W.W. Grainger's Q2 2025: Unraveling Contradictions in LIFO Impact, Zoro Strategy, and Tariff Strategies

LIFO accounting impact and price realization, Zoro growth and strategy, tariff and price increases, and tariffs and global sourcing strategy are the key contradictions discussed in W.W. Grainger's latest 2025Q2 earnings call.



Q2 Sales and Earnings Performance:
- W.W. Grainger reported total company reported sales of $4.6 billion for Q2 2025, up 5.6% or 5.1% on a daily constant currency basis.
- Operating margins for the company were 14.9%, and diluted EPS finished the quarter at $9.97, up $0.21.
- This performance was affected by tariff-related LIFO inventory valuation headwinds and continued price/cost timing pressures.

Impact of Tariffs and LIFO Accounting:
- The LIFO inventory valuation impacted operating margins by 50 basis points, which without this impact, would have been flat year-over-year.
- The company anticipates continued LIFO headwinds and further price/cost timing pressures for the back half of the year.

Segment Performance and Margin Trends:
- The High-Touch Solutions segment saw sales up 2.5% on a reported basis, with gross margin at 41%, down 70 basis points versus the prior year.
- The Endless Assortment segment increased 19.7%, with Zoro U.S. up 20% and MonotaRO achieving 16.4% growth in local days, local constant currency.

Updated Financial Outlook:
- The company lowered its gross margin guide to between 38.6% and 38.9%, down 0.8% to 0.5% year-over-year, due to tariff-related price/cost timing headwinds and LIFO valuation impacts.
- Earnings per share are now expected between $38.50 and $40.25, up roughly 1% year-over-year at the midpoint.