Can you update your view on the pacing of margins through the year, especially given prior comments about a U-shape trajectory?

Management confirmed a U-shape trajectory for margins, explaining that Q1 benefited from strong price realization and less private label sell-through than expected. Q2 will see the delayed private label cost impact, normal seasonality, and new fuel cost headwinds, which will be difficult to pass on immediately. “I would say now we believe it's going to have more of a U-shape. And part of that is because Q1 performance we did very well from a price realization perspective as price continued to build based upon the changes that we made in 2025 and then, of course, the change we made in January.”

Is MonotaRO in Japan seeing any concerns related to the energy shock, given its reliance on energy imports?

Management noted some price pressure on certain products and a little pre-buying of potentially at-risk products in Japan at the end of Q1, particularly petroleum-based items. While not material yet, it could become so depending on the duration of the geopolitical situation. “So what we've seen is some price pressure with some products there. And then we have seen a little bit of buying in the end of the first quarter, they talked about on their call today of those products that are potentially at risk. It hasn't been material yet, but certainly, it could become so depending how long it goes.”

How has the private label business adapted to the tariff environment, and are there any ongoing concerns?

Management stated that the cost spread between private label and national brands has compressed for some products, leading to some customers choosing national brands. They expect this to normalize over time and are confident in their private brand path, noting success with leveraging the Grainger brand. “So what I would say is there have been some private label products where the cost spread between it and the national branded products have compressed. And so we have seen some impact there and some more buying of national brand versus private brand.”

GWW

W.W. Grainger (GWW) Q1 FY26 earnings call: guidance and Q&A

Q: Could you provide the price contribution for each segment and overall?

Management stated that for North America, the price contribution was about 5 points, but declined to provide segment-specific details. “So generally, we don't talk about the segment detail. Dave, thank you for the question, though. And so I would say when you look at North America, we're about 5% or 5 points of price.”

Earnings call· Mar 2026 (Q1 FY26)· Industrials· May 7, 2026

Source: earnings call transcript

Executive summary

W.W. Grainger Q1 FY26 — Strong Start with Double-Digit Growth and Raised Guidance

W.W. Grainger delivered a strong Q1 FY26, exceeding expectations with robust sales growth driven by improved market demand, healthy price realization, and strong share gains. The company raised its full-year guidance, reflecting this momentum, despite anticipating some near-term margin pressure from increased fuel costs and private label inventory dynamics. Management remains confident in its strategy and ability to navigate market uncertainties.

Highlights

Total company reported sales increased 10.1%, or 12.2% on a daily organic constant currency basis.
Operating margin was strong at 16.7%, up 110 basis points year-over-year.
Diluted EPS finished the quarter up 18.2% to $11.65.
Operating cash flow came in at $739 million.
Quarterly dividend increased by 10%, marking the 55th consecutive year of increases.

Concerns

LIFO inventory valuation headwinds impacted gross margin by approximately 70 basis points (Q1 vs Q4).
Increased fuel costs are pressuring margins, causing leakage, and are expected to contribute to Q2 operating margins being in the low 15% range.
A 20 basis point gross margin headwind from private label inventory costs is expected to hit in Q2, shifted from Q1.
Potential for incremental costs from the Middle East conflict if it persists, particularly in the Japanese market and for U.S. LIFO accounting.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 Daily Organic Constant Currency Sales Growth	9.5% to 12% high materiality	FY26	High
Full-year 2026 Operating Margin	Ticked up slightly at the midpoint high materiality	FY26	Medium
Full-year 2026 Diluted EPS	$44.25 to $46.25 high materiality	FY26	High
Full-year 2026 Total Company Operating Cash Flow	Increased compared to prior guide medium materiality	FY26	Medium
Q2 Sales	North of $4.9 billion medium materiality	Q2 · FY26	High
Q2 Operating Margins	Low 15% range high materiality	Q2 · FY26	High
Full-year MRO Market Volume Growth	0% to 1% medium materiality	FY26	Medium
Full-year Price Contribution	4% medium materiality	FY26	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
High-Touch Solutions Broad-based acceleration across end markets, with strong contributions from manufacturing, government, and contractor customers. Gross margin benefited from positive mix and freight, partially offset by the annual Grainger sales meeting and LIFO inventory valuation headwinds. SG&A leveraged due to strong sales and productivity, offsetting marketing investment and higher incentive-based compensation. Daily constant currency sales growth: 10%Operating margin change YoY: +60 basis pointsGross margin: 42.6%Gross margin change YoY: +20 basis pointsSales growth contributions: roughly equal from price and volume	—	10.5%	—	18.3%
Endless Assortment Zoro U.S. saw strong growth from core B2B customers and improving customer retention, with continued improvements in customer experience. MonotaRO achieved strong growth from enterprise customers and solid acquisition/repeat purchase rates with SMBs, benefiting from increased web traffic due to a competitor cyber outage. Both businesses benefited from healthy top-line leverage. Daily organic constant currency sales growth: 21.9%Operating margin change YoY: +190 basis pointsZoro U.S. daily sales growth: 18.7%MonotaRO local days, local constant currency sales growth: 24.3%MonotaRO operating margin: 12.9%MonotaRO operating margin change YoY: +90 basis pointsZoro operating margin: 7.3%Zoro operating margin change YoY: +210 basis points	—	19.6%	—	10.6%

GWW operating KPIs by quarter

GWW operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2024 Q4 FY24	Dec 2025 Q4 FY25	Change vs prior quarter
Employees	26K+ At the core of our success is our more than 26,000 team members who live our purpose-driven culture. Source: earnings call transcript	<25K Before I open it up for questions, I want to acknowledge our nearly 25,000 Grainger team members who consistently demonstrate our principles and drive strong performance for Grainger. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

Cromwell divestiture

Divestiture of the U.K. market business, completed in Q4 2025.

