Deidra C. Merriwether
Senior Vice President and Chief Financial Officer at W.W. Grainger
I want to echo D.G.'s sentiment on our strong 2024 performance. Not only did we make progress on a number of strategic initiatives, but the team was also able to deliver on the majority of our 2024 financial commitments. This includes revenue, margin and EPS, all finishing within the original guidance ranges we provided this time last year.
Now turning to detail on the 4th-quarter. We had another good quarter to finish out the year with results coming roughly in-line with expectations. For the total company, daily sales grew 4.2% or 4.7% on a daily organic constant-currency basis, which included growth in both segments. Sales were strong in the quarter despite softness in the back-half of December from holiday timing and customer shutdowns.
Total company gross margins for the quarter were strong, ending at 39.6%, up 50 basis-points over the prior year period. Favorability was mainly driven by the High Touch Solutions segment, which I'll detail on the next slide. This gross margin favorability largely flowed through to the bottom-line, where operating margins ended the quarter at 15%, up 40 basis-points versus the prior year. Overall, we delivered diluted EPS for the quarter of $9.71, which was up over 16% versus the 4th-quarter of 2023.
Diving into segment level results. The Solutions segment continues to perform well with sales up 4% on a reported basis or 3% on a daily organic constant-currency basis. Results were driven by solid volume growth and continued improved price contribution within the segment. We also delivered growth across all geographies in the period in local days, local-currency. In the US specifically, we saw strong growth with government and healthcare customers, which helped to offset more sluggish performance across the other areas. For the segment, gross profit margin finished the quarter at a strong 42.3%, up 90 basis-points versus prior year. Favorability was aided by a roughly 50 basis-point lapse of year-end inventory cost adjustments from the prior year, as well as slight mix and freight favorability in the current year period. Price/cost for the quarter was roughly neutral. Operating margin for the segment finished the quarter at 17%, which was up 60 basis-points versus the prior year. Gross margin favorability in this segment more than offset incremental investment in-demand generating activities in the period. Despite the December top-line softness, it was a good finish to the year for the High-Touch Solutions segment.
Turning to market outgrowth on Slide 16, using our total market model, which includes both producer price index and industrial production endpoint puts, we estimate that Grainger took approximately 100 basis-points of total share gain in the 4th-quarter. As you can see on the slide, this helped us finish full-year 2024 with roughly 100 basis-points of mathematical share gain in total as our Solutions US business grew 3.3% organically compared to our total MRO market model, which was up between 2% and 2.5% for the year.
Pulling apart the model at the bottom of the slide, we drove approximately 325 basis-points of volume outgrowth for the year. This growth was offset by a mathematical share loss from price of roughly 225 basis-points as the PPI sub-index we use in the market model inflated meaningfully higher than Grainger's price contribution to revenue. As we've discussed all year, our mathematical share gain has been impacted by differences in-product and customer mix between our business and the underlying mix that contributes to the PPI and IP sub-indices we use as the price and volume inputs to our market models.
On price specifically, the dislocation is more dramatic on products that are experiencing high inflation in the current environment such as airplanes and medical equipment. These products are contributing to higher market inflation than what Grainger is seeing on MRO-specific products. While the total market model remains highly correlated to our performance over-time. This period of dislocation has persisted for several quarters. Our focus as a company has been and is to remain price-competitive and grow share via volume-based initiatives. With this and given the recent outsized dislocation we've seen in the price component, we will be focusing our market measurement on just the volume component going-forward.
While the volume component of the model can still have dislocations due to its aggregated and broad nature. We feel it captures the essence of the underlying MRO activity and will serve as a good benchmark for our performance over-time. On price, we have several internal and external signals that can be used to ensure that we are remaining price-competitive and our ability to do this well can be better monitored through our gross margin results. We will continue to break-out a high-touch revenue between volume and price in the appendix of these materials each quarter as we pivot to the volume-based view.
So, with these changes, if you turn to Slide 17, you can see our go-forward view of volume-only outgrowth, which ties back to the 325 basis-points of volume contribution from the previous slide for the full-year of 2024. This metric still reflects some mix-related dislocation, but much less after removing the undue noise from the price component. Overall, we remain confident in our strategic growth engines and their ability to drive share over the long-term and continue to target 400 basis to 500 basis-points of average annual outgrowth over-time.
Turning to the endless assortment segment, sales increased 15.1% or 13.2% on a daily constant-currency basis. Zora US was up 13.9%, while Monotaro achieved 14.3% growth in local days, local-currency. At a business level, growth rate continued to ramp as it has all year. The business saw strong traction across all customer types, including growth in the teens within their core B2B customer group. For the quarter, B2C and B2C-like customers grew roughly in-line with the core -- with core B2B, a trend we expect to be reasonably consistent going-forward.
At Monotaro, sales growth remained strong with enterprise customers coupled with solid acquisition and repeat purchase rates with core small and midsized businesses. On profitability, operating margins for the segment increased by 80 basis-points to 8.6% with both businesses contributing year-over-year. Thoro operating margins were up 140 basis-points to 3.7%, aided by continued operating leverage. At Monotaro, margins remained strong at 12.6% with DC operating efficiencies driving continued year-over-year improvement. Overall, we're proud of the improved performance through 2024 within the segment and look to continue momentum this year.
Now moving to our 2025 guidance. Our outlook for the year includes revenue to be between $17.6 billion and $18.1 billion at the total company-level, driven by growth in both segments. This translates to daily constant-currency sales growth between 4% and 6.5% within our High-Touch Solutions segment, we expect daily constant-currency sales growth between 2.5% and 4.5%. In the US, we expect market volume growth for the full-year to remain muted. This is consistent with what we're seeing in the current short-cycle environment and does not assume a step-change macro recovery that some are projecting for the back-half of the year.
