Greetings, ladies and gentlemen, and welcome to the W.W. Grainger second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A 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 our host, Kyle Bland, Vice President of Investor Relations. Thank you. You may begin. Good morning. Welcome to Grainger's Second Quarter 2022 Earnings Call. With me are D.G. Macpherson, Chairman and CEO, and Dee Merriwether, Senior Vice President and CFO. As a reminder, some of our comments today may include forward-looking statements. Actual results may differ materially as a result of various risks and uncertainties, including those detailed in our SEC filings. Reconciliations of any non-GAAP financial measures with their corresponding GAAP measures are found in the tables at the end of this presentation and in our Q2 earnings release, both of which are available on our IR website. This morning's call will focus on our second quarter 2022 results, which are consistent on both a reported and adjusted basis for the respective quarterly periods presented. 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 disclosed will differ somewhat from MonotaRO's public statements. Now I'll turn it over to D.G.. Thanks, Kyle. Good morning, and thank you for joining us. Today, I'll provide an overview of our second quarter performance and pass it to Dee to walk through the financials. Before I get to the quarter, I'd like to start with our Grainger Edge framework, which guides our strategy and behaviors across the company and with our customer and supplier partners. Over the last several years, this has been critical to our response to COVID and our efforts to gain share. Importantly, these principles that you see here form the basis of what we expect of each other. Team members have embraced these principles to build better customer solutions, focus on what matters, and move faster to deliver value. They are more than words on a page. They are how we work together to support our customers and team members. One example of the Grainger Edge helping guide our efforts is around ESG. Our principles of starting with the customer, investing in our success, and doing the right thing heavily influence our approach. At Grainger, we operate sustainably and with a long-term approach to critical issues. Our ESG approach, which we have reported on now for 11 years, is tightly integrated into the Grainger Edge and increasingly tied to our daily operations. In our recently published 2022 ESG report, we discussed how we are organizing our environmental, social, and governance practices, as well as our four near-term priorities, which is where we believe we can make the most impact. These near-term focus areas are diversity, equity, and inclusion, making sure that Grainger is a place where each team member feels welcome and able to give their best work. Energy and emissions, we continue to make great progress on improving our carbon footprint, and we have significant plans moving forward. Customer sustainability solutions, helping customers reduce energy and water consumption. Finally, supplier diversity, which helps us identify and support great supplier partners to propel the business. Our team members have brought and will continue to bring these priorities into their work with our customers, helping them to achieve their ESG goals and creating even more value. As highlighted in the 2022 ESG report, we have recently worked with a state university to retrofit parking garage lighting, creating over $200,000 in annual energy savings, assisted a CPG company as they build out their supplier diversity program, and partnered with a nationwide hospital system in identifying a roofing vendor to install bio-based materials on roughly 500,000 sq ft of rooftop, which will reduce greenhouse emissions by 39 million lbs over a 40-year period. These are just a few examples of ESG in action, and I am incredibly proud of how our teams are continuing to live our principles each day as they work with our customers, suppliers, and each other to further our efforts in this area. I hope you will take some time to review our full 2022 ESG report, which can be found on graingeresg.com. Turning now to our second quarter results. We had another strong quarter with sales growth of 19.6% or 22% on a daily constant currency basis. Our results were driven by strong performance in both segments. This included 1,000 basis points of market outgrowth in our U.S. High-Touch business, fueled by continued solid execution on our strategic initiatives and strong returns on our inventory and supply chain investments. Total company gross profit finished the quarter at 37.6%, expanding 255 basis points over the prior year's second quarter. The largest driver of our expansion in the quarter was lapping the prior year pandemic-related inventory adjustment. Even when excluding that adjustment, however, we're still up around 60 basis points year-over-year, with both segments contributing to the favorable results. We delivered 13.9% operating margin, an increase of 350 basis points over the prior year's second quarter. This is primarily a result of the improved gross margin performance, as well as our ability to continue to drive SG&A leverage on the top line growth. In the quarter, we delivered adjusted ROIC of 40.5%, a significant increase over the 29.2% generated in the second quarter of last year. We also returned $219 million to shareholders