Fortune partnered with Great Place to Work to analyze survey feedback representing more than 60,000 U.S. employees.

GPTW_100BestCompaniesToWorkForByRegion_2026-Chicago_Large-W.W._Grainger,_Inc._US1__69b3fd4d5504e0abfadc0515_3

Employees say:"Grainger actually works and lives by our principles: Start with the customer, embrace curiosity, act with intent, compete with urgency, win as one team, invest in our success and do the right thing. &nbsp;They come together to support one another, even those we've never met. &nbsp;I've loved working for this company for over 16 years and hope to remain with the company throughout my professional career."

Best Large Workplaces in Chicago

With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

The 300 companies on this year’s list brought in over $12.5 trillion in revenue for the latest 12 months, with the median revenue figure at $24 billion.

America's Most Innovative Companies

AI is a major force shaping this year’s list—but it’s far from the only story.

World's Most Admired Companies

This year's 100 Best Companies to Work For are rebuilding the social contract at work so people feel supported, trusted, and future-ready as they undergo that transition.

DEI-BRG

Employees say:"Our CEO not only lives our core principles but ensures that we hold strong to those principles no matter the political or economic climate. I have worked for corporate companies prior to Grainger, and the overall feeling of connectiveness to each other, to community, and to self, is one that I had not experienced prior. I feel at home with Grainger."

Fortune 100 Best Companies to Work For

The companies on this annual list make a conscious effort to be supportive, inclusive workplaces.

2025 Best Large Workplaces for Women_W.W. Grainger, Inc._US1__68a71dfc383bc91cadd06a7f_6

Employees say:"The team culture is unmatched! Everyone is welcoming, willing to step out of their way to help you, and you can always assume good intent from others. Additionally, our leadership strongly values the differences of its team members—above and beyond anything I've seen from other organizations—by ensuring an open space for them to be themselves at work and celebrate the things that make them unique and special."

100 Best Large Workplaces for Women

Fortune partnered with Great Place to Work to analyze survey feedback representing nearly 62,000 U.S. employees.

Best Workplaces_Chicago_Large_2025-Grainger_US1__67fd6226d94556dd4465c985_2

Employees say:"For me Grainger is an amazing place to work. I can honestly say that both my team and manager care about me, they want to see me succeed at work and my personal life. My team is like an extension of my family. There are so many opportunities for employees here at Grainger—you can move up, move over, or move around to find that position that works best for you. My job/career means a lot to me, and this is where I plan to work until I retire. I tell my friends and family how great it is here and if they are ever looking for a new career/job to come work here because they will also love it as much as I do."

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

Leaders in all industries rely more than ever on Big Tech—and appreciate the giants that deliver, at scale, without drama.

Fortune partners with global people analytics firm Great Place to Work to analyze survey feedback representing employees from companies across the U.S.

GPTW-Millennials-Large-2024-Grainger

Employees say:"Our culture is one that is very special and not like other places I've worked. From our opportunities for advancement, a culture of recognition, individual team cultures, the collaborative nature, the focus on DEI, BRG involvement, and volunteer opportunities, it's my home."

100 Best Large Workplaces for Millennials

Industries included in the sector are diversified, electronics, and food and grocery.

Fortune Sector Leaders: Wholesalers

Fortune partnered with Great Place to Work to analyze survey feedback representing nearly 50,000 U.S. employees.

GPTW 2024 Chicago Large-Grainger_US1__20240410151431_3

Employees say: "Everyone here makes you feel like you are family - This is something the other companies "try" to achieve but Grainger makes it happen from the get-go. I am VERY proud and blessed to be working with my Grainger Family."

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

Creating a more empathetic workplace looks like staying loyal to workers, emphasizing D&I initiatives, and paying well.

100 Best Companies 2024-Grainger

Grainger is the country’s leading distributor of maintenance, repair, and supplies for industries like hardware, lighting, and plumbing. Established in 1927, the company now operates the 11th largest online e-commerce site by revenue. &nbsp;Grainger is building two new distribution centers in the U.S., and is adding 3.5 million square feet to its supply chain network for a more than 35% increase in overall warehouse space. &nbsp;In 2022, the company trained all of its team members in a DEI learning course, focusing on unconscious bias and how it emerges in day-to-day work. It aims to have half of its senior leadership roles filled by women by 2030. Currently, its CEO’s leadership team is 43% women while 29% is racially diverse.&nbsp;

The 26th edition of the list shows how much esteem Big Tech giants command among other business leaders.

