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What changed in W. W. Grainger's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of W. W. Grainger's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+249 added−253 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-21)

Top changes in W. W. Grainger's 2023 10-K

249 paragraphs added · 253 removed · 199 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeTo that end, the Company requires each of its locations to perform regular safety audits to confirm proper safety policies, programs, procedures and training are in place and operating effectively. The Company is focused on promoting a culture of safety and education.
Biggest changeTo that end, the Company requires each of its locations to perform regular safety audits to confirm proper safety policies, programs and procedures. The Company is focused on promoting a culture of safety and education. Operational team members must complete routine training to fully understand the expectation of behaviors defined by the Company’s global EHS policy.
Addit ionally, 6 Grainger offers comprehensive inventory management through its KeepStock® program that includes vendor-managed inventory, customer-managed inventory and onsite vending machines . In the Endless Assortment segment, orders are placed primarily through online channels. Zoro leverages the High-Touch Solution N.A.'s DC network and third-party drop shipments to deliver seamless service and product fulfillment to customers.
Addit ionally, Grainger offers comprehensive inventory management through its KeepStock® program that includes vendor-managed inventory, customer-managed inventory and onsite vending machines . 6 In the Endless Assortment segment, orders are placed primarily through online channels. Zoro leverages the High-Touch Solution N.A.'s DC network and third-party drop shipments to deliver seamless service and product fulfillment to customers.
To that end, Grainger's Board of Directors and senior management are actively involved in cultivating Grainger’s culture. The Compensation Committee of the Board, which is comprised of independent directors, oversees the Company's human capital management programs and policies and routinely provides updates to the Board.
To that end, Grainger's Board of Directors (the Board) and senior management are actively involved in cultivating Grainger’s culture. The Compensation Committee of the Board, which is comprised of independent directors, oversees the Company's human capital management programs and policies and routinely provides updates to the Board.
The Company is committed to providing team members with resources designed to help them succeed. Grainger focuses on creating opportunities for team member growth, development and training, including offering a comprehensive talent program that continues throughout a team member’s career. This talent program is comprised of performance management, career management, professional development learning opportunities and milestone leadership development programs.
The Company is committed to providing team members with resources designed to help them succeed. Grainger focuses on creating opportunities for team member growth, development and training, including offering a comprehensive talent program that continues throughout a team member’s career. This talent program is comprised of performance 8 management, career management, professional development learning opportunities and milestone leadership development programs.
Item 1: Business W.W. Grainger, Inc., incorporated in the State of Illinois in 1928, is a broad line, 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.
Item 1: Business W.W. Grainger, Inc., incorporated in the State of Illinois in 1928, is a broad line, distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America, Japan and the United Kingdom (U.K.). In this report, the words “Grainger” or “Company” mean W.W.
The Company's High-Touch Solutions N.A. segment provides value-added MRO solutions that are rooted in deep product knowledge and customer expertise. The high-touch solutions model serves customers with complex buying needs. This segment includes the Grainger-branded businesses in the United States (U.S.), Canada, Mexico and Puerto Rico.
The Company's High-Touch Solutions N.A. segment provides value-added MRO solutions that are rooted in deep product knowledge and customer expertise. The high-touch solutions model serves customers with complex buying needs. This segment primarily includes the Grainger-branded businesses in the United States (U.S.), Canada, Mexico and Puerto Rico.
Distribution and Sources of Supply In the large and fragmented MRO industry, Grainger holds an advantaged position with its supply chain infrastructure and a broad in-stock product offering. More than 5,000 suppliers worldwide provide Grainger businesses with more than 1.4 million products stocked in Distribution Centers (DCs) and branches globally.
Distribution and Sources of Supply In the large and fragmented MRO industry, Grainger holds an advantaged position with its supply chain infrastructure and a broad in-stock product offering. More than 5,000 primary suppliers worldwide provide Grainger businesses with more than 1.4 million products stocked in Distribution Centers (DCs) and branches globally.
No single supplier comprised more than 5% of Grainger's total purchases for the year ended December 31, 2022. In the High-Touch Solutions N.A. segment, DCs are the primary order fulfillment channel, mainly through direct shipments to customers. Automation in the DCs allows orders to ship complete with next-day delivery and also replenish branches that provide same-day availability to customers.
No single supplier comprised more than 5% of Grainger's total purchases for the year ended December 31, 2023. In the High-Touch Solutions N.A. segment, DCs are the primary order fulfillment channel, mainly through direct shipments to customers. Automation in the DCs allows orders to ship complete with next-day delivery and also replenish branches that provide same-day availability to customers.
For further segment information, see Part II, Item 7: Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations and Note 14 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. Below is a description of Grainger’s reportable segments and other businesses. High-Touch Solutions N.A.
For further segment information, see Part II, Item 7: Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations and Note 13 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. Below is a description of Grainger’s reportable segments and other businesses. High-Touch Solutions N.A.
Approximately 20% of 2022 sales were private label MRO items bearing Grainger’s registered trademarks, including DAYTON®, SPEEDAIRE®, AIR HANDLER®, TOUGH GUY®, WESTWARD®, CONDOR® and LUMAPRO®. Grainger also provides a suite of inventory services to its customers under the KEEPSTOCK® brand, which is a registered service mark.
Approximately 20% of 2023 sales were private label MRO items bearing Grainger’s registered trademarks, including DAYTON®, SPEEDAIRE®, AIR HANDLER®, TOUGH GUY®, WESTWARD®, CONDOR® and LUMAPRO®. Grainger also provides a suite of inventory services to its customers under the KEEPSTOCK® brand, which is a registered service mark.
Merriwether held various positions of increasing responsibility at Sears Holdings Corporation, a broadline retailer, PriceWaterhouseCoopers, a global professional services firm, and Eli Lilly & Company, a global pharmaceutical company. 10 Paige K. Robbins (54) Senior Vice President and President, Grainger Business Unit, a position assumed in January 2021. Previously, Ms.
Merriwether held various positions of increasing responsibility at Sears Holdings Corporation, a broadline retailer, PriceWaterhouseCoopers, a global professional services firm, and Eli Lilly & Company, a global pharmaceutical company. 10 Paige K. Robbins (55) Senior Vice President and President, Grainger Business Unit, a position assumed in January 2021. Previously, Ms.
No single product category comprised more than 20% of the Company's sales for the year ended December 31, 2022. In the High-Touch Solutions N.A. segment, Grainger.com provides real-time price and product availability, detailed product information and features, such as product search and compare capabilities.
No single product category comprised more than 20% of the Company's sales for the year ended December 31, 2023. In the High-Touch Solutions N.A. segment, Grainger.com provides real-time price and product availability, detailed product information and features, such as product search and compare capabilities.
Macpherson served as Partner and Managing Director at Boston Consulting Group, a global management consulting firm. Deidra C. Merriwether (54) Senior Vice President and Chief Financial Officer, a position assumed in January 2021. Previously, Ms. Merriwether served as Senior Vice President, and President, North American Sales & Services, a position assumed in November 2019, Senior Vice President, U.S.
Macpherson served as Partner and Managing Director at Boston Consulting Group, a global management consulting firm. Deidra C. Merriwether (55) Senior Vice President and Chief Financial Officer, a position assumed in January 2021. Previously, Ms. Merriwether served as Senior Vice President, and President, North American Sales & Services, a position assumed in November 2019, Senior Vice President, U.S.
For further information on the Company's principles, see below "Workplace Practices and Policies." General Grainger's two reportable segments are High-Touch Solutions N.A. and Endless Assortment. These reportable segments align with Grainger's go-to-market strategies and bifurcated business models of high-touch solutions and endless assortment.
For further information on the Company's principles, see below "Workplace Practices and Policies." General Grainger's two reportable segments are High-Touch Solutions North America (High-Touch Solutions N.A.) and Endless Assortment. These reportable segments align with Grainger's go-to-market strategies and bifurcated business models of high-touch solutions and endless assortment.
Berardinelli-Krantz is a veteran of the United States Army and Judge Advocate General’s Corps, where she served as a trial attorney in Fort Hood, Texas, and for the Contract Appeals Division in Washington, D.C. She also served as a trial defense counsel in Baghdad, Iraq. Kathleen S.
Berardinelli-Krantz is a veteran of the United States Army and Judge Advocate General’s Corps, where she served as a trial attorney in Fort Hood, Texas, and for the Contract Appeals Division in Washington, D.C. She also served as a trial defense counsel in Baghdad, Iraq.
The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. 9 Information about Executive Officers Following is information about the executive officers of Grainger, including age, as of January 31, 2023.
The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. 9 Information about Executive Officers Following is information about the executive officers of Grainger, including age, as of January 31, 2024.
Compliance with these laws, regulations and standards requires the dedication of time and effort of team members as well as financial resources. In 2022, compliance with the applicable laws, regulations and standards did not have a material effect on capital expenditures, earnings or competitive position.
Compliance with these laws, regulations and standards requires the dedication of time and effort of team members as well as financial resources. In 2023, compliance with the applicable laws, regulations and standards did not have a material effect on capital expenditures, earnings or competitive position.
Previously, Ms. Berardinelli-Krantz served in roles of increasing responsibility at Eaton Corporation (Eaton), a power management company, from 2011-2015 and again from 2017-2022. Her most recent position was Senior Vice President and Deputy Chief Legal Officer.
Berardinelli-Krantz served in roles of increasing responsibility at Eaton Corporation (Eaton), a power management company, from 2011-2015 and again from 2017-2022. Her most recent position was Senior Vice President and Deputy Chief Legal Officer.
In addition to Grainger’s U.S. based operations, which in 2022 generated approximately 82% of its consolidated net sales, Grainger operates its business principally through wholly owned subsidiaries in Canada, Mexico and the U.K., and through its majority-owned subsidiary in Japan.
In addition to Grainger’s U.S. based operations, which in 2023 generated approximately 82% of its consolidated net sales, Grainger operates its business principally through wholly owned subsidiaries in Canada, Mexico and the U.K., and through its majority-owned subsidiary in Japan.
Grainger believes that a purpose-driven culture is an asset that creates a sustainable, competitive advantage for the Company. Building on its strong foundation while evolving a framework to address the future is critical to Grainger’s continued success. Grainger has been consistently recognized for its commitment to its culture, diversity, equity and inclusion efforts and employee engagement.
Grainger believes that a purpose-driven culture is an asset that creates a sustainable, competitive advantage for the Company. Building on its strong foundation while evolving a framework to address the future is critical to Grainger’s continued success. Grainger has been consistently recognized for its commitment to its culture, diversity, equity and inclusion efforts and team member engagement.
Macpherson (55) Chairman of the Board, a position assumed in October 2017, and Chief Executive Officer, a position assumed in October 2016 at which time he was also appointed to the Board of Directors. Previously, Mr.
Macpherson (56) Chairman of the Board, a position assumed in October 2017, and Chief Executive Officer, a position assumed in October 2016 at which time he was also appointed to the Board of Directors. Previously, Mr.
Health and Safety Grainger strives to provide a safe work environment and ensuring team members are properly prepared to perform the many tasks required to support customers. The Company’s Environmental, Health and Safety (EHS) program is designed to integrate EHS into Grainger’s business operations and comply with applicable regulations.
Health and Safety Grainger strives to provide a safe work environment in which team members are properly prepared to perform the many tasks required to support customers. The Company’s Environmental, Health and Safety (EHS) program is designed to integrate EHS into Grainger’s business operations and comply with applicable regulations.
In 2022 , the Company’s Occupational Safety and Health Administration (OSHA) Total Recordable Incident Rate in the U .S. was 1.3 and the Company’s Lost Time Incident Rate in the U.S. was 0.4 based upon the number of incidents per 100 team members (or per 200,000 work hours).
In 2023 , the Company’s Occupational Safety and Health Administration Total Recordable Incident Rate in the U .S. was 1.3 and the Company’s Lost Time Incident Rate in the U.S. was 0.4 based upon the number of incidents per 100 team members (or per 200,000 work hours).
Grainger’s customers range from smaller businesses to large corporations, government entities and other institutions, representing a broad collection of industries, including, but not limited to commercial, healthcare, and manufacturing. No single end customer accounted fo r more than 4% of to tal sales for the year ended December 31, 2022.
Grainger’s customers range from smaller businesses to large corporations, government entities and other institutions, representing a broad collection of industries, including, but not limited to commercial, healthcare, and manufacturing. No single end customer accounted fo r more than 10% of to tal sales for the year ended December 31, 2023.
As of December 31, 2022, within Grainger’s U.S. workforce, approximately 39% of team members were women and approximately 39% of team members were racially and ethnically diverse. 8 Talent Acquisition, Retention and Development Grainger believes that a great customer experience starts with a great team member experience.
As of December 31, 2023, within Grainger’s U.S. workforce, approximately 39% of team members were women and approximately 37% of team members were racially and ethnically diverse. Talent Acquisition, Retention and Development Grainger believes that a great customer experience starts with a great team member experience.
Thomson (49) Vice President, Controller and principal accounting officer, a position assumed in May 2021. Previously, Ms.
Thomson (50) Vice President, Controller and principal accounting officer, a position assumed in May 2021. Previously, Ms.
