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W.W. Grainger reported a strong first quarter, with sales up 10.1% and adjusted for currency and timing up 12.2% on a daily organic constant-currency basis. Diluted earnings per share rose 18.2% year over year to $11.65. Management attributed the outperformance to improved maintenance, repair and operations (MRO) demand, pricing actions and execution.
Grainger’s High-Touch Solutions segment posted reported sales growth of 10.5%, or 10% on a daily constant-currency basis. Management said the segment’s growth reflected “roughly equal contributions from price and volume.” High-Touch also saw broad-based acceleration across end markets, including manufacturing, government and contractor customers. Segment gross margin was 42.6%, up 20 basis points, and operating margin rose 60 basis points to 18.3%.
The Endless Assortment segment delivered reported sales growth of 19.6%, or 21.9% on a daily organic constant-currency basis, adjusted for the closure of Zoro U.K. and currency effects. Management said Zoro U.S. grew 18.7% on a daily basis, while MonotaRO grew 24.3% in local days and local constant currency.
At Zoro, management cited strong growth from core B2B customers and improving retention rates. At MonotaRO, it pointed to growth from enterprise customers and solid acquisition and repeat purchase rates among small and midsized businesses. MonotaRO also benefited from increased web traffic tied to a competitor cyber outage, though management said that tailwind waned as the quarter progressed.
Endless Assortment operating margin rose 190 basis points to 10.6%. MonotaRO’s margin increased 90 basis points to 12.9%, while Zoro’s margin improved 210 basis points to 7.3%.
During the call, executives addressed inflationary pressures, tariffs and supply chain risks. Management said it continues to manage toward price-cost neutrality over time. Grainger implemented further price increases in January tied to previously delayed tariff inflation and supplier cost increases, while May pricing actions were neutral overall.
On tariffs, management said it expects only a modest impact from a recent Supreme Court ruling on IEEPA tariffs because the tariff rate differential with prevailing Section 122 duties is minimal. Executives said Grainger adjusted prices where it saw modest cost reductions on products it imports directly and is working with suppliers to assess additional cost reduction opportunities.
Fuel costs were also flagged as a margin headwind, particularly because some large customers do not fully pay for partial shipping. Management said the effect is currently modest and has been included in updated guidance.
Grainger is also monitoring raw material pressures related to the conflict in the Middle East. Management said the impact is minimal in the U.S. business so far, but the Japanese market is seeing more strain due to reliance on energy inputs moving through the Strait of Hormuz. Macpherson later said MonotaRO saw some price pressure and limited buying ahead on products considered at risk, but that the impact had not been material.
Grainger increased its full-year 2026 guidance. The company now expects daily organic constant-currency sales growth of 9.5% to 12%. Management said the updated forecast reflects first-quarter strength, continued execution and improved MRO market demand.
For earnings, Grainger raised its outlook for full-year EPS to $44.25 to $46.25, representing nearly 15% year-over-year growth at the midpoint. Management said the midpoint is $1.75 higher than the prior guidance range. The company also increased its operating cash flow outlook.
For the second quarter, management said preliminary April sales were up more than 13% on a daily organic constant-currency basis. Grainger expects second-quarter sales above $4.9 billion, approaching 12% growth on a daily organic constant-currency basis. Reported growth is expected to be 330 basis points lower after adjusting for the U.K. market exit and currency headwinds.
Management expects operating margin to decline sequentially in the second quarter to the low 15% range. Merriwether said the decline reflects normal seasonality, higher fuel costs and increased costs tied to private label inventory that were expected to affect the first quarter but are now flowing through in the second quarter.
Total company sales rose 10.1% in the first quarter, or 12.2% on a daily organic constant currency basis. Operating margin was 16.7%, and diluted earnings per share increased 18.2% year over year to $11.65. Operating cash flow totaled $739 million, and Grainger returned $345 million to shareholders through dividends and share repurchases.
Macpherson also noted that Grainger recently announced a 10% increase to its quarterly dividend, marking its 55th consecutive year of dividend increases.
In the question-and-answer session, analysts pressed on pricing and whether the quarter’s margin performance can be sustained. Asked by Baird analyst David Manthey about price contribution, Merriwether said North America saw about five points of price.
Macpherson said the revenue upside reflected three factors: improving end-market demand, better-than-expected price realization and strong share gains. He added that market volume had been negative for several years but appeared to have turned slightly positive.
On the full-year outlook, Macpherson said guidance assumes market volume growth of “0 to 1-ish” and price contribution that moderates from about five points in the first quarter to roughly four points for the year.
Merriwether said margins are expected to follow more of a “U shape” during the year. She said first-quarter gross margin benefited from stronger price realization and delayed private label cost pressure, while the second quarter will reflect normal seasonal margin decline, about 20 basis points of private label inventory cost pressure and some fuel-related leakage.
Macpherson said Grainger has not seen customers in North America pull forward inventory purchases due to uncertainty, nor has it seen customers stop projects. He also said the company has not observed unusual competitor behavior or product availability issues in the U.S.
Macpherson concluded by saying the company is focused on performing through uncertainty while building for the future, adding that it feels the business is resilient.
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