GWW 10-K & 10-Q changes, risk factors and insider trading

Market variables, such as inflation of product costs, labor rates, fuel, freight and energy costs, as well as geopolitical events, could negatively impact Grainger's ability to effectively manage its operating and administrative expenses. For example, geopolitical conflicts and related international responses have exacerbated, and may continue to exacerbate inflationary pressures, including increases in fuel and other energy costs. Additionally, climate-related policies, carbon pricing mechanisms, and regulations aimed at reducing emissions may increase energy and raw material costs, which could put additional pressure on Grainger’s margins. Inflation may also reduce demand for products, resulting in lower sales volumes. In addition, Grainger's inability to pass on increases in costs to customers in a timely manner, or at all, could cause Grainger's operating and administrative expenses to grow more rapidly than net sales, which could result in lower gross profit margins and lower net earnings.

Even when Grainger is able to find alternate sources for certain products, they may cost more or require Grainger to incur higher transportation costs, which could adversely impact Grainger's profitability and financial condition. For example, disruptions to global transportation networks, such as risinglabor sea levels impacting portsstrikes or extreme weather damaging logistics hubs, could increase delays and costs. Any of these circumstances could impair Grainger's ability to meet customer demand for products and result in lost sales, increased supply chain costs, penalties or damage to Grainger's reputation. Grainger’s ability to provide same-day shipping and next-day delivery is an integral component of Grainger’s business strategy and any such disruption could adversely impact results of operations and financial performance.

Any of these events could also reduce the volume of products and services these customers purchase from Grainger or impair the ability of Grainger’s customers to make full and timely payments and could cause increased pressure on Grainger’s pricing and terms of sale. Accordingly, a significant or prolonged slowdown in economic activity in Canada, Japan, Mexico, the U.K., the U.S. or any other major world economy, or a segment of any such economy, could negatively impact Grainger’s sales andsales, results of operations.operations and cash flow.

Unexpected product shortages, tariffs, product cost increases and risks in trade and tariff policies associated with Grainger’s suppliers could negatively impact customer relationships or result in an adverse impact on results of operations.

Grainger's products are purchased from more than 5,000 primary suppliers located in various countries around the world, not one of which accounted for more than 5% of total purchases.purchases in the year ended December 31, 2025.

For products sold in the U.S., Canada, Mexico and Mexico,Japan, Grainger requires its suppliers and sub-suppliers, to comply with Grainger’s Supplier Code of Ethics, or other similar responsible sourcing standards, as a condition of doing business with Grainger. Grainger’s Supplier Code of Ethics focuses on four main areas of ethical sourcing: (i) human rights and labor standards (including prohibitions on child and forced labor); (ii) environment, health and safety; (iii) sanctions, trade, bribery and corruption; and (iv) privacy and information security. TheGrainger's Supplier Code of Ethics also addresses how to report potential Supplier Code of Ethics violations and related concerns. Grainger does not control its suppliers and their sub-suppliers, and neither Grainger nor its suppliers or other partners may be able to uncover all instances of noncompliance with Grainger’s Supplier Code of Ethics and ethical and lawful business practices. Even an isolated incident, or the aggregate effect of individually insignificant incidents, can erode trust and confidence, particularly if they result in adverse publicity, governmental attention or investigations, product recalls, or litigation, and as a result, could tarnish Grainger’s brand and lead to adverse effects on Grainger’s business.business and results of its operations.

Further changes in U.S. and foreign trade policy (including new or additional increases in duties or tariffs), andincluding retaliatory actions by U.S. trade partnerspartners, could result in a worsening of economic conditions. The level of demand for Grainger's products and services is influenced in multiple ways by the price and availability of raw materials and commodities, including fuel. For example, climate-related regulations on transportation emissions could increase fuel costs, thereby impacting the cost of product distribution. Fluctuations in the price of fuel or increased demand for freight services could affect transportation costs. Grainger’s ability to pass on such increases in costs in a timely mannermanner, or at all, depends on market conditions. The inability to pass along cost increases could result in lower gross margins.margins and lower net earnings. In addition, higher prices could reduce demand for these products, resulting in lower sales volumes.

Grainger’s exposure to fluctuations in foreign currency rates results primarily from the translation exposure associated with the preparation of the Consolidated Financial Statements, as well as from transactions in currencies other than an entity’s functional currency. While the Consolidated Financial Statements are reported in U.S. dollars, the Financial Statements of Grainger’s subsidiaries outside the U.S. are prepared using the local currency as the functional currency and translated into U.S. dollars. In addition, Grainger is exposed to foreign currency exchange rate risk with respect to the U.S. dollar relative to the local currencies of Grainger’s international subsidiaries, primarily the Japanese yen, Mexican peso, and Canadian dollar, and British pound sterling, arising from transactions in the normal course of business, such as sales and loans to wholly owned subsidiaries, sales to customers, purchases from suppliers, and bank loans and lines of credit denominated in foreign currencies. The foreign currency exchange rate is driven by a variety of macroeconomic factors and fiscal decisions of various governments and central banks, all over which Grainger has no control. Grainger also has foreign currency exposure to the extent receipts and expenditures are not denominated in a subsidiary’s functional currency and that could have an impact on sales, costs and cash flows.currency. These fluctuations in foreign currency exchange rates have affected and may continue to affect Grainger’s results of operations and impact reported net salessales, costs, cash flows and net earnings.

To remain competitive, Grainger must be willing and able to respond to market pressures. Downward pressure on sales prices, changes in the volume of orders, and an inability to pass higher product costs on to customers could cause Grainger’s gross profit percentage to fluctuate or decline. Grainger may not be able to pass rising product costs to customers if those customers have ready product or supplier alternatives in the marketplace. These pressures could have a material effect on Grainger’s sales and profitability.

