Why did Grainger raise its 2026 guidance?

Management cited a strong start to the year across both segments and positive signs in demand, despite ongoing tariff uncertainty and geopolitical conditions. The raised outlook reflects Q1 outperformance, with adjusted EPS guidance rising by $2.00 at the midpoint and organic constant currency sales growth now expected at 9.5%-12.0%.

How much of the sales growth is organic versus driven by acquisitions or divestitures?

Reported sales growth of 10.1% understated underlying growth. On a daily, organic constant currency basis, sales grew 12.2%, after adjusting for a 2.3% benefit from lapping the divested Cromwell business and closed Zoro U.K. business, and a 0.2% FX headwind. The High-Touch Solutions - N.A. segment grew 10.0% on that basis, while Endless Assortment grew 21.9%.

Is the margin improvement sustainable, and how much did the U.K. exit help?

Operating margin improved 110 bps to 16.7%, with gross margin up 30 bps to 40.0% from product mix, freight and Zoro margin gains, plus leverage on SG&A. The U.K. exit contributed a benefit to both gross and operating margin, but the release does not quantify it. Full-year operating margin guidance of 15.6%-16.0% implies less expansion for the rest of the year than Q1 delivered, suggesting Q1 may have been above the run-rate.

Are there any concerns in the cash flow or balance sheet?

Operating cash flow of $739M was helped by a $173M increase in income taxes payable and a $253M increase in trade payables, while receivables rose $303M. Investors may want to watch working capital normalization. Cash rose to $695M, and the company repaid $125M of short-term borrowings, but long-term debt increased to $2.41B and total buybacks and dividends ($345M) exceeded the quarter's free cash flow of $569M by a smaller margin than in prior periods.

What drove the increase in EPS compared with the increase in net earnings?

Net earnings attributable to Grainger rose 15.9%, while diluted EPS rose 18.2%. The difference comes from a 1.9% reduction in diluted shares outstanding (48.3M to 47.4M), largely due to share repurchases. This was partly offset by a higher effective tax rate of 25.1% (vs. 23.9%), driven by lower tax credit activity and new 2026 tax legislation.

GWW 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed May 8, 2026. Cited figures are marked; the original filing is the authoritative source.

Grainger reported first quarter 2026 results that beat on growth, margins and earnings, and raised its full-year 2026 outlook.

Net sales rose 10.1% to $4.74 billion^a (12.2% on a daily, organic constant currency basis, excluding the exit from the U.K. market and FX effects). Operating margin expanded 110 basis points to 16.7%, and diluted EPS grew 18.2% to $11.65, aided by a 2.6% reduction in diluted share count (48.3M to 47.4M) and a higher tax rate of 25.1%. Growth was broad-based: High-Touch Solutions - N.A. sales rose 10.0% on a constant currency basis, while the Endless Assortment segment (MonotaRO and Zoro) grew 21.9% on the same basis.

Cash generation was solid at $739 million^b of operating cash flow and $569 million of free cash flow, though working capital absorbed cash, with accounts receivable up $303 million. The company returned $345 million to shareholders through $108 million of dividends and $237 million of buybacks, and announced a 10% dividend increase. Cash rose to $695 million, and total debt is roughly $2.4 billion, with long-term debt increasing modestly.

Management raised 2026 guidance: adjusted diluted EPS is now $44.25 to $46.25^c (up from $42.25 to $44.75), net sales is $19.2 to $19.6 billion, and daily organic constant currency sales growth is 9.5% to 12.0%. Operating margin guidance was lifted to 15.6% to 16.0%, while gross margin, capex, buybacks and the tax rate were held steady. Note that the Q1 results were reported as consistent on a reported and adjusted basis, and that part of the sales and margin strength reflects the lapping of the U.K. exit and divestitures, so underlying organic momentum should be assessed carefully.

02—Key points

Key Highlights

Net sales of $4.74B, up 10.1% reported and 12.2% on a daily, organic constant currency basis; High-Touch Solutions - N.A. up 10.0% and Endless Assortment up 21.9% (organic constant currency).
Operating margin expanded 110 bps to 16.7%, driven by gross margin gains in both segments, sales leverage and a benefit from the U.K. market exit.
Diluted EPS of $11.65, up 18.2% year over year, supported by strong operations and a 1.9% lower diluted share count, partly offset by a 25.1% effective tax rate (vs. 23.9%).
Operating cash flow of $739M and free cash flow of $569M, though accounts receivable rose $303M, absorbing a significant portion of earnings.
Shareholder returns of $345M in Q1 ($108M dividends, $237M buybacks), plus a 10% quarterly dividend increase.
2026 guidance raised: adjusted diluted EPS to $44.25-$46.25 (from $42.25-$44.75), net sales to $19.2-$19.6B, and operating margin to 15.6%-16.0%; gross margin, capex, buyback and tax rate guidance unchanged.
Balance sheet remains manageable with cash of $695M and long-term debt of $2.41B, with shareholders' equity up to $4.34B.

03—Questions

Frequently Asked Questions

Why did Grainger raise its 2026 guidance?
Management cited a strong start to the year across both segments and positive signs in demand, despite ongoing tariff uncertainty and geopolitical conditions. The raised outlook reflects Q1 outperformance, with adjusted EPS guidance rising by $2.00 at the midpoint and organic constant currency sales growth now expected at 9.5%-12.0%.
How much of the sales growth is organic versus driven by acquisitions or divestitures?
Reported sales growth of 10.1% understated underlying growth. On a daily, organic constant currency basis, sales grew 12.2%, after adjusting for a 2.3% benefit from lapping the divested Cromwell business and closed Zoro U.K. business, and a 0.2% FX headwind. The High-Touch Solutions - N.A. segment grew 10.0% on that basis, while Endless Assortment grew 21.9%.
Is the margin improvement sustainable, and how much did the U.K. exit help?
Operating margin improved 110 bps to 16.7%, with gross margin up 30 bps to 40.0% from product mix, freight and Zoro margin gains, plus leverage on SG&A. The U.K. exit contributed a benefit to both gross and operating margin, but the release does not quantify it. Full-year operating margin guidance of 15.6%-16.0% implies less expansion for the rest of the year than Q1 delivered, suggesting Q1 may have been above the run-rate.
Are there any concerns in the cash flow or balance sheet?
Operating cash flow of $739M was helped by a $173M increase in income taxes payable and a $253M increase in trade payables, while receivables rose $303M. Investors may want to watch working capital normalization. Cash rose to $695M, and the company repaid $125M of short-term borrowings, but long-term debt increased to $2.41B and total buybacks and dividends ($345M) exceeded the quarter's free cash flow of $569M by a smaller margin than in prior periods.
What drove the increase in EPS compared with the increase in net earnings?
Net earnings attributable to Grainger rose 15.9%, while diluted EPS rose 18.2%. The difference comes from a 1.9% reduction in diluted shares outstanding (48.3M to 47.4M), largely due to share repurchases. This was partly offset by a higher effective tax rate of 25.1% (vs. 23.9%), driven by lower tax credit activity and new 2026 tax legislation.

04—Continue

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