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."

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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."

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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."

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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;

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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."

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

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."

100 Best Large Workplaces for Women

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!"

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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.”

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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.

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F500-2020-278-WW-Grainger

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

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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

100% health coverage

Subsidized childcare

Compressed work weeks

Option to work remotely

Minimum requirement in-office attendance (days per week)

Percentage of health care premiums covered

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

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

Culture rank

Process rank

Product rank

Previous rank

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

Founded

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 2025

Q1 2025

Q4 2024

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

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W.W. Grainger

w.w. grainger

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Kyle Blant, Vice President, Investor Relations. Thank you. You may begin.

Good morning. Welcome to Grainger's first quarter twenty twenty five earnings call. With me are D. J. Macpherson, Chairman and CEO and Dean Meriwether, 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 eight ks and other periodic reports filed with the SEC. This morning's call will focus on results for the first quarter of twenty twenty five, which are consistent on both the reported and adjusted basis. 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 will turn it over to DG.

Thanks, Kyle. Good morning and we appreciate everyone joining the call. Despite the unpredictable environment, the first few months of 2025 have panned out much like we expected. The business continues to perform well as our team stays focused on serving our customers and delivering value to our stakeholders. While tariffs are certainly a topic of conversation, customers remain acutely focused on running their businesses safely and efficiently.

I recently had the chance to visit a large corporate campus where we work alongside a facilities maintenance organization to support this customer. Our team shows up as a trusted partner helping the customer solve the challenges they face on the ground each day including ordering, organizing and managing their MRO inventory. It was again apparent that local on-site execution is critical to creating value for our customers. This visit was a good reminder that no matter what the external environment, it is important to stay focused on what we can control to ensure that we capitalize on the significant opportunity in the market. Although it's largely business as usual on the ground, the external environment remains highly fluid.

We are working closely with our supplier partners to understand the full impact that announced tariffs will have on our business. Fortunately, the investments we've made in our product information and pricing capabilities, our scale and the depth of our sourcing know how position Grainger to effectively navigate this situation. As we move forward, we remain committed to ensuring transparency with our customers and adhering to our core pricing tenants, offering market relevant pricing while targeting price cost neutrality over time. Distributors generally benefit from modest inflationary environment and depending on the depth and duration of the tariff uncertainty it may play out that way, but the situation remains highly unpredictable. In any case, we expect to play a key role in helping our customers navigate this current challenge and I'm confident in the team's ability to remain agile in this dynamic environment.

Moving to Q1 results, while the demand environment remain muted, we delivered another quarter of solid growth and profitability in line with the quarterly financial targets we communicated for the company in January. We continue to leverage technology, our product and customer information advantage and analytical capabilities to drive differentiated value for our customers in both segments. Total company reported sales for the quarter were up 1.7% or 4.4% on a daily constant currency basis. Operating margins for the company remained healthy at 15.6% and diluted EPS finished the quarter up $0.24 to $9.86 Operating cash flow came in at $646,000,000 which allowed us to return a

to Grainger shareholders through dividends and share repurchases. Lastly, I want to mention that yesterday we announced a 10% increase to our quarterly dividend marking the fifty fourth consecutive year of expected dividend increases. This reflects our continued commitment to returning cash to shareholders through a balanced and return focused approach. Overall, the quarter finished largely in line with expectations and we remain on track to deliver our 2025 guidance. I will now turn it over to Dee.

Thank you, DG. Turning to Slide seven, you can see the high level first quarter results for the total company, including $4,300,000,000 in sales, up 4.4% on a daily constant currency basis. Within the period, we saw gross margin improvement across both segments, which mostly offset SG and A deleverage and High Touch. This led to total company operating margins of 15.6% for the quarter, down 20 basis points compared to 2024, but above our communicated first quarter expectations largely due to the timing of certain SG and A items. Diluted EPS for the quarter of $9.86 was up $0.24 or 2.5% higher compared to the prior year period.

