W.W. Grainger (GWW) 10-K risk factor changes: FY2023 vs FY2022

The following [removed: is] [added: represents] a discussion of [removed: significant] risk factors relevant to Grainger’s business that could adversely affect its financial condition, results of operations and cash [removed: flows.][added: flows, along with the accuracy of forward-looking statements.]

The risk factors discussed in this section should be considered together with information included elsewhere in this Annual Report on Form 10-K and should not be considered the only risks to which [removed: the Company] [added: Grainger] is exposed.

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

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

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

Even when Grainger is able to find alternate sources for certain products, they may cost more or require [removed: the Company] [added: Grainger] to incur higher transportation costs, which could adversely impact [removed: the Company's] [added: Grainger's] profitability and financial condition.

It is not possible to predict whether [removed: these] [added: certain geopolitical] events [added: which could adversely affect Grainger's business] 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.

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

Any of these events could also reduce the volume of products and services these customers purchase from Grainger or impair the ability of Grainger’s customers to make full and timely payments and could cause increased pressure on Grainger’s [removed: selling prices] [added: pricing] and terms of sale.

Accordingly, a significant or prolonged slowdown in economic activity in Canada, [removed: China,] Japan, Mexico, the U.K., the U.S. or any other major world economy, or a segment of any such economy, could negatively impact Grainger’s sales [removed: growth] and results of operations.

[removed: Products] [added: Grainger's products] are purchased from more than 5,000 [added: primary] 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 [removed: disease such as the COVID-19 pandemic or other similar global pandemics,] [added: disease,] natural or human induced disasters, [added: cybersecurity attacks,] extreme weather, geopolitical unrest, [removed: tariffs,] new [removed: tariffs] or [removed: tariff increases,] [added: increased tariffs,] 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, 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.

In the event Grainger was unable to maintain those relations, there might be a loss of competitive pricing [removed: advantages] [added: arrangements] which could, in turn, adversely affect results of operations.

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

Grainger’s Supplier Code of Ethics focuses on four main areas of ethical sourcing: [added: (i)] human [removed: rights,] [added: rights and] labor [added: standards] (including prohibitions on child and forced [removed: labor), environment] [added: labor); (ii) environment, health] and [removed: anti-corruption.][added: safety; (iii) sanctions, trade, bribery and corruption; and (iv) privacy and information security.]

Fluctuations in the price of fuel or increased demand for freight services, including as a result of [removed: outbreaks of pandemic disease such as the COVID-19] [added: a] pandemic, could affect transportation costs.

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

[removed: While] the [removed: Consolidated] Financial Statements [removed: 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 Japanese yen, [added: Mexican peso,] Canadian dollar, British pound sterling, [removed: Mexican peso,] Chinese renminbi and 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.

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

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

The facilities maintenance industry is highly competitive, and changes in competition [added: and other risks] could [removed: result in decreased] [added: impact] demand for Grainger’s products and services.

Grainger competes in a variety of ways, including product assortment and availability, services offered to customers, pricing, purchasing [removed: convenience,] [added: convenience] and the overall experience Grainger offers.

Grainger faces competition in all markets it serves from manufacturers (including some of its own suppliers) that sell directly to certain segments of the market, wholesale distributors, catalog houses, retail enterprises and online [removed: businesses that compete with price transparency.][added: businesses.]

To remain competitive, [removed: the Company] [added: Grainger] must be willing and able to respond to market pressures.

If [removed: the Company] [added: Grainger] is unable to [removed: grow sales] [added: sustain] or [added: grow sales,] reduce costs, [added: and prevent loss and fraud,] among other actions, [removed: the Company’s] [added: Grainger's] results of operations and financial condition may be adversely affected.

Moreover, Grainger expects technological [removed: advancements] [added: advancements, innovations] and the increased use of eCommerce solutions within the industry to continue to evolve at a rapid pace.

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

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

The successful execution of Grainger’s eCommerce growth strategy depends on a number of factors, including [removed: the Company’s] [added: Grainger’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.

If Grainger’s customer-facing technology systems are perceived as more difficult or less compelling for customers to use than those of [removed: the Company’s] [added: Grainger’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.

Grainger also relies on email and other messaging services to promote its websites and product offerings, and changes in [removed: the Company’s] [added: Grainger’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 [removed: the Company’s] [added: Grainger’s] results of operations.

From time to time, Grainger experiences changes in [added: its] customer base and product mix that affect gross margin.

Changes in customer base and product mix result primarily from business [removed: acquisitions,] [added: acquisitions and divestitures,] changes in customer demand, customer acquisitions, selling and marketing activities, competition and the increased use of eCommerce by Grainger and its competitors.

If [removed: the Company] [added: Grainger] is unable to enter into, or sustain, contractual arrangements on a satisfactory commercial basis with GPOs, Grainger's results of operations could be adversely affected.

As [added: its] customer base and product mix change over time, Grainger must identify new products, product lines and services that respond to industry trends and customer needs.

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, [removed: the Company’s] [added: Grainger’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 [removed: repurchase programs] [added: repurchases] or [removed: dividend policies,] [added: dividends,] economic decline, political unrest or geopolitical conflict, outbreak of pandemic [removed: disease such as the COVID-19 pandemic,] [added: disease,] and a number of other factors, including those discussed in this Item 1A.

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 [removed: listing requirements and U.S. securities laws.]

The [removed: proper] functioning of Grainger’s information systems is critical to the [removed: successful] operation of its business.

Grainger continues to invest in software, hardware and network infrastructures [removed: in order] to effectively manage its information systems.

The risks included below are not exhaustive.

As Grainger operates in a rapidly changing environment, it is not possible for management to predict all risks and the corresponding impact of each such risk or a combination of risks.

The presented risks and any new risks could cause actual results to differ materially from those contained in any forward-looking statements.

Further escalation of geopolitical tensions across the world and potential actions taken in response to them could have a broad impact on markets where Grainger does business, adversely affect its suppliers and disrupt the sourcing, manufacturing and transportation of products.

The Code also addresses how to report potential Code violations and related concerns.

While the Consolidated Financial Statements are reported in U.S. dollars,

To manage these potential pressures, Grainger continuously considers the adoption of new operating initiatives, including new marketing programs, productivity improvements, inventory management and loss prevention initiatives, and other similar strategies.

Additionally, Grainger faces many risks and uncertainties beyond the Company's control, including theft, credit card fraud, and other fraudulent behavior.

Grainger has also increased, and expects to continue to increase, its investments in developing, managing and implementing artificial intelligence (AI), machine learning and large language model technologies.

While the use of these technologies can present significant benefits to Grainger, it also creates risks and challenges.

Further, if these investments in Grainger’s eCommerce platforms are less successful at attracting and retaining customers than similar investments by our competitors, or if Grainger is otherwise unsuccessful at realizing the benefits of these technological investments generally, its reputation, financial condition and operating results may be adversely affected.

listing requirements and U.S. securities laws.

However, Grainger may not be able to maintain or update its information systems to capture and use data in ways that result in operational efficiency, including as a result of ineffective software, difficulties obtaining the right talent and ability to manage the increasing volume of data available to, and managed by Grainger.

Grainger may be unable to anticipate these techniques or implement preventative measures.

For further information regarding Grainger's cybersecurity risk management strategy and the Board's oversight role, see Part I, Item 1C: Cybersecurity of this Form 10-K.

Additionally collective bargaining or unionization of team members could decrease Grainger's operational flexibility and lead to work stoppages or slowdowns.

Further, failure to successfully hire executives and key team members or adequately plan for the succession, transition, and assimilation of executive leaders and team members in key roles, or to plan for the loss of executives and key team members, could adversely affect Grainger's business results and financial condition.

Grainger is subject to a complex array of laws, regulations and standards globally.

The wide array of laws, regulations and standards in each jurisdiction where Grainger operates, include, but are not limited to, advertising, marketing and Internet regulations (including the use of proprietary or third-party “cookies” in connection with Grainger’s eCommerce platforms), anti-bribery and corruption laws, competition and antitrust regulations, data protection (including, because Grainger accepts credit cards, the Payment Card Industry Data Security Standard), data privacy (including in the U.S., the California Consumer Privacy Act and Privacy Rights Act,

The Organization for Economic Cooperation and Development (OECD) Pillar Two guidelines address the increasing digitization of the global economy, re-allocating taxing rights among countries.

The OECD continues to release additional guidance and countries are implementing legislation with widespread adoption of the Pillar Two Framework expected during 2024.

Grainger continues to evaluate the Pillar Two Framework and its potential impact on future periods.

Based on information to date, Grainger does not expect either the Pillar One or Two proposals to materially impact the Company’s global income tax liability or effective tax rate.

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.

Grainger’s competitive strengths include product selection and availability.

Grainger’s business and operations have been and could in the future be adversely affected by the global outbreak of the Coronavirus and its variants (COVID-19 pandemic), or other global outbreaks of pandemic disease.

Any global outbreaks of pandemic disease, such as the COVID-19 pandemic, could have a material adverse effect on Grainger’s business, results of operations and financial condition, including liquidity, capital and financing resources.

Additional effects from global pandemics on Grainger's business could include adverse impacts on transportation, including shipping delays and port disruptions, increased shipping costs, constraints on the availability of products, inflation, and labor shortages.

Furthermore, Grainger's ability to collect its accounts receivable or receive product ordered from suppliers, as customers and suppliers face higher liquidity and solvency risks and seek terms that are less favorable to Grainger, may adversely affect the Company’s business.

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 and 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.

Addressing shortages may require the Company to procure products from new suppliers or through brokers with whom it has a limited or no prior relationship.

These developments, alone or in combination, could materially adversely affect Grainger’s future sales and results of operations.

Moreover, global outbreaks such as the COVID-19 pandemic have resulted in a widespread health crisis that has adversely affected and could continue to adversely affect the economies of many countries, resulting in a global or regional economic downturn or recession and supply chain challenges.

Any such recession could result in a significant decline in access to products, demand for the Company’s products or limit Grainger’s ability to access capital markets, any of which could materially adversely affect the Company’s business, results of operations and financial condition.

The duration and ultimate impact of 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 extent and geographic spread, severity and duration of the pandemic, including whether there are periods of increased cases, 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.

In addition, if the Company is unable to respond to and manage the impact of governmental mandates, requirements or other directives related to a pandemic, the Company’s business and results of operations may be adversely affected.

Such tactics may also seek to cause payments due to or from the Company to be misdirected to fraudulent accounts, which may not be recoverable by the Company.

Grainger maintains information security staff, policies and procedures for managing risk to its information security systems, conducts annual employee awareness training of cybersecurity threats and routinely utilizes consultants to assist in evaluating the effectiveness of the security of its IT systems.

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.

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

Grainger continuously evaluates the need to upgrade and/or replace its systems and network infrastructure to protect its computing environment, to stay current on vendor supported products and to improve the efficiency of its systems and for other business reasons.

The Company's employee hiring and

Further, changes in the Company's management team may be disruptive to its business, and any failure to successfully transition and assimilate key new hires or promoted employees could adversely affect its business and results of operations.

Grainger is subject to various domestic and foreign laws, regulations and standards.

In addition, Grainger’s business and results of operations in the U.K. may be negatively affected by changes in trade policies, or changes in labor, immigration, tax or other laws, resulting from the U.K.’s exit from the European Union.