through share repurchases and dividends. It was an excellent quarter all around. As a result of the strong performance and the continued momentum we are seeing through July, we are raising our full-year 2022 guidance, which Dee will discuss in more detail. With that, I'll pass it over to Dee. Thanks, D.G. Turning to slide eight, we covered revenue and margins at a total company level, but I'd like to highlight a few other key points. Our total company SG&A as a percent of sales was 23.7%, a 95 basis point improvement over the prior year's second quarter as we drove leverage from our top-line performance. We continue to invest in our strategic initiatives, but remain committed to not adding unnecessary costs to the business. Our resulting EPS in the quarter was $7.19 up 68% versus the second quarter of 2021. Turning to our High-Touch Solutions segment for the second quarter, we continued to see strong results with daily sales up 22.2% compared to the second quarter of 2021. We saw broad-based double-digit growth across all geographies and over 20% growth in both midsize and large customers in the U.S.. In the U.S., we continue to see strong double-digit volume growth and price realization of around 11%, all helping fuel 23.1% daily sales growth. Canadian daily sales were also strong of 11.1% or 15.5% in local days in local currency. It's been a long journey, and we are proud of the traction the Canadian team has gained with their now fifth consecutive quarter of profitability. For the segment, GP margins finished the quarter at 39.7%, up 275 basis points versus the prior year, driven primarily by lapping of a $63 million pandemic product inventory adjustment in the prior year period. Excluding this inventory adjustment, we achieved gross margin expansion of over 25 basis points as favorable product mix and largely neutral price cost spread were partially offset by heightened freight costs. As we manage through this highly inflationary period, while there will be quarter-to-quarter fluctuations due to timing, our goal is to remain price competitive while achieving price cost neutrality. Increased SG&A spend was driven primarily by higher variable compensation expense as well as continued investments in marketing, payroll, and benefits to support growth. Even with the increased investment, we delivered 150 basis points of SG&A leverage year-over-year, and when combined with strong gross margin recovery, Q2 operating margin of 15.6% was up 425 basis points versus the prior year period. Overall, the performance in our High-Touch Solutions business remains strong as our powerful value proposition continues to resonate with customers. Looking at market outgrowth on slide 10, we estimate that the U.S. MRO market, including both volume and price inflation, grew between 12.5% and 13.5%, indicating that we achieved roughly 1,000 basis points of market outgrowth in the quarter. While we know that our advanced supply chain contributes to our success, we also continue to see strong growth with our strategic investments. We are excited about the returns that we are seeing on these investments, most notably with our remerchandising and our data-driven marketing programs. Our continued success gives us confidence in our ability to consistently achieve 300-400 basis points of annual market outgrowth on an ongoing basis and through the cycle. Moving to our endless assortment segment, reported and daily sales increased 11.4% and 21.1% on a daily constant currency basis after normalizing for significant impact of the depreciating Japanese yen. In local currency and local days, MonotaRO achieved 21.9% growth, and Zoro U.S. daily sales were up 23.2%. The segment growth continues to be driven by new customer acquisition at both Zoro and MonotaRO and enterprise and repeat customer growth at MonotaRO. An impressive quarter of growth across the segment. Gross margin expanded 100 basis points versus the second quarter of 2021 and was primarily driven by freight efficiencies as average order values increased at both Zoro and MonotaRO as both continued to focus on B2B customers. As planned, segment operating margin declined 25 basis points in the quarter, consistent with the first quarter. This decline was primarily a result of the new DC at MonotaRO, coupled with continued investment in technology, marketing, and payroll costs to support growth at Zoro. Despite the increased investment, Zoro operating margins still improved 85 basis points over the second quarter of 2021 on strong GP improvement. As a reminder, the increased cost at MonotaRO will continue for the remainder of 2022 as they transition to their new Inagawa DC. We anticipate that the business will return to more normal operating margins in 2023. In addition, we also continue to see positive results with our key endless assortment operating metrics. On slide 12, you can see total registered users across MonotaRO and Zoro combined are up 18% over the prior year period. On the right, we show the continued growth of Zoro's SKU portfolio. We are targeting about 2 million SKU additions in 2022 and will likely exceed that given our progress after the first six months. At the end of the second quarter, we have around 10.2 million active SKUs on the website. Now looking to the back half of the year. With another very strong quarter and with July total company daily sales of 19% or 21% in constant currency, we are raising