Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of W.W. Grainger, Inc. (Grainger or Company) as it is viewed by management of the Company. The following discussion should be read in conjunction with the Consolidated Financial Statements and accompanying notes for the year ended December 31, 2024 included in the Company's 2024 Form 10-K and the Condensed Consolidated Financial Statements and accompanying notes included in Part I, Item 1: Financial Statements of this Form 10-Q.

Percentage figures included in this section have not been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in the Company's Condensed Consolidated Financial Statements or in the associated text.

Overview

Grainger is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America, Japan and the U.K. Grainger uses a combination of its high-touch solutions and endless assortment businesses to serve its customers worldwide, which rely on Grainger for products and services that enable them to run safe, sustainable and productive operations.

Strategic Priorities

For a discussion of the Company’s strategic priorities for 2025, see Part 1, Item 1: Business and Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2024 Form 10-K.

Recent Events

Macroeconomic Conditions

The global economy continues to experience elevated levels of volatility and uncertainty, including within the commodity, labor, and transportation markets, driven by a combination of geopolitical developments and macroeconomic factors. Recent imposition of new and fluctuating tariffs have further contributed to disruptions in global capital markets and global supply chains. These developments may impact the Company’s operations, financial condition, and results of operations.

The Company is actively monitoring economic conditions in the U.S. and internationally, including the potential ramifications of evolving trade policies, changes in interest rates, foreign currency exchange rate fluctuations, inflationary pressures, and the risk of a global or regional economic recession. In response to these factors, the Company has implemented various strategies designed to mitigate certain adverse effects of changing inflationary conditions and supply chain challenges, while continuing to maintain market price competitiveness to the extent possible.

Historically, the Company's broad and diverse customer base and the generally nondiscretionary nature of its products have provided a degree of resilience during periods of economic contraction in the industrial MRO market. However, the ultimate impact of ongoing macroeconomic conditions, including recent, unprecedented tariff-related developments, remains uncertain and cannot be predicted at this time, but may impact the Company’s operations, financial condition, and results of operations.

For further discussion of the Company's risks and uncertainties, see Part I, Item 1A: Risk Factors in the Company’s 2024 Form 10-K.

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Results of Operations –Three Months Ended June 30, 2025

In this section, Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. For further information regarding the Company's non-GAAP measures including reconciliations to the most directly comparable GAAP measures, see below "Non-GAAP Measures."

The following table is included as an aid to understanding the changes in Grainger’s Condensed Consolidated Statements of Earnings for the three months ended June 30, 2025 and 2024 (in millions of dollars except per share amounts):

Three Months Ended June 30,
% Change% of Net Sales
2025202420252024
Net sales(1)$4,554$4,3125.6%100.0%100.0%
Cost of goods sold2,7992,6186.961.560.7
Gross profit1,7551,6943.638.539.3
Selling, general and administrative expenses1,0771,0453.123.624.2
Operating earnings6786494.514.915.1
Other expense – net171330.80.30.3
Income tax provision1531464.83.43.4
Net earnings5084903.711.211.4
Noncontrolling interest262030.00.60.5
Net earnings attributable to W.W. Grainger, Inc.$482$4702.610.6%10.9%
Diluted earnings per share$9.97$9.514.8%
(1)For further information regarding the Company's disaggregated revenue, see Note 2 of the Notes to Condensed Consolidated Financial Statements in Part 1, Item 1: Financial Statements of this Form 10-Q.

The following table is included as an aid to understanding the changes of Grainger's total net sales, daily net sales and daily, constant currency net sales from the prior period for the three months ended June 30, 2025 and 2024 (in millions of dollars):

Three Months Ended June 30,
2025% Change(1)2024% Change(1)
Net sales$4,5545.6%$4,3123.1%
Daily net sales(2)$71.25.6%$67.43.1%
Daily, constant currency net sales(2)$70.85.1%$68.44.6%
(1)Calculated on the basis of prior year net sales for the three months ended June 30, 2025 and 2024.
(2)Daily net sales are adjusted for the difference in U.S. selling days relative to the prior year period. Daily, constant currency net sales are also adjusted to exclude the impact on net sales due to year-over-year foreign currency exchange rate fluctuations. There were 64 sales days in the three months ended June 30, 2025 and 2024. For further information regarding the Company's non-GAAP measures, including reconciliations to the most directly comparable GAAP measures, see below "Non-GAAP Measures."