The 25th Fortune World’s Most Admired Companies list suggests that tech giants’ peers respect them as much as ever.

Building a culture of trust and transparency is essential to help everyone thrive, especially in rocky economic times.

100 BEST COMPANIES 2023-Grainger

This long-standing industrial supply company is adapting to the changing times with an emphasis on diversity. 
<ul> 
 	<li>In the last year, Grainger implemented a technology tool to remove noninclusive language from over 400 job postings; after the revisions went live, the pool of female applicants increased by 15%.</li> 
 	<li>A mandatory e-learning course for leaders tackles unconscious bias, including how it may emerge in day-to-day work and behaviors for managing it.</li> 
 	<li>Senior leadership values transparency, holding monthly calls with all employees to address questions ranging from business operations questions to U.S. Supreme Court decisions to employee compensation.</li> 
 	<li>“Every team member I have encountered during my time at Grainger so far is caring and willing to help each individual succeed,” said one worker. “You are welcomed with open arms, work together as one team, and [colleagues are] willing to help you develop professionally and personally.”</li> 
</ul>

The 300 companies on this list are transforming industries from the inside out.

GPTW Chicago 2023-Grainger

Employees say: 
 
"Grainger does a fantastic job of making sure everybody is able to show up as their true selves. There are multiple BRGs that people can join to feel more connected and informed. Grainger also does a really awesome job of supporting individuals' desires to grow professionally, and offers numerous courses that you can take to grow in your skillset while gaining new knowledge."

GPTW Women 2023-Grainger

Employees say: 
 
"Grainger is the best company I've ever worked for. They go above and beyond to be inclusive to all of our team members. They genuinely seek out feedback from their team members and actually take action on that feedback whenever possible. We're provided more benefits than most other companies and are also paid fairly for the work we do."

Fortune partnered with Great Place to Work to analyze survey feedback representing nearly half a million U.S. employees.

GPTW Millennial Large 2023-Grainger

Employees say: 
 
"Senior leadership invests a lot of time in being transparent about the company’s direction. They strive to foster an inclusive environment, and they genuinely care about the employees. This culture has led to a stronger frontline leadership team. That makes all the difference in wanting to remain with Grainger and knowing it is a great place to work!"

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

Just as it dominates our economy, Big Tech now dominates Fortune’s annual ranking of corporate reputation.

When it comes to supporting employees, flexibility, diversity, and a few extra paid days off go a long way.

100-Best-2022-Grainger

This industrial supplies company has appeared on the Best Companies list five times thanks to its emphasis on employee training and its focus on corporate inclusivity. From each team member’s first day, Grainger offers a variety of professional learning opportunities, skills training courses, and leadership programs. Employees spent an average of six hours last year on these supplemental trainings. “I feel that the company never lacks development opportunities,” says one staffer. “It is a main focus of every manager I have worked with so far, having been offered the opportunity to participate in classes and get involved with projects that align to my interests.” Additionally, the company is invested in its diversity efforts, conducting pay equity audits each year and aiming for 50% of its leadership team to be women by 2030.

Winning workplaces in Chicagoland earned high marks from employees when it comes to leadership.

GPTW Chicago Large 2022-Grainger

Employees say: 
 
“They provide tremendous resources that encourage growth and development—leaders want us to succeed. The company authentically celebrates and champions diversity, inclusion, and equality. The company also memorialized a 10-year commitment to reduce greenhouse gas emissions.” 
 
Read the Great Place to Work review .

GPTW Women 2022-Grainger

Employees say: 
 
“Grainger is unique in that it celebrates all of its employees, all the way from the CEO to the warehouse team members. Everybody is represented and respected here. The pay is above average, not just for the industry but in general. The benefits offered are excellent and add great value to working here. Grainger values talent and ideas at all levels and in my experience has made great strides in growing based on ideas from Team Members or management. There is a great potential for growth within Grainger and I would highly recommend it to anyone looking for a career to grow into.”

