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OFFON

W.W. GRAINGER, INC.

(GWW)
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Grainger WW : 2020 Fact Book

05/07/2020 | 09:04am EDT

Fact Book 2020

CONTENTS

2

About Us

3

The Grainger Edge

4

Geographic Overview

5

Business Model

6

Portfolio and Strategic Pillars

7

U.S. Business - High-Touch Solutions Model

8

U.S. Business - Advantaged MRO Solutions

8

U.S. Business - Unparalleled Customer Service

9

U.S. Business - Differentiated Sales and Services

10

Canada - High-Touch Solutions Model

10

Mexico - High-Touch Solutions Model

10

International - High-Touch Solutions Model

11

Endless Assortment Model

12

Creating Shareholder Value

13

Historical Financial Summary

14

Financial Definitions and Non-GAAP

Reconciliation/Company Information

About Us

  1. Grainger, Inc. is a broad line,business-to-business distributor of maintenance, repair and operating (MRO) supplies and other related products and services. More than 3.5 million businesses and institutions worldwide rely on Grainger for products in categories such as safety, material handling and metalworking, along with services like inventory management and technical support. These customers represent a broad collection of industries, including commercial, government, healthcare and manufacturing. They place orders online, on mobile devices, through sales representatives, over the phone and at local branches. Approximately 5,000 suppliers provide Grainger with 1.6 million products stocked in the company's distribution centers (DCs) and branches worldwide. Grainger employs 25,000 team members across the globe. For more information on Grainger, visit www.grainger.com/investor.

2019 SALES CUSTOMER CATEGORY

17%

Heavy Manufacturing

14%

Government

10%

Light Manufacturing

8%

Commercial

8%

Contractor

7%

Retail/Wholesale

6%

Healthcare

5%

Transportation

4%

Natural Resources

21%

Other*

*A portion of Other includes revenue from businesses outside of the U.S. and Canada.

2019 SALES PRODUCT CATEGORY

17%

Safety and Security

11%

Material Handling

10%

Metalworking

8%

Cleaning and

Maintenance

8%

Pumps, Plumbing

and Test Equipment

6%

Hand Tools

5%

HVAC

4%Electrical

4%Power Tools

3%Fluid Power

3%Lighting

3%Specialty Brands

2%Power Transmission

1%Motors

15%Other*

More than

1.6 million

3.5 million

products stocked

active customers

More than

Approximately

5,000

25,000

key product suppliers

team members

Safe Harbor Statement

All statements in this Fact Book, other than those relating to historical facts, are "forward-looking statements." Forward-looking statements can generally be identified by their use of terms such as "anticipate," "estimate," "believe," "expect," "could," "forecast," "may," "intend," "plan," "predict," "project" "will" or "would" and similar terms and phrases, including references to assumptions.

Forward-looking statements are not guarantees of future performance and are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from such statements. Forward-looking statements include, but are not limited to, statements about future strategic plans and future financial and operating results.

Important factors that could cause actual results to differ materially from those in the forward-looking statements include, among others: the unknown duration and economic, operational and financial impacts of the global outbreak of the Coronavirus (COVID-19 pandemic) and the actions taken or contemplated by governmental authorities or others in connection with the pandemic on the company's businesses, its employees, customers and suppliers, including the uncertain duration of mandated shut-downs for our customers and suppliers, changes in our customers' product needs, our suppliers' inability to meet unprecedented demand for COVID-19 related products, the potential for government action to allocate or direct products to certain customers which may cause disruption in our relationships with other customers, and disruption caused by business responses to COVID-19, including working remote arrangements, which may create increased vulnerability to cybersecurity incidents; higher product costs or other expenses; a major loss of customers; loss or disruption of sources of supply; increased competitive pricing pressures; failure to develop or implement new technology initiatives or business strategies; failure to adequately protect intellectual property or successfully defend against infringement claims; fluctuations or declines in the company's gross profit percentage; the company's responses to market pressures; the outcome of pending and future litigation or governmental or regulatory proceedings, including with respect to wage and hour, anti-bribery and corruption, environmental, advertising, consumer protection, pricing (including disaster or emergency declaration pricing statutes), product liability, safety or compliance, or privacy and cybersecurity matters; investigations, inquiries, audits and changes in laws and regulations; failure to comply with laws, regulations and standards; government contract matters; disruption of information technology or data security systems involving us or third parties on which we depend; general industry, economic, market or political conditions; general global economic conditions including tariffs and trade issues and policies; currency exchange rate fluctuations; market volatility, including volatility or price declines of the company's common stock; commodity price volatility; labor shortages; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; pandemic diseases or viral contagions; natural and other catastrophes; unanticipated and/or extreme weather conditions; loss of key members of management; our ability to operate, integrate and leverage acquired businesses; changes in effective tax rates; changes in credit ratings or outlook; the company's incurrence of indebtedness and other factors which can be found in our filings with the Securities and Exchange Commission, including our most recent periodic reports filed on Form 10-K and Form 10-Q, which are available on our Investor Relations website. Forward-looking statements are given only as of the date of this communication and we disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

