- Company name
- Grainger
- Sector
- Industrial distribution
- About
- Grainger is a large distributor of maintenance, repair and operating (MRO) products, such as safety equipment, tools, pumps and lighting. It buys products from more than 5,000 suppliers and resells them to more than 4.6 million customers, mainly in North America and Japan. It makes money from the gross margin between what it pays for products and what it charges, which was 38.8% of sales in Q3 2026. The High-Touch Solutions segment serves mid-size and large businesses with complex needs through sales staff, branches, distribution centers and next-day delivery. The Endless Assortment segment sells millions of products online through Zoro in the US and MonotaRO in Japan. The US gave about 81% of sales in 2025. Grainger left the UK market in the fourth quarter of 2025. Revenue in 2025 was $17.9 billion.
- Thesis
- Grainger trades at a discount because investors doubt that its 2026 growth and margins will last. Part of the 2026 sales growth comes from price increases that pass on tariff, fuel and freight costs, and the Q2 2026 margin included $43 million of one-time IEEPA tariff refunds. Investors fear that growth slows and margins fall when these effects end. The CFO also left on September 4, 2026, and an interim CFO serves while the company looks for a new one. Q3 2026 gave the first evidence against this fear. Sales grew 14.9% on a daily, organic constant currency basis, with double-digit volume growth in the High-Touch Solutions segment, and the operating margin was 16.0%, above the mid-15% range that management guided. Grainger raised its 2026 EPS guidance to $47.00 to $48.00. Freight costs and mix still lowered the gross margin of the High-Touch Solutions segment by 30 basis points. For the gap to close, Grainger must give a 2027 outlook that keeps volume growth above the MRO market and an operating margin near 16% as price inflation fades. A permanent CFO must also be named. The next test is the Q4 2026 report and the 2027 guidance, expected in early February 2027. The second test is the Q1 2027 report, when growth must hold against higher prices a year earlier. If margins hold, the gap can close over the next two to four quarters. The main risk is a slowdown in US industrial demand when price inflation fades.
- Risks
- The Q2 2026 margin included $43 million of one-time IEEPA tariff refunds. In Q3 2026, higher freight costs and mix lowered the gross margin of the High-Touch Solutions segment by 30 basis points, to 40.8%. Higher freight and fuel costs, linked to the conflict in the Middle East, and lower margins on private label products and large projects can press on gross margin further.
Part of the 2026 sales growth comes from higher prices that pass on tariff and freight costs, and from about $45 million of temporary prebuying at MonotaRO in Q2 2026. When price inflation fades, sales growth can slow to the rate of volume growth.
Demand for MRO products follows US industrial activity. A recession or a fall in factory output lowers sales, because about 81% of 2025 sales came from the US.
Grainger competes with manufacturers that sell directly, other distributors, retailers and online businesses. If large online sellers win more customers on price and range, Grainger can lose share or must cut prices.
Grainger has only an interim CFO since September 5, 2026. A long search or a change in financial policy can add uncertainty.
- Balance sheet
- Cash: $768M
Debt: $2.7B
Net debt: $1.9B
EBITDA, last 12 months: $3.4B
Net debt / EBITDA: 0.6× (low)
Interest cover: 39×
Undrawn credit line: $1.3B, to October 2028
Debt due within 12 months: $227M
Last debt due: 2047
Ratings: Moody's A1, S&P A+
Grainger has little debt for its size. Total debt was $2,685 million at September 30, 2026, against $2,488 million at December 31, 2025. Most of it was $2.3 billion of unsecured senior notes that mature from 2034 to 2047. MonotaRO also has Japanese yen term loans of $178 million that it repays from September 2028 to June 2035. Commercial paper was $225 million at September 30, 2026, and it is most of the $227 million due within one year. EBITDA is operating earnings plus depreciation and amortization for the 12 months to September 2026, and it includes Q4 2025, when Grainger completed its exit from the UK. Interest cover is for the first nine months of 2026. The company had about $2.0 billion of available liquidity at September 30, 2026. The $1.25 billion revolving credit facility, which supports the commercial paper program, runs for five years from October 2023. Total debt was 36.2% of total capitalization at September 30, 2026. In Q3 2026, Grainger paid $215 million for the Adroit Worldwide Media assets and returned $396 million to shareholders through dividends and buybacks. On November 4, 2026, it guided 2026 buybacks to $975 million to $1.025 billion and operating cash flow to $2.35 billion to $2.45 billion.
As of Sep 30, 2026.
- Checkpoints
- Nov 4, 2026: Q3 2026 results: margin without tariff refunds. Passed. Watch: Daily, organic constant currency sales growth near 12% and an operating margin in the mid-15% range pass; a lower margin or a cut to the 2026 guidance fails. Outcome: Sales grew 14.9% on a daily, organic constant currency basis, the operating margin was 16.0%, and Grainger raised its 2026 EPS guidance to $47.00 to $48.00.
Feb 4, 2027 (estimate): Q4 2026 results and 2027 guidance. Pending. Watch: A 2027 outlook with volume growth above the MRO market and a stable operating margin passes; guidance that depends on price increases alone or shows a lower margin fails.
May 2027 (estimate): Q1 2027 results: growth after price inflation. Pending. Watch: Sales growth that holds as tariff-driven price increases fade, and a permanent CFO in place, pass; a sharp slowdown in volume fails.
- Recent events
- Nov 4, 2026: Grainger reported Q3 2026 results. Sales were $5.18 billion, up 11.3%, or 14.9% on a daily, organic constant currency basis. The operating margin was 16.0%, and the adjusted operating margin was 16.1%. Diluted EPS was $12.42, and adjusted diluted EPS was $12.54, up 22.8%. Grainger raised its 2026 guidance to adjusted diluted EPS of $47.00 to $48.00 and sales of $19.8 billion to $20.0 billion.
Sep 4, 2026: CFO Deidra Merriwether left the company to pursue another opportunity. Laurie Thomson, Vice President and Controller, became interim CFO on September 5, 2026. Grainger started a search for a permanent CFO.
Aug 26, 2026: Grainger bought the technology, intellectual property and staff of Adroit Worldwide Media for $210 million in cash. The assets help customers manage their MRO inventory in the High-Touch Solutions segment. Grainger plans a commercial pilot over the next several months and expects no material effect on near-term results.
Aug 19, 2026: Grainger opened a new, automated Northwest distribution center in Gresham, Oregon. It started to ship orders in July 2026.
Aug 4, 2026: Grainger reported Q2 2026 results. Sales were $5.02 billion, up 10.3%, or 13.7% on a daily, organic constant currency basis. Diluted EPS was $12.01, up 20.5%. Refunds of IEEPA tariffs lowered the cost of goods sold by $43 million. Grainger raised its 2026 EPS guidance to $45.50 to $47.25 and said the Q3 operating margin will be in the mid-15% range. The stock fell about 6% before the market opened.
Jul 31, 2026: Grainger said that CFO Deidra Merriwether will resign, effective September 4, 2026. The company said that her decision is not because of a disagreement about its operations or financial statements.
May 7, 2026: Grainger reported Q1 2026 results. Sales were $4.74 billion, up 10.1%, or 12.2% on a daily, organic constant currency basis. Diluted EPS was $11.65, up 18.2%. Grainger raised its 2026 EPS guidance to $44.25 to $46.25.
Apr 29, 2026: Grainger increased its quarterly dividend by 10%.