This year’s Fortune 500 marks the 68th running of the list.

After a year in which humanity leaned more heavily than ever on tech giants, see which companies topped Fortune's ranking of corporate reputation.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-258-W.W. Grainger

Typically selling to other businesses rather than retail, the supply company sells industrial tools and equipment for heavy machinery, plumbing, tools, and other business needs.

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-278-WW-Grainger

The industrial supply company distributes maintenance, repair, and operating equipment to businesses around the world.

Here are the World's Most Admired Companies for 2019 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 65th running of the list.

Here are the World's Most Admired Companies for 2018 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 64th running of the list.

Here are the World's Most Admired Companies for 2017 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 63rd running of the list.

Here are the World's Most Admired Companies for 2016 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 62nd running of the list.

Business insiders have spoken: Asked which companies they most admire, more than 4,100 executives, directors, and analysts chose these top 50 All-Stars.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Best Companies

Rank last year

Years on list

U.S. employees

U.S. job openings

Year founded

Benefits

Subsidized childcare

Compressed work weeks

Option to work remotely

Minimum requirement in-office attendance (days per week)

Mental health coverage

Free mental health sessions (per year)

Free backup childcare time off (days)

Maximum $ amount covered for fertility services

Fully paid maternal leave (days)

Fully paid paternal leave (days)

Fully paid adoptive leave (days)

Maternal leave in addition to regular time off (days)

Paid days off for volunteering

Best Workplaces For Women

Industry Vertical

Founded

# Work Sites

Sector

Industry

Current All-Star Rank

Previous All-Star Rank

Industry Rank

Previous Industry Rank

Overall Score

Innovation

People Management

Use of Corporate Assets

Social Responsibility

Quality of Management

Financial Soundness

Long-Term Investment Value

Quality of Products/Services

Global Competitiveness

Strongest Dimension

Previous rank

State

Key Financials (last Fiscal Year)

Revenues ($M)

Profits ($M)

Assets ($M)

Total Stockholder Equity ($M)

Profit Ratios

Profit as % of Revenues

Profits as % of Assets

Profits as % of Stockholder Equity

Earnings Per Share (last Fiscal Year)

Earnings Per Share ($)

EPS % Change (from prior fiscal year)

EPS % Change (5 year annual rate)

EPS % Change (10 year annual rate)

Total Return

Total Return to Investors (last year)

Total Return to Investors (5 year, annualized)

Total Return to Investors (10 year, annualized)

Best Workplaces In Chicago

Sites

Grainger is an industrial-supply distribution company, focused on safety, security, and storage equipment, along with cleaning, metalworking, and hand tools. As of 2025, it offers over 30 million products to some 4.5 million customers worldwide, but its services are primarily in North America, Japan, and the United Kingdom. The company was founded in 1927.

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Q2 2025

Q1 2025

Q4 2024

W.W. Grainger (GWW): Company Profile, Stock Price, News, Rankings

legacy

W.W. Grainger

w.w. grainger

Greetings, welcome to the W.W. Grainger second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Kyle Bland, Vice President and Investor Relations. Thank you. You may begin.

Good morning. Welcome to Grainger's second quarter 2026 earnings call. With me are D.G. Macpherson, Chairman and CEO, and Dee Merriwether, Senior Vice President and CFO. As a reminder, some of our comments today may include forward-looking statements that are subject to various risks and uncertainties. Additional information regarding factors that could cause actual results to differ materially is included in the company's most recent Form 8-K and other periodic reports filed with the SEC. This morning's call includes non-GAAP financial measures, which reflect certain adjustments in previous periods as noted in the presentation. There were no adjusting items in the second quarter of 2026 period. We have also included organic revenue adjustments in the presentation, which normalize sales growth to reflect our exit from the U.K. market, including the Cromwell divestiture and the closure of Zoro U.K., both of which were completed in the fourth quarter of 2025.

Definitions and full reconciliations of our non-GAAP financial measures with their corresponding GAAP measures are found in the tables at the end of this presentation and in our earnings release, both of which are available on our IR website. We will also share results related to MonotaRO. Please remember that MonotaRO is a public company and follows Japanese GAAP, which differs from U.S. GAAP and is reported in our results one month in arrears. As a result, the numbers discussed will differ from MonotaRO's public statements. Now I'll turn it over to D.G.

