NYSE: GWW

Q1 2024 Earnings Call

April 25, 2024

Safe Harbor Statement and Non-GAAP Financial Measures

All 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 "anticipate," "estimate," "believe," "expect," "could," "forecast," "may," "predict," "project," "will," "continue," "commit," "target," "guidance," "deliver," or "beyond" 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; 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.

Additional information relating to certain non-GAAP financial measures referred to in this presentation is available in the appendix to this presentation, including: adjusted return on invested capital; adjusted gross profit, adjusted operating earnings, adjusted EBITDA; adjusted SG&A; daily sales; daily, organic daily sales; constant currency sales; daily, organic constant currency sales; constant currency sales in local days; daily, organic constant currency sales in local days; net leverage ratio; and free cash flow. This communication also includes certain non-GAAPforward-looking information (including, but not limited to slides 12 & 21). The Company believes that a quantitative reconciliation of such forward-looking information to the most comparable financial measure calculated and presented in accordance with GAAP cannot be made available without unreasonable efforts. A reconciliation of these non-GAAP financial measures would require the Company to predict the timing and likelihood of future restructurings, asset impairments, and other charges. Neither these forward-looking measures, nor their probable significance, can be quantified with a reasonable degree of accuracy. Accordingly, the most directly comparable forward-looking GAAP measures are not provided. Forward-lookingnon-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.

© 2024 W.W. Grainger, Inc.

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Opening

Remarks

D.G. Macpherson

Chairman and CEO

© 2024 W.W. Grainger, Inc.

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The Grainger Edge® embedded in everything we do

Our

Purpose

Our

Aspiration

"We Keep the

World Working®"

We relentlessly expand our leadership position by being the go-topartner for people who build and run safe, sustainable, and productive operations

Our Principles

Start with the

Win as One Team

Customer

Act with Intent

Invest in our

Success

Embrace

Compete with

Curiosity

Urgency

Do the Right Thing

© 2024 W.W. Grainger, Inc.

4

Q1 2024 Highlights

Strategic focus driving business forward

  • Continued advancing HTS-N.A. growth engines and strategic flywheel initiatives within Endless Assortment
  • Delivered another quarter of solid growth and profitability
    • Generated reported sales growth of 3.5% (4.9% in daily, organic constant currency)
    • Produced operating cash flow of $661 million, up 45.6% versus prior year
  • Returned $360 million to shareholders through dividends and share repurchases(1)
  • Announced quarterly dividend increase of 10.0%
  • Refreshed repurchase authorization for up to 5 million shares of common stock
  • Reaffirming FY 2024 guidance

Sales

Operating

Margin

EPS

(diluted)

Adj. ROIC(2)

$4.2B 1B

$154.1B8%

$9.62

$4.1B

42$4..9%1B

+4.9%

(daily, organic

constant currency)

  1. bps
    +0.1%

(270) bps

Note: Results are consistent on a reported and adjusted basis for the quarter. Numbers may not sum due to rounding.

(1) Includes only share repurchases and dividends related to Grainger common stock.

© 2024 W.W. Grainger, Inc.

5

  1. See appendix for a reconciliation of any non-GAAP financial measures.

Q1 2024

Results

Dee Merriwether

SVP and CFO

© 2024 W.W. Grainger, Inc.

6

Q1 2024 Results: Total Company

Summary Results

($ in millions)

Q1 2024

Q1 2023

% vs. PY

Fav/(Unfav)

Sales

$

4,235

$

4,091

3.5%

Daily Sales

66.2

63.9

3.5%

GP

1,668

1,634

2.1%

SG&A

999

954

(4.7)%

Op Earnings

$

669

$

680

(1.6)%

EPS (diluted)

$

9.62

$

9.61

0.1%

(% of sales)

Q1 2024

Q1 2023

bps vs. PY

Fav/(Unfav)

GP Margin

39.4 %

39.9 %

(50)

SG&A

23.6 %

23.3 %

(30)

Op Margin

15.8 %

16.6 %

(80)

Commentary vs. Prior Year

Sales increased 3.5% (reported and daily)

  • 4.9% sales growth on a daily, organic constant currency basis
  • Generated growth in both segments

Gross profit margin declined 50 bps

  • Margin contracted in both segments as anticipated

Operating margin declined 80 bps

  • SG&A deleverage from continued investment in demand generating activities

Diluted EPS of $9.62, up $0.01 versus prior year

Note: Results are consistent on a reported and adjusted basis. See appendix for a reconciliation of any non-GAAP financial measures. Numbers may not sum due to rounding.

