GWW - Earnings call 3 2023 | W.W. Grainger, Inc.

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Operator

Greetings, and welcome to the W.W. Grainger Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Kyle Bland, Vice President of Investor Relations. Thank you.

begin. may You

Kyle Bland

to me Welcome Dee Quarter Earnings XXXX Vice Good D.G. Grainger's Macpherson, With are and and Chairman Call. President morning. CFO. Third and Merriwether, CEO;

our some materially as of result include reminder, As those today uncertainties, risks in any a measures our SEC detailed this results the differ corresponding our Actual are earnings in in tables presentation of the their GAAP on may non-GAAP our a with may forward-looking of found financial of both of and at end and statements. including available which QX release, measures various comments are website. IR Reconciliations filings.

This which all basis morning's quarter for third on focus presented. and XXXX our adjusted are periods call results, both will on consistent a reported

MonotaRO. reported results differs X also our that follows Please We company was is a which month Japanese arrears. GAAP, to and will in remember GAAP share related and public in results from U.S. MonotaRO

disclosed from As the differ MonotaRO's a numbers public statements. result, will somewhat

I'll it Now to over D.G. turn

Donald Macpherson

in Good thank Dee an performance you provide us. I'll third Today, our our of overview then and Kyle. through results walk pass it and morning, to for to joining Thanks, detail. quarter

today's typically benefited from how outsized with share do, network as This customer of remainder I to our in have value not to Unlike profitable year means supply bring the results XXXX the don't MRO emphasize slightly and start volume I'd must we for change Grainger experience last like macro drive the gain. reflections to this success. chain we growth market As expect remained and on Edge our negative. to some call our drive continues framework year, we our tailwinds through

and spend time the had government opportunity manufacturing recently I've California. in customers several with to

that supply problems solve While these advantaged the strong it value and capabilities to adding their our chain, complex digital ability was clear for on operations, first customers.

gain this to continue helping us All to is share. of

few month, operate. ] ensure results, our buckets examples buckets U.S. share the assembled improve we respond a members than [ members prepared to I of how in team were want and into team a Last hurricanes flooding continually deliver our residents disaster across to our where principles crisis get the we more Before communities X,XXX hits. victims quickly regions are help vulnerable strategically and when to These to to placed natural the

is know for the one based recognized when heard on has trust, team responses potential of respect, questions Grainger Work in We Best team key member that our of unlock [indiscernible]. to till and year team row, recognized, full Places members recognition the a as And credibility, full and based we fairness, business. and second to pride Fortune's for Women. our the been on This potential of

Now the quarter. let's dive into

stayed to continue On continue quarter basis. customers. within finished we in of X.X% demand Slide see profitable strong driven Touch constant most X.X% reasonably notably can to as tangible another the daily performance had gain. were service steady sales on strong you positive with as we by to share High and our We segment, drive growth quarter Solutions currency deliver provide we Results both the X, or again a segments, where value

over mix, efficiencies, gross XX was freight margin margin over of top prior another and operating company increase operating strong has delivered cash the with our strong with we quarter to year, growth, performance, driven of Combine along line. XX%. basis line favorable of ROIC chain supply points flow record robust an EPS and the Total fell largely and XX.X%, bottom this continued improved by performance product

share quarter repurchases. dividends to shareholders and Grainger a through the also total returned million We of $XXX in

customers. Portland We assets Pacific outside distribution on we we as continue data the to advantage performance of our we value Northwest. our on engines focused announced ground our technology in In growth to key are leverage center remain the service for our previously extending which broke and our High-Touch segment, will advancing and enhance expect Solutions unlock service X officially further help

endless to customers demand growth. softer continue rates see assortment a driving on acquiring long-term the repeat remain we focused for shaping improving track business, Edge, value while drive remain and shareholders. the as is on to Within we segment across earnings we new XXXX Overall, be purchase up Grainger We profitable deliver to strategy progress another over the great on customers. and follow year for make XX% our growth environment,