Thanks, Kyle. Good morning, everyone, thanks for joining today. Building on our momentum from the start of the year, we delivered strong performance in the second quarter by executing well and delivering exceptional service to customers. Despite ongoing uncertainty, sales remained strong in both the High-Touch and Endless Assortment segments, and core operating profitability was in line with expectations. While the external landscape remains fluid, we're confident in our ability to manage the impact while remaining committed to our pricing tenets. We also saw continued strength in demand environment during the period, with most end markets showing acceleration. As I spend time with customers, I can see this playing out in the way we serve them on-site and inside their operations. Recently, I visited several manufacturing customers where our teams are closely connected to the day-to-day work.

We're helping them manage inventory in ways that fit their specific needs, and that is contributing to strong year-over-year growth at these locations. More and more customers are asking us to help them run their operations more efficiently and solve specific challenges, including areas like safety. With one customer, our safety expertise was the catalyst for accelerating that partnership. We're also seeing solid growth from our national accounts in both the U.S. and Canada. On Canada specifically, we have seen tremendous improvement over the past several years as a team to stay focused on two things: serving customers well and building a stronger, more profitable business. They've made great progress improving service, resetting their sales force, and revamping their website, while also diversifying their customer end markets and product offering.

These efforts have driven strong sales growth and operating margin recovery to the highest levels we have seen in nearly a decade. Now turning to our second quarter results. We delivered another quarter of strong growth and profitability. Results benefited from ongoing operational execution across both segments and an improving market, which helped accelerate volume growth in the period. We are pleased with what we are seeing from our High-Touch growth engine and from our efforts within the EA segment to continue propelling the flywheel. Total company reported sales for the quarter were up 10.3%, or 13.7% on a daily organic constant currency basis. Operating margin was strong at 16.1%, and diluted EPS finished the quarter up over 20% inclusive of the impact of IEEPA tariff refunds recognized in the period.

Operating cash flow came in at $444 million, which allowed us to return a total of $341 million to Grainger shareholders through dividends and share repurchases. Lastly, we are excited to announce that our new Northwest distribution center in Oregon began outbound operations in July. This new technology-enabled building gives us another way to get more of the products customers need closer to where and when they need them. Overall, we're encouraged by the progress we've made across the business. After our strong first half performance and continued momentum, we are increasing our outlook for the year. With that, I'll turn it over to Dee for a closer look at our financials from the quarter.

Thanks, D.G. Turning to slide seven, you can see the high-level results we had in the second quarter with total company sales of 10.3%, or 13.7% on a daily organic constant currency basis, which included strong growth across High-Touch Solutions and Endless Assortment. Growth margin for the quarter was healthy at 39.5%, up 100 basis points versus the prior year period, as we saw expansion in both segments and recognized a 90 basis point tailwind from IEEPA tariff refunds on products directly imported by Grainger. Operating margin was 16.1%, up 120 basis points year over year, as growth margins flow through and leverage in Endless Assortment contributed to results. Both growth margin and operating margin benefited from our exit of the U.K. market.

If you were to normalize for the tariff refund benefit realized in the period, operating margins were in line with our verbal guide, aided by better-than-expected top-line leverage. Overall, results were strong for the quarter, we delivered diluted EPS of $12.01, which was up over 20% versus the prior year period.

Moving to segment level results. The High-Touch Solutions segment delivered sales growth of 11.9% on a reported basis, or 11.7% on a daily constant currency basis. Results were driven by strong volume growth and healthy price contribution to revenue, and also benefited from some project-based spend. From an end market perspective, MRO market demand continued to improve in the period. For Grainger, specifically, we saw broad-based acceleration across nearly all customer groups with strong contributions from manufacturing and government sectors. This was alongside outsized growth in our contractor and retail end markets, which are both benefiting from data center activities as new facilities are stood up. On profitability, gross profit margin finished the quarter at 41.8%, up 80 basis points versus the prior year.

