10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _______

 Commission file number 1-5684

W.W. Grainger, Inc.

(Exact name of registrant as specified in its charter)

Illinois			36-1150280
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
100 Grainger Parkway
	Lake Forest,	Illinois	60045-5201
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (847) 535-1000             

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock	GWW	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒  Accelerated Filer ☐   Non-accelerated Filer ☐   Smaller Reporting Company ☐ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐  No ☒ 

There were 50,000,883 shares of the Company’s Common Stock outstanding as of July 20, 2023.

1

	TABLE OF CONTENTS
		Page
	PART I - FINANCIAL INFORMATION
Item 1:	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Earnings      for the Three and Six Months Ended June 30, 2023 and 2022	3
	Condensed Consolidated Statements of Comprehensive Earnings      for the Three and Six Months Ended June 30, 2023 and 2022	4
	Condensed Consolidated Balance Sheets     as of June 30, 2023 and December 31, 2022	5
	Condensed Consolidated Statements of Cash Flows     for the Six Months Ended June 30, 2023 and 2022	6
	Condensed Consolidated Statements of Shareholders' Equity     for the Three and Six Months Ended June 30, 2023 and 2022	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2:	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4:	Controls and Procedures	26
	PART II - OTHER INFORMATION
Item 1:	Legal Proceedings	27
Item 1A:	Risk Factors	27
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 5:	Other Information	27
Item 6:	Exhibits	28
Signatures		29

2

PART I – FINANCIAL INFORMATION

Item 1: Financial Statements

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In millions of dollars and shares, except for per share amounts)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net sales	$	4,182	$	3,837	$	8,273	$	7,484
Cost of goods sold	2,538		2,396		4,995		4,660
Gross profit	1,644		1,441		3,278		2,824
Selling, general and administrative expenses	983		907		1,937		1,756
Operating earnings	661		534		1,341		1,068
Other (income) expense:
Interest expense – net	24		22		48		45
Other – net	(8)		(5)		(14)		(11)
Total other expense – net	16		17		34		34
Earnings before income taxes	645		517		1,307		1,034
Income tax provision	155		128		309		260
Net earnings	490		389		998		774
Less net earnings attributable to noncontrolling interest	20		18		40		37
Net earnings attributable to W.W. Grainger, Inc.	$	470	$	371	$	958	$	737
Earnings per share:
Basic	$	9.32	$	7.22	$	18.98	$	14.33
Diluted	$	9.28	$	7.19	$	18.89	$	14.26
Weighted average number of shares outstanding:
Basic	50.1		51.0		50.2		51.1
Diluted	50.3		51.3		50.4		51.4

The accompanying notes are an integral part of these financial statements.

3

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In millions of dollars)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net earnings	$	490	$	389	$	998	774
Other comprehensive earnings (losses):
Foreign currency translation adjustments – net of reclassification to earnings	(32)		(83)		(30)		(109)
Postretirement benefit plan losses and other – net of tax benefit of $1, $1, $2, and $2 respectively	(3)		(4)		(6)		(7)
Total other comprehensive earnings (losses)	(35)		(87)		(36)		(116)
Comprehensive earnings – net of tax	455		302		962		658
Less comprehensive earnings (losses) attributable to noncontrolling interest
Net earnings	20		18		40		37
Foreign currency translation adjustments	(27)		(31)		(32)		(47)
Total comprehensive earnings (losses) attributable to noncontrolling interest	(7)		(13)		8		(10)
Comprehensive earnings attributable to W.W. Grainger, Inc.	$	462	$	315	$	954	$	668

The accompanying notes are an integral part of these financial statements.

4

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions of dollars, except for share and per share amounts)

	As of
Assets	(Unaudited) June 30, 2023		December 31, 2022
Current assets
Cash and cash equivalents	$	515	$	325
Accounts receivable (less allowances for credit losses of $37 and $36, respectively)	2,418		2,133
Inventories – net	2,223		2,253
Prepaid expenses and other current assets	187		266
Total current assets	5,343		4,977
Property, buildings and equipment – net	1,485		1,461
Goodwill	368		371
Intangibles – net	237		232
Operating lease right-of-use	428		367
Other assets	170		180
Total assets	$	8,031	$	7,588
Liabilities and shareholders' equity
Current liabilities
Current maturities	$	33	$	35
Trade accounts payable	1,158		1,047
Accrued compensation and benefits	254		334
Operating lease liability	74		68
Accrued expenses	368		474
Income taxes payable	33		52
Total current liabilities	1,920		2,010
Long-term debt	2,275		2,284
Long-term operating lease liability	375		318
Deferred income taxes and tax uncertainties	131		121
Other non-current liabilities	103		120
Shareholders' equity
Cumulative preferred stock – $5 par value – 12,000,000 shares authorized; none issued or outstanding	—		—
Common Stock – $0.50 par value – 300,000,000 shares authorized; 109,659,219 shares issued	55		55
Additional contributed capital	1,331		1,310
Retained earnings	11,477		10,700
Accumulated other comprehensive losses	(184)		(180)
Treasury stock, at cost – 59,660,871 and 59,402,896 shares, respectively	(9,744)		(9,445)
Total W.W. Grainger, Inc. shareholders’ equity	2,935		2,440
Noncontrolling interest	292		295
Total shareholders' equity	3,227		2,735
Total liabilities and shareholders' equity	$	8,031	$	7,588

 The accompanying notes are an integral part of these financial statements.

5

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions of dollars)

(Unaudited)

	Six Months Ended
	June 30,
	2023		2022
Cash flows from operating activities:
Net earnings	$	998	$	774
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for credit losses	9		8
Deferred income taxes and tax uncertainties	17		15
Depreciation and amortization	106		107
Net losses from sale of assets	—		2
Stock-based compensation	31		27
Change in operating assets and liabilities:
Accounts receivable	(303)		(398)
Inventories	28		(149)
Prepaid expenses and other assets	93		(50)
Trade accounts payable	147		263
Accrued liabilities	(177)		(8)
Income taxes – net	(28)		10
Other non-current liabilities	(17)		(8)
Net cash provided by operating activities	904		593
Cash flows from investing activities:
Capital expenditures	(193)		(163)
Proceeds from sale of assets	2		2
Other – net	—		(11)
Net cash used in investing activities	(191)		(172)
Cash flows from financing activities:
Proceeds from debt	6		—
Payments of debt	(18)		—
Proceeds from stock options exercised	28		15
Payments for employee taxes withheld from stock awards	(29)		(19)
Purchases of treasury stock	(313)		(199)
Cash dividends paid	(194)		(183)
Other – net	(1)		(2)
Net cash used in financing activities	(521)		(388)
Exchange rate effect on cash and cash equivalents	(2)		(12)
Net change in cash and cash equivalents	190		21
Cash and cash equivalents at beginning of year	325		241
Cash and cash equivalents at end of period	$	515	$	262

The accompanying notes are an integral part of these financial statements.

6

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In millions of dollars, except for per share amounts)

(Unaudited)

	Common Stock		Additional Contributed Capital		Retained Earnings		Accumulated Other Comprehensive Earnings (Losses)		Treasury Stock		Noncontrolling Interest		Total
Balance at January 1, 2022	$	55	$	1,270	$	9,500	$	(96)	$	(8,855)	$	286	$	2,160
Stock-based compensation	—		10		—		—		3		—		13
Purchases of treasury stock	—		—		—		—		(75)		—		(75)
Net earnings	—		—		366		—		—		19		385
Other comprehensive earnings (losses)	—		—		—		(13)		—		(16)		(29)
Cash dividends paid ($1.62 per share)	—		—		(84)		—		—		—		(84)
Balance at March 31, 2022	$	55	$	1,280	$	9,782	$	(109)	$	(8,927)	$	289	$	2,370
Stock-based compensation	—		7		—		—		2		1		10
Purchases of treasury stock	—		—		—		—		(117)		(1)		(118)
Net earnings	—		—		371		—		—		18		389
Other comprehensive earnings (losses)	—		—		—		(56)		—		(31)		(87)
Cash dividends paid ($1.72 per share)	—		—		(87)		—		—		(12)		(99)
Balance at June 30, 2022	$	55	$	1,287	$	10,066	$	(165)	$	(9,042)	$	264	$	2,465

The accompanying notes are an integral part of these financial statements.

7

W.W. Grainger, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In millions of dollars, except for per share amounts)

(Unaudited)

	Common Stock		Additional Contributed Capital		Retained Earnings		Accumulated Other Comprehensive Earnings (Losses)		Treasury Stock		Noncontrolling Interest		Total
Balance at January 1, 2023	$	55	$	1,310	$	10,700	$	(180)	$	(9,445)	$	295	$	2,735
Stock-based compensation	—		14		—		—		18		—		32
Purchases of treasury stock	—		—		—		—		(142)		—		(142)
Net earnings	—		—		488		—		—		20		508
Other comprehensive earnings (losses)	—		—		—		4		—		(5)		(1)
Cash dividends paid ($1.72 per share)	—		—		(87)		—		—		—		(87)
Balance at March 31, 2023	$	55	$	1,324	$	11,101	$	(176)	$	(9,569)	$	310	$	3,045
Stock-based compensation	—		7		—		—		(7)		2		2
Purchases of treasury stock	—		—		—		—		(168)		—		(168)
Net earnings	—		—		470		—		—		20		490
Other comprehensive earnings (losses)	—		—		—		(8)		—		(27)		(35)
Cash dividends paid ($1.86 per share)	—		—		(94)		—		—		(13)		(107)
Balance at June 30, 2023	$	55	$	1,331	$	11,477	$	(184)	$	(9,744)	$	292	$	3,227

The accompanying notes are an integral part of these financial statements.

8

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

W.W. Grainger, Inc. is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America (N.A.), Japan and the United Kingdom (U.K.). In this report, the words “Grainger” or “Company” mean W.W. Grainger, Inc. and its subsidiaries, except where the context makes it clear that the reference is only to W.W. Grainger, Inc. itself and not its subsidiaries.

Basis of Presentation

The Company's Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting and the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and therefore do not include all information and disclosures normally included in the annual Consolidated Financial Statements. The preparation of these Condensed Consolidated Financial Statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from these estimated amounts. In the opinion of the Company’s management, the Condensed Consolidated Financial Statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.

The Condensed Consolidated Balance Sheet at December 31, 2022, has been derived from the audited Consolidated Financial Statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 21, 2023 (2022 Form 10-K).

There were no material changes to the Company’s significant accounting policies from those disclosed in Note 1 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data in the Company's 2022 Form 10-K.

NOTE 2 - REVENUE

Grainger serves a large number of customers in diverse industries, which are subject to different economic and market-specific factors. The Company's revenue is primarily comprised of MRO product sales and related activities.

The Company's presentation of revenue by segment and industry most reasonably depicts how the nature, amount, timing and uncertainty of the Company's revenue and cash flows are affected by economic and market-specific factors. In addition, the segments have unique underlying risks associated with customer purchasing behaviors. In the High-Touch Solutions N.A. segment, more than two-thirds of revenue is derived from customer contracts whereas in the Endless Assortment segment, a majority of revenue is derived from non-contractual purchases.