Zoro offers more than 11 million products and MonotaRO provides access to more than 20 million products, primarily through its websites and catalogs. The endless assortment businesses continue to enhance assortment by strategically adding products and expanding the offer of third party held products.
Zoro offers more than 13 million products and MonotaRO provides access to more than 22 million products, primarily through its websites and catalogs. The endless assortment businesses continue to enhance assortment by strategically adding products and expanding the offer of third party held products.
The high-touch solutions businesses offer more than 2 million products and several services, such as technical support and inventory management. In the Endless Assortment segment, Grainger offers an expansive product assortment and a broad, extensive product range that contains millions of products including those outside of traditional industrial MRO categories.
The high-touch solutions businesses offer approximately 2 million products and several services, such as technical support and inventory management. In the Endless Assortment segment, Grainger offers an expansive product assortment that contains millions of products including those outside of traditional industrial MRO categories.
Executive officers of Grainger generally serve until the next annual appointment of officers, or until earlier resignation or removal. Name and Age Positions and Offices Held and Principal Occupation and Employment Nancy L. Berardinelli-Krantz (45) Senior Vice President and Chief Legal Officer, a position assumed in January 2023 after John L. Howard stepped down as General Counsel (1) .
Executive officers of Grainger generally serve until the next annual appointment of officers, or until earlier resignation or removal. Name and Age Positions and Offices Held and Principal Occupation and Employment Nancy L. Berardinelli-Krantz (46) Senior Vice President and Chief Legal Officer, a position assumed in January 2023. Previously, Ms.
The Company’s Board of Directors is comprised of approximately 33% female and 25% racially and ethnically diverse directors. Grainger also maintains this strong commitment with the CEO's leadership team and throughout the organization. The CEO's leadership team is comprised of approximately 43% women and approximately 29% racially and ethnically diverse leaders.
The Company’s Board of Directors is comprised of approximately 31% female and 23% racially and ethnically diverse directors. Grainger also maintains this strong commitment with the CEO's leadership team and throughout the organization. The CEO's U.S. based leadership team is comprised of approximately 40% women and approximately 30% racially and ethnically diverse leaders.
Team Member Profile As of December 31, 2022, Gr ainger had more than 26,000 team members worldwide, of whom approximately 23,000 were full-time and 3,000 were part-time or temporary. Approximately 86% of these team members resided in 7 North America, 8% in Asia and 6% in Europe.
Team Member Profile As of December 31, 2023, Gr ainger had more than 26,000 team members worldwide, of whom approximately 23,200 were full-time and 2,900 were part-time or temporary.
Thomson is a certified public accountant and prior to Grainger served as Director, Internal Audit at CVS Health Corporation, a pharmacy healthcare provider, and Audit Manager at Arthur Andersen LLP, a professional services firm. (1) As previously disclosed on the Company's Current Report on Form 8-K filed with the SEC on December 15, 2022, Mr.
Thomson is a certified public accountant and prior to Grainger served as Director, Internal Audit at CVS Health Corporation, a pharmacy healthcare provider, and Audit Manager at Arthur Andersen LLP, a professional services firm. 11
After her return to Eaton, her other positions were: Senior Vice President and General Counsel, Digital, Innovation and Technology; Senior Vice President, Ethics and Compliance; and Vice President and Chief Counsel, Litigation. Ms. Berardinelli-Krantz held various positions of senior leadership at The Goodyear Tire & Rubber Company and worked for the international law firm of Jones Day. Ms.
After her return to Eaton, her other positions were: Senior Vice President and General Counsel, Digital, Innovation and Technology; Senior Vice President, Ethics and Compliance; and Vice President and Chief Counsel, Litigation. Ms.
Grainger has not experienced any major work stoppages and considers team member relations to be go od. Workplace Practices and Policies The Company has in place a strategic framework, The Grainger Edge, which outlines a set of principles that define the behaviors expected from Grainger’s team members in working with each other and the Company's customers, suppliers and communities.
Approximately 85% of these team members are located in North America, 9% in Asia and 6% in Europe. 7 Workplace Practices and Policies The Company's strategic framework, The Grainger Edge, outlines a set of principles that define the behaviors expected from Grainger’s team members in working with each other and the Company's customers, suppliers and communities.
Operational team members must complete routine training to fully understand the expectation of behaviors defined by the Company’s global EHS policy. Managing and reducing risks at DCs and other facilities remain a core objective and injury rates continue to be low.
Managing and reducing risks at DCs and other facilities remain a core objective and injury rates continue to be low.
Removed
Carroll (54) Senior Vice President and Chief Human Resources Officer, a position assumed in December 2018. Previously, Ms. Carroll served as Executive Vice President, Chief Human Resources Officer of First Midwest Bancorp, Inc., a diversified financial services company, from 2017 to 2018. Prior to that role, Ms.
Added
Berardinelli-Krantz held various positions of senior leadership at The Goodyear Tire & Rubber Company, a multinational tire manufacturer, and worked for the international law firm of Jones Day. Ms.
Removed
Carroll was employed at Aon Corporation, a global insurance brokerage and consulting company, between 2006 and 2017 in various human resources roles, culminating in her position as Vice President, Global Head of Talent Acquisition. D.G.
Added
Matt Fortin (57) Senior Vice President and Chief Human Resources Officer, a position assumed in September 2023. Previously, Mr.
Removed
Howard stepped down as the Company's General Counsel on January 30, 2023. He will continue as Senior Vice President until July 31, 2023 and as an active employee for six months thereafter. 11
Added
Fortin served as Group Vice President, Merchandising and Supplier Management, Grainger Business Unit, a position assumed in 2022, Vice President and President, Merchandising and Supplier Management, a position assumed in May 2018, and as Vice President and President, Global Product Management and Indirect Procurement, a position assumed in September 2017. Since joining Grainger in 2006, Mr.
Added
Fortin has held various other positions, including in the areas of supply chain, sourcing and operations in China. Prior to Grainger, Mr. Fortin spent 16 years at General Motors, a multinational automotive manufacturing company, in various leadership roles in manufacturing, purchasing, continuous improvement and general management. D.G.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf the Company is unable to enter into, or sustain, contractual arrangements on a satisfactory commercial basis with GPOs, Grainger's results of operations could be adversely affected. As customer base and product mix change over time, Grainger must identify new products, product lines and services that respond to industry trends and customer needs.
Biggest changeIn addition, Grainger has entered, and may in the future continue to enter, into contracts with group purchasing organizations (GPOs) that aggregate the buying power of their member customers in negotiating selling prices. If Grainger is unable to enter into, or sustain, contractual arrangements on a satisfactory commercial basis with GPOs, Grainger's results of operations could be adversely affected.
In addition, Grainger is exposed to foreign currency exchange rate risk with respect to the U.S. dollar relative to the local currencies of Grainger’s international subsidiaries, primarily the Japanese yen, Canadian dollar, British pound sterling, Mexican peso, Chinese renminbi and euro, arising from transactions in the normal course of business, such as sales and loans to wholly owned subsidiaries, sales to customers, purchases from suppliers, and bank loans and lines of credit denominated in foreign currencies.
In addition, Grainger is exposed to foreign currency exchange rate risk with respect to the U.S. dollar relative to the local currencies of Grainger’s international subsidiaries, primarily the Japanese yen, Mexican peso, Canadian dollar, British pound sterling, Chinese renminbi and euro, arising from transactions in the normal course of business, such as sales and loans to wholly owned subsidiaries, sales to customers, purchases from suppliers, and bank loans and lines of credit denominated in foreign currencies.
The foreign currency exchange rate is driven by a variety of macroeconomic factors and fiscal decisions of various governments and central banks, all of which Grainger has no control over.
The foreign currency exchange rate is driven by a variety of macroeconomic factors and fiscal decisions of various governments and central banks, all over which Grainger has no control.
Grainger also has foreign currency exposure to the extent receipts and expenditures are not denominated in a subsidiary’s functional currency and that could have an impact on sales, costs and cash flows. These fluctuations in foreign currency exchange rates has affected and may continue to affect Grainger’s results of operations and impact reported net sales and net earnings.
Grainger also has foreign currency exposure to the extent receipts and expenditures are not denominated in a subsidiary’s functional currency and that could have an impact on sales, costs and cash flows. These fluctuations in foreign currency exchange rates have affected and may continue to affect Grainger’s results of operations and impact reported net sales and net earnings.
Grainger devotes time and resources to environmental, social and governance (ESG) efforts that are consistent with its corporate values and are designed to strengthen its business and protect and preserve its reputation, including programs driving ethics and corporate responsibility, strong communities, diversity, equity and inclusion, gender equality and environmental sustainability.
Grainger devotes time and resources to environmental, social and governance (ESG) efforts that are consistent with its corporate values and are designed to strengthen its business and protect and preserve its reputation, including programs driving environmental sustainability, ethics and corporate responsibility, strong communities, diversity, equity and inclusion, and gender equality.
Although Grainger’s information systems are protected with backup and security systems, including physical and software safeguards and remote processing capabilities, information systems are still vulnerable to damage or interruption from natural or human induced disasters, extreme weather, power losses, telecommunication failures, user error, third party actions such as malicious computer programs, denial-of-service attacks and cybersecurity breaches, and other problems.
Furthermore, although Grainger’s information systems are protected with backup and security systems, including physical and software safeguards and remote processing capabilities, information systems are still vulnerable to damage or interruption from natural or human induced disasters, extreme weather, power losses, telecommunication failures, user error, third-party actions such as malicious computer programs, denial-of-service attacks and cybersecurity breaches, and other problems.
Commerce Department’s Export Administration Regulations, trade sanctions promulgated by the Office of Foreign Asset Control and anti-money laundering regulations), intellectual property laws, labor laws (including federal and state wage and hour laws), product compliance or safety laws, supplier regulations regarding the sources of supplies or products, tax laws (including as to U.S. taxes on foreign subsidiaries), unclaimed property laws and laws, regulations and standards applicable to other commercial matters.
Commerce Department’s Export Administration Regulations, trade sanctions promulgated by the Office of Foreign Asset Control and anti-money laundering regulations), intellectual property laws, labor laws (including federal and state wage and hour laws), product compliance or safety laws, supplier regulations regarding the sources of supplies or products, tax laws (including as to U.S. taxes on international subsidiaries), unclaimed property laws and laws, regulations and standards applicable to other commercial matters.
If Grainger’s customer-facing technology systems are perceived as more difficult or less compelling for customers to use than those of the Company’s competitors, or if digital marketing efforts are unsuccessful or if Grainger is otherwise unsuccessful at realizing the benefits of these investments, its reputation, financial condition and operating results may be adversely affected.
If Grainger’s customer-facing technology systems are perceived as more difficult or less compelling for customers to use than those of Grainger’s competitors, or if digital marketing efforts are unsuccessful or if Grainger is otherwise unsuccessful at realizing the benefits of these investments, its reputation, financial condition and operating results may be adversely affected.
Grainger also relies on email and other messaging services to promote its websites and product offerings, and changes in the Company’s current or prospective customers’ use of email or other messaging services or actions by third parties to block, restrict or charge for the delivery of such messages could adversely affect sales through Grainger’s eCommerce channels and the Company’s results of operations.
Grainger also relies on email and other messaging services to promote its websites and product offerings, and changes in Grainger’s current or prospective customers’ use of email or other messaging services or actions by third parties to block, restrict or charge for the delivery of such messages could adversely affect sales through Grainger’s eCommerce channels and Grainger’s results of operations.
Grainger has a controlling ownership interest in MonotaRO, which is listed on the Tokyo Stock Exchange (TSE). MonotaRO's disclosure and reporting obligations under TSE listing requirements and Japanese securities laws, including the timing of such obligations, may vary from Grainger's obligations under New York Stock Exchange listing requirements and U.S. securities laws.
Grainger has a controlling ownership interest in MonotaRO, which is listed on the Tokyo Stock Exchange (TSE). MonotaRO's disclosure and reporting obligations under TSE listing requirements and Japanese securities laws, including the timing of such obligations, may vary from Grainger's obligations under New York Stock Exchange 15 listing requirements and U.S. securities laws.
These efforts and programs could be difficult to achieve and costly to implement, and Grainger’s actual or perceived failure to execute its ESG programs as planned could adversely affect the Company’s reputation, business and financial performance. To be successful in the future, Grainger must continue to preserve, grow and leverage the value of Grainger’s brand.
These efforts and programs could be difficult to achieve and costly to implement, and Grainger’s actual or perceived failure to execute its ESG programs as planned could adversely affect Grainger’s reputation, business and financial performance. To be successful in the future, Grainger must continue to preserve, grow and leverage the value of Grainger’s brand.
Grainger’s future results could be adversely affected by changes in the effective tax rate as a result of Grainger’s relative overall profitability and the mix of earnings in countries with differing statutory tax rates, changes in tax legislation, the results of the examination of previously filed tax returns, and continuing assessment of the Company’s tax exposures.
Grainger’s future results could be adversely affected by changes in the effective tax rate as a result of Grainger’s relative overall profitability and the mix of earnings in countries with differing statutory tax rates, changes in tax legislation, the results of the examination of previously filed tax returns, and continuing assessment of Grainger's tax exposures.