For a list of factors that could cause Grainger's results to differ materially from those that are presented, please see Item 7: Management's Discussion and Analysis of Financial Condition

and Results of Operations, other factors identified under Item 1A: Risk Factors and elsewhere in Grainger's Annual Report on Form 10-K.

W.W. GRAINGER, INC. AND SUBSIDIARIES 2

The Grainger EdgeSM

Last year, Grainger introduced the Grainger EdgeSMframework that uniquely defines the company by describing why it exists, how it serves its customers and how its team members work together to achieve its objectives.

Grainger's purpose is to keep the world working. Whether that means helping a hospital focus on patient care, a manufacturing plant focus on building great products or a school focus on teaching, Grainger and its team members helps keep facilities running so customers can focus on what they do best.

The framework also outlines a set of principles that define the behaviors expected from Grainger's team members in working with each other and their customers, supplier partners and communities. It is a basis for holding team members accountable to these principles and that they will help the company execute its strategy and create value for shareholders.

OUR PURPOSE

We Keep the World WorkingSM

OUR ASPIRATION

We relentlessly expand our leadership position by being the go-to partner for people who build and run safe, sustainable and productive operations.

OUR STRATEGY

High-Touch Solutions Model

  • Advantaged MRO solutions
  • Differentiated sales and services
  • Unparalleled customer service

Endless Assortment Model

  • Expansive product assortment
  • Innovative customer acquisition and retention capabilities

OUR PRINCIPLES

Start

with the

customer

Do the

Embrace

right

curiosity

thing

Invest

Act with

in our

success

intent

Win as

Compete

with

one team

urgency

W.W. GRAINGER, INC. AND SUBSIDIARIES 3

Geographic Overview

In the large and fragmented MRO industry, Grainger holds an advantaged position with its supply chain infrastructure, broad in-stock product offering, robust eCommerce platform and deep customer relationships.

The global MRO market is approximately $622 billion, and Grainger's estimated addressable market is approximately $290 billion. Grainger is most successful in markets where it has scale positions in purchasing, supply chain and IT, and where a developed infrastructure exists. Those markets include North America, Europe and Japan. Each of these core markets has strong growth characteristics: the market

is large, and the competition is highly fragmented. In total, Grainger has about a 4 percent share of its addressable market with ample opportunity for growth.

The table below shows Grainger's estimated share of the MRO market and the summary of its operations by reporting segments and other businesses as of December 31, 2019:

APPROXIMATE

DISTRIBUTION

APPROXIMATE NUMBER

BRANCHES 1

OF CUSTOMERS SERVED

MARKET SHARE

CENTERS (DCS) 1

(THOUSANDS) 2

UNITED STATES

7 percent

17

282

1,000

CANADA

4 percent

5

53

50

OTHER BUSINESSES

ENDLESS ASSORTMENT BUSINESSES

2 percent

4

-

2,600

INTERNATIONAL HIGH-TOUCH SOLUTIONS BUSINESSES

1 percent

6

119

150

TOTAL

4 percent

32

454

3,800

  1. See 2019 Form10-K Item 2, "Properties" for more information.
  2. Customers served in the U.S. may include overlap with Zoro within the endless assortment businesses.

W.W. GRAINGER, INC. AND SUBSIDIARIES 4

Business Model

The company's strategy has always been defined by its customers' needs, and Grainger uses a combination of its high-touch solutions and endless assortment models to serve customers of all sizes.

The high-touchsolutions modelserves customers with complex buying needs, primarily in North America. This model helps Grainger create powerful customer solutions, deliver a great customer experience and develop deep customer relationships-whether onsite, at a branch, over the phone or online. Grainger creates value for customers through its sales and service representatives, technical product support, fulfillment capabilities, inventory management solutions and other services.