The following tables present the Company's percentage of revenue by reportable segment and by major customer industry:

9

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

	Three Months Ended June 30,
	2023						2022(1)
	High-Touch Solutions N.A.		Endless Assortment		Total Company(2)		High-Touch Solutions N.A.		Endless Assortment		Total Company(2)
Commercial Services	7	%	12	%	8	%	7	%	13	%	8	%
Contractors	5	%	12	%	6	%	5	%	12	%	6	%
Government	21	%	3	%	18	%	18	%	3	%	15	%
Healthcare	7	%	2	%	6	%	7	%	2	%	6	%
Manufacturing	29	%	30	%	30	%	31	%	29	%	30	%
Retail	4	%	4	%	4	%	4	%	4	%	4	%
Transportation	4	%	2	%	4	%	4	%	2	%	4	%
Utilities	3	%	2	%	2	%	3	%	2	%	3	%
Warehousing	4	%	1	%	3	%	5	%	1	%	4	%
Wholesale	7	%	16	%	8	%	7	%	16	%	9	%
Other(3)	9	%	16	%	11	%	9	%	16	%	11	%
Total net sales	100	%	100	%	100	%	100	%	100	%	100	%
Percent of total company revenue	80	%	18	%	100	%	80	%	19	%	100	%
(1) Customer industry results for the three months ended June 30, 2022 were reclassified to reflect the Company's current year classifications, which primarily uses the North American Industry Classification System (NAICS) beginning January 1, 2023.
(2) Total Company includes other businesses, which includes the Cromwell business. Other businesses account for approximately 2% and 1% of total Company revenue for the three months ended June 30, 2023 and 2022, respectively.
(3) Other primarily includes revenue from industries and customers that are not material individually, including hospitality, restaurants, property management and natural resources.

10

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

	Six Months Ended June 30,
	2023						2022(1)
	High-Touch Solutions N.A.		Endless Assortment		Total Company(2)		High-Touch Solutions N.A.		Endless Assortment		Total Company(2)
Commercial Services	7	%	12	%	8	%	7	%	13	%	8	%
Contractors	5	%	12	%	6	%	5	%	12	%	6	%
Government	20	%	3	%	16	%	18	%	3	%	15	%
Healthcare	7	%	2	%	6	%	7	%	2	%	6	%
Manufacturing	30	%	30	%	30	%	31	%	30	%	30	%
Retail	4	%	4	%	4	%	4	%	4	%	4	%
Transportation	4	%	2	%	4	%	4	%	2	%	4	%
Utilities	3	%	2	%	3	%	3	%	2	%	3	%
Warehousing	4	%	1	%	3	%	5	%	1	%	4	%
Wholesale	7	%	16	%	9	%	7	%	15	%	9	%
Other(3)	9	%	16	%	11	%	9	%	16	%	11	%
Total net sales	100	%	100	%	100	%	100	%	100	%	100	%
Percent of total company revenue	80	%	18	%	100	%	79	%	19	%	100	%
(1) Customer industry results for the six months ended June 30, 2022 were reclassified to reflect the Company's current year classifications, which primarily uses the North American Industry Classification System (NAICS) beginning January 1, 2023.
(2) Total Company includes other businesses, which includes the Cromwell business. Other businesses account for approximately 2% of total Company revenue for both the six months ended June 30, 2023 and 2022.
(3) Other primarily includes revenue from industries and customers that are not material individually, including hospitality, restaurants, property management and natural resources.

Total accrued sales incentives are recorded in Accrued expenses and were approximately $111 million and $102 million as of June 30, 2023 and December 31, 2022, respectively.

The Company had no material unsatisfied performance obligations, contract assets or liabilities as of June 30, 2023 and December 31, 2022.

NOTE 3 - PROPERTY, BUILDINGS AND EQUIPMENT

Property, buildings and equipment consisted of the following (in millions of dollars):

	As of
	June 30, 2023		December 31, 2022
Land and land improvements	$	323	$	318
Building, structures and improvements	1,413		1,463
Furniture, fixtures, machinery and equipment	1,766		1,662
Property, buildings and equipment	$	3,502	$	3,443
Less accumulated depreciation	2,017		1,982
Property, buildings and equipment – net	$	1,485	$	1,461

11

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 4 - GOODWILL AND OTHER INTANGIBLE ASSETS

The Company did not identify any significant events or changes in circumstances that indicated the existence of impairment indicators during the three and six months ended June 30, 2023. As such, quantitative assessments were not required.     

The balances and changes in the carrying amount of goodwill by segment are as follows (in millions of dollars):

	High-Touch Solutions N.A.		Endless Assortment		Total
Balance at January 1, 2022	$	321	$	63	$	384
Translation	(8)		(5)		(13)
Balance at December 31, 2022	313		58		371
Translation	2		(5)		(3)
Balance at June 30, 2023	$	315	$	53	$	368

The Company's cumulative goodwill impairments as of June 30, 2023 was $137 million. No goodwill impairments were recorded for the six months ended June 30, 2023 or the twelve months ended December 31, 2022.

The balances and changes in intangible assets – net are as follows (in millions of dollars):

		As of
		June 30, 2023						December 31, 2022
	Weighted average life	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Customer lists and relationships	11.7 years	$	215	$	183	$	32	$	217	$	181	$	36
Trademarks, trade names and other	14.3 years	32		23		9		32		22		10
Non-amortized trade names and other	Indefinite	20		—		20		22		—		22
Capitalized software	4.2 years	615		439		176		580		416		164
Total intangible assets	6.8 years	$	882	$	645	$	237	$	851	$	619	$	232

12

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 5 - DEBT

Total debt, including long-term, current maturities and debt issuance costs and discounts – net, consisted of the following (in millions of dollars):

	As of
	June 30, 2023				December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
4.60% senior notes due 2045	$	1,000	$	949	$	1,000	$	916
1.85% senior notes due 2025	500		475		500		470
4.20% senior notes due 2047	400		351		400		338
3.75% senior notes due 2046	400		325		400		317
MonotaRO term loan	52		52		69		69
Other	(24)		(24)		(29)		(29)
Subtotal	2,328		2,128		2,340		2,081
Less current maturities	(33)		(33)		(35)		(35)
Debt issuance costs and discounts – net of amortization	(20)		(20)		(21)		(21)
Long-term debt	$	2,275	$	2,075	$	2,284	$	2,025

Senior Notes

Between 2015 and 2020, Grainger issued $2.3 billion in unsecured long-term debt (Senior Notes) primarily to provide flexibility in funding general working capital needs, share repurchases and long-term cash requirements. The Senior Notes require no principal payments until maturity and interest is paid semi-annually.

The Company incurred debt issuance costs related to its Senior Notes of approximately $29 million, representing underwriting fees and other expenses, that were recorded as a contra-liability within Long-term debt and are being amortized over the term of the Senior Notes using the straight-line method to Interest expense – net.

The Company uses interest rate swaps to manage the risks associated with its 1.85% Senior Notes. These swaps were designated for hedge accounting treatment as fair value hedges. The resulting carrying value adjustments as of June 30, 2023 and December 31, 2022, are presented within Other in the table above. For further discussion on the Company's hedge accounting policies, see Note 6.

MonotaRO Term Loan

In August 2020, MonotaRO entered into a ¥9 billion term loan agreement to fund technology investments and the expansion of its distribution center (DC) network. As of June 30, 2023 and December 31, 2022, the carrying amount of the term loan, including current maturities due within one year, was $52 million and $69 million, respectively. The term loan matures in August 2024, payable over four equal semi-annual principal installments in 2023 and 2024 and bears an average interest of 0.05%.

Fair Value

The estimated fair value of the Company’s Senior Notes was based on available external pricing data and current market rates for similar debt instruments, among other factors, which are classified as Level 2 inputs within the fair value hierarchy.

For further information on the Company’s debt instruments, see Note 5 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data in the Company’s 2022 Form 10-K.

13

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 6 - DERIVATIVE INSTRUMENTS

The Company's earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates and interest rates. Grainger currently enters into certain derivatives or other financial instruments to hedge against these risks, and may continue to do so in the future.

Fair Value Hedges

The Company uses interest rate swaps to hedge a portion of its fixed-rate long-term debt. These swaps are treated as fair value hedges and consequently the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item, are recognized in the Consolidated Statements of Earnings in Interest expense – net. The notional amount of the Company’s outstanding fair value hedges as of June 30, 2023 and December 31, 2022 was $450 million and $500 million, respectively.

The liability hedged by the interest rate swaps is recorded on the Condensed Consolidated Balance Sheets in Long-term debt. As of June 30, 2023 and December 31, 2022, the carrying amount of the hedged item, including the cumulative amount of fair value hedging adjustments was $422 million and $466 million, respectively.

The effect of the Company's fair value hedges on the Condensed Consolidated Statements of Earnings in Interest expense – net is as follows (in millions of dollars):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Gain or (loss):
Interest rate swaps:
Hedged item	$	2	$	5	$	(6)	$	24
Derivatives designated as hedging instrument	$	(2)	$	(5)	$	6	$	(24)

The location and fair values of derivative instruments designated as hedging instruments in the Condensed Consolidated Balance Sheets as of June 30, 2023, are shown in the following table (in millions of dollars):

	As of
	June 30, 2023		December 31, 2022
Interest rate swaps reported in Other non-current liabilities	$	25	$	34

Fair Value

The estimated fair values of the Company's derivative instruments were based on quoted market forward rates, which are classified as Level 2 inputs within the fair value hierarchy and reflect the present value of the amount that the Company would pay for contracts involving the same notional amounts and maturity dates. No adjustments were required during the current period to reflect the counterparty’s credit risk or the Company’s own nonperformance risk.

NOTE 7 - SEGMENT INFORMATION

Grainger's two reportable segments are High-Touch Solutions N.A. and Endless Assortment. The remaining businesses, which include the Company's Cromwell business, are classified as Other to reconcile to consolidated results. These remaining businesses individually and in the aggregate do not meet the criteria of a reportable segment.

The Company's corporate costs are allocated to each reportable segment based on benefits received. Additionally, intersegment sales transactions, which are sales between Grainger businesses in separate reportable segments, are eliminated within the segment to present only the impact of sales to external customers. Service fees for intersegment sales are included in each segment's selling, general and administrative expenses and are also eliminated in the Company's Consolidated Financial Statements.

14

W.W. Grainger, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Following is a summary of segment results (in millions of dollars):

	Three Months Ended June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
	Net sales		Operating earnings (losses)		Net sales		Operating earnings (losses)		Net sales		Operating earnings (losses)		Net sales		Operating earnings (losses)
High-Touch Solutions N.A.	$	3,355	$	600	$	3,053	$	475	$	6,649	$	1,221	$	5,931	$	956
Endless Assortment	751		65		719		62		1,475		123		1,416		117
Other	76		(4)		65		(3)		149		(3)		137		(5)
Total Company	$	4,182	$	661	$	3,837	$	534	$	8,273	$	1,341	$	7,484	$	1,068

The Company is a broad line distributor of MRO products and services. Products are regularly added and removed from the Company's inventory. Accordingly, it would be impractical to provide sales information by product category due to the way the business is managed, and the dynamic nature of the inventory offered, including the evolving list of products stocked and additional products available online but not stocked. Assets for reportable segments are not disclosed as such information is not regularly reviewed by the Company's Chief Operating Decision Maker.

NOTE 8 - CONTINGENCIES AND LEGAL MATTERS

From time to time the Company is involved in various legal and administrative proceedings, including claims related to: product liability, safety or compliance; privacy and cybersecurity matters; negligence; contract disputes; environmental issues; unclaimed property; wage and hour laws; intellectual property; advertising and marketing; consumer protection; pricing (including disaster or emergency declaration pricing statutes); employment practices; regulatory compliance, including trade and export matters; anti-bribery and corruption; and other matters and actions brought by employees, consumers, competitors, suppliers, customers, governmental entities and other third parties.

