Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒  No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐  No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒  Accelerated Filer ☐   Non-accelerated Filer ☐   Smaller Reporting Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐  No ☒

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement to be filed in connection with the annual meeting of shareholders to be held on April 28, 2021,26, 2023, are incorporated by reference into Part III hereof of this Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (Form 10-K) where indicated. The registrant's definitive 2020 proxy statement will be filed on or about March 18, 2021.

PART I

Item 1: Business

W.W. Grainger, Inc., incorporated in the State of Illinois in 1928, is a broad line, business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America (N.A.), Japan and Europe.the United Kingdom (U.K.). In this report, the words “Grainger” or “Company” mean W.W. Grainger, Inc. and its subsidiaries, except where the context makes it clear that the reference is only to W.W. Grainger, Inc. itself and not its subsidiaries.

The Grainger Edge (Purpose, Aspiration, Strategy)

Grainger's strategic framework, “The Grainger Edge”,Edge,” uniquely defines the Company by describingasserting why it exists, how it serves its customers and how its team members work together to achieve its objectives. Grainger’s purpose is to keepWe Keep the world working. Whether that means helping a hospitalWorld Working®, which in turn allows customers to focus on patient care, a manufacturing plant focus on building great products or a school focus on educating, Graingerthe core of their businesses and its team members help keep facilities running so customers can focus ondo what they do best.

TheThis framework also outlines a set of principles that define the behaviors expected from Grainger’s team members in working with each other and theirthe Company's customers, supplier partnerssuppliers and communities. It is a basis for holding team members accountable to these principles and helps the company executecommunities as Grainger executes its strategy and createcreates value for shareholders.

The Company's High-Touch Solutions N.A. segment provides value-added MRO solutions that are rooted in deep product knowledge and customer expertise. The high-touch solutions model serves customers with complex buying needs,needs. This segment includes the Grainger-branded businesses in the United States (U.S.), Canada, Mexico and Puerto Rico.

SalesIn the Endless Assortment segment, Grainger offers an expansive product assortment and service representatives ina broad, extensive product range that contains millions of products including those outside of traditional industrial MRO categories. Zoro offers more than 11 million products and MonotaRO provides access to more than 20 million products, primarily through its websites and catalogs. The endless assortment businesses continue to enhance assortment by strategically adding products and expanding the U.S. high-touch business drive relationships with customers by helping select the right products for their needs and reducing costs by utilizing Grainger as a consistent sourceoffer of supply. Additionally, inventory management through KeepStock® allows the U.S. high-touch business to help customers be more productive. KeepStock® is a comprehensive program that includes vendor-managed inventory, customer-managed inventory and onsite vending machines.third party held products.

Zoro -In the Endless Assortment insegment, orders are placed primarily through online channels. Zoro leverages the U.S.

Seasonality

Grainger sells products that may have seasonal demand fluctuations during the winter or summer seasons or during periods of natural disasters. However, historical seasonality impacts have not been material to Grainger’s operating results.

Competition

In the large and fragmented MRO industry, Grainger faces competition from a variety of competitors, including manufacturers (including some of its own suppliers) that sell directly to certain segments of the market, wholesale distributors, retailers and internet-based businesses. Also, competitors vary by size, from large broad line distributors and eCommerce retailers to small local and regional competitors, with a high degree of overlap for both business models.competitors. Grainger differentiates itself by providing local product availability, a broad product line, sales and service representatives catalogs (which include product descriptions and, in certain cases, extensive technical and application data) and advanced electronic and eCommerce technology. Grainger also offers other services, such as inventory management and technical support.

Government Regulations

Human Capital Resources

The Company strongly believes that its corporate culture must be aligned with its business strategy and aspiration to create value. To that end, Grainger's Board of Directors and senior management are actively involved in cultivating Grainger’s culture. The Compensation Committee of the Board, which is comprised of independent directors, oversees the Company's human capital management programs and policies and routinely provides updates to the Board.

Grainger believes that a purpose-driven culture is an asset that creates a sustainable, competitive advantage for the Company. Building on its strong foundation while evolving a framework to address the future challenges is critical to Grainger’s continued success. Grainger has been consistently recognized for its commitment to its culture, diversity, equity and inclusion efforts and employee engagement.

The Company has in place a strategic framework, The Grainger Edge, which defines who Grainger is, why Grainger exists, and howoutlines a set of principles that define the behaviors expected from Grainger’s team members work together to achieve Grainger’s objectives.in working with each other and the Company's customers, suppliers and communities. This framework helps the Company execute its strategy and create value for shareholders.

The Grainger Edge outlines Grainger's purpose, aspiration, strategyprinciples also guide the Company’s actions supporting health and principles, which are foundational to its culture.safety, diversity, equity and inclusion, and team member experience, including talent acquisition and team member retention, development and compensation and benefits. The Grainger Edge principles are:

Grainger’s purpose-driven culture and principles help the Company attract, retain, motivate and develop its workforce and help drive employeeteam member engagement. The Company believes an engaged workforce leads to a more innovative, productive and profitable company and measures employeeteam member engagement on an ongoing basis. The results from engagement surveys are used to implementinform programs and processes designed and implemented to enhance Grainger’sthe inclusive culture.