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,

This section of this Form 10-K generally discusses [removed: 2022] [added: 2023] and [removed: 2021] [added: 2022] items and year-to-year comparisons between [removed: 2022] [added: 2023] and [removed: 2021.][added: 2022.]

Discussions of [removed: 2020] [added: 2021] items and year-to-year comparisons between [removed: 2021] [added: 2022] and [removed: 2020] [added: 2021] are not included in this Form 10-K, and can be found in MD&A of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2021.][added: 2022.]

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

The Company’s continued strategic [removed: priority] [added: aspiration] for [removed: 2023] [added: 2024] is to relentlessly expand Grainger’s leadership position [removed: in the MRO space] by being the go-to partner for people who build and run [removed: safe] [added: safe, sustainable,] and productive operations.

To achieve this, each Grainger business has a set of strategic [removed: objectives.][added: growth drivers to drive top-line revenue and MRO market outgrowth.]

[removed: The endless assortment] [added: In the Endless Assortment segment,] businesses are focused on product assortment expansion and innovative customer acquisition and [removed: retention.][added: retention capabilities.]

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

[removed: In combination with the economic recovery of the ongoing COVID-19 pandemic, the] [added: The] global economy continues to experience volatile disruptions including to the commodity, labor and transportation [removed: markets.][added: markets, arising from a combination of geopolitical events and various economic and financial factors.]

[removed: Such] [added: These] disruptions have [removed: impacted,] [added: affected the Company's operations] and may continue to [removed: impact,] [added: affect] the Company's business, financial condition and results of operations.

The Company continues to monitor economic conditions in the U.S. and globally, and the impact of macroeconomic pressures, including [removed: rising] [added: repercussions from changes in] interest rates, [removed: fluctuating] currency exchange [removed: rates] [added: fluctuations, inflation] and [added: a potential] recession [removed: fears,] on the Company’s business, customers, suppliers and other third parties.

[added: Historically, the Company’s broad and diverse] customer base and the nondiscretionary nature of the Company’s products to its customers has helped [added: to insulate] it [removed: perform well] [added: from the effects of recessionary periods] in the industrial MRO [removed: market in recessionary periods.][added: market.]

The following table is included as an aid to understanding [added: the] changes in Grainger's Consolidated Statements of Earnings [added: for the twelve months ended December 31, 2023 and 2022] (in millions of dollars).

| Net sales(1) | | | $ | [removed: 15,228] [added: 16,478] | | | | | $ | [removed: 13,022] [added: 15,228] | | | | | [removed: 16.9] [added: 8.2] | | % | | | | 100.0 | | % | | | | 100.0 | | % |

| Cost of goods sold | | | [removed: 9,379] [added: 9,982] | | | | | | [removed: 8,302] [added: 9,379] | | | | | | [removed: 13.0] [added: 6.4] | | | | | | [removed: 61.6] [added: 60.6] | | | | | | [removed: 63.8] [added: 61.6] | | |

| Gross profit | | | [removed: 5,849] [added: 6,496] | | | | | | [removed: 4,720] [added: 5,849] | | | | | | [removed: 23.9] [added: 11.1] | | | | | | [removed: 38.4] [added: 39.4] | | | | | | [removed: 36.2] [added: 38.4] | | |

| Selling, general and administrative expenses | | | [removed: 3,634] [added: 3,931] | | | | | | [removed: 3,173] [added: 3,634] | | | | | | [removed: 14.5] [added: 8.2] | | | | | | [removed: 23.9] [added: 23.8] | | | | | | [removed: 24.4] [added: 23.9] | | |

| Operating earnings | | | [removed: 2,215] [added: 2,565] | | | | | | [removed: 1,547] [added: 2,215] | | | | | | [removed: 43.2] [added: 15.8] | | | | | | [removed: 14.5] [added: 15.6] | | | | | | [removed: 11.9] [added: 14.5] | | |

| [removed: Other] [added: Total other] expense – net | | | [removed: 69] [added: (69)] | | | | | | [removed: 62] [added: —] | | | | | | [removed: 10.6] [added: (69)] | | | | | | [removed: 0.4] [added: 10.6] | | | | | | [removed: 0.5] [added: (0.4)] | | |

| Income tax [removed: provision] [added: provision(4)] | | | [removed: 533] [added: (533)] | | | | | | [removed: 371] [added: —] | | | | | | [removed: 43.8] [added: (533)] | | | | | | [removed: 3.5] [added: 43.8] | | | | | | [removed: 2.8] [added: (3.5)] | | |

| Net earnings | | | [removed: 1,613] [added: 1,903] | | | | | | [removed: 1,114] [added: 1,613] | | | | | | [removed: 44.8] [added: 18.0] | | | | | | [removed: 10.6] [added: 11.6] | | | | | | [removed: 8.6] [added: 10.6] | | |

| Noncontrolling interest | | | [removed: 66] [added: (66)] | | | | | | [removed: 71] [added: —] | | | | | | [removed: (7.1)] [added: (66)] | | | | | | [removed: 0.4] [added: (7.1)] | | | | | | [removed: 0.5] [added: (0.5)] | | |

| Net earnings attributable to W.W. Grainger, Inc. | | | $ | [removed: 1,547] [added: 1,829] | | | | | $ | [removed: 1,043] [added: 1,547] | | | | | [removed: 48.4] [added: 18.2] | | | | | | [removed: 10.2] [added: 11.1] | | [added: %] | | | | [removed: 8.0] [added: 10.2] | | [added: %] |

| Diluted earnings per share: | | | $ | [removed: 30.06] [added: 36.23] | | | | | $ | [removed: 19.84] [added: 30.06] | | | | | [removed: 51.5] [added: 20.5] | | % | | | | | | | | | | | | |

| (1) For further information regarding the Company's disaggregated revenue, see Note [removed: 3] [added: 2] of the Notes to the Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

The following table is included as an aid to understanding the changes [removed: in] [added: of] Grainger's total net [added: sales, daily net] sales and daily [added: organic constant currency net] sales from the prior period [removed: to] [added: for] the [removed: most recent period] [added: twelve months ended December 31, 2023] (in millions of dollars):

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

| [removed: Net Sales] | | | [removed: $] | [removed: 15,228] | | | | | [removed: $] | [removed: 13,022] | | [added: | | | | | | | | | % of Net Sales | | | | | | | | |]

| [removed: (1) Daily sales are defined as] [added: (3) Excludes] the [removed: total] [added: impact on] net sales [removed: for the period divided by] [added: due to] the [removed: number of] [added: difference in] U.S. selling days [removed: in] [added: relative to] the [removed: period.] [added: prior year period on a daily basis.] There were [removed: 255 and] 254 [added: and 255] sales days in the full year [removed: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] respectively. | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

Net sales of [removed: $15,228] [added: $13,267] million for the year ended December 31, [removed: 2022] [added: 2023] increased [removed: $2,206] [added: $1,085] million, or [removed: 16.9%,] [added: 9%] compared to the same period in [removed: 2021.][added: 2022.]

[removed: The increase in net sales was primarily due to growth in the] [added: Both] High-Touch Solutions N.A. and [added: the] Endless Assortment segments [added: contributed to sales growth] in [removed: 2022.][added: 2023.]

[removed: Gross profit] [added: SG&A] of [removed: $5,849] [added: $631] million for the year ended December 31, [removed: 2022] [added: 2023] increased [removed: $1,129] [added: $37] million, or [removed: 24%,] [added: 6%,] compared to the same period in [removed: 2021.][added: 2022.]

[removed: The increase was driven by favorability in the] [added: | | | | | | |] High-Touch Solutions N.A. [removed: and] [added: | | | | | | | | | | | |] Endless Assortment [removed: segments.][added: | | | | | | | | | | | | Total Company(1) | | | | | | | | | | | | | | |]

[removed: SG&A] [added: Operating earnings] of [removed: $3,634] [added: $233] million for the year ended December 31, [removed: 2022] [added: 2023] increased [removed: $461] [added: $10] million, or [removed: 15%,] [added: 4%,] compared to the same period in [removed: 2021.][added: 2022.]

The increase was primarily due to higher [removed: marketing, payroll] [added: marketing] and [removed: variable compensation expenses in 2022.][added: payroll expenses.]

Operating earnings of [removed: $2,215] [added: $2,334] million for the year ended December 31, [removed: 2022] [added: 2023] increased [removed: $668] [added: $351] million, or [removed: 43%,] [added: 18%, and adjusted operating earnings of $2,360 million increased $377 million, or 19%] compared to the same period in [removed: 2021.][added: 2022.]

The increase was [removed: driven by] [added: due to] higher gross profit dollars, partially offset by higher [removed: SG&A.][added: SG&A in 2023.]

[removed: Other expense – net] [added: SG&A] of [removed: $69] [added: $3,212] million for the year ended December 31, [removed: 2022] [added: 2023] increased [removed: $7] [added: $244] million, or [removed: 11%,] [added: 8%, and adjusted SG&A of $3,186 million increased $218 million, or 7%] compared to the same period in [removed: 2021.][added: 2022.]

[added: | (4)] Grainger's [added: reported and adjusted] effective tax rates were 24.8% and [removed: 25.0%] [added: 25.1%] for the [removed: twelve months] [added: year] ended December 31, [removed: 2022 and 2021,] [added: 2022,] respectively. [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

[removed: Diluted] [added: Adjusted diluted] earnings per share was [removed: $30.06] [added: $36.67] for the year ended December 31, [removed: 2022,] [added: 2023,] an increase of [removed: 52%] [added: 24%] compared to [removed: $19.84] [added: $29.66] for the same period in [removed: 2021.][added: 2022.]

The following tables [removed: reconcile] [added: provide a reconciliation of] reported [removed: selling, general and administrative (SG&A)] [added: SG&A] expenses, operating earnings, net earnings attributable to W.W. Grainger, Inc. and diluted earnings per share determined in accordance with [removed: U.S. generally accepted accounting principles (GAAP)] [added: GAAP] to [added: the Company's] non-GAAP measures [removed: including] adjusted SG&A, adjusted operating earnings, adjusted net earnings attributable to W.W. Grainger, Inc. and adjusted diluted earnings per [removed: share.][added: share for the twelve months ended December 31, 2023 and 2022 (in millions of dollars):]

In the High-Touch Solutions North America (High-Touch Solutions N.A.) segment, businesses are focused on three areas: advantaged MRO solutions, differentiated sales and services, and unparalleled customer service.

In this section, Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business.

Non-GAAP measures exclude certain items affecting comparability that can affect the year-over-year assessment of operating results and other one-time items that do not directly reflect ongoing operating results.

