AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-3: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 31/10/2026
Moat56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · Existing purchasing-system integrations and onsite inventory arrangements establish concrete workflow embedding. Reported share gains support commercial relevance, subject to the internally estimated market benchmark. Shared distribution is an operating benefit, but relative cost superiority is unproven.
durability · 2/4 · Integration and onsite services recur across the 2024 and 2025 disclosures, with three years of reported share gains. Alternative channels remain available, and neither long-term lock-in nor exceptional barriers to replication are established.
customer dependency · 2/4 · Purchasing connections and onsite inventory support create practical reliance. Predominantly product-delivery obligations and transparent-price shopping temper dependency; no customer-level switching or retention outcomes are disclosed.
erosion resilience · 2/4 · Reported share gains and 2026 volume growth alongside tariff-price pass-through support resilience. Realized 2025 price/cost pressure and margin contraction establish limits. Digital-competition risks describe potential erosion rather than observed customer losses.
Pricing power56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 3/4 · Both first-half 2026 quarters report High-Touch price inflation from passing tariff costs alongside volume growth. This demonstrates actual pass-through without an aggregate segment volume decline, although its magnitude is unspecified and 2025 timing pressure limits demonstrated durability.
retention · 2/4 · Assessed indirectly from embedded workflows, multiyear share gains and sustained Endless Assortment growth. These support continuing engagement but cannot distinguish repeat demand from customer acquisition or establish retention following price increases.
margin resilience · 2/4 · 2026 High-Touch gross margins improved following 2025 price/cost and operating-margin pressure. First-quarter improvement was attributed largely to mix and freight; second-quarter improvement included tariff refunds. Recovery is demonstrated, but cannot be attributed wholly to pricing.
contractual freedom · 2/4 · Observed pass-through demonstrates some practical pricing latitude, while predominantly product-delivery transactions provide context rather than proof of unilateral reset rights. Existing GPO price negotiations and government modification rights constrain terms. Detailed reset and termination clauses are absent.
Predictability100
5 consecutive published 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
- observedAnnualPeriods
- 5.00
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, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or reported pretax profit plus reported gross interest expense. Reported EBIT is distinct from GAAP operating income and gross interest. 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, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or EBIT calculated from reported pretax profit plus reported gross interest expense; the issuer-reported EBIT is distinct from GAAP operating income and gross interest; 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. ROIC remains undefined for nonpositive invested capital; the explicit asset-return alternative does not change the ROIC chart. Missing financial inputs alone never trigger an alternative. 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
Management69
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · First-half 2026 operating cash flow of $1,183 million covered $281 million of capital expenditures and $714 million of dividends and repurchases. Outstanding shares declined across annual periods. However, 2025 distributions of $1,512 million exceeded operating cash flow less capital expenditures of $1,331 million, and U.K. exits incurred $196 million of losses. Investment returns and repurchase valuation remain incompletely established.
incentive alignment · 3/4 · Actual 2025 equity mixes included substantial PSUs, with disclosed measures covering share gains, organic growth and operating margin. Director ownership compliance, no executive or director hedging or pledging, and double-trigger vesting reinforce alignment. Time-based awards and missing executive ownership compliance and realized payout details limit the conclusion.
execution · 3/4 · Reported multiyear share gains, sustained Endless Assortment growth, and higher first-half 2026 sales, operating earnings and operating cash flow demonstrate strong execution. This uses operating outcomes as indirect evidence of execution rather than management's service superlatives. Estimated share benchmarks, U.K. exit losses and 2025 margin pressure preclude an exceptional grade.
governance · 3/4 · Disclosed independent committees and lead director, annual elections, shareholder rights and double-trigger vesting provide substantive protections. The auditor's unqualified internal-control opinion supports functioning controls. A single late Form 4 is a limited adverse event. The advisory compensation vote was subsequently approved; nominee independence is not treated as proof of election.
Evidence
Customers in this segment utilize sophisticated electronic purchasing platforms that communicate directly with Grainger's systems through eProcurement technology.
