AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 4/6 · 18/10/2026
Moat—
Insufficient evidence for every rubric criterion; no category score is inferred.
structural advantage · — · Supplier breadth, facilities and proprietary assets establish capabilities, but not durable relative cost or differentiation advantages.
durability · — · Reported commercial gains span several years, but the passages do not establish replication barriers or a defensible duration for the candidate advantages.
customer dependency · — · Predominantly product-delivery obligations do not demonstrate procurement integration, switching friction or dependence on Grainger specifically.
erosion resilience · — · Growth and recent earnings improvement are positive, but mixed margins and missing comparative economics prevent assessment of structural resistance to erosion.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · — · Sales growth and margin movements do not separate realized pricing from volume, mix or costs. Market-dependent cost pass-through is a risk disclosure, not an observed pricing outcome.
retention · — · Multi-year sales growth supplies indirect demand evidence, but acquisition spending and absent repeat-customer disclosures prevent attribution to retention or engagement by existing customers.
margin resilience · 2/4 · Mixed demonstrated performance: adjusted constant-currency operating margin declined in 2024 and 2025. First-half 2026 statements show gross margin improving from approximately 39.1% to 39.7% and operating margin from 15.2% to 16.4%, calculated from supplied figures. This recovery does not isolate pricing power.
contractual freedom · 2/4 · Disclosed GPO arrangements involve negotiated prices and aggregated buyer power; government contracts can be modified or terminated by the customer. These establish meaningful constraints, while companywide repricing rights and the current extent of GPO exposure remain unknown.
Predictability100
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 5.14
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 1.57
Financial strength93
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 87.58
- netDebtEbitGrade
- 84.75
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 100.00
- Debt / FCF (x)
- 1.87
- Net debt / operating income (x)
- 0.76
- Interest coverage (x)
- 30.80
- Current ratio (x)
- 2.83
Capital allocation96
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 48.61
- 3-year average dilution (%)
- -2.00
- 3-year average SBC / revenue (%)
- 0.36
- cashConversionGrade
- 82.42
Management75
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 3/4 · First-half 2026 operating cash flow of $1,183 million covered $281 million of capital expenditures, $461 million of repurchases and $253 million of dividends, alongside net debt repayment. Actual 2025 share counts declined despite equity issuance. This supports disciplined funding and dilution control; investment returns weakened in 2025, and repurchase valuation and expansion paybacks remain unproven.
incentive alignment · 3/4 · Actual 2025 equity compensation combined performance and time-vested awards; annual incentives included sales growth and ROIC. The completed 2023–2025 PSU cycle used relative growth and margin metrics and received an approved 90% target payout. These establish functioning alignment mechanisms, without proving exceptional target rigor or executive ownership.
execution · 3/4 · Reported positive U.S. share-gain performance, accelerating Endless Assortment growth across 2023–2025, and higher first-half 2026 sales, earnings and operating cash demonstrate strong execution. Assessment relies on operating evidence and issuer-defined relative metrics; 2025 margin and ROIC declines temper it.
governance · 3/4 · Disclosed independent committees, an independent lead director, annual elections, shareholder meeting rights, proxy access, clawback and hedging restrictions support strong governance structures. A late Form 4 is a realized compliance lapse. Nominee independence is not treated as proof of a completed election, and policy disclosures do not establish exceptional governance effectiveness.
Evidence
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 in the year ended December 31, 2025.
Risk factors: primary supplier breadth and concentration · Filed 19/02/2026
As of December 31, 2025, Grainger’s owned and leased facilities totaled approximately 28.7 million square feet.
Properties: owned and leased facility footprint · Filed 19/02/2026
Capital Expenditures In fiscal 2025, the Company's capital expenditures were $684 million and $541 million for the years ended December 31, 2025 and 2024, respectively.
Liquidity and capital resources: actual 2025 and 2024 capital expenditures · Filed 19/02/2026
share gain performance for 2023 (+518 bps), 2024 (+97 bps) and 2025 (+235 bps).
Executive compensation: reported annual U.S. share-gain performance · Filed 10/03/2026
Grainger’s ability to pass on such increases in costs in a timely manner, or at all, depends on market conditions.
Risk factors: market-dependent ability to pass through costs · Filed 19/02/2026
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.
Risk factors: competing customer-facing systems and investment effectiveness · Filed 19/02/2026
daily sales growth of 18.0% and MonotaRO daily, organic constant currency sales growth of 15.3% in local days.(1) Financial Results • We finished the year with record sales of $17.9 billion, up 4.5% on a reported basis or 4.9% in daily, organic constant currency sales.(1)(2) • During the year, operating margin decreased by 50 bps on an adjusted basis due primarily to lower gross margin, higher operating expenses, and slower sales in the High-Touch Solutions—N.A.
