The following Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of W.W. Grainger, Inc. (Grainger or Company) as it is viewed by management of the Company. The following discussion should be read in conjunction with the Consolidated Financial Statements and accompanying notes for the year ended December 31, 2025 included in the Company's 2025 Form 10-K and the Condensed Consolidated Financial Statements and accompanying notes included in Part I, Item 1: Financial Statements of this Form 10-Q. Percentage figures included in this section have not been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in the Company's Condensed Consolidated Financial Statements or in the associated text. Overview Grainger is a broad line distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America and Japan. In the fourth quarter of 2025, Grainger exited the U.K. market by completing the sale of the Cromwell business and closing the Zoro U.K. business. Grainger uses a combination of its high-touch solutions and endless assortment businesses to serve its customers worldwide, which rely on Grainger for products and services that enable them to run safe, sustainable and productive operations. Strategic Priorities For a discussion of the Company’s strategic priorities for 2026, see Part I, Item 1: Business and Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2025 Form 10-K. Recent Events Macroeconomic Conditions The global economy continues to experience elevated levels of volatility and uncertainty, including within the commodity, labor, and transportation markets, driven by a combination of geopolitical developments and macroeconomic factors that can influence demand, cost and execution risk. These dynamics, together with recent changes in U.S. and foreign tariff and trade policies, continue to drive intermittent disruptions in global capital markets and supply chains. These developments may impact the Company’s operations, business, financial condition, and results of operations. The Company is actively monitoring economic conditions in the U.S. and key international markets, including the continued uncertainty regarding evolving tariff and trade policies, changes in interest rates, foreign currency exchange rate fluctuations, inflationary pressures, rising fuel and transportation costs, and the risk of a global or regional economic recession. Although the precise timing and magnitude of these factors remains uncertain, the Company believes its strategy is well positioned to navigate a range of outcomes. The Company continues to evaluate the impact of evolving tariff and trade policies, including potential changes in product sourcing strategies, cost management and customer pricing, and has implemented various strategies designed to mitigate certain adverse effects of changing inflationary conditions and challenges in our supply chain, while striving to maintain market competitiveness. Historically, the Company's broad and diverse customer base and the generally nondiscretionary nature of its products have provided a degree of resilience during periods of economic contraction in the industrial MRO market. The full extent and impact of ongoing macroeconomic conditions, including recent, heightened regional military conflict, unprecedented tariff-related developments and shifting government budget policies and priorities at the municipal, state, and national levels, remain uncertain and cannot be predicted at this time, but may affect the Company’s operations, business, financial condition and results of operations. For further discussion of the Company's risks and uncertainties, see Part I, Item 1A: Risk Factors in the Company’s 2025 Form 10-K. 16 W.W. Grainger, Inc. and Subsidiaries MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations –Three Months Ended June 30, 2026 In this section, Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. 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 Condensed Consolidated Statements of Earnings for the three months ended June 30, 2026 and 2025 (in millions of dollars except per share amounts): Three Months Ended June 30, % Change % of Net Sales 2026 2025 2026 2025 Net sales(1) $ 5,021 $ 4,554 10.3 % 100.0 % 100.0 % Cost of goods sold 3,037 2,799 8.5 60.5 61.5 Gross profit 1,984 1,755 13.0 39.5 38.5 Selling, general and administrative expenses 1,177 1,077 9.3 23.4 23.6 Operating earnings 807 678 19.0 16.1 14.9 Other expense – net 9 17 (47.1) 0.2 0.3 Income tax provision 198 153 29.4 3.9 3.4 Net earnings 600 508 18.1 12.0 11.2 Noncontrolling interest 30 26 15.4 0.6 0.6 Net earnings attributable to W.W. Grainger, Inc. $ 570 $ 482 18.3 11.4 % 10.6 % Diluted earnings per share $ 12.01 $ 9.97 20.5 % (1)For further information regarding