2025 Form 10-K, business: High-Touch eProcurement connections · Filed 19/02/2026
Additionally, Grainger offers comprehensive inventory management through its KeepStock® program which provides onsite industry expertise, flexible storage solutions and intuitive customer tools powered by proprietary processes and technology.
2025 Form 10-K, business: KeepStock onsite inventory management · Filed 19/02/2026
Customers in this segment utilize sophisticated electronic purchasing platforms that communicate directly with Grainger.com through eProcurement technology.
2024 Form 10-K, business: customer purchasing-system connections · Filed 20/02/2025
KeepStock®, Grainger's inventory management solution, serves customers on site, offering valuable insights to drive efficiencies and cost savings.
2024 Form 10-K, business: onsite KeepStock services · Filed 20/02/2025
(5)
For purposes of the 2023-2025 PSU cycle, the three-year average was based on performance for 2025 (+235 bps), 2024 (+97 bps) and 2023 (+518 bps).
2026 proxy, Appendix B: 2023–2025 share-gain performance · Filed 10/03/2026
Grainger faces competition from a variety of competitors, including manufacturers (including some of its own suppliers) that sell directly to certain segments of the market, wholesale distributors, retailers and internet-based businesses.
2025 Form 10-K, competition: alternative distribution channels · Filed 19/02/2026
Customers purchasing through the endless assortment platforms are focused on transparent pricing and an easy-to-navigate procurement process.
2025 Form 10-K, business: transparent-pricing customer preferences · Filed 19/02/2026
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.
2025 Form 10-K, risk factors: existing GPO price negotiations · 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.
2025 Form 10-K, risk factors: customer-facing technology competition · Filed 19/02/2026
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.
Second-quarter 2026 Form 10-Q, revenue recognition: product-delivery obligations · Filed 04/08/2026
(4)
The U.S. MRO market growth is an internally generated metric based on the Company’s estimates using a compilation of external market data.
2026 proxy, Appendix B: internally estimated MRO market growth · Filed 10/03/2026
For the twelve months ended December 31, 2025, share gain was calculated based solely on volume.
2026 proxy, Appendix B: 2025 volume-only share-gain methodology · Filed 10/03/2026
Grainger’s North American distribution network supplies inventory planning and management, transportation and distribution services to all Grainger businesses in the North American region.
2025 Form 10-K, business: shared North American distribution services · Filed 19/02/2026
Zoro leverages the High-Touch Solution N.A.'s DC network and third-party drop shipments to deliver seamless service and product fulfillment to customers.
2025 Form 10-K, business: Zoro fulfillment through shared distribution infrastructure · Filed 19/02/2026
Results for the segment were driven by volume growth and price inflation as tariff costs are passed.
First-quarter 2026 earnings release: High-Touch volume growth and tariff-price pass-through · Filed 08/05/2026
Results for the segment were driven by volume growth and price inflation as tariff costs are passed.
Second-quarter 2026 earnings release: High-Touch volume growth and tariff-price pass-through · Filed 04/08/2026
The decrease in gross profit margin was primarily driven by tariff-related inflation which caused unfavorable price / cost timing and last-in, first-out (LIFO) inventory valuation headwinds in the High-Touch Solutions - N.A.
2025 earnings release: unfavorable tariff-related price/cost timing and LIFO effects · Filed 03/02/2026
Adjusted operating margin of 15.0% decreased 50 basis points compared to 2024 due primarily to lower gross margin, higher operating expenses, and slower sales growth in the High-Touch Solutions - N.A.
2025 earnings release: adjusted operating-margin contraction · Filed 03/02/2026
In the High-Touch Solutions - N.A. segment, gross profit margin was 42.6%, up 20 basis points compared to the prior year quarter largely due to favorable product mix and freight.
First-quarter 2026 earnings release: High-Touch gross-margin improvement drivers · Filed 08/05/2026
In the High-Touch Solutions - N.A. segment, gross profit margin was 41.8%, up 80 basis points compared to the prior year quarter as the benefit from the IEEPA tariff refunds and positive mix were partly offset by unfavorable freight and headwinds from certain private label products.