Moving to segment level results, the High Touch Solutions segment got off to a slower start as weather, holiday timing and some government softness across January and February impacted results to begin the year. In total, sales were down 0.2% on a reported basis or up 1.9% on a daily constant currency basis. Results were driven by continued volume growth and modest price contribution within the segment, and we delivered growth across all geographies in local days, local currency. In The U. S.

Specifically, we saw strong performance with contractors and healthcare customers, which helped to offset slower growth in other areas, including manufacturing. For the segment, gross profit margin finished the quarter at 42.4%, up 60 basis points versus the prior year. In the quarter, gross margin benefited from favorable product mix and supplier funding tailwind related to the annual Grainger sales meeting. Each of these items contributed roughly half of the year over year gross margin favorability. For the quarter, pricecost was roughly neutral.

SG and A costs for the segment increased over the prior year period as we continue to invest in demand generating activities and reflect the P and L impact of the annual Granger sales meeting, which was an equal offset to the favorability we saw in gross margin. These costs coupled with the softer top line and one fewer selling day in the current year led to SG and A deleverage of 80 basis points for the quarter. If you normalize for one fewer selling day and the impact of the Grainger sales meeting, SG and A only slightly delevered year over year. Taking all of this together, operating margin remained healthy at 17.7%, down 20 basis points versus Q1 twenty twenty four, but ahead of our expectations to start the year. Looking at market outgrowth on Slide nine.

On a volume only basis using the manufacturing subcomponent of industrial production as a proxy, implied growth for The U. S. MRO market volume was 1% to 1.5% in the quarter. With our High Touch Solutions U. S.

Business driving 1.3% volume growth, this would suggest mathematical market outgrowth on a volume basis was roughly flat in Q1, which was surprising to us even with our slower start in January and February. While tariffs have not had a meaningful impact on our business to date, they seem to be inflating the underlying IP benchmark, likely reflecting trade related noise as manufacturers react abnormally given the unique environment. The IP benchmark has been a strong accessible indicator of our overall MRO industry performance over multiple cycles, but its ability to capture the dynamic and unprecedented nature of the current economic environment is uncertain. As we've been discussing over the last year, we run a separate internal model in parallel to help triangulate around MRO volume growth. This internal model pulls in several supply and demand factors, including MRO product shipments, importexport dynamics and end user activity to formulate a comprehensive view of the MRO landscape including segments outside of manufacturing.

This internal view suggests that the MRO market volume actually declined in the low single digits during the first quarter implying we drove several hundred basis points of outgrowth. While the two different models have been highly correlated during normal business cycles, the divergence calls into question the relevance of our quarterly outgrowth disclosure given the uncertain environment. It is likely that this quarterly disconnect will persist so long as trade policy and tariffs continue to influence the manufacturers' production decisions. With this, moving forward, we're pivoting to our annual disclosure of our outgrowth metric. We believe this decision will create less quarter to quarter noise and allow us to stay focused on discussing the drivers of our growth while keeping an eye on our relative performance compared to competition.

We'll consider reintroducing the quarterly disclosure when the macro environment stabilizes and in the meantime look forward to sharing our annual progress on volume outgrowth at the end of the year. It's important to note that despite the noise in the metric, we still delivered on our first quarter sales expectation and this change in disclosure has no impact on the full year high touch segment sales guidance we discussed back in January. Moreover, nothing is changing with our long term earnings algorithm, including our annual volume outgrowth target, which remains at 400 to 500 basis points. Now focusing on endless assortment. Sales increased 10.3% or 15.3% on a daily constant currency basis, which adjusts for the impact of the depreciated Japanese yen.

Store U. S. Was up 18.4%, while MonotaRO achieved 13.6% growth in local days local currency. At a business level, Zoro continues its momentum, once again delivering strong growth underpinned by its core B2B customers and improving retention rates. At Monotaro, sales growth remained strong with enterprise customers coupled with solid acquisition and repeat purchase rates with small and midsized businesses.