The successful execution of Grainger’s eCommerce growth strategy depends on a number of factors, including the Company’s investment in its eCommerce platforms, consumer preferences and purchasing trends, and the ability to deliver a seamless procurement experience across digital and also physical retail channels.
The successful execution of Grainger’s eCommerce growth strategy depends on a number of factors, including Grainger’s investment in its eCommerce platforms, consumer preferences and purchasing trends, and the ability to deliver a seamless procurement experience across digital and also physical retail channels.
There can be no assurance that any future incidents will not be material to Grainger’s business, operations or financial condition. 16 Cybersecurity incidents, including breaches of information systems security, could damage Grainger’s reputation, disrupt operations, increase costs and/or decrease revenues.
There can be no assurance that any future incidents will not be material to Grainger’s business, operations or financial condition. Cybersecurity incidents, including breaches of information systems security, could damage Grainger’s reputation, disrupt operations, increase costs and/or decrease revenues.
Grainger requires its suppliers and their sub-suppliers, for products sold in the U.S., Canada and Mexico, to comply with Grainger’s Supplier Code of Ethics, or other similar responsible sourcing standards, as a condition to doing business with Grainger.
For products sold in the U.S., Canada, and Mexico, Grainger requires its suppliers and sub-suppliers, to comply with Grainger’s Supplier Code of Ethics, or other similar responsible sourcing standards, as a condition of doing business with Grainger.
This includes the ease of use of Grainger’s high-touch operations, eCommerce platforms and delivery of products. 14 There are several large competitors in the industry, although most of the market is served by small local and regional competitors.
This includes the ease of use of Grainger’s high-touch operations, eCommerce platforms and delivery of products. There are several large competitors in the industry, although most of the market is served by small local and regional competitors.
Grainger’s exposure to fluctuations in foreign currency rates results primarily from the translation exposure associated with the preparation of the Consolidated Financial Statements, as well as from transaction exposure associated with transactions in currencies other than an entity’s functional currency.
Grainger’s exposure to fluctuations in foreign currency rates results primarily from the translation exposure associated with the preparation of the Consolidated Financial Statements, as well as from transactions in currencies other than an entity’s functional currency.
While the Consolidated Financial Statements are reported in U.S. dollars, the Financial Statements of Grainger’s subsidiaries outside the U.S. are prepared using the local currency as the functional currency and translated into U.S. dollars.
While the Consolidated Financial Statements are reported in U.S. dollars, 13 the Financial Statements of Grainger’s subsidiaries outside the U.S. are prepared using the local currency as the functional currency and translated into U.S. dollars.
Changes in customer base or product mix could cause changes in Grainger’s revenue or gross margin, or affect Grainger’s competitive position. From time to time, Grainger experiences changes in customer base and product mix that affect gross margin.
Changes in customer base or product mix could cause changes in Grainger’s revenue or gross margin, or affect Grainger’s competitive position. From time to time, Grainger experiences changes in its customer base and product mix that affect gross margin.
Moreover, Grainger is also subject to audits and inquiries in the normal course of business. Failure to comply with any of these laws, regulations and standards could result in civil, criminal, monetary and non-monetary fines, penalties, remediation costs and/or significant legal fees as well as potential damage to the Company’s reputation.
Moreover, Grainger is also subject to audits and inquiries in the normal course of business. Failure to comply with any of these laws, regulations and standards could result in civil, criminal, monetary and non-monetary fines, penalties, remediation costs and/or significant legal fees as well as potential damage to Grainger’s reputation.
The defense of these proceedings may require significant expenses and divert management’s time and attention, and Grainger may be required to pay damages that could individually or in the aggregate materially adversely affect its financial condition, results of operations and cash flows.
The defense of any proceedings may require significant expenses and divert management’s time and attention, and Grainger may be required to pay damages that could individually or in the aggregate materially adversely affect its financial condition, results of operations and cash flows.
New or changing environmental laws and regulations could also increase the Company’s operating costs, including through higher utility and transportation costs, and Grainger is unable to predict the potential impact such laws and regulations could have on its financial condition and results of operations.
New or changing environmental laws and regulations could also increase Grainger’s operating costs, including through higher utility and transportation costs, and Grainger is unable to predict the potential impact such laws and regulations could have on its financial condition and results of operations.
Accordingly, a significant or prolonged slowdown in economic activity in Canada, China, Japan, Mexico, the U.K., the U.S. or any other major world economy, or a segment of any such economy, could negatively impact Grainger’s sales growth and results of operations.
Accordingly, a significant or prolonged slowdown in economic activity in Canada, Japan, Mexico, the U.K., the U.S. or any other major world economy, or a segment of any such economy, could negatively impact Grainger’s sales and results of operations.
While Grainger generally relies on third parties to facilitate eCommerce payments and payment processing services, Grainger may become subject to additional compliance requirements and regulations regarding these transactions, and may also suffer losses from online fraudulent transactions on its eCommerce channels.
Although Grainger generally relies on third parties to facilitate eCommerce payments and payment processing services, Grainger may become subject to additional compliance requirements and regulations regarding these transactions, and may also suffer losses from online fraudulent transactions on its eCommerce channels.
Any of these factors could cause customers to idle or close facilities, delay purchases, reduce production levels, or experience reductions in the demand for their own products or services. 12 Any of these events could also reduce the volume of products and services these customers purchase from Grainger or impair the ability of Grainger’s customers to make full and timely payments and could cause increased pressure on Grainger’s selling prices and terms of sale.
Any of these factors could cause customers to idle or close facilities, delay purchases, reduce production levels, or experience reductions in the demand for their own products or services. 12 Any of these events could also reduce the volume of products and services these customers purchase from Grainger or impair the ability of Grainger’s customers to make full and timely payments and could cause increased pressure on Grainger’s pricing and terms of sale.
If critical information systems fail or otherwise become unavailable, Grainger’s ability to operate its eCommerce platforms, process orders, maintain proper levels of inventories, collect accounts receivable, disburse funds, manage its supply chain, monitor results of operations, and process and store employee or customer data, among other functions, could be adversely affected.
If critical information systems fail or otherwise become unavailable, Grainger’s ability to operate its eCommerce platforms, process orders, maintain proper levels of inventories, collect accounts receivable, disburse funds, manage its supply chain, monitor results of operations, and process and store team member or customer data, among other functions, could be adversely affected.
The risk factors discussed in this section should be considered together with information included elsewhere in this Annual Report on Form 10-K and should not be considered the only risks to which the Company is exposed.
The risk factors discussed in this section should be considered together with information included elsewhere in this Annual Report on Form 10-K and should not be considered the only risks to which Grainger is exposed.
The wide array of laws, regulations and standards in each domestic and foreign jurisdiction where Grainger operates, include, but are not limited to, advertising, marketing and Internet regulations (including the use of proprietary or third-party “cookies” in connection with Grainger’s eCommerce platforms), anti-bribery and corruption laws, anti-competition regulations, data protection (including, because Grainger accepts credit cards, the Payment Card Industry Data Security Standard), data privacy (including in the U.S., the California Consumer Privacy Act and Privacy Rights Act, in Japan, the Act on Protection of Personal Information, and in the European Union, the General Data Protection Regulation 2016) and cybersecurity requirements (including protection of information and incident responses), environmental protection laws, foreign exchange controls and cash repatriation restrictions, health and safety laws, import and export compliance (including the U.S.
The wide array of laws, regulations and standards in each jurisdiction where Grainger operates, include, but are not limited to, advertising, marketing and Internet regulations (including the use of proprietary or third-party “cookies” in connection with Grainger’s eCommerce platforms), anti-bribery and corruption laws, competition and antitrust regulations, data protection (including, because Grainger accepts credit cards, the Payment Card Industry Data Security Standard), data privacy (including in the U.S., the California Consumer Privacy Act and Privacy Rights Act, 18 in Japan, the Act on Protection of Personal Information, and in the European Union, the General Data Protection Regulation) and cybersecurity requirements (including protection of information and incident responses), environmental protection laws, currency exchange controls and cash repatriation restrictions, health and safety laws, import and export compliance (including the U.S.
In the event Grainger was unable to maintain those relations, there might be a loss of competitive pricing advantages which could, in turn, adversely affect results of operations.
In the event Grainger was unable to maintain those relations, there might be a loss of competitive pricing arrangements which could, in turn, adversely affect results of operations.
Through Grainger’s sales and eCommerce channels, the Company collects and stores personally identifiable, confidential, proprietary and other information from customers so that they may, among other things, purchase products or services, enroll in promotional programs, register on Grainger’s websites or otherwise communicate or interact with the Company.
Through Grainger’s sales and eCommerce channels, Grainger collects and stores personally identifiable, confidential, proprietary and other information from customers so that they may, among other things, purchase products or services, enroll in promotional programs, register on Grainger’s websites or otherwise communicate or interact with Grainger.
Furthermore, while Grainger has implemented policies and procedures and provides training designed to facilitate compliance with these laws, regulations and standards, there can be no assurance that employees, contractors, suppliers, vendors, or other third parties will not violate such laws, regulations and standards or Grainger’s policies.
Furthermore, while Grainger has implemented policies and procedures and provides training designed to facilitate compliance with these laws, regulations and standards, there can be no assurance that team members, contractors, suppliers, vendors, or other third parties will not violate such laws, regulations and standards or Grainger’s policies.
Grainger also may be subject to disputes and proceedings incidental to its business, including product-related claims for personal injury or illness, death, environmental or property damage or other commercial disputes, including the proceedings discussed in Note 15 to the Consolidated Financial Statements included in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.
Grainger also may be subject to disputes and proceedings incidental to its business, including product-related claims for personal injury or illness, death, environmental or property damage or other commercial disputes, and the types of matters discussed in Note 14 to the Consolidated Financial Statements included in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.
Grainger has incurred substantial indebtedness and may incur substantial additional indebtedness, which could adversely affect cash flow, decrease business flexibility, or prevent Grainger from fulfilling its obligations. As of December 31, 2022, Grainger’s consolidated indebtedness was approximately $2.3 billion.
Grainger has incurred indebtedness and may incur additional indebtedness, which could adversely affect cash flow, decrease business flexibility, or prevent Grainger from fulfilling its obligations. As of December 31, 2023, Grainger’s consolidated indebtedness was approximately $2.3 billion.
Grainger’s logistics or supply chain network could be disrupted by the occurrence of: one or more natural or human induced disasters, including earthquakes, tsunamis, storms, hurricanes, floods, fires, droughts, tornados and other extreme weather; pandemic diseases or viral contagions such as the COVID-19 pandemic; geopolitical events, such as war, civil unrest or terrorist attacks in a country in which Grainger operates or in which its suppliers are located; disruptions in transport networks, including from transport providers or third party work stoppages related to labor strikes or lockouts; and the imposition of measures that create barriers to or increase the costs associated with international trade.
Grainger’s logistics or supply chain network could be disrupted by the occurrence of: one or more natural or human induced disasters, including earthquakes, tsunamis, storms, hurricanes, floods, fires, droughts, tornados and other extreme weather events or conditions; pandemic diseases or viral contagions; geopolitical events, such as war, civil unrest or terrorist attacks in a country in which Grainger operates or in which its suppliers are located; disruptions to transportation infrastructure and networks, including from transport providers or third-party work stoppages related to labor strikes or lockouts; and the imposition of measures that create barriers to or increases in costs associated with international trade.
Increased public awareness and concern regarding global climate change may result in more international, federal, and/or state or other stakeholder requirements or expectations that could result in more restrictive or expansive standards, such as stricter limits on greenhouse gas emissions or more prescriptive reporting of environmental, social, and governance metrics.
Increased public awareness and concern regarding global climate change have resulted in, and may continue to result in, more international, federal, and/or state or other stakeholder requirements or expectations that have resulted in, and could continue to result in, more restrictive or expansive standards, such as stricter limits on greenhouse gas emissions or more prescriptive reporting of environmental, social, and governance metrics.
The growth of Grainger’s eCommerce platforms exposes Grainger to additional risks which could adversely affect Grainger’s reputation, financial performance and operating results.
The growth of Grainger’s eCommerce platforms exposes Grainger to additional risks which could adversely affect Grainger’s reputation, financial condition and operating results.
While many of Grainger's agreements with these third parties include indemnification provisions, the Company may not be able to recover sufficiently, or at all, under such provisions to adequately offset any losses it may incur.
While many of Grainger's agreements with these third parties include indemnification provisions, Grainger may not be able to recover sufficiently, or at all, under such provisions to adequately offset any losses it may incur.
In addition, any insurance or indemnification rights that Grainger may have with respect to such matters may be insufficient or unavailable to protect the Company against potential loss exposures. Grainger also may be requested or required to recall products or take other actions. The Company’s reputation could also be adversely affected by any resulting negative publicity.
In addition, any insurance or indemnification rights that Grainger may have with respect to such matters may be insufficient or unavailable to protect Grainger against potential loss exposures. Grainger also may be requested or required to recall products or take other actions. Grainger's reputation could also be adversely affected by any resulting negative publicity.
If successful, those attempting to penetrate Grainger’s or its vendors’ information systems may misappropriate intellectual property or personally identifiable, credit card, confidential, proprietary or other sensitive customer, supplier, employee or business information, or cause systems disruption.