To manage these potential pressures, Grainger continuouslyroutinely considers the adoption of new operating initiatives, including new marketing programs, productivity improvements, inventory management and loss prevention initiatives, practical applications of artificial intelligence (AI) and other similar strategies. If Grainger is unable to sustain or grow sales, reduce costs, and prevent loss and fraud, among other actions, Grainger's results of operations and financial condition may be adversely affected.

Moreover, Grainger expects technological advancements, innovations and the increased use of eCommerce solutions within the industry to continue to evolve at a rapid pace. As a result, Grainger’s ability to effectively compete requires Grainger to respond and adapt to new industry trends and developments. Developing, upgrading, managing or implementing new technologies, including AI, business applications, strategies and innovations may require significant investment of resources by Grainger, may result in unexpected costs and disruptions to operations, may take longer than expected, may increase Grainger's vulnerability to cyber breaches,security incidents, attacks or intrusions, and may not provide all anticipated benefits.

From time to time, Grainger experiences changes in its customer base and product mix that affect gross margin. Changes in customer base and product mix result primarily from business acquisitions and divestitures, changes in customer demand, customer acquisitions, selling and marketing activities, competition and the increased use of eCommerce by Grainger and its competitors.

As its customer base and product mix change over time, Grainger must identify new products, product lines and services that respond to industry trends and customer needs. The inability to introduce new products and services and effectively integrate them into Grainger’s existing assortment could have a negative impact on future sales growth and Grainger’s competitive position. The inclusion of Grainger-branded products in the product assortment could subject Grainger to increased claims and litigation activity. In addition, any insurance or indemnification rights,rights related to Grainger-branded products, including against the manufacturer of such products, may be insufficient or unavailable to protect Grainger against potential loss exposures.

The trading prices and volumes of Grainger’s common stock may be subject to broad and unpredictable fluctuations due to changes in economic, political and market conditions, the financial results and business strategies of Grainger and its competitors, changes in expectations as to Grainger’s future financial or operating performance, including estimates by securities analysts and investors, Grainger’s failure to meet the financial performance guidance or other forward-looking statements provided to the public, speculation, coverage or sentiment in the media or investment community or by groups of individual investors, changes in capital structure, share repurchases or dividends, economic decline, political unrest or geopolitical conflict, outbreak of pandemic disease, and a number of other factors, including those discussed in this Item 1A. These factors, many of which are outside of Grainger’s control, could cause stockvolatility pricein securities prices and trading volumevolume, volatility orincluding Grainger’s stock priceprice, to decline. Volatility in the price of Grainger's securities could result in the filing of securities classlitigation actionor litigation,government investigations, which could result in substantial costs and the diversion of managementmanagement's time and resources.

Grainger has a controlling ownership interest in MonotaRO, which is listed on the Tokyo Stock Exchange (TSE). MonotaRO's disclosure and reporting obligations under TSE listing requirements and Japanese securities laws, including the timing of such obligations, vary and may continue to vary from Grainger's obligations under New York Stock Exchange listing requirements and U.S. securities laws. MonotaRO's listed securities may be subject to the same volatility, price and securities litigation risks to which Grainger's common stock is subject.

The successful execution of Grainger’s eCommerce growth strategy depends on a number of factors, including Grainger’s investment in its eCommerce platforms, consumer preferences and purchasing trends, and the ability to deliver a seamless procurement experience across digital and also physical retail channels. As its eCommerce platforms have grown in recent years, Grainger has increased, and expects to continue to increase, its investments in developing, managing and implementing technology information systems, software developmentdevelopment, machine learning and other capabilities to provide simplified customer interactions and to provide high-quality, user-friendly service to its customers and streamline customer interactions. Grainger has also made significant investments in digital advertising and customer acquisition and retention efforts for its eCommerce channels, including through paid and non-paid advertising such as display advertising, search engine optimization, email and mobile “push” notifications. If Grainger’s customer-facing technology systems are perceived as more difficult or less compelling for customers to use than those of Grainger’s competitors, or if digital marketing efforts are unsuccessful or if Grainger is otherwise unsuccessful at realizing the benefits of these investments, its reputation, financial condition and operating results may be adversely affected. Additionally, Grainger faces many risks and uncertainties beyond the Company's control, including theft, credit card fraud, and other fraudulent behavior.

Grainger accepts a variety of payment methods via its eCommerce channels, including credit card, debit card, PayPal and other payment methods and other online transactions, including through its eProcurement technologies whichthat communicate directly with Grainger.com and Grainger's other eCommerce channels. Although Grainger generally relies on third parties to facilitate eCommerce payments and payment processing services, Grainger may become subject to additional compliance requirements and regulations regarding these transactions and may also suffer losses from online fraudulent transactions on its eCommerce channels.channels, including theft, credit card fraud and other fraudulent behavior. In addition, Grainger must pay certain transaction fees relating to these transactions, which may increase over time and could have anadversely impact on product margin,margins, operating costs and profitability. Grainger’s eCommerce channels may become subject to further rules and regulations, and changes in these rules and regulations, or their interpretation, could increase the cost of doing business and adversely affect results of operations.

In order to compete, Grainger must attract, train, motivate, develop and retain executive leaders and key team members, and the failure to do so could have an adverse effect on results of operations.operations and financial condition.

