GWW · Q1 2026 Earnings

Bullish

W. W. Grainger

Reported May 8, 2026

30-second summary

Q1 revenue grew 10.1% YoY to $4.74B, EPS of $11.65 was up 18.2% YoY, and daily organic constant-currency sales growth of 12.2% printed at the top end of the freshly-raised FY2026 range of 9.5–12.0% — meaning Grainger's Q1 alone delivered what the Q4 guide implied for the full year. Management raised FY revenue by $0.5B at the midpoint, FY EPS by $1.75, and lifted the organic-growth midpoint by 3 full points to 10.75%, with explicit confirmation that MRO market momentum sustained into April. The Q2 setup is a U-shaped margin step-down (low-15% operating margin) on fuel, private-label LIFO timing, and seasonality — real but explainable, and the FY raise absorbs it.

Headline numbers

EPS

Q1 FY2026

$11.65

+14.1% vs est.

Revenue

Q1 FY2026

$4.74B

+10.1% YoY

+3.5% vs est.

Gross margin

Q1 FY2026

40.0%

Free cash flow

Q1 FY2026

$0.57B

Operating margin

Q1 FY2026

16.7%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$4.74B	+10.1%	$4.42B	+7.2%
EPS	$11.65	—	$9.44	+23.4%
Gross margin	40.0%	—	39.5%	+50bps
Operating margin	16.7%	—	14.3%	+240bps
Free cash flow	$0.57B	—	$0.27B	+111.5%

Guidance

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q1 FY2026	—	$4.742 billion	+3.5% above estimate	Beat
EPS (non-GAAP)	Q1 FY2026	—	$11.65	+14.1% above estimate	Beat
Daily organic constant currency sales growth	Q1 FY2026	—	12.2%	+3.2pts above midpoint of FY2026 prior guide (9.5% midpoint was for full year)	Beat
Operating margin	Q1 FY2026	—	16.7%	+0.8pts above prior FY2026 guidance range high (15.9%)	Beat
Gross profit margin	Q1 FY2026	—	40.0%	+0.5pts above prior FY2026 guidance range high (39.5%)	Beat

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
EPS (non-GAAP)	FY2026	$42.25 - $44.75 (GAAP)	$44.25 - $46.25 (non-GAAP)	+$1.75 at low end (vs $42.25), +$1.50 at high end (vs $44.75); midpoint raised from $43.50 to $45.25 (+$1.75 or +4.0%)	Raised
Revenue	FY2026	$18.7 - $19.1 billion	$19.2 - $19.6 billion	+$0.5B at low end, +$0.5B at high end; midpoint raised from $18.9B to $19.4B (+$0.5B or +2.6%)	Raised
Daily organic constant currency sales growth	FY2026	6.5% - 9.0%	9.5% - 12.0%	+3.0pts at low end, +3.0pts at high end; midpoint raised from 7.75% to 10.75% (+3.0pts or +38.7%)	Raised
Operating margin	FY2026	15.4% - 15.9%	15.6% - 16.0%	+0.2pts at low end, +0.1pts at high end; midpoint raised from 15.65% to 15.80% (+0.15pts)	Raised
Operating cash flow	FY2026	$2.125 - $2.325 billion	$2.2 - $2.4 billion	+$0.075B at low end, +$0.075B at high end; midpoint raised from $2.225B to $2.30B (+$0.075B or +3.4%)	Raised

Reaffirmed unchanged this quarter: Gross profit margin (39.2% - 39.5%)

Segment KPIs

Q1 FY2026

Segment	Q1 FY2026
High-Touch Solutions - N.A. gross margin	42.6%
Endless Assortment organic constant currency growth	21.9%

Other KPIs

Q1 FY2026

Segment	Q1 FY2026
Daily, organic constant currency sales growth	12.2%
Operating cash flow	$739M
Capital expenditures	$170M
Gross profit margin	40.0%

Management tone

Q2: "transitory" LIFO and softening MRO → Q3: LIFO extends into 2026, UK exit, off-cycle pricing → Q4: market contraction reframed as structural, growth algorithm leans on price + share → Q1: MRO market inflects positive, volume returns, guidance raised across the board.

The MRO market framing flipped from structural contraction to sustained positive momentum in a single quarter. As recently as Q4, management asked investors to value Grainger on consistent share-gain execution against a flat-to-down market, citing 30-year history of stable manufacturing activity. This quarter: "The broader MRO market showed positive momentum as we moved through the quarter and appears to have sustained that strength in April... we believe the MRO market demand gained momentum in the period." The April call-out matters — management is signaling the inflection isn't a Q1 fluke. This is the most constructive demand commentary Grainger has offered since 2023.

Growth composition shifted from price-dominant to balanced price-and-volume. Through 2025 the algorithm was ~5pts price on a flat-to-down volume base — the FY2026 prior guide of 6.5–9.0% assumed 3+ points of price on a market modeled at -1.5% to flat. This quarter: "Sales growth included roughly equal contributions from price and volume... We saw broad-based acceleration across in-markets with strong contributions from manufacturing, government, and contractor customers." Confirmed by the JP Morgan exchange where management guided FY pricing to ~4% (down from Q1's ~5%) but FY volume to 0–1% positive — the first positive volume guide in two years.