Grainger is committedstrives to providingprovide a safe work environment and ensuring team members are properly prepared to perform the many tasks required to support customers. The Company’s Environmental, Health and Safety (EHS) program is designed to integrate EHS initiatives into Grainger’s business operations and comply with applicable regulations. To that end, the Company requires each of its locations to perform regular safety audits to confirm proper safety policies, programs, procedures and training are in place.place and operating effectively.

Diversity, Equity and Inclusion

Grainger hasbelieves a diverse talent pipelinepool is essential to live its principles, foster innovation, build high performinghigh-performing teams and drive business results. The Company understands that future business success requires a mix of current and new skill sets, multiple experiences, and a diversity of backgrounds and perspectives, hence the Company'sand strives to reflect this priority in its hiring, retention and promotion practices reflect this priority.practices. The Company aspires to and promotesincreasingly promote a welcoming, inclusive culture that values all people – regardless of sex, gender, race, color, religion, national origin, age, disability, veteran status, sexual orientation, gender expression or experiences – through recruiting outreach, internal networking, business resource groups and mentoring programs.

Grainger's commitment to diversity, equity and inclusion starts at the top. The Company’s Board of Directors is comprised of 25%approximately 33% female and approximately 33%25% racially and ethnically diverse directors. Grainger also maintains this strong commitment at its senior management levelwith the CEO's leadership team and throughout the organization. Of Grainger's six executive officers, 50% areThe CEO's leadership team is comprised of approximately 43% women and approximately 33% are29% racially and ethnically diverse.diverse leaders. As of December 31, 2020,2022, within Grainger’s U.S. workforce, approximately 38%39% of team members were women and approximately 35%39% of team members were racially and ethnically diverse.

Grainger believes that a great customer experience starts with a great team member experience. The Company is committed to providing its team members with resources designed to help them succeed. Grainger focuses on creating opportunities for employeeteam member growth, development and training, education,including offering a comprehensive talent program that continues throughout a team member’s career. This talent program is comprised of performance management, career management, professional development learning opportunities and milestone leadership development programs.

Available Information

Grainger makes available free of charge, through its website, http://www.invest.grainger.com, itsGrainger's annual reportreports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), are filed with the U.S. Securities and Exchange Commission (SEC). Such reports and other information filed with the SEC are available free of charge as soon as reasonably practicable after these materials are electronically filed with, or furnished to, the U.S. SecuritiesSEC on the Company's website at www.grainger.com, and Exchange Commission (SEC).its investor relations website, invest.grainger.com. This includes press releases and other information about financial performance, information on environmental, social and governance matters, and details related to the Company’s annual meeting of shareholders. The content of Grainger’sthe Company's website and investor relations website is not incorporated by reference into this Form 10-K or in any other report or document filed with the SEC, and any references to Grainger’s website and investor relations website are intended to be inactive textual references only. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Information about Executive Officers

Following is information about the executive officers of Grainger, including age, as of January 31, 2021.2023. Executive officers of Grainger generally serve until the next annual appointment of officers, or until earlier resignation or removal.

Item 1A: Risk Factors

The following is a discussion of significant risk factors relevant to Grainger’s business that could adversely affect its financial condition, results of operations and cash flows. The risk factors discussed in this section should be considered together with information included elsewhere in this Annual Report on Form 10-K and should not be considered the only risks to which the Company is exposed.

Market variables, such as inflation of product costs, labor rates and fuel, freight and energy costs, as well as geopolitical events could potentially cause the Company to be unable to manage its operating and administrative expenses in a way that would enable it to leverage its revenue growth into higher net earnings. For example, Russia’s invasion of Ukraine and other geopolitical conflicts, as well as the related international response, has and may continue to exacerbate inflationary pressures, including causing increases in fuel and other energy costs. In addition, Grainger's inability to pass on increases in costs to customers in a timely manner, or at all, could cause Grainger's operating and administrative expenses to grow, which could result in lower gross profit margins and lower net earnings.

Grainger’s logistics or supply chain network could be adversely affecteddisrupted by the global outbreak of the Coronavirus (COVID-19)occurrence of: one or more natural or human induced disasters, including earthquakes, tsunamis, storms, hurricanes, floods, fires, droughts, tornados and other extreme weather; pandemic and may be adversely affected by other global outbreaks of pandemic disease.

Furthermore, as resultin connection with Russia’s invasion of surgesUkraine, the U.S. and other countries have responded by imposing major, and potentially prolonged, economic sanctions and other responses. Although Grainger's business has limited direct exposure in demandRussia and disruptionsUkraine, further escalation of geopolitical tensions could have a broader impact that expands into other markets where we do business, which could adversely affect Grainger’s business and/or supply chain, customers and/or suppliers in supply chains, includingthe broader region. Similarly an increase in tensions across the Taiwan Straits and in overall relations with China, and other locations, the COVID-19 pandemic has resulted in shortagespotential of certain PPE, cleaning suppliesvarious resulting actions and responses of the international community and other products, which may materially impact Grainger's ability to obtain or deliver inventory to customers on a timely basis or at all. While Grainger attempts to maintain sufficient inventory levels to meet quickly shifting customer demand patternsfactors affecting trade in and supplier lead time requirements, which may become extended due tofrom the pandemic demand increase, the Company cannot be certain it will be able to accurately predict demand or lead times, which might cause it to be unable to service customer demand or expose it to risks of product shortages, or acquire excess inventory, which could lead to additional inventory carrying costs and inventory obsolescence.

