Graco Inc. Q2 2025: Tariff Turbulence and Mixed Signals on Growth Prospects

China tariff impact on revenue, Contractor segment growth outlook, pricing strategy and impact on segments, customer confidence and DIY market recovery, tariff impact and price increase strategy are the key contradictions discussed in Graco Inc.'s latest 2025Q2 earnings call.



Revenue and Earnings Performance:
- Graco Inc. reported second quarter sales of $572 million, an increase of 3% from the second quarter of last year.
- Excluding acquisitions, which contributed 6% growth, sales declined 3%.
- Reported net earnings decreased by 4% to $128 million or $0.76 per diluted share.

Impact of Tariffs and Price Actions:
- Tariffs increased by $4 million in the quarter, affecting the gross margin rate by 80 basis points.
- In response, Graco announced targeted price increases set to begin in September.
- The pricing adjustments aim to offset the full-year impact of tariffs, with expectations of mitigating most of the pressure currently felt.

Contractor Segment Challenges:
- The Contractor segment's operating margin rate for the quarter was 26%, compared to 31% for the same quarter last year, a decline of 5 percentage points.
- The decline was primarily due to higher tariffs and lower factory volume, with the acquisition of Corob decreasing the margin rate by 2 percentage points.

Cash Flow and Inventory Management:
- Cash provided by operations totaled $308 million for the year, an increase of $50 million or 19%.
- Improved inventory management, driven by the One Graco initiative, contributed to increased cash flow conversion.