I'll And that, to the it pass to Dee details. with go through

Deidra Merriwether

for total prior relatively you stable see currency year growth as contribution growth high-level we in sales can to driven This growth of strong period. second including basis inflation a Thanks, pass the X.X% segments. a on constant compared by even rate the price quarter, the across D.G. X, the company, is as wrap declined Slide both results On daily

and which which margin operating diluted gross XXXX. company SG&A offset the due margin of more quarter over up In we XX High-Touch, total, Total was across margin EA points, was gross versus delivered lower up the quarter for $X.XX, business. of third in basis XX% to deleverage slight than EPS expanded primarily the

for by Moving The up Volume accelerated High-Touch first in contributed with and growth X across of growth, level segment well, Solutions results. points X segment continues sales contribution perform price X.X% time in to constant the currency quarters. sequentially all excluding daily on to percentage underpinned geographies.

the In U.S.

customer Canadian We local in in segments continue strong, growth with X.X% days and were drive to up year-over-year daily transportation sales currency. local faster. government growing in in all

gross the quarter segment, prior margin finished this profit up points basis XX.X%, at XXX year. the For versus

supply which drove improved from benefit in chain efficiencies to quarter. the continue availability, and freight We product

project-related a services repeat remained year to don't number a value-added by the an current forward. period, expect of driven which level outsized we partially tailwind, in going also mix Product

unwind. and and in favorability finishing XXXX in expected, price/cost quarter, a as for spread fourth As trend stack will the full XXXX year neutral to on anticipate negative was continue This combined. price/cost the timing XXXX the we continues nearly captured X-year

in was continued another marketing line, the by XX current improvement American operating selling Solutions the and year-over-year segment. GP of favorability to year investments High-Touch for offset North leverage period. was the headcount SG&A by X as long-term it growth. strong Overall, was day we At saw quarter drive partially impacted less points further basis

Looking indicating grew engines. for market to X.X% Slide on execution estimate target we XXX High-Touch by the Solutions by to achieved roughly market business XXX the growth that X the outgrowth across the X.X%, X, our driven and we basis between of above points, MRO that our market outgrowth basis consistent in remains U.S. at outgrow XXX annual U.S. quarter. Performance points

any in achieve cycle. to remain confident ability target our continue to We our through annual outlook economic

enterprise increased MonotaRO currency basis, on a X.X% segment. the the days, depreciated growth constant XX.X% At still level, and with business new BXB adjust in we're focused drove repeat local impact the was for and currency. Zoro local assortment core the daily on seeing endless while some our customer. yen. business X.X% up MonotaRO, to its Sales growing growth while achieved Japanese business strong or of remain X.X%, U.S. at which signs softness customers Moving of macro-related with

At a growth. year nearly BXC remains our and for down contributing top was decline headwinds a more for Zoro all customer comp more continuation macro Noncore continues in last the and the slowing year-over-year XX% line prior with quarter tough in continue where to discussed markets macro muted skewed. to results single Zoro stickier is environment BXB volume small slower quarter as focus was we customer and noncore of high BXC on customers. reflect to efforts growth digits reflect Core end growth businesses performance a BXB

pressures these persist expect least balance to We year. of the for the at

freight headwinds price for driven by timing top gross XX points Zoro mix was and margins the the price a From margin realization XX operating investments continued versus product continued decline year-over-year while offset coupled the basis basis from Zoro. drove These was MonotaRO profitability results generation Zoro declined year strong demand segment. in year prior of in impact MonotaRO quarter perspective, gross with point softer and as declines reflect the prior unfavorable line a the in segment increases. for at the negative margin decline by efficiencies favorability the

propel and XX.X SKUs we to total the we having to products million Zoro added new registered at segment, the assortment continue our Total grow continue On portfolio flywheel quarter, pushing we over and endless Slide and in users the SKU in XXX,XXX roughly XX, count. assortment users across to offered. XX% up total grow our add as were the

