Could you provide an update on the share of order origination from digital channels like KeepStock, website, and EDI/ePro?

Direct connections to customers have increased their share. EDI/ePro is now the largest share, closer to 40%, with G-com still significant and KeepStock also growing as a percentage of the total. “So actually, EDI/ePro is the biggest share we have at this point, closer to 40% at this point. G-com is still a big part of that and then KeepStock has grown a little bit as well as a percentage of the total.”

What is the tone of conversations with large customers, especially in rate-sensitive markets, and what is driving the acceleration in the medium customer segment?

The tone with large customers hasn't changed much; no panic, but no enormous volume tailwinds, with very industry-specific sentiment. Medium customer acceleration is partly due to comps and focused marketing/merchandising efforts, but not a huge inflection point. “I think the tone hasn't changed too much. There's no -- I'd say there's no panic, but there's not really enormous tailwinds that people are seeing from a volume perspective.”

What drove the better-than-expected gross margins in Q4, and why are Q1 gross margins expected to be down sequentially?

Q4 gross margin upside was mainly due to LIFO headwinds being softer than expected and continued price actions. Q1 sequential decline is attributed to LIFO costs shifting into Q1, the Grainger Sales Meeting impacting supplier rebates, and a modest headwind from private label competitiveness due to tariffs. “The main headwind that we received in the quarter was really related to LIFO. So we had kind of laid out that LIFO would be a little bit more negative than what it actually came in, still increase but softer than that.”

GWW

W.W. Grainger (GWW) Q4 FY25 earnings call: guidance and Q&A

Q: Given strong January growth and similar market backdrop to 2025, what drives the cautiousness in the 2026 guidance for High-Touch Solutions?

Management plans conservatively, noting that while January was strong, it included a tailwind from a competitor outage in Japan. They are confident in the 7.5% Q1 sales growth, but market growth remains a variable. “As we planned, we always start planning relatively conservatively. We try to. There's no advantage in planning for growth that we haven't seen yet.”

Earnings call· Dec 2025 (Q4 FY25)· Industrials· Feb 3, 2026

Source: earnings call transcript

Executive summary

W.W. Grainger Q4 FY25 — Strong Sales Growth and Strategic Execution

W.W. Grainger delivered solid Q4 FY25 results, capping a year of strategic execution and share gains across both High-Touch Solutions and Endless Assortment segments, despite macroeconomic headwinds. The company is leveraging technology and AI to enhance customer experience and drive efficiency, while investing in supply chain capacity. Management anticipates continued growth and margin expansion in FY26, supported by strategic initiatives and disciplined capital allocation.

Highlights

Total company sales grew 4.9% on a daily organic constant currency basis to $17.9 billion for FY25.
High-Touch Solutions U.S. business achieved ~250 basis points of outgrowth on a volume basis for FY25.
Endless Assortment segment daily organic constant currency sales increased 15.6% for FY25.
Operating cash flow reached $2 billion in FY25, enabling $1.5 billion in shareholder returns.
Total company operating margin finished at 15% for FY25, demonstrating strong management.

Concerns

Total company operating margins declined 70 basis points year-over-year in Q4 FY25 due to higher SG&A and softer High-Touch Solutions top line.
High-Touch Solutions segment operating margin decreased 120 basis points to 15.8% in Q4 FY25.
Price/cost on a LIFO basis remained negative in Q4 FY25, though it improved sequentially.
Adjusted EPS growth for FY25 was modest at 1.3%, reaching $39.48 per share.