The endless assortment modelis designed for customers with less complex needs and includes the Zoro brand in the United States and Europe and MonotaRO in Japan. Customers buying through the endless assortment platforms can quickly find the products they need with an easy and streamlined online search experience and an expansive product assortment. The assortment contains millions of SKUs, including products outside of traditional industrial MRO categories.

MODEL/VALUE PROPOSITION

RELATIONSHIPS

HIGH-TOUCH SOLUTIONS1

Customized services and curated product offering for complex customer needs

Sales and Service Representatives

Digital

®

®

Sales and service representatives and digital solutions drive relationships with purchasers and end users

ENDLESS ASSORTMENT

Broad assortment at competitive prices

Primarily Digital

®

®

Digital solutions and marketing

to build relationships

ORDER

ORIGINATION

Digital Channels

Website

KeepStock®

EDI/ePro

30% of

16% of

25% of

orders

orders

orders

®

Highly curated product

Inventory management

Embedded in large

information and search

system

customer purchasing process

Phone

Branch

19% of

10% of

®

orders

orders

Strong technical knowledge across a wide range of product lines helps customers through the purchasing process over the phone or at the branch

Website

Streamlined search and transactional experience

Direct-to-Customer (DTC)

Distribution Center

70% of orders

®

17% of orders

shipped direct-

delivered through

to-customer (DTC)

KeepStock

ORDER

FULFILLMENT

Branch

13% of orders

®

picked up

at branch

Stocked assortment of quality industrial

MRO products with high availability

KeepStock®

®

Distribution Center

Expansive assortment across all business-to-business categories at competitive prices

1High-touch solutions order origination and fulllment data is for the U.S. Business and excludes Zoro U.S.

W.W. GRAINGER, INC. AND SUBSIDIARIES 5

Portfolio and Strategic Pillars

Each business in Grainger's portfolio has a set of strategic pillars focused on creating value for customers.

High-Touch Solutions Model

Grainger is focused on growing share through the Grainger brand in North America with large and midsize customers by focusing on the following strategic pillars:

BUILDING ADVANTAGED MRO SOLUTIONS

Providing advantaged MRO solutions means being able to get customers the exact products and services they need to solve a problem quickly. Grainger delivers value to its customers through a broad assortment of high-quality products, customer and product expertise and digital capabilities. Read more on page 8.

DELIVERING UNPARALLELED CUSTOMER SERVICE

Grainger is committed to providing the absolute best customer experience in the industry through its efforts to deliver flawlessly on every customer transaction. Read more on page 8.

OFFERING DIFFERENTIATED SALES AND SERVICES

Grainger has an advantage in serving complex customers at their places of business through its direct customer relationships and onsite services. Read more on page 9.

Endless Assortment Model

Grainger is investing in the growth of its endless assortment businesses (MonotaRO and Zoro) through product assortment expansion and enhanced marketing and analytics capabilities that drive customer acquisition and retention. Read more on page 11.

Across the Business

Grainger continues to focus on driving growth while maintaining a prudent cost structure. Overall, Grainger operates under the strategy of continuous improvement and methodical investments. 2019 was a year of investment in both the growth initiatives in the U.S. high-touch model and the infrastructure for growth in the endless assortment businesses-while still driving SG&A leverage for the year.

HIGH -TOUCH SOLUTIONS

ENDLESS

TOTAL

U.S.

Canada

International2

ASSORTMENT

COMPANY4

REVENUE

$ 8.8B

$ 0.5B

$ 0.8B

$1.8B

$11.5B

DAILY REVENUE GROWTH %

3%

(19%)

(9%)

19%

2%

OPERATING MARGIN %1

16%

1%

(17%)

7%

11%

ROIC1

42%

1%

(19%)

32%3

27%

1For a reconciliation of non-GAAP measures reflected on this page and ROIC definition, see "Financial Definitions and Non-GAAP Reconciliation" on page 14.

  1. International includes Cromwell, Fabory, Mexico, China and Puerto Rico. In 2019, the company recorded a $120 millionwrite-down of substantially all of the remaining intangible assets of the Cromwell business.
  2. ROIC shown is for MonotaRO, which serves as a proxy for the overall endless assortment businesses.
  3. Total company also includes Specialty Brands, eliminations and unallocated expenses.