daily comparison roughly is our looking $XX given growth in year. and in between X.X% of and $XX.XX XXXX. sales our X.X%, and expectations points This Now full company XXX rest narrowed between growth daily reflects the outlook includes sales range ]. a an that higher [ to forward and growth the year, These [indiscernible] can QX EPS October, we've updated figures is growth X.X% the the and a you in in between X.X% X% guidance total The basis with month-to-date includes line new for which prior see imply sales hurricane-related year month-to-date constant currency. which ranges

to as the delivering year expect we're includes be also record cash been From record our anticipate flow mix of total [indiscernible] Supplemental of flow to shareholders. and SG&A profitability the and a full the further for lower for seasonality normalize can product XX.X%, strong increased lower quarter be in the margin typical our and with value-added told, of results sales, achieve are found year fourth in have now implies XX.X% share guidance All to for repurchase returns perspective, margin operating will between sequentially the fewer margin and company. The appendix to we line Grainger strengthening end engagement we with ranges delever for the quarter. raising placed which service cash operating that new full the track margin presentation. and year of in be expectations, a covering fourth range

to I'll remarks. D.G. closing turn that, it With back for

Donald Macpherson

Thanks, Dee.

tremendous Before wanted since Investor made the the we've close Day fall. progress last years reflect on our we that to I out, over quickly

to recall, operating to growth and may attractive us EPS some earnings an delivering us ramping targets we growth, line got framework producing top included X-year that you XXXX. outlined double-digit record strong margins through As that

to if just onetime were With the of elevating trending we benefits outlined, XXXX towards you favorably XXXX are margins you some our guidance the year, for targets. normalize this the even

this As core the remain of intact. framework [indiscernible] look we earnings XXXX, beyond

and are going on expense to healthy this focus XXXX Executing generation attractive EPS earnings which deliver strong to by growth in well slower adjusting than leverage consistently double-digit onetime produce stabilize us we for and margins, continue framework maximizing to expect returns dollars growth, we top benefits shareholders. gaining line after positions maintaining delivering SG&A by the gross sales. against our will growing realized We for

we for the open With line that, questions. will up

Operator

William question from our first [Operator Instructions] And comes Blair. Merkel Ryan with

Ryan Merkel

with to could. on margin, high-level a I start wanted question gross I quarter. Nice if

bit above Can good Investor for here, I a you higher guidance why margins us so gross laid gross XX% out tell think and your your plus. at that are expectation -- is XX% XX% the the margin, you're much Day? than you

Deidra Merriwether

wanted Dee. for go of kind exactly we coming were is of of this it if improve in even us where about back get our in product QX, performance you kind piece. though we was not midst good. That's were later in time significantly your about question. we Like, Product was the where Ryan, much relative to pandemic. And helped and of our Thanks year one ago, in availability out pretty the this it think a we [indiscernible] back really availability to line year. be, quickly That with in margins. expecting and were

anticipation price expected. point you cost. passed price that than cost as Costs year a year. We will had to expected is flowing come this now I did piece neutrality earlier through cost in target to over of we last last around what time. we sooner lot they other time, that we in And are really year The GP

another time, So related. that relates are supply -- anticipated it freight continue availability, focus as also what price/cost to timing a really continued well do and better to lot was on product do are had it's We efficiencies. performing very but element. to we've we due we than timing chain of neutrality. That And as things to timing we at then

Ryan Merkel

Got it.

just very growth, transport, X%? thing, Just September fine think well, that's a are drivers like trends. going there? on then October, just month-to-date put performing the then from maybe a down And looks the on And mentioned it's to point helpful. X% I what's question can That's you and that's there? closer Okay. Government on unpack same you what

Donald Macpherson

Yes.

strong very So that. government, of across a been think I board. has lot Government the

won come contracts have board some on We helped that have new this that us have year.

been certainly Aerospace that has we so tailwind. say very, And we aerospace there. think, mean been has transportation, a When strong. very I arguably,

airplanes enough build aerospace companies the think I now. can't

we're but remains certainly puts us. for two general have benefiting say side the on the that. So from And those I takes, There's plus been market would in and stable.

the our far, things a think, last of that we us. gain, In going did there. of seen we've on market other a [indiscernible] Hurricane but for terms growth so have generated going strong X% we share pretty to couple be through October year there's of in is and lot in One is sales Ian basically October,

compare makes little worse are The than that look it it actually volumes so And a quite the underlying actually month still good. is.