For further information regarding the Company's non-GAAP measures including reconciliations to the most directly comparable GAAP measures, see below "Non-GAAP Measures."

| | | | 2023 | | | | | | 2022 | | | | | | % Change | | | 2023 | | | | | | 2022 | | | | | |

| Other expense – net | | | 65 | | | | | | 69 | | | | | | (5.5) | | | | | | 0.4 | | | | | | 0.4 | | |

| Income tax provision | | | 597 | | | | | | 533 | | | | | | 12.0 | | | | | | 3.6 | | | | | | 3.5 | | |

| Less noncontrolling interest | | | 74 | | | | | | 66 | | | | | | 12.5 | | | | | | 0.5 | | | | | | 0.4 | | |

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

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

| | | | 2023 | | | | | | % Change(1) | | | | | | 2022 | | | | | | % Change(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Net sales | | | $ | 16,478 | | | | | 8.2 | | % | | | | $ | 15,228 | | | | | 16.9 | | % | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

| Daily net sales(2) | | | $ | 65.2 | | | | | 8.6 | | % | | | | $ | 59.5 | | | | | 16.5 | | % | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

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

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

| Daily, organic constant currency net sales(2) | | | $ | 65.8 | | | | | 9.5 | | % | | | | $ | 61.0 | | | | | 19.3 | | % | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

| (1) Calculated on the basis of prior year reported net sales for the years ended December 31, 2023 and 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| (2) Daily net sales are adjusted for the difference in U.S. selling days relative to the prior year period. Daily, organic constant currency net sales excludes the results of E & R Industrial Sales, Inc. in the comparable prior year period post date of divestiture and excludes the impact on net sales due to year-over-year foreign currency exchange rate fluctuations. There were 254 and 255 sales days in the full year 2023 and 2022, respectively. For further information regarding the Company's non-GAAP measures, including reconciliations to the most directly comparable GAAP measures, see below "Non-GAAP Measures." | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

Gross profit of $6,496 million for the year ended December 31, 2023 increased $647 million, or 11%, and gross profit margin of 39.4% increased 100 basis points compared to the same period in 2022.

Both segments contributed to margin expansion in 2023.

Selling, general, and administrative (SG&A) expenses of $3,931 million for the year ended December 31, 2023 increased $297 million, or 8%.

Adjusted SG&A of $3,905 million increased $250 million, or 7%, compared to the same period in 2022 driven by higher marketing and payroll expenses.

Adjusted SG&A leverage improved 30 basis points in 2023.

Adjusted operating earnings of $2,591 million increased $397 million, or 18%, compared to the same period in 2022 due to higher gross profit dollars, partially offset by increased SG&A consistent with sales growth in 2023.

Adjusted operating margin improved 130 basis points in 2023.

Income tax expense of $597 million and $533 million represents effective tax rates of 23.9% and 24.8% for the years ended December 31, 2023 and 2022, respectively.

The Company's effective tax rate was positively impacted by increased benefits related to stock compensation in 2023.

Diluted earnings per share was $36.23 for the year ended December 31, 2023.

Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business.

Non-GAAP measures exclude certain items affecting comparability that can affect the year-over-year assessment of operating results and other one-time items that do not directly reflect ongoing operating results.

Organic net sales results exclude the impact of changes in foreign currency exchange rates and results of certain divested businesses in the comparable prior year period post date of divestiture.

Adjusted results including adjusted SG&A, adjusted operating earnings, adjusted net earnings and adjusted diluted EPS exclude certain non-recurring items, including restructuring charges, asset impairments, gains and losses associated with business divestitures and other non-recurring, infrequent or unusual gains and losses from the Company’s most directly comparable reported U.S. generally accepted accounting principles (GAAP) results.

Grainger’s non-GAAP financial measures should be considered in addition to, and not as a replacement for or as a superior measure to its most directly comparable GAAP measure and may not be comparable to similarly titled measures reported by other companies.

*Business Divestitures*

In the fourth quarter of 2023, Grainger divested E & R Industrial Sales, Inc. (E&R) and recorded a one-time pre-tax loss on the divestiture of $26 million in SG&A.

In the fourth quarter of 2022, Grainger divested Cromwell's wholly owned software business in the U.K. and recorded a one-time pre-tax gain on the divestiture of $21 million in SG&A.

The high-touch solutions businesses are focused on key initiatives that drive top-line revenue and MRO market outgrowth.

Additionally, the high-touch solutions businesses are focused on growing through differentiated sales and services (e.g., direct customer relationships and onsite services), advantaged MRO solutions (e.g., get customers the exact products and services they need to solve a problem quickly) and unparalleled customer service (e.g., deliver flawlessly on every customer transaction).

*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.

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.

Historically, the Company’s broad and diverse

*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.

| | | | | | | | | | | | | | | | Percent Increase/(Decrease) from Prior Year | | | | | | As a Percent of Net Sales | | | | | | | | |

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

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

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

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

| $ 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 | | |

| % Change from prior-year period | | | 16.5 | | % | | | | 11.3 | | % |

| Daily sales impact of currency fluctuations | | | (2.8) | | % | | | | 0.3 | | % |

Gross profit margin of 38.4% increased 2.2 percentage points compared to the same period in 2021.

The increase was primarily driven by unfavorable changes in market interest rates in 2022.

Income taxes of $533 million for the year ended December 31, 2022 increased $162 million, or 44%, compared to the same period in 2021.

The increase was primarily driven by higher taxable operating earnings for the full year 2022.

Net earnings of $1,547 million attributable to W.W. Grainger, Inc. for the year ended December 31, 2022 increased $504 million, or 48%, compared to the same period in 2021.

The increase was primarily due to higher net earnings in 2022.

Because non-GAAP financial measures are not standardized, it may not be possible to compare these measures with other companies' non-GAAP measures having the same or similar names.

The following tables provide a reconciliation of GAAP to non-GAAP measures (in millions of dollars):

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

| | | | 2022 | | | | | | 2021 | | | | | | | | | Percent Increase from Prior Year | | |

| Reported selling, general, and administration expenses | | | $ | 3,634 | | | | | $ | 3,173 | | | | | | | | 14.5 | | % |

| Reported operating earnings | | | $ | 2,215 | | | | | $ | 1,547 | | | | | | | | 43.2 | | % |

| Business divestiture | | | (21) | | | | | | — | | | | | | | | | | | |

| Business divestiture | | | (0.40) | | | | | | — | | | | | | | | | | | |

For the fiscal year ended December 31, [removed: 2022,] [added: 2023,] approximately 18% of the Company's net sales were denominated in a currency other than the Company's functional U.S. dollar currency.

Consequently, the Company is exposed to the impact of exchange rate volatility primarily between the U.S. dollar and the Japanese yen, [added: Mexican peso,] Canadian dollar and the British pound sterling.

A hypothetical 10% change in the relative value of the U.S. dollar would not materially impact the Company's net earnings for [removed: 2022.][added: 2023.]

For [added: debt and] derivative instrument information, see Note [removed: 12] [added: 5 and Note 11] of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.

The annualized effect of a hypothetical 1 percentage point increase in interest rates on Grainger’s variable-rate debt obligations would not materially impact the Company's net earnings for [removed: 2022.][added: 2023.]

In February 2020, Grainger entered into certain derivative instrument agreements to manage this risk.

For 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.

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

Grainger's two reportable segments are High-Touch Solutions [removed: N.A.] [added: North America (High-Touch Solutions N.A.)] and Endless Assortment.

For further segment information, see Part II, Item 7: Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations and Note [removed: 14] [added: 13] of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.

This segment [added: primarily] includes the Grainger-branded businesses in the United States (U.S.), Canada, Mexico and Puerto Rico.

[removed: ][added: ]

No single end customer accounted for more than [removed: 4%] [added: 10%] of total sales for the year ended December 31, [removed: 2022.][added: 2023.]

No single product category comprised more than 20% of the Company's sales for the year ended December 31, [removed: 2022.][added: 2023.]

The high-touch solutions businesses offer [removed: more than] [added: approximately] 2 million products and several services, such as technical support and inventory management.

In the Endless Assortment segment, Grainger offers an expansive product assortment [removed: and a broad, extensive product range] that contains millions of products including those outside of traditional industrial MRO categories.

Zoro offers more than [removed: 11] [added: 13] million products and MonotaRO provides access to more than [removed: 20] [added: 22] million products, primarily through its websites and catalogs.

More than 5,000 [added: primary] suppliers worldwide provide Grainger businesses with more than 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: 2022.][added: 2023.]

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

Approximately 20% of [removed: 2022] [added: 2023] 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 U.S. based operations, which in [removed: 2022] [added: 2023] generated approximately 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: 2022,] [added: 2023,] compliance with the applicable laws, regulations and standards did not have a material effect on capital expenditures, earnings or competitive position.

To that end, Grainger's Board of Directors [added: (the Board)] and senior management are actively involved in cultivating Grainger’s culture.

Grainger has been consistently recognized for its commitment to its culture, diversity, equity and inclusion efforts and [removed: employee] [added: team member] engagement.

As of December 31, [removed: 2022,] [added: 2023,] Grainger had more than 26,000 team members worldwide, of whom approximately [removed: 23,000] [added: 23,200] were full-time and [removed: 3,000] [added: 2,900] were part-time or temporary.

[added: Approximately 85% of these team members are located in] North America, [removed: 8%] [added: 9%] in Asia and 6% in Europe.

The [removed: Company has in place a] [added: Company's] strategic framework, The Grainger Edge, [removed: which] outlines a set of principles that define the behaviors expected from Grainger’s team members in working with each other and the Company's customers, suppliers and communities.

Grainger strives to provide a safe work environment [removed: and ensuring] [added: in which] team members are properly prepared to perform the many tasks required to support customers.

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

In [removed: 2022,] [added: 2023,] the Company’s Occupational Safety and Health Administration [removed: (OSHA)] Total Recordable Incident Rate in the U.S. was 1.3 and the Company’s Lost Time Incident Rate in the U.S. was 0.4 based upon the number of incidents per 100 team members (or per 200,000 work hours).

The Company’s Board of Directors is comprised of approximately [removed: 33%] [added: 31%] female and [removed: 25%] [added: 23%] racially and ethnically diverse directors.

The CEO's [added: U.S. based] leadership team is comprised of approximately [removed: 43%] [added: 40%] women and approximately [removed: 29%] [added: 30%] racially and ethnically diverse leaders.

As of December 31, [removed: 2022,] [added: 2023,] within Grainger’s U.S. workforce, approximately 39% of team members were women and approximately [removed: 39%] [added: 37%] of team members were racially and ethnically diverse.

[removed: This talent program is comprised of performance] management, career management, professional development learning opportunities and milestone leadership development programs.

Such reports and other information filed with the SEC are available free of charge as soon as reasonably practicable after these materials are electronically filed with, or furnished to, the [removed: SEC] [added: SEC,] on the Company's website at www.grainger.com, and its investor relations website, invest.grainger.com.