If successful, those attempting to penetrate Grainger’s or its vendors’ information systems may misappropriate intellectual property or personally identifiable, credit card, confidential, proprietary or other sensitive customer, supplier, team member or business information, or cause systems disruption.
MonotaRO's listed securities may be subject to the same volatility, price and securities litigation risks to which Grainger's common stock is subject. Operational Risks Interruptions in the proper functioning of information systems could disrupt operations and cause unanticipated increases in costs and/or decreases in revenues.
MonotaRO's listed securities may be subject to the same volatility, price and securities litigation risks to which Grainger's common stock is subject. Operational Risks Interruptions in the proper functioning of information systems could disrupt operations and cause unanticipated increases in costs and/or decreases in revenues. The functioning of Grainger’s information systems is critical to the operation of its business.
Moreover, Grainger’s operations routinely involve receiving, storing, processing and transmitting sensitive information pertaining to its business, customers, suppliers and employees, and other sensitive matters. Cyber threats are rapidly evolving and those threats and the means for obtaining access to information in digital and other storage media are becoming increasingly sophisticated.
Moreover, Grainger’s operations routinely involve receiving, storing, processing and transmitting sensitive information pertaining to its business, customers, suppliers and team member, and other sensitive matters. Cyber threats are rapidly evolving and the means for obtaining access to information in digital and other storage media are becoming increasingly sophisticated.
If Grainger’s systems or those of third parties on which Grainger depends are damaged, breached, cease to function properly or are otherwise disrupted, Grainger may have to make a significant investment to repair or replace them and may suffer interruptions in its business operations in the interim.
If Grainger’s systems or those of third parties on which Grainger depends are damaged, breached, cease to function properly or are otherwise disrupted, Grainger may require a significant investment to repair or replace them and may suffer interim interruptions in its business operations.
Natural disasters as a result of climate change at locations where the Company, its suppliers or customers operate could cause disruptions to the Company’s operations, which could adversely affect sales and could negatively impact Grainger’s business, financial condition, results of operations and cash flows .
Natural disasters as a result of climate change at locations where Grainger, its suppliers or customers operate could cause disruptions to Grainger’s operations, which could adversely affect sales and could negatively impact Grainger’s business, financial condition, results of operations and cash flows .
In order to compete, Grainger must attract, retain, train, motivate and develop key employees, and the failure to do so could have an adverse effect on results of operations.
In order to compete, Grainger must attract, train, motivate, develop and retain key team members, and the failure to do so could have an adverse effect on results of operations.
Grainger faces competition in all markets it serves from manufacturers (including some of its own suppliers) that sell directly to certain segments of the market, wholesale distributors, catalog houses, retail enterprises and online businesses that compete with price transparency. To remain competitive, the Company must be willing and able to respond to market pressures.
Grainger faces competition in all markets it serves from manufacturers (including some of its own suppliers) that sell directly to certain segments of the market, wholesale distributors, catalog houses, retail enterprises and online businesses. To remain competitive, Grainger must be willing and able to respond to market pressures.
Developing, upgrading, managing or implementing new technologies, business applications, strategies and innovations may require significant investment of resources by the Company, may result in unexpected costs and disruptions to operations, may take longer than expected, may increase the Company’s vulnerability to cyber breaches, attacks or intrusions, and may not provide all anticipated benefits.
Developing, upgrading, managing or implementing new technologies, business applications, strategies and innovations may require significant investment of resources by Grainger, may result in unexpected costs and disruptions to operations, may take longer than expected, may increase Grainger's vulnerability to cyber breaches, attacks or intrusions, and may not provide all anticipated benefits.
The trading prices and volumes of Grainger’s common stock may be subject to broad and unpredictable fluctuations due to changes in economic, political and market conditions, the financial results and business strategies of Grainger and its competitors, changes in expectations as to Grainger’s future financial or operating performance, including estimates by securities analysts and investors, the Company’s failure to meet the financial performance guidance or other forward-looking statements provided to the public, speculation, coverage or sentiment in the media or investment community or by groups of individual investors, changes in capital structure, share repurchase programs or dividend policies, economic decline, political unrest or geopolitical conflict, outbreak of pandemic disease such as the COVID-19 pandemic, and a number of other factors, including those discussed in this Item 1A.
The trading prices and volumes of Grainger’s common stock may be subject to broad and unpredictable fluctuations due to changes in economic, political and market conditions, the financial results and business strategies of Grainger and its competitors, changes in expectations as to Grainger’s future financial or operating performance, including estimates by securities analysts and investors, Grainger’s failure to meet the financial performance guidance or other forward-looking statements provided to the public, speculation, coverage or sentiment in the media or investment community or by groups of individual investors, changes in capital structure, share repurchases or dividends, economic decline, political unrest or geopolitical conflict, outbreak of pandemic disease, and a number of other factors, including those discussed in this Item 1A.
Even when Grainger is able to find alternate sources for certain products, they may cost more or require the Company to incur higher transportation costs, which could adversely impact the Company's profitability and financial condition.
Even when Grainger is able to find alternate sources for certain products, they may cost more or require Grainger to incur higher transportation costs, which could adversely impact Grainger's profitability and financial condition.
It is not possible to predict whether these events will occur, or the broader consequences of these events if they did occur, which could include further instability, geopolitical shifts and adverse effects on the global economy or possible sanctions, embargoes or other trade barriers.
It is not possible to predict whether certain geopolitical events which could adversely affect Grainger's business will occur, or the broader consequences of these events if they did occur, which could include further instability, geopolitical shifts and adverse effects on the global economy or possible sanctions, embargoes or other trade barriers.
The facilities maintenance industry is highly competitive, and changes in competition could result in decreased demand for Grainger’s products and services. Grainger competes in a variety of ways, including product assortment and availability, services offered to customers, pricing, purchasing convenience, and the overall experience Grainger offers.
The facilities maintenance industry is highly competitive, and changes in competition and other risks could impact demand for Grainger’s products and services. Grainger competes in a variety of ways, including product assortment and availability, services offered to customers, pricing, purchasing convenience and the overall experience Grainger offers.
There continues to be a lack of consistent climate change legislation and standards, which creates economic and regulatory uncertainty. New laws, regulations and enforcement could strain the Company’s suppliers and result in increased compliance-related costs, which could result in higher product costs that are passed to the Company.
There continues to be a lack of consistent climate change legislation and standards, which creates economic and regulatory uncertainty. New laws, regulations and enforcement could strain Grainger’s suppliers and result in increased compliance-related costs, which could result in higher product costs that are passed to Grainger.
The level of demand for Grainger's products and services is influenced in multiple ways by the price and availability of raw materials and commodities, including fuel. Fluctuations in the price of fuel or increased demand for freight services, including as a result of outbreaks of pandemic disease such as the COVID-19 pandemic, could affect transportation costs.
The level of demand for Grainger's products and services is influenced in multiple ways by the price and availability of raw materials and commodities, including fuel. Fluctuations in the price of fuel or increased demand for freight services, including as a result of a pandemic, could affect transportation costs.
These factors could include economic downturns, recessions, outbreaks of pandemic disease such as the COVID-19 pandemic or other similar global pandemics, natural or human induced disasters, extreme weather, geopolitical unrest, tariffs, new tariffs or tariff increases, trade issues and policies, detention orders or withhold release orders on imported products, labor problems or shortages experienced by Grainger’s suppliers or others in the supply chain, transportation availability, staffing and cost, shortage of raw materials, supplier consolidation, unilateral product cost increases by suppliers of products in short supply, inflation and other factors, any of which could adversely affect a supplier’s ability to manufacture or deliver products or could result in an increase in Grainger’s product costs.
These factors could include economic downturns, recessions, outbreaks of pandemic disease, natural or human induced disasters, cybersecurity attacks, extreme weather, geopolitical unrest, new or increased tariffs, trade issues and policies, detention orders or withhold release orders on imported products, labor problems or shortages experienced by Grainger’s suppliers or others in the supply chain, transportation availability, staffing and cost, shortage of raw materials, supplier consolidation, unilateral product cost increases by suppliers of products in short supply, inflation and other factors, any of which could adversely affect a supplier’s ability to manufacture or deliver products or could result in an increase in Grainger’s product costs.
Many of these customers operate in markets that are subject to cyclical fluctuations resulting from market uncertainty, trade and tariff policies, costs of goods sold, currency exchange rates, interest rate fluctuations, economic downturns, recessions, foreign competition, offshoring of production, oil and natural gas prices, geopolitical developments, labor shortages, inflation, natural or human induced disasters, extreme weather, outbreaks of pandemic disease such as the COVID-19 pandemic, inflation, deflation, and a variety of other factors beyond Grainger’s control.
Many of these customers operate in markets that are subject to fluctuations resulting from market uncertainty, trade and tariff policies, costs of goods sold, currency exchange rates, interest rate fluctuations, government spending and government shutdowns, economic downturns, recessions, foreign competition, offshoring of production, oil and natural gas prices, geopolitical developments, labor shortages, work stoppages, inflation, natural or human induced disasters, extreme weather, outbreaks of pandemic disease, inflation, deflation, and a variety of other factors beyond Grainger’s control.
Loss of customer, supplier, employee or intellectual property or other business information or failure to comply with data privacy and security laws could disrupt operations, damage Grainger’s reputation and expose Grainger to claims from customers, suppliers, financial institutions, regulators, payment card associations, employees and others, any of which could have a material adverse effect on Grainger, and financial condition and results of operations.
Loss of customer, supplier, and team member information, intellectual property or other business information, or failure to comply with data privacy and security laws could, for example, disrupt operations, damage Grainger’s reputation and expose Grainger to claims from customers, suppliers, financial institutions, regulators, payment card associations, team members and others, any of which could have a material adverse effect on Grainger, including its financial condition and results of operations.
In addition, the potential physical risks of climate change may impact the availability and cost of materials and natural resources, sources and supply of energy and product demand, and could increase the Company’s operating costs.
In addition, the potential physical risks of climate change may impact the availability and cost of materials and natural resources, sources and supply of energy and product demand, impact Grainger's transportation costs and supply chain network, and could increase Grainger’s operating costs.
Even an isolated incident, or the aggregate effect of individually insignificant incidents, can erode trust and confidence, particularly if they result in adverse publicity, governmental investigations, product recalls, or litigation, and as a result, could tarnish Grainger’s brand and lead to adverse effects on Grainger’s business.
Even an isolated incident, or the aggregate effect of individually insignificant incidents, can erode trust and confidence, particularly if they result in adverse publicity, governmental investigations, product recalls, or litigation, and as a result, could tarnish Grainger’s brand and lead to adverse effects on Grainger’s business. Volatility in commodity prices may adversely affect gross margins.
Qualified individuals needed to fill open positions may be in short supply in some areas. Further, changes in market compensation rates may adversely affect the Company's labor costs. Competition for qualified employees could require the Company to pay higher wages to attract a sufficient number of employees.
Qualified individuals needed to fill open positions may be in short supply in some areas. Further, changes in market compensation rates may adversely affect Grainger's labor costs. Competition for qualified team members could require Grainger to pay higher wages to attract a sufficient number of team members.
Grainger accepts a variety of payment methods via its eCommerce channels, including credit card, debit card, PayPal and other payment methods and other online transactions, including through its eProcurement technologies which communicate directly with Grainger.com and Grainger's other eCommerce channels.
Grainger’s eCommerce channels are subject to risks related to online payment methods and other online transactions, including through purchasing platforms. Grainger accepts a variety of payment methods via its eCommerce channels, including credit card, debit card, PayPal and other payment methods and other online transactions, including through its eProcurement technologies which communicate directly with Grainger.com and Grainger's other eCommerce channels.
In order to compete and have continued growth, Grainger must attract, retain, train, motivate and develop executives and other key employees, including those in managerial, technical, sales, marketing and IT support positions. Grainger competes to hire employees at increasingly competitive wage rates and then must train them and develop their skills and competencies.
In order to compete and have continued growth, Grainger must attract, train, motivate, develop, and retain executives and other key team members, including those in managerial, technical, sales, supply chain, technology development and information technology positions. Grainger competes to hire team members at increasingly competitive wage rates and then must train them and develop their skills and competencies.
In addition, any insurance or indemnification rights, including against the manufacturer of such products, may be insufficient or unavailable to protect Grainger against potential loss exposures. Grainger’s common stock may be subject to volatility or price declines.
The inclusion of Grainger-branded products in the product assortment could subject Grainger to increased claims and litigation activity. In addition, any insurance or indemnification rights, including against the manufacturer of such products, may be insufficient or unavailable to protect Grainger against potential loss exposures. Grainger’s common stock may be subject to volatility or price declines.
If environmental laws and regulations are either changed or adopted that impose significant operational restrictions or compliance requirements upon the Company or its suppliers, products, 20 or customers, or the Company's operations are disrupted due to physical impacts of climate change, the Company's business, capital expenditures, financial condition, results of operations and competitive position could be negatively impacted.
If environmental laws, regulations, and other stakeholder requirements impose significant operational restrictions or compliance requirements upon Grainger or its suppliers, products, or customers, or Grainger's operations are disrupted due to physical impacts of climate change, Grainger's business, capital expenditures, financial condition, results of operations, reputation, and competitive position could be negatively impacted.
