0000277135-26-000053
SEC filingStrong Q1 with double-digit revenue and earnings growth, driven by balanced volume and price gains across both segments.
Revenue increased 10.1% to $4.7 billion in the first quarter of 2026, compared to $4.3 billion in the prior year period. The growth was driven by balanced contributions from volume and price, reflecting strong demand across both the High-Touch Solutions and Endless Assortment segments. Gross profit rose 10.9% to $1.9 billion, with gross margin expanding to 40.0% from 39.7% in the prior year, driven by favorable product mix and cost management.
Operating income increased 18.0% to $793 million, with operating margin expanding to 16.7% from 15.6% in the prior year. The margin improvement was driven by SG&A leverage as the company scaled its operations efficiently. Net income grew 15.9% to $555 million, and diluted earnings per share increased 18.2% to $11.65, reflecting the strong operating performance and lower share count from share repurchases.
Net cash provided by operating activities was $739 million in the first quarter, compared to $646 million in the prior year, driven by higher net income and working capital management. Free cash flow, defined as operating cash flow less capital expenditures, was $569 million. Capital expenditures increased to $170 million from $125 million in the prior year, primarily driven by continued investments in MonotaRO's supply chain. The company maintains a strong liquidity position and expects to continue investing in the business while returning excess cash to shareholders through dividends and share repurchases.
The Endless Assortment segment, which includes MonotaRO, continued to benefit from repeat business and enterprise customer growth. The company's investments in supply chain and digital capabilities are expected to support long-term growth. Management commentary indicates that Grainger maintains a debt ratio and liquidity position that provides flexibility in funding working capital needs and long-term cash requirements.
The company expects to continue investing in its business and returning excess cash to shareholders through cash dividends and share repurchases, funded by cash flows from operations. Key risks include macroeconomic conditions, supply chain disruptions, and competitive pressures. The company's diversified business model and strong balance sheet position it to navigate these challenges.