On a reported basis, these results were partially offset by foreign exchange as the yen devaluation represented a headwind year over year. On profitability, operating margins for the segment increased by 80 basis points to 8.7% with both businesses contributing to the favorability. MonotaRO margins remained strong at 12% with continued DC efficiencies driving improved operating leverage. At Zoro, operating margins were up two forty basis points to 5.2% aided by gross margin flow through and strong top line leverage. Gross margins outpaced expectations as we made some non tariff related pricing changes in the quarter, the benefit of which we expect to moderate slightly as the year continues.

Overall, we're encouraged by the strong progress made in the quarter and expect to continue our momentum across this segment. Given the environment, I think it would be helpful to share an overview of how we see the current tariff landscape. On Slide 12, there are a few things to call out. First, it's early innings and things are constantly adjusting. Even with the original Chinese tariffs, which have been in effect for nearly sixty days, we're only recently completing negotiations with a subset of our supplier partners regarding tariff related cost increases.

So while we've seen a swift pace of tariff related headlines, things are progressing more slowly on the ground. Second, understanding the full impact that the tariffs have on our business is not straightforward and needs to be quantified at a granular level. You can see our total U. S. Cause exposure on the left hand side of the slide, with around 50% being domestically sourced and the remainder comprised of import products, including those from China.

As others in the markets have discussed, this view of COGS is on a country of origin basis and does not further deconstruct individual product components by their respective country of origin. What we can do is take the announced tariff rates and apply that to our total COGS exposure to estimate the impact. You have to go through each product and evaluate its composition and cost structure. This includes answering questions like what are the input components and where are they sourced, how much of their cost is freight related, etcetera. You need to do this by product to grasp what elements are subject to tariffs as you adhere to the government tariff schedule and engage in cost conversations with our supplier base.

Given the investment we've made in private information, the tools we've built, and the product teardown work we've completed over the last several years, we feel we are well equipped to navigate this challenge. As we gain clarity on costs, we'll work to pass along these increases to our customers similar to what we do for other cost increases we received. With this earlier today, we took initial pricing actions primarily related to Section two thirty two and the first wave of announced tariffs on China, which did not include any increases related to the recent reciprocal escalations. These initial pricing actions only apply to a small portion of our products, largely those where Grainger is importing the product directly. On the vast majority of our products where we don't directly import, we are taking a measured approach and will wait to pass price until we have clarity on the amount and timing of cost increases.

Our goal here will be to mitigate impacts to our business and achieve price cost neutrality over time. Obviously, if the heightened reciprocal tariffs persist, we would need to consider source of supply and overall product economics to determine what course of action we would need to take. It goes without saying, but this remains a very fluid situation and we're working side by side with our suppliers and customers alike. Importantly, as we look across our assortment today, we don't believe we're uniquely exposed to these tariffs compared to our competitive set. In any case, our team is focused on adhering to our two core pricing tenets to remain price competitive and achieve price cost neutrality over time, and I have full confidence in our ability to remain agile while we execute on these objectives.

As ZG mentioned at the beginning of the call, after our solid start to the year, we're reaffirming our 2025 guidance. From a tariff perspective, we've included pricecost impacts we are seeing today and assume any go forward incremental pricing actions passed on price cost neutral basis will be offset by lower demand. While the tariff inflation in a vacuum would provide a net tailwind to our business, it is unclear at this stage what the duration of the tariffs will be and what impact they will ultimately have on customer demand. With this, we assume these impacts will offset and are leaving our outlook unchanged, but we'll check and adjust as the year progress. From a seasonal perspective, we expect the year over year sales growth will improve slightly in the second quarter, reflecting normal seasonality and including a modest tailwind from the first wave of tariff related pricing actions that went into effect today.