Following is information about the executive officers of Grainger, including age, as of January 31, [removed: 2023.][added: 2024.]

| Nancy L. Berardinelli-Krantz [removed: (45)] [added: (46)] | | | Senior Vice President and Chief Legal Officer, a position assumed in January [removed: 2023 after John L. Howard stepped down as General Counsel(1).] [added: 2023.] 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 [removed: Company] [added: Company, a multinational tire manufacturer,] 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. | | |

| D.G. Macpherson [removed: (55)] [added: (56)] | | | 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. | | |

| Deidra C. Merriwether [removed: (54)] [added: (55)] | | | Senior Vice President and Chief Financial Officer, a position assumed in January 2021. Previously, Ms. Merriwether served as Senior Vice President, and President, North American Sales & Services, a position assumed in November 2019, Senior Vice President, U.S. Direct Sales and Strategic Initiatives, a position assumed in September 2017, Vice President, Pricing and Indirect Procurement, a position assumed in 2016 and as a Vice President in Finance from 2013 to 2016. Prior to Grainger, Ms. Merriwether held various positions of increasing responsibility at Sears Holdings Corporation, a broadline retailer, PriceWaterhouseCoopers, a global professional services firm, and Eli Lilly & Company, a global pharmaceutical company. | | |

| Paige K. Robbins [removed: (54)] [added: (55)] | | | Senior Vice President and President, Grainger Business Unit, a position assumed in January 2021. Previously, Ms. Robbins served as Senior Vice President and Chief Technology, Merchandising, Marketing, and Strategy Officer, a position assumed in November 2019, as Senior Vice President and Chief Merchandising, Marketing, Digital, Strategy Officer, a position assumed in May 2019, as Senior Vice President and Chief Digital Officer, a position assumed in September 2017, and as Senior Vice President, Global Supply Chain, Branch Network, Contact Centers and Corporate Strategy, a position assumed in 2016. Since joining Grainger in September 2010, Ms. Robbins has held various positions as a Vice President, including in the areas of Global Supply Chain and Logistics. Prior to Grainger, Ms. Robbins served as Partner and Managing Director at Boston Consulting Group, a global management consulting firm. | | |

| Laurie R. Thomson [removed: (49)] [added: (50)] | | | Vice President, Controller and principal accounting officer, a position assumed in May 2021. Previously, Ms. Thomson served as Vice President, Internal Audit and Finance Continuous Improvement of the Company, a position assumed in November 2019, Vice President, Internal Audit from October 2016 to November 2019, Senior Director, Finance from June 2011 to September 2016, and Director, Internal Audit from February 2008 to June 2011. Ms. Thomson is a certified public accountant and prior to Grainger served as Director, Internal Audit at CVS Health Corporation, a pharmacy healthcare provider, and Audit Manager at Arthur Andersen LLP, a professional services firm. | | |

This talent program is comprised of performance

| Matt Fortin (57) | | | Senior Vice President and Chief Human Resources Officer, a position assumed in September 2023. Previously, Mr. Fortin served as Group Vice President, Merchandising and Supplier Management, Grainger Business Unit, a position assumed in 2022, Vice President and President, Merchandising and Supplier Management, a position assumed in May 2018, and as Vice President and President, Global Product Management and Indirect Procurement, a position assumed in September 2017. Since joining Grainger in 2006, Mr. Fortin has held various other positions, including in the areas of supply chain, sourcing and operations in China. Prior to Grainger, Mr. Fortin spent 16 years at General Motors, a multinational automotive manufacturing company, in various leadership roles in manufacturing, purchasing, continuous improvement and general management. | | |

| | | | | | |

Additionally,

Approximately 86% of these team members resided in

Grainger has not experienced any major work stoppages and considers team member relations to be good.

| Kathleen S. Carroll (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. | | |

| (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. | | | | | |

For a description of legal proceedings, see the disclosure contained in Note [removed: 15] [added: 14] to the Consolidated Financial Statements included in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K, which is incorporated herein by reference.

For the fiscal year ended December 31, [removed: 2022][added: 2023]

The aggregate market value of the voting common equity held by non-affiliates of the registrant was [removed: $20,641,746,573] [added: $35,235,880,897] as of the close of trading as reported on the New York Stock Exchange on June 30, [removed: 2022.][added: 2023.]

The registrant had [removed: 50,199,270] [added: 49,173,357] shares of the Company’s Common Stock outstanding as of February [removed: 15, 2023.][added: 14, 2024.]

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: 26, 2023,] [added: 24, 2024,] are incorporated by reference into Part III of this Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2022] [added: 2023] (Form 10-K) where indicated.

| Item 1: | | | BUSINESS | | | | | | | | | | | | | | | [removed: [4](#i553f5ed0f5a94ebeacecf7c5e3d1081a_13)] [added: [4](#i81aa82e55c054c1fa32fd055ec949ce7_16)] | | |

| Item 1A: | | | RISK FACTORS | | | | | | | | | | | | | | | [removed: [12](#i553f5ed0f5a94ebeacecf7c5e3d1081a_19)] [added: [12](#i81aa82e55c054c1fa32fd055ec949ce7_22)] | | |

| Item 1B: | | | UNRESOLVED STAFF COMMENTS | | | | | | | | | | | | | | | [removed: [21](#i553f5ed0f5a94ebeacecf7c5e3d1081a_22)] [added: [21](#i81aa82e55c054c1fa32fd055ec949ce7_25)] | | |

| Item 2: | | | PROPERTIES | | | | | | | | | | | | | | | [removed: [22](#i553f5ed0f5a94ebeacecf7c5e3d1081a_25)] [added: [22](#i81aa82e55c054c1fa32fd055ec949ce7_28)] | | |

| Item 3: | | | LEGAL PROCEEDINGS | | | | | | | | | | | | | | | [removed: [22](#i553f5ed0f5a94ebeacecf7c5e3d1081a_28)] [added: [22](#i81aa82e55c054c1fa32fd055ec949ce7_31)] | | |

| Item 4: | | | MINE SAFETY DISCLOSURES | | | | | | | | | | | | | | | [removed: [22](#i553f5ed0f5a94ebeacecf7c5e3d1081a_31)] [added: [22](#i81aa82e55c054c1fa32fd055ec949ce7_34)] | | |

| Item 5: | | | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER | | | | | | | | | | | | | | | [removed: [23](#i553f5ed0f5a94ebeacecf7c5e3d1081a_37)] [added: [23](#i81aa82e55c054c1fa32fd055ec949ce7_40)] | | |

| Item 6: | | | RESERVED | | | | | | | | | | | | | | | [removed: [24](#i553f5ed0f5a94ebeacecf7c5e3d1081a_40)] [added: [24](#i81aa82e55c054c1fa32fd055ec949ce7_43)] | | |

| Item 7: | | | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL | | | | | | | | | | | | | | | [removed: [25](#i553f5ed0f5a94ebeacecf7c5e3d1081a_43)] [added: [25](#i81aa82e55c054c1fa32fd055ec949ce7_46)] | | |

| Item 7A: | | | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | | | | | | | | | | | | | | | [removed: [35](#i553f5ed0f5a94ebeacecf7c5e3d1081a_64)] [added: [36](#i81aa82e55c054c1fa32fd055ec949ce7_67)] | | |

| Item 8: | | | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | | | | | | | | | | | | | | | [removed: [36](#i553f5ed0f5a94ebeacecf7c5e3d1081a_67)] [added: [37](#i81aa82e55c054c1fa32fd055ec949ce7_70)] | | |

| Item 9: | | | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS | | | | | | | | | | | | | | | [removed: [66](#i553f5ed0f5a94ebeacecf7c5e3d1081a_154)] [added: [65](#i81aa82e55c054c1fa32fd055ec949ce7_160)] | | |

| Item 9A: | | | CONTROLS AND PROCEDURES | | | | | | | | | | | | | | | [removed: [66](#i553f5ed0f5a94ebeacecf7c5e3d1081a_157)] [added: [65](#i81aa82e55c054c1fa32fd055ec949ce7_163)] | | |

| Item 9B: | | | OTHER INFORMATION | | | | | | | | | | | | | | | [removed: [68](#i553f5ed0f5a94ebeacecf7c5e3d1081a_166)] [added: [67](#i81aa82e55c054c1fa32fd055ec949ce7_172)] | | |

| Item 9C: | | | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | | | | | | | | | | | | | | | [removed: [68](#i553f5ed0f5a94ebeacecf7c5e3d1081a_169)] [added: [67](#i81aa82e55c054c1fa32fd055ec949ce7_175)] | | |

| Item 10: | | | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | | | | | | | | | | | | | | | [removed: [69](#i553f5ed0f5a94ebeacecf7c5e3d1081a_175)] [added: [68](#i81aa82e55c054c1fa32fd055ec949ce7_181)] | | |

| Item 11: | | | EXECUTIVE COMPENSATION | | | | | | | | | | | | | | | [removed: [69](#i553f5ed0f5a94ebeacecf7c5e3d1081a_178)] [added: [68](#i81aa82e55c054c1fa32fd055ec949ce7_184)] | | |

| Item 12: | | | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND | | | | | | | | | | | | | | | [removed: [69](#i553f5ed0f5a94ebeacecf7c5e3d1081a_181)] [added: [68](#i81aa82e55c054c1fa32fd055ec949ce7_187)] | | |

| Item 13: | | | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR | | | | | | | | | | | | | | | [removed: [69](#i553f5ed0f5a94ebeacecf7c5e3d1081a_184)] [added: [68](#i81aa82e55c054c1fa32fd055ec949ce7_190)] | | |

| Item 14: | | | PRINCIPAL ACCOUNTANT FEES AND SERVICES | | | | | | | | | | | | | | | [removed: [69](#i553f5ed0f5a94ebeacecf7c5e3d1081a_187)] [added: [68](#i81aa82e55c054c1fa32fd055ec949ce7_193)] | | |

| Item 15: | | | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | | | | | | | | | | | | | | | [removed: [70](#i553f5ed0f5a94ebeacecf7c5e3d1081a_193)] [added: [7](#i81aa82e55c054c1fa32fd055ec949ce7_199)[0](#i81aa82e55c054c1fa32fd055ec949ce7_199)] | | |

| Item 16: | | | FORM 10-K SUMMARY | | | | | | | | | | | | | | | [removed: [74](#i553f5ed0f5a94ebeacecf7c5e3d1081a_199)] [added: [7](#i81aa82e55c054c1fa32fd055ec949ce7_205)[3](#i81aa82e55c054c1fa32fd055ec949ce7_205)] | | |

From time to time in this Annual Report on Form 10-K as well as in other written reports, communications and verbal statements, Grainger [added: (as defined below)] 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,” [removed: “will”] [added: “will,”] or [removed: “would”] [added: “would,”] and similar terms and phrases, including references to assumptions.

[removed: The Company] [added: Grainger] 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 [removed: the Company’s] [added: Grainger's] control, which could cause [removed: the Company’s] [added: Grainger'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 [removed: 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; [removed: 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 [removed: third party] [added: 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 [removed: the Company’s] [added: Grainger's] eCommerce platforms; failure to adequately protect intellectual property or successfully defend against infringement claims; fluctuations or declines in [removed: the Company's] [added: Grainger's] gross profit margin; [removed: the Company’s] [added: Grainger'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; [added: the impact of any government shutdown;] disruption or breaches of information technology or data security systems involving [removed: the Company] [added: Grainger] or third parties on which [removed: the Company] [added: Grainger] 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 [removed: the Company’s] [added: Grainger's] common stock; commodity price volatility; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; outbreaks of pandemic disease or viral [removed: contagions such as the COVID-19 pandemic;] [added: contagions;] 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 [removed: employees;] [added: team members;] loss of key members of management or key [removed: employees;] [added: team members; loss of operational flexibility and potential for work stoppages or slowdowns if team members unionize or join a collective bargaining arrangement;] changes in effective tax rates; changes in credit ratings or outlook; [removed: the Company’s] [added: Grainger'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.