In order to compete and haveexperience continued growth, Grainger must attract, train, motivate, develop, and retain executives and other key team members, including those in managerial, technical, sales, supply chain, technology developmentdevelopment, data science and information technology positions. Grainger competes to hire team members at increasingly competitive wage rates and then must train them and develop their skills and competencies. Qualified individuals needed to fill open positions may be in short supply in some areas. Further, changes in market compensation rates may adversely affect Grainger's labor costs. Competition for qualified team members could require Grainger to pay higher wages to attract a sufficient number of team members. In addition to intense competition for talent, workforce dynamics are constantly evolving. If Grainger does not manage changing workforce dynamics effectively, it could materially adversely affect Grainger's culture, reputation, and operational flexibility.

Additionally, Grainger's operational flexibility could be impacted by work stoppages or slowdowns resulting from collective bargaining or unionization ofefforts by team members, or situations preventing team members couldfrom decreaseaccessing Grainger'sGrainger operationalfacilities flexibilitysuch andas leadsocial unrest, major weather events or significant threats to workpublic stoppages or slowdowns.safety. The performance of Grainger’s stock price could impact Grainger’s use of equity-based compensation to attract and retain executives and other key team members. The success of Grainger's team member hiring and retention also depends on Grainger's ability to build and maintain a workplace culture that enables all team members to have the opportunity for a fulfilling and meaningful career.

Generally, higher wages and benefit costs, competition for talent, and the risk of an increase in team member turnover, could adversely affect Grainger's results of operations. Moreover, changes in immigration policies may impair our ability to recruitrecruit, hire and hireretain technical and professional talent globally. Further, failure to successfully hire executives and key team members or adequately plan for the succession, transition, and assimilation of executive leaders and team members in key roles, or to plan for the loss of executives and key team members, could adversely affect Grainger's businessresults resultsof operations and financial condition.

One of the reasons customers choose to do business with Grainger and team members choose Grainger as a place of employment is the reputation that Grainger has built over many years. Grainger devotes time and resources to initiatives that align with its corporate values and are designed to strengthen its business and protect and preserve its reputation. These efforts include maintaining high standards of product quality and safety, ethical business practices, strong customer relationships, operational reliability, and a commitment to providing a positive workplace environment. These programs couldcan be challenging to implement and costly to maintain, and Grainger’s actual or perceived failure to achieve its goals or uphold its commitments could adversely affect its reputation, business, and financial performance.

To be successful in the future, Grainger must continue to preserve, grow and leverage the value of Grainger’sits brand. Reputational value is based in large part on perceptions of subjective qualities. An isolated incident, or the aggregate effect of individually insignificant incidents, negative or inaccurate postings, articles, or comments on social media or the internet can erode trust and confidence, particularly if they result in adverse publicity, governmental investigations or litigation, and as a result, could tarnish Grainger’s brand and lead to adverse effects on Grainger’s business.

Grainger’s disclosures related to environmentalcorporate and social mattersresponsibility expose it to risks that could adversely affect its reputation and performance.

Grainger has established and publicly announced environmentalits andGrainger socialImpact programs,Program, including its efforts to addresseliminate climatewaste, change,reduce humanits rights,carbon footprint, improve workplace safety and anfoster inclusivea welcoming workplace. These statements reflect its current plans and are not guarantees that Grainger will be able to achieve them. Grainger’s pursuit of or inability to update, achieve, or accurately report its goals could damage its reputation, financial performance, and growth, leading to increased scrutiny from customers, enforcement authorities, and other various stakeholders and potential risks related to "anti-ESG sentiment", such as reputational harm, lawsuits, or market access restrictions.

Grainger’s ability to achieve anythe environmentalobjectives orof socialthe changeGrainger Impact Program is subject to numerous risks, some of which are outside of its control. For example, evolving climate-related regulations in multiple jurisdictions—such as stricter emissions limits, carbon disclosure mandates, and supply chain sustainability requirements—may require Grainger to adjust its operations and increase compliance investments. New environmental laws, regulations, and enforcement could strain Grainger's suppliers and result in increased compliance-related costs, which could result in higher product costs that are passed to Grainger. For instance, California's new climate disclosure requirements and SEC-mandated climate risk reporting could increase compliance burdens and legal exposure. Furthermore, our customers may adopt procurement policies that include environmental or social provisions orvarying requirements that their suppliers should comply with, or they may seek to include such provisions or requirements in their procurement terms and conditions.

Standards for tracking and reporting Grainger's activity, if any, related to environmentalthe andGrainger socialImpact mattersProgram continue to evolve. Grainger’s selection of voluntary disclosure frameworks and standards, and the interpretation or application of those frameworks and standards, may change from time to time or differ from those of others. Methodologies for reporting environmental and socialapplicable data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of Grainger’s operations and other changes in circumstances. Grainger’s processes and controls for reporting such matters across its operations and supply chain are evolving along with multiple disparate standards for identification, measurement, and reporting Regulatoryregulatory disclosure standards are or may become required by the SEC, European and other regulators (including, but not limited to, the EU Corporate Sustainability Reporting Directive, the EU Corporate Sustainability Due Diligence Directive, theand other state ofor California’s newfederal climate change disclosure requirements, and climate-change disclosure requirements from the SEC that may become effective), and such standards may change over time, which could result in revisions to Grainger’s current goals, reported progress in achieving such goals, or ability to achieve such goals in the future. If Grainger’s environmental and social practices do not meet evolving government, investor or other stakeholder expectations and standards, then Grainger’s reputation or its attractiveness as an investment, business partner, product or service provider or employer could be negatively impacted, and Grainger could be subject to litigation or regulatory proceedings.