Compensation discussion: 2025 sales growth and adjusted operating-margin decline · Filed 10/03/2026
segment, we leveraged proprietary data assets, including artificial intelligence and machine learning capabilities to further our competitive advantage.
Driving strategy forward: management claim about proprietary data and AI · Filed 10/03/2026
Grainger’s business relies on the use, validity and continued protection of certain proprietary information and intellectual property, which includes current and future patents, trade secrets, trademarks, service marks, copyrights and confidentiality agreements as well as license and sublicense agreements to use intellectual property owned by affiliated entities or third parties.
Risk factors: proprietary information and intellectual property · Filed 19/02/2026
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.
Risk factors: digital advertising, acquisition and retention investment · Filed 19/02/2026
Grainger, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (In millions of dollars and shares, except for per share amounts) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 Net sales $ 5,021 $ 4,554 $ 9,763 $ 8,860 Cost of goods sold 3,037 2,799 5,883 5,395 Gross profit 1,984 1,755 3,880 3,465 Selling, general and administrative expenses 1,177 1,077 2,280 2,115 Operating earnings 807 678 1,600 1,350 Other expense (income): Interest expense – net 20 20 41 41 Other – net (11) (3) (14) (9) Total other expense – net 9 17 27 32 Earnings before income taxes 798 661 1,573 1,318 Income tax provision 198 153 392 310 Net earnings 600 508 1,181 1,008 Less net earnings attributable to noncontrolling interest 30 26 56 47 Net earnings attributable to W.W.
Unaudited consolidated earnings: first-half 2026 and 2025 results · Filed 04/08/2026
(4) Based on three-year average year-over-year change in total Company adjusted, constant currency operating margin performance for 2023 (+126 bps), 2024 (-29 bps) and 2025 (-44 bps).
Executive compensation: 2023–2025 adjusted constant-currency margin changes · Filed 10/03/2026
In addition, Grainger has entered, and may in the future continue to enter, into contracts with group purchasing organizations (GPOs) that aggregate the buying power of their member customers in negotiating selling prices.
Risk factors: existing GPO contracts and negotiated selling prices · Filed 22/02/2024
In addition, Grainger’s government contracts may provide for termination, reduction or modification by the government at any time, with or without cause.
Risk factors: government rights to terminate, reduce or modify contracts · Filed 19/02/2026
5 W.W. Grainger, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions of dollars) (Unaudited) Six Months Ended June 30, 2026 2025 Cash flows from operating activities: Net earnings $ 1,181 $ 1,008 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for credit losses 13 13 Deferred income taxes and tax uncertainties 31 1 Depreciation and amortization 128 125 Non-cash lease expense 40 41 Stock-based compensation 39 35 Change in operating assets and liabilities: Accounts receivable (510) (212) Inventories 14 (19) Prepaid expenses and other assets (32) (33) Trade accounts payable 312 231 Operating lease liabilities (48) (53) Accrued liabilities 21 (60) Income taxes – net (4) (37) Other non-current liabilities (2) (17) Net cash provided by operating activities 1,183 1,023 Cash flows from investing activities: Capital expenditures (281) (300) Proceeds from sale of assets — 4 Other – net (13) 13 Net cash used in investing activities (294) (283) Cash flows from financing activities: Short-term borrowings (repayments), original maturities of 90 days or less, net (125) — Proceeds from debt 52 63 Payments of debt (4) (503) Proceeds from stock options exercised 8 2 Payments for employee taxes withheld from stock awards (30) (30) Purchases of treasury stock (461) (507) Purchases of noncontrolling interests (70) — Cash dividends paid (253) (225) Other – net 9 (1) Net cash used in financing activities (874) (1,201) Exchange rate effect on cash and cash equivalents (11) 22 Net change in cash and cash equivalents 4 (439) Cash and cash equivalents at beginning of year 585 1,036 Cash and cash equivalents at end of period $ 589 $ 597 The accompanying notes are an integral part of these financial statements.
Unaudited cash flows: operating cash, investment, financing and shareholder returns · Filed 04/08/2026
The activity related to outstanding common stock and common stock held in treasury was as follows: 2025 2024 2023 Outstanding Common Stock Treasury Stock Outstanding Common Stock Treasury Stock Outstanding Common Stock Treasury Stock Balance at beginning of period 48,332,870 61,326,349 49,317,402 60,341,817 50,256,323 59,402,896 Exercise of stock options 45,618 (45,618) 113,274 (113,274) 139,189 (139,189) Settlement of restricted stock units – net of 26,078, 39,118 and 32,800 shares retained, respectively 64,422 (64,422) 79,400 (79,400) 83,795 (83,795) Settlement of performance share units – net of 8,596, 9,629 and 18,521 shares retained, respectively 14,380 (14,380) 15,110 (15,110) 28,135 (28,135) Purchase of treasury shares (1,038,509) 1,038,509 (1,192,316) 1,192,316 (1,190,040) 1,190,040 Balance at end of period 47,418,781 62,240,438 48,332,870 61,326,349 49,317,402 60,341,817 NOTE 11 - ACCUMULATED OTHER COMPREHENSIVE EARNINGS (LOSSES) (AOCE) The components of AOCE consisted of the following (in millions of dollars): Foreign Currency Translation and Other Defined Postretirement Benefit Plan Other Employment-related Benefit Plans Total Foreign Currency Translation Attributable to Noncontrolling Interests AOCE Attributable to W.W.