There have been no material changes to the contingencies and legal matters from those disclosed in Note 15 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data in the Company's 2022 Form 10-K and the Company's Form 10-Q for the quarterly period ended March 31, 2023. Although the Company is unable to determine the probability of the outcome of these matters or the estimate of potential loss or range of loss, the Company anticipates that any potential liability, which may arise of or with respect to these matters, will not have, either individually or in the aggregate, a material adverse effect on the Company's financial position, results of operations or cash flows.

NOTE 9 - SUBSEQUENT EVENTS

On July 6, 2023, the Company purchased 48 acres of land in Oregon for the construction of a new 500,000 square foot DC in accordance with its strategic plan to expand its distribution network. The Company expects to begin operations in 2025.

On July 26, 2023, the Company’s Board of Directors declared a quarterly dividend of $1.86 per share, payable September 1, 2023, to shareholders of record on August 14, 2023.

15

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of W.W. Grainger, Inc. (Grainger or Company) as it is viewed by management of the Company. The following discussion should be read in conjunction with the Consolidated Financial Statements and accompanying notes for the year ended December 31, 2022 included in the Company's 2022 Form 10-K and the Condensed Consolidated Financial Statements and accompanying notes included in Part I, Item 1: Financial Statements of this Form 10-Q.

Percentage figures included in this section have not been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in the Company's Condensed Consolidated Financial Statements or in the associated text.

General

Grainger is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America, Japan and the U.K. Grainger uses a combination of its high-touch solutions and endless assortment businesses to serve its customers worldwide, which rely on Grainger for products and services that enable them to run safe, sustainable and productive operations.

Strategic Priorities

For a discussion of the Company’s strategic priorities for 2023, see Part 1, Item 1: Business and Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2022 Form 10-K.

Recent Events

Inflationary Cost Environment and Macroeconomic Pressures

In combination with the economic recovery from the pandemic and repercussions from geopolitical events, including the war in Ukraine, the global economy continues to experience volatile disruptions including to the commodity, labor and transportation markets. These disruptions have contributed to an inflationary environment which has affected, and may continue to affect, the price and availability of certain products and services necessary for the Company's operations. Such disruptions have impacted, and may continue to impact, the Company's business, financial condition and results of operations.

The Company continues to monitor economic conditions in the U.S. and globally, and the impact of macroeconomic pressures, including repercussions from the recent banking crisis, rising interest rates, fluctuating currency exchange rates, inflation and recession fears on the Company’s business, customers, suppliers and other third parties. As a result of continued inflation, the Company has implemented strategies designed to mitigate certain adverse effects of higher costs while also remaining market price competitive. Historically, the Company’s broad and diverse customer base and the nondiscretionary nature of the Company’s products to its customers has helped to insulate it from the effects of recessionary periods in the industrial MRO market. The full extent and impact of these conditions are uncertain and cannot be predicted at this time.

For further discussion of the Company's risks and uncertainties, see Part I, Item 1A: Risk Factors in the Company’s 2022 Form 10-K.

16

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Results of Operations –Three Months Ended June 30, 2023

The following table is included as an aid to understanding the changes in Grainger’s Condensed Consolidated Statements of Earnings (in millions of dollars except per share amounts):

	Three Months Ended June 30,
					Percent Increase/(Decrease) from Prior Year		As a Percent of Net Sales
	2023		2022				2023		2022
Net sales(1)	$	4,182	$	3,837	9.0	%	100.0	%	100.0	%
Cost of goods sold	2,538		2,396		6.0		60.7		62.4
Gross profit	1,644		1,441		14.0		39.3		37.6
Selling, general and administrative expenses	983		907		8.4		23.5		23.7
Operating earnings	661		534		23.5		15.8		13.9
Other expense – net	16		17		(5.1)		0.4		0.4
Income tax provision	155		128		20.1		3.7		3.4
Net earnings	490		389		25.9		11.7		10.1
Noncontrolling interest	20		18		12.1		0.5		0.4
Net earnings attributable to W.W. Grainger, Inc.	$	470	$	371	26.5		11.2		9.7
Diluted earnings per share:	$	9.28	$	7.19	29.1	%
(1) For further information regarding the Company's disaggregated revenue, see Note 2 of the Notes to Condensed Consolidated Financial Statements in Part 1, Item 1: Financial Statements of this Form 10-Q.

The following table is included as an aid to understanding the changes in Grainger's total net sales and daily sales from the prior period to the most recent period (in millions of dollars):

	Three Months Ended June 30,
	2023			2022
Net sales	$	4,182		$	3,837
$ Change from prior-year period	345			630
% Change from prior-year period	9.0		%	19.6		%
Daily sales(1)	$	65.3		$	60.0
$ Change from prior-year period	5.3			9.9
% Change from prior-year period	9.0		%	19.6		%
Daily sales impact of currency fluctuations	(1.1)		%	(2.4)		%
(1) Daily sales are defined as the total net sales for the period divided by the number of U.S. selling days in the period. There were 64 sales days in both the three months ended June 30, 2023 and 2022.

Net sales of $4,182 million for the three months ended June 30, 2023 increased $345 million, or 9%, compared to the same period in 2022. For further discussion on the Company's net sales, see the Segment Analysis section below.

Gross profit of $1,644 million for the three months ended June 30, 2023 increased $203 million, or 14%, compared to the same period in 2022. Gross profit margin of 39.3% for the three months ended June 30, 2023 increased 170 basis points compared to the same period in 2022. For further discussion on the Company's gross profit, see the Segment Analysis section below.

17

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

SG&A of $983 million for the three months ended June 30, 2023 increased $76 million, or 8%, compared to the same period in 2022. The increase was primarily due to higher marketing and payroll expenses.

Operating earnings of $661 million for the three months ended June 30, 2023 increased $127 million, or 24%, compared to the same period in 2022.

Income taxes of $155 million for the three months ended June 30, 2023 increased $27 million, or 20%, compared to the same period in 2022. The increase in tax expense was driven by higher taxable operating earnings for the second quarter of 2023. Grainger's effective tax rates were 24.0% and 24.8% for the three months ended June 30, 2023 and 2022, respectively. The decrease in the effective tax rate was primarily due to increased stock compensation tax benefit.

Net earnings of $470 million attributable to W.W. Grainger, Inc. for the three months ended June 30, 2023 increased $99 million, or 27%, compared to the same period in 2022.

Diluted earnings per share was $9.28 for the three months ended June 30, 2023, an increase of 29% compared to $7.19 for the same period in 2022.

Segment Analysis

For further segment information, see Note 7 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1: Financial Statements of this Form 10-Q.

High-Touch Solutions N.A.

The following table shows reported segment results (in millions of dollars):

	Three Months Ended June 30,
	2023		2022		Percent Increase
Net sales	$	3,355	$	3,053	9.9	%
Gross profit	$	1,398	$	1,211	15.5	%
Selling, general and administrative expenses	$	798	$	736	8.7	%
Operating earnings	$	600	$	475	26.0	%

Net sales of $3,355 million for the three months ended June 30, 2023 increased $302 million, or 10%, compared to the same period in 2022. The increase was due to price, which includes customer mix of 5%, and volume, which includes product mix of 5%.

Gross profit of $1,398 million for the three months ended June 30, 2023 increased $187 million, or 16%, compared to the same period in 2022. Gross profit margin of 41.7% increased 200 basis points compared to the same period in 2022. The increase was driven by freight and supply chain efficiencies, as well as improved product mix in the second quarter of 2023.

SG&A of $798 million for the three months ended June 30, 2023 increased $62 million, or 9%, compared to the same period in 2022. The increase was primarily due to higher marketing and payroll expenses. SG&A leverage improved 30 basis points compared to the same period in 2022.

Operating earnings of $600 million for the three months ended June 30, 2023 increased $125 million, or 26%, compared to the same period in 2022.

18

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Endless Assortment

The following table shows reported segment results (in millions of dollars):

	Three Months Ended June 30,
	2023		2022		Percent Increase
Net sales	$	751	$	719	4.5	%
Gross profit	$	224	$	209	6.6	%
Selling, general and administrative expenses	$	159	$	147	7.7	%
Operating earnings	$	65	$	62	3.8	%

Net sales of $751 million for the three months ended June 30, 2023 increased $32 million, or 5%, compared to the same period in 2022. The increase was due to sales growth of 10%, driven by customer acquisition at MonotaRO and Zoro, as well as enterprise growth at MonotaRO, partially offset by unfavorable foreign exchange of 5% due to changes in the exchange rate between the U.S. dollar and the Japanese yen.

Gross profit of $224 million for the three months ended June 30, 2023 increased $15 million, or 7%, compared to the same period in 2022. Gross profit margin of 29.7% increased 50 basis points compared to the same period in 2022. The increase was driven by price realization and continued freight efficiencies at MonotaRO, partially offset by unfavorable product mix at Zoro in the second quarter of 2023.

SG&A of $159 million for the three months ended June 30, 2023 increased $12 million, or 8%, compared to the same period in 2022. The increase was primarily driven by higher marketing and payroll and benefits expenses. SG&A leverage decreased 60 basis points.

Operating earnings of $65 million for the three months ended June 30, 2023 increased $3 million, or 4%, compared to the same period in 2022.

19

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Results of Operations – Six Months Ended June 30, 2023

The following table is included as an aid to understanding the changes in Grainger's total net sales and daily sales from the prior period to the most recent period (in millions of dollars):

	Six Months Ended June 30,
					Percent Increase from Prior Year		As a Percent of Net Sales
	2023		2022				2023		2022
Net sales(1)	$	8,273	$	7,484	10.6	%	100.0	%	100.0	%
Cost of goods sold	4,995		4,660		7.2		60.4		62.3
Gross profit	3,278		2,824		16.0		39.6		37.7
SG&A	1,937		1,756		10.3		23.4		23.4
Operating earnings	1,341		1,068		25.5		16.2		14.3
Other expense – net	34		34		(0.3)		0.4		0.5
Income tax provision	309		260		18.7		3.7		3.5
Net earnings	998		774		28.9		12.1		10.3
Noncontrolling interest	40		37		8.0		0.5		0.4
Net earnings attributable to W.W. Grainger, Inc.	$	958	$	737	30.0		11.6		9.9
Diluted earnings per share:	$	18.89	$	14.26	32.6	%
(1) For further information regarding the Company's disaggregated revenue, see Note 2 of the Notes to Condensed Consolidated Financial Statements in Part 1, Item 1: Financial Statements of this Form 10-Q.

The following table is included as an aid to understanding the changes in Grainger's total net sales and daily sales from the prior period to the most recent period (in millions of dollars):

	Six Months Ended June 30,
	2023			2022
Net sales	$	8,273		$	7,484
$ Change from prior-year period	789			1,193
% Change from prior-year period	10.6		%	19.0		%
Daily sales(1)	$	64.6		$	58.5
$ Change from prior-year period	6.1			9.0
% Change from prior-year period	10.6		%	18.0		%
Daily sales impact of currency fluctuations	(1.7)		%	(2.0)		%
(1) Daily sales are defined as the total net sales for the period divided by the number U.S. selling days in the period. There were 128 sales days in both the six months ended June 30, 2023 and 2022.

Net sales of $8,273 million for the six months ended June 30, 2023 increased $789 million, or 11%, compared to the same period in 2022. For further discussion on the Company's net sales, see the Segment Analysis section below.

