Operational execution driving resilient performance; Company narrows 2024 earnings outlook Second Quarter Highlights Delivered sales of $4.3 billion, up 3.1%, or 5.1% on a daily, organic constant currency basis Achieved reported operating margin of 15.1%, down 70 basis points, or 15.4% on an adjusted basis, down 40 basis points Generated diluted EPS of $9.51 on a reported basis, up 2.5%, or $9.76 on an adjusted basis, up 5.2% Produced $411 million in operating cash flow and returned $345 million to Grainger shareholders through dividends and share repurchases Narrowing most 2024 total Company guidance ranges, including daily, organic constant currency sales growth of 4.0% to 6.0% and adjusted diluted EPS of $38.00 to $39.50 CHICAGO, Aug. 1, 2024 /PRNewswire/ -- Grainger (NYSE:GWW) today reported results for the second quarter of 2024 with sales of $4.3 billion, up 3.1%, or 5.1% on a daily, organic constant currency basis, and adjusted diluted EPS of $9.76, up 5.2% compared to the second quarter of 2023.  "I'm proud of our team for providing a flawless experience and creating tangible value for our customers. Amidst the backdrop of a slow, but generally stable demand environment, we focused on what matters and produced another quarter of solid results," said D.G. Macpherson, Chairman and CEO. "As we look to the second half of the year, I'm confident in our ability to execute well and deliver results for all stakeholders."  2024 Second Quarter Financial Summary ($ in millions, except per share amounts) Q2 2024 Q2 2023 Q2'24 vs. Q2'23 Fav. / (Unfav.) Reported Adjusted(1) Reported Adjusted Reported Adjusted Net Sales $4,312 $4,312 $4,182 $4,182 3.1 % 3.1 % Gross Profit $1,694 $1,694 $1,644 $1,644 3.0 % 3.0 % Operating Earnings $649 $665 $661 $661 (1.8) % 0.6 % Net Earnings Attributable to W.W. Grainger, Inc. $470 $482 $470 $470 — % 2.6 % Diluted Earnings Per Share $9.51 $9.76 $9.28 $9.28 2.5 % 5.2 % Gross Profit Margin 39.3 % 39.3 % 39.3 % 39.3 % 0 bps 0 bps Operating Margin 15.1 % 15.4 % 15.8 % 15.8 % (70) bps (40) bps Effective Tax Rate 22.9 % 22.9 % 24.0 % 24.0 % 110 bps 110 bps (1) Results exclude restructuring costs incurred in the second quarter of 2024. See the supplemental information of this release    for a reconciliation of adjusted and non-GAAP financial measures. RevenueSales in the quarter, on a reported and daily basis, increased 3.1% compared to the second quarter of 2023. Normalizing for the impact of foreign currency exchange and the Company's 2023 divestiture of its subsidiary, E & R Industrial Sales, Inc., sales on a daily, organic constant currency basis increased 5.1% compared to the second quarter of 2023. In the High-Touch Solutions - N.A. segment, sales, on a reported and daily basis, were up 3.1%, or up 3.7% on a daily, organic constant currency basis, compared to the second quarter of 2023. Revenue growth for the segment was driven by increased volume in all geographies and included broad-based gains across most customer end markets. In the Endless Assortment segment, daily sales were up 3.3%, or 11.7% on a daily, constant currency basis, compared to the second quarter of 2023. Revenue growth for the segment was driven by core B2B customers at Zoro and strong performance across MonotaRO, most notably with Enterprise customers. This growth was partially offset by the continued decrease in non-core customers at Zoro. Gross Profit MarginGross profit margin of 39.3% in the second quarter of 2024 was flat to the second quarter of 2023.  In the High-Touch Solutions - N.A. segment,  2024 second quarter gross profit margin of 41.7% was flat over the prior year quarter as various factors offset in the period. In the Endless Assortment segment, gross profit margin declined by 20 basis points from the second quarter of 2023 driven primarily by product and customer mix headwinds.  