our 2022 full year outlook. While we acknowledge that the broader market conditions remain uncertain, we have not seen a slowdown in demand in our business and continue to hear positive sentiment from our customers, further supporting our revised outlook. Our updated outlook for the full year 2022 includes expected daily sales growth between 14.5% and 16.5% and EPS between $27.25 and $28.75, a 41% increase year-over-year at the midpoint. We've also updated our supplemental guidance in the appendix, which reflects improved segment operating margins and narrow ranges for all other metrics. While it is not typical for us to change our guidance this frequently, our objective is to provide our most up-to-date view with each earnings cycle. Given the strong revenue and profitability performance to date, we felt it was necessary to update our guidance metric again this quarter. With that, I will turn it back to D.G. for some closing remarks. Thank you, Dee. Before I open it up for questions, I would make just a few comments. While we may not know exactly what the rest of this and next year will bring from a market perspective, I'm confident in our team's ability to execute, drive market outgrowth, and invest in the areas that matter most. The time that I spent with customers this past quarter has reinforced the pride I have in the Grainger team and our ongoing commitment to remain customer-focused. I hear consistently that we have delivered to keep our customers working. As a result of our team's efforts, we have deepened customer relationships, becoming the trusted partner to many. We performed extremely well in the quarter, and I am confident that we will produce a strong finish to 2022 and remain well positioned to serve our customers for the years to come. With that, let's open the line up for questions. Thank you. Ladies and gentlemen, at this time, we'll be conducting our question-and-answer session. Please limit yourself to one question and one follow-up question. To ask a question at this time, simply press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, to ask a question at this time, press star one on your telephone keypad. Our first question comes from Ryan Merkel with William Blair. Please state your question. Thanks. Good morning and very nice quarter. Thank you. Hi, Ryan. I wanted to ask a question on the share gains, which have been really impressive. I guess it's a two-part question. First, is the key driver of the share gains the advantage inventory that you have or have the initiatives also maybe added a couple hundred basis points above that 300-400 target? Yes, it's a great question. Thanks for asking. Yeah, the initiatives have added more than 300-400 basis points. We do on many of the initiatives, we do A/B tests, and we're able to track what the initiatives are bringing, and they've been very effective in the last year or so. We continue to see very strong gain from the initiatives. We are getting some tailwind from our inventory position as well, but the initiatives have been very strong in terms of their performance. Okay. I guess the follow-up is, you know, why don't you raise the share gain target if these initiatives are, you know, adding more than, you know, the 300-400? Is it not sustainable, or you just don't have enough evidence yet? Yeah, you know, I think more time will help us understand if this is gonna be if we're gonna get to a new norm in terms of higher share gain. Thus far, we've, you know, committed to the share gain targets, and we'll continue to talk to you about what we expect going forward. Perfect. Thank you. Thanks. Our next question comes from Tommy Moll with Stephens. Please state your question. Morning, and thanks for taking my questions. Morning. Well, I was gonna ask if you'd seen any slowdown in demand, and Dee beat me to the punch, so I guess I'll ask it a different way. Is there any end market or customer anecdote that's not as positive as you could even hope for at this point? Is there anything at all that's changed? I'd, I just wanna circle back on that because your comment, you haven't yet seen a slowdown, was pretty clear. At the same time, investors are searching closely for any sign of anything that's changed, and there have been at least a few macro indicators that have been minimal. Yeah. Yeah. No. Let me just, you know, we're not, we're certainly not experts on every segment, but I will give you some observations. A lot of this, you know, probably has to do with what we've seen through the pandemic and coming out of the pandemic. If you look at our segment performance in the appendix of the materials, you'll see that slower growth markets, but still growth markets are retail, which is a lot of distribution centers typically for us. That market was way up the last couple of years. That has certainly slowed down, but still growing. Healthcare and government are still growing and have sort of accelerated recently again, but they're not as strong as general manufacturing. The industrial parts of the economy are certainly growing faster for us than the non-industrial parts right now. That would be my observation. I think that's certainly consistent with what we're hearing from others as well. You know, I think the nice thing here is that we are seeing growth in all segments and the share gain is helping us. Yeah, that's great. Thank you. Pivoting to a question on your technology investment for