Deidra Merriwether

sale-through one to as of relates October our related time the QX related This Hurricane second X.X%. to X% to to thing. year, at and last Ian. range And month-to-date products question, of the growth versus X.X% it implied we the top recovery the of I'll your the line being part support you for for to point did in

a are where comps easier. we're we period get the cycling cap quarter a on, tougher so in moves as will And but

feel out we that range we've the about quarter. good for So the pretty laid

Operator

Our Tommy with next Stephens. question comes Moll from

Thomas Moll

the D.G., demand used reasonably steady you to phrase characterize environment. the

or out? So range question behind bit want I else? little moves mountain was Or offer to anything rather unpack -- a calling you revenue anecdotes, it a something of slightly guidance is FX is the worth noise is ], [ don't my make if molehill any lower. but or or out that that a helpful there the midpoint could

Donald Macpherson

all volume reality the market been Well, the I near pretty think X, the this much volume has year, is in the year.

have gain been all gain, that of pluses -- volume share volume so continue. our will share all And

I think lapped going fourth been the we happened increase into is price last but the year quarter. quarter. had fourth that that for the revenue our an moving biggest the X through We quarters, that has difference in line first

So exactly out we but to There's changes. playing how we pretty play don't we this is much out up, it's be exactly the really made expected. year to see nothing and as predicted any

about we So we line. revenue are not what the It's exactly concerned at all expected.

Thomas Moll

how to Great. margins to anchor to High-Touch and shifting is XX.X% long-term could there, it know back And still I maybe from XQ -- then XX% the you official qualitatively into us walk even early to that around reported wait you next in prudent be specifically XQ and progress gross But just that and the that. year? even revise may the segment. for may

Deidra Merriwether

Sure.

of this last sequentially resetting and what little us the But which like early that couple in that to to QX, That think to or service-related mix. say point, to of QX product you're QX. expect we're go where my benefit it as remarks into We right, a both So feels out, QX going I a I QX. will prepared for would quarters. start if don't really our things. related in happened and we in mentioned to At kind I've reiterated High-Touch you compare continue call we've

years in still volume then we're volume as last some some rebates. are your Both year. really noted, to to again, very related last other price very was that, reset pieces doing but strong there and fall D.G. addition that year, of cost strong, In into rebates the that like good

bit And unwind, a fall so that of will off continue and then QX to to will kind QX. price/cost little

Operator

question comes Levinson from Melius next with Our Research. Jacob

Jacob Levinson

laid maybe bit out, touching that or those certainly I least worse. contracting or favorable but bit see Just you operating worse items this would that you just above business a that growth year, sense XXXX how know you thinking going well Dee, the you give you're some forward if us on a meaningfully, is about mix you're for there trending is not margins. leverage and in targets I was probably have D.G. of a manner, talked at it going little that price/cost -- little the even margins about to because you're the think can

Donald Macpherson

model slower in what we so to able forward. do that gross the Yes. sales, about. to out adjustments -- believe is talked you -- I grow stable we The be stable you we to talked expect share mean the say to that once than SG&A And that take not are adjustments margins favorable about, model formula High-Touch the would is and and moving relatively moving [indiscernible] continue we is trending to change, earnings the forward. as gain I be that will and that going that

Jacob Levinson

just is And more for think there conservatism gears, special buybacks cash shareholders? levered helpful. sheet or to took your that I the over That's returning switching share probably aggressive balance more Okay. least D.G., the Or since is you macro? some on or otherwise is dividend appetite maybe reflecting

Deidra Merriwether

are You correct.

cash see the have based lever the fortunate very strong further our word flow need the at balance time, sheet. don't to significant are use generation, to We upon a we business, a And conservatism.

