Understanding the impact of September pricing actions on Q3/Q4 and the full-year price contribution.

September pricing actions are expected to add about 1 point annually to pricing, translating to roughly 40 basis points for the balance of the year. The full-year price contribution is now expected to be around 4%, at the high end of the previously guided 3% to 4% range. “What we're doing in September will add about 1 point annually. So less than that, obviously, for the balance of the year, maybe 40 basis points or something like that. And for the whole year, we'll be around 4%. We originally said 3% to 4%, we're going to be the high end of that given those increases.”

Sizing the potential impact of the data center market over time, considering construction vs. ongoing operations.

Direct exposure to data centers is less than 1% of revenue, but the broader ecosystem impact is larger, affecting construction and general manufacturing. Project spend related to data centers contributed about 90 basis points to High Touch growth this year. “Our exposure to direct data centers directly is probably less than 1%. We're seeing obviously strong growth there. But it's having a bigger impact on the ecosystem... The direct exposure will be pretty small, but the exposure overall is probably bigger than that as far as we can tell.”

Understanding the drivers of gross margin being below expectations (ex-tariff refund) and the lack of SG&A leverage in High Touch, and expectations for H2 SG&A.

Gross margin was impacted by mix (large projects, lower-margin products) and freight costs. SG&A was higher due to incentive compensation (management bonus, commissions) and increased marketing spend. H2 SG&A is expected to moderate and be more in line. “I'd say it's more mix actually than freight, but it's a little bit of both. So both of those were the complete driver of that... Any year when we get the forecast incorrect... We have headwinds in both management bonus and commissions. We also spent more on marketing in the quarter.”

GWW

W.W. Grainger (GWW) Q2 FY26 earnings call: guidance and Q&A

Q: Clarification on remaining tariff refund benefits in Q3/Q4 and the offsetting factors that led to a smaller full-year gross margin raise despite the Q2 refund impact.

The vast majority of tariff refunds were booked in Q2, with immaterial amounts expected in H2. The full-year gross margin benefit from tariffs (23 bps) is largely offset by mix headwinds (higher volume of lower-margin project sales) and continued freight/Middle East-related cost pressures, leading to a net 15 bps benefit. “If you look at it on a full year basis, the tariff refunds account for, call it, 23 basis points on the year. That was offset by what you hear us talk about higher volume on lower gross margin products or project-based sales that we're incurring with some of our new large customers as we ramp. That offsets that. So that nets to about 15 basis points.”

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Aug 4, 2026

Source: earnings call transcript

Executive summary

W.W. Grainger Q2 FY26 — Strong Performance and Raised Full-Year Outlook

W.W. Grainger delivered strong Q2 FY26 results, driven by robust sales growth in both High Touch and Endless Assortment segments and effective operational execution. Despite some gross margin pressures from mix and freight, core operating profitability remained solid, leading to a raised full-year outlook. Management is focused on maintaining price-cost neutrality and leveraging strategic investments, while also navigating a CFO transition.

Highlights

Company reported sales were up 10.3%, or 13.7% on a daily organic constant currency basis.
Diluted EPS finished the quarter up over 20% to $12.01.
Operating cash flow came in at $444 million, enabling $341 million returned to shareholders.
High Touch Solutions segment sales grew 11.7% on a daily constant currency basis.
Endless Assortment segment sales increased 20.6% on a daily organic constant currency basis.
Operating margin was strong at 16.1%, up 120 basis points year-over-year.

Concerns

Gross margin was impacted by mix headwinds from higher volume of lower-margin products and project-related spend.
Private label cost headwinds and unfavorable freight costs affected High Touch gross margin.
MonotaRO's $45 million pre-buy benefit has fully subsided, leading to expectations of slower growth in the second half.
Anticipated mix headwinds and cost timing pressures (inflation) are partially offsetting improved sales leverage in the updated guidance.
Operating margins are expected to be down sequentially in Q3, projected to be in the mid-15% range, largely due to the lap of tariff refunds.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year Daily Organic Constant Currency Sales Growth	11.5% to 13% high materiality	FY26	High
Full-year Operating Margin	15.8% to 16.2% high materiality	FY26	High
Full-year Diluted EPS	$45.50 to $47.25 high materiality	FY26	High
Full-year Operating Cash Flow	Slight increase at midpoint medium materiality	FY26	Medium
Q3 Sales	North of $5 billion medium materiality	Q3 · FY26	High
Q3 Operating Margins	Mid-15% range medium materiality	Q3 · FY26	High
September Pricing Actions Annual Impact	Add ~1 point annually medium materiality	Annually	High
Full-year Price Contribution	~4% medium materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
High Touch Solutions Sales growth was 11.9% on a reported basis or 11.7% on a daily constant currency basis, driven by strong volume growth and healthy price contribution, benefiting from project-based spend. Gross profit margin finished at 41.8%, up 80 bps YoY, driven by AIFA tariff refunds and slightly positive mix, though mix was less favorable than expected due to higher volume of lower-margin products and project-related spend. Private label cost headwinds and unfavorable freight partially offset gains. Operating margin was up 70 bps versus the prior year. MRO market demand: continued to improveBroad-based acceleration across nearly all customer groupsStrong contributions from manufacturing and government sectorsOutsized growth in contractor and retail end markets (data center activities)	—	11.7%	—	17.3%
Endless Assortment Sales increased 13.5% on a reported basis or 20.6% on a daily organic constant currency basis, normalizing for the closure of Zoro U.K. and depreciated Japanese yen. Zoro U.S. saw strong growth from core B2B customers and improved customer retention. MonotaRO achieved strong sales with continued growth from enterprise customers and solid acquisition/repeat purchase rates from SMBs, benefiting from a pre-buy ahead of anticipated shortages due to the Middle East conflict, which has now subsided. Operating margins increased by 160 bps, with MonotaRO margins at 14% (up 80 bps) and Zoro margins at 7.6% (up 180 bps), both benefiting from healthy top-line leverage. Zoro U.S. daily sales growth: 18.4%MonotaRO local currency growth: 24%MonotaRO pre-buy impact: ~$45M (petroleum-related products)Higher customer retention rates (Zoro)	—	20.6%	—	11.5%

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.