the Company's disaggregated revenue, see Note 2 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1: Financial Statements of this Form 10-Q. The 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 compared to the prior year period for the three months ended June 30, 2026 and 2025 (in millions of dollars): Three Months Ended June 30, 2026 % Change(1) 2025 % Change(1) Net sales $ 5,021 10.3 % $ 4,554 5.6 % Daily net sales(2) $ 78.5 10.3 % $ 71.2 5.6 % Daily, organic constant currency net sales(2) $ 80.7 13.7 % $ 70.8 5.1 % (1)Calculated on the basis of prior year net sales for the three months ended June 30, 2026 and 2025. (2)Daily net sales are adjusted for the difference in U.S. selling days relative to the prior year period. There were 64 sales days in the three months ended June 30, 2026 and 2025. Daily, organic constant currency net sales are also adjusted to exclude the impact on net sales due to year-over-year changes in foreign currency exchange rates and the net sales results of the divested and closed businesses in the prior year period on a daily basis. For further information regarding the Company's non-GAAP measures, including reconciliations to the most directly comparable GAAP measures, see below "Non-GAAP Measures." 17 W.W. Grainger, Inc. and Subsidiaries MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales of $5,021 million for the three months ended June 30, 2026 increased $467 million, or 10%, and on a daily, organic constant currency basis, net sales increased 14% compared to the same period in 2025. Both High-Touch Solutions N.A. and the Endless Assortment segment contributed to sales growth in the second quarter of 2026. For further discussion on the Company's net sales, see the Segment Analysis section below. Gross profit of $1,984 million for the three months ended June 30, 2026 increased $229 million, or 13%, and gross profit margin of 39.5% increased 100 basis points compared to the same period in 2025. For further discussion on the Company's gross profit, see the Segment Analysis section below. Selling, general and administrative (SG&A) expenses of $1,177 million for the three months ended June 30, 2026 increased $100 million, or 9%, compared to the same period in 2025. The increase was due to higher payroll and benefit expenses in the second quarter of 2026 partially offset by a benefit related to the exit from the U.K. market in the fourth quarter of 2025. Operating earnings of $807 million for the three months ended June 30, 2026 increased $129 million, or 19%, compared to the same period in 2025. Income tax expense of $198 million for the three months ended June 30, 2026 increased $45 million compared to the same period in 2025. Grainger's effective tax rates were 24.8% and 23.2% for the three months ended June 30, 2026 and 2025, respectively. The Company's effective tax rate increase was primarily due to decreased tax credit activity in the current year period and the impact of tax legislation effective in 2026. Diluted earnings per share was $12.01 for the three months ended June 30, 2026, an increase of 20% compared to $9.97 for the same period in 2025. Segment Analysis In this section, Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. For further information regarding the Company's non-GAAP measures, including reconciliations to the most directly comparable GAAP measure, see below "Non-GAAP Measures." For further segment information, see Note 6 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1: Financial Statements of this Form 10-Q. High-Touch Solutions N.A. The following table shows reported segment results (in millions of dollars): Three Months Ended June 30, 2026 2025 % Change Net sales $ 3,967 $ 3,544 11.9 % Gross profit $ 1,660 $ 1,454 14.2 % Selling, general and administrative expenses 974 865 12.6 % Operating earnings $ 686 $ 589 16.5 % Net sales of $3,967 million for the three months ended June 30, 2026 increased $423 million, which represents a 12% increase on a reported and daily, constant currency basis compared to the same period in 2025. The increase was primarily due to volume. Gross profit of $1,660 million for the three months ended June 30, 2026 increased $206 million, or 14%, and gross profit margin of 41.8% increased 80 basis points compared to the same period in 2025. The increase was primarily due to tariff refund benefits recognized in the quarter, which was partially offset by an increase in freight costs. SG&A expenses of $974 million for the three months ended June 30, 2026 increased $109 million, or 13%, compared to the same period in 2025. The increase was primarily due to higher payroll and benefit expenses. 