Zoro U.K. divestiture

Closure of the Zoro U.K. business, completed in Q4 2025.

Capital programs

Portland Distribution Center underway

Ramping up operations in 2026.

Houston Distribution Center underway

Benefit:Expands capacity in the Texas market

A very big building that will go live in 2028.

Risks & headwinds

Tariff uncertainty Ongoing

Ongoing tariff uncertainty, particularly IEEPA tariffs.

Mitigation:Actively managing pricing actions to maintain price/cost neutrality; monitoring for potential recovery of previously paid IEEPA tariffs.

Geopolitical climate and Middle East conflict Ongoing

Potential for incremental costs, supply pressure on raw materials (e.g., nitrile-based gloves), and more strain in the Japanese market due to reliance on energy inputs through the Strait of Hormuz.

Mitigation:Assessing the situation, working with suppliers to minimize supply impacts, changing sourcing strategy where needed. Not anticipating a step change in cost inflation at this time, but impacts could result in incremental cost if conflict persists.

Fuel costs Short-term (Q2 FY26)

Rising diesel prices pressuring margins, causing leakage due to free parcel shipping for large customers. Expected to impact Q2 operating margins.

Mitigation:Working with supplier and transportation partners to minimize cost headwinds; confident in ability to pass on costs over time through future pricing windows.

Private label inventory cost pressure Q2 FY26

20 basis point gross margin impact expected in Q2 FY26.

Mitigation:Impact is a timing shift from Q1 due to lower-than-anticipated sell-through of lower-cost inventory.

LIFO inventory valuation headwinds Q1 FY26

Approximately 70 basis points impact on total company gross margin (Q1 FY26 vs Q4 FY25).

Mitigation:Normalizes and subsides over time; inherent to LIFO accounting in an inflationary environment.

Q&A highlights

Could you provide the price contribution for each segment and overall?

Management stated that for North America, the price contribution was about 5 points, but declined to provide segment-specific details.

“So generally, we don't talk about the segment detail. Dave, thank you for the question, though. And so I would say when you look at North America, we're about 5% or 5 points of price.”

asked by David Manthey · answered by Deidra Merriwether

2 min read 7 chapters

Detailed narrative

Market Demand and Share Gains

The MRO market demand showed positive momentum in Q1 FY26, with volume growth turning slightly positive after several years of negativity. Grainger experienced broad-based acceleration across end markets, including strong contributions from manufacturing, government, and contractor customers. This, combined with higher-than-anticipated price realization and strong share gains, contributed to a robust demand environment for the company.

Pricing Strategy and Inflation Management

Grainger implemented price increases in January to address lagged tariff actions from 2025 and annually negotiated cost increases, partially offset by Chinese tariff rollbacks. May pricing actions were net neutral, incorporating Section 122 actions and IEEPA rollbacks for directly sourced private label products.

The company is actively evaluating further inflationary pressures from new tariff changes and the Middle East conflict, aiming to maintain price/cost neutrality over time.

Private Label Inventory Dynamics

While most of Grainger's inventory is on LIFO, private brand inventory uses FIFO, adding complexity to cost management. The company sold through less lower-cost private label inventory than anticipated in Q1, shifting a 20 basis point gross margin headwind to Q2.

There has been some compression in the cost spread between private label and national branded products, leading to some customers opting for national brands, though management remains confident in its private brand strategy.

Fuel Cost Headwinds

Rising diesel prices are creating margin pressure, particularly due to the common practice of offering free parcel shipping to large contract customers. While this is a short-term headwind, Grainger expects to mitigate these costs over time through future pricing cycles. The impact of these heightened fuel costs has been incorporated into the updated full-year guidance.

MonotaRO Performance and Geopolitical Impact

The Endless Assortment segment, particularly MonotaRO, saw strong sales growth driven by enterprise customers and small/midsized businesses, further boosted by a competitor's cyber outage. In Japan, there's been some price pressure on petroleum-based products and slight pre-buying due to the Middle East conflict, given the region's reliance on energy inputs from the Strait of Hormuz.

However, the impact on the U.S. business remains minimal so far.

Capital Deployment and Shareholder Returns

Grainger demonstrated its commitment to shareholder returns by announcing a 10% increase in its quarterly dividend, marking the 55th consecutive year of dividend increases. In Q1 FY26, the company returned a total of $345 million to shareholders through dividends and share repurchases, reflecting a balanced and return-focused capital allocation approach.

Sales Force and Distribution Network Expansion

Grainger continues to make consistent net additions to its sales force, typically 3-4% annually, leveraging improved customer data to identify coverage gaps. The company expects to complete these coverage fill-ins by the end of 2027. In terms of infrastructure, the Portland facility is currently ramping up, and a large Houston distribution center is slated to go live in 2028, expanding capacity in the Texas market.

Future investments are more likely to enhance existing positions rather than establish entirely new greenfield sites.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.