In addition, although Grainger maintains insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber and information security risks, depending on the nature, location and extent of any event, such insurance coverage may be insufficient to cover all losses.
Although Grainger maintains insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber and information security risks, depending on the nature, location and extent of any event, such insurance coverage may be insufficient to cover all losses. Grainger has experienced certain cybersecurity incidents and in each instance Grainger provided notifications and adopted remedial measures.
Any inability to obtain financing when needed could materially adversely affect the Company’s business, financial condition or results of operations.
Any inability to obtain financing when needed could materially adversely affect the Company’s business, financial condition or results of operations. 20 Item 1B: Unresolved Staff Comments None.
In addition to Grainger’s U.S. operations, which in 2022 generated approximately 82% of its consolidated net sales, Grainger operates its business principally through wholly owned subsidiaries in Canada, Mexico, and the U.K., and its majority-owned subsidiary in Japan.
Grainger’s business is subject to legislative, legal, and regulatory risks and conditions specific to the countries in which it operates. In addition to Grainger’s U.S. operations, which in 2023 generated approximately 82% of its consolidated net sales, Grainger operates its business principally through wholly owned subsidiaries in Canada, Mexico, and the U.K., and its majority-owned subsidiary in Japan.
Any breach of Grainger’s security measures or any breach, error or malfeasance of those of its third-party service providers could cause Grainger to incur significant costs to protect any customers, suppliers, 17 employees, and other parties whose personal data is compromised and to make changes to its information systems and administrative processes to address security issues.
Any breach of Grainger’s security measures or any breach, error or malfeasance of those of its third-party service providers could cause Grainger to incur significant costs to protect any customers, suppliers, team members and other parties whose information is compromised.
Grainger’s business relies on the use, validity and continued protection of certain proprietary information and intellectual property, which includes current and future patents, trade secrets, trademarks, service marks, copyrights and confidentiality agreements as well as license and sublicense agreements to use intellectual property owned by affiliated entities or third parties.
Grainger’s inability to adequately protect its intellectual property or successfully defend against infringement claims by others may have an adverse impact on operations. 17 Grainger’s business relies on the use, validity and continued protection of certain proprietary information and intellectual property, which includes current and future patents, trade secrets, trademarks, service marks, copyrights and confidentiality agreements as well as license and sublicense agreements to use intellectual property owned by affiliated entities or third parties.
One of the reasons customers choose to do business with Grainger and employees choose Grainger as a place of employment is the reputation that Grainger has built over many years.
Grainger’s continued success is substantially dependent on positive perceptions of Grainger’s reputation. One of the reasons customers choose to do business with Grainger and team members choose Grainger as a place of employment is the reputation that Grainger has built over many years.
The transition in recent years to remote and “hybrid” working arrangements, may increase Grainger’s vulnerability to cybersecurity incidents, including breaches of information systems security, which could damage Grainger’s reputation and commercial relationships, disrupt operations, increase costs and/or decrease revenues, and expose Grainger to claims from customers, suppliers, financial institutions, regulators, payment card associations, employees and others.
The transition in recent years to remote and “hybrid” working arrangements may increase Grainger’s vulnerability to cybersecurity incidents, including breaches of information systems security, which could damage Grainger’s reputation and commercial relationships, disrupt operations, increase costs and/or decrease revenues, and expose Grainger to claims or other actions from customers, suppliers, financial institutions, regulators, payment card associations, team members and others. 16 Grainger's IT infrastructure also includes products and services provided by suppliers, vendors and other third parties, and these providers can experience breaches of their systems and products that impact the security of systems and proprietary or confidential information.
Regulatory, Legal and Tax Risks Grainger is subject to various domestic and foreign laws, regulations and standards. Failure to comply or unforeseen developments in related contingencies such as litigation could adversely affect Grainger's financial condition, profitability and cash flows. Grainger’s business is subject to legislative, legal, and regulatory risks and conditions specific to the countries in which it operates.
Regulatory, Legal and Tax Risks Grainger is subject to a complex array of laws, regulations and standards globally. Failure to comply or unforeseen developments in related contingencies such as litigation and other regulatory proceedings could adversely affect Grainger's financial condition, profitability and cash flows.
Item 1A: Risk Factors The following is a discussion of significant risk factors relevant to Grainger’s business that could adversely affect its financial condition, results of operations and cash flows.
Item 1A: Risk Factors The following represents a discussion of risk factors relevant to Grainger’s business that could adversely affect its financial condition, results of operations and cash flows, along with the accuracy of forward-looking statements. The risks included below are not exhaustive.
While Grainger has instituted these and other safeguards for the protection of information and governance and oversight of its information security posture, because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, Grainger may be unable to anticipate these techniques or implement adequate preventative measures.
Techniques used to obtain unauthorized access or to sabotage systems change frequently and may not be recognized until they are launched against a target. Grainger may be unable to anticipate these techniques or implement preventative measures.
In addition, Grainger must pay certain transaction fees relating to these transactions, which may increase over time and could have an impact on product margin, profitability and operating costs. Grainger’s eCommerce channels may become subject to further rules and regulations, and changes in these rules and regulations, or their interpretation, could increase the cost of doing business.
In addition, Grainger must pay certain transaction fees relating to these transactions, which may increase over time and could have an impact on product margin, profitability and operating costs.
Grainger has experienced certain of these cybersecurity incidents in each instance, Grainger provided notifications and adopted remedial measures. None of these incidents have been deemed to be material to Grainger and Grainger has neither incurred any material net expenses nor been penalized or paid any settlement amounts with respect to any cybersecurity breach in the las t three years.
None of these incidents have been deemed to be material to Grainger and Grainger has neither incurred any material net expenses nor been materially penalized or subject to any material settlement amounts with respect to such incidents in the last three years.
Each year, cyber-attackers make numerous attempts to access the information stored in the Company’s information systems. If successful, cyber-attacks may expose Grainger to risk of loss or misuse of proprietary or confidential information or disruptions of business operations.
If successful, cyber-attacks may expose Grainger to risk of loss or misuse of proprietary or confidential information or disruptions of business operations.
Moreover, from time to time, Grainger may share information with these third parties in connection with the products and services they provide to the business. While Grainger requires assurances that these third parties will protect confidential information, there is a risk that the confidentiality of data held or accessed by them may be compromised.
Moreover, Grainger shares information with these third parties in connection with the products and services they provide to the business. Although Grainger performs risk assessments on third parties where appropriate to learn about their security program, there is a risk that the confidentiality of data held or accessed by them may be compromised.
The proper functioning of Grainger’s information systems is critical to the successful operation of its business. Grainger continues to invest in software, hardware and network infrastructures in order to effectively manage its information systems.
Grainger continues to invest in software, hardware and network infrastructures to effectively manage its information systems.
Violations of these regulations could result in fines, criminal sanctions, the inability to participate in existing or future government contracting and other administrative sanctions. Any such penalties could result in damage to the Company’s reputation, increased costs of compliance and/or remediation and could adversely affect the Company’s financial condition and results of operations.
Any such penalties could result in damage to Grainger’s reputation, increased costs of compliance and/or remediation and could adversely affect Grainger’s financial condition and results of operations.
Systems implementation disruption and any other IT disruption, if not anticipated and appropriately mitigated, could have an adverse effect on its business.
In addition, Grainger's systems implementations may not result in productivity improvements at the levels anticipated. Systems implementation disruption and any other IT disruption could have an adverse effect on its business.
In addition, a Grainger employee, contractor or other third party with whom Grainger does business may attempt to circumvent security measures or otherwise access Grainger’s information systems in order to obtain such information or inadvertently cause a breach involving such information.
In addition, a Grainger team member, contractor or other third party with whom Grainger does business may attempt to circumvent security measures or otherwise access Grainger’s information. Grainger’s systems are integrated with customer systems and a breach of Grainger's systems could be used as an attempt to gain illicit access to customer systems and information.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThese branches range in size from approximately 500 to 109,000 square feet. These facilities are primarily owned. (3) Consists of seven DCs that range in size from approximately 11,000 to 2 million square feet. These facilities are primarily leased. Other facilities include office space that range in size from approximately 1,000 to 49,000 square feet.
Biggest changeThese facilities are primarily owned. (3) Consists of four DCs that range in size from approximately 160,000 to 2.1 million square feet. These facilities are both owned and leased. Other facilities include office space that range in size from approximately 1,500 to 90,000 square feet. These facilities are primarily leased.
Item 2: Properties As of December 31, 2022, Grainger’s owned and leased facilities totaled approximately 30.3 million square feet. Grainger owns and leases facilities primarily in the U.S., Japan, Canada (5) , Mexico (6) , Puerto Rico (7) and the U.K.
Item 2: Properties As of December 31, 2023, Grainger’s owned and leased facilities totaled approximately 30.4 million square feet. Grainger owns and leases facilities primarily in the U.S., Japan, Canada (5) , Mexico (6) , Puerto Rico (7) and the U.K.
The following table includes Grainger's material facilities: Location Facility and Use (9) Size in Square Feet (in thousands) Segment U.S. (1) DCs 10,368 High-Touch Solutions N.A. U.S. (2) Branch Locations 6,325 High-Touch Solutions N.A. Japan (3) DCs 3,924 Endless Assortment U.S. (4) Other Facilities 3,638 High-Touch Solutions N.A.
The following table includes Grainger's material facilities: Location Facility and Use (9) Size in Square Feet (in thousands) Segment U.S. (1) DCs 11,635 High-Touch Solutions N.A. U.S. (2) Branch locations 6,324 High-Touch Solutions N.A. Japan (3) DCs 3,370 Endless Assortment U.S. (4) Other facilities 3,878 High-Touch Solutions N.A.
(6) In Mexico, Grainger has 16 branch locations and two DCs which total 649,000 square feet. (7) In Puerto Rico, Grainger has three branch locations and one DC which total 95,000 square feet. (8) In the U.K., Grainger has 37 branch locations, one DC and other facilities which total 751,000 square feet.
(6) In Mexico, Grainger has 16 branch locations, two DCs and one other location which total 655,000 square feet. (7) In Puerto Rico, Grainger has three branch locations and one DC which total 95,000 square feet. (8) In the U.K., Grainger has 35 branch and other facility locations and one DC which total 705,000 square feet.
These facilities are also primarily leased. (4) Primarily consists of storage facilities, office space and customer service centers. These facilities are owned and leased. These facilities range in size from approximately 200 to 633,000 square feet. (5) In Canada, Grainge r has 35 branch locations, five DCs and other facilities which total two million square feet.
(4) Primarily consists of storage facilities, office space and customer service centers. These facilities are owned and leased. These facilities range in size from under 1,000 to over 1 million square feet. (5) In Canada, Grainge r ha s 32 branch locations, five DCs and other facilities which total two million square feet.
(8) The Company's corporate headquarters is located in Lake Forest, Illinois and other general offices are located in the Chicago Metropolitan area. Grainger believes that its properties are generally in excellent condition, well maintained and suitable for the conduct of business.
(8) The Company owns its corporate headquarters in Lake Forest, Illinois and leases other general offices in the Chicago Metropolitan area that consists of approximately one million square feet. Grainger believes that its properties are generally in excellent condition, well maintained and suitable for the conduct of business.
(1) Consists of 19 DCs that range in size from approximately 61,000 to 1.5 million square feet, including three leased facilities that primarily manage bulk products, that were previously disclosed in Other Facilities. The remaining DCs are primarily owned. (2) Consists of 246 branches, 49 onsite and four will-call express locations.
(1) Consists of 21 DCs that range in size from approximately 60,000 to 1.5 million square feet, including six leased facilities that primarily manage bulk products. The remaining DCs are primarily owned. (2) Consists of 245 branches, 62 onsite and four will-call express locations. These facilities range in size from under 1,000 to 110,000 square feet.
Added
The square footage of Grainger's corporate headquarters in Lake Forest, Illinois and other general offices in the Chicago Metropolitan area are not included in the total square footage of Grainger's U.S. Other facilities provided above. Square footage of the Company's owned and leased properties provided below are presented as approximates.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3: Legal Proceedings For a description of legal proceedings, see the disclosure contained in Note 15 to the Consolidated Financial Statements included in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K, which is incorporated herein by reference.
Biggest changeItem 3: Legal Proceedings For a description of legal proceedings, see the disclosure contained in Note 14 to the Consolidated Financial Statements included in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K, which is incorporated herein by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information relating to Grainger's repurchase of common stock during the three months ended December 31, 2022: Period Total Number of Shares Purchased (A) (D) Average Price Paid Per Share (B) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (C) Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs Oct. 1 – Oct. 31 141,647 $521.62 141,647 3,003,036 shares Nov. 1 – Nov. 30 131,768 $595.88 131,722 2,871,314 shares Dec. 1 – Dec. 31 130,147 $575.69 129,348 2,741,966 shares Total 403,562 402,717 (A) There were no shares withheld to satisfy tax withholding obligations.
Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information relating to Grainger's repurchase of common stock during the three months ended December 31, 2023: Period Total Number of Shares Purchased (A) (D) Average Price Paid Per Share (B) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (C) Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs Oct. 1 – Oct. 31 154,423 $708.93 154,423 1,833,521 shares Nov. 1 – Nov. 30 150,765 $787.67 150,765 1,682,756 shares Dec. 1 – Dec. 31 130,851 $819.69 130,830 1,551,926 shares Total 436,039 436,018 (A) There were no shares withheld to satisfy tax withholding obligations.