Weakness in the economy, market trends and other conditions affecting the profitability and financial stability of Grainger’s customers could negatively impact Grainger’s sales growth and results of operations.

Economic, political and industry trends affect Grainger’s business environments.environment. Grainger serves several industries and markets in which the demand for its products and services is sensitive to the production activity, capital spending and demand for products and services of Grainger’s customers. Many of these customers operate in markets that are subject to cyclical fluctuations resulting from market uncertainty, trade and tariff policies, costs of goods sold, currency exchange rates, central bank interest rate changes,fluctuations, economic downturns, recessions, foreign competition, offshoring of production, oil and natural gas prices, geopolitical developments, labor shortages, inflation, natural or human induced disasters, extreme weather, outbreaks of pandemic disease such as the COVID-19 pandemic, inflation, deflation, and a variety of other factors beyond Grainger’s control. Any of these factors could cause customers to idle or close facilities, delay purchases, reduce production levels, or experience reductions in the demand for their own products or services.

Any of these events could also reduce the volume of products and services these customers purchase from Grainger or impair the ability of Grainger’s customers to make full and timely payments and could cause increased pressure on Grainger’s selling prices and terms of sale. Accordingly, a significant or prolonged slowdown in economic activity in Canada, China, Japan, Mexico, the U.K., the U.S. or any other major world economy, or a segment of any such economy, could negatively impact Grainger’s sales growth and results of operations.

The facilities maintenance industry is highly competitive, and changes in competition could result in decreased demand for Grainger’s products and services.

Grainger competes in a variety of ways, including product assortment and availability, services offered to customers, pricing, purchasing convenience, and the overall experience Grainger offers. This includes the ease of use of Grainger’s high-touch operations, (branches and digital platforms)eCommerce platforms and delivery of products.

There are several large competitors in the industry, although most of the market is served by small local and regional competitors. Grainger faces competition in all markets it serves from manufacturers (including some of its own suppliers) that sell directly to certain segments of the market, wholesale distributors, catalog houses, retail enterprises and online businesses that compete with price transparency.

To remain competitive, the Company must be willing and able to respond to market pressures. Downward pressure on sales prices, changes in the volume of orders, and an inability to pass higher product costs on to customers could cause Grainger’s gross profit percentage to fluctuate or decline. Grainger may not be able to pass rising product costs to customers if those customers have ready product or supplier alternatives in the marketplace. These pressures could have a material effect on Grainger’s sales and profitability. If the Company is unable to grow sales or reduce costs, among other actions, the Company’s results of operations and financial condition may be adversely affected.

Moreover, Grainger expects technological advancements and the increased use of eCommerce solutions within the industry to continue to evolve at a rapid pace. As a result, Grainger’s ability to effectively compete requires Grainger to respond and adapt to new industry trends and developments. ImplementingDeveloping, upgrading, managing or implementing new technologytechnologies, business applications, strategies and innovations may require significant investment of resources by the Company, may result in unexpected costs and interruptionsdisruptions to operations, may take longer than expected, may increase the Company’s vulnerability to cyber breaches, attacks or intrusions, and may not provide all anticipated benefits.

The successful execution of Grainger’s eCommerce growth strategy depends on a supplier’snumber of factors, including the Company’s investment in its eCommerce platforms, consumer preferences and purchasing trends, and the ability to manufacturedeliver a seamless procurement experience across digital and also physical retail channels. As its eCommerce platforms have grown in recent years, Grainger has increased, and expects to continue to increase, its investments in developing, managing and implementing technology information systems, software development and other capabilities to provide simplified customer interactions and to provide high-quality, user-friendly service to its customers and streamline customer interactions. Grainger has also made significant investments in digital advertising and customer acquisition and retention efforts for its eCommerce channels, including through paid and non-paid advertising such as display advertising, search engine optimization, email and mobile “push” notifications. If Grainger’s customer-facing technology systems are perceived as more difficult or deliver productsless compelling for customers to use than those of the Company’s competitors, or could result in an increase in Grainger’s product costs.if digital marketing efforts are unsuccessful or if Grainger is otherwise unsuccessful at realizing the benefits of these investments, its reputation, financial condition and operating results may be adversely affected.

In addition, the successful operation of Grainger’s eCommerce channels depends in part upon third parties and factors over which Grainger has limited or no control. For example, Grainger relies in part on Internet search engines to drive traffic to its websites, and the reach of Grainger’s eCommerce channels is impacted by how and where its websites rank in both paid and unpaid search results. Potential changes to search engine ranking rules could cause Grainger’s websites to place lower in search results and cause Grainger to incur increased advertising costs in order to increase its visibility. Further, Grainger sources products from Asiaongoing changes in the legal and regulatory requirements surrounding data privacy, online tracking technologies such as cookies, digital advertising and other areas of the world. This increases the risk of supply disruption dueeCommerce matters could require Grainger to themodify its eCommerce strategy, incur significant additional lead time required and distances involved.

Changes in customer base or product mix could cause changes in Grainger’s revenue or gross margin, or affect Grainger’s competitive position.

From time to time, Grainger experiences changes in customer base and product mix that affect gross margin. Changes in customer base and product mix result primarily from business acquisitions, changes in customer demand, customer acquisitions, selling and marketing activities, competition and the increased use of eCommerce by Grainger and its competitors. For example, as a result of the COVID-19 pandemic, the Company has sold higher volumes of lower-margin pandemic-related products to larger, lower-margin customers, while non-pandemic sales have decreased.