don't that a But word. big for use can You need now that. see we right

generation, feel based becomes well to upon anything. operating to leverage. into positioned flow if there our place good we help like now, access cash conversion, the feel a for our are right But need based a in flow our Now ever like us with markets capital, we we're capital cash that, upon with to go and we

Operator

Your next Christopher with from comes question Oppenheimer. Glynn

Christopher Glynn

algorithm? was competitive is expect in was pricing quarter? I fine market a price/cost What holding on of 'XX price curious to margin the neutral impact HTS the components. on baseline? And couple in well price/cost then Looking it dynamics, like in the

Deidra Merriwether

that say would position. ahead, stack, you business, would if that a competitive. I just of components first at And that quarter. and accrue a X.X% take answer all And competitiveness, change we to for the of neutral to look impact lumpiness be expect due close to price we So be not view you of price/cost price to longer-term your would High-Touch again, the if price question, the was in we remaining of X-year and costs 'XX. the 'XX looking

we year over When cost time. are the detail more guide, XXXX XXXX. targeting to price early We and get neutrality about talk set we'll next in

Donald Macpherson

only are product a that we've years. seen lot cost of thing to The seeing pressure not is in I'd that add to the last what we relative few

expect, and of a lot lot True. into generally, takes, product year. As new been expecting puts you of might inflation but a not we're there's heading cost the

Christopher Glynn

the then Zoro XX% back path And thinking to and line how about MonotaRO, top XX% curious of targets? to you're just Okay. long-term on kind

Donald Macpherson

Yes.

is been is say I strong. confidence grew Japanese the there. about memory anybody's right with lot the performance dealing I'd be team growth, the to the strong sorry, been something time the whether going MonotaRO years grew they've on to that's has concerns what -- less business. approaching last absolutely XX first deliver probably have debatable. that So The over done XX I'm a to We've in in than really, that is track XX% quarter. inflation to no some not there's about or for Zoro But the that continue like market of of

competitors to terms some In in Zoro Zoro, actually the negative of revenue. go last we've seen couple quarters of in

And an certainly so has had Zoro. that market an had impact has impact. on The

you were be, be there's business consumer and falling as and working to to key other sales the working growth better things particularly want is better we this The more not team get that being core we real lot off, to successful do continue get to to fall of the repeat going talked business on, we business us at high out and not that, to term want well. it. on digits that. need will of that's where about that And is customers, up but BXB long to with of lot a single I that and at But we're which point, off. factors There's think horrible. a

Operator

from question David Our Manthey Baird. comes with next

David Manthey

on Zoro. My the along question was lines same

it I the seeing terms what in the said I'll here. right try in trends, like nature. there bit cyclical sounds primarily you it D.G., a you're -- what is So to of refine guess just now

business. You're a we you of also strategic about what to then are are? just outline us, Could those drivers so know for not concerned implementing couple you grow the you there. strategy moves that that the But said

Donald Macpherson

Yes.

acquiring that really is So customers, to but there's acquisition I is a good customers. Zoro. has at good One a to say customer They've been acquiring pieces very growth this always would simplified, what engine. Zoro been one X is

The the those customers, other business choice you become We've with of shop. is place developing to that. had success so some for repeat

customers. have need a We get of that piece. long-term We at to better lot

to And area to So but big testing doing change, make most it's to a will figure focus strategy that business. we're of the that really forward. of what going be talking not things about a alterations, of part bunch how improve of we're out is how the

David Manthey

Got it.