[removed: Caution should be taken] [added: Given these risks and uncertainties, you are cautioned] not to place undue reliance on [removed: the Company’s forward-looking statements] [added: Grainger's forward looking-statements] and [removed: the Company] [added: Grainger] 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.

| Item 1C: | | | CYBERSECURITY | | | | | | | | | | | | | | | [2](#i81aa82e55c054c1fa32fd055ec949ce7_1609)[2](#i81aa82e55c054c1fa32fd055ec949ce7_1609) | | |

| Signatures | | | | | | | | | | | | | | | | | | [73](#i81aa82e55c054c1fa32fd055ec949ce7_208) | | |

The preceding list is not intended to be an exhaustive list of all of the factors that could impact Grainger's forward-looking statements.

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

Risk Management and Strategy

Grainger has a cybersecurity team that works to prevent, detect, and respond to cybersecurity threats.

The team has implemented processes designed to assess, identify and manage material risks and vulnerabilities to the Company’s security posture, including prioritizing and remediating such risks.

The team also works to assess and manage cybersecurity risks by: (i) reviewing cyber risks with senior management, including the Senior Vice President and Chief Technology Officer (CTO); (ii) incorporating cybersecurity in its enterprise risk processes; (iii) establishing regular reviews of cybersecurity risks and mitigation efforts, including with the Audit Committee and the Board; and (iv) using third parties as needed for reviews and testing.

Grainger regularly identifies its enterprise risks.

Grainger’s cybersecurity team reviews and updates its information security strategy and plans to align cybersecurity prioritization with the identified top enterprise risks.

Grainger has developed a cybersecurity risk intake process to facilitate the identification of cybersecurity risks, including those related to third-party vendors.

Identified risks are tracked by management, and incorporated into mitigation plans.

The management team engaged in the cybersecurity risk management process, including the CTO, has risk management backgrounds, certifications, and/or cyber experience in prior professional roles and at Grainger.

The team maintains expertise on cyber risk management through third-party consultants, external trainings, and affiliations with relevant organizations.

Grainger has been subject to unauthorized access of systems on which certain supplier, customer, and team member information was stored, which have been deemed immaterial to our business and operations individually and in the aggregate.

Grainger, or third-party service providers engaged by Grainger, may be subject to other unauthorized access of information systems in the future.

There can be no assurance that any future unauthorized access to or breach of these information systems will not be material to Grainger’s business, operations or financial condition.

See Part I, Item 1A: Risk Factors of this Form 10-K.

Governance

The Audit Committee assists the Board in its oversight of the Company’s Enterprise Risk Management (ERM) program and processes, including with respect to cybersecurity.

Both the Board and the Audit Committee regularly review the Company’s risk assessment and management processes and policies and receive regular updates from the Company’s management team members who are responsible for the effectiveness of the Company’s ERM program.

As part of its ERM oversight, the Board oversees and regularly reviews the Company’s programs and processes for cybersecurity risks, including the Company’s framework for preventing, detecting, and addressing cybersecurity incidents and identifying emerging risks both broadly and within related industries.

The Company’s CTO routinely provides cybersecurity updates to the Audit Committee and information to the Board.

The CTO leads an information security team that works to facilitate the protection of the Company’s information and computing assets.

As of December 31, [removed: 2022,] [added: 2023,] Grainger’s owned and leased facilities totaled approximately [removed: 30.3] [added: 30.4] million square feet.

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

| U.S.(1) | | | | | | DCs | | | | | | [removed: 10,368] [added: 11,635] | | | | | | High-Touch Solutions N.A. | | |

| U.S.(2) | | | | | | Branch [removed: Locations] [added: locations] | | | | | | [removed: 6,325] [added: 6,324] | | | | | | High-Touch Solutions N.A. | | |

| Japan(3) | | | | | | DCs | | | | | | [removed: 3,924] [added: 3,370] | | | | | | Endless Assortment | | |

| U.S.(4) | | | | | | Other [removed: Facilities] [added: facilities] | | | | | | [removed: 3,638] [added: 3,878] | | | | | | High-Touch Solutions N.A. | | |

[added: |] (1) Consists of [removed: 19] [added: 21] DCs that range in size from approximately [removed: 61,000] [added: 60,000] to 1.5 million square feet, including [removed: three] [added: six] leased facilities that primarily manage bulk [removed: products, that were previously disclosed in Other Facilities.][added: products. The remaining DCs are primarily owned. | | | | | | | | | | | | | | | | | | | | |]

[added: | (3) Consists of four DCs that range in size from approximately 160,000 to 2.1 million square feet. These facilities are both owned and leased.] Other facilities include office space that range in size from approximately [removed: 1,000] [added: 1,500] to [removed: 49,000] [added: 90,000] square feet. [added: These facilities are primarily leased. | | | | | | | | | | | | | | | | | | | | |]

[added: |] (4) Primarily consists of storage facilities, office space and customer service centers. [added: These facilities are owned and leased. These facilities range in size from under 1,000 to over 1 million square feet. | | | | | | | | | | | | | | | | | | | | |]

[added: |] (5) In Canada, Grainger has [removed: 35] [added: 32] branch locations, five DCs and other facilities which total two million square feet. [added: | | | | | | | | | | | | | | | | | | | | |]

[added: |] (6) In Mexico, Grainger has 16 branch [removed: locations and] [added: locations,] two DCs [added: and one other location] which total [removed: 649,000] [added: 655,000] square feet. [added: | | | | | | | | | | | | | | | | | | | | |]

[added: |] (7) In Puerto Rico, Grainger has three branch locations and one DC which total 95,000 square feet. [added: | | | | | | | | | | | | | | | | | | | | |]

[added: |] (8) In the U.K., Grainger has [removed: 37] [added: 35] branch [removed: locations, one DC] and other [removed: facilities] [added: facility locations and one DC] which total [removed: 751,000] [added: 705,000] square feet. [added: | | | | | | | | | | | | | | | | | | | | |]

[added: |] (9) Owned facilities are not subject to any mortgages. [added: | | | | | | | | | | | | | | | | | | | | |]

| *The square footage of Grainger's corporate headquarters in Lake Forest, Illinois and other general offices in the Chicago Metropolitan area are not included in the total square footage of Grainger's U.S. Other facilities provided above. Square footage of the Company's owned and leased properties provided below are presented as approximates.* | | | | | | | | | | | | | | | | | | | | |

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

| (2) Consists of 245 branches, 62 onsite and four will-call express locations. These facilities range in size from under 1,000 to 110,000 square feet. These facilities are primarily owned. | | | | | | | | | | | | | | | | | | | | |

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

The remaining DCs are primarily owned.

(2) Consists of 246 branches, 49 onsite and four will-call express locations.

These branches range in size from approximately 500 to 109,000 square feet.

These facilities are primarily owned.

(3) Consists of seven DCs that range in size from approximately 11,000 to 2 million square feet.

These facilities are primarily leased.

These facilities are also primarily leased.

These facilities are owned and leased.

These facilities range in size from approximately 200 to 633,000 square feet.

The approximate number of shareholders of record of Grainger’s common stock as of [removed: January 31, 2023,] [added: February 14, 2024,] was [removed: 531] [added: 510] with approximately [removed: 423,817] [added: 593,729] additional shareholders holding stock through nominees.

The following table provides information relating to Grainger's repurchase of common stock during the three months ended December 31, [removed: 2022:][added: 2023:]

(B)Average price paid per share excludes commissions of [removed: $0.01] [added: $0.02] per share paid.

(D)The difference of [removed: 845] [added: 21] 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: 2017] [added: 2018] and ending December 31, [removed: 2022.][added: 2023.]

The graph assumes that the value for the investment in Grainger common stock and in each index was $100 on December 31, [removed: 2017,] [added: 2018,] and that all dividends were reinvested.

[removed: ][added: ]

| | | | [removed: 2017 | | |] 2018 | | | 2019 | | | 2020 | | | 2021 | | | 2022 | | | [added: 2023 | | |]

| Dow Jones US Industrial Suppliers Total Stock Market Index | | | 100 | | | [removed: 96] [added: 133] | | | [removed: 126] [added: 166] | | | [removed: 149] [added: 226] | | | [removed: 192] [added: 200] | | | [removed: 157] [added: 296] | | |

| Oct. 1 – Oct. 31 | | | 154,423 | | | $708.93 | | | 154,423 | | | 1,833,521 | | | shares | | |

| Nov. 1 – Nov. 30 | | | 150,765 | | | $787.67 | | | 150,765 | | | 1,682,756 | | | shares | | |

| Dec. 1 – Dec. 31 | | | 130,851 | | | $819.69 | | | 130,830 | | | 1,551,926 | | | shares | | |

| Total | | | 436,039 | | | | | | 436,018 | | | | | | | | |

| W.W. Grainger, Inc. | | | $ | 100 | | $ | 122 | | $ | 150 | | $ | 193 | | $ | 210 | | $ | 317 | |

| S&P 500 Stock Index | | | 100 | | | 131 | | | 156 | | | 200 | | | 164 | | | 207 | | |

| 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 | |

| S&P 500 Stock Index | | | 100 | | | 92 | | | 122 | | | 153 | | | 209 | | | 184 | | |

W.W. Grainger, Inc. [removed: and Subsidiaries]

We have audited the accompanying consolidated balance sheets of W.W. Grainger, Inc. and [removed: Subsidiaries] [added: subsidiaries] (the Company) as of December 31, [removed: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] 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: 2022,] [added: 2023,] 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: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2022,] [added: 2023,] 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: 2022,] [added: 2023,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 [removed: framework)] [added: framework),] and our report dated February [removed: 21, 2023] [added: 22, 2024] expressed an unqualified opinion thereon.