In addition, Grainger has entered, and may in the future continue to enter, into contracts with group purchasing organizations (“GPOs”)(GPOs) that aggregate the buying power of their member customers in negotiating selling prices. If the Company is unable to enter into, or sustain, contractual arrangements on a satisfactory commercial basis with GPOs, Grainger's results of operations could be adversely affected.

Disruptions in Grainger’s supply chain could result in an adverse impact on results of operations.common stock may be subject to volatility or price declines.

The occurrencetrading prices and volumes of oneGrainger’s common stock may be subject to broad and unpredictable fluctuations due to changes in economic, political and market conditions, the financial results and business strategies of Grainger and its competitors, changes in expectations as to Grainger’s future financial or more naturaloperating performance, including estimates by securities analysts and investors, the Company’s failure to meet the financial performance guidance or human induced disasters, including earthquakes, storms, hurricanes, floods, fires, droughts, tornados and other extreme weather;forward-looking statements provided to the public, speculation, coverage or sentiment in the media or investment community or by groups of individual investors, changes in capital structure, share repurchase programs or dividend policies, economic decline, political unrest or geopolitical conflict, outbreak of pandemic diseases or viral contagionsdisease such as the COVID-19 pandemic; geopolitical events, such as war, civil unrestpandemic, and a number of other factors, including those discussed in this Item 1A. These factors, many of which are outside of Grainger’s control, could cause stock price and trading volume volatility or terrorist attacksGrainger’s stock price to decline. Volatility in a country in which Grainger operates or in which its suppliers are located; and the impositionprice of measures that create barriers to or increase the costs associated with international tradeGrainger's securities could result in disruptionthe filing of Grainger’s logistics or supply chain network. For example, the outbreak of the COVID-19 pandemic has disrupted and may continue to disrupt the operations of the Company and its suppliers and customers. Any such disruption or other catastrophic eventsecurities class action litigation, which could cause one or more of Grainger’s distribution centers or branches to become non-operational, adversely affect Grainger’s ability to obtain or deliver inventory in a timely manner, impair Grainger’s ability to meet customer demand for products, result in lost sales, additionalsubstantial costs or penalties, or damage Grainger’s reputation. Grainger’s ability to provide same-day shipping and next-day delivery is an integral componentthe diversion of Grainger’s business strategymanagement time and any such disruption could adversely impact results of operations and financial performance.resources.

Interruptions in the proper functioning of information systems could disrupt operations and cause unanticipated increases in costs and/or decreases in revenues.

The proper functioning of Grainger’s information systems is critical to the successful operation of its business. Grainger continues to invest in software, hardware and network infrastructures in order to effectively manage its information systems. Although Grainger’s information systems are protected with robust backup and security systems, including physical and software safeguards and remote processing capabilities, information systems are still vulnerable to damage or interruption from natural or human induced disasters, extreme weather, power losses, telecommunication failures, user error, third party actions such as malicious computer programs, denial-of-service attacks and cybersecurity breaches, and other problems. In addition, from time to time Grainger relies on the information technology (IT) systems of third parties to assist in conducting its business.

If Grainger’s systems or those of third parties on which Grainger depends are damaged, breached, or cease to function properly or are otherwise disrupted, Grainger may have to make a significant investment to repair or replace them and may suffer interruptions in its business operations in the interim. If critical information systems fail or otherwise become unavailable, Grainger’s ability to operate its eCommerce platforms, process orders, maintain proper levels of inventories, collect accounts receivable, disburse funds, manage its supply chain, monitor results of operations, and process and store employee or customer data, among other functions, could be adversely affected. Any such interruption of Grainger’s information systems could have a material adverse effect on its business or results of operations. Grainger has experienced these incidents in the past, which it deemed immaterial to its business and operations individually and in the aggregate and may be subject to other incidents in the future. There can be no assurance that any future incidents will not be material to Grainger’s business, operations or financial condition.

Cybersecurity incidents, including breaches of information systems security, could damage Grainger’s reputation, disrupt operations, increase costs and/or decrease revenues.

Through Grainger’s sales and eCommerce channels, Graingerthe Company collects and stores personally identifiable, confidential, proprietary and other information from customers so that they may, among other things, purchase products or services, enroll in promotional programs, register on Grainger’s websites or otherwise communicate or interact with the Company. Moreover, Grainger’s operations routinely involve receiving, storing, processing and transmitting sensitive information pertaining to its business, customers, suppliers and employees, and other sensitive matters.

Cyber threats are rapidly evolving and those threats and the means for obtaining access to information in digital and other storage media are becoming increasingly sophisticated. Each year, cyber-attackers make numerous attempts to access the information stored in the Company’s information systems. If successful, these attackscyber-attacks may expose Grainger to risk of loss or misuse of proprietary or confidential information or disruptions of business operations. The transition in recent years to remote and “hybrid” working arrangements, may increase Grainger’s vulnerability to cybersecurity incidents, including breaches of information systems security, which could damage Grainger’s reputation and commercial relationships, disrupt operations, increase costs and/or decrease revenues, and expose Grainger to claims from customers, suppliers, financial institutions, regulators, payment card associations, employees and others.