Second-quarter 2026 earnings release: tariff refunds, mix and freight effects · Filed 04/08/2026
In addition, Grainger’s government contracts may provide for termination, reduction or modification by the government at any time, with or without cause.
2025 Form 10-K, risk factors: government contractual modification and termination rights · Filed 19/02/2026
(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%).
2026 proxy: three-year Endless Assortment organic sales-growth performance · Filed 10/03/2026
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.
Second-quarter 2026 Form 10-Q: first-half cash-flow statement · Filed 04/08/2026
Net cash provided by operating activities
395
428
2,015
2,111
Cash flows from investing activities:
Capital expenditures
(126)
(258)
(684)
(541)
Proceeds from sale of assets and business divestitures
29
1
33
3
Other – net
(5)
(1)
6
18
Net cash used in investing activities
(102)
(258)
(645)
(520)
Cash flows from financing activities:
2025 earnings release: annual operating cash flow and capital expenditures · Filed 03/02/2026
Short-term borrowings (repayments), original maturities of 90 days or less, net
125
—
125
—
Proceeds from debt
1
—
91
503
Payments of debt
(3)
(1)
(506)
(39)
Proceeds from stock options exercised
13
4
15
30
Payments for employee taxes withheld from stock awards
(5)
(6)
(36)
(50)
Purchases of treasury stock
(247)
(462)
(1,045)
(1,201)
Cash dividends paid
(109)
(100)
(467)
(421)
Other – net
(1)
—
(2)
(2)
Net cash used in financing activities
(226)
(565)
(1,825)
(1,180)
Exchange rate effect on cash and cash equivalents
(17)
(17)
4
(35)
Net change in cash and cash equivalents
50
(412)
(451)
376
Cash and cash equivalents at beginning of period
535
1,448
1,036
660
Cash and cash equivalents at end of period
$
585
$
1,036
$
585
$
1,036
10
SUPPLEMENTAL INFORMATION - RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES (Unaudited)
The Company supplements the reporting of financial information determined under U.S.
2025 earnings release: annual financing, repurchases and dividends · Filed 03/02/2026
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.
2025 Form 10-K, MD&A: U.K. divestiture and closure losses · Filed 19/02/2026
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.
2025 Form 10-K, equity note: outstanding shares and treasury-share activity · Filed 19/02/2026
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.
2026 proxy: actual 2025 executive long-term incentive equity mix · Filed 10/03/2026
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.
2026 proxy: equally weighted PSU performance measures · Filed 10/03/2026
All Directors are in compliance with the stock ownership guidelines.
2026 proxy: director stock-ownership guideline compliance · Filed 10/03/2026
No Directors (or executive officers) have hedged or pledged any of the shares beneficially owned by them.
2026 proxy: absence of director and executive hedging or pledging · Filed 10/03/2026
Under the terms of the Company’s 2015 Incentive Plan and 2022 Incentive Plan, which are the sources for all equity awards granted after April 2015, “double-trigger” vesting provisions apply to all equity awards (i.e., both a change in control occurs and a participant is involuntarily terminated within one year of the change in control).
2026 proxy: existing double-trigger equity vesting provisions · 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.
2026 proxy, corporate governance: committees, lead director and shareholder protections · Filed 10/03/2026
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 19, 2026 expressed an unqualified opinion thereon.
2025 Form 10-K, auditor report: unqualified internal-control opinion · Filed 19/02/2026
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.
2026 proxy: late Form 4 for one tax-withholding transaction · Filed 10/03/2026
A non-binding, advisory proposal to approve the compensation of the Company’s Named Executive Officers was approved.
May 2026 annual-meeting Form 8-K: approved advisory executive-compensation vote · Filed 01/05/2026
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.
Second-quarter 2026 Form 10-Q: first-half sales and operating earnings · Filed 04/08/2026