The critical audit matter communicated below is a matter arising from the current period audit of the [removed: consolidated] financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the [removed: consolidated] financial statements and (2) involved our especially challenging, subjective or complex judgments.

| *Description of the Matter* | | | At December 31, [removed: 2022,] [added: 2023,] the goodwill balance of the Canada business reporting unit was [removed: $121] [added: $124] million. As discussed in Notes 1 and [removed: 5] [added: 4] 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 [removed: certain assumptions that are] [added: the] significant [added: estimation required] to [added: determine] the [removed: analysis. Management performed an annual impairment analysis in] [added: fair value of] the [removed: fourth quarter to evaluate changes in key assumptions and results since] [added: reporting unit. In particular,] the [removed: last impairment test. The more subjective] [added: fair value estimate was sensitive to significant] assumptions [removed: used in the analysis were] [added: such as] projections of future [removed: revenue growth,] operating expenditures, [removed: changes in working capital, as well as the discount rate used,] which are [removed: all] affected by expectations about future market or economic conditions. | | |

| *How We Addressed the Matter in Our Audit* | | | Our audit procedures included, among others obtaining an understanding, evaluating the design and testing the operating effectiveness of controls over the Company’s goodwill impairment analysis, including controls over management’s review of the significant [removed: assumptions] [added: assumption] described above. | | |

| | | | To test [removed: management’s annual goodwill impairment analysis] [added: the estimated fair value] of the Canada business reporting unit, we performed audit procedures that included, among others, [removed: evaluating] [added: assessing methodologies and involving our valuation specialists to assist in testing] the [removed: key] [added: significant] assumptions and [removed: results considering] [added: testing] the [removed: relevant events] [added: completeness] and [removed: circumstances identified since] [added: accuracy of] the [removed: date] [added: underlying data used by] the [removed: last fair value calculation.] [added: Company in its analysis.] We compared the significant assumptions used by management to current industry and economic trends, changes to the Company’s business model, customer [added: base or] product mix, and other relevant factors. We [removed: also] assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in [added: the] fair value [added: of the reporting units] that would result from changes in the [removed: assumptions utilized in the last quantitative assessment. In addition, we reviewed the reconciliation of the fair value of the reporting units to the market capitalization of the Company and tested the completeness and accuracy of the underlying data used by management in its analysis.] [added: assumptions.] | | |

| | | | [removed: 2022] [added: 2023] | | | | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | |

| Net sales | | | $ | [removed: 15,228] [added: 16,478] | | | | | $ | [removed: 13,022] [added: 15,228] | | | | | $ | [removed: 11,797] [added: 13,022] | |

| Cost of goods sold | | | [removed: 9,379] [added: 9,982] | | | | | | [removed: 8,302] [added: 9,379] | | | | | | [removed: 7,559] [added: 8,302] | | |

| Gross profit | | | [removed: 5,849] [added: 6,496] | | | | | | [removed: 4,720] [added: 5,849] | | | | | | [removed: 4,238] [added: 4,720] | | |

| Selling, general and administrative expenses | | | [removed: 3,634] [added: 3,931] | | | | | | [removed: 3,173] [added: 3,634] | | | | | | [removed: 3,219] [added: 3,173] | | |

| Operating earnings | | | [removed: 2,215] [added: 2,565] | | | | | | [removed: 1,547] [added: 2,215] | | | | | | [removed: 1,019] [added: 1,547] | | |

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

| Other – net | | | [removed: (24)] [added: (28)] | | | | | | [removed: (25)] [added: (24)] | | | | | | [removed: (21)] [added: (25)] | | |

| Total other expense – net | | | [removed: 69] [added: 65] | | | | | | [removed: 62] [added: 69] | | | | | | [removed: 72] [added: 62] | | |

| Earnings before income taxes | | | [removed: 2,146] [added: 2,500] | | | | | | [removed: 1,485] [added: 2,146] | | | | | | [removed: 947] [added: 1,485] | | |

| Income tax provision | | | [removed: 533] [added: 597] | | | | | | [removed: 371] [added: 533] | | | | | | [removed: 192] [added: 371] | | |

| Net earnings | | | [removed: 1,613] [added: 1,903] | | | | | | [removed: 1,114] [added: 1,613] | | | | | | [removed: 755] [added: 1,114] | | |

| Less net earnings attributable to noncontrolling interest | | | [removed: 66] [added: 74] | | | | | | [removed: 71] [added: 66] | | | | | | [removed: 60] [added: 71] | | |

| Net earnings attributable to W.W. Grainger, Inc. | | | $ | [removed: 1,547] [added: 1,829] | | | | | $ | [removed: 1,043] [added: 1,547] | | | | | $ | [removed: 695] [added: 1,043] | |

| Basic | | | $ | [removed: 30.22] [added: 36.39] | | | | | $ | [removed: 19.94] [added: 30.22] | | | | | $ | [removed: 12.88] [added: 19.94] | |

| Diluted | | | $ | [removed: 30.06] [added: 36.23] | | | | | $ | [removed: 19.84] [added: 30.06] | | | | | $ | [removed: 12.82] [added: 19.84] | |

| Basic | | | [removed: 50.9] [added: 49.9] | | | | | | [removed: 51.9] [added: 50.9] | | | | | | [removed: 53.5] [added: 51.9] | | |

| Diluted | | | [removed: 51.1] [added: 50.1] | | | | | | [removed: 52.2] [added: 51.1] | | | | | | [removed: 53.7] [added: 52.2] | | |

| Net earnings | | | $ | [removed: 1,613] [added: 1,903] | | | | | $ | [removed: 1,114] [added: 1,613] | | | | | $ | [removed: 755] [added: 1,114] | |

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

| Postretirement benefit plan [removed: (losses) gains] [added: losses] – net of tax [removed: benefit (expense)] [added: expense] of [added: $2,] $6, [removed: $—,] and [removed: $(7),] [added: $0,] respectively [removed: (see Note 7 and Note 11)] | | | [removed: (17)] [added: (2)] | | | | | | [removed: —] [added: (17)] | | | | | | [removed: 22] [added: —] | | |

| Total other comprehensive earnings (losses) | | | [removed: (118)] [added: (13)] | | | | | | [removed: (64)] [added: (118)] | | | | | | [removed: 105] [added: (64)] | | |

| Comprehensive earnings – net of tax | | | [removed: 1,495] [added: 1,890] | | | | | | [removed: 1,050] [added: 1,495] | | | | | | [removed: 860] [added: 1,050] | | |

| Net earnings | | | [removed: 66] [added: 74] | | | | | | [removed: 71] [added: 66] | | | | | | [removed: 60] [added: 71] | | |

| Foreign currency translation adjustments | | | [removed: (34)] [added: (21)] | | | | | | [removed: (29)] [added: (34)] | | | | | | [removed: 12] [added: (29)] | | |

| Total comprehensive earnings (losses) attributable to noncontrolling interest | | | [removed: 32] [added: 53] | | | | | | [removed: 42] [added: 32] | | | | | | [removed: 72] [added: 42] | | |

| Comprehensive earnings attributable to W.W. Grainger, Inc. | | | $ | [removed: 1,463] [added: 1,837] | | | | | $ | [removed: 1,008] [added: 1,463] | | | | | $ | [removed: 788] [added: 1,008] | |

| Assets | | | [removed: 2022] [added: 2023] | | | | | | [removed: 2021] [added: 2022] | | |

| Cash and cash equivalents | | | $ | [removed: 325] [added: 660] | | | | | $ | [removed: 241] [added: 325] | |

| Accounts receivable (less allowance for credit losses of [removed: $36] [added: $35] and [removed: $30,] [added: $36,] respectively) | | | [removed: 2,133] [added: 2,192] | | | | | | [removed: 1,754] [added: 2,133] | | |

| Inventories – net | | | [removed: 2,253] [added: 2,266] | | | | | | [removed: 1,870] [added: 2,253] | | |

| Prepaid expenses and other current assets | | | [removed: 266] [added: 156] | | | | | | [removed: 146] [added: 266] | | |

February 22, 2024

| Net earnings | | | $ | 1,903 | | | | | $ | 1,613 | | | | | $ | 1,114 | |

| Non-cash lease expense | | | 76 | | | | | | 70 | | | | | | 50 | | |

| Operating lease liabilities | | | (88) | | | | | | (76) | | | | | | (68) | | |

| Capital expenditures | | | (445) | | | | | | (256) | | | | | | (255) | | |

| Proceeds from sales of assets and business divestitures | | | 21 | | | | | | 28 | | | | | | 29 | | |

| Net earnings | | | — | | | — | | | 1,829 | | | — | | | — | | | 74 | | | 1,903 | | |

| Balance at December 31, 2023 | | | $ | 55 | | $ | 1,355 | | $ | 12,162 | | $ | (172) | | $ | (10,285) | | $ | 326 | | $ | 3,441 | |

*Reclassifications*

Certain reclassifications have been made to prior year amounts in Grainger's Consolidated Statements of Cash Flows to conform with the current year presentation.

The Company reclassified amounts to separately disclose Non-cash lease expense as an adjustment to reconcile net earnings to net cash provided by operating activities and Operating lease liabilities as a change in operating assets and liabilities.

Previously, the net activity for these amounts were included in Depreciation and amortization.

The change had no effect on previously reported results including net cash provided by (used in) operating, investing and financing activities or net earnings for the twelve months ended December 31, 2023, 2022 and 2021.

Total accrued sales incentives were approximately $114 million and $102

Total accrued vendor rebates were $155 million and $136 million as of December 31, 2023 and 2022, respectively, and are reported in Trade accounts payable.

Company inventories primarily consist of merchandise purchased for resale.

documented periodically.

In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07, *Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.* This update requires public entities to disclose significant segment expenses and other segment items on an annual and interim basis.

The effective date is for fiscal years beginning after December 15, 2023, with the option to early adopt prior to the effective date and requires application on a retrospective basis.

The Company is evaluating the impact of the requirements on the related segment reporting disclosures.

In December 2023, the FASB issued Accounting Standards Update (ASU) 2023-09, *Income Taxes (Topic 740): Improvements to Income Tax Disclosures*.

This update requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction.

The effective date is for fiscal years beginning after December 15, 2024, with the option to early adopt prior to the effective date and should be applied on prospective basis, but retrospective application is permitted.

The Company is evaluating the impact of the requirements on the related income tax disclosures.

| Wholesale | | | 7 | | % | | | | 16 | | % | | | | 9 | | % | | | | 7 | | % | | | | 16 | | % | | | | 9 | | % | | | | 7 | | % | | | | 14 | | % | | | | 8 | | % |

| Utilities | | | 3 | | % | | | | 2 | | % | | | | 3 | | % | | | | 3 | | % | | | | 2 | | % | | | | 3 | | % | | | | 3 | | % | | | | 2 | | % | | | | 3 | | % |

| Warehousing | | | 4 | | % | | | | — | | % | | | | 3 | | % | | | | 5 | | % | | | | — | | % | | | | 4 | | % | | | | 5 | | % | | | | — | | % | | | | 4 | | % |

| (1) Customer industry results for the twelve months ended December 31, 2022, and 2021 were reclassified to reflect the Company's current year classifications, which primarily uses the North American Industry Classification System (NAICS) beginning January 1, 2023. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Land and land improvements | | | $ | | | 397 | | | | | | $ | | | 318 | | |

The Company also performed various sensitivities over key assumptions, including projections of future operating expenditures used in the analysis.

| Balance at December 31, 2023 | | | | | | $ | 315 | | | | | $ | 55 | | | | | | | | | | | $ | 370 | |

Grainger's cumulative goodwill impairment as of December 31, 2023, was $137 million.

No goodwill impairment was recorded for the twelve months ended December 31, 2023, 2022 and 2021.

The 2020 Credit Facility was terminated in October 2023.

As of December 31, 2023 and 2022, the unamortized costs were $19 million and $21 million, respectively.

| 2028 | | | | | | — | | |

| Total | | | | | | $ | 2,337 | |

| Benefits paid | | | (10) | | | | | | (12) | | |

Current allocations may differ from targeted allocations based on investment results and other timing factors.

| | | | 2023 | | | | | | 2022 | | |

February 21, 2023

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

| | | | For the Years Ended December 31, | | | | | | | | | | | | | | |

| Depreciation and amortization | | | 217 | | | | | | 185 | | | | | | 182 | | |

| Proceeds from sale or redemption of assets | | | 28 | | | | | | 29 | | | | | | 20 | | |

| Proceeds from long-term debt | | | — | | | | | | — | | | | | | 1,584 | | |

| Payments of long-term debt | | | — | | | | | | (8) | | | | | | (1,370) | | |

| Balance at January 1, 2020 | | | $ | 55 | | $ | 1,182 | | $ | 8,405 | | $ | (154) | | $ | (7,633) | | $ | 205 | | $ | 2,060 | |

| Net earnings | | | — | | | — | | | 695 | | | — | | | — | | | 60 | | | 755 | | |

Company inventories primarily consist of merchandise purchased for resale, and they are valued at the lower of cost or net realizable value.