High-Touch. D.G., you've talked for some time about some of the investments you've made in the website, the product information systems, customer database, et cetera. Can you bring us up to speed on those initiatives? What inning are we in for this investment cycle? I was gonna ask- Yeah. If you could identify any of the fruit that's been borne out of these initiatives, which you've already touched on a little bit, but maybe you could give a few more examples. Yeah. I would say, I'll just plug for the Analyst Day. We'll talk a little bit more about this during Analyst Day for sure. What I would say is the things we started earlier have proven to be very, very valuable around product information and publishing, which helps our merchandising efforts and website efforts and print publications as well. We've seen really good results from that. We started to see really good results from the investments in customer information as well in terms of things like improving seller coverage, improving marketing outreach, making sure we're sending the right message to the right customers. We'll talk more in September about sort of what we have and what we plan to work on from a technology transformation. We really like the signs we've seen so far, and we've had some very significant results. Thank you. Our next question comes from Deane Dray with RBC Capital Markets. Please go ahead. Thank you. Good morning, everyone. Hey, just a first stab clarification for Dee on the price-cost neutrality. Just, is that on the margin basis, I trust? That is on product costs. If you kinda go back, when we've talked over a period of time, we try to focus on the inflation that comes through product versus what comes through like transportation. What we have noted is that our goal is over the cycle, any cycle, is to be price cost neutral as it relates to our product costs and to cover a majority of any incremental freight costs on a go-forward basis. As you all probably know, we saw a significant acceleration of fuel prices during the quarter, and we are working very hard to look for ways to cover some of that incremental freight cost. It is not when we say price cost neutrality, we're not talking about overall gross margin. It is a component within gross margin. Okay. That's helpful. Thanks for that. This is more of a nuance, but you lowered the high end of the buyback guidance, and this quarter share count creep was up, and it cost you $0.03. I don't know if that's off. It's more of a nuance. Just why would you lower the buyback, and how do you feel about trying to contain share creep? Thanks. Yeah. Thanks for the question. You know, we're generally always in the market from a repurchase perspective. We're not specifically looking to attempt to try to time the market with our repurchases, and we really try to balance that with our cash generation. It was nothing more than, you know, Q1 and Q2, we have some large cash payouts during those periods as it relates to our bonuses, some tax payments. It's generally just timing for us. Got it. Thanks for all the color. Our next question comes from David Manthey with Baird. Please state your question. Yeah. Thank you. Good morning, everyone. The High-Touch gross margin has seasonality, so I get the second half operating margin guidance relative to the first half. In Endless Assortment, the op margin looked like it averaged about 8.3% in the first half. Your guidance for the second half implies lower than that. I'm just wondering if you can outline what are the key factors that are pressuring second half profitability relative to the first half in Endless Assortment? Well, I'll start, D.G. Well, generally, you know, we're continuing, as it relates to MonotaRO to ramp up, our investments there and, fund those investments for carrying two DCs, Inagawa and Amagasaki, at the same time. Those ramp costs continue to have an impact on us. You know, similar to the High-Touch segment, the Zoro business is continuing to invest in marketing, payroll costs as well as technology, to drive their long-term revenue growth. It is just investments during the period of time. As we get to 2023, specifically for MonotaRO, we expect their operating margins to normalize back to historic levels. We'll see some settling out at that point. Okay. Thank you for that. Second, could you outline the impact of LIFO accounting on your results? We don't talk much about that, but if you talk about sort of gross margin impact in the current quarter, the recent past, you know, the near future. Sure. You know, we generally speak to or share our LIFO impact on an annual basis. So what I will say is that, with us being in an inflationary period, it's very important, as you can imagine, to stay on top of standard cost increases with product. We are doing that. We continue to have increased cost inflation within our inventory and COGS related to LIFO, but we feel like we're fairly on top of that, now that we've been in this situation for going on two. Well, I won't say two years. Close to a year now. Materially in the quarter, it was a really immaterial impact, but because we continue to update our standard costs, on our inventory and cover that LIFO impact with price. Thank you. Our next question comes from Hamzah Mazari with Jefferies. Please state your question. Hi, this is Hans Hoffman filling in for Hamzah. On the endless assortment segment, specifically Zoro, where do you