Tariff posture moved from defensive containment to confident operational control. Q2 management leaned on "transitory" and accepted being "slightly upside-down" on price-cost; Q3 took off-cycle pricing to catch up; Q4 explicitly excluded future tariff actions from the FY guide. Q1: "our team is staying agile and we continue to be confident in our ability to maintain supply for our customers while adhering to our core pricing tenets." The shift from reactive to confident is reinforced by the disclosure that the May 1 price cycle was net neutral after absorbing Section 122 and the IEPA rollback — Grainger is now treating tariff churn as a manageable input, not a guidance risk.

High-Touch is no longer being framed as the mature/stable anchor offset by EA growth — both segments are growth engines now. "At the same time, our high-touch growth engines are gaining traction, and the EA segment is continuing to power the flywheel." HTS-NA at +10.5% YoY validates this; it's the segment's strongest growth print in several years and was specifically attributed to coordinated solutions wins on contract customers, not just market reflation.

One genuine caution remains: Q2 margin step-down is being telegraphed early. Management is explicit that the U-shape exists and provided unusual detail: ~60bps gross-margin seasonality, ~20bps private-label LIFO timing, fuel cost leakage on free-parcel-shipping contracts with large customers, plus SG&A stock comp normalizing. The Q2 operating margin guide of "low 15%" implies a sequential step-down of ~170bps from Q1's 16.7%. The fact that management is preemptively framing this — rather than waiting for the print — suggests confidence the trajectory is understood, but the magnitude is real.

Recurring themes management leaned on this quarter:

MRO market momentum accelerationPrice-volume balance with healthy price realizationHigh-touch segment growth and customer coordination capabilitiesEndless assortment segment outperformance (EA flywheel)Tariff management and pricing agility amid geopolitical uncertaintyMargin expansion through operational leverage despite transitory headwinds

Risks management surfaced:

Tariff uncertainty and geopolitical cost pressures with fluid inflationary landscapeFuel cost headwinds from elevated diesel prices with margin leakage on partial shippingMiddle East conflict impact on raw materials (nitrile gloves) and energy inputs affecting MonotaroLIFO inventory valuation headwinds continuing into Q2Uncertainty on timing and magnitude of IEPA tariff recovery where Grainger is importer of record

Q&A highlights

David Mancy · Baird

Request for price contribution details by segment and overall, and update on margin pacing through the year given previously mentioned deviations from normal seasonality patterns.

North America pricing was approximately 5%. Management revised margin outlook to U-shaped pattern rather than flat/declining first half. Q1 benefited from strong price realization and lower-than-expected private label sell-through. Q2 will see private label drag, normal January price increase bleed-off, and fuel cost impacts that are difficult to pass to large customers with free parcel shipping agreements.

North America price contribution: ~5 percentage pointsQ1 gross margin: 40% (vs. expected 39%)Q2 expected gross margin: ~39% (U-shaped recovery pattern)Private label inventory sold through less than anticipated in Q1

Ryan Merkel · William Blair

What drove Q1 revenue upside, and explanation of Q1 gross margin beat (40% vs. 39% expected) and Q2 private label cost negative impact timing.

Revenue beat driven by three factors: end market demand turned positive (first time in years), higher-than-anticipated price realization, and strong share gains. Q1 margin beat attributable to better pricing on certain SKUs and lower private label inventory sell-through than expected. Q2 will see the private label drag materialize as higher-cost inventory layers are sold, combined with normal January price bleed-off and seasonality.

End market demand flipped from negative to slightly positivePrice realization exceeded internal assumptionsShare gains were strongLower private label sell-through in Q1 than anticipated

Chris Schneider · Morgan Stanley

Quantification of LIFO impact on Q1 gross margin and clarification of price increase timing (January, May, September cycles) with relative sizing.

LIFO impact was 20 basis points on Q1 gross margin from private label cost increases. Confirmed January 1, May 1, and September 1 are standard annual price cycles (not ad-hoc). January increase was slightly positive net of 2025 tariff lag, 2026 tariff negotiations, and November tariff rollbacks. May increase was net neutral, incorporating Section 122 actions offset by IEPA rollback on private label products.

Q1 LIFO impact on gross margin: 20 basis points (private label)Total company Q1 LIFO benefit: ~70 basis pointsThree annual price cycles: January 1, May 1, September 1January pricing action: slightly positive after tariff adjustments

Andrew Obin · Bank of America

Assessment of pricing momentum sustainability into H2, guidance conservatism, and LIFO impact sizing relative to historical quarters.

Management characterized pricing sustainability as fundamentally strong and stable, noting internal confidence in price-cost dynamics despite external debate. U-shape trajectory driven by explainable factors (fuel cost uncertainty, private label costs, seasonality). LIFO normalizes and subsides; at total company level in Q1 was approximately 70 basis points. Acknowledged elevated uncertainty on fuel costs but forecasting challenge given geopolitical conflicts.