Grainger's IT infrastructure also includes products and services provided by suppliers, vendors and other third parties, and these providers can experience breaches of their systems and products that impact the security of systems and proprietary or confidential information. Moreover, from time to time, Grainger may share information with these third parties in connection with the products and services they provide to the business. While Grainger requires assurances that these third parties will protect confidential information, there is a risk that the confidentiality of data held or accessed by them may be compromised. If successful, those attempting to penetrate Grainger’s or

Moreover, the Company may face the threat to its computer systems of unauthorized access, computer hackers, computer viruses, malicious code, ransomware, phishing, organized cyber-attacks and other security problems and system disruptions. Such tactics may also seek to cause payments due to or from the Company to be misdirected to fraudulent accounts, which may not be recoverable by the Company.

In addition, a Grainger employee, contractor or other third party with whom Grainger does business may attempt to circumvent security measures or otherwise access Grainger’s information systems in order to obtain such information or inadvertently cause a breach involving such information. Further, Grainger’s systems are integrated with customer systems in certain cases, and a breach of the Company’s information systems could be used to gain illicit access to a customer’s systems and information.

Grainger has been subject to unauthorized accesses of certain supplier and customer information, including in the last three years, which it deemed immaterial to its business and operations individually and in the aggregate, and may be subject to other unauthorized accesses of its systems in the future. There can be no assurance that any future unauthorized access to or breach of Grainger’s information systems will not be material to Grainger’s business, operations or financial condition.

Grainger maintains information security staff, policies and procedures for managing risk to its information security systems, conducts annual employee awareness training of cybersecurity threats and routinely utilizes consultants to assist in evaluating the effectiveness of the security of its IT systems. Moreover, senior leadership, including Grainger's Chief Technology Officer and Chief Information Security Officer, present a cybersecurity briefing at every Audit Committee meeting, provide "cyber dashboard" reports for the Board material at each meeting, and at least annually brief the full Board of Directors. While Grainger has instituted these and other safeguards for the protection of information and governance and oversight of its information security posture, because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, Grainger may be unable to anticipate these techniques or implement adequate preventative measures. Any breach of Grainger’s security measures or any breach, error or malfeasance of those of its third partythird-party service providers could cause Grainger to incur significant costs to protect any customers, suppliers,

employees, and other parties whose personal data is compromised and to make changes to its information systems and administrative processes to address security issues. Grainger works with third party information security consultants to assess and enhance its policies and incident responses and to respond to breaches. In addition, although Grainger maintains insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber and information security risks, depending on the nature, location and extent of any event, such insurance coverage may be insufficient to cover all losses.

Grainger continuously evaluates the need to upgrade and/or replace its systems and network infrastructure to protect its computing environment, to stay current on vendor supported products and to improve the efficiency of its systems and for other business reasons. The implementation of new systems and IT could adversely impact its operations by imposing substantial capital expenditures, demands on management time and risks of delays or difficulties in transitioning to new systems. In addition, the Company's systems implementations may not result in productivity improvements at the levels anticipated. Systems implementation disruption and any other IT disruption, if not anticipated and appropriately mitigated, could have an adverse effect on its business.

Grainger’s ability to adequately protect its intellectual property or successfully defend against infringement claims by others may have an adverse impact on operations.

Grainger’s business relies on the use, validity and continued protection of certain proprietary information and intellectual property, which includes current and future patents, trade secrets, trademarks, service marks, copyrights and confidentiality agreements as well as license and sublicense agreements to use intellectual property owned by affiliated entities or third parties. Unauthorized use of Grainger’s intellectual property by others could result in harm to various aspects of the business and may result in costly and protracted litigation in order to protect Grainger’s rights. In addition, Grainger may be subject to claims that it has infringed on the intellectual property rights of others, which could subject Grainger to liability, require Grainger to obtain licenses to use those rights at significant cost or otherwise cause Grainger to modify its operations.

In order to compete and have continued growth, Grainger must attract, retain, train, motivate develop and transitiondevelop executives and other key employees, including those in managerial, technical, sales, marketing and IT support positions. Grainger competes to hire employees at increasingly competitive wage rates and then must train them and develop their skills and competencies. Qualified individuals needed to fill open positions may be in short supply in some areas. Further, changes in market compensation rates may adversely affect the Company's labor costs. Competition for qualified employees could require the Company to pay higher wages to attract a sufficient number of employees. The performance of Grainger’s stock price could impact Grainger’s use of equity-based compensation to attract and retain executives and other key employees. The Company's employee hiring and

retention also dependdepends on itsthe Company's ability to build and maintain a diverse and inclusive workplace culture that enables its employees to thrive.

Grainger’s results of operations could be adversely affected by increased costs due to increasedgenerally higher wage rates, competition for diverse talent, higher employee turnover, increased employee benefit costs, failure to successfully hire executives and key employees or the loss of executives and key employees. Further, changes in the Company's management team may be disruptive to its business, and any failure to successfully transition and assimilate key new hires or promoted employees could adversely affect its business and results of operations.

Grainger’s continued success is substantially dependent on positive perceptions of Grainger’s reputation.

Grainger’s business is subject to legislative, legal, and regulatory risks and conditions specific to the countries in which it operates. In addition to Grainger’s U.S. operations, which in 20202022 generated approximately 78%82% of its consolidated net sales, Grainger operates its business principally through wholly-ownedwholly owned subsidiaries in Canada, China, Mexico, and the U.K., and its majority-owned subsidiary in Japan.