Historically, Grainger had depreciated certain property, buildings and equipment using both the declining balance and sum-of-the-years’ digits methods as well as certain buildings over estimated useful lives of approximately thirty years.

In accordance with its policy, the Company periodically reviews information impacting the pattern of consumption for its capital assets and useful lives to ensure that estimates of depreciation expenses are appropriate.

The Company’s investment in its supply chain infrastructure and technology triggered the review of these patterns of consumption.

Pursuant to the review and effective January 1, 2020, the method of estimating depreciation for certain assets was changed to the straight-line method and updated useful lives to forty and fifty years.

The Company determined that these changes in depreciation method and useful lives were considered a change in accounting estimate effected by a change in accounting principle, and as such have been accounted for on a prospective basis.

Grainger believes the changes to the straight-line method and useful lives are appropriate estimations of the Company's current patterns of economic consumption of its capital assets and appropriately match current revenues and costs over updated estimates of the assets' useful lives.

The effect of these changes resulted in a decrease of $34 million to depreciation expense for the year ended December 2020.

In March 2020, the FASB issued ASU 2020-04, *Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform* on Financial Reporting as modified by subsequently issued ASU 2021-01.

This update provides optional expedients and exceptions for applying GAAP to certain contract modifications and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued.

The guidance is effective upon issuance and generally can be applied prospectively to contract modifications made and hedging relationships entered or evaluated on or before December 31, 2022.

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

The Company adopted this ASU on July 1, 2022 on a prospective basis and it did not have a material impact on the Consolidated Financial Statements.

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*.

This update provides increased transparency of government assistance, including the disclosure of the types of assistance an entity receives, an entity's method of accounting for government assistance and the effect of the assistance on an entity's financial statements.

The guidance is effective for annual periods beginning after December 15, 2021 and should be applied prospectively or retrospectively.

Early adoption is permitted.

The Company adopted this ASU on January 1, 2022 on a prospective basis and it did not have a material impact on the Consolidated Financial Statements and related disclosures.

NOTE 2 - BUSINESS DIVESTITURES AND LIQUIDATIONS

Consistent with the Company's strategic focus on broad line MRO distribution in key markets, Grainger divested Cromwell's wholly owned software business in the U.K. (Cromwell subsidiary) on October 21, 2022, the China business (China) on August 21, 2020, the Fabory business in Europe (Fabory) on June 30, 2020 and commenced the liquidation of Zoro Tools Europe (ZTE) in the fourth quarter of 2020.

Accordingly, the Company's Consolidated Statements of Earnings, Comprehensive Earnings and Cash Flows and related notes include these business results in Other businesses through the respective dates of divestiture and liquidation.

The proceeds from the divestitures were used to fund general business and corporate needs.

The Company does not expect these business exits to have a future material impact on its Consolidated Financial Statements.

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.

In 2020, Grainger recorded a gain of $5 million and a loss of approximately $109 million in SG&A as a result of the China and Fabory business divestitures, respectively, which included net accumulated foreign currency translation losses of $45 million, that were reclassified from Accumulated other comprehensive earnings (losses) (AOCE) to SG&A.

Additionally in 2020, the Company recorded $9 million in expense in SG&A associated with the wind down of ZTE.

| Land | | | $ | | | 318 | | | | | | $ | | | 329 | | |

| Property, buildings and equipment – net | | | $ | | | 1,461 | | | | | | $ | | | 1,424 | | |

NOTE 5 - GOODWILL AND OTHER INTANGIBLE ASSETS

As part of our annual impairment testing, the Company performed evaluations of changes in key assumptions, notably projections of revenue growth, operating expenditures, changes in working capital, and factors that could impact the discount rate used in the analysis.

Grainger's management assessed the effectiveness of Grainger's internal control over financial reporting as of December 31, [removed: 2022,] [added: 2023,] 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: 2022.][added: 2023.]

Ernst & Young LLP, an independent registered public accounting firm, has audited Grainger's internal control over financial reporting as of December 31, [removed: 2022,] [added: 2023,] 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: 2022] [added: 2023] that have materially affected, or are reasonably likely to materially affect, Grainger's internal control over financial reporting.

W.W. Grainger, Inc. [removed: and Subsidiaries]

We have audited W.W. Grainger, Inc. and [removed: Subsidiaries’] [added: subsidiaries’] internal control over financial reporting as of December 31, [removed: 2022,] [added: 2023,] 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 [removed: Subsidiaries] [added: subsidiaries] (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2022,] [added: 2023,] 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: 2022] [added: 2023] and [removed: 2021,] [added: 2022,] 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: 2022,] [added: 2023,] and the related notes and our report dated February [removed: 21, 2023] [added: 22, 2024] expressed an unqualified opinion thereon.

February 22, 2024

February 21, 2023

None of the Company's directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's quarter ended December 31, 2023.

None.

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: 26, 2023,] [added: 24, 2024,] 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 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.”

This code of ethics is part of Grainger’s Business Conduct Guidelines for directors, officers and [removed: employees,] [added: team members,] which is available free of charge through Grainger’s website at invest.grainger.com.

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: 26, 2023,] [added: 24, 2024,] under the captions “Director Compensation,” “Compensation Discussion and Analysis,” “Compensation [removed: Committee,”] [added: Committee of the Board,”] “Report of the Compensation Committee of the Board,” “CEO Pay Ratio,” and “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: 26, 2023,] [added: 24, 2024,] 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: 26, 2023,] [added: 24, 2024,] under the captions “Director Independence,” “Annual Election of 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: 26, 2023,] [added: 24, 2024,] under the caption “Audit Fees and Audit Committee Pre-Approval Policies and Procedures.”

| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PCAOB ID: | | | 42 | | | [removed: [36](#i553f5ed0f5a94ebeacecf7c5e3d1081a_70)] [added: [37](#i81aa82e55c054c1fa32fd055ec949ce7_73)] | | |

| CONSOLIDATED STATEMENTS OF EARNINGS FOR THE YEARS ENDED DECEMBER 31, [removed: 2022, 2021] [added: 2023, 2022] AND [removed: 2020] [added: 2021] | | | | | | [removed: [38](#i553f5ed0f5a94ebeacecf7c5e3d1081a_73)] [added: [39](#i81aa82e55c054c1fa32fd055ec949ce7_76)] | | |

| CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS FOR THE YEARS ENDED DECEMBER 31, [removed: 2022, 2021] [added: 2023, 2022] AND [removed: 2020] [added: 2021] | | | | | | [removed: [39](#i553f5ed0f5a94ebeacecf7c5e3d1081a_76)] [added: [40](#i81aa82e55c054c1fa32fd055ec949ce7_79)] | | |

| CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, [removed: 2022] [added: 2023] AND [removed: 2021] [added: 2022] | | | | | | [removed: [40](#i553f5ed0f5a94ebeacecf7c5e3d1081a_79)] [added: [41](#i81aa82e55c054c1fa32fd055ec949ce7_82)] | | |

| CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, [removed: 2022, 2021] [added: 2023, 2022] AND [removed: 2020] [added: 2021] | | | | | | [removed: [41](#i553f5ed0f5a94ebeacecf7c5e3d1081a_82)] [added: [42](#i81aa82e55c054c1fa32fd055ec949ce7_85)] | | |

| CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, [removed: 2022, 2021] [added: 2023, 2022] AND [removed: 2020] [added: 2021] | | | | | | [removed: [42](#i553f5ed0f5a94ebeacecf7c5e3d1081a_85)] [added: [43](#i81aa82e55c054c1fa32fd055ec949ce7_88)] | | |

| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | | | | | | [removed: [43](#i553f5ed0f5a94ebeacecf7c5e3d1081a_88)] [added: [44](#i81aa82e55c054c1fa32fd055ec949ce7_91)] | | |

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

| [removed: [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)] [added: [4.1](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.](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)] [added: [4.2](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.](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)] [added: [4.3](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.](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)] [added: [4.4](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.](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)] [added: [4.5](http://www.sec.gov/Archives/edgar/data/277135/000110465916121315/a16-8597_3ex4d1.htm)] | | | | | | Form of 3.75% Senior Notes due 2046 (included in Exhibit 4.3), 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.](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)] [added: [4.6](http://www.sec.gov/Archives/edgar/data/277135/000110465917034230/a17-12594_3ex4d1.htm)] | | | | | | Form of 4.20% Senior Notes due 2047 (included in Exhibit 4.4), 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.](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit47toformdescription.htm)[7](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit47toformdescription.htm)] [added: [4.7](https://www.sec.gov/Archives/edgar/data/277135/000027713524000011/gww-20231231xex47.htm)] | | | | | | Description of Registrant's Securities Pursuant to Section 12 of the Securities Exchange Act of 1934. | | |

| [removed: [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)] [added: [4.8](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.](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)] [added: [4.9](http://www.sec.gov/Archives/edgar/data/277135/000110465920025418/tm208239d5_ex4-1.htm)] | | | | | | Form of 1.85% Senior Notes due 2025 (included in Exhibit 4.8), incorporated by reference to Exhibit 4.1 to W.W. Grainger, Inc.'s Current Report on Form 8-K dated February 21, 2020. | | |

| [removed: [10.1](http://www.sec.gov/Archives/edgar/data/277135/000027713506000031/ex10a1990amended072606.htm)] [added: [10.15](http://www.sec.gov/Archives/edgar/data/277135/000027713518000029/gww-2018093018xex101.htm)] | | | | | | [removed: 1990 Long-Term Stock] [added: W.W. Grainger, Inc. 2015] Incentive [removed: Plan,] [added: Plan] as [removed: amended,] [added: Amended and Restated Effective October 31, 2018,] incorporated by reference to Exhibit [removed: 10(a)] [added: 10.1] to W.W. Grainger, [removed: Inc.’s] [added: Inc.'s] Quarterly Report on Form 10-Q for the quarter ended [removed: June] [added: September] 30, [removed: 2006.*] [added: 2018.*] | | |

| [removed: [10.2](http://www.sec.gov/Archives/edgar/data/277135/000027713509000012/exhibit10bi.htm)] [added: [10.1](http://www.sec.gov/Archives/edgar/data/277135/000027713509000012/exhibit10bi.htm)] | | | | | | Form of Indemnification Agreement between W.W. Grainger, Inc. and each of its directors and certain of its executive officers, incorporated by reference to Exhibit 10(b)(i) to W.W. Grainger, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.* | | |

| [removed: [10.3](http://www.sec.gov/Archives/edgar/data/277135/000027713508000006/exhibit10v.htm)] [added: [10.2](http://www.sec.gov/Archives/edgar/data/277135/000027713508000006/exhibit10v.htm)] | | | | | | Frozen Executive Death Benefit Plan, as amended, incorporated by reference to Exhibit 10(b)(v) to W.W. Grainger, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2007.* | | |

| [removed: [10.4](http://www.sec.gov/Archives/edgar/data/277135/000027713509000005/exhibit10v1.htm)] [added: [10.3](http://www.sec.gov/Archives/edgar/data/277135/000027713509000005/exhibit10v1.htm)] | | | | | | First amendment to the Frozen Executive Death Benefit Plan, incorporated by reference to Exhibit 10(b)(v)(1) to W.W. Grainger, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008.* | | |