W.W. GRAINGER, INC. AND SUBSIDIARIES 6

U.S. Business - High-Touch Solutions Model

With 2019 sales of $8.8 billion, the U.S. segment represents 72 percent of Grainger's total revenue. The U.S. segment includes Grainger's sales to large and midsize customers

U.S. LARGE~$7.0 billion in revenue U.S. MEDIUM~$1.1 billion in revenue

in the U.S., which make up about $8.1 billion in revenue,

as well as specialty brands and intercompany sales primarily to Zoro in the U.S.

Further, Grainger defines its U.S. customers by two elements:

  1. whether or not a customer has a contract and
  2. the size of the customer site

( As of December 31, 2019)

2019

> $ 60 K

REVENUE

(MRO

$10- $60K

potential

in $/year)

< $10K

Numbers may not sum due to rounding.

CONTRACT

~$4.8B

~$0.8B

~$0.2B

NONCONTRACT

~$1.1B

~$0.7B

~$0.4B

U.S. LARGE

U.S. Large customers tend to be more complex and require services at their place of business. Large customers value Grainger's partnership approach, which focuses on reducing total cost of ownership in MRO spend by helping them manage their labor, product and inventory costs. The U.S. Large market is estimated at $76 billion of which Grainger has roughly 8 percent share.

U.S. LARGE

Daily sales growth on $7.0 billion of revenue

2018 2019

2%

5%

2%

3%

3%

9%

8%

7%

6%

6%

Q1

Q2

Q3

Q4*

FY

Total U.S. MRO Market 2019

2-2.5%

~1%

~0%

(1)- 0%

0.5 -1%

*Q4'18 sales are normalized for a negative 1 ppt. impact from Christmas/New Year's timing. Revenue is for the full-year ended 12/31/2019.

U.S. MEDIUM

U.S. Medium, or midsize, customers tend to be less complex than large customers and want a purchasing experience that gives them peace of mind that their immediate business problems will be solved. Grainger sees significant opportunity for growth with midsize customers. The company developed new price, coverage and service offerings to more effectively compete for midsize customers who are not part of a negotiated contract. The U.S. Medium market is estimated at $56 billion of which Grainger has roughly 3 percent share.

U.S. MEDIUM

Daily sales growth on $1.1 billion of revenue

2018 2019

5%

9%

5%

6%

20%

18%

5%

16%

15%

14%

Q1

Q2

Q3

Q4*

FY

Total U.S. MRO Market 2019

2-2.5%

~1%

~0%

(1)-0%

0.5-1%

*Q4'18 sales are normalized for a negative 1 ppt. impact from Christmas/New Year's timing. Revenue is for the full-year ended 12/31/2019.

In 2019, Grainger shifted its focus to driving 300 -400 basis points of outgrowth versus market by focusing on activities within its three strategic pillars: building advantaged MRO solutions, delivering unparalleled customer service and offering differentiated sales and services.

W.W. GRAINGER, INC. AND SUBSIDIARIES 7

U.S. Business - Advantaged MRO Solutions

Advantaged MRO Solutions

Providing advantaged MRO solutions means getting customers exactly what they need to solve a problem quickly. Grainger is continuously improving its ability to effectively and efficiently solve customers' problems by strengthening its supplier relationships, curating its customer and product information, increasing the effectiveness of its marketing efforts and building upon its digital capabilities.

Merchandising and Supplier Management

Grainger's scale, knowledge of the marketplace and breadth of customers helps the company cultivate strong partnerships with suppliers. Productive supplier relationships allow Grainger to better describe the products it sells and build a more relevant assortment, so customers can be confident they have the right solution for their needs.

In 2019, the company reviewed $1.2 billion of its product assortment revenue, resulting in an incremental increase to revenue and a better experience for customers, and it expects to complete another $1.6 billion in 2020. Over the next few years, Grainger expects to add to its assortment in a selective manner based on current and future customer needs.

Marketing

Grainger's marketing efforts are central to acquiring new customers and growing with existing customers by helping them better understand the products, services and solutions Grainger offers. By leveraging analytics-focused evaluations around investments in search and display, radio, catalog and direct marketing, Grainger expects to reach and engage more customers through incremental marketing investments and more effective marketing outreach. In 2019, Grainger's marketing efforts generated solid incremental revenue with its refined and improved approach, which Grainger plans to continue in 2020.

