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    GWW
    Earnings call· Dec 2025(Q4 FY25)

    W.W. GRAINGER Q4 FY25 earnings call GWW

    Feb 3, 2026 Source

    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

    5

    • 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

    4

    • 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

    20
    CategoryTargetConfidence
    Total company revenue
    $18.7 billion to $19.1 billion
    high materiality
    High
    Total company daily organic constant currency sales growth
    6.5% to 9%
    high materiality
    High
    High-Touch Solutions daily constant currency sales growth
    5% to 7.5%
    medium materiality
    High
    High-Touch Solutions MRO market volume
    down 1.5% to flat
    medium materiality
    Medium
    High-Touch Solutions outgrowth
    at or below our long-term target range
    medium materiality
    Medium
    Endless Assortment daily organic constant currency sales growth
    12.5% to 15%
    medium materiality
    High
    Zoro sales growth
    low teens
    low materiality
    High
    MonotaRO sales growth
    low teens
    low materiality
    High
    Total company operating margins
    15.4% and 15.9%
    high materiality
    High
    High-Touch Solutions operating margins
    16.9% and 17.4%
    medium materiality
    High
    Endless Assortment operating margins
    10% to 10.5%
    medium materiality
    High
    Operating cash flow
    $2.1 billion to $2.3 billion
    high materiality
    High
    Capital expenditures
    $550 million to $650 million
    medium materiality
    High
    Annual dividend increases
    high single to low double-digit
    medium materiality
    High
    Share repurchases
    around $1 billion
    high materiality
    High
    Effective tax rate
    roughly 25%
    low materiality
    High
    EPS
    $42.25 to $44.75 per share
    high materiality
    High
    Q1 FY26 sales
    around $4.5 billion to $4.6 billion
    medium materiality
    High
    Q1 FY26 daily organic constant currency sales growth
    north of 7.5%
    medium materiality
    High
    Q1 FY26 operating margins
    just north of 15%
    medium materiality
    High

    Segment performance

    8
    SegmentRevenueYoYQoQMargin
    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 billion4.5%—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%

    Operational metrics

    8
    Capital returned to shareholders
    $1.5 billion
    FY25

    Amount returned to shareholders through dividends and share repurchases in FY25.

    ROIC
    39.1%
    FY25

    Return on invested capital for the full year 2025.

    Net assortment growth
    85,000 SKUs
    2025

    Largest net SKU growth for the High-Touch segment in nearly a decade.

    New sellers added
    110
    2025

    New sellers added across two geographies in 2025, part of a broader program expansion.

    High-Touch Solutions U.S. volume growth
    1.4%
    FY25

    Volume growth for the High-Touch Solutions U.S. business in FY25.

    Multifactor MRO model market volume
    down 1.5% to 0.5%
    FY25

    Estimated MRO market volume based on the multifactor model for FY25.

    Total company daily organic constant currency sales growth
    >10%
    January

    Preliminary sales growth for January, off to a strong start.

    Price contribution to revenue
    >3%
    FY26

    Meaningful price contribution expected for full-year 2026, including wrap of 2025 actions and incremental price.

    Industry KPIs

    7
    MetricValueDetails
    Daily sales rate4.9%%
    End market growth mix—
    ROIC capital intensity39.1%%
    Price realization vs cost~3 pointspoints
    Market volume mro market benchmarkdown 1.5% to 0.5%%
    Contract vs spot large customer mix25%%
    Digital vending managed inventory penetration40%%

    Product announcements

    3
    ProductTypeDetails
    Factory Automation Productsexpansion
    Data Center Offeringsexpansion
    Zoro branded private label productslaunch

    Deals & partnerships

    2
    Cromwelldivestiture

    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

    3
    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 Centerunderway

    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

    9
    Macroeconomic uncertainty and challenging environment2025, ongoing into 2026

    Not quantified

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

    Shifting tariff dynamics2025, 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 demand2025, 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 salesQ4 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 costsQ4 FY25

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

    Mitigation: Partially offset by productivity efforts.

    LIFO inventory valuation headwindsQ4 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 AssortmentOngoing (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 changesFY26

    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 dynamicsFY26

    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

    7

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.