18 W.W. Grainger, Inc. and Subsidiaries MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating earnings of $686 million for the three months ended June 30, 2026 increased $97 million, or 17%, compared to the same period in 2025. Endless Assortment The following table shows reported segment results (in millions of dollars): Three Months Ended June 30, 2026 2025 % Change Net sales $ 1,054 $ 929 13.5 % Gross profit $ 324 $ 277 17.0 % Selling, general and administrative expenses 203 185 9.7 % Operating earnings $ 121 $ 92 31.5 % Net sales of $1,054 million for the three months ended June 30, 2026 increased $125 million, or 14%, and on a daily, organic constant currency basis increased 21% compared to the same period in 2025. The increase was due to repeat business for the segment and enterprise customer growth at MonotaRO. Sales growth was partially offset by unfavorable currency exchange of 6% due to changes in the exchange rate between the U.S. dollar and the Japanese yen. Gross profit of $324 million for the three months ended June 30, 2026 increased $47 million, or 17%, and gross profit margin of 30.7% increased 90 basis points compared to the same period in 2025. The increase was primarily due to favorable discount activity at Zoro and favorable product mix across the segment. SG&A expenses of $203 million for the three months ended June 30, 2026 increased $18 million, or 10%, compared to the same period in 2025. The increase was primarily due to higher marketing expenses. Operating earnings of $121 million for the three months ended June 30, 2026 increased $29 million, or 32%, compared to the same period in 2025. 19 W.W. Grainger, Inc. and Subsidiaries MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations – Six Months Ended June 30, 2026 In this section, Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. For further information regarding the Company's non-GAAP measures, including reconciliations to the most directly comparable GAAP measure, see below "Non-GAAP Measures." The following table is included as an aid to understanding the changes in Grainger’s Condensed Consolidated Statements of Earnings for the six months ended June 30, 2026 and 2025 (in millions of dollars except per share amounts): Six Months Ended June 30, % Change % of Net Sales 2026 2025 2026 2025 Net sales(1) $ 9,763 $ 8,860 10.2 % 100.0 % 100.0 % Cost of goods sold 5,883 5,395 9.0 60.3 60.9 Gross profit 3,880 3,465 12.0 39.7 39.1 Selling, general and administrative expenses 2,280 2,115 7.8 23.3 23.9 Operating earnings 1,600 1,350 18.5 16.4 15.2 Other expense – net 27 32 (15.6) 0.3 0.4 Income tax provision 392 310 26.5 4.0 3.5 Net earnings 1,181 1,008 17.2 12.1 11.3 Noncontrolling interest 56 47 19.1 0.6 0.5 Net earnings attributable to W.W. Grainger, Inc. $ 1,125 $ 961 17.1 11.5 % 10.8 % Diluted earnings per share $ 23.66 $ 19.83 19.3 % (1)For further information regarding the Company's disaggregated revenue, see Note 2 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1: Financial Statements of this Form 10-Q. The 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 compared to the prior year period for the six months ended June 30, 2026 and 2025 (in millions of dollars): Six Months Ended June 30, 2026 % Change(1) 2025 % Change(1) Net sales $ 9,763 10.2 % $ 8,860 3.7 % Daily net sales(2) $ 76.9 10.2 % $ 70.3 4.5 % Daily, organic constant currency net sales(2) $ 78.6 12.9 % $ 70.5 4.7 % (1)Calculated on the basis of prior year net sales for the six months ended June 30, 2026 and 2025. (2)Daily net sales are adjusted for the difference in U.S. selling days relative to the prior year period. There were 127 sales days in the six months ended June 30, 2026 and 2025. Daily, organic constant currency net sales are also adjusted to exclude the impact on net sales due to year-over-year changes in foreign currency exchange rates and the net sales results of the divested and closed businesses in the prior year period on a daily basis. For further information regarding the Company's non-GAAP measures, including reconciliations to the most directly comparable GAAP measures, see below "Non-GAAP Measures." 