Guidance & targets

Category	Target	Timeline	Confidence
Total company revenue	$18.7 billion to $19.1 billion high materiality	FY26	High
Total company daily organic constant currency sales growth	6.5% to 9% high materiality	FY26	High
High-Touch Solutions daily constant currency sales growth	5% to 7.5% medium materiality	FY26	High
High-Touch Solutions MRO market volume	down 1.5% to flat medium materiality	FY26	Medium
High-Touch Solutions outgrowth	at or below our long-term target range medium materiality	FY26	Medium
Endless Assortment daily organic constant currency sales growth	12.5% to 15% medium materiality	FY26	High
Zoro sales growth	low teens low materiality	FY26	High
MonotaRO sales growth	low teens low materiality	FY26	High
Total company operating margins	15.4% and 15.9% high materiality	FY26	High
High-Touch Solutions operating margins	16.9% and 17.4% medium materiality	FY26	High
Endless Assortment operating margins	10% to 10.5% medium materiality	FY26	High
Operating cash flow	$2.1 billion to $2.3 billion high materiality	FY26	High
Capital expenditures	$550 million to $650 million medium materiality	FY26	High
Annual dividend increases	high single to low double-digit medium materiality	FY26	High
Share repurchases	around $1 billion high materiality	FY26	High
Effective tax rate	roughly 25% low materiality	FY26	High
EPS	$42.25 to $44.75 per share high materiality	FY26	High
Q1 FY26 sales	around $4.5 billion to $4.6 billion medium materiality	Q1 · FY26	High
Q1 FY26 daily organic constant currency sales growth	north of 7.5% medium materiality	Q1 · FY26	High
Q1 FY26 operating margins	just north of 15% medium materiality	Q1 · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Total Company Q4 FY25 daily sales growth was 4.5% reported, or 4.6% daily organic constant currency. Operating margins were down 70 basis points year-over-year. Diluted EPS was $9.44, down 2.8% versus Q4 2024. Daily organic constant currency sales growth: 4.6%Diluted EPS: $9.44	—	4.5%	—	14.3%
Total Company FY25 total sales were $17.9 billion, up 4.5% reported or 4.9% daily organic constant currency. Operating margin finished at 15%. Adjusted EPS grew 1.3% to $39.48 per share. ROIC was 39.1% and operating cash flow was $2 billion. Daily organic constant currency sales growth: 4.9%Adjusted EPS growth: 1.3%Adjusted EPS: $39.48 per shareROIC: 39.1%Operating cash flow: $2 billion	$17.9 billion	4.5%	—	15%
High-Touch Solutions Q4 FY25 sales grew 2.2% reported, or 2.1% daily constant currency, including nearly 3 points of price inflation. Gross margin was 42.3%, flat versus prior year. Operating margin finished at 15.8%, down 120 basis points year-over-year. Daily constant currency sales growth: 2.1%Price inflation: ~3 pointsGross margin: 42.3%	—	2.2%	—	15.8%
High-Touch Solutions U.S. For full-year 2025, the U.S. business achieved roughly 250 basis points of outgrowth on a volume basis. Outgrowth on a volume basis: ~250 basis points	—	—	—	—
Endless Assortment Q4 FY25 sales increased 14.3% reported, or 15.7% daily organic constant currency. Operating margins increased by 200 basis points to 10.6%. Daily organic constant currency sales growth: 15.7%	—	14.3%	—	10.6%
Endless Assortment For full-year 2025, daily organic constant currency sales were up 15.6%.	—	15.6%	—	—
Zoro U.S. Q4 FY25 sales were up 16%. Operating margins improved to 6.3%, up 260 basis points.	—	16%	—	6.3%
MonotaRO Q4 FY25 sales achieved 18.4% growth in local days local constant currency. Operating margins remained strong at 13.6%, up 100 basis points. FY25 saw 25% growth with enterprise customers. Growth with enterprise customers: 25%	—	18.4%	—	13.6%

GWW operating KPIs by quarter

GWW operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2024 Q4 FY24	This call 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.

Product announcements

Product	Type	Timeline
Factory Automation Products	expansion	—
Data Center Offerings	expansion	—
Zoro branded private label products	launch	—

Deals & partnerships

Cromwell divestiture

Grainger streamlined its portfolio by exiting the U.K. market, including the Cromwell divestiture.

Zoro U.K. divestiture

Grainger streamlined its portfolio by exiting the U.K. market, including the closure of Zoro U.K.

Capital programs

Northwest DC (Portland) underway

Benefit:Improve service and reduce transportation costs throughout the Northwest

New distribution center located outside of Portland, set to start full outbound operations later in 2026.

Houston Distribution Center underway

Progress continues on the Houston DC, with inbound operations expected to begin in the second half of 2027, and outbound a few quarters later.

MonotaRO Mito DC (Japan) underway

Benefit:Nearly double shipping capacity in Japan

New highly-automated distribution center in Mito, Japan, scheduled to open in 2028, which will nearly double MonotaRO's shipping capacity in the country.

Risks & headwinds

Macroeconomic uncertainty and challenging environment 2025, ongoing into 2026

Not quantified

Mitigation:Execution against strategy, leveraging technology, investing in supply chain capacity.

Shifting tariff dynamics 2025, ongoing into 2026

Caused LIFO inventory valuation headwinds; required price increases

Mitigation:Active dialogue with supplier partners, modest price increases in November 2025, further price actions in January 2026, agile response to fluid situation.

Soft MRO market demand 2025, expected to continue in 2026

Not quantified, but market modeled to be down 1.5% to flat for FY26

Mitigation:Continued share gain from High-Touch Solutions U.S. business, reaccelerating growth drivers, strategic investments.