Results were driven by the benefit from IEEPA tariff refunds and slightly positive mix, although mix came in less favorable than expected on a higher volume of lower margin products and project related spend. These impacts were partially offset by private label cost hit wins and unfavorable freight as we absorbed the higher cost in the period. Price cost was roughly neutral during the quarter. On SG&A, we delivered slightly year-over-year as strong sales and productivity were offset by continued marketing investment and higher payroll and benefits expense, including higher incentive-based compensation, given our strong top-line results. Taking all of this together, operating margin for the segment finished at 17.3%, up 70 basis points versus the prior year quarter. All told, we are pleased with the continued strength across the High-Touch segment as we move into the second half of the year.

Now focusing on Endless Assortment segment. Sales increased 13.5% on a reported basis, or 20.6% on a daily organic constant currency basis, which normalizes for the closure of our Zoro U.K. business and adjusts for the impact of the depreciated Japanese yen. Zoro U.S. was up 18.4% on a daily basis, while MonotaRO achieved 24% growth in local days and local constant currency. At a business level, Zoro saw strong growth from its core B2B customers, along with higher customer retention rates as our marketing program, both targeted and efficiency, continued to improve. The team remains focused on delivering our core foundational capabilities to improve the assortment, search experience, pricing, and delivery. At MonotaRO, sales were strong with continued growth from enterprise customers coupled with solid acquisition and repeat purchase rates with small and mid-sized businesses.

Additionally, MonotaRO benefited from customer pre-buying of certain petroleum-related products ahead of anticipated shortages due to the conflict in the Middle East. This behavior has fully subsided, and our updated guide reflects slower growth in the back half of the year as this benefit moderates. On profitability, operating margins increased by 160 basis points to 11.5%, with favorability across the segment. MonotaRO margins were strong at 14% up 80 basis points, and Zoro margins improved to 7.6% up 180 basis points, with both businesses benefiting from healthy top-line leverage. Overall, another great quarter for the Endless Assortment team. As we look to the back half of the year, I want to share a brief update on the inflationary environment. We continue to manage the business with the goal of maintaining price-cost neutrality over time. With ongoing shifts in the tariff environment, we've had to remain nimble.

In the second quarter, we adjusted prices to reflect the changing tariff landscape, including the rollback of IEEPA tariff pricing and offsetting Section 232 tariff impacts. While we made several changes across our assortment, our May pricing actions were net neutral in total. Also in the quarter, we recognized refunds from the federal government for previously paid IEEPA tariffs, where Grainger was the importer of record. The majority of this benefit was recognized during the second quarter as a reduction to our cost of goods sold, with a small remainder expected to flow through over the next couple of quarters. When considering these refunds, it's important to remember that they relate only to tariffs paid directly by Grainger and represent only a small portion of the many tariff costs that we faced over the last year and a half.

Importantly, these refund proceeds and the price pass on these SKUs only partially offset the cost we absorbed in 2025 related to IEEPA. Separately, we continue to face inflationary pressures from rising freight and product costs due to the conflict in the Middle East. As these pressures persist, we expect to take additional pricing actions in September to help mitigate this impact. Our September pricing actions will also reflect adjustments related to the recent Section 232 tariff modifications, in addition to new Section 301 tariffs. Though we anticipate that these tariff-related changes will be minimal. Following our September pricing actions, the majority of known cost increases will have been addressed. And although the situation remains highly fluid, our team continues to stay focused on adhering to our two core pricing tenets, to maintain market-relevant pricing and to achieve price-cost neutrality over time. Turning to our guide.

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%, reflecting our second quarter performance and expectations for continued solid MRO market demand in the second half. Our updated operating margin range has increased versus the prior guide to 15.8%-16.2%. This includes the tariff refund benefit, most of which was recognized in the second quarter, and improved sales leverage, but is partially offset by anticipated mix headwinds and cost timing pressures as inflation builds ahead of our September pricing round. Lastly, rounding out our guide, you can see EPS is expected to be between $45.50 and $47.25, or up over 17% year-over-year at the midpoint.

This represents an improvement of over $1 at the midpoint versus the prior guidance range. We've also updated our supplemental guidance in the appendix, which includes a slight increase in total company operating cash flow at the midpoint compared to the prior guide. We've continued our strong momentum into the third quarter with preliminary July sales up north of 13% on a daily organic constant currency basis. This start supports our expectation for third quarter sales north of $5 billion, or up over 12% on a daily organic constant currency basis, which is 380 basis points lower on a reported basis when normalizing for the U.K. market exit and currency headwinds.