In addition, AI algorithms may be flawed. Datasets may be insufficient or contain biased information. AI models deployed by Grainger or its partners may lead to unexpected or unintended outcomes that could erode trust in its digital platforms and potentially cause harm to individuals or society. These deficiencies and other failures of AI systems could subject Grainger to competitive harm, regulatory action, legal liability, including under new and proposed legislation regulating AI in jurisdictions such as the U.S. and European Union, new applications of existing data protection, privacy, intellectual property, and other laws, and brand or reputational harm. Additionally, Grainger’s obligations to comply with the evolving legal and regulatory landscape could entail significant costs or limit its ability to incorporate certain AI capabilities into its digital platforms. Some AI capabilities also present ethical issues, and Grainger may be unsuccessful in identifying or resolving issues before they arise. If Grainger enables or offers AI products or solutions or implement AI capabilities in its internal operations that are controversial because of their impact on human rights, the environment, privacy, employment, or other social, economic, or political issues, Grainger may experience brand or reputational harm or greater team member attrition.

Cybersecurity threats and incidents, including breaches of information systems securitysecurity, could damage Grainger’s reputation, disrupt operations, increase costs and/or decrease revenues.

Through Grainger’s sales and digital channels, as well as its ordinary course of business, Grainger collects and stores personally identifiable, confidential, proprietary and other information from customers, team members, suppliers, website visitors, and other entities or individuals so that they may, among other things, purchase products or services, enroll in promotional programs, register on Grainger’s websites or otherwise communicate or interact with Grainger. Moreover, Grainger’s operations routinely involve receiving, storing, processing and transmitting sensitive information pertaining to its business, customers, suppliers and team members, and other sensitive matters.

Cybersecurity threats are rapidly evolving and some of the means for obtaining unauthorized access to information in digitalsystems and other storage mediadata are becoming increasingly sophisticated.sophisticated, Eachincluding year,through cybersecuritythe threatuse of artificial intelligence to enhance social engineering and other techniques. Threat actors makemay numerous attemptsattempt to access the information stored in Grainger's information systems or the information systems of Grainger's third-party business partners. Loss of customer, supplier, and team member information, intellectual property or other business information, or failure to comply with data privacy and security laws, or failure to maintain systems or software, could, for example, disrupt operations, damage Grainger’s reputation and expose Grainger to claims from customers, suppliers, financial institutions, regulators, payment card associations, team members and others, any of which could have a material adverse effect on Grainger, including its business strategy, financial condition and results of operations. If successful, cybersecurity incidents may expose Grainger to risk of loss or misuse of proprietary or confidential information or disruptions of business operations.

Grainger's IT infrastructure also includes products and services provided by suppliers, vendors and other third-party business partners, and these third parties canmay experience cybersecurity threats, breaches, attacks, disruptions, and cybersecurityother incidents that impactcould theaffect securityconfidentiality, integrity or availability of systems and proprietary or confidential information. Moreover, Grainger shares information with these third parties in connection with the products and services they provide to the business. Although Grainger performs risk assessments on third parties where Grainger deems it appropriate to learn aboutevaluate their security program,programs, theresuch isassessments amay risknot thatidentify all risks, and the confidentiality of data held or accessed by them may be compromised or their systems may be disrupted or interrupted by threat actors.

Moreover, Grainger, andor its third-party business partners, may face cybersecurity threats and cybersecurity incidents which cancould include unauthorized access to information systems, business email compromise, viruses,misconfiguration of assets, exploitation of vulnerabilities, malware (including viruses and other malicious code,code), ransomware, denial-of-service attacks,attacks and other targeted or organized cyber-attacks. Cybersecurity incidents canmay also include team member failures, fraud, phishing or other social engineering attempts or other methods to cause confidential information, payments, account access or access credentials, or other data to be transmitted to an unintended recipient. Cybersecurity threatThreat actors also may attempt to exploit vulnerabilities in software that is commonly used by companies in cloud-based services and bundled software. If successful, those attempting to penetrate Grainger’s or its third-party business partners’ information systems may misappropriate intellectual property or personally identifiable, credit card, confidential, proprietary or other sensitive customer, supplier, team member or business information, or cause systems disruption. Further, cybersecurityCybersecurity threats or cybersecurity incidents that impact Grainger’s systems, or those of its third-party business partners, could have a material adverse effect on Grainger, including its business strategy, financial condition and results of operations,operations. includingSuch incidents could result in major disruptions to business operations, alteration or corruption of data or systems, costs related to remediation or the payment of ransom, and litigation including individual claims or consumer class actions, commercial litigation, administrative, and civil or criminal investigations or actions, regulatory intervention and sanctions or fines, investigation and remediation costs and possible prolonged negative publicity. While many of Grainger's agreements with these third parties include indemnification provisions, Grainger may not be able to recover sufficiently, or at all, under such provisions to adequately offset any losses it may incur.

In addition, a Grainger team member, contractor or other third party with whom Grainger does business may attempt to circumvent security measures or otherwise access Grainger’s information. Grainger’s systems aremay integratedhave integrations with customer systems and a breach of Grainger's systems could be used as an attempt to gain illicit access to customer systems and information. There can be no assurance that any future incidents will not be material to Grainger's business, operations or financial condition.

Techniques used to obtain unauthorized access or to sabotage systems change frequently and may not be recognized until they are launched against a target. Although Grainger has a dedicated Information Security team, Grainger may be unable to anticipateanticipate, detect or prevent these techniques or implement effective preventative measures.measures Further,in securityall circumstances. Security measures and efforts may not be effective in each instance and may be subject to human error or failures. Any breach of Grainger’s security measures or any breach, error or malfeasance by its third-party business partners could cause Grainger to incur significant costs to protectrespond anyto and remediate such incidents, including implementing additional safeguards and addressing impacts to customers, suppliers, team members and other parties whose information is compromised. Such a breach could also cause Grainger to make changes to its information systems and administrative processes to address security issues. Although Grainger maintains insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cybersecurity risks, depending on the nature, locationscope and extent of any event, such insurance coverage may be insufficient to cover all losses.