And use you on key Can there. product driver lately Okay. a High-Touch capabilities if been have new tools ] have the update applications? the and added side, any if those of don't information you Salesforce's tools customer then on us? statistics [ the I to really those know outperformance or you've of

Donald Macpherson

to own help website, I were are -- Yes. the really cycle. the long we've system first know, I as particular, and product this of our through customer some -- both with developed and a time Product that merchandising. helped think for information that core with you customer positivity information help on building and marketing start lot let's we software a a our early website, information, mean and the in of growth publishing drive in in time

and more It's supporting us understand refined system also have marketing efforts. where add in adding is information been we seller we that which sellers that. coverage, can customer supporting help The and become

that both of information have it we will a driver of to of and our sales and for been those going So go, be marketing all still particularly to growth think better And big of have in those we customer our ways a to forward. all continue activities, continue but I areas. so team get long to leverage

Operator

Wolfe with Coe Nigel from Research. comes question next Our

Nigel Coe

the follow-on the how and kind quarter. of on at between of all? XX got margins then third thereabouts High-Touch Zoro that well. first out, math And end then out or called I I've points of Dee, think, versus quarter of margin margin, this basis a looking as you correct, And [indiscernible]? So that fourth -- gross does Is sequential shake

Deidra Merriwether

Yes.

change from... about talking you're a sequential So

Nigel Coe

to XQ margin. gross XQ Yes,

Deidra Merriwether

yes. Yes,

think So XX And the I -- that bps. I is total company same. again, the pieces about are know

in favorability related QX that's High-Touch, related And revenue, XX is that XX about company At saw to bps then the business. that's QX which services, as And the accretive so level, other and bps. really price/cost related and piece -- related and some that that another point up to to about headwinds is the some total flows smaller rebates, to High-Touch I on to as round project called a about level out, the total and through basis that's we well. which to company close some XX

Nigel Coe

then about maintain just higher the looking to We're And margin gross no thinking Okay. calibrate you're XX% comments at price/cost plateau longer normalization. that? High-Touch, a you than

Deidra Merriwether

But this point What Earlier that's supplier you we've which gross all benefits margins. We a those had that benefit. XX D.G. that see said year, that of year-over-year stable what that had and is a we things, some we've together, you at rebate be project out feel relatively mix, we won't like services-related benefit reiterate would going not When had the like onetime expect. basis related if this will forward. able we supplier maintain to And then look freight a related benefit. to in supplier pull outside headwind set is year. accrual-related product we services, we

Nigel Coe

BXC Okay. gross as Zoro ] quick one margins would just BXC. margins on BXB, [ [indiscernible] BXB helpful. I you thought That's a have then been higher on because And gross than focus the

gross a mix up. get actually margin therefore, So you

dynamic. wanted that understand So just to

Donald Macpherson

X for cases. discounts In It's and have consumers. But way some and Zoro, business it in works. we basically spot the price differentiated that's pricing not don't

Operator

Steve Our comes with next Volkmann Jefferies. question from

Stephen Volkmann

you I said, wanted D.G. back to to go something

in put but cost sort price said think expect not of that I in how flat are you I'm exactly we you you are thinking sure any didn't pressures that, increases 'XX? and 'XX. cost or

Donald Macpherson

we price We'll commodity and that much last seen about down costs we're year the cost seeing where that are will really are the numbers in But we about of we're years. at cost And the yet. pressure But of talk we've up. X end a next there seeing talked cost as Well, certain pressure. certainly for actual categories [indiscernible] product not know the lot as haven't and year. generally, related that be do not

Stephen Volkmann

leveraging continue about talked Fair but that investments. do there? actually Okay. algo I quarters? Or your some for those the do we quarter. making you long-term enough. SG&A, this on sort how a guess about of we're think And number we of Do in trajectory didn't

Donald Macpherson

going to over we as continue business, we we're will -- mean not this. investing cost any over to consistent but in our leverage improve you will invest us believe position see to SG&A have the but find we do time, we that I to ways it, continue in quarter, have Yes. into to may for

Operator

Our next Chris question Markets. Capital comes from Dankert Loop with

Christopher Dankert

Given about has kind out? of really hate mean, and on SKU more been what up Zoro you I'm on can perhaps what curious, that I keep talked here, to couple a get I to happen to to the up? moving has different a Or But of but acquisition harping is friction pull count doing customer again, of system well, else there initiatives. holistic basis? you a kind system in that need that we

