W.W. Grainger (NYSE:GWW) raised its 2026 earnings outlook after reporting double-digit third-quarter sales growth across both of its business segments, as management cited improving demand and strong customer retention.
The distributor reported third-quarter sales growth of 11.3%, or 14.9% on a daily organic constant currency basis. Adjusted diluted earnings per share rose more than 22% from a year earlier to $12.54, while operating margin expanded 90 basis points to 16.1%.
Chairman and CEO D.G. Macpherson said demand improved across all major end markets. He pointed to activity tied to data centers and power generation, as well as new contracts and execution on existing customer agreements.
The company’s adjusted results exclude transaction-related costs associated with a technology acquisition completed during the quarter. Its organic revenue adjustments account for its exit from the U.K. market in the fourth quarter of 2025.
Higher Earnings Outlook
Grainger increased its full-year adjusted diluted earnings forecast to $47 to $48 per share and projected daily organic constant currency sales growth of 13% to 14.5%. It expects operating margin of 16% to 16.2%, an increase of 100 to 120 basis points from the prior year and 10 basis points above the midpoint of its previous forecast.
Vice President and Interim CFO Laurie Thomson said third-quarter outperformance was partly offset in the outlook by additional fourth-quarter costs, including higher incentive compensation and expenses associated with the technology acquisition.
Grainger expects fourth-quarter sales above $4.9 billion and implied operating margin of about 15.5% at the midpoint. Thomson said the outlook also implies a gross margin of approximately 39.6%, with higher supplier rebates expected to more than offset continued freight pressure.
Preliminary October sales rose approximately 18% on a daily organic constant currency basis. Macpherson said about 2 percentage points of that growth reflected the comparison with the 2025 government shutdown. Thomson said the company expects growth to normalize during the quarter as comparisons become more difficult.
Both Segments Grow
High-Touch Solutions sales increased 13.8% on both a reported and daily constant currency basis, supported by double-digit volume growth and price contribution. Its operating margin rose 10 basis points to 17.3%, while gross margin fell 30 basis points to 40.8%, primarily because of freight costs and a slightly unfavorable mix of project-related spending.
Macpherson said project activity continued to support growth, though less than the 90-basis-point contribution cited for the previous quarter. He said demand associated with data centers and power generation was visible among contractors and other customers, while new contracts also contributed to Grainger’s share gains.
Endless Assortment sales grew 11.9% as reported, or 19.3% on a daily organic constant currency basis. Zoro U.S. sales rose 25.2% on a daily basis, and Japan-based MonotaRO grew 13.6% in local days and currency. Segment operating margin increased 190 basis points to 11.7%.
Macpherson said Zoro’s acceleration came almost entirely from existing customers buying more, particularly small and midsize customers or individuals at larger organizations. He attributed margin improvement in the segment in part to attracting customers without as much discounting and encouraging repeat purchases.
Costs and Technology Investment
Thomson said September price increases covered most known cost increases at the time, including higher freight and product costs associated with the conflict in the Middle East. Diesel prices have continued to fluctuate, she said, and Grainger will consider those pressures when setting prices for early next year.
Macpherson estimated that freight costs were a 20-basis-point drag during the quarter. Thomson said a tariff refund provided a roughly 10-basis-point benefit, largely offset by an inventory write-off after a fire at the company’s Louisville distribution center. Macpherson said nobody was hurt in the fire.
Grainger also is piloting technology acquired in August that uses cameras, weights and software to track inventory and allow customers to take products without a conventional checkout. Thomson said integration and scaling costs are expected to reduce fourth-quarter operating margin by roughly 10 to 15 basis points, with a similar effect continuing into 2027. Once integrated, Macpherson said, the technology is expected to be roughly neutral to margins and support growth.
About W.W. Grainger (NYSE:GWW)
W.W. Grainger, founded in Chicago in 1927, is a distributor of maintenance, repair and operating supplies. The company provides products such as safety equipment, tools, fasteners, electrical and plumbing supplies, material-handling equipment, and cleaning products.
Grainger serves businesses, government agencies and other organizations through sales representatives, distribution centers, catalogs and digital platforms. Its operations include a high-touch distribution business in North America and online businesses serving customers in markets including the United States and Japan.
The company also offers services such as product sourcing, inventory management and technical support to help customers maintain and operate their facilities.