Net sales of $4,554 million for the three months ended June 30, 2025 increased $242 million, or 6%, and on a daily, constant currency basis, net sales increased 5% compared to the same period in 2024. Both High-Touch Solutions N.A. and the Endless Assortment segment contributed to sales growth in the second quarter of 2025. For further discussion on the Company's net sales, see the Segment Analysis section below.

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Gross profit of $1,755 million for the three months ended June 30, 2025 increased $61 million, or 4%, and gross profit margin of 38.5% decreased 80 basis points compared to the same period in 2024. For further discussion on the Company's gross profit, see the Segment Analysis section below.

Selling, general and administrative (SG&A) expenses of $1,077 million for the three months ended June 30, 2025 increased $32 million, or 3%, compared to the same period in 2024. Adjusted SG&A expenses increased $48 million, or 5%, compared to the same period in 2024. The increase was primarily due to higher marketing expenses in the second quarter of 2025.

Operating earnings of $678 million for the three months ended June 30, 2025 increased $29 million, or 5%, compared to the same period in 2024. Adjusted operating earnings increased $13 million, or 2%, compared to the same period in 2024. The increase was due to higher gross profit dollars, partially offset by increased SG&A expenses in the second quarter of 2025.

Income tax expense of $153 million for the three months ended June 30, 2025 increased $7 million compared to the same period in 2024. Adjusted income tax expense increased $3 million compared to the same period in 2024. Grainger's reported and adjusted effective tax rates were 23.2% and 22.9% for the three months ended June 30, 2025 and 2024, respectively. The increase in the effective tax rate was primarily due to lower benefits from stock compensation in the period.

Diluted earnings per share was $9.97 for the three months ended June 30, 2025, an increase of 5% compared to $9.51 for the same period in 2024. Adjusted diluted earnings per share increased 2% compared to $9.76 for the same period in 2024.

Segment Analysis

In this section, Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. For further information regarding the Company's non-GAAP measures including reconciliations to the most directly comparable GAAP measure, see below "Non-GAAP Measures." For further segment information, see Note 6 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1: Financial Statements of this Form 10-Q.

High-Touch Solutions N.A.

The following table shows reported segment results (in millions of dollars):

Three Months Ended June 30,
20252024% Change
Net sales$3,544$3,4582.5%
Gross profit$1,454$1,4430.8%
Selling, general and administrative expenses8658521.5%
Operating earnings$589$591(0.3)%

Net sales of $3,544 million for the three months ended June 30, 2025 increased $86 million, which represents a 3%, increase on a reported and daily, constant currency basis, compared to the same period in 2024. The increase was primarily due to volume.

Gross profit of $1,454 million for the three months ended June 30, 2025 increased $11 million, or 1%. Gross profit margin of 41.0% decreased 70 basis points compared to the same period in 2024. The decrease was primarily driven by negative price cost spread due to timing and last-in, first-out (LIFO) inventory valuation impacts.

SG&A expenses of $865 million for the three months ended June 30, 2025 increased $13 million, or 2%, compared to the same period in 2024. Adjusted SG&A expenses increased $28 million, or 3%, compared to the same period in 2024. The increase was primarily due to higher marketing expenses.

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Operating earnings of $589 million for the three months ended June 30, 2025 decreased $2 million compared to the same period in 2024. Adjusted operating earnings decreased $17 million, or 3%, compared to the same period in 2024**.**

Endless Assortment

The following table shows reported segment results (in millions of dollars):

Three Months Ended June 30,
20252024% Change
Net sales$929$77619.7%
Gross profit$277$22921.0%
Selling, general and administrative expenses18516810.1%
Operating earnings$92$6150.8%

Net sales of $929 million for the three months ended June 30, 2025 increased $153 million, or 20%, and on a daily, constant currency basis increased 16% compared to the same period in 2024. The increase was due to repeat business for the segment and enterprise customer growth at MonotaRO.