think profitability can go longer term from where we sit today and where SKU count can go? Just what does the competitive set or competition look like for Zoro? Thanks. I mean, with Zoro, you know, what we talked about is, we're gonna pass 10 million items this year, unique SKUs. We expect profitability to get to the high single digits over the next several years. It's on a very good path to do that. You know, from a return on invested capital perspective, it's obviously very profitable, given it doesn't have the inventory position. Profitability is getting better. It's gonna continue to get better. We think we can get to probably 20 million SKUs at a minimum through Zoro over time, but that's sort of a long-term effort, probably four, five -year effort to get there, we'd expect. Yeah. You know, competitive set wise, it's a lot of digital players that we see, and there's a lot of them out there. You know, we continue to perform well and think we can gain share consistently through that model. Got it. Thanks. Could you just talk about how you're thinking about headcount additions going forward? You know, what you're seeing in terms of labor inflation, turnover, and labor availability. It's been a challenging labor market, to say the least, over the last year or year and a half, I'd say. We feel like we are in a good position from a staffing perspective, particularly in areas that are so important, like our distribution centers. We've been able to add significantly to our headcount. We still need to manage that effectively on an ongoing basis. We're looking at what turnover we have typically with the distribution center. You know, our biggest turnover is in the first year. People come in, they don't realize the job's as challenging as it is and they don't like the job. We do see high first-year turnover. Once we get people through that first year, they typically stay and become long-term team members. That continues to be the dynamic, but it's been certainly challenging. We've had to hire a lot over the last couple of years, and we have had turnover in those population pools. Generally, you know, we're very focused on making sure that we have the right staffing levels for the volume that we see and then not adding costs where it doesn't make sense in the business. We are being careful about sort of headcount additions outside of areas that are sort of volume dependent. Thank you. Our next question comes from Nigel Coe with Wolfe Research. Please state your question. Thanks. Good morning. I've got a couple clarifications, and then one question and then assortment. Just on the market growth definition, the 12% growth in the market this quarter, is that price and volumes, or is that just volumes? Just wanna make sure we're comparing like for like. That's price and volume, the 12%. Okay, great. That's what I thought. Just on the price cost, essentially it's an invoice price. Basically your invoice minus supplier invoice. That's how you define it? Well, are you talking about price inflation? Price cost. Your definition is, you said it's based on product price minus product cost. Yeah. It's effectively okay. Like an invoice spread, basically. Yeah. Yeah. Okay, great. Yeah. Just on the endless assortment, you know, the growth in users is pretty consistent and pretty impressive quarter by quarter. Just wondering, what is the typical profile of the active users you're adding? How do you reach these users? You know, kind of acquisition cost. Any kind of help there would be helpful. And then just, you know, kind of how do you expect, you know, Zoro to perform in a recession? You know, if these are sort of smaller users, do you expect it to be more volatile, more cyclical perhaps, or do you think that the underlying structural growth in that business can offset any pressures in a downturn? Yeah, what I would say is the typical customer that we acquire is a small business customer. We have actually gotten out of some of the lower value marketplaces where we weren't getting business users as frequently as you want. Mostly business customers and relatively small business customers. We are then really focused on getting those customers to repeat, and we've seen really nice results through MonotaRO and Zoro over the last year in terms of increasing repeat rates for existing customers. That's been a nice trend and a very positive trend. In terms of a downturn, you know, we would expect the underlying growth to be able to sort of power through the downturn. We would be affected by the downturn, but we still think we'd have significant outgrowth from the Zoro model, given the way the model works and what we've seen in other downturns in MonotaRO and other places. Thank you. Our next question comes from Christopher Glynn with Oppenheimer. Please state your question. Thank you. Great first half. Curious on the second half outlook, the HTS margin guide implies a little bit of a softer sort of tail off in the margin versus your normal seasonality. I know last year was bent a little differently, so looking past that, but I think the taper is usually a little more than what's implied here. Curious if you could comment on that. You know, this is again another year that's been difficult to forecast based upon what's going on in the marketplace. As you know, seasonally, Q3 is a lower gross margin point for us in High-Touch U.S. We're planning and forecasting for that to be the