The wide array of laws, regulations and standards in each domestic and foreign jurisdiction where Grainger operates, include, but are not limited to:to, advertising, marketing and marketingInternet regulations (including the use of proprietary or third-party “cookies” in connection with Grainger’s eCommerce platforms), anti-bribery and corruption laws, anti-competition regulations, data protection (including, because Grainger accepts credit cards, the Payment Card Industry Data Security Standard), data privacy (including in the U.S., the California Consumer Privacy Act and Privacy Rights Act, in Japan, the Act on Protection of Personal Information, and in the European Union, the General Data Protection Regulation 2016) and cybersecurity requirements (including protection of information and incident responses), environmental protection laws, foreign exchange controls and cash repatriation restrictions, health and safety laws, import and export requirements,compliance (including the U.S. Commerce Department’s Export Administration Regulations, trade sanctions promulgated by the Office of Foreign Asset Control and anti-money laundering regulations), intellectual property laws, labor laws (including federal and state wage and hour laws), product compliance or safety laws, supplier regulations

Failure to comply with any of these laws, regulations and standards could result in civil, criminal, monetary and non-monetary fines, penalties, remediation costs and/or remediation costssignificant legal fees as well as potential damage to the Company’s reputation. Changes in these laws, regulations and standards, or in their interpretation, could increase the cost of doing business, including, among other factors, as a result of increased investments in technology and the development of new operational processes. Furthermore, while Grainger has implemented policies and procedures and provides training designed to facilitate compliance with these laws, regulations and standards, there can be no assurance that employees, contractors, suppliers, vendors, or other third parties will not violate such laws, regulations and standards or Grainger’s policies. Any such failure to comply or violation could individually or in the aggregate materially adversely affect Grainger’s financial condition, results of operations and cash flows.

In addition, Grainger’s business and results of operations in the U.K. may be negatively affected by changes in trade policies, or changes in labor, immigration, tax or other laws, resulting from the U.K.’s exit from the European Union.

Grainger is subject to a number of rules and regulations related to its government contracts, which may result in increased compliance costs and potential liabilities.

Grainger’s contracts with U.S. federal, state and local government entities are subject to various and changing regulations related to procurement, formation and performance. In addition, the Company’s government contracts may provide for termination, reduction or modification by the government at any time, with or without cause. From time to time, Grainger is subject to governmental or regulatory investigations or audits related to its compliance with these rules and regulations. Violations of these regulations could result in fines, criminal sanctions, the inability to participate in existing or future government contracting and other administrative sanctions. Any such penalties could result in damage to the Company’s reputation, increased costs of compliance and/or remediation and could adversely affect the Company’s financial condition and results of operations.

In conducting its business, Grainger may become subject to legal proceedings or governmental investigations, including in connection with product liability or product compliance claims if people, property or the environment are harmed by Grainger’s products or services.

Grainger is, and from time to time may become, party to a number of legal proceedings or governmental investigations for alleged violations of laws, rules or regulations. Grainger also may be subject to disputes and proceedings incidental to its business, including product-related claims for personal injury or illness, death, environmental or property damage or other commercial disputes, including the proceedings discussed in Note 15 to the Consolidated Financial Statements included in Part I,II, Item 3. Legal Proceedings.8: Financial Statements and Supplementary Data of this Form 10-K. The defense of these proceedings may require significant expenses and divert management’s time and attention, and Grainger may be required to pay damages that could individually or in the aggregate materially adversely affect its financial condition, results of operations and cash flows. In addition, any insurance or indemnification rights that Grainger may have with respect to such matters may be insufficient or unavailable to protect the Company against potential loss exposures. Grainger also may be requested or required to recall products or take other actions. The Company’s reputation could also be adversely affected by any resulting negative publicity.

Tax changes could affect Grainger’s effective tax rate and future profitability.

Grainger’s future results could be adversely affected by changes in the effective tax rate as a result of changes in Grainger’s relative overall profitability and changes in the mix of earnings in countries with differing statutory tax rates, changes in tax legislation, the results of the examination of previously filed tax returns, and continuing assessment of the Company’s tax exposures. For example, the Company continues to monitor the Inflation Reduction Act of 2022 (IRA) and other similar regulatory developments to evaluate their potential impact on Grainger’s tax rate, financial statements and share repurchase program.

Grainger’s common stockGrainger may be subject to volatility or price declines.

other factors, including those discussed in this Item 1A. These factors, manyor customers, or the Company's operations are disrupted due to physical impacts of which are outsideclimate change, the Company's business, capital expenditures, financial condition, results of Grainger’s control,operations and competitive position could cause stock price and trading volume volatility or Grainger’s stock price to decline. Volatility in the price of Grainger's securities could result in the filing of securities class action litigation, which could result in substantial costs and the diversion of management time and resources.be negatively impacted.

Changes in Grainger’s credit ratings and outlook may reduce access to capital and increase borrowing costs.

Grainger’s credit ratings are based on a number of factors, including the Company’s financial strength and factors outside of Grainger’s control, such as conditions affecting Grainger’s industry generally or the introduction of new rating practices and methodologies. Grainger cannot provide assurances that its current credit ratings will remain in effect or that the ratings will not be lowered, suspended or withdrawn entirely by the rating agencies. If rating agencies lower, suspend or withdraw the ratings, the market price or marketability of Grainger’s securities may be adversely affected. In addition, any change in ratings could make it more difficult for the Company to raise capital on favorable terms, impact the Company’s ability to obtain adequate financing, and result in higher interest costs for the Company’s existing credit facilities or on future financings.