Gross profit of $3,278 million for the six months ended June 30, 2023 increased $454 million, or 16%, compared to the same period in 2022. Gross profit margin of 39.6% increased 190 basis points compared to the same period in 2022. For further discussion on the Company's gross profit, see the Segment Analysis section below.

20

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

SG&A of $1,937 million for the six months ended June 30, 2023 increased $181 million, or 10%, compared to the same period in 2022. The increase was primarily due to payroll and marketing expenses.

Operating earnings of $1,341 million for the six months ended June 30, 2023 increased $273 million, or 26%, compared to the same period in 2022.

Income taxes of $309 million for the six months ended June 30, 2023 increased $49 million or 19%, compared to the same period in 2022. The increase was driven by higher taxable operating earnings for the six months ended June 30, 2023. Grainger's effective tax rates were 23.6% and 25.2% for the six months ended June 30, 2023 and 2022, respectively. The decrease in the effective tax rate was primarily due to increased stock compensation tax benefit.

Net earnings of $958 million attributable to W.W. Grainger, Inc. for the six months ended June 30, 2023 increased $221 million, or 30%, compared to the same period in 2022.

Diluted earnings per share was $18.89 for the six months ended June 30, 2023, an increase of 33% compared to $14.26 for the same period in 2022.

Segment Analysis

For further segment information, see Note 7 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1: Financial Statements of this Form 10-Q.

High-Touch Solutions N.A.

The following table shows reported segment results (in millions of dollars):

	Six Months Ended June 30,
	2023		2022		Percent Increase
Net sales	$	6,649	$	5,931	12.1	%
Gross profit	$	2,795	$	2,375	17.7	%
SG&A	$	1,574	$	1,419	11.0	%
Operating earnings	$	1,221	$	956	27.7	%

Net sales of $6,649 million for the six months ended June 30, 2023 increased $718 million, or 12%, compared to the same period in 2022. The increase in net sales was due to price, which includes customer mix of 6%, and volume, which includes product mix of 6%.

Gross profit of $2,795 million for the six months ended June 30, 2023 increased $420 million, or 18%, compared to the same period in 2022. Gross profit margin of 42.0% increased 200 basis points compared to the same period in 2022. The increase was driven by freight efficiencies and improved product mix in the first half of 2023.

SG&A of $1,574 million for the six months ended June 30, 2023 increased $155 million, or 11%, compared to the same period in 2022. The increase was primarily due to higher marketing and payroll expenses. SG&A leverage improved 20 basis points compared to the same period in 2022.

Operating earnings of $1,221 million for the six months ended June 30, 2023 increased $265 million, or 28%, compared to the same period in 2022.

21

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Endless Assortment

The following table shows reported segment results (in millions of dollars):

	Six Months Ended June 30,
	2023		2022		Percent Increase
Net sales	$	1,475	$	1,416	4.2	%
Gross profit	$	438	$	406	7.8	%
SG&A	$	315	$	289	8.9	%
Operating earnings	$	123	$	117	4.9	%

Net sales of $1,475 million for the six months ended June 30, 2023 increased $59 million, or 4%, compared to the same period in 2022. The increase was due to sales growth of 12% driven by customer acquisition at MonotaRO and Zoro, as well as enterprise growth at MonotaRO, partially offset by unfavorable foreign exchange of 8% due to changes in the exchange rate between the U.S. dollar and the Japanese yen.

Gross profit of $438 million for the six months ended June 30, 2023 increased $32 million, or 8%, compared to the same period in 2022. Gross profit margin of 29.7% increased 100 basis points compared to the same period in 2022. The increase was driven by freight efficiencies at MonotaRO in the first half of 2023.

SG&A of $315 million for the six months ended June 30, 2023 increased $26 million, or 9%, compared to the same period in 2022. The increase was primarily due to higher marketing and payroll and benefit expenses. SG&A leverage decreased 90 basis points.

Operating earnings of $123 million for the six months ended June 30, 2023 increased $6 million, or 5%, compared to the same period in 2022.

22

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

Grainger believes its current balances of cash and cash equivalents, marketable securities and availability under its revolving credit facility will be sufficient to meet its liquidity needs for the next twelve months. The Company expects to continue to invest in its business and return excess cash to shareholders through cash dividends and share repurchases, which it plans to fund through cash flows generated from operations. Grainger also maintains access to capital markets and may issue debt or equity securities from time to time, which may provide an additional source of liquidity.

Cash and Cash Equivalents

As of June 30, 2023 and December 31, 2022, Grainger had cash and cash equivalents of $515 million and $325 million, respectively. The Company had approximately $1.8 billion in available liquidity as of June 30, 2023.

Cash Flows

The following table shows the Company's cash flow activity for the periods presented (in millions of dollars):

	Six Months Ended June 30,
	2023		2022
Total cash provided by (used in):
Operating activities	$	904	$	593
Investing activities	(191)		(172)
Financing activities	(521)		(388)
Effect of exchange rate changes on cash and cash equivalents	(2)		(12)
Increase in cash and cash equivalents	$	190	$	21

Net cash provided by operating activities was $904 million and $593 million for the six months ended June 30, 2023 and 2022, respectively. The increase was driven by higher net earnings, partially offset by changes in year-over-year working capital requirements primarily due to sales growth and inflation.

Net cash used in investing activities was $191 million and $172 million for the six months ended June 30, 2023 and 2022, respectively. The change was driven by increased U.S. supply chain investment.

Net cash used in financing activities was $521 million and $388 million for the six months ended June 30, 2023 and 2022, respectively. The increase was primarily due to higher treasury stock repurchases.

Working Capital

Working capital as of June 30, 2023 was $3,144 million, an increase of $280 million compared to $2,864 million as of December 31, 2022. The increase was driven by increased accounts receivable due to continued sales growth and lower accrued current liabilities. As of June 30, 2023 and December 31, 2022, the ratio of current assets to current liabilities was 2.7 and 2.5, respectively.

Debt

Grainger maintains a debt ratio and liquidity position that provides flexibility in funding working capital needs and long-term cash requirements. In addition to internally generated funds, Grainger has various sources of financing available, including bank borrowings under lines of credit.

Total debt, which is defined as total interest-bearing debt and lease liabilities, as a percent of total capitalization was 46.3% and 49.9% as of June 30, 2023 and December 31, 2022, respectively.

Grainger receives ratings from two independent credit rating agencies: Moody's Investor Service (Moody's) and Standard & Poor's (S&P). Both credit rating agencies currently rate the Company's corporate credit at investment grade.

23

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following table summarizes the Company's credit ratings as of June 30, 2023:

	Corporate	Senior Unsecured	Short-term
Moody's	A2	A2	P1
S&P	A+	A+	A1

Commitments and Other Contractual Obligations

There were no material changes to the Company’s commitments and other contractual obligations from those disclosed in Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2022 Form 10-K.

Critical Accounting Estimates

The preparation of Grainger’s Condensed Consolidated Financial Statements and accompanying notes are in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results of operations require the Company’s management to make assumptions and estimates that affect the reported amounts. The Company considers an accounting policy to be a critical estimate if: (i) it involves assumptions that are uncertain when judgment was applied, and (ii) changes in the estimate assumptions, or selection of a different estimate methodology, could have a significant impact on Grainger’s consolidated financial position and results. While the Company believes the assumptions and estimates used are reasonable, the Company’s management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances.

Note 1 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements of the Company's 2022 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company’s Condensed Consolidated Financial Statements.

There were no material changes to the Company's critical accounting estimates from those disclosed in Part II, Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 2022 Form 10-K.

24

W.W. Grainger, Inc. and Subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

From time to time in this Quarterly Report on Form 10-Q as well as in other written reports, communications and verbal statements, Grainger makes forward-looking statements that are not historical in nature but concern forecasts of future results, business plans, analyses, prospects, strategies, objectives and other matters that may be deemed to be “forward-looking statements” under the federal securities laws. Forward-looking statements can generally be identified by their use of terms such as “anticipate,” “estimate,” “believe,” “expect,” “could,” “forecast,” “may,” “intend,” “plan,” “predict,” “project,” “will,” or “would,” and similar terms and phrases, including references to assumptions.

The Company cannot guarantee that any forward-looking statement will be realized and achievement of future results is subject to assumptions, risks and uncertainties, many of which are beyond the Company’s control, which could cause the Company’s actual results to differ materially from those that are presented.

Important factors that could cause actual results to differ materially from those presented or implied in the forward-looking statements include, without limitation: inflation, higher product costs or other expenses, including operational and administrative expenses; the impact of macroeconomic pressures and geopolitical trends, changes and events, including the impact of Russia’s invasion of Ukraine on the global economy, tensions across the Taiwan Straits and in overall relations with China, and the ramifications of these and other events; a major loss of customers; loss or disruption of sources of supply; changes in customer or product mix; increased competitive pricing pressures; changes in third party practices regarding digital advertising; failure to enter into or sustain contractual arrangements on a satisfactory basis with group purchasing organizations; failure to develop, manage or implement new technology initiatives or business strategies, including with respect to the Company’s eCommerce platforms; failure to adequately protect intellectual property or successfully defend against infringement claims; fluctuations or declines in the Company's gross profit margin; the Company’s responses to market pressures; the outcome of pending and future litigation or governmental or regulatory proceedings, including with respect to wage and hour, anti-bribery and corruption, environmental, regulations related to advertising, marketing and the Internet, consumer protection, pricing (including disaster or emergency declaration pricing statutes), product liability, compliance or safety, trade and export compliance, general commercial disputes, or privacy and cybersecurity matters; investigations, inquiries, audits and changes in laws and regulations; failure to comply with laws, regulations and standards, including new or stricter environmental laws or regulations; government contract matters; disruption or breaches of information technology or data security systems involving the Company or third parties on which the Company depends; general industry, economic, market or political conditions; general global economic conditions including tariffs and trade issues and policies; currency exchange rate fluctuations; market volatility, including price and trading volume volatility or price declines of the Company’s common stock; commodity price volatility; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; outbreaks of pandemic disease or viral contagions such as the COVID-19 pandemic; natural or human induced disasters, extreme weather and other catastrophes or conditions; effects of climate change; failure to execute on our efforts and programs related to environmental, social and governance matters; competition for, or failure to attract, retain, train, motivate and develop executives and key employees; loss of key members of management or key employees; changes in effective tax rates; changes in credit ratings or outlook; the Company’s incurrence of indebtedness or failure to comply with restrictions and obligations under its debt agreements and instruments; and other factors identified under Part I, Item 1A: Risk Factors in the Company's latest Form 10-K, as updated from time to time in the Company's Quarterly Form 10-Q.

The preceding list is not intended to be an exhaustive list of all of the factors that could impact the Company's forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on the Company’s forward-looking statements and the Company undertakes no obligation to update or revise any of its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

25

W.W. Grainger, Inc. and Subsidiaries

Item 3: Quantitative and Qualitative Disclosures About Market Risk

Grainger’s primary market risk exposures include changes in foreign currency exchange and interest rates.

There were no material changes to the Company’s market risk from those described in Part II, Item 7A: Quantitative and Qualitative Disclosures About Market Risk in the Company's 2022 Form 10-K.

Item 4: Controls and Procedures

Disclosure Controls and Procedures

The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of Grainger's disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Securities Exchange Act of 1934, as amended (the Exchange Act) as of the end of the period covered by this quarterly report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that Grainger’s disclosure controls and procedures were effective as of the end of the period covered by this report in (i) ensuring that information required to be disclosed by Grainger in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There were no changes in Grainger's internal control over financial reporting for the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, Grainger’s internal control over financial reporting.