Donald Macpherson

which on reiterate Yes, repeat to trying acquisition done but some in customers actually does customer really And that where the well. done piece, we've quite product help, we to the customers it's think I where that, breadth get would we're to I need we've cases, become after well that them buy, to way and doing. product And that's intimate these get repeat oversimplify to the in, some in use get the improve really you with that not have we're new part become again, customers then to to focused you on customers what to of and model. breadth

Christopher Dankert

some just the that business, seen? cyclicality beyond how Got growth there should greater like this benchmarking, just in we've far thinking it. as we challenges the about And of given as year be and

Donald Macpherson

here like we're to go-forward is Yes. mean going for we fourth we to and communicate said, the I with think to that going growth think growth running company. continue move in going driver We're the the tests to We're you real strong forward. still -- what some more, as I a it's quarter. be we learn we'll

Operator

with Dray RBC Capital And our from comes Markets. Deane next question

Deane Dray

for call on lightening of Question destocking, I'm working sure all on and post-COVID normalization. your up it's that of here some up not issues Certainly Is not impacting remarks. they're it's issue destocking because on just not maybe all coming -- an and at with their customer sort times -- in the products volumes? lead on your the it's you. Any capitals,

Donald Macpherson

in they of really That our just for in not products, comes ever I up have week. is customer need value of frankly, like visits. have much. when our a types never And lot it. out too them of last was overstock say And inventory, customers I don't California No. helping proposition would generally buying our they're Northern

really pride what need sure all keep ourselves making So and that the really to have. running, they business they in customers that's we have

Deane Dray

right. on like then aware hearing I it TV but there more of I'm And certainly Good. All a just and radio now, advertising, bigger is because I'm the on any both hearing brand some push -- that. on -- have maybe your building. That's it building, you how that around other of a helps it but I'm returns It precision do measure you lot brand outgrowth, that? more. And do certainly helps in

Donald Macpherson

gain has share. Yes. part what's Certainly, we've talked us been big about helping it before, a marketing of

is A/B measure In based pull-through understand markets of media in what returns [ and where test we terms we those. actual certain advertising, on the tests generally ] from

so -- possibly area say in we measured imagine. areas our marketing And as well probably you -- could the I would is

that and not, us to helps with what's you precision and tell what's do. of figure can we lot out a So what working

Operator

And Snyder from UBS. Chris question comes from our next

Christopher Snyder

gross it point project-related guess value-added on And first, to sounds are just boost bit nature? a wanted basis just little services. QX? like I time value-added ask then is them the I that high I margin confirm, to about company such in to XX what was guess what you providing? or project-related transitory And just higher makes these services X a that kind talk can of level, in the

Deidra Merriwether

thanks So questions. the for

combination -- So but to them with those to help problems, our a are we services. also market products, and go customers with of solve you know, as solved problems

ongoing service that an have problems. over those stream what XXX We help value-added as we this customers' And solve is classify revenue for us. providers us

in not area us also we the is a QX this what that do then larger quarter services However, of in call projects will have attempted in believe we we repeat. that impacted and to out had it number

of Some safety like lighting that working things that ensure them have et we over are roofing of right state steady help safety for are can they certifications as on projects they investing customers the that that to to those retrofits, ensure as longer time our more are the been pass audits, projects, include capabilities with things us cetera. well period in products

Christopher Snyder

earlier, XX Or in that And point was boost QX margin? High-Touch say then to gross did was right? the you basis it a

Deidra Merriwether

correct. is Yes, that

Christopher Snyder

on value-added going a staying you in remarks, services. of a on by to more those guys price lot maybe outgrow about I services for to view sideways? forward, as drive cost to -- we then those the digits about well, bringing topic D.G., those called talked just as the can you why a table. a do services opening mid-single guess continue way that think environment the your even you we is basis? And the in environment view going out as Or volume you market [indiscernible] that's Grainger do

Donald Macpherson

Yes.