Digital Capabilities

As the world becomes more connected geographically and technologically, customers want highly tailored solutions with real-time access to information and fast delivery of products, and they want to be able to execute their business activities in the most efficient way possible, which often means online. In 2019, 64 percent of Grainger's revenue came from online channels, making it the 11th largest e-retailer in North America, according to Internet Retailer.1Through Grainger.com, eProcurement connections, KeepStock solutions and mobile applications, the company continues to develop online capabilities that promote a personalized, relevant and effortless experience for each customer.

U.S. Business - Unparalleled Customer Service

Grainger's industry-leading Product Research and Order to Cash capabilities provide an exceptional end-to-end experience for customers of all sizes. Over the past two years, we've substantially improved systems, processes and controls to provide a flawless fulfillment experience from order placement to delivery and through invoicing and payment receipt.

Grainger offers both Digital (Grainger.com, EDI/ePRO, KeepStock) and Person to Person (phone, e-mail at store) product research, order origination and post-order support services, which gives customers the ability to order in a way that best meets their preferences and to receive personalized support for any post-order needs.

In addition to Grainger's industry-leading online capabilities, Grainger offers 24x7 access to highly trained customer service representatives who are available to assist customers with product selection and order placement and to technical specialists who are able to assist customers with both product selection and post-purchase technical needs. Grainger has made significant investments in internal order management and customer communication capabilities that ensure customers continue to receive consistent and transparent service.

Grainger has invested heavily in its distribution center network to ensure optimum inventory levels and to provide fast, complete delivery on most orders. We've increased automation and standardization in

response to the need for on-demand delivery of products, information and services. This capability, in combination with our strong store footprint, gives Grainger the market- leading ability to deliver quickly to customers in their time of need.

In 2020, Grainger will open a new distribution center in Louisville, Ky. to enhance its already robust and evolving distribution center network. The 1.5-million-square-foot facility will provide significant service benefits, including:

  • The ability to stock more than 800,000 products in the network
  • The ability to deliver critical orders bynext-day air to most customers in the U.S. with late-order cutoff times
  • Will-callservice
  • Export capability to support customers around the world

In addition, Grainger's simple, customer-focused invoicing and return policies offer hassle-free ways to pay for goods and return products as customers need.

1Internet Retailerranking is based on 2019 revenue.

W.W. GRAINGER, INC. AND SUBSIDIARIES 8

U.S. Business - Differentiated Sales and Services

Grainger's competitive advantage with complex customers depends upon its ability to build deep customer relationships that deliver value. Grainger helps both large and midsize customers solve problems every day through its inside and outside sales force, inventory management solutions, technical support and services and ability to connect Grainger.com directly to customers' procurement systems. Customers rely on Grainger to help them improve productivity, drive compliance, reduce complexity and save money.

Building Relationships

SALES FORCE

Customers appreciate Grainger's sellers' ability to understand their biggest challenges and

help them solve problems.

OUTSIDE SALES FORCE

  • > 2,700 professionals
  • Focus on large customers with more complex purchasing requirements
  • Understandcustomer-specific segments and geographies
  • Formin-person relationships

INSIDE SALES FORCE

  • > 400 professionals
  • Focus on making more frequent contact with a larger number of medium customers at lower cost per contact
  • Form relationships over the phone

KEEPSTOCK

Grainger's inventory management solution, KeepStock, helps customers reduce their MRO spend by analyzing consumption data, automating the procurement process and ensuring a customer's required materials are on hand.

  • KeepStock inventory management solutions include onsite branches,vendor-managed inventory (VMI), customer-managed inventory (CMI), secure vending, managed MRO and consignment
  • Sales through KeepStock were ~10 percent of U.S. segment revenue in 2019

TECHNICAL SOLUTIONS AND SUPPORT

Customers rely on Grainger's specialized technical resources to answer questions, provide expertise and help them find solutions.

  • Trained and certifiedfield-based specialists provide expertise and solutions in safety, energy management and metalworking
  • Trained network of internal specialists help customers across the entire product portfolio
  • Customer surveys highlight that businesses place significant value on the technical expertise they receive from Grainger
  • Avalue-documentation tool helps quantify the value provided to customers through activities such as inventory management, energy management and safety solutions

EDI/ePRO

Customers with sophisticated purchasing platforms use eProcurement to communicate directly with Grainger.com.

  • The direct connection provides a simple and efficient ordering experience for customers
  • Sales through eProcurement were ~19 percent of U.S. revenue in 2019

W.W. GRAINGER, INC. AND SUBSIDIARIES 9

Canada - High-Touch Solutions Model

Grainger recently completed a two-year reset of the company's Canadian business model. This transformation delivered foundational improvements to the Canadian customer experience and enabled Grainger's operations in Canada to take better advantage of the size and scale of the company's U.S. business.