On share gain, we will continue to target 400 to 500 basis-points of US market volume outgrowth over-time. However, we expect to land in the low-end of the range in 2025 from continued measurement dislocation due to mix and as we check and adjust our marketing and seller expansion efforts to incorporate learnings.
Lastly, we anticipated minimal pricing inflation for the year, which is in-line with what we're hearing from suppliers and seeing in the market for MRO-specific products. This assumption excludes any impact from incremental tariffs that may or may not occur in 2025. In the endless Assortment segment, we anticipate daily constant-currency sales to grow between 11% and 15%. This segment level growth will be roughly 325 basis-points lower on a reported basis when you normalize for expected foreign currency exchange headwinds and fewer selling days in the current year period.
At the business unit-level, is anticipated to grow in the low-double-digits as they continue their momentum in driving higher repeat rates, consistent service and improved target marketing is expected to grow in the low-teens at the midpoint in local days and local-currency, which normalizes for three less selling days in 2025 and expected FX headwinds from the yen. This strong performance is fueled by growth with new and enterprise customers alongside strong repeat rates with their core B2B customers.
Moving to our margin expectations. We expect total company operating margins to remain strong in 2025, ranging between 15.1% and 15.5%. In the Solutions segment, operating margins are expected to stay healthy, but will contract slightly to be between 17% and 17.4%. This is driven by relatively stable gross margins, although they may tick down slightly off a strong finish to 2024. We expect SG&A will modestly delever at the midpoint on a softer top-line and continued investment across our growth engines.
In Endless Assortment, we anticipate operating margin will continue to ramp between 8.5% and 9%, up 20 to 70 basis-points versus 2024. Slight gross margin headwinds at from continued growth of lower-margin third-party ship SKUs will be offset by continued operating leverage at both business units as the flywheel continues to drive new customer growth and repeat purchase rates.
Turning to capital allocation, we expect the business will continue to generate strong cash-flow in the year with an expected range of $2.05 billion to $2.25 billion, implying operating cash conversion north of 100%. We plan to continue to execute a consistent return-driven approach to our capital allocation strategy, meaning our priorities remain largely unchanged from prior years. We'll continue to invest in the business and expect capex in the range of $450 million to $550 million. Spending here includes further supply-chain investment as we progress with the construction of our new DC capacity. We also plan to advance our data and technology capabilities, helping to further our customer value proposition.
Alongside these organic investments, we continue to explore inorganic opportunities that help further our strategy or advance our capabilities. We plan to remain highly selective here in 2025. Outside of investment, we expect to return the balance of our excess cash to shareholders in the form of dividends and share repurchases. We will formally set our 2025 dividend in the second-quarter, but again, anticipate consistent annual dividend increases in the high-single-digit to low double-digit percentage range.
On share repurchases, we anticipate the amount for 2025 will be -- will be between $1.15 billion and $1.25 billion. As in prior years, we feel this return-focused allocation philosophy provides for -- provides the organization optimal flexibility to efficiently manage investment while maximizing shareholder returns now and into the future.
In summary, at the total company-level, we plan to grow top-line by roughly 4% to 6.5% on a daily constant-currency basis. Note that reported sales growth is roughly 130 basis-points lower than our daily constant-currency range as we're normalizing for FX headwinds and one fewer selling day-in the current year. A reconciliation of these impacts is provided in the appendix of this presentation. Gross margin and operating margin, as we discussed will remain healthy for the year, leading to an expected EPS growth of flat-to-up 6.5% or $39 to $41.50 per share. Note, this expected EPS growth range includes a $20 million net interest headwind in 2025 following our debt refinancing and expected lower interest rates on our cash balances. Further, there is roughly a 110 basis-point year-over-year headwind to our EPS growth rate as our effective tax-rate normalizes in 2025 after the one-time benefit we captured in 2024.
From a seasonality perspective, we expect sales to start slower and ramp as we move through the year. This includes a softer start in January from the timing of the New Year's holiday and the cold-weather disruptions experienced during the month. With this, January sales started slow, but picked-up momentum as the month progressed with preliminary results up approximately 2.5% on a daily constant-currency basis. January growth will be approximately 100 basis-points higher if you normalize for the holiday and weather impacts.
When translating daily constant-currency sales to reported revenue, there's a lot of noise this year, particularly in the first-quarter. This is driven by foreign-exchange headwinds, which are most pronounced in Q1 before subsiding in the middle of the year. There's also one fewer selling day-in February, which reduces revenue by roughly $70 million year-over-year, representing a 160 basis-point headwind to reported sales growth in the first-quarter. All-in, this translates to expected reported sales of around $4.3 billion for the first-quarter of 2025.
On profitability, given the slower start to sales and one less selling day-in the current year period, operating margin rates will be challenged in the first-quarter before ramping through the year. This deviates from our normal seasonal pattern as we won't see the price timing favorability we normally capture in Q1 given the low-cost inflation environment we're experience experiencing this year. With this, first-quarter operating margins will be closer to the bottom of our 2025 full-year guidance range around 15%. This will drive year-over-year EPS growth to be flat to slightly down in the first-quarter and will ramp thereafter as the year continues.
Lastly, we are reiterating the core tenets of our long-term earnings framework, including continued strong top-line growth comprised of 400 to 500 basis-points of annual volume outgrowth in the high-touch US business and annual revenue growth in the teens for endless assortment. Generally stable gross profit margins within each segment and SG&A growing slower than sales over-time, while still investing in demand-generating activities to drive sustainable long-term growth. Executing against these tenants can drive double-digit EPS growth under normal market conditions. Combining this with our balanced capital allocation strategy, we think this represents an attractive return profile that can drive significant value-creation for shareholders.
With that, I'll turn it back to D.G. for closing remarks.