Gross profit of $277 million for the three months ended June 30, 2025 increased $48 million, or 21%, and gross profit margin of 29.8% increased 30 basis points compared to the same period in 2024.

SG&A expenses of $185 million for the three months ended June 30, 2025 increased $17 million, or 10%, compared to the same period in 2024. The increase was primarily due to higher marketing expenses.

Operating earnings of $92 million for the three months ended June 30, 2025 increased $31 million, or 51%, compared to the same period in 2024.

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Results of Operations – Six Months Ended June 30, 2025

In this section, Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. For further information regarding the Company's non-GAAP measures including reconciliations to the most directly comparable GAAP measure, see below "Non-GAAP Measures."

The following table is included as an aid to understanding the changes in Grainger's Condensed Consolidated Statements of Earnings (in millions of dollars except per share amounts):

Six Months Ended June 30,
% Change% of Net Sales
2025202420252024
Net sales(1)$8,860$8,5473.7%100.0%100.0%
Cost of goods sold5,3955,1854.160.960.7
Gross profit3,4653,3623.139.139.3
Selling, general and administrative expenses2,1152,0443.523.923.9
Operating earnings1,3501,3182.415.215.4
Other expense – net322718.50.40.2
Income tax provision3103042.03.53.6
Net earnings1,0089872.111.311.6
Noncontrolling interest473920.50.50.5
Net earnings attributable to W.W. Grainger, Inc.$961$9481.410.8%11.1%
Diluted earnings per share$19.83$19.133.7%
(1)For further information regarding the Company's disaggregated revenue, see Note 2 of the Notes to Condensed Consolidated Financial Statements in Part 1, Item 1: Financial Statements of this Form 10-Q.

The following table is included as an aid to understanding the changes of Grainger's total net sales, daily net sales and daily, organic constant currency net sales compared from the prior period for the six months ended June 30, 2025 and 2024 (in millions of dollars):

Six Months Ended June 30,
2025% Change(1)2024% Change(1)
Net sales$8,8603.7%$8,5473.3%
Daily net sales(2)$70.34.5%$66.83.3%
Daily, constant currency net sales(2)$70.54.7%$67.64.5%
(1)Calculated on the basis of prior year net sales for the six months ended June 30, 2025 and 2024.
(2)Daily net sales are adjusted for the difference in U.S. selling days relative to the prior year period. Daily constant currency net sales are also adjusted to exclude the impact on net sales due to year-over-year foreign currency exchange rate fluctuations. There were 127 and 128 sales days in the six months ended June 30, 2025 and 2024, respectively. For further information regarding the Company's non-GAAP measures, including reconciliations to the most directly comparable GAAP measure, see below "Non-GAAP Measures."

Net sales of $8,860 million for the six months ended June 30, 2025 increased $313 million, or 4%, and on a daily, constant currency basis increased 5% compared to the same period in 2024. Both High-Touch Solutions N.A. and the Endless Assortment segments contributed to sales growth in the six months ended June 30, 2025. For further discussion on the Company's net sales, see the Segment Analysis section below.

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Gross profit of $3,465 million for the six months ended June 30, 2025 increased $103 million, or 3%, and gross profit margin of 39.1% decreased 20 basis points compared to the same period in 2024. For further discussion on the Company's gross profit, see the Segment Analysis section below.

SG&A expenses of $2,115 million for the six months ended June 30, 2025 increased $71 million, or 4%, and adjusted SG&A expenses increased $87 million, or 4%, driven by higher marketing expenses in 2025.

Operating earnings of $1,350 million for the six months ended June 30, 2025 increased $32 million or 2%, compared to the same period in 2024. Adjusted operating earnings increased $16 million, or 1% compared to the same period in 2024.

Income taxes of $310 million for the six months ended June 30, 2025 increased $6 million, compared to the same period in 2024. Adjusted income taxes increased $2 million, compared to the same period in 2024. Grainger's reported and adjusted effective tax rates were 23.5% for the six months ended June 30, 2025 and 2024.