(B) Average price paid per share excludes commissions of $0.01 per share paid. (C) Purchases were made pursuant to a share repurchase program approved by Grainger's Board of Directors and announced April 28, 2021 (2021 Program). The 2021 Program authorized the repurchase of up to five million shares with no expiration date.
(B) Average price paid per share excludes commissions of $0.02 per share paid. (C) Purchases were made pursuant to a share repurchase program approved by Grainger's Board of Directors and announced April 28, 2021 (2021 Program). The 2021 Program authorized the repurchase of up to five million shares with no expiration date.
It covers the period commencing December 31, 2017 and ending December 31, 2022. The graph assumes that the value for the investment in Grainger common stock and in each index was $100 on December 31, 2017, and that all dividends were reinvested. December 31, 2017 2018 2019 2020 2021 2022 W.W.
It covers the period commencing December 31, 2018 and ending December 31, 2023. The graph assumes that the value for the investment in Grainger common stock and in each index was $100 on December 31, 2018, and that all dividends were reinvested. December 31, 2018 2019 2020 2021 2022 2023 W.W.
Retirement Savings Plan for the benefit of the team members who participate in the plan. 23 Company Performance The following stock price performance graph compares the cumulative total return on an investment in Grainger common stock with the cumulative total return of an investment in each of the Dow Jones US Industrial Suppliers Total Stock Market Index and the S&P 500 Stock Index.
Retirement Savings Plan for the benefit of the team members who participate in the plan. 23 Company Performance The fo llowing stock price performance graph compares the cumulative total return on an investment in Grainger common stock with the cumulative total return of an investment in each of the Dow Jones US Industrial Suppliers Total Stock Market Index and the S&P 500 Stock Index.
(D) The difference of 845 shares between the Total Number of Shares Purchased and the Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs represents shares purchased by the administrator and record keeper of the W.W. Grainger, Inc.
(D) The difference of 21 shares between the Total Number of Shares Purchased and the Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs represents shares purchased by the administrator and record keeper of the W.W. Grainger, Inc.
Holders The approximate number of shareholders of record of Grainger’s common stock as of January 31, 2023, was 531 with approximately 423,817 additional shareholders holding stock through nominees.
Holders The approximate number of shareholders of record of Grainger’s common stock as of February 14, 2024, was 510 with approximately 593,729 additional shareholders holding stock through nominees.
Grainger, Inc. $ 100 $ 122 $ 149 $ 183 $ 235 $ 256 Dow Jones US Industrial Suppliers Total Stock Market Index 100 96 126 149 192 157 S&P 500 Stock Index 100 92 122 153 209 184
Grainger, Inc. $ 100 $ 122 $ 150 $ 193 $ 210 $ 317 Dow Jones US Industrial Suppliers Total Stock Market Index 100 133 166 226 200 296 S&P 500 Stock Index 100 131 156 200 164 207

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe 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): For the Years Ended December 31, 2022 2021 Net Sales $ 15,228 $ 13,022 $ Change from prior-year period 2,206 1,225 % Change from prior-year period 16.9 % 10.4 % Daily sales (1) $ 59.7 $ 51.3 $ Change from prior-year period 8.4 5.2 % Change from prior-year period 16.5 % 11.3 % Daily sales impact of currency fluctuations (2.8) % 0.3 % (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.
Biggest changeThe following table is included as an aid to understanding the changes of Grainger's total net sales, daily net sales and daily organic constant currency net sales from the prior period for the twelve months end ed December 31, 2023 (in millions of dollars ): For the Years Ended December 31, 2023 % Change (1) 2022 % Change (1) Net sales $ 16,478 8.2 % $ 15,228 16.9 % Daily net sales (2) $ 65.2 8.6 % $ 59.5 16.5 % Daily, organic constant currency net sales (2) $ 65.8 9.5 % $ 61.0 19.3 % (1) Calculated on the basis of prior year reported net sales for the years ended December 31, 2023 and 2022.
The Company believes that these non-GAAP measures provide meaningful information to assist investors in understanding financial results and assessing prospects for future performance as they provide a better baseline for analyzing the ongoing performance of its businesses by excluding items that may not be indicative of core operating results.
The Company believes its non-GAAP measures provide meaningful information to assist investors in understanding financial results and assessing prospects for future performance as they provide a better baseline for analyzing the ongoing performance of its businesses by excluding items that may not be indicative of core operating results.
Overview W.W. Grainger, Inc. is a broad line 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.).
Overview W.W. Grainger, Inc. is a broad line distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America, Japan and the United Kingdom (U.K.).
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Form 10-K, and can be found in MD&A of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included in this Form 10-K, and can be found in MD&A of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
The following discussion should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021 .
The following discussion should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022 .
Changes in these estimates and assumptions could materially affect the determination of fair value and impairment for each reporting unit and indefinite-lived i ntangible asset. For further information on the Company's goodwill and other intangible assets, see Note 5 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.
Changes in these estimates and assumptions could materially affect the determination of fair value and impairment for each reporting unit and indefinite-lived intangible asset. For further information on the Company's goodwill and other intangible assets, see Note 4 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.
Inventories Company inventories primarily consist of merchandise purchased for resale and are valued at the lower of cost or net realizable value. The majority of the Company’s inventory is accounted for using the last-in, first-out (LIFO) method.
Inventories Company inventories primarily consist of merchandise purchased for resale and are valued at the lower of cost or market value. The majority of the Company’s inventory is accounted for using the last-in, first-out (LIFO) method.
Net realizable value is based on an analysis of inventory trends including, but not limited to, reviews of inventory levels, sales and cost information and on-hand quantities relative to the sales history for the product and shelf-life.
Market value is based on an analysis of inventory trends including, but not limited to, reviews of inventory levels, sales and cost information and on-hand quantities relative to the sales history for the product and shelf-life.
Share repurchases are executed at prices the Company determines appropriate subject to various factors, including market conditions and the Company's financial performance and may be effected through accelerated share repurchase programs, open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. Share repurchases for 2023 are expected to be in the r ange of $550 and $700 million.
Share repurchases are executed at prices the Company determines appropriate subject to various factors, including market conditions and the Company's financial performance and may be affected through accelerated share repurchase programs, open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. Share repurchases for 2024 are expected to be in the r ange of $900 and $1,100 million.
Purchase Obligations Grainger had purchase obligations of approximately $1,563 million as of December 31, 2022 , which includes approximately $1,407 million payable within 12 months. Grainger's purchase obligations primarily include commitments to purchase inventory, uncompleted additions to property, buildings and equipment and other goods and services.
Purchase Obligations Grainger had purchase obligations of approximately $1,453 million as of December 31, 2023 , which includes approximately $1,175 million payable within 12 months. Grainger's purchase obligations primarily include commitments to purchase inventory, uncompleted additions to property, buildings and equipment and other goods and services.
Dividends For the years ended December 31, 2022 and 2021, Grainger declared and paid $370 million and $357 million, respectively, in dividends to holders of the Company's common stock. Commitments and Other Contractual Obligations The Company's material cash requirements include the following commitments and other contractual obligations.
Dividends For the years ended December 31, 2023 and 2022, Grainger declared and paid $392 million a nd $370 million, respectively, in dividends to holders of the Company's common stock. Commitments and Other Contractual Obligations The Company's material cash requirements include the following commitments and other contractual obligations.
Debt As of December 31, 2022, the Company had outstanding debt obligations with varying maturities for an aggregate principal amount of $2,374 million, with $35 million pa ya ble within 12 months. Total future interest payments associated with the Company's outstanding debt obligations was $1,843 million, with $87 million payable within 12 months.
Debt As of December 31, 2023, the Company had outstanding debt obligations with varying maturities for an aggregate principal amount of $2,337 million, with $34 million pa ya ble within 12 months. Total future interest payments associated with the Company's outstanding debt obligations was $1,729 million, with $87 million payable within 12 months.
As of December 31, 2022 , the Company had fixed operating lease payment obligations of $405 million, with $77 million payable within 12 months. 33 Critical Accounting Estimates The preparation of Grainger’s 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 require the Company’s management to make assumptions and estimates that affect the reported amounts.
As of December 31, 2023 , the Company had fixed operating lease payment obligations o f $492 million, with $87 million payab le within 12 months. 34 Critical Accounting Estimates The preparation of Grainger’s 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 require the Company’s management to make assumptions and estimates that affect the reported amounts.
The Company continues to monitor economic conditions in the U.S. and globally, and the impact of macroeconomic pressures, including rising interest rates, fluctuating currency exchange rates and recession fears, on the Company’s business, customers, suppliers and other third parties.
The Company continues to monitor economic conditions in the U.S. and globally, and the impact of macroeconomic pressures, including repercussions from changes in interest rates, currency exchange fluctuations, inflation and a potential recession on the Company’s business, customers, suppliers and other third parties.
Grainger, Inc. $ 1,547 $ 1,043 48.4 10.2 8.0 Diluted earnings per share: $ 30.06 $ 19.84 51.5 % (1) For further information regarding the Company's disaggregated revenue, see Note 3 of the Notes to the Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.
Grainger, Inc. $ 1,829 $ 1,547 18.2 11.1 % 10.2 % Diluted earnings per share: $ 36.23 $ 30.06 20.5 % (1) For further information regarding the Company's disaggregated revenue, see Note 2 of the Notes to the Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.
Sources of Liquidity Cash and Cash Equivalents As of December 31, 2022 and 2021, Grainger had cash and cash equivalents of $325 million and $241 million, respectively. The increase in cash was primarily due to cash flows from operations and lower volume of share repurchases, partially offset by working capital changes and higher tax disbursements in 2022.
Sources of Liquidity Cash and Cash Equivalents As of December 31, 2023 and 2022, Grainger had cash and cash equivalents of $660 million and $325 million, respectively. The increase in cash was primarily due to cash flows from operations and favorable year-over-year working capital, partially offset by higher capital expenditures and higher volume of share repurchases.
Historically, the Company’s broad and diverse 25 customer base and the nondiscretionary nature of the Company’s products to its customers has helped it perform well in the industrial MRO market in recessionary periods. The full extent and impact of these conditions are uncertain and cannot be predicted at this time. Geopolitical Events In February 2022, Russia i nvaded Ukraine.
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.
Capital expenditures were $256 million and $255 million for the years ended December 31, 2022 and 2021, respectively. Capital project spending for 2023 is expected to be in the range of $450 and $525 million. This includes continued supply chain capacity expansion and technology enhancements across the Company.
Capital Expenditures In fiscal 2023, the Company's capital expenditures were $445 million and $256 million for the years ended December 31, 2023 and 2022, respectively. Capital project spending for 2024 is expected to be in the range o f $400 and $500 million. This includes continued supply chain capacity expansion and technology enhancements across the Company.
Grainger, Inc. and diluted earnings per share determined in accordance with U.S. generally accepted accounting principles (GAAP) to non-GAAP measures including adjusted SG&A, adjusted operating earnings, adjusted net earnings attributable to W.W. Grainger, Inc. and adjusted diluted earnings per share.
Grainger, Inc. and diluted earnings per share determined in accordance with GAAP to the Company's non-GAAP measures adjusted SG&A, adjusted operating earnings, adjusted net earnings attributable to W.W.
Share Repurchases For the years ended December 31, 2022 and 2021, Grainger repurchased shares of its common stock in the open market for $603 million and $695 million, respectively.
Share Repurchases For the years ended December 31, 2023 and 2022, Grainger repurchased shares of its common stock in the open mark et for $850 million an d $603 million, respectively.
Both credit rating agencies currently rate the Company's corporate credit at investment grade. The following table summarizes the Company's credit ratings as of December 31, 2022: Corporate Senior Unsecured Short-term Moody's A3 A3 P2 S&P A+ A+ A1 32 Uses of Liquidity Internally generated cash flows are the primary source of Grainger's working capital and growth initiatives, including capital expenditures.
The following table summarizes the Company's credit ratings as of December 31, 2023: Corporate Senior Unsecured Short-term Moody's A2 A2 P1 S&P A+ A+ A1 Uses of Liquidity Internally generated cash flows are the primary source of Grainger's working capital and growth initiatives, including 33 capital expenditures.
Strategic Priorities The Company’s continued strategic priority for 2023 is to relentlessly expand Grainger’s leadership position in the MRO space by being the go-to partner for people who build and run safe and productive operations. To achieve this, each Grainger business has a set of strategic objectives.
Strategic Priorities The Company’s continued strategic aspiration for 2024 is to relentlessly expand Grainger’s leadership position by being the go-to partner for people who build and run safe, sustainable, and productive operations. To achieve this, each Grainger business has a set of strategic growth drivers to drive top-line revenue and MRO market outgrowth.
The increase was due to the divestiture of Cromwell's software business in the fourth quarter of 2022. 31 Liquidity and Capital Resources Grainger believes its current balances of cash and cash equivale nts, marketable securities and availability under its revolving credit facilities will be sufficient to meet its liquidity needs for the next 12 months and beyond.
Liquidity and Capital Resources Grainger believes its current balances of cash and cash equivale nts, marketable securities and availability under its revolving credit facilities will be sufficient to meet its liquidity needs for the next twelve months.