26

PART II – OTHER INFORMATION

Item 1: Legal Proceedings

For a description of the Company’s legal proceedings, see Note 15 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data in the Company's 2022 Form 10-K and the Company's Form 10-Q for the quarterly period ended March 31, 2023.

Item 1A: Risk Factors

There have been no material changes from the risk factors previously disclosed in Part 1, Item 1A: Risk Factors in the Company's 2022 Form 10-K.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities – Second Quarter 2023

Period	Total Number of Shares Purchased (A)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (B)	Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs
Apr. 1 – Apr. 30	76,169	$661.81	76,169	2,441,215
May 1 – May 31	103,131	$671.99	103,131	2,338,084
Jun. 1 – Jun. 30	64,999	$714.27	64,999	2,273,085
Total	244,299		244,299

A.There were no shares withheld to satisfy tax withholding obligations.

B.Purchases were made pursuant to a share repurchase program approved by Grainger's Board of Directors and announced on April 28, 2021 (2021 Program). The 2021 Program authorized the repurchase of up to 5 million shares with no expiration date.

Item 5: Other Information

None of the Company’s directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s quarter ended June 30, 2023.

27

W.W. Grainger, Inc. and Subsidiaries

Item 6: Exhibits

EXHIBIT NO.	DESCRIPTION
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

28

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			W.W. GRAINGER, INC.
Date:	July 27, 2023	By:	/s/ Deidra C. Merriwether
			Deidra C. Merriwether
			Senior Vice President
			and Chief Financial Officer
			(Principal Financial Officer)
Date:	July 27, 2023	By:	/s/ Laurie R. Thomson
			Laurie R. Thomson
			Vice President and Controller
			(Principal Accounting Officer)

29

EX-31.1

CERTIFICATION

Exhibit 31.1

I, D.G. Macpherson, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of W.W. Grainger, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 27, 2023

By:	/s/ D.G. Macpherson
Name:	D.G. Macpherson
Title:	Chairman and Chief Executive Officer

EX-31.2

CERTIFICATION

Exhibit 31.2

I, Deidra C. Merriwether, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of W.W. Grainger, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 27, 2023

By:	/s/ Deidra C. Merriwether
Name:	Deidra C. Merriwether
Title:	Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of W.W. Grainger, Inc. (“Grainger”) for the quarterly period ended June 30, 2023, (the “Report”), D.G. Macpherson, as Chairman and Chief Executive Officer of Grainger, and Deidra C. Merriwether, as Senior Vice President and Chief Financial Officer of Grainger, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Grainger.

 /s/ D.G. Macpherson

D.G. Macpherson

Chairman and Chief Executive Officer

July 27, 2023

 /s/ Deidra C. Merriwether

Deidra C. Merriwether

Senior Vice President and Chief Financial Officer

July 27, 2023

XML

COVER - shares	6 Months Ended
	Jun. 30, 2023	Jul. 20, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2023
Document Transition Report	false
Entity File Number	1-5684
Entity Registrant Name	W.W. Grainger, Inc.
Entity Incorporation, State or Country Code	IL
Entity Tax Identification Number	36-1150280
Entity Address, Address Line One	100 Grainger Parkway
Entity Address, City or Town	Lake Forest,
Entity Address, State or Province	IL
Entity Address, Postal Zip Code	60045-5201
City Area Code	847
Local Phone Number	535-1000
Title of 12(b) Security	Common Stock
Trading Symbol	GWW
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		50,000,883
Entity Central Index Key	0000277135
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Net sales	$ 4,182	$ 3,837	$ 8,273	$ 7,484
Cost of goods sold	2,538	2,396	4,995	4,660
Gross profit	1,644	1,441	3,278	2,824
Selling, general and administrative expenses	983	907	1,937	1,756
Operating earnings	661	534	1,341	1,068
Other (income) expense:
Interest expense – net	24	22	48	45
Other – net	(8)	(5)	(14)	(11)
Total other expense – net	16	17	34	34
Earnings before income taxes	645	517	1,307	1,034
Income tax provision	155	128	309	260
Net earnings	490	389	998	774
Less net earnings attributable to noncontrolling interest	20	18	40	37
Net earnings attributable to W.W. Grainger, Inc.	$ 470	$ 371	$ 958	$ 737
Earnings per share:
Basic (in dollars per share)	$ 9.32	$ 7.22	$ 18.98	$ 14.33
Diluted (in dollars per share)	$ 9.28	$ 7.19	$ 18.89	$ 14.26
Weighted average number of shares outstanding:
Basic (in shares)	50.1	51.0	50.2	51.1
Diluted (in shares)	50.3	51.3	50.4	51.4

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Statement of Comprehensive Income [Abstract]
Net earnings	$ 490	$ 389	$ 998	$ 774
Other comprehensive earnings (losses):
Foreign currency translation adjustments – net of reclassification to earnings	(32)	(83)	(30)	(109)
Postretirement benefit plan losses and other – net of tax benefit of $1, $1, $2, and $2 respectively	(3)	(4)	(6)	(7)
Total other comprehensive earnings (losses)	(35)	(87)	(36)	(116)
Comprehensive earnings – net of tax	455	302	962	658
Less comprehensive earnings (losses) attributable to noncontrolling interest
Net earnings	20	18	40	37
Foreign currency translation adjustments	(27)	(31)	(32)	(47)
Total comprehensive earnings (losses) attributable to noncontrolling interest	(7)	(13)	8	(10)
Comprehensive earnings attributable to W.W. Grainger, Inc.	$ 462	$ 315	$ 954	$ 668

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (PARENTHETICAL) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Statement of Comprehensive Income [Abstract]
Postretirement benefit plan reclassification, net of tax benefit	$ 1	$ 1	$ 2	$ 2

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Jun. 30, 2023	Dec. 31, 2022
Current assets
Cash and cash equivalents	$ 515	$ 325
Accounts receivable (less allowances for credit losses of $37 and $36, respectively)	2,418	2,133
Inventories – net	2,223	2,253
Prepaid expenses and other current assets	187	266
Total current assets	5,343	4,977
Property, buildings and equipment – net	1,485	1,461
Goodwill	368	371
Intangibles – net	237	232
Operating lease right-of-use	428	367
Other assets	170	180
Total assets	8,031	7,588
Current liabilities
Current maturities	33	35
Trade accounts payable	1,158	1,047
Accrued compensation and benefits	254	334
Operating lease liability	74	68
Accrued expenses	368	474
Income taxes payable	33	52
Total current liabilities	1,920	2,010
Long-term debt	2,275	2,284
Long-term operating lease liability	375	318
Deferred income taxes and tax uncertainties	131	121
Other non-current liabilities	103	120
Shareholders' equity
Cumulative preferred stock – $5 par value – 12,000,000 shares authorized; none issued or outstanding	0	0
Common Stock – $0.50 par value – 300,000,000 shares authorized; 109,659,219 shares issued	55	55
Additional contributed capital	1,331	1,310
Retained earnings	11,477	10,700
Accumulated other comprehensive losses	(184)	(180)
Treasury stock, at cost – 59,660,871 and 59,402,896 shares, respectively	(9,744)	(9,445)
Total W.W. Grainger, Inc. shareholders’ equity	2,935	2,440
Noncontrolling interest	292	295
Total shareholders' equity	3,227	2,735
Total liabilities and shareholders' equity	$ 8,031	$ 7,588

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - USD ($) $ in Millions	Jun. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 37	$ 36
Cumulative preferred stock, par value (in dollars per share)	$ 5	$ 5
Cumulative preferred stock, shares authorized	12,000,000	12,000,000
Cumulative preferred stock, shares issued	0	0
Cumulative preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.50	$ 0.50
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	109,659,219	109,659,219
Treasury stock, shares at cost	59,660,871	59,402,896

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash flows from operating activities:
Net earnings	$ 998	$ 774
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for credit losses	9	8
Deferred income taxes and tax uncertainties	17	15
Depreciation and amortization	106	107
Net losses from sale of assets	0	2
Stock-based compensation	31	27
Change in operating assets and liabilities:
Accounts receivable	(303)	(398)
Inventories	28	(149)
Prepaid expenses and other assets	93	(50)
Trade accounts payable	147	263
Accrued liabilities	(177)	(8)
Income taxes – net	(28)	10
Other non-current liabilities	(17)	(8)
Net cash provided by operating activities	904	593
Cash flows from investing activities:
Capital expenditures	(193)	(163)
Proceeds from sale of assets	2	2
Other – net	0	(11)
Net cash used in investing activities	(191)	(172)
Cash flows from financing activities:
Proceeds from debt	6	0
Payments of debt	(18)	0
Proceeds from stock options exercised	28	15
Payments for employee taxes withheld from stock awards	(29)	(19)
Purchases of treasury stock	(313)	(199)
Cash dividends paid	(194)	(183)
Other – net	(1)	(2)
Net cash used in financing activities	(521)	(388)
Exchange rate effect on cash and cash equivalents	(2)	(12)
Net change in cash and cash equivalents	190	21
Cash and cash equivalents at beginning of year	325	241
Cash and cash equivalents at end of period	$ 515	$ 262

XML

CONDENSED CONSOLIDATED STATEMENT OF SHAREDHOLDERS' EQUITY CONDENSED CONSOLIDATED STATEMENT OF SHAREDHOLDERS' EQUITY - USD ($) $ in Millions	Total	Common Stock	Additional Contributed Capital	Retained Earnings	Accumulated Other Comprehensive Earnings (Losses)	Treasury Stock	Noncontrolling Interest
Beginning balance at Dec. 31, 2021	$ 2,160	$ 55	$ 1,270	$ 9,500	$ (96)	$ (8,855)	$ 286
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	13		10			3
Purchases of treasury stock	(75)					(75)
Net earnings	385			366			19
Other comprehensive earnings (losses)	(29)				(13)		(16)
Cash dividends paid	(84)			(84)
Ending balance at Mar. 31, 2022	2,370	55	1,280	9,782	(109)	(8,927)	289
Beginning balance at Dec. 31, 2021	2,160	55	1,270	9,500	(96)	(8,855)	286
Increase (Decrease) in Stockholders' Equity
Net earnings	774
Other comprehensive earnings (losses)	(116)
Ending balance at Jun. 30, 2022	2,465	55	1,287	10,066	(165)	(9,042)	264
Beginning balance at Mar. 31, 2022	2,370	55	1,280	9,782	(109)	(8,927)	289
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	10		7			2	1
Purchases of treasury stock	(118)					(117)	(1)
Net earnings	389			371			18
Other comprehensive earnings (losses)	(87)				(56)		(31)
Cash dividends paid	(99)			(87)			(12)
Ending balance at Jun. 30, 2022	2,465	55	1,287	10,066	(165)	(9,042)	264
Beginning balance at Dec. 31, 2022	2,735	55	1,310	10,700	(180)	(9,445)	295
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	32		14			18
Purchases of treasury stock	(142)					(142)
Net earnings	508			488			20
Other comprehensive earnings (losses)	(1)				4		(5)
Cash dividends paid	(87)			(87)
Ending balance at Mar. 31, 2023	3,045	55	1,324	11,101	(176)	(9,569)	310
Beginning balance at Dec. 31, 2022	2,735	55	1,310	10,700	(180)	(9,445)	295
Increase (Decrease) in Stockholders' Equity
Net earnings	998
Other comprehensive earnings (losses)	(36)
Ending balance at Jun. 30, 2023	3,227	55	1,331	11,477	(184)	(9,744)	292
Beginning balance at Mar. 31, 2023	3,045	55	1,324	11,101	(176)	(9,569)	310
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	2		7			(7)	2
Purchases of treasury stock	(168)					(168)	0
Net earnings	490			470			20
Other comprehensive earnings (losses)	(35)				(8)		(27)
Cash dividends paid	(107)			(94)			(13)
Ending balance at Jun. 30, 2023	$ 3,227	$ 55	$ 1,331	$ 11,477	$ (184)	$ (9,744)	$ 292

XML

CONDENSED CONSOLIDATED STATEMENT OF SHAREDHOLDERS' EQUITY CONDENSED CONSOLIDATED STATEMENT OF SHAREDHOLDERS' EQUITY (PARENTHETICAL) - $ / shares	3 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2022	Mar. 31, 2022
Statement of Stockholders' Equity (Parentheticals) [Abstract]
Cash dividends paid per share (in dollars per share)	$ 1.86	$ 1.72	$ 1.72	$ 1.62

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

W.W. Grainger, Inc. is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America (N.A.), Japan and the United Kingdom (U.K.). In this report, the words “Grainger” or “Company” mean W.W. Grainger, Inc. and its subsidiaries, except where the context makes it clear that the reference is only to W.W. Grainger, Inc. itself and not its subsidiaries.

