Aug 4, 2026 earnings call — Raised guidance after strong sales and tariff refunds
Raised full-year sales growth outlook to expected daily organic constant currency sales growth between 11.5% and 13%.
Revenue $5.0B (est $5.0B) · EPS $12.01 (est $11.30)
Key quotes
"Total company reported sales for the quarter were up 10.3% or 13.7% on a daily organic constant currency basis."
"Also in the quarter, we recognized refunds from the federal government for previously paid IEEPA tariff where Grainger was the importer of record."
"We are raising our guidance to reflect the strong sales momentum, along with the impact of tariff refunds."
Analyst Q&A 10
tariff refund timing
Q (David Manthey · Baird): He asked how much of the refunds landed in Q2 and whether there will be material refund benefits in Q3 and Q4. He also asked why full-year gross margin guide rose by less than the Q2 refund benefit.
A: Management said the vast majority of refunds were already accrued or received and that any remaining benefit in the back half should be immaterial. They said the tariff refunds add about 23 basis points to the year, but that was offset by higher volume of lower gross margin product sales, fuel and freight headwinds, and less mix benefit in the second half.
"And so in the back half, we think it's going to be fairly immaterial based upon that, and it was very hard to estimate from a quarterly perspective." — Deidra Merriwether (CFO)
pricing and data center exposure
Q (Jacob Levinson · Melius): He wanted detail on upcoming pricing actions for Q3 and Q4 and whether pricing will exit the year higher. He also asked how material data center business is for the company.
A: Management said the September pricing actions will add about 1 point annually, roughly 40 basis points for the remainder of this year, and full-year price increases will be around 4%. They said direct exposure to data centers is small — probably less than 1% — though data center activity shows up more broadly in the ecosystem and construction.
"Our exposure to direct data centers directly is probably less than 1%." — Donald Macpherson (CEO·CHAIR)
drivers of gross margin and SG&A
Q (Ryan Merkel · William Blair): He asked whether the Q2 gross margin was worse than expected due to fuel and freight and asked for quantification, and he asked why High-Touch SG&A did not leverage and if SG&A leverage should improve in H2.
A: Management said the gross margin shortfall was driven more by product mix than freight, though both mattered, and they purposely held off on aggressive freight price increases. For SG&A, they said higher management bonuses, commissions, and marketing drove the quarter's increase; they see those costs moderating in the back half and expect better leverage.
"I'd say it's more mix actually than freight, but it's a little bit of both." — Donald Macpherson (CEO·CHAIR)
Q1 to Q2 margin change and back half
Q (Christopher Snyder · Morgan Stanley): He asked for color on sequential gross margin change from Q1 to Q2 and what to expect for Q3 versus Q4 gross margin (the back half U-shape).
A: Management said seasonality and price running off were normal, but fuel cost leakage and additional private label inventory costs also weighed on Q2. They said the U-shaped pattern should continue, noting there will be no tariff refund in Q3 and they expect stronger supplier rebates by year end.
"As it relates to gross margin specifically, we saw normal seasonality from a gross margin perspective related to price running off." — Deidra Merriwether (CFO)
private label changes
Q (Christopher Glynn · Oppenheimer & Company): He asked how private label cost headwinds are phasing and whether the private label changes are a margin play or growth move. He also asked if supplier price increases have stabilized.
A: Management said private label will remain a headwind similar to the first half, but they have launched the Grainger brand and see good growth from it. They said supplier price requests are coming in for next year and have been generally stable over the last couple months, with some categories seeing Middle East–centric increases.
"I would say we've launched the Grainger brand, and that has shown good growth." — Donald Macpherson (CEO·CHAIR)
MonotaRO prebuy size and projects vs MRO
Q (Deane Dray · RBC): He asked how big the MonotaRO prebuy was and whether there was any U.S. prebuy. He also asked how project business differs from MRO and whether Grainger might pursue more project work.
A: Management said there was no U.S. prebuy and no prebuy at Zoro — the prebuy was with MonotaRO and was roughly $45 million, largely PPE and gloves tied to the Middle East. On projects, they said projects come from existing customer relationships and have boosted revenue this year, but they don't plan to shift the company to be project-focused; projects are a headwind to gross margin but add volume.
"Given their reliance on the Middle East, there was a run on mostly PPE and natural glove type products, it's roughly $45 million." — Donald Macpherson (CEO·CHAIR)
large project impact on margins and OpEx
Q (Guy Drummond Hardwick · Barclays): He asked whether large projects give more top-line visibility and whether they hurt gross margin but might be neutral or positive to EBITDA because of lower cost to serve. He also asked about risks to achieving implied second-half SG&A trends.
A: Management said large projects are dilutive to gross margin but not to operating margin, and they are driving revenue this year, particularly from data center build activity. On SG&A, they cited two tailwinds supporting the guide: the easy healthcare expense comparison in Q4 last year and the absence of last year's government slowdown, which helps leverage.
"They're dilutive to gross margin, but they're not dilutive to operating margin." — Donald Macpherson (CEO·CHAIR)
July trend and Zoro SKUs
Q (Christopher Dankert · D.A. Davidson): He asked how July trended versus Q3 guidance and about the SKU count trend at Zoro after last year's pruning.
A: Management said July is expected to be up 13% and the quarter up around 12% on a daily constant currency basis. On Zoro SKUs, they said pruning removed items that never sold, they are constantly pruning, and SKU count will grow again modestly over the next couple of years but not as fast as previously planned.
"We kind of noted on the call that we expect July to be up 13% and then on the quarter, be up around 12%." — Deidra Merriwether (CFO)
September surcharges and share
Q (Thomas Moll · Stephens): He asked whether the September freight and fuel actions are normal pricing negotiations or require force majeure. He also asked for any color on share trends, especially in High-Touch.
A: Management said the September actions will be normal price discussions with customers and not force majeure. They said top-line strength reflects pricing, market demand, and share gains; they expect the share benefit to continue through the balance of the year as the market has turned from negative to clearly positive.
"These are mostly going to be normal course discussions, price increases with our customers, it's not going to be a force majeure." — Donald Macpherson (CEO·CHAIR)
IEEPA refunds and data center sizing
Q (Connor Cerniglia · Bernstein): He asked whether the IEEPA tariff comment implies more future refunds beyond the $43 million mentioned and whether data center project contribution to volume can be sized.
A: Management said they do not expect a lot more refunds beyond what they have already seen. They said project spend increased High-Touch growth about 90 basis points this year, and they review projects for net margin to ensure profitability.
"But we don't think there's going to be a lot more refunds." — Donald Macpherson (CEO·CHAIR)