Dee Merriwether
Senior Vice President & Chief Financial Officer at W.W. Grainger
Thanks, D.G. As D.G. highlighted, it was another quarter of exceptional results, which are summarized at the total company level on Slide 7. We delivered strong growth and gross margin performance across both segments and also manage our SG&A well, driving 85 basis points of leverage in the quarter as we continue to stay disciplined while investing to support long-term sustainable growth. This growth in profitability resulted in diluted EPS for the quarter of $8.27, up 46.4% versus third quarter of 2021.
Turning now to our High-Touch Solutions segment for the third quarter. We continue to see strong results with daily sales up 19.4% compared to the third quarter of 2021. We saw a broad-based double-digit growth across all geographies and over 20% growth with both midsized and large customers in the U.S. Daily sales growth in the U.S. of 20% was fueled by broad-based volume growth and strong price realization of over 12% in the quarter. Canadian daily sales were also strong, up 11.4% or 15.5% in local days and local currency.
For this segment, GP margin finished the quarter at 40.6%, achieving 125 basis points of margin expansion. The increase is primarily due to product mix as well as favorable price/cost spread, realizing a timing benefit as we continue to work through cost discussions with our suppliers.
Price/cost was also aided by some targeted customer and product actions as we work to ensure we are receiving the right economics for the value we provide to customers. These favorable contributors to gross margin were partially offset by heightened freight costs in the quarter.
Our pricing team continues to do a really nice job managing through this highly inflationary environment. And while the timing will always be choppy from quarter-to-quarter, we remain focused on our core pricing tenets of achieving price/cost neutrality over time while ensuring our prices remain market competitive.
Increased SG&A spend in this segment was driven primarily by higher headcount to support growth and compensation costs as well as continued investments in marketing. Even with the increased investment, we delivered 150 basis points of SG&A leverage year-over-year, and we're combined with the continued gross margin expansion, Q3 operating margin of 17.3% was up 275 basis points versus the prior year.
Overall, a very strong quarter for the High-Touch Solutions business.
Looking at market outgrowth on Slide 9, we estimate that the U.S. MRO market, including volume and price inflation, grew between 12.5% and 13.5%, indicating that we achieved roughly 700 basis points of market outgrowth in the quarter.
As you heard at Investor Day last month, we're having great success gaining share as we execute against our strategic growth engine. Given our recent performance and go-forward expectations, as announced at Investor Day, we are now targeting 400 to 500 basis points of annual outgrowth going forward, a 100-basis point increase from our previous outlook target.
The strength of our initiatives, coupled with our supply chain advantage, gives us confidence in our ability to deliver against this commitment.
Moving to our Endless Assortment segment. Reported and daily sales increased 8.6% or up 23.7% on a daily constant currency basis after normalizing for the significant impact of the depreciating Japanese yen, which is down over 23% versus last year. In local currency and local days, MonotaRO achieved 19.8% growth and Zoro U.S. was up 27.4%.
Revenue growth continues to be driven by strong new customer acquisition and repeat business for this segment as well as enterprise customer growth at MonotaRO.
Gross margin expanded 130 basis points versus the third quarter of 2021 as we continue to see freight efficiencies from increased average order value. We also benefited from favorable business unit mix as Zoro grew faster than MonotaRO in the quarter.
Segment operating margin declined 95 basis points in the quarter as favorable gross margins were offset by continued investments to support growth in both businesses as well as DC start-up costs at MonotaRO for the new and a valid DC. The new facility is ramping nicely. As we exit our legacy facility in the first quarter of 2023, we anticipate that the business will return to normal operating margins thereafter.
On Slide 11, we continue to see positive results with our key Endless Assortment operating metrics. Total registered users are tracking nicely with Zoro and MonotaRO combined up 17% over the prior year period.
On the right, we show the continued growth of the Zoro SKU portfolio, now at over 10.3 million SKUs. You'll see a more modest increase between the second and third quarter as Zoro backend offering of SKUs that could not meet our service level expectations. We continue to target around 2 million SKU additions in 2022 and have a robust pipeline to meet that goal as we finish the year.
Turning to guidance. With another very strong quarter and with sales in October trending up over 16% on a daily reported basis or over 21% in constant currency, we are raising our 2022 full year outlook. While we acknowledge that the broader market conditions remain uncertain and the risk of a potential recession has certainly increased, we have not seen any meaningful slowdown in our business and continue to outperform our normal seasonal trends.
Our updated outlook for the full year 2022 includes: expected daily sales growth between 15.5% and 16.5% and EPS between $29.10 and $29.70, a 48% increase year-over-year at the midpoint. This implies Q4 daily sales, which normally slowed due to seasonality, will grow roughly 9% to 13% as we face into difficult comps over the fourth quarter 2021, especially in November and December.
We also continue to see further FX headwinds from the depreciation of the Japanese yen. We've included updates to our supplemental guidance as well, which can be found in the appendix.
While it is not our typical practice to change guidance each quarter, doing so provides our most up-to-date expectations in light of the current economic environment.
With that, I'll turn it back to D.G. for some closing remarks.