Preliminary April sales are up approximately 5.5% on a daily constant currency basis, which includes a 30 basis points headwind from the timing shift of the Good Friday holiday. All told, we expect the total company sales for the second quarter to be just north of $4,500,000,000 or approximately 5% on a daily constant currency basis. From a profitability perspective, there are a number of moving pieces that we know will impact second quarter results. Moving sequentially from the first quarter, we know gross margins will structurally trend downwards, generally in line with normal seasonality. We've layered in the tariff related price and cost impact that we know of today or can reasonably expect based upon conversations we've had to date with our supplier partners.

On SG and A, we expect some leverage improvement sequentially as productivity and sales leverage partially offsets increased costs. We will continue to invest in demand generation. And as with every year, merit increases went live to start the quarter. Further, as we've discussed, some expenses that were planned for the first quarter are shifting to the second, creating a sequential headwind. These items are in addition to the previously discussed noise that occurred in the first quarter from the Grainger sales meeting.

This impact will flip sequentially in the second quarter and become a headwind to gross margin, but an offsetting tailwind to SG and A. Taking all these moving pieces into account, we are targeting second quarter operating margin to be at or near 15% for the total company. Again, this is obviously a highly fluid environment, but we believe our outlook covers a reasonable set of potential outcomes. With that, I'll turn it back to DG.

Thanks Dee. Overall, I'm encouraged by how the team has managed through what is a very dynamic environment and how we continue to show up for our customers every day. Before I close, I want to take one more opportunity to acknowledge the strength of the Grainger culture. Just four months into the year, we received several recognitions including World's Most Admired Companies, Glassdoor's Best Places to Work and for our first time ever the World's Most Ethical Companies. Each of these achievements are special individually, but together I believe they showcase why team members choose to grow their careers with Grainger.

Congratulations to the team for earning these notable awards. And with that, I will open it up for Q and

you. Our first question comes from the line of David Manthey with Baird. Please proceed with your question.

First off, let me ask about Zoro. It looks like a great quarter and terrific SG and A leverage there. Is the improvement that you're seeing there just based on stronger than expected sales this quarter? Or are you starting to find an equilibrium between revenues and OpEx so

we continue to see a higher level of profitability there?

Yes. Most of it is what we think is sustainable revenue growth. So we're seeing nice repeat rates in the business and that's gotten a lot better. And we don't have to grow expenses with that revenue growth given where we're at.

We're in good shape to get leverage if we continue to drive that revenue growth.

Yes, it's great to hear. And then second, you've in the past said that you could achieve 20% consolidated contribution margin at kind of a mid single digit rate of growth or higher. If we have the situation where volume and tariff driven pricing net each other out, is it possible you could do that at a slightly lower rate because price is coming through at a higher contribution margin?

The short answer is yes, is true. Obviously, if you don't have significant demand degradation with the increased prices, then yes, we have a lower rate of growth to get that pull through.

Thank you. Our next question comes from the line of Jacob Levenson with Melius Research. Please proceed with your question.

DG, I realize you folks have quite a broad product offering here. But can you maybe just speak to your, I guess, your ability to flex your sourcing given the tariff headwinds maybe how you're balancing that versus taking up price, especially given all of the inflation we had over the past few years?

Yes. So the good news is we've done a lot of work to understand sources and alternative sources. We've already moved some things over the last few years, to allow us to have a more resilient supply chain. The challenge is there are certain categories for which there are really no alternatives where everything comes from China for instance. And so, that gets harder because that takes time, a lot of time in some cases to actually move somewhere we're talking with our own suppliers on private brand and our brand suppliers and we're hearing people talk about potentially moving things, but it's not immediate.

Our hope is that we don't completely shut down trade between China and The U. S. For a long period of time because obviously we wouldn't have everything we need to support our customers. We do have inventory on hand, and we're doing some creative things to make sure we have the right inventory to support our customers without taking extra cost on. And I think that's probably the trick right now.

Our team is working very hard to make that happen.

Okay. That's helpful. Is that I mean, that applied to your private label offering or maybe sort of different ways, I assume the economics change quite a bit with the tariffs as they stand today?