Risks & headwinds

Mix headwinds from higher volume of lower-margin products and project-related spend Q2 FY26, expected to continue in H2 FY26

Impacted gross margin, less favorable mix than expected.

Mitigation:Focus on overall profitability, as these projects have strong contribution margins.

Private label cost headwinds and unfavorable freight costs Q2 FY26, expected to continue

Impacted High Touch gross margin.

Mitigation:September pricing actions to recover freight costs; private brand strategy with Grainger branded items.

Inflationary pressures from rising freight and Middle East-related product costs Ongoing, addressed by September pricing

Expected to take additional pricing actions in September.

Mitigation:September pricing actions to maintain price-cost neutrality and address known cost increases.

MonotaRO pre-buy benefit subsiding, leading to slower growth H2 FY26

~$45 million pre-buy in Q2 FY26.

Mitigation:Reflected in updated guidance for slower growth in the back half of the year.

Operating margins expected to be down sequentially in Q3 FY26 Q3 FY26

Mid-15% range for total company in Q3.

Mitigation:Primarily due to the lap of tariff refunds, not a fundamental business issue; expected to pick up with stronger supplier rebates by year-end.

What to watch in Q3 FY26

Full-year Daily Organic Constant Currency Sales Growth

Next quarter (Q3 FY26 results)

Current 13.7% (Q2 actual)

Target 11.5% to 13% (FY26 guide)

Why it matters

To assess if the company maintains strong sales momentum and achieves its raised full-year target, especially with moderating MonotaRO growth and project-related tailwinds.

We are raising our guidance to reflect the strong sales momentum, along with the impact of tariff refunds. On the top line, this translates to expected daily organic constant currency sales growth between 11.5% and 13%...

Find out whether GWW delivers this. Inve re-checks your case every morning.

Q&A highlights

Clarification on remaining tariff refund benefits in Q3/Q4 and the offsetting factors that led to a smaller full-year gross margin raise despite the Q2 refund impact.

The vast majority of tariff refunds were booked in Q2, with immaterial amounts expected in H2. The full-year gross margin benefit from tariffs (23 bps) is largely offset by mix headwinds (higher volume of lower-margin project sales) and continued freight/Middle East-related cost pressures, leading to a net 15 bps benefit.

“If you look at it on a full year basis, the tariff refunds account for, call it, 23 basis points on the year. That was offset by what you hear us talk about higher volume on lower gross margin products or project-based sales that we're incurring with some of our new large customers as we ramp. That offsets that. So that nets to about 15 basis points.”

asked by David Manthey · answered by Deidra Merriwether

2 min read 7 chapters

Detailed narrative

Strong Q2 Performance and Market Demand

Grainger reported strong Q2 FY26 results with total sales up 10.3% (13.7% daily organic constant currency) and diluted EPS up over 20% to $12.01. The company observed continued strength in demand across most end markets, with broad-based acceleration in manufacturing and government sectors, and outsized growth in contractor and retail end markets, particularly benefiting from data center activities.

Gross Margin Dynamics and Tariff Refunds

Gross margin was 39.5%, up 100 bps YoY, benefiting from a 90 bps tailwind from EPA tariff refunds. However, mix (higher volume of lower-margin products and project-related spend) and private label cost headwinds, along with unfavorable freight costs, partially offset these gains. The majority of the $43 million tariff refund was recognized in Q2, with a small remainder expected in subsequent quarters.

Pricing Strategy and Inflationary Pressures

Management maintains a strategy of price-cost neutrality. May pricing actions were net neutral, but September pricing actions are planned to address ongoing inflationary pressures from rising freight and Middle East-related product costs, as well as minor adjustments for Section 232 and 301 tariffs. These actions are expected to add about 1 point to annual pricing, bringing full-year price contribution to around 4%.

Segment Performance Highlights

High Touch Solutions delivered 11.7% daily constant currency sales growth, driven by volume and price, with operating margin at 17.3% (up 70 bps). Endless Assortment sales grew 20.6% daily organic constant currency, with Zoro U.S. up 18.4% and MonotaRO up 24% in local currency. Endless Assortment operating margins increased 160 bps to 11.5%.

MonotaRO Pre-buy and Outlook

MonotaRO experienced a pre-buy of approximately $45 million in petroleum-related products due to anticipated shortages from the Middle East conflict. This behavior has subsided, and the updated guidance reflects slower growth for MonotaRO in the second half as this benefit moderates. No pre-buy activity was observed in the U.S. or for Zoro.

Data Center Impact on Growth

While direct exposure to data centers is less than 1% of revenue, the company sees a broader ecosystem impact, showing up in construction and general manufacturing strength. Project spend, partly driven by data centers, increased the High Touch growth rate by about 90 basis points this year, contributing to revenue tailwinds but also gross margin headwinds due to lower-margin project sales.

CFO Transition

Deidra Merriwether will step down as CFO effective September 4, 2026, to pursue another opportunity. Laurie Thompson, VP Controller and Principal Accounting Officer, has been appointed interim CFO effective September 5. A search for a permanent CFO will commence immediately, with management expressing confidence in the interim leadership.

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