Diluted earnings per share was $19.83 for the six months ended June 30, 2025, an increase of 4% compared to $19.13 for the same period in 2024. Adjusted diluted earnings per share increased 2% compared to $19.37 for the same period in 2024.

Segment Analysis

In this section, Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. For further information regarding the Company's non-GAAP measures including reconciliations to the most directly comparable GAAP measure, see "Non-GAAP Measures." For further segment information, see Note 7 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1: Financial Statements of this Form 10-Q.

High-Touch Solutions N.A.

The following table shows reported segment results (in millions of dollars):

Six Months Ended June 30,
20252024% Change
Net sales$6,941$6,8631.1%
Gross profit$2,893$2,8660.9%
Selling, general and administrative expenses1,7041,6652.3%
Operating earnings$1,189$1,201(1.0)%

Net sales of $6,941 million for the six months ended June 30, 2025 increased $78 million, or 1%, and on a daily, constant currency basis increased 2% compared to the same period in 2024. The increase was primarily due to volume.

Gross profit of $2,893 million for the six months ended June 30, 2025 increased $27 million, or 1%, and gross profit margin of 41.7% decreased 10 basis points compared to the same period in 2024.

SG&A expenses of $1,704 million for the six months ended June 30, 2025 increased $39 million, or 2%, compared to the same period in 2024. Adjusted SG&A expenses increased $54 million, or 3%. The increase was primarily due to higher marketing and payroll and benefit expenses in 2025.

Operating earnings of $1,189 million for the six months ended June 30, 2025 decreased $12 million, or 1%, compared to the same period in 2024. Adjusted operating earnings deceased $27 million, or 2%, compared to the same period in 2024.

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Endless Assortment

The following table shows reported segment results (in millions of dollars):

Six Months Ended June 30,
20252024% Change
Net sales$1,757$1,52715.1%
Gross profit$522$44916.3%
Selling, general and administrative expenses3583298.8%
Operating earnings$164$12036.7%

Net sales of $1,757 million for the six months ended June 30, 2025 increased $230 million, or 15%, and on a daily constant currency basis increased 16% compared to the same period in 2024. The increase was due to repeat business for the segment and enterprise customer growth at MonotaRO.

Gross profit of $522 million for the six months ended June 30, 2025 increased $73 million, or 16%, and gross profit margin of 29.7% increased 30 basis points compared to the same period in 2024.

SG&A expenses of $358 million for the six months ended June 30, 2025 increased $29 million, or 9%, compared to the same period in 2024. The increase was primarily due to higher marketing expenses in 2025.

Operating earnings of $164 million for the six months ended June 30, 2025 increased $44 million, or 37% compared to the same period in 2024.

Non-GAAP Measures

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. The Company adjusts its reported net sales when there are differences in the number of U.S. selling days relative to the prior year period and also excludes the impact on reported net sales due to changes in foreign currency exchange rate fluctuations and results of certain divested businesses. 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. The Company believes its non-GAAP measures provide meaningful information to assist investors in understanding financial results and assessing prospects for future performance as they provide a better baseline for analyzing the ongoing performance of its businesses by excluding items that may not be indicative of core operating 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 measures and may not be comparable to similarly titled measures reported by other companies.

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following tables provide reconciliations of reported net sales growth from the prior year period in accordance with GAAP to the Company's non-GAAP measures daily net sales and daily, constant currency net sales for the three months ended June 30, 2025 and 2024 (in millions of dollars):

Three Months Ended June 30,
High-Touch Solutions N.A.Endless AssortmentTotal Company(1)
2025% Change(2)2025% Change(2)2025% Change(2)
Reported net sales$3,5442.5%$92919.7%$4,5545.6%
Daily impact(3)——————
Daily net sales55.42.514.519.771.25.6
Foreign currency exchange(4)0.10.3(0.4)(3.4)(0.4)(0.5)
Daily, constant currency net sales$55.52.8%$14.116.3%$70.85.1%
2024% Change(2)2024% Change(2)2024% Change(2)
Reported net sales$3,4583.1%$7763.3%$4,3123.1%
Daily impact(3)——————
Daily net sales54.03.112.13.367.43.1
Foreign currency exchange(4)——1.08.41.01.5
Daily, constant currency net sales$54.03.1%$13.111.7%$68.44.6%
(1)Total Company includes Other. Grainger's businesses reported in Other do not meet the criteria of a reportable segment.
(2)Compared to net sales in the prior year period.
(3)Excludes the impact on net sales due to the difference in U.S. selling days relative to the prior year period on a daily basis. There were 64 sales days in the three months ended June 30, 2025 and 2024.
(4)Excludes the impact on net sales due to year-over-year foreign currency exchange rate fluctuations on a daily basis.