case. Then we usually see a seasonal deceleration with customers on the top line in Q4. We feel confident in how we have planned out and provided the updated guidance for High-Touch. You know, nothing to read into that other than we don't think the last couple of years are necessarily a great benchmark. We've gone back and looked at longer-term trends to actually forecast how we believe the High-Touch U.S. business will perform for the remainder of this year, taking into account, you know, our jumping off point from H1. Great. Just on this price level getting, you know, 10%-11%, what scenarios within reason would you see maybe price giving back and reversing a little bit? Or are you pretty confident this is a new baseline? Well, you know, from what we're seeing right now, it's fairly steady. You know, it's hard to see it reversing itself. I think if you go back and look over a number of prior cycles, I think there's only one instance where there may have been a true give back versus just a slowdown in price inflation. I think time will tell. Thank you. Our next question comes from Josh Pokrzywinski with Morgan Stanley. Please state your question. Hey, good morning, y'all. Morning. Just a question on the inbound inflation that you're seeing, sort of how that's progressed over the last couple months. You know, I think, you know, you're starting to see some of the PPI indicators, you know, kind of, you know, plateau a little bit. You know, obviously you guys are diverse across your purchases. So just wondering what that looks like, in terms of what you're seeing today in the marketplace as you go out to make purchases and maybe how that's trended over the past quarter. Do you mean inbound transportation or inbound product cost or all of it? All in, but I guess more product than transportation. You know, we've seen a stabilizing of purchase prices from our suppliers. We have had fewer requests for price increases in the last, you know, several weeks than we had several months ago, for sure. We really haven't seen any backtracking at this point. It's stabilized but still not going down, going up slightly, going up less than it was going up. Got it. On the, I guess kind of related to that on availability, I think there's probably a point in time, you know, further back in the pandemic when there was a wider spread between what Grainger could get and maybe what some of your smaller competitors can get. You know, how would you characterize that spread today? Well, of course, we don't know exactly what our competitors can get, so this is all speculation. It's still a pretty challenging availability market. There still is, you know, certainly the China shutdown didn't help anything, and there's still areas of supply that are challenged. You know, I suspect we still have an advantage on some level. You know, I think some of the things we've done with our product information management system have helped us get to crosses, which has been very important in the last year and a half, to be able to cross to a functional equivalent so we can get. If a product is not in stock, we can actually get customer solutions. I think we have some advantages. I would say that we are not out of the woods from a global supply chain in our industry yet. It's gonna take some while to get out of this. Our next question comes from Jacob Levinson with Melius Research. Please go ahead. Morning, everyone. Morning. Morning. At the risk of beating a dead horse here on price, certainly the 11 points you got in the High-Touch business is quite a bit higher than we've seen in some of your peers. I realize there are gonna be some nuances. If we peel back the onion, I guess the question is. What's really changed this cycle that's allowing you to stay ahead of cost? Because certainly, D.G., when you took over that, maybe that muscle memory wasn't there. Just curious what's happening under the hood, if you will. I think one thing I would just say is that it's, there's the signal-to-noise in some cases is probably lower than you'd like if you're looking from the outside, because some competitors have taken price at different times. What's changed is we know we are market price competitive now, and we spend a lot more time focused on that. The pricing changes we've made have been in line with market, that we may have taken them at different times, later, earlier, depending on how things go. We're very confident that we are market priced at this point, and that's our primary tenet for pricing. Okay, that's helpful. Just changing gears a bit on Zoro, still seeing that growth accelerate over time, and that's a different tone, I guess, than what we're hearing from other e-commerce players more broadly. I guess the question is how much of this is that you built a better mousetrap with the investments you've made over the years in the IT and the buying experience itself? Or how much of that is SKU additions or the amount you're spending on advertising? Just trying to get a sense of what you feel like is really contributing to that success there. Yeah, I think SKU additions are a big part of it. I also think that, you know, the customers we're going after are business customers. I think most of what you would see as compares in the digital space would not be business-focused. You know, we think business customers are probably doing better than consumers online right now, and that's a big part of it too. Thank