© 2024 W.W. Grainger, Inc.

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Q1 2024 Results: High-Touch Solutions - N.A.

Summary Results

($ in millions)

Q1 2024

Q1 2023

% vs. PY

Fav/(Unfav)

Sales

$

3,405

$

3,294

3.4%

Daily Sales

53.2

51.5

3.4%

GP

1,423

1,397

1.9%

SG&A

813

775

(4.9)%

Op Earnings

$

610

$

621

(1.8)%

(% of sales)

Q1 2024

Q1 2023

bps vs. PY

Fav/(Unfav)

GP Margin

41.8 %

42.4 %

(60)

SG&A

23.9 %

23.5 %

(40)

Op Margin

17.9 %

18.9 %

(100)

Commentary vs. Prior Year

Sales increased 3.4% (reported and daily)

  • Increased 3.8% on a daily, organic constant currency basis
  • Growth across all geographies

Gross profit margin declined 60 bps, driven by:

  • Negative price / cost spread due to timing
  • Lap of one-time freight adjustment in prior year
  • Partially offset by sustained freight and supply chain efficiencies

Operating margin declined 100 bps

  • SG&A deleverage, as expected, from continued spend in demand generating investments

Note: Results are consistent on a reported and adjusted basis. See appendix for a reconciliation of any non-GAAP financial measures. Numbers may not sum due to rounding.

© 2024 W.W. Grainger, Inc.

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Sales Outgrowth: High-Touch Solutions - U.S.

Delivered market outgrowth of ~150 bps reflecting headwinds from price timing

U.S. MRO Market (1)

Annual Trend

800775

Impacted by

525

heightened

pandemic sales;

~450 bps

2-year avg

190

100

2019

2020

2021

2022

2023

0.5% -

(6%) -

10% -

11.5% -

4.0% -

1%

(5%)

11%

12.5%

5.0%

Quarterly Trend

750

Volume

525

550

outgrowth (2)

~450bps

225

~150

Q1'23

Q2'23

Q3'23

Q4'23

Q1'24

7.0% - 8.0%

4.5% - 5.0%

2.5% - 3.5%

2.5% - 3.0%

2.0% - 3.0 %

Target is to grow

400 to 500 bps faster than the market, on average, each year

  1. Company estimates using a compilation of IP - NAICS Manufacturing sub-index (volume component) and PPI - Final Demand, Private Capital sub-index (price component) as the primary inputs. Outgrowth measured as High-Touch Solutions - U.S. daily, organic sales growth less estimated U.S. MRO market growth.

(2) Volume outgrowth measured as High-Touch Solutions - U.S. daily, organic sales growth excluding price/customer mix contribution less estimated volume component of U.S MRO

© 2024 W.W. Grainger, Inc.

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market growth.

Q1 2024 Results: Endless Assortment

Summary Results

($ in millions)

Q1 2024

Q1 2023

% vs. PY

Fav/(Unfav)

Sales

$

751

$

724

3.7%

Daily Sales

11.7

11.3

3.7%

GP

220

214

2.8%

SG&A

161

156

(3.2)%

Op Earnings

$

59

$

58

1.7%

(% of sales)

Q1 2024

Q1 2023

bps vs. PY

Fav/(Unfav)

GP Margin

29.3 %

29.6 %

(30)

SG&A

21.4 %

21.5 %

10

Op Margin

7.9 %

8.1 %

(20)

Commentary vs. Prior Year

Sales increased 3.7% (reported and daily); up 10.0% on a daily, constant currency basis

  • Zoro growth of 5.1% on a daily basis
  • MonotaRO reported growth impacted by depreciating Yen; 13.1% growth in local days, local currency

Gross profit margin declined 30 bps

  • Unfavorable product mix at Zoro which was partially offset by freight efficiencies at MonotaRO

Operating margin declined 20 bps

  • Zoro decreased 150 bps due to unfavorable GP margin
  • MonotaRO increased 70 bps on higher GP margin coupled with improved operating leverage

Note: Results are consistent on a reported and adjusted basis for the quarter. See appendix for a reconciliation of any non-GAAP financial measures. Numbers may not sum due to rounding.

© 2024 W.W. Grainger, Inc.

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W.W. Grainger Inc. published this content on 25 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 April 2024 12:26:08 UTC.