W.W. Grainger, Inc.

Greetings and welcome to the WW Granger second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to your host, Kyle Bland. Vice President, Investor Relations. Thank you. You may begin.

Good morning. Welcome to Grainger's second quarter 2025 earnings call. With me are D.J. McPherson, Chairman and CEO, and D. Merriweather, Senior Vice President and CFO. As a reminder, some of our comments today may include forward-looking statements that are subject to various risks and uncertainties. Additional information regarding factors that could cause actual results to differ materially is included in the company's most recent Form 8K and other periodic reports filed with the SEC. Results for the second quarter of 2025 are consistent on both a reported and adjusted basis, but will be compared to adjusted results from the prior year period, which were normalized for restructuring costs incurred in the second quarter of 2024. Definitions and full reconciliations of our non-GAAP financial measures with their corresponding GAAP measures are found in the tables at the end of this presentation and in our earnings release, both of which are available on our IR website. We will also share results related to Monotaro. Please remember that Monotaro is a public company and follows Japanese GAAP, which differs from U.S. GAAP and is reported in our results one month in arrears. As a result, the numbers discussed will differ from Monotaro's public statements. Now, I'll turn it over to DG.

Thanks, Kyle. Good morning, everyone, and thank you for joining today. In the second quarter, the external environment continued to present a degree of uncertainty. What we're observing in the field, though, is largely business as usual, with a sharp focus on execution. Customers are seeking reliable partners who can help them manage the current complexity, and Grainger is proud to be that partner. I recently spent some time with manufacturing and industrial customers in Salt Lake City, These conversations consistently focused on how Grainger can help them drive efficiencies, lowering their purchasing costs, and improving inventory management. In times of uncertainty, our role becomes even more important, and we are uniquely positioned to help our customers strengthen their purchasing processes and overall operations. To that end, we continue to collaborate closely with our supplier network to uphold our standard of getting customers the right products when and where they need them. We build a strong foundation anchored by a world-class supply chain and enhanced by strategic investments in product information and digital capabilities. These efforts combined with our scale, deep supplier relationships, and ability to provide alternative product solutions allow us to deliver unmatched value in any environment. Beyond serving our customers' operations, we also recognize our broader responsibility to the communities we serve. In times of need, we remain steadfast in our commitment to supporting local communities with emergency response and recovery efforts. It's a part of who we are and how we show up every day. I am proud of the resilience and dedication demonstrated across our organization and remain confident that our team will continue to deliver value for our customers, our communities, and our shareholders. In the second quarter, we delivered solid results that, in total, were largely in line with our May verbal guide. Total company reported sales for the quarter were nearly $4.6 billion, up 5.6% or 5.1% on a daily, constant currency basis. Operating margins for the company were 14.9%. and diluted EPS finished the quarter up 21 cents to $9.97. Operating cash flow came in at $377 million, which allowed us to return a total of $336 million to greater shareholders through dividends and share repurchases. Importantly, while the headline results for the second quarter played out largely as expected, they do reflect our estimate of tariff-related LIFO inventory valuation headwinds. As Dee will discuss, without this LIFO impact, our operating margin would have been flat year over year in the period. As we look ahead, we anticipate that continued LIFO headwinds, along with further price-cost timing pressures, will impact our performance in the back half of the year. And as a result, we are updating our earnings outlook for 2025, which Dee will detail in a moment. Importantly, these accounting and timing effects are mostly transitory, and our expectation is the gross margin will begin to recover over time as we work back toward our price-cost neutrality target. And with that, I'll turn it over to Dee to go through the details.