Grainger has experiencednot certainhad an information security or cybersecurity incidents, and in each instance, Grainger provided notifications where required by applicable law and adopted remedial measures. None of these incidents have beenincident deemed to be material to Grainger and Grainger has neither incurred any material net expenses nor been materially penalized or subject to any material settlement amounts with respect to such incidents.incident. However, there can be no assurance that a future breach or incident would not be material to Grainger’s operations and financial condition.

Grainger’s business is subject to legislative, legal, and regulatory risks and conditions specific to the countries in which it operates. In addition to Grainger’s U.S. operations, which in 20242025 generated approximately 82%81% of its consolidated net sales, Grainger operates its business principally through wholly owned subsidiaries in Canada, Mexico,Canada and the U.K.,Mexico, and its majority-owned subsidiary in Japan.

Failure to promptly comply with any of these laws, regulations and standards could result in civil, criminal, monetary and non-monetary fines, penalties, remediation costs and/or significant legal fees as well as potential damage to Grainger’s reputation. Changes in these laws, regulations and standards, or in theirhow interpretation,they are interpreted, as well as an inability to effectively engage with the officials or regulators responsible for them, could increase the cost of doing business, including, among other factors, as a result of increased investments in technology and the development of new operational processes. Furthermore, while Grainger has implemented policies and procedures and provides training designed to facilitate compliance with these laws, regulations and standards, there can be no assurance that team members, contractors, suppliers, vendors, or other third parties will not violate such laws, regulations and standards or Grainger’s policies. Any such failure to comply or violation could individually or in the aggregate materially adversely affect Grainger’s financial condition, results of operations and cash flows.

The agreements governing Grainger’s debt agreementsobligations and instruments contain representations, warranties, affirmative, negative and financial covenants, and default provisions. Grainger’s failure to comply with these restrictions and obligations could result in a default under such agreements, which may allow Grainger’s creditors to accelerate the related indebtedness. Any such acceleration could have a material adverse effect on Grainger’s business, financial condition, results of operations, cash flows, and its ability to obtain financing on favorable terms in the future.

W.W. Grainger, Inc. is a broad line distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America, Japan and the United Kingdom (U.K.). Grainger uses its high-touch solutions and endless assortment businesses to serve customers worldwide, who rely on Grainger for products and services that enable them to run safe, sustainable and productive operations.

The Company’s continued strategic aspiration for 20252026 is to relentlessly expand Grainger’s leadership position by being the go-to partner for people who build and run safe, sustainable, and productive operations. To achieve this, each Grainger business has a set of strategic growth drivers to drive top-line revenue and MRO market outgrowth. The High-Touch Solutions North America (High-Touch Solutions N.A.) segment is focused on three areas: advantaged MRO solutions, differentiated sales and services, and unparalleled customer service. In the Endless Assortment segment, the business is focused on product assortment expansion and innovative customer acquisition and retention capabilities. Additionally, all Grainger businesses are focused on continuously enhancing our operational processes to improve service and cost through customertechnology, experience,strong technologysupplier andrelationships, supply chain infrastructure and a continuous improvement mindset, which ultimately delivers long-term returns for shareholders.

The global economy continues to experience elevated levels of volatility and uncertaintyuncertainty, including towithin the commodity, laborlabor, and transportation markets, arisingdriven fromby a combination of geopolitical conditionsdevelopments and events,macroeconomic factors that can influence demand, cost and variousexecution economicrisk. These dynamics, together with recent changes in U.S. and financialforeign factors. These conditions have affected the Company's operationstariff and maytrade policies, continue to affectdrive intermittent disruptions in global capital markets and supply chains. These developments may impact the Company'sCompany’s operations, business, financial conditioncondition, and results of operations.

In this section, Grainger utilizes non-GAAP (as defined below) measures where it believes it will assist users of its financial statements in understanding its business. Non-GAAP measures exclude certain items affecting comparability that can affect the year-over-year assessment of operating results and other one-time items that do not directly reflect ongoing operating results. As discussed in the "Non-GAAP Measures" section, we have adjusted the current year results to exclude one-time losses recorded in SG&A expenses of $186 million within Other and $10 million within Endless Assortment related to the Cromwell divestiture and closure of Zoro U.K., respectively. For further information regarding the Company's non-GAAP measuresmeasures, including reconciliations to the most directly comparable U.S. generally accepted accounting principles (GAAP) measures, see "Non-GAAP Measures."

The following table is included as an aid to understanding the changes in Grainger's Consolidated Statements of Earnings for the twelve months ended December 31, 20242025 and 20232024 (in millions of dollars except per share amounts).:

The following table is included as an aid to understanding the changes of Grainger's total net sales, daily net sales and dailydaily, organic constant currency net sales from the prior period for the twelve months ended December 31, 20242025 (in millions of dollars):

Net sales of $17,168$17,942 million for the year ended December 31, 20242025 increased $690$774 million, orwhich 4%,represents anda 5% increase on a reported and daily, organic constant currency basis, net sales increased 5%basis compared to the same period in 2023.2024. Both High-Touch Solutions N.A. and the Endless Assortment segments contributed to sales growth in 2024.2025. For further discussion on the Company's net sales, see the Segment Analysis section below.

Gross profit of $6,758$7,009 million for the year ended December 31, 20242025 increased $262$251 million, or 4%, and gross profit margin of 39.4%39.1% wasdecreased flat30 basis points compared to the same period in 2023. Both segments contributed to gross profit dollar expansion in 2024. For further discussion on the Company's gross profit, see the Segment Analysis section below.