20 W.W. Grainger, Inc. and Subsidiaries MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales of $9,763 million for the six months ended June 30, 2026 increased $903 million, or 10%, and on a daily, constant currency basis increased 13% compared to the same period in 2025. Both High-Touch Solutions N.A. and the Endless Assortment segments contributed to sales growth in the six months ended June 30, 2026. For further discussion on the Company's net sales, see the Segment Analysis section below. Gross profit of $3,880 million for the six months ended June 30, 2026 increased $415 million, or 12%, and gross profit margin of 39.7% increased 60 basis points compared to the same period in 2025. For further discussion on the Company's gross profit, see the Segment Analysis section below. SG&A expenses of $2,280 million for the six months ended June 30, 2026 increased $165 million, or 8%, compared to the same period in 2025. The increase was due to higher payroll and benefit expenses in 2026 partially offset by a benefit related to the exit from the U.K. market in the fourth quarter of 2025. Operating earnings of $1,600 million for the six months ended June 30, 2026 increased $250 million, or 19%, compared to the same period in 2025. Income taxes of $392 million for the six months ended June 30, 2026 increased $82 million, compared to the same period in 2025. Grainger's effective tax rates were 24.9% and 23.5% for the six months ended June 30, 2026 and 2025, respectively. The Company's effective tax rate increase was primarily due to decreased tax credit activity in the current year period and the impact of tax legislation effective in 2026. Diluted earnings per share was $23.66 for the six months ended June 30, 2026, an increase of 19% compared to $19.83 for the same period in 2025. Segment Analysis In this section, Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. For further information regarding the Company's non-GAAP measures, including reconciliations to the most directly comparable GAAP measure, see below "Non-GAAP Measures." For further segment information, see Note 6 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1: Financial Statements of this Form 10-Q. High-Touch Solutions N.A. The following table shows reported segment results (in millions of dollars): Six Months Ended June 30, 2026 2025 % Change Net sales $ 7,719 $ 6,941 11.2 % Gross profit $ 3,259 $ 2,893 12.7 % Selling, general and administrative expenses 1,885 1,704 10.6 % Operating earnings $ 1,374 $ 1,189 15.6 % Net sales of $7,719 million for the six months ended June 30, 2026 increased $778 million, which represents an 11% increase on a reported and daily, constant currency basis compared to the same period in 2025. The increase was primarily due to volume. Gross profit of $3,259 million for the six months ended June 30, 2026 increased $366 million, or 13%, and gross profit margin of 42.2% increased 50 basis points compared to the same period in 2025. The increase was primarily due to tariff refund benefits recognized in 2026, which was partially offset by an increase in freight costs. SG&A expenses of $1,885 million for the six months ended June 30, 2026 increased $181 million, or 11%, compared to the same period in 2025. The increase was primarily due to higher payroll and benefit expenses in 2026. 21 W.W. Grainger, Inc. and Subsidiaries MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating earnings of $1,374 million for the six months ended June 30, 2026 increased $185 million, or 16%, compared to the same period in 2025. Endless Assortment The following table shows reported segment results (in millions of dollars): Six Months Ended June 30, 2026 2025 % Change Net sales $ 2,044 $ 1,757 16.3 % Gross profit $ 621 $ 522 19.0 % Selling, general and administrative expenses 395 358 10.3 % Operating earnings $ 226 $ 164 37.8 % Net sales of $2,044 million for the six months ended June 30, 2026 increased $287 million, or 16%, and on a daily, constant currency basis increased 21% compared to the same period in 2025. The increase was due to repeat business for the segment and enterprise customer growth at MonotaRO. Sales growth was partially offset by unfavorable currency exchange of 4% due to changes in the exchange rate between the U.S. dollar and the Japanese yen. Gross profit of $621 million for the six months ended June 30, 2026 increased $99 million, or 19%, and gross profit margin of 30.4% increased 70 basis points compared to the same period in 2025. The increase was primarily due to favorable discount activity at Zoro and favorable product mix across the segment. SG&A expenses of $395 million for the six months ended June 30, 2026 increased $37 million, or 10%, compared to the same period in 2025. The increase was primarily due to higher marketing expenses in 2026. Operating earnings of $226 million for the six months ended June 30, 2026 increased $62 million, or 38%, compared to the same period in 2025. 22 W.W. Grainger, Inc. and Subsidiaries MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Non-GAAP Measures Grainger utilizes non-GAAP measures where it believes it will assist users of its financial statements in understanding its business. 