| [removed: [10.5](http://www.sec.gov/Archives/edgar/data/277135/000027713510000011/exhibit10biv2.htm)] [added: [10.4](http://www.sec.gov/Archives/edgar/data/277135/000027713510000011/exhibit10biv2.htm)] | | | | | | Second amendment to the Frozen Executive Death Benefit Plan, incorporated by reference to Exhibit 10(b)(iv)(2) to W.W. Grainger, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2009.* | | |

| [removed: [10.6](http://www.sec.gov/Archives/edgar/data/277135/000027713504000007/exhibit10_8.htm)] [added: [10.5](http://www.sec.gov/Archives/edgar/data/277135/000027713504000007/exhibit10_8.htm)] | | | | | | Supplemental Profit Sharing Plan, as amended, incorporated by reference to Exhibit 10(viii) to W.W. Grainger, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003.* | | |

| [removed: [10.7](http://www.sec.gov/Archives/edgar/data/277135/000027713508000006/exhibit10ix.htm)] [added: [10.6](http://www.sec.gov/Archives/edgar/data/277135/000027713508000006/exhibit10ix.htm)] | | | | | | Supplemental Profit Sharing Plan II, as amended, incorporated by reference to Exhibit 10(b)(ix) to W.W. Grainger, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2007.* | | |

| [removed: [10.8](http://www.sec.gov/Archives/edgar/data/277135/000027713508000006/exhibit10xi.htm)] [added: [10.7](http://www.sec.gov/Archives/edgar/data/277135/000027713508000006/exhibit10xi.htm)] | | | | | | Voluntary Salary and Incentive Deferral Plan, as amended, incorporated by reference to Exhibit 10(b)(xi) to W.W. Grainger, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2007.* | | |

| [removed: [10.9](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit109summarydescripti.htm)] [added: [10.8](https://www.sec.gov/Archives/edgar/data/277135/000027713524000011/gww-20231231xex108.htm)] | | | | | | Summary Description of the Directors Compensation Program.* | | |

| [removed: [10.10](https://www.sec.gov/Archives/edgar/data/277135/000104746910002108/a2196890zdef14a.htm#Appendix_B)] [added: [10.9](https://www.sec.gov/Archives/edgar/data/277135/000104746910002108/a2196890zdef14a.htm#Appendix_B)] | | | | | | 2010 Incentive Plan, incorporated by reference to Appendix B of W.W. Grainger, Inc.’s Proxy Statement dated March 12, 2010.* | | |

| [removed: [10.11](http://www.sec.gov/Archives/edgar/data/277135/000027713510000011/exhibit10xvi.htm)] [added: [10.12](http://www.sec.gov/Archives/edgar/data/277135/000027713511000011/exhibit10bxxvii.htm)] | | | | | | Form of [removed: Stock Option Award] [added: Change in Control Employment] Agreement between W.W. Grainger, Inc. and certain of its executive officers, incorporated by reference to Exhibit [removed: 10(b)(xvi)] [added: 10(b)(xxvii)] to W.W. Grainger, Inc.’s Annual Report on Form 10-K for the year ended December 31, [removed: 2009.*] [added: 2010.*] | | |

| [removed: [10.12](http://www.sec.gov/Archives/edgar/data/277135/000027713510000011/exhibit10bxvii.htm)] [added: [10.35](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit1041-formofrsuagree.htm)] | | | | | | [added: 2023] Form of [removed: Stock Option Award and] [added: W.W. Grainger, Inc. 2022 Incentive Plan] Restricted Stock Unit [added: Award] Agreement between W.W. Grainger, Inc. and certain of its executive officers, incorporated by reference to Exhibit [removed: 10(b)(xvii)] [added: 10.41] to W.W. Grainger, [removed: Inc.’s] [added: Inc.'s] Annual Report on Form 10-K for the year ended December [removed: 31, 2009.*] [added: 31,2022.*] | | |

| [removed: [10.13](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit10132022companymana.htm)] [added: [10.10](https://www.sec.gov/Archives/edgar/data/277135/000027713524000011/gww-20231231xex1010.htm)] | | | | | | Summary Description of the Company Management Incentive Program.* | | |

| [removed: [10.14](http://www.sec.gov/Archives/edgar/data/277135/000027713510000011/exhibit10bxxv.htm)] [added: [10.11](http://www.sec.gov/Archives/edgar/data/277135/000027713510000011/exhibit10bxxv.htm)] | | | | | | Incentive Program Recoupment Agreement, incorporated by reference to Exhibit 10(b)(xxv) to W.W. Grainger, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2009.* | | |

| [removed: [10.15](http://www.sec.gov/Archives/edgar/data/277135/000027713511000011/exhibit10bxxvii.htm)] [added: [10.30](https://www.sec.gov/Archives/edgar/data/277135/000027713522000012/exhibit1035tothe2021xformp.htm)] | | | | | | [added: 2022] Form of [removed: Change in Control Employment] [added: W.W. Grainger, Inc. 2015 Incentive Plan Performance Stock Unit] Agreement between W.W. Grainger, Inc. and certain of its executive [removed: officers,] [added: officers] incorporated by reference to Exhibit [removed: 10(b)(xxvii)] [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: 2010.*] [added: 2021.*] | | |

| [removed: [10.16](http://www.sec.gov/Archives/edgar/data/277135/000027713516000037/exhibit1028formperformance.htm)] [added: [10.19](http://www.sec.gov/Archives/edgar/data/277135/000027713517000018/gww-2017033117xex104.htm)] | | | | | | Form of [removed: 2015] [added: 2017] Performance Share Award Agreement between W.W. Grainger, Inc. and certain of its executive officers, incorporated by reference to Exhibit [removed: 10.28] [added: 10.4] to W.W. Grainger, [removed: Inc.'s Annual] [added: Inc.’s Quarterly] Report on Form [removed: 10-K] [added: 10-Q] for the [removed: year] [added: quarter] ended [removed: December] [added: March] 31, [removed: 2015.*] [added: 2017.*] | | |

| [removed: [10.17](http://www.sec.gov/Archives/edgar/data/277135/000104746915002102/a2223255zdef14a.htm#30)] [added: [10.13](http://www.sec.gov/Archives/edgar/data/277135/000104746915002102/a2223255zdef14a.htm#30)] | | | | | | W.W. Grainger, Inc. 2015 Incentive Plan, incorporated by reference to Exhibit B of W.W. Grainger, Inc.’s Proxy Statement dated March 13, 2015.* | | |

| [removed: [10.18](http://www.sec.gov/Archives/edgar/data/277135/000027713517000018/gww-2017033117xex101.htm)] [added: [10.14](http://www.sec.gov/Archives/edgar/data/277135/000027713517000018/gww-2017033117xex101.htm)] | | | | | | First Amendment to the W.W. Grainger, Inc. 2015 Incentive Plan, incorporated by reference to 10.1 of W.W. Grainger, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017.* | | |

| [removed: [10.19](http://www.sec.gov/Archives/edgar/data/277135/000027713518000029/gww-2018093018xex101.htm)] [added: [10.20](http://www.sec.gov/Archives/edgar/data/277135/000027713518000016/gww-2018033118xex103.htm)] | | | | | | [added: Form of 2018] W.W. Grainger, Inc. 2015 Incentive Plan [removed: as Amended] [added: Stock Option Agreement between W.W. Grainger, Inc.] and [removed: Restated Effective October 31, 2018,] [added: certain of its executive officers,] incorporated by reference to Exhibit [removed: 10.1] [added: 10.3] to W.W. Grainger, Inc.'s Quarterly Report on Form 10-Q for the quarter ended [removed: September 30,] [added: March 31,] 2018.* | | |

| [removed: [10.20](http://www.sec.gov/Archives/edgar/data/277135/000027713516000052/gww-2016063016xex101.htm)] [added: [10.16](http://www.sec.gov/Archives/edgar/data/277135/000027713516000052/gww-2016063016xex101.htm)] | | | | | | Form of Stock Option 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, 2016.* | | |

| [removed: [10.21](http://www.sec.gov/Archives/edgar/data/277135/000027713516000052/gww-2016063016xex102.htm)] [added: [10.18](http://www.sec.gov/Archives/edgar/data/277135/000027713517000018/gww-2017033117xex103.htm)] | | | | | | Form of Restricted Stock Unit Award Agreement between W.W. Grainger, Inc. and certain of its executive officers, incorporated by reference to Exhibit [removed: 10.2] [added: 10.3] to W.W. Grainger, Inc.’s Quarterly Report on Form 10-Q for the quarter ended [removed: June 30, 2016.*] [added: March 31, 2017.*] | | |

| [removed: [10.22](http://www.sec.gov/Archives/edgar/data/277135/000027713516000052/gww-2016063016xex103.htm)] [added: [10.17](http://www.sec.gov/Archives/edgar/data/277135/000027713517000018/gww-2017033117xex102.htm)] | | | | | | Form of [removed: 2016 Performance Share] [added: Stock Option] Award Agreement between W.W. Grainger, Inc. and certain of its executive officers, incorporated by reference to Exhibit [removed: 10.3] [added: 10.2] to W.W. Grainger, Inc.’s Quarterly Report on Form 10-Q for the quarter ended [removed: June 30, 2016.*] [added: March 31, 2017.*] | | |

| [removed: [10.23](http://www.sec.gov/Archives/edgar/data/277135/000027713517000018/gww-2017033117xex102.htm)] [added: [10.23](http://www.sec.gov/Archives/edgar/data/277135/000027713519000015/gww-2019033119xex101.htm)] | | | | | | Form of [added: 2019 W.W. Grainger, Inc. 2015] Stock [added: Incentive Plan Stock] Option [removed: Award] Agreement between W.W. Grainger, Inc. and certain of its executive officers, incorporated by reference to Exhibit [removed: 10.2] [added: 10.1] to W.W. Grainger, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, [removed: 2017.*] [added: 2019.*] | | |

| [10.39](https://www.sec.gov/Archives/edgar/data/0000277135/000110465923108856/tm2328304d1_ex10-1.htm) | | | | | | Credit Agreement dated as of October 11, 2023, by and among W.W. Grainger, Inc. the lenders party thereto, and JP Morgan Chase Bank, N.A., as Administrative Agent, incorporated by reference to Exhibit 10.1 to W.W. Grainger, Inc.'s Current Report on Form 8-K filed on October 12, 2023. | | |

| [97](https://www.sec.gov/Archives/edgar/data/277135/000027713524000011/exhibit97.htm) | | | | | | W.W. Grainger, Inc. Financial Statement Executive Compensation Recoupment Policy | | |

| [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.* | | |

| [10.40](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.* | | |

| [10.42](https://www.sec.gov/Archives/edgar/data/277135/000027713523000014/exhibit1042-formofpsuagree.htm) | | | | | | 2023 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.* | | |

| [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. | | |

DATE: February [removed: 21, 2023][added: 22, 2024]

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: 21, 2023,] [added: 22, 2024,] in the capacities indicated.

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

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

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

| [removed: Senior Vice President] | | | | | | /s/ Stuart L. Levenick | | |

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

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