Government shutdown impact on sales Q4 FY25

Caused softness in Q4 FY25; normalized sales would have been up ~6.5% for total company and ~4.5% for High-Touch segment

Mitigation:Not explicitly stated, but impact is recognized and normalized for analysis.

Increased SG&A expense due to unforeseen health care costs Q4 FY25

Contributed to 70 bps YoY operating margin decline for total company in Q4 FY25

Mitigation:Partially offset by productivity efforts.

LIFO inventory valuation headwinds Q4 FY25, Q1 FY26, subsiding in H2 FY26

Caused gross margin pressure in Q4 FY25 and expected in Q1 FY26

Mitigation:Price/cost normalization, LIFO headwinds expected to subside in the back half of 2026.

Segment mix headwinds from faster-growing Endless Assortment Ongoing (FY25 to FY26)

10 basis points headwind for total company operating margin year-over-year (FY25 to FY26)

Mitigation:Not explicitly stated as mitigated, but recognized as a factor in margin expectations.

Impact of recent federal tax law changes FY26

130 basis points unfavorable versus prior year adjusted rate for FY26 effective tax rate

Mitigation:Not explicitly stated, but factored into tax rate guidance.

Private label portfolio competitiveness due to tariff dynamics FY26

Modest headwind for High-Touch Solutions gross margin in FY26

Mitigation:Customers transitioning to national brands for certain SKUs; company aims to maintain competitive pricing.

Q&A highlights

Given strong January growth and similar market backdrop to 2025, what drives the cautiousness in the 2026 guidance for High-Touch Solutions?

Management plans conservatively, noting that while January was strong, it included a tailwind from a competitor outage in Japan. They are confident in the 7.5% Q1 sales growth, but market growth remains a variable.

“As we planned, we always start planning relatively conservatively. We try to. There's no advantage in planning for growth that we haven't seen yet.”

asked by David Manthey · answered by Donald Macpherson

2 min read 5 chapters

Detailed narrative

Strategic Growth Engines & AI Integration

Grainger made significant progress across its five strategic growth engines in 2025, including merchandising, marketing, seller coverage, seller effectiveness, and value-added services like KeepStock. Merchandising efforts led to a net assortment growth of over 85,000 SKUs, the largest in nearly a decade for the High-Touch segment, with expansion into data center and factory automation products.

The company added 110 new sellers in 2025, bringing the total program expansion to over 300 sellers since 2022. AI and machine learning are increasingly leveraged to optimize marketing investment, improve seller effectiveness through a new insights platform, and enhance customer experience in KeepStock.

Endless Assortment Segment Momentum

The Endless Assortment segment demonstrated strong performance in 2025, with daily organic constant currency sales up 15.6%. Zoro U.S. reaccelerated sales growth into the high teens for the full year by focusing on improved repeat purchase rates, optimizing assortment for delivery times, and enhancing direct marketing capabilities.

MonotaRO continued its strong execution, achieving 25% growth with enterprise customers and expanding distribution capabilities with same-day shipping to new regions, alongside planning for a new highly-automated DC in Mito.

Supply Chain Capacity Investments

Grainger is extending its industry-leading distribution network with significant investments in new facilities. The Northwest DC near Portland is set to begin full outbound operations later in 2026, improving service and reducing transportation costs. The Houston distribution center expects inbound operations to start in the second half of 2027, with outbound following a few quarters later.

In Japan, MonotaRO's new highly-automated Mito DC, scheduled to open in 2028, will nearly double its shipping capacity in the country, reinforcing customer fulfillment capabilities.

Transition to Multifactor MRO Market Model

Grainger has transitioned from a single-factor to a multifactor MRO market model to measure its outgrowth progress, citing a sustained period of dislocation between the single-factor model and on-the-ground customer observations. The new model, developed after testing over 1,000 economic indicators, incorporates various supply and demand factors like net core capital good shipments, import/export dynamics, and end-user activity.

This comprehensive approach is believed to more accurately reflect market performance, especially during economic disruptions, and showed a stronger correlation to underlying MRO product consumption data.

Tariff Dynamics and Price/Cost Management

The company continued to navigate shifting tariff dynamics and cost pressures in 2025. Modest price increases were implemented in November 2025, building on earlier actions in May and September, to offset tariff-related costs. Further price adjustments were made in January 2026 to catch up on delayed tariff inflation and annual supplier cost increases, net of a partial rollback on certain Chinese tariffs.

Management aims for price/cost neutrality over time, despite LIFO inventory valuation headwinds, and remains agile in responding to the fluid tariff situation.

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