With this transformation now complete, the Canadian business began operating as Grainger Canada in March 2020.

Backed by strong customer service, Grainger Canada plans to focus on delivering profitable growth in 2020 and beyond.

Grainger Canada had revenue of $529 million (USD) in 2019.

Mexico - High-Touch Solutions Model

Grainger's Mexico business consists of a network of 19 branches, two distribution centers and nearly 900 team members.

After five years of double-digit growth, Grainger Mexico grew in the mid-single digits in 2019. The company used a period of economic slowing to reset its go-to-market strategy, significantly reducing cost and developing a new model for calling on large and midsize customers.

Grainger Mexico currently holds approximately 1 percent share in an $11 billion (USD) MRO Mexican market, which translates into an opportunity for share growth with local customers and U.S. accounts that have locations across North America.

International - High-Touch Solutions Model

Grainger's high-touch solutions operations outside of North America include Cromwell in the U.K. and Fabory in the Netherlands. Revenue for Grainger's international businesses totaled $815 million (USD) in 2019.

W.W. GRAINGER, INC. AND SUBSIDIARIES 10

Endless Assortment Model

Grainger's endless assortment model makes business supply purchasing easy through a streamlined and transparent online relationship that provides access to everything a customer needs. The primary businesses in the endless assortment portfolio include MonotaRO in Japan and Zoro in the U.S.

In 2019, endless assortment model revenue grew revenue by 19 percent, driven by strong performance at both MonotaRO in Japan and Zoro in the U.S.

Operating earnings for the endless assortment businesses declined in

2019 due to growth investments at Zoro. The investments supported adding approximately 1.5 million products to the Zoro assortment, implementing a new analytics platform to increase repeat purchases and launching a new Zoro brand campaign to increase brand awareness.

Over the next 3-5 years, Zoro plans to continue executing on its growth initiatives, which include:

  • Accelerating the positioning of Zoro as an endless assortment business focused on smaller businesses and individual buyers who want a simple transaction.
  • Aggressively expanding Zoro's assortment beyond the $136 billion industrial MRO market, with a goal to offer approximately 10 million products.

Leveraging third parties to help Zoro fulfill an endless assortment model- meaning it will slowly become less reliant on Grainger as its sole fulfillment path.

  • Investing in systems and people, so Zoro can develop better marketing and customer segmentation tools to support it in acquiring small businesses more effectively.

$640 million

2019 REVENUE

$1.2 billion

14%

REVENUE GROWTH

22%

VERSUS 2018

~3.5

PRODUCT OFFERING

~20

million

million

SKUS

(available)

(available)

The endless assortment model differs from the high-touch solutions model in several ways. These differences allow businesses like Zoro U.S. to reach different customers than Grainger.

  • The endless assortment businesses have extraordinarily broad SKU counts that often reach beyond MRO.
  • They have very limited or no onsite services or salespeople, preferring instead to steer everything to online channels.
  • They provide aconsumer-like, simple and easy transactional experience that stands apart from other MRO websites that serve larger customers with more complex needs.
  • They price to be competitive in the online market, withlittle-to-modest premiums.
  • They are engineered to maximize customer acquisition.

W.W. GRAINGER, INC. AND SUBSIDIARIES 11

Creating Shareholder Value

The market in 2019 was certainly challenging, with market growth declining as the year progressed. Nevertheless, the Grainger team delivered solid results for the year. Even in a slowing market, Grainger's emphasis centered on driving top-line growth while improving efficiencies in its cost structure. In 2019, the company drove 2 percent sales growth and expanded operating margins by 10 basis points over the prior year, driven by SG&A leverage and effective cost management.

The company's cash flow for 2019 continued to be strong with over a billion dollars in cash generation, a majority of which was returned to shareholders in the form of dividends and share repurchases. The U.S. segment outgrew the MRO market by 150 to 200 basis points in 2019, and that outperformance to the market gained momentum throughout the year. The segment exited the fourth quarter growing about 300 basis points faster than the market.

Lastly, the endless assortment businesses grew revenue 19 percent in 2019, driven by strong growth at both MonotaRO and Zoro. Overall, 2019 was a strong year for execution of strategic initiatives and sets the company up for significant success going forward.

