Deidra C. Merriwether
Senior Vice President and Chief Financial Officer at W.W. Grainger
Thank you, D.G. Turning to Slide 7. You can see the high-level second quarter results for the total company, including 5.1% growth on a daily organic constant currency basis. The quarter played out largely as anticipated, despite the persistent demand softness D.G. mentioned. Operating margins were down 40 basis points year-over-year, generally following normal seasonal trends. Gross margins were flat year-over-year as the number of items offset within the period and SG&A delevered 40 basis points as we ramp our demand generation investment. In total, we delivered diluted EPS for the quarter of $9.76, up 5.2% or $0.48 over the prior year period.
Moving on to segment level results. The High-Touch Solutions segment continues to perform well with sales up 3.1% on a reported basis or 3.7% on a daily organic constant currency basis. Results were driven by strong volume growth and moderate price contribution across all geographies in the period. In the U.S. specifically, nearly all customer end markets were up year-over-year with warehousing, contractors and health care customers having the largest gains. For the segment, gross profit margin finished the quarter at 41.7%, flat versus the prior year. In the quarter, we expanded an unfavorable lap of roughly 40 basis points from the nonrecurring rebate benefit captured in Q2 of 2023, which was offset by several small tailwinds in the current year period. When excluding the unfavorable lap of nonrecurring rebate, price cost was roughly neutral in the quarter. SG&A delevered 40 basis points in Q2 as DC capacity came online, and we continue to invest in demand-generating activities like marketing and seller head count.
Annual merit increases that went live in April were offset by productivity actions and lower variable compensation expense within the period. Overall, it was a solid quarter of growth and profitability for the High-Touch Solutions business.
Looking at market outgrowth on Slide 9. We estimate that the U.S. MRO market, including volume and price grew in the quarter between 2.5% and 3% with price contributing nearly all of the growth. Within our High-Touch Solutions U.S. business growing at 3.6% organically, our mathematical market outgrowth in the quarter was roughly 100 basis points in total. This includes approximately 300 basis points of volume outgrowth contribution netted against the continued price tailwinds when comparing our price contribution to PPI. As we said before, there is no perfect way to measure the MRO market, and we're currently in a cycle where the headline PPI and IP metrics don't completely reflect what we're seeing in the MRO specific space. With the differences in product and customer mix, these disconnects happen from time to time and cause short-term noise within our external market share gain calculation.
Given the current dislocation we're seeing this year, it's unlikely we will mathematically achieve our market outlook target in 2024. However, we have several different ways, including both internal and external data points to understand our relative performance and know we're performing quite well in the current environment. History would suggest that this dislocation will normalize over a multiyear period and we believe this metric remains useful in tracking our relative performance over time. We're still generating strong returns on our demand-generating investments, which gives us confidence that over the long term, we will continue to outload the market by 400 to 500 basis points annually on average. Now turning to the Endless Assortment segment.
Sales increased 3.3% or 11.7% on a daily constant currency basis, which adjusts for the impact of the depreciated Japanese yen. Zoro U.S. was up 8.7%, with MonotaRO achieving 13.2% in local days local currency. At a business level, Zoro saw improved growth from core B2B customers who were up mid-teens in the quarter. Performance was driven by B2B customer acquisition and improved repeat purchase rates, which were aided by service enhancements to increase same-day shipping and better communicate delivery date. Headwinds from the continued unwind of noncore business, including B2C and B2C like volumes started to dissipate in the quarter but remained down low double digits year-over-year. We expect these B2C headwinds to continue to subside as the year progresses. At MonotaRO, sales were strong from continued growth with enterprise customers, coupled with solid acquisition and repeat purchase rates with small and midsized businesses. On a reported basis, these results were all offset by continued foreign exchange rate pressures as the yen continues to show incremental weakness against the dollar.
On profitability, operating margins for the segment declined 70 basis points to 7.9%. This decline was driven by lower gross margins at MonotaRO from product and customer headwinds combined with SG&A deleverage at Zoro as the business ramps marketing investments and re-baselines on lower B2C and B2C like volume. As these volumes normalize, this should create a better baseline to relever the business going forward. Overall, for endless assortment, we're encouraged by the strong progress in the quarter and are on track to finish the year at or above our original expectations. Now moving to the updated outlook for the remainder of 2024.
As D.G. mentioned at the beginning of the call, we are trimming the top end of most estimates to reflect continued market softness as macroeconomic uncertainties persist in the U.S. With this, we are now expecting total company daily organic constant currency sales to grow between 4% and 6% for the full year of 2024. When including the continued deterioration of the Japanese yen, this translates to an updated reported sales range between $17 billion and $17.3 billion and an EPS range between $38 and $39.50. As you can see on this slide, we flowed these changes through and have also made slight tweaks to the margin outlook based upon how we're performing in the first half. I want to note, while we continue to remain diligent on managing expenses and measuring returns, given the softer top line, our ability to generate leverage is challenged this year as we invest in our growth engines to power long-term share gain.
Setting that aside, we remain strongly committed to growing SG&A slower than sales over time and have a track record of doing so. Supplemental guidance ranges, including increased operating cash flow and share repurchase expectations can be found in the appendix of this presentation. On seasonality, as we move to the second half of the year, we expect relatively normal sequential growth from Q2 to Q3 and into the fourth quarter. There are some puts and takes from a profitability perspective, but we anticipate operating margins and earnings to remain healthy and relatively consistent in the third quarter when compared to the second.
As we start the third quarter, a number of external factors have impacted our results in July. The sales started to ramp in the final few days of the month. This led preliminary July sales results to finish up roughly 2% on the total company daily organic constant currency basis. Of note, this number will be approximately 100 basis points higher if you normalize for the tough comp caused by an elevated level of project-related service engagement in July of last year. Altogether, at the total company level, we're performing well and are confident in our ability to drive solid growth and strong profitability in the second half of the year.
With that, I'll pass it back to D.G.