We expect operating margins will be down sequentially in the third quarter compared to the second quarter, largely driven by the lap of tariff refunds. With this, we anticipate third quarter operating margins will be in the mid 15% range for the total company. I'll now hand it back over to D.G. for his closing remarks.

Thanks, Dee. To wrap things up, we feel good about how the business is operating, and we're confident in our strategy. I'm encouraged by our ability to continue growing profitably in this ever-evolving environment while staying focused on creating value over the long term. Before I turn it over to Q&A, I want to take a minute to acknowledge the news we shared yesterday that Dee Merriwether has made the personal decision to step down to pursue another opportunity, effective September 4, 2026. On behalf of the company, I want to thank Dee for her many contributions to Grainger. Dee has been a trusted advisor, guiding us with deep knowledge and sound judgment during her tenure. With this transition, Laurie Thomson, VP, Controller, and Principal Accounting Officer, has been appointed interim CFO, effective September 5th. She will also maintain her existing controllership responsibilities.

Laurie brings strong financial expertise and guidance, and I'm confident in her leadership. The transition has no impact on our day-to-day operations, and Dee and Laurie will partner on a smooth transition over the next couple of weeks. We will begin a search process for the next CFO immediately. We wish Dee all the best in the future, and I look forward to working with Laurie in the interim. With that, we'll open it up for Q&A.

Thank you. At this time, we will conduct the question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Your first question comes from David Manthey with Baird. Please state your question.

Thank you. Good morning, D.G., and Dee, thank you and best of luck. First question is on the refunds, of course. One thing you mentioned in the slide deck, I think you said the majority of refunds are reflected in the second quarter. You didn't say all. I am just wondering if there is any kind of estimate you can give us on third quarter and fourth quarter potential refund benefits there so we can anticipate those.

Again, the vast majority, as we noted, have been accrued for and/or received. In the back half, we think it is going to be fairly immaterial based upon that, and it was very hard to estimate from a quarterly perspective. We focused mostly on what we could estimate and what we felt was probable at this time, and that is what we booked in Q2.

Okay. Thinking about the guidance relative to what you reported this quarter and the benefit from the refund, could you just talk about You mentioned a few of these things. I know we are splitting atoms here. Could you talk about the offsetting factors that caused you to raise full year gross margin by less than the benefit that you got from the second quarter refunds alone?

Sure. You're talking about kind of decomposing the guide a little bit, right? As it relates to gross margins?

If you kind of really just start with where we're at, we noted that the impact in the quarter was about 90 basis points. 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. We see some continued net headwinds as we go through the year, mostly related to fuel and freight related to the crisis. Secondly, we do expect to have less of a mix benefit in the second half. We expect that to have some headwinds. That nets that benefit down that we're receiving from the tariff refunds.

I would just add that I think the mix benefits, oftentimes we see, if you look historically, when we are in really hot market times, big projects come through. We've seen quite a bit of that actually from customers, those tend to be at lower gross margin. They're strong contribution margin. We expect that's a big part of the change actually that we're talking about and a bit of a drag on gross margin, but not on profitability overall. The freight. If you thought about how we managed tariffs last year, we didn't increase price immediately.

We were patient with customers. We started raising them in September substantially, and we got sort of price cost neutral by January. We're actually price cost neutral in the quarter this time, but that same pattern will play out in September. We'll start to recover some of the headwind we're seeing from freight and Middle East products.

Your next question comes from Jacob Levinson with Melius Research. Please state your question.

Hey, good morning everyone. Dee, best of luck in your new role. I appreciate your help over the last couple of years.

Maybe just following up on David's question a little bit. I'm just trying to think about maybe putting a finer point on your pricing actions, because I know there's a lot of moving pieces between product prices going up and down, and I'm sure surcharges in there as well. Can you help us understand where we're going to shake out in the third quarter and into the fourth quarter? Because I'd imagine you're going to be exiting the year at a bit of a higher rate, maybe, than where we are today.