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following tables provide reconciliations of reported net sales growth from the prior year period in accordance with GAAP to the Company's non-GAAP measures daily net sales and daily, constant currency net sales for the six months ended June 30, 2025 and 2024 (in millions of dollars):

Six months ended June 30,
High-Touch Solutions N.A.Endless AssortmentTotal Company(1)
2025% Change(2)2025% Change(2)2025% Change(2)
Reported net sales$6,9411.1%$1,75715.1%$8,8603.7%
Daily impact(3)0.40.80.10.90.50.8
Daily net sales55.11.913.916.070.34.5
Foreign currency exchange(4)0.20.4—(0.1)0.20.2
Daily, constant currency net sales$55.32.3%$13.915.9%$70.54.7%
2024% Change(2)2024% Change(2)2024% Change(2)
Reported net sales$6,8633.2%$1,5273.5%$8,5473.3%
Daily impact(3)——————
Daily net sales53.63.211.93.566.83.3
Foreign currency exchange(4)—(0.1)0.97.40.81.2
Daily, constant currency net sales$53.63.1%$12.810.9%$67.64.5%
(1)Total Company includes Other. Grainger's businesses reported in Other do not meet the criteria of a reportable segment.
(2)Compared to net sales in the prior year period.
(3)Excludes the impact on net sales due to the difference in U.S. selling days relative to the prior year period on a daily basis. There were 127 and 128 sales days in the six months ended June 30, 2025 and 2024, respectively.
(4)Excludes the impact on net sales due to year-over-year foreign currency exchange rate fluctuations on a daily basis.

The following tables provide reconciliations of reported SG&A expenses, operating earnings, net earnings attributable to W.W. Grainger, Inc. and diluted earnings per share determined in accordance with GAAP to the Company's non-GAAP measures adjusted SG&A expenses, adjusted operating earnings, adjusted net earnings attributable to W.W. Grainger, Inc. and adjusted diluted earnings per share for the three and six months ended June 30, 2025 and 2024 (in millions of dollars):

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Three months ended June 30, 2025ReportedAdjustment(1)Adjusted% Change Reported(2)% Change Adjusted(2)
Selling, general and administrative expenses
High-Touch Solutions N.A.$865$—$865
Endless Assortment185—185
Other(3)27—27
Selling, general and administrative expenses$1,077$—$1,0773.1%4.7%
Earnings
High-Touch Solutions N.A.$589$—$589
Endless Assortment92—92
Other(3)(3)—(3)
Operating earnings$678$—$6784.5%2.0%
Total other expense – net(17)—(17)
Income tax provision(153)—(153)
Net earnings$508$—$508
Noncontrolling interest(26)—(26)
Net earnings attributable to W.W. Grainger, Inc.$482$—$4822.6%—
Diluted earnings per share$9.97$—$9.974.8%2.2%
Three months ended June 30, 2024ReportedAdjustment(1)Adjusted% Change Reported(2)% Change Adjusted(2)
Selling, general and administrative expenses
High-Touch Solutions N.A.$852$(15)$837
Endless Assortment168—168
Other(3)25(1)24
Selling, general and administrative expenses$1,045$(16)$1,0296.3%4.7%
Earnings
High-Touch Solutions N.A.$591$15$606
Endless Assortment61—61
Other(3)(3)1(2)
Operating earnings$649$16$665(1.8)%0.6%
Total other expense – net(13)—(13)
Income tax provision(4)(146)(4)(150)
Net earnings$490$12$502
Noncontrolling interest(20)—(20)
Net earnings attributable to W.W. Grainger, Inc.$470$12$482—2.6%
Diluted earnings per share$9.51$0.25$9.762.5%5.2%
(1)Reflects restructuring costs incurred in the second quarter of 2024. There were no non-GAAP adjustments for the three months ended June 30, 2025.
(2)Compared to the reported and adjusted results of the prior year period.
(3)Grainger's businesses reported in Other do not meet the criteria of a reportable segment.
(4)Reflects a tax benefit related to the restructuring costs incurred in the second quarter of 2024. Grainger's reported and adjusted effective tax rates were 23.2% for the three months ended June 30, 2025.