Basis of Presentation

The Company's Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial reporting and the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and therefore do not include all information and disclosures normally included in the annual Consolidated Financial Statements. The preparation of these Condensed Consolidated Financial Statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from these estimated amounts. In the opinion of the Company’s management, the Condensed Consolidated Financial Statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.

The Condensed Consolidated Balance Sheet at December 31, 2022, has been derived from the audited Consolidated Financial Statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 21, 2023 (2022 Form 10-K).

There were no material changes to the Company’s significant accounting policies from those disclosed in Note 1 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data in the Company's 2022 Form 10-K.

XML

REVENUE

6 Months Ended

Jun. 30, 2023

Revenue from Contract with Customer [Abstract]

REVENUE

REVENUE

Grainger serves a large number of customers in diverse industries, which are subject to different economic and market-specific factors. The Company's revenue is primarily comprised of MRO product sales and related activities.

The Company's presentation of revenue by segment and industry most reasonably depicts how the nature, amount, timing and uncertainty of the Company's revenue and cash flows are affected by economic and market-specific factors. In addition, the segments have unique underlying risks associated with customer purchasing behaviors. In the High-Touch Solutions N.A. segment, more than two-thirds of revenue is derived from customer contracts whereas in the Endless Assortment segment, a majority of revenue is derived from non-contractual purchases.

The following tables present the Company's percentage of revenue by reportable segment and by major customer industry:

	Three Months Ended June 30,
	2023						2022(1)
	High-Touch Solutions N.A.		Endless Assortment		Total Company(2)		High-Touch Solutions N.A.		Endless Assortment		Total Company(2)
Commercial Services	7	%	12	%	8	%	7	%	13	%	8	%
Contractors	5	%	12	%	6	%	5	%	12	%	6	%
Government	21	%	3	%	18	%	18	%	3	%	15	%
Healthcare	7	%	2	%	6	%	7	%	2	%	6	%
Manufacturing	29	%	30	%	30	%	31	%	29	%	30	%
Retail	4	%	4	%	4	%	4	%	4	%	4	%
Transportation	4	%	2	%	4	%	4	%	2	%	4	%
Utilities	3	%	2	%	2	%	3	%	2	%	3	%
Warehousing	4	%	1	%	3	%	5	%	1	%	4	%
Wholesale	7	%	16	%	8	%	7	%	16	%	9	%
Other(3)	9	%	16	%	11	%	9	%	16	%	11	%
Total net sales	100	%	100	%	100	%	100	%	100	%	100	%
Percent of total company revenue	80	%	18	%	100	%	80	%	19	%	100	%
(1) Customer industry results for the three months ended June 30, 2022 were reclassified to reflect the Company's current year classifications, which primarily uses the North American Industry Classification System (NAICS) beginning January 1, 2023.
(2) Total Company includes other businesses, which includes the Cromwell business. Other businesses account for approximately 2% and 1% of total Company revenue for the three months ended June 30, 2023 and 2022, respectively.
(3) Other primarily includes revenue from industries and customers that are not material individually, including hospitality, restaurants, property management and natural resources.

	Six Months Ended June 30,
	2023						2022(1)
	High-Touch Solutions N.A.		Endless Assortment		Total Company(2)		High-Touch Solutions N.A.		Endless Assortment		Total Company(2)
Commercial Services	7	%	12	%	8	%	7	%	13	%	8	%
Contractors	5	%	12	%	6	%	5	%	12	%	6	%
Government	20	%	3	%	16	%	18	%	3	%	15	%
Healthcare	7	%	2	%	6	%	7	%	2	%	6	%
Manufacturing	30	%	30	%	30	%	31	%	30	%	30	%
Retail	4	%	4	%	4	%	4	%	4	%	4	%
Transportation	4	%	2	%	4	%	4	%	2	%	4	%
Utilities	3	%	2	%	3	%	3	%	2	%	3	%
Warehousing	4	%	1	%	3	%	5	%	1	%	4	%
Wholesale	7	%	16	%	9	%	7	%	15	%	9	%
Other(3)	9	%	16	%	11	%	9	%	16	%	11	%
Total net sales	100	%	100	%	100	%	100	%	100	%	100	%
Percent of total company revenue	80	%	18	%	100	%	79	%	19	%	100	%
(1) Customer industry results for the six months ended June 30, 2022 were reclassified to reflect the Company's current year classifications, which primarily uses the North American Industry Classification System (NAICS) beginning January 1, 2023.
(2) Total Company includes other businesses, which includes the Cromwell business. Other businesses account for approximately 2% of total Company revenue for both the six months ended June 30, 2023 and 2022.
(3) Other primarily includes revenue from industries and customers that are not material individually, including hospitality, restaurants, property management and natural resources.

Total accrued sales incentives are recorded in Accrued expenses and were approximately $111 million and $102 million as of June 30, 2023 and December 31, 2022, respectively.

The Company had no material unsatisfied performance obligations, contract assets or liabilities as of June 30, 2023 and December 31, 2022.

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PROPERTY, BUILDINGS AND EQUIPMENT

6 Months Ended

Jun. 30, 2023

Property, Plant and Equipment [Abstract]

PROPERTY, BUILDINGS AND EQUIPMENT

PROPERTY, BUILDINGS AND EQUIPMENT

Property, buildings and equipment consisted of the following (in millions of dollars):

	As of
	June 30, 2023		December 31, 2022
Land and land improvements	$	323	$	318
Building, structures and improvements	1,413		1,463
Furniture, fixtures, machinery and equipment	1,766		1,662
Property, buildings and equipment	$	3,502	$	3,443
Less accumulated depreciation	2,017		1,982
Property, buildings and equipment – net	$	1,485	$	1,461

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GOODWILL AND OTHER INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

The Company did not identify any significant events or changes in circumstances that indicated the existence of impairment indicators during the three and six months ended June 30, 2023. As such, quantitative assessments were not required.     

The balances and changes in the carrying amount of goodwill by segment are as follows (in millions of dollars):

	High-Touch Solutions N.A.		Endless Assortment		Total
Balance at January 1, 2022	$	321	$	63	$	384
Translation	(8)		(5)		(13)
Balance at December 31, 2022	313		58		371
Translation	2		(5)		(3)
Balance at June 30, 2023	$	315	$	53	$	368

The Company's cumulative goodwill impairments as of June 30, 2023 was $137 million. No goodwill impairments were recorded for the six months ended June 30, 2023 or the twelve months ended December 31, 2022.

The balances and changes in intangible assets – net are as follows (in millions of dollars):

		As of
		June 30, 2023						December 31, 2022
	Weighted average life	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Customer lists and relationships	11.7 years	$	215	$	183	$	32	$	217	$	181	$	36
Trademarks, trade names and other	14.3 years	32		23		9		32		22		10
Non-amortized trade names and other	Indefinite	20		—		20		22		—		22
Capitalized software	4.2 years	615		439		176		580		416		164
Total intangible assets	6.8 years	$	882	$	645	$	237	$	851	$	619	$	232

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DEBT

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

DEBT

DEBT

Total debt, including long-term, current maturities and debt issuance costs and discounts – net, consisted of the following (in millions of dollars):

	As of
	June 30, 2023				December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
4.60% senior notes due 2045	$	1,000	$	949	$	1,000	$	916
1.85% senior notes due 2025	500		475		500		470
4.20% senior notes due 2047	400		351		400		338
3.75% senior notes due 2046	400		325		400		317
MonotaRO term loan	52		52		69		69
Other	(24)		(24)		(29)		(29)
Subtotal	2,328		2,128		2,340		2,081
Less current maturities	(33)		(33)		(35)		(35)
Debt issuance costs and discounts – net of amortization	(20)		(20)		(21)		(21)
Long-term debt	$	2,275	$	2,075	$	2,284	$	2,025

Senior Notes

Between 2015 and 2020, Grainger issued $2.3 billion in unsecured long-term debt (Senior Notes) primarily to provide flexibility in funding general working capital needs, share repurchases and long-term cash requirements. The Senior Notes require no principal payments until maturity and interest is paid semi-annually.

The Company incurred debt issuance costs related to its Senior Notes of approximately $29 million, representing underwriting fees and other expenses, that were recorded as a contra-liability within Long-term debt and are being amortized over the term of the Senior Notes using the straight-line method to Interest expense – net.

The Company uses interest rate swaps to manage the risks associated with its 1.85% Senior Notes. These swaps were designated for hedge accounting treatment as fair value hedges. The resulting carrying value adjustments as of June 30, 2023 and December 31, 2022, are presented within Other in the table above. For further discussion on the Company's hedge accounting policies, see Note 6.

MonotaRO Term Loan

In August 2020, MonotaRO entered into a ¥9 billion term loan agreement to fund technology investments and the expansion of its distribution center (DC) network. As of June 30, 2023 and December 31, 2022, the carrying amount of the term loan, including current maturities due within one year, was $52 million and $69 million, respectively. The term loan matures in August 2024, payable over four equal semi-annual principal installments in 2023 and 2024 and bears an average interest of 0.05%.

Fair Value

The estimated fair value of the Company’s Senior Notes was based on available external pricing data and current market rates for similar debt instruments, among other factors, which are classified as Level 2 inputs within the fair value hierarchy.

For further information on the Company’s debt instruments, see Note 5 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data in the Company’s 2022 Form 10-K.

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DERIVATIVE INSTRUMENTS

6 Months Ended

Jun. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

The Company's earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates and interest rates. Grainger currently enters into certain derivatives or other financial instruments to hedge against these risks, and may continue to do so in the future.

Fair Value Hedges

The Company uses interest rate swaps to hedge a portion of its fixed-rate long-term debt. These swaps are treated as fair value hedges and consequently the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item, are recognized in the Consolidated Statements of Earnings in Interest expense – net. The notional amount of the Company’s outstanding fair value hedges as of June 30, 2023 and December 31, 2022 was $450 million and $500 million, respectively.

The liability hedged by the interest rate swaps is recorded on the Condensed Consolidated Balance Sheets in Long-term debt. As of June 30, 2023 and December 31, 2022, the carrying amount of the hedged item, including the cumulative amount of fair value hedging adjustments was $422 million and $466 million, respectively.