you. Our next question comes from Chris Snyder with UBS. Please go ahead. Thank you. I wanted to ask about customer inventory levels. One of the concerns that investors have on the distributors is that industrial companies are reporting outsized inventory levels. Obviously a good chunk of that is price, but I would appreciate any color or views you have on an MRO inventory at your customer base. Yeah. Just to, you know, I'll try to take this one. I think that the industrial manufacturers that are reporting higher inventory levels, my guess is that most of that is actually WIP. When you visit customers now, there are many cases in which product is not MRO product. I will get to MRO product in a minute, but product generally is sitting around, and you see it. The reason it's sitting around is they don't have everything they need to actually produce. They have strong demand, but they just can't get it out the door because they don't have everything they need to produce. I've seen that at many customers that I visited in the last three or four months. I think that's the bigger issue. Our customers don't have stockpiles of MRO product. That's not the way it works. In fact, our value proposition is to make sure they have only what they need. Our inventory management solutions and such make sure that we don't have too much stock. I don't talk with any customer who has a backlog of MRO product. I do see supply chain driven work in process inventory issues at a lot of manufacturers. Appreciate that color. I guess I want to follow up for my second question on previous commentary around product availability across the industry, so at your competitors. I guess, as you know, industry-wide product availability gets better and starts to normalize, you know, what do you think that means for your business? It sounds like some of the market outgrowths could compress back to the target range. Do you think that carries any risk of price cost as, I'd imagine maybe some of those smaller competitors will look to get back their market share? Any thoughts on that would be helpful. Thank you. Yeah. I mean, of course, we haven't really gone through a period driven by a pandemic like this, so any answer here is speculative. I would say that more customer visits that I'm on, our ability to keep customers going has actually led to a lot stickier relationships, led to us connecting more directly from a digital perspective, led to us managing more inventory pools. We've seen very strong growth with our KeepStock, and so things that we're doing on site are really valued right now. I'm not overly concerned that that will be a detriment. You know, are we gonna grow outgrowth of a thousand basis points every quarter now, or not? We feel like we can gain share consistently and that we've built the right relationships and processes to do that. Thank you. Our next question comes from Chris Dankert with Loop Capital. Please go ahead. Hey, morning. Thanks for taking the question. It looks like the operating cash flow guidance increase is based principally on that better sales and profitability outlook here. Has anything changed as far as working capital requirements for expectations into the back half of the year here? Well, I mean, as you can kind of see, our working capital needs have kind of grown with trying to ensure we have the right inventory and stock to meet demand and to support our customer sales. We see that trend continuing. I will say, you know, some of the AR growth is starting to stabilize here for us a little bit. You know, just inside, collections are strong, so we have no issues with collecting from our customers. It's more a matter of ensuring that we have the right inventory on a go-forward basis. You know, we still will have strong growth, as you note, in the back half, as implied by the guidance. No big material changes. I would just say a little bit more stability, as it relates to working capital needs. Okay. Well, I guess inventory specific, we had expected some of those purchases to taper a bit or flatten out a bit. Is that kind of still the case? Well, I mean, based upon what you just heard D.G. say, you know, we still as our customers continue to operate, they will still need MRO product. We're building inventory on some SKUs, and on some SKUs, we still can't quite build inventory. We will continue to attempt to get inventory back levels back to where we feel they need to be to meet demand. Got it. Okay. I guess switching gears to endless assortment, you know, is the value per order there continuing to trend higher? I guess, how does that, you know, trend on value per order compared to what kind of the internal targets are for that metric? We've seen nice increases in our average order value for the Zoro business. I think a lot of that has to do with who we're targeting. We're targeting only business customers. We found ways to avoid acquiring consumers, I would say, through that process, and that helps average order value. We expect that to continue to get a little bit better as we continue to refine our processes and continue to get more repeat business from those business customers. You know, we feel like we're on a trend. It's been a little bit better than we expected actually this year from an average order value, so probably a little better than expected, but we're basically on the path we wanna be. Thank you. Our next question comes from Ken Newman with