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. The Company adjusts its reported net sales when there are differences in the number of U.S. selling days relative to the prior year period and also excludes the impact on reported net sales due to changes in foreign currency exchange rates and results of certain divested or closed businesses. This includes the net sales results of the divested Cromwell business and closed Zoro U.K. business, within Other and Endless Assortment, respectively, announced in the third quarter of 2025 and completed in the fourth quarter of 2025. 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 or closures 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. 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. 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 measures and may not be comparable to similarly titled measures reported by other companies. 23 W.W. Grainger, Inc. and Subsidiaries MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following tables provide reconciliations of reported net sales growth compared to 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 three months ended June 30, 2026 and 2025 (in millions of dollars): Three Months Ended June 30, High-Touch Solutions N.A. Endless Assortment Total Company(1) 2026 % Change(2) 2026 % Change(2) 2026 % Change(2) Reported net sales $ 3,967 11.9 % $ 1,054 13.5 % $ 5,021 10.3 % Daily impact(3) — — — — — — Daily net sales 62.0 11.9 16.5 13.5 78.5 10.3 Foreign currency exchange(4) (0.1) (0.2) 0.9 5.9 0.8 1.1 Business divestiture(5) — — 0.2 1.2 1.4 2.3 Daily, organic constant currency net sales $ 61.9 11.7 % $ 17.6 20.6 % $ 80.7 13.7 % 2025 % Change(2) 2025 % Change(2) 2025 % Change(2) Reported net sales $ 3,544 2.5 % $ 929 19.7 % $ 4,554 5.6 % Daily impact(3) — — — — — — Daily net sales 55.4 2.5 14.5 19.7 71.2 5.6 Foreign currency exchange(4) 0.1 0.3 (0.4) (3.4) (0.4) (0.5) Business divestiture(5) — — — — — — Daily, organic constant currency net sales $ 55.5 2.8 % $ 14.1 16.3 % $ 70.8 5.1 % (1)Total Company includes other businesses, which included the Cromwell business through the date of divestiture in the fourth quarter of 2025. Grainger's businesses reported in Other do not meet the criteria of a reportable segment. (2)Compared to net sales in the prior year period. (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 64 sales days in the three months ended June 30, 2026 and 2025. (4)Excludes the impact on net sales due to year-over-year changes in foreign currency exchange rates on a daily basis. (5)Excludes the net sales results of the divested Cromwell business and closed Zoro U.K. business, announced in the third quarter of 2025 and completed in the fourth quarter of 2025, in the prior year period on a daily basis. There was no business divestiture impact for the three months ended June 30, 2025 compared to the prior year period on a daily basis. 24 W.W. Grainger, Inc. and Subsidiaries MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following tables provide reconciliations of reported net sales growth compared to 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 six months ended June 30, 2026 and 2025 (in millions of dollars): Six Months Ended June 30, High-Touch Solutions N.A. Endless Assortment Total Company(1) 2026 % Change(2) 2026 % Change(2) 2026 % Change(2) Reported net sales $ 7,719 11.2 % $ 2,044 16.3 % $ 9,763 10.2 % Daily impact(3) — — — — — — Daily net sales 60.8 11.2 16.1 16.3 76.9 10.2 Foreign currency exchange(4) (0.2) (0.3) 0.5 3.5 0.3 0.4 Business divestiture(5) — — 0.1 1.3 1.4 2.3 Daily, organic constant currency net sales $ 60.6 10.9 % $ 16.7 21.1 % $ 78.6 12.9 % 2025 % Change(2) 2025 % Change(2) 2025 % Change(2) Reported net sales $ 6,941 1.1 % $ 1,757 15.1 % $ 8,860 3.7 % Daily impact(3) 0.4 0.8 0.1 0.9 0.5 0.8 Daily net sales 55.1 1.9 13.9 16.0 70.3 4.5 Foreign currency exchange(4) 0.2 0.4 — (0.1) 0.2 0.2 Business divestiture(5) — — — — — — Daily, organic constant currency net sales $ 55.3 2.3 % $ 13.9 15.9 % $ 70.5 4.7 % (1)Total Company includes other businesses, which included the Cromwell business through the date of divestiture in the fourth quarter of 2025. Grainger's businesses reported in Other do not meet the criteria of a reportable segment. (2)Compared to net sales in the prior year period. (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 127 sales days in the six months ended June 30, 2026 and 2025. (4)Excludes the impact on net sales due to year-over-year changes in foreign currency exchange rates on a daily basis. (5)Excludes the net sales results of the divested Cromwell business and closed Zoro U.K. business, announced in the third quarter of 2025 and completed in the fourth quarter of 2025, in the prior year period on a daily basis. There was no business divestiture impact for the six months ended June 30, 2025 compared to the prior year period on a daily basis. 