Selling, general, and administrative (SG&A) expenses of $4,121$4,514 million for the year ended December 31, 20242025 increased $190$393 million, or 5%.10%. Adjusted SG&A of $4,105$4,318 million increased $200$213 million, or 5%, compareddue to the same period in 2023 driven by higher marketing and payroll and benefit expenses. SG&A leveragebenefits and adjustedmarketing SG&A leverage decreased 20 basis pointsexpenses in 2024.2025.

Operating earnings of $2,637$2,495 million for the year ended December 31, 20242025 increaseddecreased $72$142 million, or 3%. Adjusted operating earnings of $2,653 million increased $62 million, or 2%,5%, compared to the same period in 20232024. dueAdjusted operating earnings of $2,691 million increased $38 million, or 1%, compared to higherthe grosssame profit dollars, partially offset by increased SG&A expense. Operating margin and adjusted operating margin decreased 20 basis pointsperiod in 2024.

Income tax provisiontaxes of $595$622 million for the year ended December 31, 20242025 decreasedincreased $2$27 million, compared to the same period in 2023. Adjusted income taxes of $599 million decreased $2 million compared to the same period in 2023.2024. Grainger's effective tax rates were 23.0%25.6% and 23.9%23.0% for the years ended December 31, 20242025 and 2023,2024, respectively. The adjusted effective tax rates were 23.0%23.7% and 23.8%.23.0% for the twelve months ended December 31, 2025 and 2024, respectively. The Company's adjusted effective tax rate increase was positivelyprimarily impacteddue to the prior year benefit from the expiration of a statutestatue of limitation period in 2024.

Diluted earnings per share was $38.71$35.40 for the year ended December 31, 2024,2025, ana increasedecrease of 7%9% compared to $36.23$38.71 for the same period in 2023.2024. Adjusted diluted earnings per share was $38.96$39.48 for the year ended December 31, 2024,2025, an increase of 6%1% compared to $36.67$38.96 for the same period in 2023.2024.

In this section, Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. For further information regarding the Company's non-GAAP measuresmeasures, including reconciliations to the most directly comparable GAAP measures, see "Non-GAAP Measures." For further segment information, see Note 1213 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.

Net sales of $13,720$13,993 million for the year ended December 31, 20242025 increased $453$273 million, or 2%, and on a daily constant currency basis increased 3% compared to the same period in 2023.2024. The increase was primarily due to volume.

Gross profit of $5,741$5,832 million for the year ended December 31, 20242025 increased $195$91 million, or 4%,2%, and gross profit margin of 41.8%41.7% wasdecreased flat10 basis points compared to the same period in 2023.2024.

SG&A expenses of $3,356$3,478 million for the year ended December 31, 20242025 increased $144$122 million, or 5%, and adjusted SG&A of $3,341 million increased $155 million, or 5%4%, compared to the same period in 2023.2024. Adjusted SG&A increased $137 million, or 4%. The increase was primarily due to higher marketing and payroll and benefit expenses. SG&A leverage decreased 20 basis pointsbenefits and adjustedmarketing SG&A leverage decreased 30 basis points compared to the same periodexpenses in 2023.2025.

Operating earnings of $2,385$2,354 million for the year ended December 31, 20242025 increaseddecreased $51$31 million, or 2%,1%, andcompared adjustedto the same period in 2024. Adjusted operating earnings ofdecreased $2,400 million increased $40$46 million, or 2% compared to the same period in 2023.2024.

Net sales of $3,134$3,625 million for the year ended December 31, 20242025 increased $218$491 million, orwhich 7%,represents anda 16% increase on a dailyreported and daily, organic constant currency basis, increased 12%basis compared to the same period in 2023.2024. The increase was due to salesrepeat growth of 12%, driven by customer acquisitionbusiness for the segment and enterprise customer growth at MonotaRO. Sales growth was partially offset by unfavorable currency exchange of 5% due to changes in the exchange rate between U.S. dollar and the Japanese yen.

Gross profit of $923$1,085 million for the year ended December 31, 20242025 increased $59$162 million, or 7%,18%, and gross profit margin of 29.5%29.9% decreasedincreased 1040 basis points compared to the same period in 2023.2024.

SG&A expenses of $663$740 million for the year ended December 31, 20242025 increased $32$77 million, or 5%,12%, compared to the same period in 2023.2024. Adjusted SG&A of $730 million increased $67 million, or 10%, compared to the same period in 2024. The increase was primarily due to higher marketing expenses in 2024. SG&A leverage improved 40 basis points compared to the same period in 2023.2025.

Operating earnings of $260$345 million for the year ended December 31, 20242025 increased $27$85 million, or 12%,33%, compared to the same period in 2023.2024. Adjusted operating earnings of $355 million increased $95 million, or 37%, compared to the same period in 2024.

Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. Non-GAAP measures exclude certain items affecting comparability that can affect the year-over-year assessment of operating results and other one-time items that do not directly reflect ongoing operating results. The Company adjusts its reported net sales when there are differences in the number of U.S. selling days relative to the prior year period and also excludes the impact on reported net sales due to changes in foreign currency exchange rate fluctuations and results of certain divested or closed businesses. Adjusted results including adjusted SG&A, adjusted operating earnings, adjusted net earnings and adjusted diluted EPS exclude certain non-recurring items, including restructuring charges, asset impairments, gains and losses associated with business divestitures and other non-recurring, infrequent or unusual gains and losses from the Company’s most directly comparable reported U.S. generally accepted accounting principles (GAAP) results. The Company believes its non-GAAP measures provide meaningful information to assist investors in understanding financial results and assessing prospects for future performance as they provide a better baseline for analyzing the ongoing performance of its businesses by excluding items that may not be indicative of core operating results. Grainger’s non-GAAP financial measures should be considered in addition to, and not as a replacement for or as a superior measure to its most directly comparable GAAP measures and may not be comparable to similarly titled measures reported by other companies.