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Six Months Ended June 30, 2025ReportedAdjustment(1)Adjusted% Change Reported(2)% Change Adjusted(2)
Selling, general and administrative expenses
High-Touch Solutions N.A.$1,704$—$1,704
Endless Assortment358—358
Other(3)53—53
Selling, general and administrative expenses$2,115$—$2,1153.5%4.3%
Earnings
High-Touch Solutions N.A.$1,189$—$1,189
Endless Assortment164—164
Other(3)(3)—(3)
Operating earnings$1,350$—$1,3502.4%1.2%
Total other expense – net(32)—(32)
Income tax provision(310)—(310)
Net earnings$1,008$—$1,008
Noncontrolling interest(47)—(47)
Net earnings attributable to W.W. Grainger, Inc.$961$—$9611.4%0.1%
Diluted earnings per share$19.83$—$19.833.7%2.4%
Six Months Ended June 30, 2024ReportedAdjustment(1)Adjusted% Change Reported(2)% Change Adjusted(2)
Selling, general and administrative expenses
High-Touch Solutions N.A.$1,665$(15)$1,650
Endless Assortment329—329
Other(3)50(1)49
Selling, general and administrative expenses$2,044$(16)$2,0285.5%4.7%
Earnings
High-Touch Solutions N.A.$1,201$15$1,216
Endless Assortment120—120
Other(3)(3)1(2)
Operating earnings$1,318$16$1,334(1.7)%(0.5)%
Total other expense – net(27)—(27)
Income tax provision(4)(304)(4)(308)
Net earnings$987$12$999
Noncontrolling interest(39)—(39)
Net earnings attributable to W.W. Grainger, Inc.$948$12$960(1.0)%0.2%
Diluted earnings per share$19.13$0.24$19.371.3%2.5%
(1)Reflects restructuring costs incurred in the second quarter of 2024. There were no non-GAAP adjustments for the six months ended June 30, 2025.
(2)Compared to the reported and adjusted results of the prior year period.
(3)Grainger's businesses reported in Other do not meet the criteria of a reportable segment.
(4)Reflects a tax benefit related to the restructuring costs incurred in the second quarter of 2024. Grainger's reported and adjusted effective tax rates were 23.5% for the six months ended June 30, 2025.

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

Grainger believes its current balances of cash and cash equivalents, marketable securities and availability under its revolving credit facility will be sufficient to meet its liquidity needs for the next twelve months. The Company expects to continue to invest in its business and return excess cash to shareholders through cash dividends and share repurchases, which it plans to fund through cash flows generated from operations. Grainger also maintains access to capital markets and may issue debt or equity securities from time to time, which may provide an additional source of liquidity.

Cash and Cash Equivalents

As of June 30, 2025 and December 31, 2024, Grainger had cash and cash equivalents of $597 million and $1,036 million, respectively. The Company had approximately $1.8 billion in available liquidity as of June 30, 2025.

Cash Flows

The following table shows the Company's cash flow activity for the periods presented (in millions of dollars):

Six Months Ended June 30,
20252024
Total cash provided by (used in):
Operating activities$1,023$1,072
Investing activities(283)(177)
Financing activities(1,201)(763)
Effect of exchange rate changes on cash and cash equivalents22(23)
Increase (decrease) in cash and cash equivalents$(439)$109

Net cash provided by operating activities was $1,023 million and $1,072 million for the six months ended June 30, 2025 and 2024, respectively. The decrease was driven by unfavorable changes in working capital primarily due to inventory inflation partially offset by timing of cash payments compared to the prior year period.