25 W.W. Grainger, Inc. and Subsidiaries MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Grainger believes its current balances of cash and cash equivalents, marketable securities, and availability under its revolving credit facility, which supports the Company's commercial paper program, will be sufficient to meet its liquidity needs for the next twelve months. The Company expects to continue to invest in its business and return excess cash to shareholders through cash dividends and share repurchases, which it plans to fund through cash flows generated from operations. Grainger also maintains access to capital markets and may issue debt or equity securities from time to time, which may provide an additional source of liquidity. Cash and Cash Equivalents As of June 30, 2026 and December 31, 2025, Grainger had cash and cash equivalents of $589 million and $585 million, respectively. The Company had approximately $1.8 billion in available liquidity as of June 30, 2026. Cash Flows The following table shows the Company's cash flow activity for the periods presented (in millions of dollars): Six Months Ended June 30, 2026 2025 Total cash provided by (used in): Operating activities $ 1,183 $ 1,023 Investing activities (294) (283) Financing activities (874) (1,201) Effect of exchange rate changes on cash and cash equivalents (11) 22 Increase (decrease) in cash and cash equivalents $ 4 $ (439) Net cash provided by operating activities was $1,183 million and $1,023 million for the six months ended June 30, 2026 and 2025, respectively. The increase was primarily due to higher net earnings. Net cash used in investing activities was $294 million and $283 million for the six months ended June 30, 2026 and 2025, respectively. The 2026 investing activities were in line with prior year and driven by continued investment in supply chain across the Company. Net cash used in financing activities was $874 million and $1,201 million for the six months ended June 30, 2026 and 2025, respectively. The decrease in cash used in financing activities was primarily due to the repayment of the 1.85% Senior Notes in the amount of $500 million in 2025. Working Capital Working capital as of June 30, 2026 was $3,615 million, an increase of $100 million compared to $3,515 million as of December 31, 2025. As of June 30, 2026 and December 31, 2025, the ratio of current assets to current liabilities was 2.8 and 3.0, respectively. Debt Grainger maintains a debt ratio and liquidity position that provides flexibility in funding working capital needs and long-term cash requirements. Grainger has various sources of financing available. Total debt as a percent of total capitalization was 34.8% and 37.5% as of June 30, 2026 and December 31, 2025, respectively. Grainger receives ratings from two independent credit rating agencies: Moody's Investor Service (Moody's) and Standard & Poor's (S&P). Both credit rating agencies currently rate the Company's corporate credit at investment grade. 26 W.W. Grainger, Inc. and Subsidiaries MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table summarizes the Company's credit ratings as of June 30, 2026: Corporate Senior Unsecured Short-term Moody's A1 A1 P1 S&P A+ A+ A1 Commitments and Other Contractual Obligations There were no material changes to the Company’s commitments and other contractual obligations from those disclosed in Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2025 Form 10-K. Critical Accounting Estimates The preparation of Grainger’s Condensed Consolidated Financial Statements and accompanying notes are in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make assumptions and estimates that affect the reported amounts. The Company considers an accounting policy to be a critical estimate if: (1) it involves assumptions that are uncertain when judgment was applied, and (2) changes in the estimate assumptions, or selection of a different estimate methodology, could have a significant impact on Grainger’s consolidated financial position and results. While the Company believes the assumptions and estimates used are reasonable, the Company’s management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances. Note 1 of the Notes to Consolidated Financial Statements in Part II, Item 8: Financial Statements of the Company's 2025 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company’s Condensed Consolidated Financial Statements. There were no material changes to the Company's critical accounting estimates from those disclosed in Part II, Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 2025 Form 10-K. 27 W.W. Grainger, Inc. and Subsidiaries MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements From time to time in this Quarterly Report on Form 