Note 10: actual share issuance, repurchases and outstanding share counts · Filed 19/02/2026
share gain (a relative metric), Endless Assortment daily, organic constant currency sales growth in local days, and total Company adjusted, constant currency operating margin performance, each equally weighted.
Executive compensation: equally weighted 2023 PSU performance metrics · Filed 10/03/2026
Therefore, the Committee approved the payout for these PSUs at 90% of target.(1)
Executive compensation: approved completed-cycle PSU payout · Filed 10/03/2026
The equity mix for the 2025 long-term incentive program for the CEO was 60% PSUs and 40% time-vested RSUs; the other NEOs had an equity mix of 50% PSUs and 50% time-vested RSUs.
Executive compensation: actual 2025 long-term incentive equity mix · Filed 10/03/2026
Our annual incentive program provided NEOs incentives to grow the business (sales growth) while achieving investment returns for the Company’s shareholders (ROIC).
Executive compensation: annual incentives tied to sales growth and ROIC · Filed 10/03/2026
Key aspects include: • 11 of our 12 Director nominees are independent • Annual election of all Directors • 100% independent Board Committees • Majority voting with Director resignation policy • Proxy access in Grainger’s By-laws (“By-laws”) • Shareholders may call special meetings • No poison pill or shareholder rights plan • No “overboarded” Directors under the voting guidelines of Institutional Shareholder Services (“ISS”) • Board orientation and education programs • Active shareholder engagement • 33% of our Director nominees are women and 25% of our Director nominees are racially diverse • Skills/demographics matrix regularly reviewed and annually disclosed • Commitment to Board refreshment—six new Directors since 2020 • Well-defined Director recruitment strategy and process • Appropriate mix of Director tenures • Age 72 retirement guideline • Robust Director selection process • Onboarding orientation centered on strategy, competition, financial reporting, governance and risk management • Annual Board and Committee evaluations and Director self-assessments • Independent Lead Director, elected annually by and from the independent Directors • Regular executive sessions, where independent Directors meet without management present to allow for candid discussion of management performance, succession planning, and other sensitive matters • Active Board oversight of strategy, risk management, corporate culture, and Grainger Impact Program focus areas • Annual review of Enterprise Risk Management (“ERM”) programs • Committees assist in oversight of risk areas related to Committee responsibilities • Active role in succession planning and management development • Business Conduct Guidelines, Equity Award Agreement Clawback Provisions, NYSE-Compliant Clawback Policy, Equity Ownership Requirements, and Prohibition on Hedging/Pledging of Company Stock under the Company’s Insider Trading Policy • “One vote per share” on all matters, including director elections Operating Principles for the Board of Directors The Board recognizes that defining its role is an evolving process and has established Operating Principles for the Board of Directors (the “Operating Principles”) as a general framework to assist the Board in fulfilling its duties and responsibilities.
Corporate governance: existing shareholder rights, committees and ownership policies; proposed director composition · Filed 10/03/2026
Due to an administrative error, such Form 4 was filed late with respect to a single transaction relating to the Company withholding 188 shares of common stock for her tax obligations upon the partial settlement of an RSU grant on February 1, 2025.
Delinquent Section 16 reports: actual late filing caused by administrative error · Filed 10/03/2026
(3) Based on three-year average Endless Assortment daily, organic constant currency sales growth performance in local days for 2023 (9.3%), 2024 (12.5%) and 2025 (16.1%).
Executive compensation: actual 2023–2025 Endless Assortment sales-growth performance · Filed 10/03/2026
The majority of Company revenue originates from contracts with a single performance obligation to deliver products, whereby performance obligations are satisfied when control of the product is transferred to the customer per the arranged shipping terms.
Revenue recognition: predominantly single product-delivery obligations · Filed 04/08/2026
• • We also generated over $2.0 billion in operating cash flow, a decrease of 4.5% over 2024, and returned $1.5 billion to Grainger shareholders through dividends and share repurchases all while achieving 39.1% 2025 ROIC, down 250 bps from last year.(1)(2) • We delivered value to shareholders with one-year TSR of -3.4% and three-year TSR of 86.4%.
Compensation discussion: 2025 operating cash flow, shareholder returns and ROIC deterioration · Filed 10/03/2026