Net cash used in investing activities was $283 million and $177 million for the six months ended June 30, 2025 and 2024, respectively. The increase was due to capital expenditures driven by continued U.S. and MonotaRO supply chain investments in the first half of 2025.

Net cash used in financing activities was $1,201 million and $763 million for the six months ended June 30, 2025 and 2024, respectively. The increase in cash used in financing activities was primarily due to the repayment of the 1.85% Senior Notes in the amount of $500 million.

Working Capital

Working capital as of June 30, 2025 was $3,455 million, an increase of $173 million compared to $3,282 million as of December 31, 2024. As of June 30, 2025 and December 31, 2024, the ratio of current assets to current liabilities was 2.8 and 2.9, respectively.

Debt

Grainger maintains a debt ratio and liquidity position that provides flexibility in funding working capital needs and long-term cash requirements. Grainger has various sources of financing available.

Total debt as a percent of total capitalization was 36.5% and 42.9% as of June 30, 2025 and December 31, 2024, respectively.

Grainger receives ratings from two independent credit rating agencies: Moody's Investor Service (Moody's) and Standard & Poor's (S&P). Both credit rating agencies currently rate the Company's corporate credit at investment grade.

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following table summarizes the Company's credit ratings as of June 30, 2025:

CorporateSenior UnsecuredShort-term
Moody'sA2A2P1
S&PA+A+A1

Commitments and Other Contractual Obligations

There were no material changes to the Company’s commitments and other contractual obligations from those disclosed in Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2024 Form 10-K.

Critical Accounting Estimates

The preparation of Grainger’s Condensed Consolidated Financial Statements and accompanying notes are in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make assumptions and estimates that affect the reported amounts. The Company considers an accounting policy to be a critical estimate if: (1) it involves assumptions that are uncertain when judgment was applied, and (2) changes in the estimate assumptions, or selection of a different estimate methodology, could have a significant impact on Grainger’s consolidated financial position and results. While the Company believes the assumptions and estimates used are reasonable, the Company’s management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances.

Note 1 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements of the Company's 2024 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company’s Condensed Consolidated Financial Statements.

There were no material changes to the Company's critical accounting estimates from those disclosed in Part II, Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 2024 Form 10-K.

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

From time to time in this Quarterly Report on Form 10-Q as well as in other written reports, communications and verbal statements, Grainger makes forward-looking statements that are not historical in nature but concern forecasts of future results, business plans, analyses, prospects, strategies, objectives and other matters that may be deemed to be “forward-looking statements” under the federal securities laws. Forward-looking statements can generally be identified by their use of terms such as “anticipate,” “estimate,” “believe,” “expect,” “could,” “forecast,” “may,” “intend,” “plan,” “predict,” “project,” “will,” or “would,” and similar terms and phrases, including references to assumptions.

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 Grainger's control, which could cause 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; a major loss of customers; loss or disruption of sources of supply; changes in customer or product mix; increased competitive pricing pressures; changes in third-party practices regarding digital advertising; failure to enter into or sustain contractual arrangements on a satisfactory basis with group purchasing organizations; failure to develop, manage or implement new technology initiatives or business strategies, including with respect to Grainger's eCommerce platforms and artificial intelligence; failure to adequately protect intellectual property or successfully defend against infringement claims; fluctuations or declines in Grainger's gross profit margin; 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; the impact of any government shutdown; disruption or breaches of information technology or data security systems involving Grainger or third parties on which Grainger depends; general industry, economic, market or political conditions; general global economic conditions including existing, new, or increased tariffs, trade issues and changes in trade policies, inflation, and interest rates; currency exchange rate fluctuations; market volatility, including price and trading volume volatility or price declines of Grainger's common stock; commodity price volatility; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; effects of outbreaks of pandemic disease or viral contagions, global conflicts, 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 team members; loss of key members of management or key 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; 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 Grainger's latest Form 10-K, as updated from time to time in Grainger's Quarterly Form 10-Q.

The preceding list is not intended to be an exhaustive list of all of the factors that could impact Grainger's forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on Grainger's forward looking-statements and 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.

W.W. Grainger, Inc. and Subsidiaries

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