10-Q as well as in other written reports, communications and verbal statements, Grainger makes forward-looking statements that are not historical in nature but concern forecasts of future results, business plans, analyses, prospects, strategies, objectives and other matters that may be deemed to be “forward-looking statements” under the federal securities laws. Forward-looking statements can generally be identified by their use of terms such as “anticipate,” “estimate,” “believe,” “expect,” “could,” “forecast,” “may,” “intend,” “plan,” “predict,” “project,” “will,” or “would,” and similar terms and phrases, including references to assumptions. Grainger cannot guarantee that any forward-looking statement will be realized and achievement of future results is subject to risks and uncertainties, many of which are beyond Grainger's control, which could cause Grainger's results to differ materially from those that are presented. Important factors that could cause actual results to differ materially from those presented or implied in the forward-looking statements include, without limitation: inflation, higher product costs or other expenses, including operational and administrative expenses; a major loss of customers; loss or disruption of sources of supply; changes in customer or product mix; increased competitive pricing pressures; changes in third-party practices regarding digital advertising; failure to enter into or sustain contractual arrangements on a satisfactory basis with group purchasing organizations; failure to develop, manage or implement new technology initiatives, acquisitions or business strategies, including with respect to Grainger's eCommerce platforms and artificial intelligence; failure to adequately protect our intellectual property or successfully defend against infringement claims; fluctuations or declines in Grainger's gross profit margin; Grainger's responses to market pressures; the outcome of pending and future litigation or governmental or regulatory proceedings, including with respect to wage and hour, anti-bribery and corruption, environmental, regulations related to advertising, marketing and the internet, consumer protection, pricing (including disaster or emergency declaration pricing statutes), product liability, compliance or safety, trade and export compliance, general commercial disputes, or privacy and cybersecurity matters; investigations, inquiries, audits and changes in laws and regulations; failure to comply with laws, regulations and standards, including new or stricter environmental laws or regulations; government contract matters, including new or revised provisions relating to contract compliance or performance; the impact of any government shutdown; disruption or breaches of information technology or data security systems involving Grainger or third parties on which Grainger depends; general industry, economic, market or political conditions; general global economic conditions including existing, new, or increased tariffs, trade issues and changes in trade policies, inflation, and interest rates; currency exchange rate fluctuations; market volatility, including price and trading volume volatility or price declines of Grainger's common stock; an incident that adversely impacts Grainger’s reputation or brand; commodity price volatility; facilities disruptions or shutdowns; higher fuel costs or disruptions in transportation services; effects of outbreaks of pandemic disease or viral contagions, global conflicts, natural or human-induced disasters, extreme weather, and other catastrophes or conditions; effects of climate change; failure to execute on our corporate responsibility efforts; competition for, or failure to attract, retain, train, motivate and develop executives and key team members; loss of key members of management or key team members; loss of operational flexibility and potential for work stoppages or slowdowns if team members unionize or join a collective bargaining arrangement; changes in effective tax rates; changes in credit ratings or outlook; Grainger's incurrence of indebtedness or failure to comply with restrictions and obligations under its debt agreements and instruments and other factors identified under Part I, Item 1A: Risk Factors and elsewhere in Grainger's 2025 Form 10-K, as updated from time to time in Grainger's Quarterly Form 10-Q. The preceding list is not intended to be an exhaustive list of all of the factors that could impact Grainger's forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on Grainger's forward-looking statements and Grainger undertakes no obligation to update or revise any of its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. 28 W.W. Grainger, Inc. and Subsidiaries