W.W. Grainger Q4 Earnings Call Highlights

Key Points

• 2025 results: Grainger met its 2025 outlook with $17.9 billion in sales, adjusted EPS of $39.48 and a 15% operating margin, returned $1.5 billion to shareholders, and expanded its assortment by ~85,000 SKUs while exiting the U.K.
• Q4 and tariff impact: Fourth-quarter daily sales rose 4.5% (about 6.5% normalized for a government shutdown and prior-year hurricane benefit) and diluted EPS was $9.44; management said tariff-driven price increases and higher SG&A/healthcare costs weighed on margins, with LIFO and mix effects also a factor.
• 2026 outlook: The company guided revenue of $18.7–$19.1 billion (6.5%–9% daily organic growth), operating margin of 15.4%–15.9% and EPS of $42.25–$44.75 (over 10% growth at the midpoint), while forecasting ~$2.1–2.3 billion operating cash flow, $550–650 million CapEx, and roughly $1 billion in buybacks.

W.W. Grainger NYSE: GWW executives said the company delivered results within its original 2025 outlook despite a “challenging” macro environment marked by shifting tariff dynamics, soft MRO demand, and a government shutdown, while also outlining a 2026 forecast that assumes continued market volume pressure but improving margins and double-digit EPS growth at the midpoint.

2025 performance and strategic progress

Chairman and CEO D.G. Macpherson said the company made progress in 2025 by leveraging technology and MRO expertise, investing in supply chain capacity, and streamlining its portfolio by exiting the U.K. market (including the Cromwell divestiture and the closure of Zoro UK). He highlighted ongoing investments in data and technology capabilities that support Grainger’s “five strategic growth engines” within High-Touch Solutions.

Macpherson said merchandising efforts drove net assortment growth of more than 85,000 SKUs in 2025, described as the largest net SKU growth for High-Touch in nearly a decade. He cited expanded focus on new product introductions and new categories, including offerings aimed at data center customers and factory automation products such as sensors, machine controls, and actuators.

On seller coverage, Macpherson said Grainger added around 110 new sellers across two geographies in 2025, bringing total expansion to more than 300 sellers across six geographies since 2022—more than a 10% increase in the U.S.-based sales team. The company plans to address two more regions in 2026. He also pointed to strong usage of the Seller Insights platform and said AI capabilities will be used on the platform in 2026 to provide actionable insights and improve coaching.

Macpherson said demand for value-added services continues to increase as customers face labor scarcity and cost-saving imperatives, citing KeepStock installations and product category expansions. He added that customer-facing tools were developed in 2025, with a broader rollout expected to begin in 2026.

Full-year 2025 financial results

For 2025, Grainger reported total company sales growth of 4.5% on a reported basis, or 4.9% on a daily organic constant currency basis, with total sales of $17.9 billion. Operating margin finished at 15% for the year. The company reported adjusted EPS growth of 1.3% to $39.48 per share, ROIC of 39.1%, and operating cash flow of $2.0 billion.

Macpherson said Grainger returned $1.5 billion to shareholders through dividends and share repurchases in 2025.

Within Endless Assortment, the company said daily organic constant currency sales increased 15.6% for the year. Macpherson said Zoro “regained its growth momentum,” reaccelerating full-year sales growth back into the high teens, while MonotaRO delivered strong results including 25% growth with enterprise customers.

Fourth-quarter results: shutdown impact, margins, and tariffs

CFO Dee Merriwether said the fourth quarter finished “roughly in line with expectations,” with total company daily sales up 4.5% (4.6% daily organic constant currency). She noted early-quarter softness tied to the government shutdown and the lapping of a prior-year hurricane-related sales benefit; normalized for those events, Merriwether said total company sales would have been up approximately 6.5% on a daily organic constant currency basis.

Fourth-quarter gross margin was 39.5%, down about 10 basis points year over year, which Merriwether attributed primarily to segment mix as Endless Assortment grew faster. Operating margin declined 70 basis points year over year due to higher SG&A, which she said reflected unforeseen healthcare costs above normal run rate and a softer top line in High-Touch Solutions. Diluted EPS was $9.44, down 2.8% versus the prior-year quarter, but above the midpoint of the company’s implied fourth-quarter guide.