EarningsFor the second quarter of 2024, total company reported operating earnings were $649 million, down 1.8% compared to the second quarter of 2023. Reported operating margin in the quarter was 15.1%, a 70-basis point decrease from the second quarter of 2023. On an adjusted basis, which removes restructuring costs incurred in the period, operating earnings for the quarter were $665 million, up 0.6% over the second quarter of 2023. Adjusted operating margin was 15.4%, a 40 basis point decrease over the second quarter of 2023, driven by continued investment in demand-generating activities and distribution center network expansion. Diluted earnings per share for the second quarter of 2024 were $9.51 on a reported basis, up 2.5% compared to the second quarter of 2023. On an adjusted basis, diluted earnings per share were $9.76, up 5.2% versus the second quarter of 2023. The increase was driven by sales growth, fewer shares outstanding and a lower tax rate. Tax RateThe second quarter 2024 effective tax rate was 22.9%, compared to 24.0% in the second quarter of 2023. The lower effective tax rate was primarily due to an increase in tax credits over the prior year quarter. Cash FlowDuring the second quarter of 2024, the Company generated $411 million of cash flow from operating activities, as solid net earnings were partially offset by unfavorable working capital. The Company invested $76 million in capital expenditures, resulting in free cash flow of $335 million. During the quarter, the Company returned $345 million to Grainger shareholders through dividends and share repurchases. GuidanceThe Company is providing the following updated total company 2024 guidance, including a narrowed earnings outlook.   Total Company(1) Previous 2024 Guidance Range (as of April 25, 2024) Updated 2024 Guidance Range (as of August 1, 2024) Net Sales $17.2 - $17.7 billion $17.0 - $17.3 billion    Sales Growth 4.3% - 7.3% 3.2% - 5.2%    Daily, organic constant currency sales growth 4.0% - 7.0% 4.0% - 6.0% Gross Profit Margin 39.1% - 39.4% 39.2% - 39.4% Operating Margin 15.3% - 15.8% 15.3% - 15.7% Diluted Earnings per Share $38.00 - $40.50 $38.00 - $39.50 Operating Cash Flow $1.9 - $2.1 billion $1.95 - $2.15 billion CapEx (cash basis) $0.4 - $0.5 billion $0.4 - $0.475 billion Share Buyback $0.9 - $1.1 billion $1.0 - $1.2 billion Effective Tax Rate ~24.0% ~24.0% Segment Operating Margin High-Touch Solutions - N.A. 17.4% - 17.9% 17.4% - 17.8% Endless Assortment 7.3% - 7.8% 7.6% - 8.0% (1) Guidance provided is on an adjusted basis. Daily, organic constant currency sales growth is adjusted for the impact of two      additional selling days in 2024 as compared to 2023, the sale of the Company's divested E & R Industrial Sales, Inc.     subsidiary completed in the fourth quarter of 2023, and changes in foreign exchange. The Company does not reconcile      forward-looking non GAAP financial measures. For further details see the supplemental information of this release. WebcastThe Company will conduct a live conference call and webcast at 11:00 a.m. ET on Thursday, August 1, 2024, to discuss the second quarter results. The webcast will be hosted by D.G. Macpherson, Chairman and CEO, and Deidra Merriwether, Senior Vice President and CFO, and can be accessed at invest.grainger.com. For those unable to participate in the live event, a webcast replay will be available for 90 days at invest.grainger.com. About GraingerW.W. Grainger, Inc., is a leading broad line distributor with operations primarily in North America, Japan and the United Kingdom. At Grainger, We Keep the World Working® by serving more than 4.5 million customers worldwide with products delivered through innovative technology and deep customer relationships. With 2023 sales of $16.5 billion, the Company operates two business models. In the High-Touch Solutions segment, Grainger offers approximately 2 million maintenance, repair and operating (MRO) products and services, including technical support and inventory management. In the Endless Assortment segment, Zoro.com offers customers access to more than 13 million products, and MonotaRO.com offers more than 22 million products. For more information, visit www.grainger.com. Visit invest.grainger.com  to view information about the Company, including a supplement regarding 2024 second quarter results. Additional Company information can be found on the Grainger Investor Relations website which includes the Company Snapshot and ESG report. Safe Harbor StatementAll statements in this communication, other than those relating to historical facts, are "forward-looking statements." Forward-looking statements can generally be identified by their use of terms such as "believe," "could," "future," "guidance," "may," "predict," "prospects," "will," or "would," and similar terms and phrases, including references to assumptions. Forward-looking statements are not guarantees of future performance and are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such statements. Forward-looking statements include, but are not limited to, statements about future strategic plans and future financial and operating results. Important factors that could cause actual results to differ materially from those presented or implied in the forward-looking statements include, without limitation: inflation, higher product costs or other expenses, including operational and administrative expenses; the impact of macroeconomic pressures and geopolitical trends, changes and events; a major loss of customers; loss or disruption of sources of supply; changes in customer or product mix; increased competitive pricing pressures; changes in third party practices regarding digital advertising; failure to enter into or sustain contractual arrangements on a satisfactory basis with group purchasing organizations; failure to develop, manage or implement new technology initiatives or business strategies, including with respect to Grainger's eCommerce platforms; failure to adequately protect intellectual property or successfully defend against infringement claims; fluctuations or declines in Grainger's gross profit margin; Grainger's responses to market pressures; the outcome of pending and future litigation or governmental or regulatory proceedings, including with respect to wage and hour, anti-bribery and corruption, environmental, regulations related to advertising, marketing and the Internet, consumer protection, pricing (including disaster or emergency declaration pricing statutes), product liability, compliance or safety, trade and export compliance, general commercial disputes, or privacy and cybersecurity matters; investigations, inquiries, audits and changes in laws and regulations; failure to comply with laws, regulations and standards, including new or stricter environmental laws or regulations; government contract matters; the impact of any government shutdown; disruption or breaches of information technology or data security systems involving Grainger or third parties on which Grainger depends; general industry, economic, market or political conditions; general global economic conditions including tariffs and trade issues and policies; foreign currency exchange rate fluctuations; market volatility, including price and trading volume volatility or price declines of Grainger's common stock; commodity price volatility; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; outbreaks of pandemic disease or viral contagions; natural or human induced disasters, extreme weather and other catastrophes or conditions; effects of climate change; failure to execute on our efforts and programs related to environmental, social and governance matters; competition for, or failure to attract, retain, train, motivate and develop executives and key employees; loss of key members of management or key employees; loss of operational flexibility and potential for work stoppages or slowdowns if employees unionize or join a collective bargaining arrangement; changes in effective tax rates; changes in credit ratings or outlook; Grainger's incurrence of indebtedness or failure to comply with restrictions and obligations under its debt agreements and instruments; and other factors that can be found in our filings with the Securities and Exchange Commission, including our most recent periodic reports filed on Form 10-K and Form 10-Q, which are available on our Investor Relations website. Forward-looking statements are given only as of the date of this communication and we disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. W.W. Grainger, Inc. and SubsidiariesCONDENSED CONSOLIDATED STATEMENTS OF EARNINGS(In millions of dollars, except for share and per share amounts)(Unaudited) Three Months EndedJune 30, Six Months EndedJune 30, 2024 2023 2024 2023 Net sales $      4,312 $      4,182 $      8,547 $     8,273 Cost of goods sold 2,618 2,538 5,185 4,995 Gross profit 1,694 1,644 3,362 3,278 Selling, general and administrative expenses 1,045 983 2,044 1,937 Operating earnings 649 661 1,318 1,341 Other (income) expense: Interest expense – net 20 24