Grainger has incurred substantial indebtedness and may incur substantial additional indebtedness, which could adversely affect cash flow, decrease business flexibility, or prevent Grainger from fulfilling its obligations.

As of December 31, 2020,2022, Grainger’s consolidated indebtedness was approximately $2.6$2.3 billion. The Company’s indebtedness could, among other things, limit Grainger’s ability to respond to rapidly changing business and economic conditions, require the Company to dedicate a substantial portion of its cash flows to the payment of principal and interest on its indebtedness, reducing the funds available for other business purposes, and make it more difficult to satisfy the Company’s financial obligations as they come due during periods of adverse economic and industry conditions.

The agreements governing Grainger’s debt agreements and instruments contain representations, warranties, affirmative, negative and financial covenants, and default provisions. Grainger’s failure to comply with these restrictions and obligations could result in a default under such agreements, which may allow Grainger’s creditors to accelerate the related indebtedness. Any such acceleration could have a material adverse effect on Grainger’s business, financial condition, results of operations, cash flows, and its ability to obtain financing on favorable terms in the future.

In addition, Grainger may in the future seek to raise additional financing for working capital, capital expenditures, refinancing of indebtedness, share repurchases or other general corporate purposes. Grainger’s ability to obtain additional financing will be dependent on, among other things, the Company’s financial condition, prevailing market conditions and numerous other factors beyond the Company’s control. Such additional financing may not be available on commercially reasonable terms or at all. Any inability to obtain financing when needed could materially adversely affect the Company’s business, financial condition or results of operations.

Item 1B: Unresolved Staff Comments

None.

Item 2: Properties

Item 3: Legal Proceedings

Item 4: Mine Safety Disclosures

Not applicable.

Item 5: Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Market Information and Dividends

Grainger's common stock is listed and traded on the New York Stock Exchange, under the symbol GWW.

Grainger expects that its practice of paying quarterly dividends on its common stock will continue, although the payment of future dividends is at the discretion of Grainger’s Board of Directors and will depend upon Grainger’s earnings, capital requirements, financial condition and other factors.

Holders

The approximate number of shareholders of record of Grainger’s common stock as of January 29, 2021,31, 2023, was 585531 with approximately 226,759423,817 additional shareholders holding stock through nominees.

Issuer Purchases of Equity Securities - Fourth Quarterby the Issuer and Affiliated Purchasers

Company Performance

Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations

W.W. Grainger, Inc. is a broad line business-to-business distributor of maintenance, repair and operating (MRO) products and services with operations primarily in North America (N.A.), Japan and Europe.the United Kingdom (U.K.). Grainger uses a combination of its high-touch solutions and endless assortment businesses to serve its more than 5 million customers worldwide, and which rely on Grainger for MRO products and services that enable them to run safe, sustainable and productive operations.

The Company’s continued strategic priority for 20212023 is clear:to relentlessly expand Grainger’s leadership position in the MRO space by being the go-to-partnergo-to partner for people who build and run safe and productive operations. To achieve this, each Grainger business has a set of strategic objectivesobjectives. The high-touch solutions businesses are focused on top line growth throughkey initiatives that drive top-line revenue and MRO market share gain. Theoutgrowth. Additionally, the high-touch solutions businesses are focused on growing through differentiated sales and services (e.g., direct customer relationships and onsite services), advantaged MRO solutions (e.g., get customers the exact products and services they need to solve a problem quickly) and unparalleled customer service (e.g., deliver flawlessly on every customer transaction). The endless assortment businesses are focused on product assortment expansion and innovative customer acquisition.acquisition and retention. Additionally, all Grainger businesses are focused on continuously improving customer experience, productivity and optimizing and scaling cost structures and investing in digital marketing, technology and supply chain infrastructure to ultimately deliver long-term returns for shareholders.

In March 2020,August 2022, the World Health Organization characterized Coronavirus (COVID-19) asInflation Reduction Act of 2022 (IRA) was signed into United States (U.S.) law. Under the IRA, there is a pandemic. The rapid spreadnew 15% corporate minimum tax and a new 1% excise tax on net stock repurchases, effective after December 31, 2022. In addition, the IRA contains provisions relating to climate change, energy and health care. Based on Grainger's current analysis of the provisions, the Company does not anticipate compliance with the IRA will result in a material impact to the Consolidated Financial Statements.

In combination with the economic recovery of the ongoing COVID-19 pandemic, the global economy continues to experience volatile disruptions including to the commodity, labor and transportation markets. These disruptions have contributed to an inflationary environment which has caused significantaffected, and may continue to affect, the price and availability of certain products and services necessary for the Company's operations. Such disruptions have impacted, and may continue to impact, the Company's business, financial condition and results of operations. As a result of continued inflation, the Company has implemented strategies designed to mitigate certain adverse effects of higher costs while also remaining market price competitive.