The effect of the Company's fair value hedges on the Condensed Consolidated Statements of Earnings in Interest expense – net is as follows (in millions of dollars):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Gain or (loss):
Interest rate swaps:
Hedged item	$	2	$	5	$	(6)	$	24
Derivatives designated as hedging instrument	$	(2)	$	(5)	$	6	$	(24)

The location and fair values of derivative instruments designated as hedging instruments in the Condensed Consolidated Balance Sheets as of June 30, 2023, are shown in the following table (in millions of dollars):

	As of
	June 30, 2023		December 31, 2022
Interest rate swaps reported in Other non-current liabilities	$	25	$	34

Fair Value

The estimated fair values of the Company's derivative instruments were based on quoted market forward rates, which are classified as Level 2 inputs within the fair value hierarchy and reflect the present value of the amount that the Company would pay for contracts involving the same notional amounts and maturity dates. No adjustments were required during the current period to reflect the counterparty’s credit risk or the Company’s own nonperformance risk.

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SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2023

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

Grainger's two reportable segments are High-Touch Solutions N.A. and Endless Assortment. The remaining businesses, which include the Company's Cromwell business, are classified as Other to reconcile to consolidated results. These remaining businesses individually and in the aggregate do not meet the criteria of a reportable segment.

The Company's corporate costs are allocated to each reportable segment based on benefits received. Additionally, intersegment sales transactions, which are sales between Grainger businesses in separate reportable segments, are eliminated within the segment to present only the impact of sales to external customers. Service fees for intersegment sales are included in each segment's selling, general and administrative expenses and are also eliminated in the Company's Consolidated Financial Statements.

Following is a summary of segment results (in millions of dollars):

	Three Months Ended June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
	Net sales		Operating earnings (losses)		Net sales		Operating earnings (losses)		Net sales		Operating earnings (losses)		Net sales		Operating earnings (losses)
High-Touch Solutions N.A.	$	3,355	$	600	$	3,053	$	475	$	6,649	$	1,221	$	5,931	$	956
Endless Assortment	751		65		719		62		1,475		123		1,416		117
Other	76		(4)		65		(3)		149		(3)		137		(5)
Total Company	$	4,182	$	661	$	3,837	$	534	$	8,273	$	1,341	$	7,484	$	1,068

The Company is a broad line distributor of MRO products and services. Products are regularly added and removed from the Company's inventory. Accordingly, it would be impractical to provide sales information by product category due to the way the business is managed, and the dynamic nature of the inventory offered, including the evolving list of products stocked and additional products available online but not stocked. Assets for reportable segments are not disclosed as such information is not regularly reviewed by the Company's Chief Operating Decision Maker.

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CONTINGENCIES AND LEGAL MATTERS

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

CONTINGENCIES AND LEGAL MATTERS

CONTINGENCIES AND LEGAL MATTERS

From time to time the Company is involved in various legal and administrative proceedings, including claims related to: product liability, safety or compliance; privacy and cybersecurity matters; negligence; contract disputes; environmental issues; unclaimed property; wage and hour laws; intellectual property; advertising and marketing; consumer protection; pricing (including disaster or emergency declaration pricing statutes); employment practices; regulatory compliance, including trade and export matters; anti-bribery and corruption; and other matters and actions brought by employees, consumers, competitors, suppliers, customers, governmental entities and other third parties.

There have been no material changes to the contingencies and legal matters from those disclosed in Note 15 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data in the Company's 2022 Form 10-K and the Company's Form 10-Q for the quarterly period ended March 31, 2023. Although the Company is unable to determine the probability of the outcome of these matters or the estimate of potential loss or range of loss, the Company anticipates that any potential liability, which may arise of or with respect to these matters, will not have, either individually or in the aggregate, a material adverse effect on the Company's financial position, results of operations or cash flows.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2023

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

On July 6, 2023, the Company purchased 48 acres of land in Oregon for the construction of a new 500,000 square foot DC in accordance with its strategic plan to expand its distribution network. The Company expects to begin operations in 2025.

On July 26, 2023, the Company’s Board of Directors declared a quarterly dividend of $1.86 per share, payable September 1, 2023, to shareholders of record on August 14, 2023.

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Pay vs Performance Disclosure - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Pay vs Performance Disclosure
Net Income (Loss) Attributable to Parent	$ 470	$ 371	$ 958	$ 737

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Insider Trading Arrangements	3 Months Ended
	Jun. 30, 2023
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

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REVENUE (Tables)

6 Months Ended

Jun. 30, 2023

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregation of Revenues

The following tables present the Company's percentage of revenue by reportable segment and by major customer industry:

	Three Months Ended June 30,
	2023						2022(1)
	High-Touch Solutions N.A.		Endless Assortment		Total Company(2)		High-Touch Solutions N.A.		Endless Assortment		Total Company(2)
Commercial Services	7	%	12	%	8	%	7	%	13	%	8	%
Contractors	5	%	12	%	6	%	5	%	12	%	6	%
Government	21	%	3	%	18	%	18	%	3	%	15	%
Healthcare	7	%	2	%	6	%	7	%	2	%	6	%
Manufacturing	29	%	30	%	30	%	31	%	29	%	30	%
Retail	4	%	4	%	4	%	4	%	4	%	4	%
Transportation	4	%	2	%	4	%	4	%	2	%	4	%
Utilities	3	%	2	%	2	%	3	%	2	%	3	%
Warehousing	4	%	1	%	3	%	5	%	1	%	4	%
Wholesale	7	%	16	%	8	%	7	%	16	%	9	%
Other(3)	9	%	16	%	11	%	9	%	16	%	11	%
Total net sales	100	%	100	%	100	%	100	%	100	%	100	%
Percent of total company revenue	80	%	18	%	100	%	80	%	19	%	100	%
(1) Customer industry results for the three months ended June 30, 2022 were reclassified to reflect the Company's current year classifications, which primarily uses the North American Industry Classification System (NAICS) beginning January 1, 2023.
(2) Total Company includes other businesses, which includes the Cromwell business. Other businesses account for approximately 2% and 1% of total Company revenue for the three months ended June 30, 2023 and 2022, respectively.
(3) Other primarily includes revenue from industries and customers that are not material individually, including hospitality, restaurants, property management and natural resources.

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PROPERTY, BUILDINGS AND EQUIPMENT (Tables)

6 Months Ended

Jun. 30, 2023

Property, Plant and Equipment [Abstract]

Schedule of Property, Buildings and Equipment

Property, buildings and equipment consisted of the following (in millions of dollars):

	As of
	June 30, 2023		December 31, 2022
Land and land improvements	$	323	$	318
Building, structures and improvements	1,413		1,463
Furniture, fixtures, machinery and equipment	1,766		1,662
Property, buildings and equipment	$	3,502	$	3,443
Less accumulated depreciation	2,017		1,982
Property, buildings and equipment – net	$	1,485	$	1,461

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GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Balances and Changes in Carrying Amounts of Goodwill

The balances and changes in the carrying amount of goodwill by segment are as follows (in millions of dollars):

	High-Touch Solutions N.A.		Endless Assortment		Total
Balance at January 1, 2022	$	321	$	63	$	384
Translation	(8)		(5)		(13)
Balance at December 31, 2022	313		58		371
Translation	2		(5)		(3)
Balance at June 30, 2023	$	315	$	53	$	368

Schedule of Balance in Intangible Assets, Net

The balances and changes in intangible assets – net are as follows (in millions of dollars):

		As of
		June 30, 2023						December 31, 2022
	Weighted average life	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Customer lists and relationships	11.7 years	$	215	$	183	$	32	$	217	$	181	$	36
Trademarks, trade names and other	14.3 years	32		23		9		32		22		10
Non-amortized trade names and other	Indefinite	20		—		20		22		—		22
Capitalized software	4.2 years	615		439		176		580		416		164
Total intangible assets	6.8 years	$	882	$	645	$	237	$	851	$	619	$	232

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DEBT (Tables)

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Schedule of Long-Term Debt Instruments

long-term, current maturities and debt issuance costs and discounts – net, consisted of the following (in millions of dollars):

	As of
	June 30, 2023				December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
4.60% senior notes due 2045	$	1,000	$	949	$	1,000	$	916
1.85% senior notes due 2025	500		475		500		470
4.20% senior notes due 2047	400		351		400		338
3.75% senior notes due 2046	400		325		400		317
MonotaRO term loan	52		52		69		69
Other	(24)		(24)		(29)		(29)
Subtotal	2,328		2,128		2,340		2,081
Less current maturities	(33)		(33)		(35)		(35)
Debt issuance costs and discounts – net of amortization	(20)		(20)		(21)		(21)
Long-term debt	$	2,275	$	2,075	$	2,284	$	2,025

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DERIVATIVE INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Effect of Fair Value Hedges in Interest Expense, Net

The effect of the Company's fair value hedges on the Condensed Consolidated Statements of Earnings in Interest expense – net is as follows (in millions of dollars):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Gain or (loss):
Interest rate swaps:
Hedged item	$	2	$	5	$	(6)	$	24
Derivatives designated as hedging instrument	$	(2)	$	(5)	$	6	$	(24)

Schedule of Fair Value and Carrying Amounts of Outstanding Derivative Instruments

The location and fair values of derivative instruments designated as hedging instruments in the Condensed Consolidated Balance Sheets as of June 30, 2023, are shown in the following table (in millions of dollars):

	As of
	June 30, 2023		December 31, 2022
Interest rate swaps reported in Other non-current liabilities	$	25	$	34

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SEGMENT INFORMATION (Tables)

6 Months Ended

Jun. 30, 2023

Segment Reporting [Abstract]

Summary of Segment Results

Following is a summary of segment results (in millions of dollars):

	Three Months Ended June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
	Net sales		Operating earnings (losses)		Net sales		Operating earnings (losses)		Net sales		Operating earnings (losses)		Net sales		Operating earnings (losses)
High-Touch Solutions N.A.	$	3,355	$	600	$	3,053	$	475	$	6,649	$	1,221	$	5,931	$	956
Endless Assortment	751		65		719		62		1,475		123		1,416		117
Other	76		(4)		65		(3)		149		(3)		137		(5)
Total Company	$	4,182	$	661	$	3,837	$	534	$	8,273	$	1,341	$	7,484	$	1,068