In High-Touch Solutions, reported sales grew 2.2% (2.1% daily constant currency). Merriwether said results included nearly three points of price inflation as tariff costs were passed through. She said contractor and manufacturing customers were strong, while government was softer year over year; normalized for the shutdown and prior-year hurricane benefit, High-Touch sales would have been up roughly 4.5% for the quarter on a daily constant currency basis.

High-Touch gross margin was 42.3%, flat year over year. Merriwether said tariff-related inflation created LIFO headwinds, although charges were favorable versus expectations. Segment operating margin was 15.8%, down 120 basis points year over year, reflecting payroll and healthcare costs and continued marketing investment, partially offset by productivity, plus the sales impact of the shutdown.

On tariffs, Merriwether said Grainger took modest price increases in November in addition to increases in May and September to offset tariff-related costs. She added that further pricing actions were taken in January in response to previously delayed tariff inflation and to offset annually negotiated supplier cost increases largely effective February 1, net of a partial rollback on certain Chinese tariffs announced late last year. “The situation still remains fluid,” Merriwether said, but she added the company has passed the majority of known tariff-related costs to date and remains focused on reaching price-cost neutrality over time while maintaining competitive pricing.

Outgrowth, market modeling, and segment momentum

Management also discussed how it measures market outgrowth. Merriwether said Grainger has more confidence in a multifactor MRO market model developed in late 2023 after sustained dislocation between customer feedback and a single-factor benchmark. Using that multifactor model, Grainger estimated it achieved roughly 250 basis points of volume outgrowth in 2025, with High-Touch U.S. volume up 1.4% while the model implied the market was down between 1.5% and 0.5% for the year. While below its long-term target of 400–500 basis points of annual outgrowth, the company said it continues to take share.

In Endless Assortment, fourth-quarter sales rose 14.3% reported (15.7% daily organic constant currency), with Zoro U.S. up 16% and MonotaRO up 18.4% in local days and local constant currency. Merriwether said MonotaRO also saw increased web traffic from a competitor cyber outage, providing a sales tailwind. Segment operating margin increased 200 basis points to 10.6%, including MonotaRO margin of 13.6% (up 100 basis points) and Zoro margin of 6.3% (up 260 basis points).

2026 outlook: higher revenue, improving margins, and EPS growth

For 2026, Grainger forecast revenue of $18.7 billion to $19.1 billion, translating to daily organic constant currency sales growth of 6.5% to 9%. High-Touch Solutions is expected to grow 5% to 7.5% on a daily constant currency basis. Merriwether said the company is conservatively modeling the market to be down 1.5% to flat, as tariff-related price increases weigh on volumes, though certain industry tailwinds are expected to persist outside core MRO categories.

Endless Assortment is expected to grow 12.5% to 15% on a daily organic constant currency basis, with Zoro and MonotaRO both expected to grow in the low teens (MonotaRO in local days and local currency). Merriwether said MonotaRO’s outlook includes a carryover benefit from the competitor cyber outage.

Grainger guided for total company operating margin of 15.4% to 15.9%, up 40 to 90 basis points versus 2025, including a 45-basis-point tailwind from the U.K. exit. The company expects EPS of $42.25 to $44.75, up “over 10% at the midpoint,” and an effective tax rate of roughly 25%.

On capital allocation, Grainger expects operating cash flow of approximately $2.1 billion to $2.3 billion in 2026, CapEx of $550 million to $650 million, share repurchases of around $1.0 billion, and said it anticipates high single-digit to low double-digit annual dividend increases, with the formal 2026 dividend to be set in the second quarter.

Merriwether also provided early-year commentary, noting preliminary January sales were up over 10% on a daily organic constant currency basis. Management cautioned that January included some tailwind from the competitor outage in Japan, and reiterated that the company plans conservatively given uncertainty around market volumes.

About W.W. Grainger NYSE: GWW

W.W. Grainger, Inc NYSE: GWW is an industrial supply distributor founded in 1927 and headquartered in Lake Forest, Illinois. The company supplies maintenance, repair and operations (MRO) products and services to businesses, institutions and government customers. Over its long history Grainger has developed a broad product assortment and a national distribution network that supports operations across a range of end markets, including manufacturing, healthcare, hospitality, transportation and public sector organizations.

Grainger's product portfolio spans core categories such as electrical and lighting, safety and personal protective equipment, material handling, motors and power transmission, plumbing and HVAC, fasteners and adhesives, hand and power tools, and janitorial and facility supplies.

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