The Company continues to monitor economic conditions in the U.S. and global markets, and economists expect the economic impact will continue to be significant. Grainger is an essential business and its major facilities have been allowed to remain operational during the pandemic as customers have depended on Grainger's products and services to keep their businesses up and running. In 2020, as the COVID-19 pandemic impacted global marketsglobally, and the needsimpact of macroeconomic pressures, including rising interest rates, fluctuating currency exchange rates and recession fears, on the Company’s business, customers, employees, suppliers and communities changed,other third parties. Historically, the Company’s effortsbroad and business plans evolved accordingly. Grainger is currently focused on serving customers and communities well through the pandemic and their respective recovery, supporting the needs and safety of employees and ensuring the Company continues to operate with a strong financial position.diverse

Impactcustomer base and the nondiscretionary nature of the COVID-19 Pandemic on Grainger Businesses

The Company's major operational facilities and infrastructure (i.e., DCs, branches, e-commerce sites, and logistic partners) remained operational during 2020 with limited disruptions, while adheringCompany does not currently expect significant disruption to strict safety and social-distancing protocols. From an inventory management and supply chain perspective, the Company has experienced elevated levels of demand for pandemic-related products, while demand for non-pandemic products has declined.its overall business resulting from these events.

The following table is included as an aid to understanding changes in Grainger's Consolidated Statements of Earnings (in millions of dollars):.

2020 ComparedThe following table is included as an aid to 2019

The following tables (in millions of dollars) reconcile reported SG&A,selling, general and administrative (SG&A) expenses, operating earnings, and net earnings attributable to W.W. Grainger, Inc. and diluted earnings per share determined in accordance with Generally Accepted Accounting PrinciplesU.S. generally accepted accounting principles (GAAP) in the United States of America to non-GAAP measures including adjusted SG&A, adjusted operating earnings, andadjusted net earnings attributable to W.W. Grainger, Inc., which are all considered non-GAAP measures. and adjusted diluted earnings per share. The Company believes that these non-GAAP measures provide meaningful information to assist shareholdersinvestors 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. Because non-GAAP financial measures are not standardized, it may not be possible to compare these measures with other companies' non-GAAP measures having the same or similar names. These non-GAAP measures should not be considered in isolation or as a substitute for reported results. These non-GAAP measures reflect an additional way of viewing aspects of operations that, when viewed with GAAP results, provide a more complete understanding of the business.

SG&AThe following tables provide a reconciliation of $3,219 million for the year ended December 31, 2020 increased $84 million, or 3% comparedGAAP to $3,135 million in the same period in 2019. During the first quarternon-GAAP measures (in millions of 2020, the Company recorded a $177 million write-down of goodwill, intangibles and long-lived assets from the Fabory business and during the second quarter of 2020, the Company recorded a $109 million pretax loss from the sale of the Fabory business which was the largest contributor to the decline in reported operating earnings. Excluding restructuring, net, impairment charges and business divestitures in both periods as noteddollars):

Noted in the table above SG&A decreased $98 million or 3%.

The Company's adjusted net earnings attributable to W.W. Grainger Inc. for the full year ended December 31, 2020 decreased $1542022 was $1,526 million, an increase of $483 million, or 18%46%, compared to $695 million from $849 million in the same period in 2019. Excluding restructuring, net, impairment charges and business divestitures and income taxes from both periods as noted in the table above, net earnings decreased $81 million, or 8%. The decrease in net earnings primarily resulted from lower gross profit dollars partially offset by lower SG&A.2021.

The following table shows reported segment results (in millions of $1,299 million decreased $92 million, or 7% from $1,391 million in the same period of 2019. This decrease was driven primarily by lower gross profit dollars.dollars):

Net sales were $476of $2,787 million for the year ended December 31, 2020, a decrease of $532022 increased $211 million, or 9.9% when compared with $529 million for 2019. On a daily basis, net sales decreased 10.3% and consisted of the following:

Gross profit margin decreased 2.9 percentage points in 2020 compared to the same period in 2019 primarily due to negative price cost spread and COVID-19 pandemic-related mix impact.

SG&A of $3 million in the prior period primarily due to lower sales volume.

Operating losses for other businesses were $24earnings of $223 million for the year ended December 31, 2020, a decrease of $152022 decreased $9 million, or 166%4%, compared to operating lossesthe same period in 2021. The decrease was primarily driven by higher SG&A, partially offset by higher gross profit dollars.

Operating earnings of $9 million for 2019. Excluding restructuring, net, impairment charges and business divestitures in both periods as noted in the table above, operating earnings would have increased $42 million, or 38%. This increase is primarily due to higher earnings in the endless assortment businesses resulting from strong revenue growth and SG&A leverage.

Cash and Cash Equivalents

AtAs of December 31, 20202022 and 2019,2021, Grainger had cash and cash equivalents of $585$325 million and $360$241 million, respectively. ThisThe increase in cash iswas primarily due to cash flows from operations delayedand lower volume of share repurchases, partially offset by working capital investmentschanges and temporarily reduced share repurchase program. Approximately 54% and 69% of cash and cash equivalents were outside the U.S.higher tax disbursements in 2022. The Company had approximately $1.6 billion in available liquidity as of December 31, 2020 and 2019, respectively. Grainger has no material limits or restrictions on its ability to use these foreign liquid assets.2022.

Debt

Total debt, which is defined as total interest-bearing debt (short-term current and long-term) and lease liabilities as a percent of total capitalization, was 55.6%49.9% and 54.3%56.2%, as of December 31, 20202022 and 2019,2021, respectively.

Commitments and Other Contractual Obligations

At December 31, 2020 Grainger'sThe Company's material cash requirements include the following commitments and other contractual obligations, including estimated payments due by period, are as follows (in millions of dollars):