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REVENUE - Disaggregation of Revenues (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	100.00%	100.00%	100.00%	100.00%
Percent of total company revenue	100.00%	100.00%	100.00%	100.00%
Operating earnings (losses)
Disaggregation of Revenue [Line Items]
Total company revenue (as a percent)	2.00%	1.00%	2.00%	2.00%
Contractors
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	8.00%	8.00%	8.00%	8.00%
Commercial
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	6.00%	6.00%	6.00%	6.00%
Government Customer
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	18.00%	15.00%	16.00%	15.00%
Healthcare Customer
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	6.00%	6.00%	6.00%	6.00%
Manufacturing
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	30.00%	30.00%	30.00%	30.00%
Retail/Wholesale
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	4.00%	4.00%	4.00%	4.00%
Transportation
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	4.00%	4.00%	4.00%	4.00%
Utilities
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	2.00%	3.00%	3.00%	3.00%
Warehousing
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	3.00%	4.00%	3.00%	4.00%
Wholesale
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	8.00%	9.00%	9.00%	9.00%
Other
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	11.00%	11.00%	11.00%	11.00%
High-Touch Solutions N.A.
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	100.00%	100.00%	100.00%	100.00%
Percent of total company revenue	80.00%	80.00%	80.00%	79.00%
High-Touch Solutions N.A. | Contractors
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	7.00%	7.00%	7.00%	7.00%
High-Touch Solutions N.A. | Commercial
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	5.00%	5.00%	5.00%	5.00%
High-Touch Solutions N.A. | Government Customer
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	21.00%	18.00%	20.00%	18.00%
High-Touch Solutions N.A. | Healthcare Customer
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	7.00%	7.00%	7.00%	7.00%
High-Touch Solutions N.A. | Manufacturing
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	29.00%	31.00%	30.00%	31.00%
High-Touch Solutions N.A. | Retail/Wholesale
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	4.00%	4.00%	4.00%	4.00%
High-Touch Solutions N.A. | Transportation
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	4.00%	4.00%	4.00%	4.00%
High-Touch Solutions N.A. | Utilities
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	3.00%	3.00%	3.00%	3.00%
High-Touch Solutions N.A. | Warehousing
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	4.00%	5.00%	4.00%	5.00%
High-Touch Solutions N.A. | Wholesale
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	7.00%	7.00%	7.00%	7.00%
High-Touch Solutions N.A. | Other
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	9.00%	9.00%	9.00%	9.00%
Endless Assortment
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	100.00%	100.00%	100.00%	100.00%
Percent of total company revenue	18.00%	19.00%	18.00%	19.00%
Endless Assortment | Contractors
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	12.00%	13.00%	12.00%	13.00%
Endless Assortment | Commercial
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	12.00%	12.00%	12.00%	12.00%
Endless Assortment | Government Customer
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	3.00%	3.00%	3.00%	3.00%
Endless Assortment | Healthcare Customer
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	2.00%	2.00%	2.00%	2.00%
Endless Assortment | Manufacturing
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	30.00%	29.00%	30.00%	30.00%
Endless Assortment | Retail/Wholesale
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	4.00%	4.00%	4.00%	4.00%
Endless Assortment | Transportation
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	2.00%	2.00%	2.00%	2.00%
Endless Assortment | Utilities
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	2.00%	2.00%	2.00%	2.00%
Endless Assortment | Warehousing
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	1.00%	1.00%	1.00%	1.00%
Endless Assortment | Wholesale
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	16.00%	16.00%	16.00%	15.00%
Endless Assortment | Other
Disaggregation of Revenue [Line Items]
Total net sales (as a percent)	16.00%	16.00%	16.00%	16.00%

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REVENUE - Narrative (Details) - USD ($) $ in Millions	Jun. 30, 2023	Dec. 31, 2022
Revenue from Contract with Customer [Abstract]
Accrued sales incentives	$ 111	$ 102

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PROPERTY, BUILDINGS AND EQUIPMENT (Details) - USD ($) $ in Millions	Jun. 30, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Property, buildings and equipment	$ 3,502	$ 3,443
Less accumulated depreciation	2,017	1,982
Property, buildings and equipment – net	1,485	1,461
Land
Property, Plant and Equipment [Line Items]
Property, buildings and equipment	323	318
Building, Structures and Improvements
Property, Plant and Equipment [Line Items]
Property, buildings and equipment	1,413	1,463
Furniture, Fixtures, Machinery and Equipment
Property, Plant and Equipment [Line Items]
Property, buildings and equipment	$ 1,766	$ 1,662

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GOODWILL AND OTHER INTANGIBLE ASSETS - Balances and Changes in Carrying Amounts of Goodwill (Details) - USD ($) $ in Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Goodwill [Roll Forward]
Goodwill, beginning balance	$ 371	$ 384
Translation	(3)	(13)
Goodwill, ending balance	368	371
High-Touch Solutions N.A. | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items
Goodwill [Roll Forward]
Goodwill, beginning balance	313	321
Translation	2	(8)
Goodwill, ending balance	315	313
Endless Assortment | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items
Goodwill [Roll Forward]
Goodwill, beginning balance	58	63
Translation	(5)	(5)
Goodwill, ending balance	$ 53	$ 58

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GOODWILL AND OTHER INTANGIBLE ASSETS - Narrative (Details) - USD ($) $ in Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Segment Reporting Information [Line Items]
Translation	$ (3)	$ (13)
Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items
Segment Reporting Information [Line Items]
Cumulative goodwill impairments	137
High-Touch Solutions N.A. | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items
Segment Reporting Information [Line Items]
Translation	$ 2	$ (8)

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GOODWILL AND OTHER INTANGIBLE ASSETS - Balance in Intangible Assets, Net (Details) - USD ($) $ in Millions	Jun. 30, 2023	Dec. 31, 2022
Intangible Assets, Gross (Excluding Goodwill), Total	$ 882	$ 851
Accumulated amortization	645	619
Total intangible assets, net	$ 237	$ 232
Weighted average life
Weighted average life	6 years 9 months 18 days	6 years 9 months 18 days
Customer lists and relationships
Gross carrying amount	$ 215	$ 217
Accumulated amortization	183	181
Net carrying amount	$ 32	$ 36
Customer lists and relationships | Weighted average life
Weighted average life	11 years 8 months 12 days	11 years 8 months 12 days
Trademarks, trade names and other
Gross carrying amount	$ 32	$ 32
Accumulated amortization	23	22
Net carrying amount	$ 9	$ 10
Trademarks, trade names and other | Weighted average life
Weighted average life	14 years 3 months 18 days	14 years 3 months 18 days
Non-amortized trade names and other
Gross carrying amount	$ 20	$ 22
Accumulated amortization	0	0
Non-amortized trade names and other	20	22
Capitalized software
Gross carrying amount	615	580
Accumulated amortization	439	416
Net carrying amount	$ 176	$ 164
Capitalized software | Weighted average life
Weighted average life	4 years 2 months 12 days	4 years 2 months 12 days

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DEBT - Long-Term Debt Instruments (Details) - USD ($) $ in Millions	Jun. 30, 2023	Dec. 31, 2022	Feb. 29, 2020
Debt Instrument [Line Items]
Long-term debt, gross	$ 2,328	$ 2,340
Other	(24)	(29)
Debt issuance costs and discounts – net of amortization	(20)	(21)
Long-term debt	2,275	2,284
Other, fair value	(24)	(29)
Long-term debt, gross, fair value	2,128	2,081
Current maturities	(33)	(35)
Less current maturities	(33)	(35)
Debt issuance costs and discounts, fair value	(20)	(21)
Long-term debt, excluding current maturities, , fair value	2,075	2,025
Yen Denominated Bank Term Loan
Debt Instrument [Line Items]
Long-term debt, gross	52	69
Long-term debt, fair value	52	69
Senior Notes, 4.60% due 2045 | Senior notes
Debt Instrument [Line Items]
Long-term debt, gross	1,000	1,000
Long-term debt, fair value	$ 949	916
Interest rate	4.60%
Unsecured Senior Notes, 1.85% | Senior notes
Debt Instrument [Line Items]
Long-term debt, gross	$ 500	500
Long-term debt, fair value	$ 475	470
Interest rate	1.85%		1.85%
Senior Notes, 4.20% due 2047 | Senior notes
Debt Instrument [Line Items]
Long-term debt, gross	$ 400	400
Long-term debt, fair value	$ 351	338
Interest rate	4.20%
Senior Notes, 3.75% due 2046 | Senior notes
Debt Instrument [Line Items]
Long-term debt, gross	$ 400	400
Long-term debt, fair value	$ 325	$ 317
Interest rate	3.75%

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DEBT - Narrative (Details) $ in Millions	1 Months Ended
	Aug. 31, 2020 JPY (¥) payment	Jun. 30, 2023 USD ($)	Jun. 30, 2023 JPY (¥)	Dec. 31, 2022 USD ($)	Dec. 31, 2022 JPY (¥)	Dec. 31, 2021 USD ($)	Feb. 29, 2020
Debt Instrument [Line Items]
Long-term debt, gross		$ 2,328		$ 2,340
Senior Notes
Debt Instrument [Line Items]
Debt principal amount						$ 2,300
Debt issuance costs						$ 29
Yen Denominated Bank Term Loan
Debt Instrument [Line Items]
Long-term debt, gross		$ 52		69
Unsecured Senior Notes, 1.85% | Senior Notes
Debt Instrument [Line Items]
Interest rate		1.85%	1.85%				1.85%
Long-term debt, gross		$ 500		$ 500
Term Loan Agreement, 0.05% | Yen Denominated Bank Term Loan
Debt Instrument [Line Items]
Debt principal amount | ¥	¥ 9,000,000,000
Long-term debt, gross | ¥			¥ 52,000,000		¥ 69,000,000
Number of semi-annual principal payments | payment	4
Average interest rate	0.05%

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DERIVATIVE INSTRUMENTS - Narrative (Details) - USD ($) $ in Millions	Jun. 30, 2023	Dec. 31, 2022
Derivative [Line Items]
Derivative instruments and hedges, liabilities	$ 422	$ 466
Designated as Hedging Instrument | Fair Value Hedging
Derivative [Line Items]
Derivative, notional amount	$ 450	$ 500

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DERIVATIVE INSTRUMENTS - Effect of Fair Value Hedges in Interest Expense, Net (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Derivative Instruments, Gain (Loss) [Line Items]
Interest income (expense), net	$ (24)	$ (22)	$ (48)	$ (45)
Other Contract | Fair Value Hedging | Designated as Hedging Instrument
Derivative Instruments, Gain (Loss) [Line Items]
Interest income (expense), net	2	5	(6)	24
Interest rate swaps | Fair Value Hedging | Designated as Hedging Instrument
Derivative Instruments, Gain (Loss) [Line Items]
Interest income (expense), net	$ (2)	$ (5)	$ 6	$ (24)

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DERIVATIVE INSTRUMENTS - Fair Value and Carrying Amounts of Outstanding Derivative Instruments (Details) - USD ($) $ in Millions	Jun. 30, 2023	Dec. 31, 2022
Interest rate swaps | Designated as Hedging Instrument | Other Noncurrent Liabilities
Derivative [Line Items]
Interest rate swaps reported in Other non-current liabilities	$ 25	$ 34

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SEGMENT INFORMATION - Narrative (Details)	6 Months Ended
	Jun. 30, 2023 segment
Segment Reporting [Abstract]
Number of reportable segments	2

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SEGMENT INFORMATION - Summary of Segment Results (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Segment Reporting Information [Line Items]
Total net sales	$ 4,182	$ 3,837	$ 8,273	$ 7,484
Segment operating earnings	661	534	1,341	1,068
Other
Segment Reporting Information [Line Items]
Total net sales	76	65	149	137
Segment operating earnings	(4)	(3)	(3)	(5)
High-Touch Solutions N.A. | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items
Segment Reporting Information [Line Items]
Total net sales	3,355	3,053	6,649	5,931
Segment operating earnings	600	475	1,221	956
Endless Assortment | Segment Balances Before Intersegment Eliminations and Consolidation Reconciling Items
Segment Reporting Information [Line Items]
Total net sales	751	719	1,475	1,416
Segment operating earnings	$ 65	$ 62	$ 123	$ 117

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SUBSEQUENT EVENTS (Details) - Subsequent event	Jul. 26, 2023 $ / shares	Jul. 06, 2023 ft² numbersOfAcres
Subsequent Event [Line Items]
Number of acres of land purchased | numbersOfAcres		48
Number of square foot for construction | ft²		500,000
Dividend declared (in dollars per share) | $ / shares	$ 1.86