KeyBanc Capital Markets. Please go ahead. Hi, good morning. Hi, good morning. I just wanted to follow up on the comments you made earlier in the call about your retail and e-commerce sales. I think they were up mid-single digits in the quarter, but can you just talk a little bit about what's embedded in the sales outlook for that portfolio and maybe just a little bit more color on how customer behavior has changed through the quarter and into July? We really aren't changing the outlook for, I believe you're talking about our endless assortment segment. No, no. What is it? Yeah, I got it. Okay. You're talking about our retail segment within Grainger. Just to make sure you understand what that is. Got it. That is a lot of distribution centers. Some is e-commerce, some is not. We do a lot of work with big retailers that are traditional as well in terms of helping them. You know, we expect that segment to grow slower the rest of the year versus other segments for sure. We don't typically give out sort of segment-level growth guidance, but we certainly are seeing trends that everybody is seeing. Again, I think the signal to noise there is probably not that as strong as might otherwise be, because what we saw during the pandemic was those channels just explode. A lot of our growth was in retail, government, and healthcare, and now that's reversed because the compares are so high. I don't think it's like activity is not strong. It is. It's just not growing as fast as some of the other segments are. Understood. It's a deceleration rather than a true year-over-year decline within that customer mix. Is that a fair- That's right. right. Correct. Okay. For my follow-up, you know, I know there's been a lot of questions on pricing on this call. Just again, can you just help me understand what are the expectations for pricing momentum in the second half within High-Touch? You know, do you think we are closer to pricing peaking here within the second half, or have we already approached that? You know, as we go through the Q3, I kind of noted it ends up being a low point for GM for us. We're looking at continuing to pass on any inflation that we may see. We have another opportunity to potentially do that within the third quarter, but it will be nowhere as meaningful as like our first quarter increases have been. We're looking to, you know, from a full year perspective for price to end, you know, around the 9%-10% range. We're a little bit higher than that now. We're just looking to end the year price cost neutral, which is our overall goal. As D.G. noted, while remaining price competitive. The other thing I would say there to add to what Dee said is that the slowdown in inflation in the second half isn't really. It's not resetting prices or lowering prices. It's basically the comparisons 'cause we started taking inflation last year in the back half. We did, yeah. It's basically just on the compares to last year that's the reason. Thank you. Our next question comes from Patrick Baumann with JP Morgan. Please go ahead. The math on the guide suggests you expect SG&A to level off in the second half of the year versus what you just reported in the second quarter, around $900 million. Maybe my math is off, but that's kind of what I was coming to. It looks like in prior years, those costs tend to increase second half versus the second quarter. The question is, if my math is right, which it might be wrong, you can just tell me it's wrong. If it's right, though, what causes those costs to be flat sequentially this year? You know, I think it's just timing of our investments. You know, earlier this year, like in most years, you know, we have you know, our variable comp payouts. This year, based upon performance, we were able to, you know, accrue some of those expenses based upon how we were running in H1, and settled out in line with our guidance and our forecast. We don't see a lot of incrementality in the second half from that perspective. You know, we're continuing to invest at a more steady rate. Again, as D.G. noted, we started some of those investments a little hotter last year in the second quarter, so we're comping some of that year-over-year from an SG&A perspective. The numbers are right. My math is right. Got it. Helpful color. Dee, also in the past, you've been more specific on month-to-date trends, you know, when you report the quarter. Is there any way to put a finer point on July when you say that there's no slowdown in demand? Can I take that to mean that July sales are still running 20%+ at constant currency? Yeah. Yes. It was in our script. Yeah, we noted that. Yeah. Yeah. It was in the script. I think you said we, you know, we're running close to 21% on a constant currency. Currency basis. That's correct. Thank you. Ladies and gentlemen, there are no further questions at this time. I'll hand the floor back over to D.G. Macpherson for closing remarks. Thank you. All right. Well, thanks for joining us. It's a pleasure to have you on. I hope you all get to enjoy the rest of your summer. As a quick reminder, we are hosting our Investor Day on Wednesday, September 21st. We hope you can join us in person if possible at our Northeast Distribution Center in New Jersey or virtually. We really look forward to spending time with you there. Again, thanks for the time and take care. Thank you. This concludes today's conference. All parties may disconnect. Have a good night.