SALES

OPERATING MARGIN1

CASH FLOW FROM OPERATIONS

Dollars in billions

Percent

Dollars in billions

$10.0

$10.1

$10.4

$11.2

$11.5

13.0%

11.0%

10.1%

12.0%*

12.1%*

$1.0

$1.0

$1.1

$1.1

$1.0

10.3%

11.0%

2015

2016

2017

2018

2019

2015

2016

2017

2018

2019

2015

2016

2017

2018

2019

EARNINGS PER SHARE - DILUTED1

ROIC1

SHARES OUTSTANDING (atyear-end)

Dollars

Percent

Millions of shares

$11.58

$9.87

$10.02

$16.70*

$17.29*

28.5%

22.8%

22.2%

28.5%*

29.3%*

62.0

58.8

56.3

55.9

53.7

$13.73

$15.32

24.6%

26.6%

2015

2016

2017

2018

2019

2015

2016

2017

2018

2019

2015

2016

2017

2018

2019

DIVIDENDS PAID

Dollars per share

$4.59

$4.83

$5.06

$5.36

$5.68

2015

2016

2017

2018

2019

  • Lower number represents reportedgure; upper number represents adjusted gure. Reconciliations of the adjusted measures reected on this page to the most directly comparable GAAP measures are provided on page 14 of this Fact Book.

1For a reconciliation of non-GAAP measures reected on this page and ROIC denition see "Financial Denitions and Non-GAAP Reconciliation" on page 14.

W.W. GRAINGER, INC. AND SUBSIDIARIES 12

Historical Financial Summary (As reported)

2019

2018

2017

2016

2015

Financial Summary ($M)

Net sales

$11,486

$11,221

$10,425

$10,137

$9,973

Earnings before income taxes

1,209

1,081

936

1,019

1,251

Income taxes

314

258

313

386

466

Net earnings attributable to W.W. Grainger, Inc.

849

782

586

606

769

Working capital

2,092

1,898

1,669

1,722

1,794

Additions to property, buildings and equipment

221

239

237

284

374

and capitalized software

Depreciation and amortization

210

234

241

223

207

Current assets

3,555

3,557

3,206

3,020

3,049

Total assets

6,005

5,873

5,804

5,694

5,858

Shareholders' equity

2,060

2,093

1,828

1,906

2,353

Cash dividends paid

328

316

304

303

306

Long-term debt (less current maturities)

1,914

2,090

2,248

1,841

1,388

Per Share ($)

Earnings - basic

15.39

13.82

10.07

9.94

11.69

Earnings - diluted

15.32

13.73

10.02

9.87

11.58

Cash dividends paid

5.68

5.36

5.06

4.83

4.59

Book value

38.37

37.47

32.45

32.41

43.50

Year-end stock price

338.52

282.36

236.25

232.25

202.59

Ratios

Percent of return on average shareholders' equity

40.9

39.9

31.4

28.5

27.3

Percent of return on average total capitalization

18.8

18.1

14.0

14.6

19.0

Earnings before income taxes as a percent of

10.5

9.6

9.0

10.1

12.5

net sales

Earnings as a percent of net sales

7.4

7.0

5.6

6.0

7.7

Cash dividends paid as a percent of net earnings

38.6

40.4

52.0

50.0

39.9

Total debt as a percent of total capitalization

54.3

51.5

56.2

54.1

45.8

Current assets as a percent of total assets

59.2

60.6

55.2

53.0

52.0

Current assets to current liabilities

2.1

2.4

2.1

1.9

1.7

Average inventory turnover - FIFO

3.3

3.3

3.3

3.1

3.1

Average inventory turnover - LIFO

4.4

4.6

4.5

4.3

4.1

Other Data

Average number of shares outstanding - basic

54,666,045

56,142,604

57,674,977

60,430,892

65,156,864

Average number of shares outstanding - diluted

54,934,069

56,534,185

57,983,167

60,839,930

65,765,121

Number of employees

25,300

24,600

24,700

25,600

25,800

Number of outside sales representatives

4,549

4,620

4,452

4,785

4,778

Number of branches

438

457

500

598

668

Number of products in the Grainger®catalog

356,625

367,000

365,000

383,000

452,000

issued February 1

Note: See the company's current and prior years' Annual Report on Form 10-K for changes in accounting and other adjustments.