In the second quarter of 2024, the Company recorded restructuring charges in SG&A expenses of $15 million in the High-Touch Solutions N.A. segment and $1 million in Grainger's Other businesses. The charges consisted primarily of team member severance and benefit costs. The Company does not expect these actions to have a material effect on its future results of operations.

Grainger believes its current balances of cash and cash equivalents, marketable securities and availability under its revolving credit facilityfacility, which supports the Company's commercial paper program, will be sufficient to meet its liquidity needs for the next twelve months. The Company expects to continue to invest in its business and return excess cash to shareholders through cash dividends and share repurchases, which it plans to fund through cash flows generated from operations. Grainger also maintains access to capital markets and may issue debt or equity securities from time to time, which may provide an additional source of liquidity.

As of December 31, 20242025 and 2023,2024, Grainger had cash and cash equivalents of $1,036$585 million and $660$1,036 million, respectively. The increasedecrease in cash was primarily due to cash flowsused fromin operationsfinancing andactivities issuancedue to repayment of newthe long-term1.85% debt,Senior partiallyNotes offsetin bythe amount of $500 million and continued capital expenditureproject spend and higher volume of share repurchases.spending. The Company had approximately $2.3$1.8 billion in available liquidity as of December 31, 2024.2025.

Net cash provided by operating activities was $2,111$2,015 million and $2,031$2,111 million for the year ended December 31, 20242025 and 2023,2024, respectively. The increasedecrease was primarily driven by continuedunfavorable growthchanges in networking earnings.capital primarily due to an increase in accounts receivable and inventory inflation.

Net cash used in investing activities was $520$645 million and $422$520 million for the year ended December 31, 20242025 and 2023,2024, respectively. The increase reflects the continued investment in U.S. and MonotaRO supply chain capacity expansion throughout 2024.2025.

Net cash used in financing activities was $1,180$1,825 million and $1,278$1,180 million for the year ended December 31, 20242025 and 2023,2024, respectively. The decreaseincrease in cash used in financing activities was primarily due to the issuancerepayment of long-termthe debt,1.85% whichSenior includesNotes in the amount of $500 million in unsecured senior notes partially offset by higher treasury stock repurchases in 2024.2025.

Working capital as of December 31, 20242025 was $3,282$3,515 million, an increase of $204$233 million compared to $3,078$3,282 million as of December 31, 2023.2024. The increase was primarily due to sustained sales growth.growth and inventory inflation. As of December 31, 20242025 and 2023,2024, the ratio of current assets to current liabilities was 2.93.0 and 2.8,2.9, respectively.

Company inventories primarily consist of merchandise purchased for resale and are valued at the lower of cost or market value.resale. The majority of the Company’s inventory is accounted for using the last-in, first-out (LIFO) method.method, valued at the lower of cost or market value. Market value is based on an analysis of inventory trends including, but not limited to, reviews of inventory levels, sales and cost information and on-hand quantities relative to the sales history for the product and shelf-life. The Company's methodology for estimating whether adjustments are necessary is continually evaluated for factors including significant changes in product demand, liquidation or disposition history values and market conditions such as inflation and other acquisition costs, including freight and duties. If business or economic conditions change, estimates and assumptions may be adjusted as deemed appropriate.

There have been no material changes from the risk factors previously disclosed in Part 1,I, Item 1A: Risk Factors in the Company's 2025 Form 10-K.

For a discussion of the Company’s strategic priorities for 2026, see Part 1,I, Item 1: Business and Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2025 Form 10-K.

The Company is actively monitoring economic conditions in the U.S. and key international markets, including the continued uncertainty regarding evolving tariff and trade policies, changes in interest rates, foreign currency exchange rate fluctuations, inflationary pressures, rising fuel and transportation costs, and the risk of a global or regional economic recession. Although the precise timing and magnitude of these factors remains uncertain, the Company believes its strategy is well positioned to navigate a range of outcomes. The Company continues to evaluate the impact of evolving tariff and trade policies, including potential changes in product sourcing strategies, cost management and customer pricing, and has implemented various strategies designed to mitigate certain adverse effects of changing inflationary conditions and challenges in our supply chain, while striving to maintain market competitiveness.

Results of Operations –Three Months Ended MarchJune 31,30, 2026

The following table is included as an aid to understanding the changes in Grainger’s Condensed Consolidated Statements of Earnings for the three months ended MarchJune 31,30, 2026 and 2025 (in millions of dollars except per share amounts):

The following table is included as an aid to understanding the changes of Grainger's total net sales, daily net sales and daily, organic constant currency net sales compared to the prior year period for the three months ended MarchJune 31,30, 2026 and 2025 (in millions of dollars):

Net sales of $4,742$5,021 million for the three months ended MarchJune 31,30, 2026 increased $436$467 million, or 10%, and on a daily, organic constant currency basis, net sales increased 12%14% compared to the same period in 2025. Both High-Touch Solutions N.A. and the Endless Assortment segment contributed to sales growth in the firstsecond quarter of 2026. For further discussion on the Company's net sales, see the Segment Analysis section below.

Gross profit of $1,896$1,984 million for the three months ended MarchJune 31,30, 2026 increased $186$229 million, or 11%,13%, and gross profit margin of 40.0%39.5% increased 30100 basis points compared to the same period in 2025. For further discussion on the Company's gross profit, see the Segment Analysis section below.

Selling, general and administrative (SG&A) expenses of $1,103$1,177 million for the three months ended MarchJune 31,30, 2026 increased $65$100 million, or 6%,9%, compared to the same period in 2025. The increase was due to higher payroll and benefit expenses in the firstsecond quarter of 2026 partially offset by a benefit related to the exit from the U.K. market in the fourth quarter of 2025.

