W.W. Grainger (GWW -0.28%), the industrial supply and MRO (maintenance, repair, and operations) distributor, released its second-quarter 2025 results for the period ended June 30, 2025, on August 1, 2025. The headline news: sales grew to $4.55 billion (GAAP), coming in above analyst estimates of $4.53 billion (GAAP), while earnings per share (GAAP) reached $9.97, slightly under GAAP expectations of $10.07. Management revised its full-year 2025 adjusted EPS and margin outlook downward. Despite strong growth from its online Endless Assortment segment, which delivered 19.7% year-over-year sales growth, the period showed narrower profitability and highlighted new challenges for the remainder of fiscal 2025.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $9.97 | $10.07 | $9.76 | 2.2% |
| Revenue (GAAP) | $4.55 billion | $4.53 billion | $4.31 billion | 5.6% |
| Gross Profit Margin | 38.5% | 39.3% | (0.8) pp | |
| Operating Margin | 14.9% | 15.4% | (0.5) pp | |
| Free Cash Flow (Non-GAAP) | $202 million | N/A |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business overview and strategic focus
W.W. Grainger is a major distributor of industrial supplies, safety products, and related MRO solutions in North America and globally. Its customers range from small businesses to major enterprises, with more than 4.5 million clients worldwide. The company relies on a two-pronged model: High-Touch Solutions for complex, service-intensive procurement and the Endless Assortment platform, which offers a massive online catalog for simpler, price-driven buying.
The Endless Assortment segment, which includes Zoro (an online supply platform) and MonotaRO (a specialist in Asia), is designed to capture small and midsize businesses with fast, digital transactions. The High-Touch division, by contrast, provides hands-on account management, technical advice, and custom inventory solutions. Recent strategy continues to emphasize technology-driven enhancements, investing heavily in supply chain resilience, eProcurement tools, and platform reliability. Critical factors for success include the ability to manage input costs, adapt pricing quickly, and maintain high fulfillment standards for a diverse, low-concentration customer base.
Quarterly highlights: Financials, operations, and key drivers
Revenue (GAAP) rose 5.6% compared to the same quarter in 2024, and revenue (GAAP) exceeded analyst estimates. Much of this growth came from the Endless Assortment unit, where sales surged 19.7%, owing to continued strength at both Zoro and MonotaRO. These online platforms specialize in selling a massive range of industrial and safety products to smaller companies over the internet, using advanced eCommerce features to draw in new and repeat customers.
High-Touch Solutions North America delivered slower growth, with sales up just 2.5%. This segment caters to larger organizations requiring more personalized MRO and procurement support. Gross profit margin for High-Touch fell to 41.0%, down 70 basis points from the prior year. The decline came as the company faced “tariff-related inflation caused unfavorable price / cost timing and last-in, first-out (LIFO) inventory valuation headwinds.” In short, rising import costs outpaced what the firm could immediately pass on through customer price increases, hurting profitability in this segment.
Gross profit margin for the entire company (GAAP) fell 0.8 percentage points to 38.5%, while operating margin fell to 14.9% (GAAP). Management explained this was primarily due to higher costs stemming from expanded U.S. tariffs on imported goods, especially those from China, which flowed through mostly on private-label direct imports. These tariff impacts were only partly offset by price hikes, resulting in some short-term price/cost mismatches. The company’s approach is to maintain price-cost neutrality over time, but inventory and supplier negotiations can delay the ability to make price changes.
Free cash flow dropped to $202 million, reflecting increased capital expenditures, which almost doubled year over year ($175 million vs. $76 million in Q2 2024). The company also returned $336 million to shareholders through dividends and share repurchases.
The company declared a quarterly dividend, continuing its longstanding practice of returning capital to shareholders.
Segment and product performance
The most notable growth came from the Endless Assortment segment, which includes eCommerce-focused Zoro in the U.S. and MonotaRO in Japan, with sales up 19.7% compared to the same quarter in 2024. These platforms offer vast online product catalogs, extending the company’s market reach to small and mid-size businesses with needs for industrial supplies and safety equipment. Zoro in particular posted sharp gains in gross profit margin, helped by improved scale and repeat business among core commercial customers.
High-Touch Solutions North America, which focuses on providing value-added supply chain and MRO services directly to larger organizations, saw volume growth but also faced challenges. Management cited tariffs and related inventory timing issues as core drivers of the year’s margin compression. Because many products are custom sourced, passing on higher costs from tariffs is not always immediate, and some categories remain especially vulnerable to supply disruptions due to limited alternatives.
Supply chain flexibility was a recurring theme, with management noting prior investments in supply chain resilience and diversification, while also highlighting that some categories remain exposed to ongoing risks from the evolving tariff schedule. There are still product categories—such as private label items sourced predominantly from China—where alternatives are limited, and so the company expects some continued risk as more tariff impacts are negotiated and flow through to both costs and prices, especially in the second half of fiscal 2025.
There was no mention of material one-time items or accounting changes in the quarter. Management specifically noted ongoing analysis of “tariff-related inflation caused unfavorable price / cost timing,” indicating the cost increases have been modest so far but could intensify if tariffs remain elevated or spread to more product categories.
Looking ahead: Guidance and trends to watch
Management lowered its full-year 2025 guidance for both adjusted diluted earnings per share and adjusted operating margin. Adjusted diluted EPS for fiscal 2025 is now expected to range from $38.50 to $40.25, compared to the prior adjusted diluted EPS forecast of $39.00 to $41.50 for the full year 2025. Gross and operating margin guidance were also trimmed in the updated full-year 2025 adjusted guidance. Meanwhile, management raised its 2025 sales growth outlook to a new range of 4.4% to 5.9%, implying management expects top-line momentum to continue, but at lower profitability.
The guidance update cited “anticipated headwinds from certain known tariff impacts.” While the initial wave of cost pass-throughs has been modest—adding roughly 1% to 1.5% to prices on directly imported goods—these impacts could rise if negotiations with suppliers require further price increases. Management expects more significant effects from tariffs, and possibly reduced demand if cost inflation picks up in coming quarters, as discussed in management commentary during the first and second quarters of 2025.
Capital spending will ramp up to a new range of $0.55 billion to $0.65 billion for fiscal 2025. Share repurchases were reduced. Areas to watch in the months ahead include the pace at which new supplier cost increases are passed through, further changes in margin profiles for both major business segments, and the ongoing strength of the Endless Assortment unit as a buffer to softer results elsewhere. Management maintained its commitment to quarterly dividends.
GWW continues to pay a regular quarterly dividend. No changes to the dividend amount were announced for the quarter.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