They do. I mean, I give you one hypothetical example that plays out a lot. It depends, of course, whether or not the national brand and the private brand are only produced in the same location or whether there's alternatives. But in an example, if a private brand product is made in China and the national brand is made in Indonesia, let's say, if there's different tariffs that can change the economics and we could be in a position where the private brand doesn't really make any sense anymore and raising the price there would actually just stop all volume. And so there are some cases like that.

There are some cases that aren't like that and you have to do it on a case by case basis.

Okay. That's great. Thank you very much. Good luck guys.

Thank you. Our next question comes from the line of Ryan Merkel with William Blair. Please proceed with your question.

Good morning. Thanks for taking the question. I wanted to start off just high level on the macro. It sounds like you haven't seen any slowdown yet in the business just based on the guide you gave for daily sales. And then DG, I don't know what any feedback that you found interesting when you're speaking with customers as it relates to the outlook and what people are concerned about?

Yes. So actually we've seen, as the year has gone, we've seen actually some accelerated growth. April was our best month yet. So we haven't seen any slowdown yet. That said, the way this works on the tariffs is it takes we have inventory obviously and it takes months for that to sort of flow through.

So we wouldn't expect to see any tariff related impact on demand yet. And probably starting this quarter, might see a little bit, but we don't think it's going be that much and more would happen later depending on how things shake out and there's lot of uncertainty there. I'd say, I think most customers are embedding modest tariffs into their thinking. They don't expect it to be significant trade challenges. They think they're going to be able to get product at this point and they're really focused on running their operations and keeping their people safe and doing the things that they do every day.

There haven't been a lot of conversations about tariffs specifically with my customer interactions. And I think that's primarily because they think this likely gets worked out some way, but nobody knows which way.

And then second question is on tariffs. I just want to make sure I heard the message right. It sounds like on May 1, you put through a price increase, but it was only for the direct imports that you're bringing in and you're sort of waiting to see what the suppliers do and you'll have an update on what that price increase might be what next quarter?

Yes, next quarter we will. What I would say is mostly just our direct imports. There are a few suppliers that came with increases and we put those through as well. Generally it's on the whole it's very modest. For some specific products, it's significant.

Our next question comes from the line of Christopher Snyder with Morgan Stanley. Please proceed with your question.

Thank you. Just following up on tariffs, maybe no surprise. Did you guys have you guys guys provided anything in the prepared remarks just around how much price is flowing through from what's been announced to date, including some of the early action on February in China and then what we got here on the direct imports in May? And you guys did not change the gross margin guidance. Is

assumption that gross margin can be held through this period of higher cost inflation? Thank you.

Hey, Chris. So yes, we didn't prepare in the prepared remarks didn't state a specific number. But we did note that we put through increases related to the tariffs on mainly on imported products and DG just noted a few other national brand suppliers. We believe that impact will be about 1% to 1.5% net impact for us. So he noted fairly modest.

And then when you look at the gross margin outlook for the year, we did a little bit better in the first quarter. We've taken some price that we know of. We are going to continue to target price cost neutrality over time. Within that price cost neutrality, DG just gave an example of where in some cases, because and if some of these very significant tariffs sustain over a period of time, we're going to have to come back and revisit how we price our project generally. But the goal will be to achieve that price cost neutrality over time.

And due to the noise and the scenarios we have run, we believe based upon the range aligned with the guidance for the year that is something that we should still be able to hit. But again, more to come. We feel like we're going to learn a lot in the second quarter. More negotiations will be completed, and we'll get a read on price elasticity as well.

Thank you. I appreciate that. And then maybe just following up on some of your commentary earlier around the benchmark maybe not being the right benchmark at this period of time. I guess, why does the company think IP is the best way to benchmark volumes? Manufacturing is only, I think, about 30% of the mix.

So I just wonder, could GDP be a better benchmark to go volumes against? I mean, I wonder if some of the dislocation we're seeing between IP and GDP could be causing some of that performance. Thank you.

W.W. Grainger (GWW) Q1 2025 Earnings Call Transcript

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