Operating earnings of $793$807 million for the three months ended MarchJune 31,30, 2026 increased $121$129 million, or 18%,19%, compared to the same period in 2025.

Income tax expense of $194$198 million for the three months ended MarchJune 31,30, 2026 increased $37$45 million compared to the same period in 2025. Grainger's effective tax rates were 25.1%24.8% and 23.9%23.2% for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The Company's effective tax rate increase was primarily due to decreased tax credit activity in the current year period and the impact of tax legislation effective in 2026.

Diluted earnings per share was $11.65$12.01 for the three months ended MarchJune 31,30, 2026, an increase of 18%20% compared to $9.86$9.97 for the same period in 2025.

Net sales of $3,752$3,967 million for the three months ended MarchJune 31,30, 2026 increased $355$423 million, orwhich 11%,represents anda 12% increase on a reported and daily, constant currency basis increased 10% compared to the same period in 2025. The increase was primarily due to equal contribution of 5% for both volume and price.volume.

Gross profit of $1,599$1,660 million for the three months ended MarchJune 31,30, 2026 increased $160$206 million, or 11%,14%, and gross profit margin of 42.6%41.8% increased 2080 basis points compared to the same period in 2025. The increase was primarily due to tariff refund benefits recognized in the quarter, which was partially offset by an increase in freight costs.

SG&A expenses of $911$974 million for the three months ended MarchJune 31,30, 2026 increased $72$109 million, or 9%,13%, compared to the same period in 2025. The increase was primarily due to higher payroll and benefit expenses.

Operating earnings of $688$686 million for the three months ended MarchJune 31,30, 2026 increased $88$97 million, or 15%,17%, compared to the same period in 2025.

Net sales of $990$1,054 million for the three months ended MarchJune 31,30, 2026 increased $162$125 million, or 20%,14%, and on a daily, organic constant currency basis increased 22%21% compared to the same period in 2025. The increase was due to repeat business for the segment and enterprise customer growth at MonotaRO. Sales growth was partially offset by unfavorable currency exchange of 6% due to changes in the exchange rate between the U.S. dollar and the Japanese yen.

Gross profit of $297$324 million for the three months ended MarchJune 31,30, 2026 increased $52$47 million, or 21%,17%, and gross profit margin of 30.0%30.7% increased 4090 basis points compared to the same period in 2025. The increase was primarily due to favorable discount activity at Zoro and favorable product mix across the segment.

SG&A expenses of $192$203 million for the three months ended MarchJune 31,30, 2026 increased $19$18 million, or 11%,10%, compared to the same period in 2025. The increase was primarily due to higher marketing and payroll and benefit expenses.

Operating earnings of $105$121 million for the three months ended MarchJune 31,30, 2026 increased $33$29 million, or 46%,32%, compared to the same period in 2025.

The following tables provide reconciliations of reported net sales growth compared to the prior year period in accordance with GAAP to the Company's non-GAAP measures daily net sales and daily, organic constant currency net sales for the three months ended MarchJune 31,30, 2026 and 2025 (in millions of dollars):

As of MarchJune 31,30, 2026 and December 31, 2025, Grainger had cash and cash equivalents of $695$589 million and $585 million, respectively. The Company had approximately $1.9$1.8 billion in available liquidity as of MarchJune 31,30, 2026.

Net cash provided by operating activities was $739$1,183 million and $646$1,023 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The increase was primarily due to higher net earnings.

Net cash used in investing activities was $178$294 million and $125$283 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The increase2026 wasinvesting dueactivities towere capitalin expendituresline primarilywith prior year and driven by continued MonotaROinvestment in supply chain investments inacross the first three months of 2026.Company.

Net cash used in financing activities was $446$874 million and $898$1,201 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The decrease in cash used in financing activities was primarily due to the repayment of the 1.85% Senior Notes in the amount of $500 million in 2025.

Working capital as of MarchJune 31,30, 2026 was $3,490$3,615 million, aan decreaseincrease of $25$100 million compared to $3,515 million as of December 31, 2025. As of MarchJune 31,30, 2026 and December 31, 2025, the ratio of current assets to current liabilities was 2.62.8 and 3.0, respectively.

Total debt as a percent of total capitalization was 35.7%34.8% and 37.5% as of MarchJune 31,30, 2026 and December 31, 2025, respectively.

The following table summarizes the Company's credit ratings as of MarchJune 31,30, 2026:

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; 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 initiativesinitiatives, acquisitions or business strategies, including with respect to Grainger's eCommerce platforms and artificial intelligence; failure to adequately protect our 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, including new or revised provisions relating to contract compliance or performance; 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 existing, new, or increased tariffs, trade issues and changes in trade policies, inflation, and interest rates; currency exchange rate fluctuations; market volatility, including price and trading volume volatility or price declines of Grainger's common stock; an incident that adversely impacts Grainger’s reputation or brand; commodity price volatility; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; effects of outbreaks of pandemic disease or viral contagions, global conflicts, natural or human inducedhuman-induced disasters, extreme weather, and other catastrophes or conditions; effects of climate change; failure to execute on our corporate responsibility efforts; competition for, or failure to attract, retain, train, motivate and develop executives and key team members; loss of key members of management or key team members; loss of operational flexibility and potential for work stoppages or slowdowns if team members 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 identified under Part I, Item 1A: Risk Factors and elsewhere in Grainger's 2025 Form 10-K, as updated from time to time in Grainger's Quarterly Form 10-Q.

The preceding list is not intended to be an exhaustive list of all of the factors that could impact Grainger's forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on Grainger's forwardforward-looking looking-statementsstatements and Grainger undertakes no obligation to update or revise any of its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.