The Company expects to continue to return excess capital to shareholders through share repurchases and dividends. Working Capital The Company's working capital was $2,864 million at December 31, 2022, compared to $2,455 million at December 31, 2021.
The Company expects to continue to return excess capital to shareholders through share repurchases and dividends. Working Capital Working capital as of December 31, 2023 was $3,078 million, an increase of $214 million compared to $2,864 million as of December 31, 2022.
Endless Assortment The following table shows reported segment results (in millions of dollars): For the Years Ended December 31, 2022 2021 Percent Increase (decrease) from Prior Year Net sales $ 2,787 $ 2,576 8.2 % Gross profit $ 817 $ 729 12.0 % Selling, general and administrative expenses $ 594 $ 497 19.4 % Operating earnings $ 223 $ 232 (3.8) % Net sales of $2,787 million for the year ended December 31, 2022 increased $211 million, or 8.2%, compared to the same period in 2021 and on a daily basis, net sales increased 7.7%.
Endless Assortment The following table shows reported segment results (in millions of dollars): For the Years Ended December 31, 2023 2022 % Change Net sales $ 2,916 $ 2,787 4.7 % Gross profit 864 817 5.7 Selling, general and administrative expenses 631 594 6.2 Operating earnings $ 233 $ 223 4.3 % Net sales of $2,916 million for the year ended December 31, 2023 increased $129 million, or 5%, and on a daily constant currency basis, increased 10% compared to the same period in 2022.
The following table shows reported segment results (in millions of dollars): For the Years Ended December 31, 2022 2021 Percent Increase from Prior Year Net sales $ 12,182 $ 10,186 19.6 % Gross profit $ 4,951 $ 3,906 26.8 % Selling, general and administrative expenses $ 2,968 $ 2,572 15.4 % Operating earnings $ 1,983 $ 1,334 48.7 % Net sales of $12,182 million for the year ended December 31, 2022 increased $1,996 million , or 19.6% , compared to the same period in 2021.
The following table shows reported segment results (in millions of dollars): For the Years Ended December 31, 2023 2022 % Change Net sales $ 13,267 $ 12,182 8.9 % Gross profit 5,546 4,951 12.0 Selling, general and administrative expenses 3,212 2,968 8.2 Operating earnings $ 2,334 $ 1,983 17.7 % Net sales of $13,267 million for the year ended December 31, 2023 increased $1,085 million, or 9% compared to the same period in 2022.
A detailed summary of the Company’s contingencies and legal matters is included in Note 15 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. 34
For further information on the Company's contingencies and legal matters, see Note 14 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. 35
Grainger has various sources of financing available. For further information regarding the Company's debt instruments and available financing sources, see Note 6 of the Notes to the Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.
For further information regarding the Company's debt instruments and available financing sources, see Note 5 of the Notes to the Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. Total debt as a percent of total capitalization was 40.1% and 45.9%, as of December 31, 2023 and 2022, respectively.
Operating earnings of $1,983 million for the year ended December 31, 2022 increased $649 million, or 49%, compared to the same period in 2021. The increase was driven by higher gross profit dollars, partially offset by higher SG&A.
S G&A lever age decreased 30 basis points compared to the same period in 2022. Operating earnings of $233 million for the year ended December 31, 2023 increased $10 million, or 4%, compared to the same period in 2022. The increase was due to higher gross profit dollars, partially offset by higher SG&A in 2023.
For the Years Ended December 31, Percent Increase/(Decrease) from Prior Year As a Percent of Net Sales 2022 2021 2022 2021 Net sales (1) $ 15,228 $ 13,022 16.9 % 100.0 % 100.0 % Cost of goods sold 9,379 8,302 13.0 61.6 63.8 Gross profit 5,849 4,720 23.9 38.4 36.2 Selling, general and administrative expenses 3,634 3,173 14.5 23.9 24.4 Operating earnings 2,215 1,547 43.2 14.5 11.9 Other expense – net 69 62 10.6 0.4 0.5 Income tax provision 533 371 43.8 3.5 2.8 Net earnings 1,613 1,114 44.8 10.6 8.6 Noncontrolling interest 66 71 (7.1) 0.4 0.5 Net earnings attributable to W.W.
For the Years Ended December 31, % of Net Sales 2023 2022 % Change 2023 2022 Net sales (1) $ 16,478 $ 15,228 8.2 % 100.0 % 100.0 % Cost of goods sold 9,982 9,379 6.4 60.6 61.6 Gross profit 6,496 5,849 11.1 39.4 38.4 Selling, general and administrative expenses 3,931 3,634 8.2 23.8 23.9 Operating earnings 2,565 2,215 15.8 15.6 14.5 Other expense – net 65 69 (5.5) 0.4 0.4 Income tax provision 597 533 12.0 3.6 3.5 Net earnings 1,903 1,613 18.0 11.6 10.6 Less noncontrolling interest 74 66 12.5 0.5 0.4 Net earnings attributable to W.W.
The increase was due to higher payroll and benefits, occupancy and marketing expenses to support the continued growth of the segment in 2022. SG&A leverage decreased 2.0 percentage points. Operating earnings of $223 million for the year ended December 31, 2022 decreased $9 million, or 4%, compared to the same period in 2021.
SG&A of $631 million for the year ended December 31, 2023 increased $37 million, or 6%, compared to the same period in 2022 . The increase was primarily due to higher marketing and payroll and benefit expenses to support the continued growth of the segment in 2023.
SG&A of $2,968 million for the year ended December 31, 2022 increased $396 million , or 15% , compared to the same period in 2021. The increase was primarily due to higher payroll, marketing and variable compensation expenses in 2022. SG& A leverage improved by 0.9 percentage point.
The increase was driven by freight and supply chain efficiencies in 2023. 31 SG&A of $3,212 million for the year ended December 31, 2023 increased $244 million, or 8%, and adjusted SG&A of $3,186 million increased $218 million, or 7% compared to the same period in 2022. The increase was primarily due to higher marketing and payroll expenses.
Gross profit margin of 29.3% increased 1.0 percentage point compared to the same period in 2021. The increase was driven by freight efficiencies and business unit mix in 2022. SG&A of $594 million for the year ended December 31, 2022 increased $97 million, or 19%, compared to the same period in 2021.
Gross profit of $864 million for the year ended December 31, 2023 increased $47 million, or 6%, and gross profit margin of 29.6% increased 30 basis points compared to the same period in 2022 . The increase was driven by freight efficiencies at MonotaRO partially offset by unfavorable product mix at Zoro in 2023.
Cash Flows The following table shows the Company's cash flow activity for the periods presented (in millions of dollars): For the Years Ended December 31, 2022 2021 Total cash provided by (used in): Operating activities $ 1,333 $ 937 Investing activities (263) (226) Financing activities (972) (1,039) Effect of exchange rate changes on cash and cash equivalents (14) (16) Increase (decrease) in cash and cash equivalents $ 84 $ (344) Debt Grainger maintains a debt ratio and liquidity position that provides flexibility in funding working capital needs and long-term cash requirements.
The Company had approximately $1.9 billion in available liquidity as of December 31, 2023. 32 Cash Flows The following table shows the Company's cash flow activity for the periods presented (in millions of dollars): For the Years Ended December 31, 2023 2022 Total cash provided by (used in): Operating activities $ 2,031 $ 1,333 Investing activities (422) (263) Financing activities (1,278) (972) Effect of exchange rate changes on cash and cash equivalents 4 (14) Increase in cash and cash equivalents $ 335 $ 84 Net cash provided by operating activities was $2,031 million and $1,333 million for the year ended December 31, 2023 and 2022, respectively.
Adjusted diluted earnings per share of $29.66 increased 49% compared to $19.84 for the twelve months ended December 31, 2021. 29 Segment Analysis For further segment information, see Note 14 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. High-Touch Solutions N.A.
For further information regarding the Company's non-GAAP measures including reconciliations to the most directly comparable GAAP measures, see above "Non-GAAP Measures ." For further segment information, see Note 13 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. High-Touch Solutions N.A.
The increase was driven by higher accounts receivable and inventory primarily due to sales growth and inflation , partially offset by increased accounts payable. As of December 31, 2022 and 2021, the ratio of current assets to current liabilities was 2.5 and 2.7, respectively. Capital Expenditures In fiscal 2022, the Company continued U.S. and Japanese supply chain investments.
The increase was primarily due to sustained sales growth and inventory management driven by supply chain efficiencies compared to the prior year period. As of December 31, 2023 and 2022, the ratio of current assets to current liabilities was 2.8 and 2.5, respectively.
The decrease was driven by unfavorable foreign exchange of 11.3% due to changes in the exchange rate between the U.S. dollar and British pound sterling, partially offset by increased sales growth due to improved customer mix of 11.1%.
Sales growth was offset by unfavorable currency exchange of 5% due to changes in the exchange rate be tween the U.S. dollar and the Japanese yen.
Operating earnings of $9 million for the year ended December 31, 2022 increased $28 million, or 145%, compared to the same period in 2021.
Adjusted SG&A leverage improved 30 basis points compared to the same period in 2022. Operating earnings of $2,334 million for the year ended December 31, 2023 increased $351 million, or 18%, and adjusted operating earnings of $2,360 million increased $377 million, or 19% compared to the same period in 2022.
The endless assortment businesses are focused on product assortment expansion and innovative customer acquisition and retention. Additionally, all Grainger businesses are focused on continuously improving customer experience, productivity and optimizing and scaling cost structures and investing in digital marketing, technology and supply chain infrastructure to ultimately deliver long-term returns for shareholders.
Additionally, all Grainger businesses are focused on continuously enhancing our operational processes to improve service and cost through customer experience, technology and supply chain infrastructure which ultimately delivers long-term returns for shareholders.
Noted in the table above for the twelve months ended December 31, 2022, Grainger divested Cromwell's wholly owned software business in the U.K. (Cromwell subsidiary). As a result of the divestiture, the Company recorded a gain in Other businesses of $21 million in SG&A in the fourth quarter of 2022.
(E&R) and recorded a one-time pre-tax loss on the divestiture of $26 million in SG&A. In the fourth quarter of 2022, Grainger divested Cromwell's wholly owned software business in the U.K. and recorded a one-time pre-tax gain on the divestiture of $21 million in SG&A.
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. The Company will continue to assess its liquidity position and potential sources of supplemental liquidity in view of Grainger's operating performance, current economic and capital market conditions and other relevant circumstances.
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.
Inflationary Cost Environment and Macroeconomic Pressures In combination with the economic recovery of the ongoing COVID-19 pandemic, the global economy continues to experience volatile disruptions including to the commodity, labor and transportation markets.
Recent Events Inflationary Cost Environment and Macroeconomic Pressures The global economy continues to experience volatile disruptions including to the commodity, labor and transportation markets, arising from a combination of geopolitical events and various economic and financial factors. These disruptions have affected the Company's operations and may continue to affect the Company's business, financial condition and results of operations.
For further discussion of the Company's risks and uncertainties, see Part I, Item 1A: Risk Factors of this Form 10-K. 26 Results of Operations The following table is included as an aid to understanding changes in Grainger's Consolidated Statements of Earnings (in millions of dollars).
For further discussion of the Company's risks and uncertainties, see Part I, Item 1A: Risk Factors of this Form 10-K. 25 Results of Operations In this section, Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business.
Gross profit of $4,951 million for the year ended December 31, 2022 increased $1,045 million , or 27% , compared to the same period in 2021. Gross profit margin of 40.6% increased 2.3 percentage points compared to the same period in 2021. The increase was primarily due to favorable product mix and lapping of prior year pandemic-related inventory adjustments.
The increase was due to volume of 5% and price, which includes customer mix, of 4%. Gross profit of $5,546 million for the year ended December 31, 2023 increased $595 million, or 12%, and gross profit margin of 41.8% increased 120 basis points compared to the same period in 2022.
The increase was primarily due to higher marketing, payroll and variable compensation expenses in 2022. Operating earning s of $2,215 million for the year ended December 31, 2022 increased $668 million, or 43%, compared to the same period in 2021. The increase was driven by higher gross profit dollars, partially offset by higher SG&A.
Adjusted SG&A of $3,905 million increased $250 million, or 7%, compared to the sa me period in 2022 driven by higher marketing and payroll expenses. Adjusted SG&A leverage improved 30 basis points in 2023 . Operating earnings of $2,565 million for the year ended December 31, 2023 increased $350 million, or 16%.
The increase was driven by favorability in the High-Touch Solutions N.A. and Endless Assortment segments. For further discus sion on the Company's gross profit, see the Segment Analysis section below. SG&A of $3,634 million for the year ended December 31, 2022 increased $461 million, or 15%, compared to the same period in 2021.
For further discussion on the Company's gross profit, see the Segment Analysis section below. 26 Selling, general, and administrative (SG&A) expenses of $3,931 million for the year ended December 31, 2023 increased $297 million, or 8%.
For further discussion on the Company's net sales, see the Segment Analysis section below. 27 Gross profit of $5,849 million for the year ended December 31, 2022 increased $1,129 million, or 24%, compared to the same period in 2021. Gr oss profit margi n of 38.4% increased 2.2 percentage points compared to the same pe riod in 2021.