W.W. GRAINGER, INC. AND SUBSIDIARIES 13

Financial Definitions and

Non-GAAP

Reconciliation

The company supplements GAAP financial information

with certain non-GAAP

measures, including adjusted operating earnings, adjusted

operating margin, adjusted net earnings, adjusted diluted earnings per share and adjusted ROIC. Adjusted measures exclude items noted below that may not be indicative of core operating results and provide a better baseline for analyzing trends in the underlying business.

Twelve Months Ended

December 31,

2019

2018

Diluted earnings per share reported

$15.32

$13.73

Restructuring, net of branch gains

0.08

0.15

(United States)

Restructuring (Canada)

-

0.6

Restructuring (Other businesses)

0.04

0.11

Impairment charges (Other businesses)

2.15

2.43

Restructuring (Unallocated expense)

(0.01)

(0.03)

Total pretax adjustments

2.26

3.26

Tax effect1

(0.29)

(0.29)

Total, net of tax

1.97

2.97

Diluted earnings per share adjusted

$17.29

$16.70

Note on ROIC

Adjusted ROIC means the Company's return on invested capital calculated using operating earnings, adjusted (as reconciled to its most directly comparable GAAP measure in Part I I, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019). The GAAP financial statements are the source for all amounts used in the ROIC calculation. ROIC is calculated using operating earnings divided by net working assets (a five-point average for the year-to-date). Net working assets are working assets minus working liabilities defined as follows: working assets equal total assets less cash equivalents (five-point average of $150.2 million and $173.6 million), deferred taxes, and investments in unconsolidated entities (part of Other Assets), plus the LIFO reserve (part of Inventories - net; five-point average of $414.1 million and $386.7 million). Working liabilities are the sum of trade payables, accrued compensation and benefits, accrued contributions to employees' profit-sharing plans, and accrued expenses.

Twelve Months Ended

December 31,

2019

2018

Operating earnings reported

$1,262

$1,158

Restructuring, net branch gains

4

8

(United States)

Restructuring (Canada)

-

35

Restructuring (Other businesses)

2

6

Impairment charges (Other businesses)

120

139

Restructuring (Unallocated expense)

-

(2)

Subtotal

126

186

Operating earnings adjusted

$1,388

$1,344

2019

2018

Net earnings reported

$849

$782

Restructuring, net of branch gains

3

6

(United States)

Restructuring (Canada)

-

26

Restructuring (Other Businesses)

2

6

Impairment charges (Other businesses)

104

133

Restructuring (Unallocated expense)

-

(1)

Subtotal

109

170

Net earnings adjusted

$958

$952

1The tax impact of adjustments and impairments are calculated based on the income tax rate in each applicable jurisdiction, subject to deductibility limitations and the company's ability to realize the associated tax benefits.

Note: The reconciliations above provide the information necessary to reconcile reported SG&A to adjusted SG&A, therefore no separate reconciliation is provided.

Company Headquarters

Investor Relations Contact

Trademarks

W.W. Grainger, Inc.

Irene M. Holman

The trademarks contained in this

100 Grainger Parkway

Vice President, Investor Relations

document are the property of their

Lake Forest, IL 60045-5201

847.535.0809

respective owners and the use of

847.535.1000

Media Relations Contact

such trademarks shall inure to the

www.grainger.com

benefit of the trademark owner.

Joseph Micucci

Corporate Social Responsibility

Senior Director, External Affairs

www.graingercsr.com

847.535.0879

W.W. GRAINGER, INC. AND SUBSIDIARIES 14

Disclaimer

W.W. Grainger Inc. published this content on 06 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 May 2020 13:03:06 UTC


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Financials (USD)
Sales 2021 12 353 M - -
Net income 2021 982 M - -
Net Debt 2021 1 762 M - -
P/E ratio 2021 22,3x
Yield 2021 1,55%
Capitalization 21 653 M 21 653 M -
EV / Sales 2021 1,90x
EV / Sales 2022 1,78x
Nbr of Employees 22 450
Free-Float 42,4%
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Mean consensus HOLD
Number of Analysts 22
Average target price 403,76 $
Last Close Price 413,70 $
Spread / Highest target 11,2%
Spread / Average Target -2,40%
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NameTitle
Donald G. Macpherson Chairman & Chief Executive Officer
Deidra Cheeks Merriwether Chief Financial Officer & Senior Vice President
Jonny LeRoy Chief Technology Officer
Brian P. Anderson Lead Independent Director
Neil S. Novich Independent Director
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