Price-cost fundamentals described as 'perfectly strong' and 'very stable'Q1 total company LIFO benefit: ~70 basis pointsU-shaped margin trajectory driven by: fuel costs, private label inventory, seasonalityManagement not changing guidance despite Q1 outperformance

Patrick Bauman · JP Morgan

Bridge of sequential margin decline from Q1 (15% operating margin) to Q2, breakdown of drivers between gross margin seasonality, private label costs, and fuel cost leakage.

Approximately 150 basis point sequential decline driven by: ~60 basis points normal seasonality on gross margin, ~20 basis points private label inventory cost increase Q1 to Q2, remainder from fuel cost leakage (timing-related, as pricing cycles don't align with fuel inflation). Operating margin decline includes SG&A seasonal increases from stock comp. SG&A expected to grow 5.5%-6% for full year. Market outlook embedded at zero to one-ish for volume, pricing expected to moderate from ~5% in Q1 to ~4% for full year.

Q2 operating margin expected ~15% range (vs. Q1 elevated level)Q1-Q2 gross margin decline: ~100 basis points (~40% to ~39%)Normal seasonality: ~60 basis points gross margin headwindPrivate label cost timing: ~20 basis points Q1 to Q2 shift

Answers to last quarter's watch list

Q1 organic constant-currency sales growth vs. the implied 6.5–9.0% FY pace. Q1 printed 12.2% — well above the 7% bull case bar and at the top of the freshly-raised 9.5–12.0% FY range. The tariff pass-through and share-gain assumptions in the prior guide were substantially conservative.

Resolved positively

HTS-NA volume trajectory under the multifactor outgrowth model. Management didn't separately quantify outgrowth bps this quarter, but HTS-NA grew +10.5% YoY with ~5pts of price contribution — implying ~5pts of volume on a market management characterizes as "positive momentum." This is well inside the long-term 400–500bps outgrowth target zone if the market is running ~0–1%, though a clean outgrowth figure wasn't disclosed.

Continue monitoring

Tariff policy stability and rollback risk. The May 1 pricing cycle absorbed both Section 122 actions and the IEPA rollback on private label and netted to neutral — meaning the rollback risk flagged in Q4 was real but managed. Management remains the importer of record on IEPA-affected SKUs where recovery timing is uncertain. Net: no material disruption to the price contribution embedded in the guide.

Resolved positively

FY26 gross margin tracking toward the 39.2–39.5% guide top. Q1 printed 40.0%, ~50bps above the guide top. However, management explicitly held the FY guide at 39.2–39.5% (unchanged) and guided Q2 to ~39%, signaling the Q1 beat is being treated as timing rather than run-rate. The FY guide reaffirmation is the more conservative read. Status: Resolved positively (Q1); Continue monitoring (FY)

Effective tax rate trajectory. Not explicitly addressed in this quarter's disclosed materials; no signal of further upward pressure on the ~25% rate.

Continue monitoring

Endless Assortment growth deceleration. EA re-accelerated to +19.6% YoY (organic CC +21.9%) from Q4's +14.3% — decisively breaking the monotonically declining trend. The 18–20% growth tier is back.

Resolved positively

What to watch into next quarter

Q2 operating margin vs. the "low 15%" guide. The U-shape is explicitly telegraphed; a print below 15% would mean fuel and private-label LIFO headwinds exceeded the model. A print at or above 15.5% would mean the Q1 strength is more durable than management's conservatism implies.

Q2 organic CC sales growth vs. the "approaching 12%" guide. Management is guiding Q2 toward Q1's pace — confirming the MRO demand inflection is structural rather than a one-quarter pull-forward. A Q2 print below 10% would suggest the April momentum didn't carry.

Whether HTS-NA volume contribution holds above 4pts. Q1's roughly equal price/volume split is the first positive volume quarter in two years; if Q2 volume contribution moderates back toward 1–2pts, the structural MRO inflection narrative weakens.

Private-label LIFO normalization through H2. Management quantified ~20bps Q1→Q2 gross-margin drag from private-label inventory timing. Watch whether the drag is contained to Q2 or extends into Q3, and whether the September pricing cycle offsets.

Whether management lifts FY gross margin guide off 39.2–39.5%. Holding this guide despite Q1's 40.0% is the most conservative element of the print. If Q2 lands above ~39.2%, the FY guide is likely raised in Q3.

Fuel cost trajectory and free-parcel-shipping leakage. A new and specific risk surfaced this quarter; if diesel stays elevated through Q3, the gross-margin recovery from the Q2 trough may be slower than the U-shape implies.

Sources

W. W. Grainger Q1 2026 earnings press release (Form 8-K Exhibit 99.1), dated May 7, 2026 — https://www.sec.gov/Archives/edgar/data/277135/000027713526000056/gww8kex991q12026.htm
W. W. Grainger Q1 2026 earnings call commentary and Q&A (referenced via management remarks and analyst exchanges with Baird, William Blair, Morgan Stanley, Bank of America, and JP Morgan)

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