Laurie R. Thomson] | | | | | | Neil S. Novich | | |

| D.G. Macpherson | | | | | | V. Ann Hailey | | |

| | | | | | | Katherine D. Jaspon | | |

| | | | | | | | | |

| | | | | | | | | |

| | | | | | | | | |

| /s/ D.G. Macpherson | | | | | | /s/ Brian P. Anderson | | |

| D.G. Macpherson | | | | | | Brian P. Anderson | | |

| /s/ Laurie R. Thomson | | | | | | /s/ Stuart L. Levenick | | |

| Laurie R. Thomson | | | | | | Stuart L. Levenick | | |

| | | | | | | Director | | |