a differently. frame little So bit I'd probably that

make and a we customers are help really we try help their have, pay, manage company. first customer. we X process. then did product simplify We things to, We easy to they almost it the for return them buy, and if inventory. purchasing foremost We every to need receive, So for them products

would services, almost should you And call those not value-added customers in the are of all so things, are I X doing any size, we're just realm what and for described. that actually those of

our are customers them. partnerships service that bunch there related. but business, when want supplier they whole value-added customers of we Then through are a important our our They are to are minority often of provide that a things

to this we wants those safety So And the were quarter value really helping do driven to the is we of make provide happen add business that their they But our model keep them help to and a running, there to we and think important what need our don't not challenges can It's safety they to how if and have really that the projects inventory. by around typically is the I have to audit. thing we in customer call service very was, at that right and to we better do repeat, fundamental customers help particular, generally, that those large them probably so likely are couple will things. get just that's things products different that out. get understand continue partners. they wanted them operations so But sure

Operator

our And next Baumann question comes from JPMorgan. Patrick with

Patrick Baumann

like margin of side. numbers around gross flying the lot on A

an points, annual just gross margin, Dee, to you I of XX that So want basis? on basis mentioned the clarify,

Deidra Merriwether

was I When calling Yes. out...

Patrick Baumann

'XX? it Is

Deidra Merriwether

margins that you normalize the about and thinking go-forward basis are looking to points. XX is basis, if Yes, 'XX on a gross that's are

Patrick Baumann

Right. Right.

comes So so XX points if everything out number -- of basis is all like a else your kind baseline? of 'XX that's equal, else

Deidra Merriwether

Correct.

Patrick Baumann

next for that's year. And

normal product is it based And a is Okay. year is like comments there of your pricing follow-up cost sounds for more the XXXX on maybe a that lot then pressure.

was there I were was bottom with expansion? year inflated think a SG&A guide able think, off your down last inflation the onetime cost, Do the that in that's some year-over-year, gross deliver SG&A see case, but margin slowing the there It I be quarter SG&A results. benefit fourth margin Assuming maybe year like line prior and bit. last to a year coming you onetime to in that looks flat

color could you give that. if curious Just any on

Deidra Merriwether

Yes.

are when timing think I happen. at results you our So quarter-over-quarter, things there that look some

quarter, prior ensure to When invest year in demand long-term outgrowth. of at things had continue number a We can help happened. generation drive to U.S. look you in specifically us that the we market we

by you little XXX U.S. we last QX, the go over year time, ] in recall, a out you framework, XXX But we zooming think had bit, points. market that if will basis we want all I to to our back be benefit in a to [ outgrow the just cycling.

talked -- leverage. of to of bit invest demand-generating a looked we towards really the to And looking SG&A lot doing And investments. the we fact we're D.G. little our are that look targeted you while growth, how into that, if a are are about also high-return we most investments really gain leverage. long-term are in SG&A productivity

really gaining are and that SG&A expenses through We our accomplished continuous in improvement. we noncore

that really with and So customer us us an also help assist efficiently we're improved operating achieving effectively. experience, more but with things targeting

as in to that to to is do as offset [indiscernible] can intent continuous much activities. Our reasonably of demand we can look continue also but improvement -- invest through

at that Day, for look out driving over we Investor it EPS that you talks growth the algorithm about double-digit laid If cycle.

And so we still expect to do that.

Operator

this hand are Macpherson for back further closing I'll no There at the time. to D.G. remarks. floor questions

Donald Macpherson

All of number are us. the We all is that I spending terms of a right. people results, today day releasing you busy with for of and you Thanks, appreciate very recognize everyone. in that time

what pretty Yes, feel I about It's the would out that to has reiterate way year just we out. we played really the expected. similar good played

focus, making gain. continue customers invest but not the business we primary our share only sure that, is successful. team to continue profitable in in to That drive are We to invest that and our and our in

joining hope So appreciate Thank have I a you. you great us. you day.

Operator

All Thank you. today's may This participants concludes disconnect. conference.

W.W. Grainger (GWW) 26 Oct 232023 Q3 Earnings call transcript