W.W. Grainger, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Reported net sales for Q3 2026 were $5.181 billion, an 11.3% increase compared to $4.657 billion in Q3 2025; daily, organic constant currency sales growth was 14.9%.
• Reported operating earnings were $828 million (up 62.0% YoY), while adjusted operating earnings were $836 million (up 18.2% YoY).
• Reported operating margin was 16.0% (up 500 basis points YoY); adjusted operating margin was 16.1% (up 90 basis points YoY).
• Reported diluted EPS was $12.42 (up 102.9% YoY); adjusted diluted EPS was $12.54 (up 22.8% YoY).
• Gross profit was $2.011 billion (up 11.8% YoY) with a gross profit margin of 38.8% (up 20 basis points YoY).
• Operating cash flow generated was $661 million; capital expenditures were $115 million, resulting in free cash flow of $546 million.
• The effective tax rate was 24.3% for the quarter, down from 34.7% in Q3 2025.
• Net earnings attributable to W.W. Grainger, Inc. were $587 million (up 99.7% YoY); adjusted net earnings were $593 million (up 21.0% YoY).

Guidance and Future Outlook:

• Updated full-year 2026 diluted adjusted EPS guidance to a range of $47.00 to $48.00, up from the previous range of $45.50 to $47.25.
• Updated full-year 2026 net sales guidance to $19.8 to $20.0 billion, up from $19.4 to $19.7 billion.
• Updated full-year 2026 daily, organic constant currency sales growth guidance to 13.0% to 14.5%, up from 11.5% to 13.0%.
• Updated full-year 2026 operating margin guidance to 16.0% to 16.2%, up from 15.8% to 16.2%.
• Updated full-year 2026 operating cash flow guidance to $2.35 to $2.45 billion, up from $2.25 to $2.4 billion.
• Updated full-year 2026 share buyback guidance to $0.975 to $1.025 billion, down from $0.975 to $1.05 billion.
• Updated full-year 2026 capital expenditures guidance to $0.575 to $0.625 billion, down from $0.575 to $0.65 billion.
• Updated full-year 2026 effective tax rate guidance to approximately 24.7%, down from approximately 25.0%.
• Updated segment operating margin guidance for High-Touch Solutions - N.A. to 17.3% to 17.5% and for Endless Assortment to 10.9% to 11.1%.

Business Segments and Product Lines:

• High-Touch Solutions - N.A. sales increased 13.8% on both reported and daily, constant currency bases, driven by double-digit volume growth and price inflation.
• Endless Assortment segment sales increased 11.9% reported (19.3% daily, organic constant currency), driven by strong performance at MonotaRO and Zoro.
• High-Touch Solutions - N.A. gross profit margin was 40.8%, down 30 basis points YoY due to unfavorable freight expense and mix.
• Endless Assortment gross profit margin increased 90 basis points YoY due to improvements at MonotaRO and Zoro.
• The company acquired technology assets from Adroit Worldwide Media, Inc. in Q3 2026, incurring transaction costs excluded from adjusted results.
• The company completed its exit from the U.K. market (including the sale of Cromwell and closure of Zoro U.K.) in Q4 2025, with the loss from this exit excluded from adjusted Q3 2026 results.

Market and Competitive Landscape:

• Management noted an improving demand environment and consistent execution across the business.
• Customers continue to turn to the company for products and solutions, supporting growth in both High-Touch Solutions and Endless Assortment segments.
• The company serves more than 4.6 million customers worldwide with MRO products and value-added solutions.

Risks and Challenges:

• Forward-looking statements are subject to risks including inflation, higher product costs, and operational expenses.
• Risks include potential loss of customers, supply disruptions, competitive pricing pressures, and changes in third-party digital advertising practices.
• Potential challenges involve failure to develop or implement new technology initiatives, including eCommerce platforms and AI, and failure to protect intellectual property.
• Risks include fluctuations in gross profit margins, litigation outcomes, regulatory changes, and cybersecurity breaches.
• Economic risks include global economic conditions, tariffs, trade issues, currency exchange fluctuations, and market volatility.
• Operational risks include facility disruptions, fuel costs, pandemics, natural disasters, and workforce unionization or retention issues.

Management Commentary and Tone:

• D.G. Macpherson, Chairman and CEO, stated that the third quarter performance reflects consistent execution and an improving demand environment.
• Management expressed confidence that the company is on track for an exceptional year following another quarter of strong performance.
• The tone was positive, highlighting impressive growth in both business segments and the decision to increase full-year earnings guidance.

Other Key Points:

• The company returned $396 million to shareholders through dividends and share repurchases during the quarter.
• Cash and cash equivalents increased to $768 million as of September 30, 2026, from $585 million as of December 31, 2025.
• Long-term debt increased to $2.458 billion as of September 30, 2026, from $2.362 billion as of December 31, 2025.
• Goodwill increased to $521 million as of September 30, 2026, from $360 million as of December 31, 2025, likely due to the acquisition of technology assets.
• The company held a live conference call and webcast on November 4, 2026, hosted by D.G. Macpherson and Laurie Thomson, VP and Interim CFO.
• The company has a controlling ownership interest in MonotaRO, which is fully consolidated and reported one month in arrears.