W.W. Grainger, Inc.

Grainger reported second-quarter sales of 10.3%, or 13.7% on a daily organic constant currency basis. Gross margin was 39.5%, up 100 basis points year over year, and operating margin was 16.1%, up 120 basis points. Diluted EPS came in at $12.01, up over 20% versus last year. Operating cash flow was $444 million, and the company returned $341 million to shareholders through dividends and repurchases. For the full year, management raised guidance to daily organic constant currency sales growth of 11.5% to 13%, operating margin of 15.8% to 16.2%, and EPS of $45.50 to $47.25. For Q3, they expect sales north of $5 billion, or up over 12% daily organic constant currency, and operating margin in the mid-15% range.

D.G. Macpherson said the quarter reflected strong execution, exceptional service, and improving demand across most end markets. He emphasized strength in both High-Touch and Endless Assortment, momentum in Canada, and continued customer pull for inventory management and safety solutions. His tone was confident and constructive, with repeated comments that the company is growing profitably and gaining share despite a fluid external backdrop.

Deidra Merriwether highlighted 39.5% gross margin, 16.1% operating margin, and $12.01 EPS. She said gross margin benefited from a 90-basis-point tailwind from IEEPA tariff refunds and that operating margin was helped by flow-through and leverage in Endless Assortment, partly offset by mix, freight, private label costs, and marketing/payroll investments. She also noted operating cash flow and said the company raised guidance, with most tariff refund benefit already recognized in Q2 and only immaterial amounts expected in the back half.

Analysts focused on how much of the tariff refund benefit would remain in the back half, and management said the vast majority had already been accrued for or received, with only immaterial benefit expected later. Questions also probed gross margin mix, freight, fuel, and project-related sales; management said mix was the bigger pressure, while freight and fuel were also headwinds that should begin to recover after September pricing actions. On data centers and large projects, management said direct exposure is less than 1%, but project spend added about 90 basis points to High-Touch growth and is dilutive to gross margin but not operating margin.