• Total Company Sales: $4.3 billion, up 4.4% on a daily constant currency basis.
• Operating Margin: 15.6% for the quarter.
• Diluted EPS: $9.86, up $0.24 or 2.5% compared to the prior year period.
• Operating Cash Flow: $646 million.
• Shareholder Returns: $380 million returned through dividends and share repurchases.
• Dividend Increase: 10% increase to quarterly dividend, marking the 54th consecutive year of expected dividend increases.
• High-Touch Solutions Segment Sales: Down 0.2% on a reported basis, up 1.9% on a daily constant currency basis.
• High-Touch Solutions Segment Gross Profit Margin: 42.4%, up 60 basis points versus the prior year.
• Endless Assortment Sales: Increased 10.3% or 15.3% on a daily constant currency basis.
• Zoro US Sales Growth: Up 18.4%.
• MonotaRO Sales Growth: 13.6% growth in local days, local currency.
• Endless Assortment Operating Margin: Increased by 80 basis points to 8.7%.

• Warning! GuruFocus has detected 6 Warning Signs with OWL.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• W.W. Grainger Inc (NYSE:GWW) reported a 1.7% increase in total company sales, or 4.4% on a daily constant currency basis, indicating solid growth despite a muted demand environment.
• Operating margins remained healthy at 15.6%, with diluted EPS increasing by $0.24 to $9.86, showcasing strong profitability.
• The company announced a 10% increase in its quarterly dividend, marking the 54th consecutive year of expected dividend increases, reflecting a strong commitment to returning cash to shareholders.
• The Endless Assortment segment saw significant growth, with sales increasing by 10.3% or 15.3% on a daily constant currency basis, driven by strong performance from Zoro US and MonotaRO.
• W.W. Grainger Inc (NYSE:GWW) has been recognized as one of the World's Most Admired Companies, Glassdoor's Best Places to Work, and for the first time, the World's Most Ethical Companies, highlighting its strong corporate culture.

Negative Points

• The High-Touch Solutions segment experienced a slower start to the year, with sales down 0.2% on a reported basis, impacted by weather, holiday timing, and government softness.
• Operating margins for the High-Touch Solutions segment decreased by 20 basis points compared to the previous year, due to SG&A deleverage.
• The external environment remains highly fluid, with ongoing tariff uncertainties posing potential challenges to the business.
• The company has not yet fully assessed the impact of tariffs on its business, and the situation remains unpredictable, potentially affecting future demand.
• Gross margins are expected to trend downward in the second quarter due to normal seasonality and the impact of tariff-related price and cost changes.

Q & A Highlights

Q: Can you explain the improvement in Zoro's performance and whether it's sustainable? A: Donald Macpherson, CEO, stated that the improvement is largely due to sustainable revenue growth, with better repeat rates in the business. They are achieving leverage without needing to grow expenses at the same rate as revenue.

Q: Could you achieve a 20% consolidated contribution margin at a lower growth rate if volume and tariff-driven pricing net each other out? A: Yes, according to Donald Macpherson, CEO. If there is no significant demand degradation with increased prices, a lower growth rate could still achieve the desired contribution margin.

Q: How is Grainger managing sourcing flexibility given tariff headwinds? A: Donald Macpherson, CEO, explained that Grainger has done significant work to understand and develop alternative sources. However, some categories have no alternatives, and moving production takes time. They are working creatively to manage inventory and costs.

Q: What is the impact of tariffs on Grainger's private label products? A: Donald Macpherson, CEO, noted that private label products are more China-centric, but not significantly more than national brands. If tariffs persist, some categories may become non-competitive, but Grainger can navigate around these issues.

Q: How is Grainger handling price increases due to tariffs, and what is the expected impact on gross margins? A: Deidra Merriwether, CFO, stated that initial pricing actions were taken on direct imports and some national brands, with an expected net impact of 1% to 1.5%. The goal is to achieve price/cost neutrality over time, and they expect to manage this within their annual guidance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.