Yeah. Dee talked about the puts and takes of May, and we basically had zero price change overall for May. We had some ups and downs. What we're doing in September will add about a point annually, so less than that, obviously, for the balance of the year, maybe 40 basis points or something like that. For the whole year will be around 4%. We originally said 3%-4%. We're going to be at the high end of that given those increases.

Okay. That's helpful. I guess it was just a matter of time before you mentioned data center as a tailwind for you folks, I'm just trying to get a sense of the materiality of that market over time, because I'm sure there's a construction phase, and then after that, you've got those facilities that are going to be around for a long time. I'm not even sure how you would think about sizing that potential over time. Is that

Let me start with, it shows up in maybe strange places. If you look at our comps at retail, we'll include data centers because some of those companies actually have retail operations, even though the data centers aren't very retail-esque. Our exposure to 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. I think for everybody, it's probably having a bigger impact, because we see it in construction, different types of construction. We maybe see it a little bit in the general strength of manufacturing. It's hard to quantify, though. The direct exposure is pretty small, but the exposure overall is probably bigger than that as far as we can tell.

Helpful color, D.G. I'll pass it on. Thank you.

Your next question comes from Ryan Merkel with William Blair. Please state your question.

Hey, everyone. Thanks for the questions. I want to start on gross margin for the quarter. It looks like ex the tariff refund, it was a little bit below what you guys expected. Was the surprise the fuel and the freight? Maybe you could quantify what that impact was. Then it also sounds like maybe large projects and mix was the other reason.

Yeah. I'd say it's more mix actually than freight, but it's a little bit of both. Both of those were the complete driver of that. The other thing is, arguably, we knew the tariff refunds were coming in. We did not want to get aggressive with freight increases because that doesn't make sense competitively. We're holding that purposely, and we'll make that up as we go through the balance of the year. Mix is the bigger part of it actually with really big projects and product sales.

Interesting. Okay. Thanks for that. SG&A, and I'm focusing on High-Touch, but it didn't lever in the quarter, and it sounds like maybe incentive comp is the main reason there. That's the first part of the question. Should you see better SG&A levers in the second half? It looks like that's implied in the guide, but just want to know how you're thinking about it.

Yeah. Any year when we get the forecast incorrect and the market's stronger than we expect, or we perform better than we expect, we have headwinds in both management bonus and commissions. We also spent more on marketing in the quarter. We're seeing good returns on that. Those are the three SG&A elements that were higher than we would have expected to start the year. None of them are concerning, to be frank. In the back of the year, we expect some moderation in the outsized cost there, and we expect to be more in line.

Got it. All right. Thanks, Best of luck Dee.

Your next question comes from Chris Snyder with Morgan Stanley. Please state your question.

Thank you. I was just hoping for maybe a little bit more color on the sequential bridge from Q1 to Q2, just to better understand some of the moving parts. I guess it was down maybe 140 basis points sequentially, ex, if we adjust out the tariff refund, if my math's right. Just kind of wondering the seasonality on that mix. Anything you could just help us as we think about the recovery opportunity into the back half. Thank you.

Yeah. As it relates to gross margin specifically, we saw normal seasonality from a gross margin perspective related to price running off. As we've talked about, we've had some leakage related to fuel costs. That also was a factor from Q1 gross margin to Q2 as well as additional private label inventory costs. We've had, as D.G. articulated and as we talked about on the call, a lot of moving pieces as it relates to that. That was also a negative impact. As you noted, the tariff refunds were not known at the time. That was a benefit, but then that was offset by mix. That gets us down about 50 basis points Q1 to Q2.

Thank you. I appreciate that. Just any color, and I don't know if you talked about this when you were talking about some of the Q3 moving parts, just any color on the Q3 versus Q4 gross margin. Just as we think through the, I guess, Q3's behind on price cost, Q4 catches up. I would imagine some of the mix headwinds get better as the year goes on, just given the hard-to-predict nature of that. Would appreciate any color on just that back half gross margin. Thank you.

Yeah. As we talked last time, we expect the U-shape to continue with our gross margins. Don't forget, we won't have the tariff impact in Q3 that we have now. We'll pick up and have stronger supplier rebates as we end the year.

W.W. Grainger (GWW) Q2 2026 Earnings Call Transcript

Company Participants