Gross profit of $6,496 million for the year ended December 31, 2023 increased $647 million, or 11%, and gr oss profit margi n of 39.4% increased 100 basis points compared to the same period in 2022. Both segments contributed to margin expansion in 2023.
The decrease was primarily driven by higher SG&A, partially offset by higher gross profit dollars. Other Net sales of $259 million for the year ended December 31, 2022 decreased $1 million, or 0.2%, compared to the same period in 2021.
Adjusted operating earnings of $2,591 million increased $397 million, or 18%, compared to the same period in 2022 due to higher gross profit dollars, partially offset by increased SG&A consistent with sales growth in 2023. Adjusted operating margin improved 130 basis points in 2023 .
Income taxes of $533 million for the year ended December 31, 2022 increased $162 million, or 44%, com pared to the sam e period in 2021. The increase was primarily driven by higher taxable operating earnings for the full year 2022. Grainger's effective tax rates were 24.8% and 25.0% for the twelve months ended December 31, 2022 and 2021, respectively.
Income tax expense of $597 million and $533 million represents effective tax rates of 23.9% and 24.8% for the years ended December 31, 2023 and 2022, respectively. The Company's effective tax rate was positively impacted by increased benefits related to stock compensation in 2023. Diluted earnings per share was $36.23 f or the year ended December 31, 2023.
Grainger, Inc. $ 1,526 $ 1,043 46.4 % Reported diluted earnings per share $ 30.06 $ 19.84 51.5 % Business divestiture (0.40) — Adjusted diluted earnings per share $ 29.66 $ 19.84 49.5 % For further information regarding the Company's business divestitures, see Note 2 of the Notes to the Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K.
Grainger, Inc. $ 1,547 $ (21) $ 1,526 46.4 10.0% Diluted earnings per share: $ 30.06 $ (0.40) $ 29.66 49.3% (1) Reflects the gain on the divestiture of Cromwell's enterprise software business in the fourth quarter of 2022. (2) Calculated on the basis of reported net sales for the year ended December 31, 2022.
Removed
The high-touch solutions businesses are focused on key initiatives that drive top-line revenue and MRO market outgrowth.
Added
In the High-Touch Solutions North America (High-Touch Solutions N.A.) segment, businesses are focused on three areas: advantaged MRO solutions, differentiated sales and services, and unparalleled customer service. In the Endless Assortment segment, businesses are focused on product assortment expansion and innovative customer acquisition and retention capabilities.
Removed
Additionally, the high-touch solutions businesses are focused on growing through differentiated sales and services (e.g., direct customer relationships and onsite services), advantaged MRO solutions (e.g., get customers the exact products and services they need to solve a problem quickly) and unparalleled customer service (e.g., deliver flawlessly on every customer transaction).
Added
Non-GAAP measures exclude certain items affecting comparability that can affect the year-over-year assessment of operating results and other one-time items that do not directly reflect ongoing operating results.
Removed
Recent Events Inflation Reduction Act of 2022 In August 2022, the Inflation Reduction Act of 2022 (IRA) was signed into United States (U.S.) law. Under the IRA, there is a new 15% corporate minimum tax and a new 1% excise tax on net stock repurchases, effective after December 31, 2022.
Added
For further information regarding the Company's non-GAAP measures including reconciliations to the most directly comparable GAAP measures, see below "Non-GAAP Measures ." The following table is included as an aid to understanding the changes in Grainger's Consolidated Statements of Earnings for the twelve months ended December 31, 2023 and 2022 (in millions of dollars).
Removed
In addition, the IRA contains provisions relating to climate change, energy and health care. Based on Grainger's current analysis of the provisions, the Company does not anticipate compliance with the IRA will result in a material impact to the Consolidated Financial Statements.
Added
(2) Daily net sales are adjusted for the difference in U.S. selling days relative to the prior year period. Daily, organic constant currency net sales excludes the results of E & R Industrial Sales, Inc. in the comparable prior year period post date of divestiture and excludes the impact on net sales due to year-over-year foreign currency exchange rate fluctuations.
Removed
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.
Added
There were 254 and 255 sales days in the full year 2023 and 2022, respectively.
Removed
In response to the conflict, the U.S. and other countries have implemented economic and other sanctions. While Grainger has limited direct exposure in Russia and Ukraine, the Company continues to monitor any broader impact on the global economy, including with respect to inflation, supply chains and fuel prices.
Added
For further information regarding the Company's non-GAAP measures, including reconciliations to the most directly comparable GAAP measures, see below "Non-GAAP Measures." Net sales of $16,478 million for the year ended December 31, 2023 increased $1,250 million, or 8%, and on a daily, organic constant currency basis, net sales increased 10% compared to the same period in 2022.
Removed
The full impact of the conflict on the Company’s business and financial results remains uncertain and will depend on the severity and duration of the conflict and its impact on global and regional economic conditions. The Company does not currently expect significant disruption to its overall business resulting from these events.
Added
Both High-Touch Solutions N.A. and the Endless Assortment segments contributed to sales growth in 2023. For further discussion on the Company's net sales, see the Segment Analysis section below.
Removed
There were 255 and 254 sales days in the full year 2022 and 2021, respectively. Net sales of $15,228 million for the year ended December 31, 2022 increased $2,206 million, or 16.9%, compared to the same period in 2021. The increase in net sales was primarily due to growth in the High-Touch Solutions N.A. and Endless Assortment segments in 2022.
Added
Adjusted diluted earnings per share was $36.67 for the year ended December 31, 2023, an increase of 24% compared to $29.66 for the same period in 2022. 27 Non-GAAP Measures Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business.
Removed
Other expense – net of $69 million for the year ended December 31, 2022 increased $7 million, or 11%, compared to the same period in 2021. The increase was primarily driven by unfavorable changes in market interest rates in 2022.
Added
Non-GAAP measures exclude certain items affecting comparability that can affect the year-over-year assessment of operating results and other one-time items that do not directly reflect ongoing operating results. Organic net sales results exclude the impact of changes in foreign currency exchange rates and results of certain divested businesses in the comparable prior year period post date of divestiture.
Removed
Net e arnings of $1,547 million attributable to W.W. Grainger, Inc. for the year ended December 31, 2022 increased $504 million, or 48%, compared to the same period in 2021 . Diluted earnings per share was $30.06 for the year ended December 31, 2022, an increase of 52% compared to $19.84 for the same period in 2021.
Added
Adjusted results including adjusted SG&A, adjusted operating earnings, adjusted net earnings and adjusted diluted EPS exclude certain non-recurring items, including restructuring charges, asset impairments, gains and losses associated with business divestitures and other non-recurring, infrequent or unusual gains and losses from the Company’s most directly comparable reported U.S. generally accepted accounting principles (GAAP) results.
Removed
The increase was primarily due to higher net earnings in 2022. 28 Non-GAAP Measures The following tables reconcile reported selling, general and administrative (SG&A) expenses, operating earnings, net earnings attributable to W.W.
Added
Grainger’s non-GAAP financial measures should be considered in addition to, and not as a replacement for or as a superior measure to its most directly comparable GAAP measure and may not be comparable to similarly titled measures reported by other companies. Business Divestitures In the fourth quarter of 2023, Grainger divested E & R Industrial Sales, Inc.
Removed
Because non-GAAP financial measures are not standardized, it may not be possible to compare these measures with other companies' non-GAAP measures having the same or similar names.
Added
The Company does not expect these business exits to have a material effect on its future results of operations. 28 The following table provides a reconciliation of reported net sales growth from the prior year period in accordance with GAAP to the Company's non-GAAP measures daily net sales and daily, organic constant currency net sales for the twelve months end ed December 31, 2023 (in millions of dollars): For the Years Ended December 31, High-Touch Solutions N.A.
Removed
The following tables provide a reconciliation of GAAP to non-GAAP measures (in millions of dollars): For the Years Ended December 31, 2022 2021 Percent Increase from Prior Year Reported selling, general, and administration expenses $ 3,634 $ 3,173 14.5 % Business divestiture 21 — Adjusted selling, general, and administration expenses $ 3,655 $ 3,173 15.2 % Reported operating earnings $ 2,215 $ 1,547 43.2 % Business divestiture (21) — Adjusted operating earnings $ 2,194 $ 1,547 41.9 % Reported net earnings attributable to W.W.
Added
Endless Assortment Total Company (1) 2023 % Change (2) 2023 % Change (2) 2023 % Change (2) Reported net sales $ 13,267 8.9 % $ 2,916 4.7 % $ 16,478 8.2 % Daily impact (3) 0.2 0.4 — 0.4 0.3 0.4 Daily net sales 52.4 9.3 11.5 5.1 65.2 8.6 Foreign currency exchange (4) — — 0.6 5.3 0.6 0.9 Business divestiture (5) — 0.1 — — — — Daily, organic constant currency net sales $ 52.4 9.4 % $ 12.1 10.4 % $ 65.8 9.5 % 2022 % Change (2) 2022 % Change (2) 2022 % Change (2) Reported net sales $ 12,182 19.6 % $ 2,787 8.2 % $ 15,228 16.9 % Daily impact (3) (0.2) (0.5) — (0.5) (0.2) (0.4) Daily net sales 47.6 19.1 10.9 7.7 59.5 16.5 Foreign currency exchange (4) 0.1 0.2 1.3 12.4 1.5 2.8 Daily, organic constant currency net sales $ 47.7 19.3 % $ 12.2 20.1 % 61.0 19.3 % (1) Total Company includes Other.
Removed
Grainger, Inc. $ 1,547 $ 1,043 48.4 % Business divestiture (21) — Adjusted net earnings attributable to W.W.
Added
Grainger's businesses reported in Other do not meet the criteria of a reportable segment. (2) Calculated on the basis of prior year reported net sales. Daily, organic constant currency net sales excludes the results of E&R in the comparable prior year period post date of divestiture for the year ended December 31, 2023.
Removed
Excluding the business divestiture, adjusted SG&A and adjusted operating earnings for the full year 2022 were $3,655 and $2,194, an increase of $482 million and $647 million, or 15% and 42%, respectively, compared to the same period in 2021. Grainger's adjusted effective tax rate was 25.1% for the twelve months ended December 31, 2022. The divestiture was non-taxable.
Added
(3) Excludes the impact on net sales due to the difference in U.S. selling days relative to the prior year period on a daily basis. There were 254 and 255 sales days in the full year 2023 and 2022, respectively. (4) Excludes the impact on net sales due to year-over-year foreign currency exchange rate fluctuations on a daily basis.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn February 2020, Grainger entered into certain derivative instrument agreements to manage this risk. A hypothetical 10% change in the relative value of the U.S. dollar would not materially impact the Company's net earnings for 2022.
Biggest changeA hypothetical 10% change in the relative value of the U.S. dollar would not materially impact the Company's net earnings for 2023. Interest Rate Risks Grainger is exposed to interest rate risk on its long-term debt. In February 2020, Grainger entered into certain derivative instrument agreements to hedge a portion of its fixed-rate long-term debt to manage this risk.
The Company regularly monitors commodity trends and, as a broad line supplier, mitigates any material exposure to commodity price risk by having alternative sourcing plans in place that mitigate the risk of supplier concentration, passing commodity-related inflation to customers or suppliers and continuing to scale its distribution networks, including its transportation infrastructure. 35
The Company regularly monitors commodity trends and, as a broad line supplier, mitigates any material exposure to commodity price risk by having alternative sourcing plans in place that mitigate the risk of supplier concentration, passing commodity-related inflation to customers or suppliers and continuing to scale its distribution networks, including its transportation infrastructure. 36
For the fiscal year ended December 31, 2022, approximately 18% of the Company's net sales were denominated in a currency other than the Company's functional U.S. dollar currency. Consequently, the Company is exposed to the impact of exchange rate volatility primarily between the U.S. dollar and the Japanese yen, Canadian dollar and the British pound sterling.
For the fiscal year ended December 31, 2023, approximately 18% of the Company's net sales were denominated in a currency other than the Company's functional U.S. dollar currency. Consequently, the Company is exposed to the impact of exchange rate volatility primarily between the U.S. dollar and the Japanese yen, Mexican peso, Canadian dollar and the British pound sterling.
For debt and derivative instrument information, see Note 6 and Note 12 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. Commodity Price Risks Grainger’s transportation costs are exposed to fluctuations in the price of fuel and some sourced products contain commodity-priced materials.
For debt and derivative instrument information, see Note 5 and Note 11 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. Commodity Price Risks Grainger’s transportation costs are exposed to fluctuations in the price of fuel and some sourced products contain commodity-priced materials.
In February 2020, Grainger entered into certain derivative instrument agreements to hedge a portion of its fixed-rate long-term debt to manage this risk. The annualized effect of a hypothetical 1 percentage point increase in interest rates on Grainger’s variable-rate debt obligations would not materially impact the Company's net earnings for 2022.
The annualized effect of a hypothetical 1 percentage point increase in interest rates on Grainger’s variable-rate debt obligations would not materially impact the Company's net earnings for 2023.
Removed
For derivative instrument information, see Note 12 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements and Supplementary Data of this Form 10-K. Interest Rate Risks Grainger is exposed to interest rate risk on its long-term debt.

Other GWW 10-K year-over-year comparisons