Greetings, and welcome to the W. W. Grainger Re segmentation Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Please note this conference is being recorded. I will now turn the conference over to our host, Irene Holman, Vice President of Investor Relations. Thank you. You may begin.
Good morning. Welcome to our call to discuss Grainger's new GAAP reporting segments. With me today is Dee Merriweather, Senior Vice President and CFO. As a reminder, some of our comments today may be forward looking. 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, which is available on our IR website. This morning's call will focus on recast adjusted results for our new reportable segments using 2020 financials, which exclude restructuring and other items that are outlined in our 8 ks, which we published on March 8. The 8 ks includes annual results for 2018 through 2020 and quarterly results for 2019 2020. In addition to the filed 8 ks to help you incorporate this information as you prepare your analysis, we have also provided an Excel model with additional details on our IR website. Now, I'll turn it over to Dee.
Thanks, Irene. I am excited to be here this morning to discuss the changes to our GAAP reporting structure. Given the size and importance of our endless assortment model, which consists of Monitaro and Zoro, we are now required to disclose this model separately. The changes we're announcing today better align our financial disclosures to our businesses, how we serve our customers and how we manage the company. Moving forward, starting with our Q1, 2021 results on April 30, all reporting will reflect these changes.
Starting on Slide 4, you'll see our High Touch Solutions, North America and Endless Assortment segment. Our Hi Touch Solutions segment in North America is comprised of our Grainger Branded businesses in the U. S, Canada, Mexico and Puerto Rico. This further solidifies the work we have done over the last couple of years to create a consistent go to market approach, while merging the commercial functions of these businesses into 1 single organization. In recast terms, these businesses represent $9,200,000,000 in 20.20 sales and approximately 78% of the business.
Given the growing size and importance of our endless assortment model, we will now be providing standalone disclosures. Our Inless Assortment segment consists of Monotaro and Zoro Businesses, which operate primarily in Japan, the U. S. And the U. K.
We continue to more closely align these businesses. The endless assortment segment represents recast sales of 2,200,000,000 dollars With these 2 connected business models, Grainger is able to address all customers in the MRO market. With these models, we have the ability to work with more customers in the way that they want to do business, and we gain more holistic views of the customer trends that enable us to serve their needs as they evolve. The connection and knowledge sharing between the models is really a unique value creator. Examples of best practice sharing include using our North American supply chain scale and expertise to support Zoro, leveraging Monitaro's playbook and supporting Monitaro's efforts to target enterprise customers.
Alongside these changes, we simplified our corporate cost allocation and intercompany sales methodology. Irene will walk you through that modeling here in a bit. Turning to Slide 5. We have long been focused on serving industrial customers well by understanding their changing purchasing behaviors and aligning our value proposition to each customer profile. I want to spend a few minutes laying out how our business models differ and how they serve varying customers.
With the Hi Touch Solutions segment, we serve customers that are part of large and midsized entities in North America. They may operate in one location or across many different sites and often have complex procurement purchases and processes. They're looking for a strategic partner with an offer that meets both their product and service needs. They value a partner that brings technical expertise, a knowledgeable sales and services team, inventory management capabilities, and they're looking for ways to reduce their total cost of ownership. Our value proposition for these customers remains consistent.
We provide advantaged MRO solutions, which consists of our broad product assortment, deep expertise and superior digital solutions. This includes our differentiated sales and services offer built on the foundation of deep personal relationships and solutions like inventory management. In addition, we deliver unparalleled customer service leveraging our fulfillment capabilities. Our value proposition continues to be a differentiating factor in how we serve these customers. Switching gears to our endless assortment model, here we serve businesses with our expansive product offering.
The typical customers are smaller businesses with simpler purchasing processes. They may be your local restaurant or say your automotive shop down the street. They have more basic ordering systems and they know what products they need to run their business. Purchasing is more straightforward and their services needs are more narrow. While the individual customer needs may be simpler, in aggregate, this customer group requires an expansive product assortment.
They're looking for a one stop shop for all their business needs, including items outside of traditional MRO. Our product assortment at both Zoro and Monotaro has continued to grow, now at over 6,000,000 and 20,000,000 SKUs, respectively. We also provide an innovative C2B customer experience through our e commerce and delivery platform. Our recent investments in those that enabled us to quickly add SKUs and add processes to help us better understand our customers, their buying behaviors and ultimately drive repeat purchases. Our comprehensive offer in both models allows us to serve varying sets of customers, so we now cover a broader slice of the market.
The resulting simplicity and transparency will drive more effective communications with all of our stakeholders. I am extremely excited about our reporting and how it's now better aligned with our strategy. With that, I'll hand it back over to Irene.
Thanks, Dee. The purpose of the next few slides is to walk through the changes and bridge the old segment reporting to the new structure with the intent to show you the ins and outs of all the changes. Total company numbers will remain the same with differences only in the underlying segments. On the next slide, our previous reporting structure is on the left, the same as we showed in our Q4 earnings call. To the right is our new realignment of the businesses.
As Dee noted, our Hi Touch Solutions businesses in North America include the U. S, Canada, Mexico and Puerto Rico. An endless assortment brings together Monotaro, Zuora U. S. And Zuora U.
K. The Cromwell business remains in other. In addition to the resegmentation, we're making a few adjustments to simplify our reporting and bring a more streamlined approach to our corporate cost allocation and our intercompany sales methodologies. Beginning in 2021, our corporate costs will now be fully allocated to the segments. In the past, a large portion of these costs remained in a separate unallocated bucket, which rolled up to the total company.
Moving forward, all of our corporate costs are pushed to the segments based upon their relative level of service. This means that nearly all of the corporate costs will fall into the Hi Touch Solutions model and specifically to the U. S. Segment revenue will now only include sales to external customers, eliminating the noise of intercompany revenue. Previously, all intercompany transactions predominantly between the U.
S. And Zoro were included in U. S. Segment revenue and were subsequently eliminated to arrive at total company revenue. In the past, intercompany sales were recorded when external customers would buy products through Zoro that flowed through the U.
S. Supply chain. Zoro would pay for the inventory at cost plus a small fee to cover supply chain expenses. This associated fee was included in gross profit dollars for the U. S.
And increased product costs for Zoro. Going forward, in addition to showing only external sales within each segment, we're also shifting the fee for these supply chain expenses to SG and A. As a result, this will raise gross profit rate for both models, but will not have an impact on operating earnings dollars or margins. This will come to life on the next few slides. First, let's take a look at revenue on Slide 8.
You can see our full year 2020 results on the left hand side totaling $11,800,000,000 Then on the right hand side, we walk from our old reporting structure to our new reporting segments moving left to right. Starting with the new High Touch Solutions North America segment, we moved from prior U. S. Segment with sales of about $9,100,000,000 We add in Canada, which was previously in its own segment at $476,000,000 and add our Mexico and Puerto Rico businesses, which in the past were part of other businesses. Then we removed intercompany sales of about $500,000,000 to get us to sales to external customers of $9,200,000,000 for Hi Touch Solutions North America.
Looking at the bottom waterfall, If we start with the former other businesses and bridge to our new endless assortment segment, we remove Cromwell and other divestitures high touch segment. We then strip out any other remaining intercompany sales, resulting in our new endless assortment segment comprised of Monotaro, Zuora U. S. And Zoro U. K.
With sales of approximately $2,200,000,000 The other bucket will consist of Cromwell on an ongoing basis. For previous periods, it will also include both Fabry and China prior to their divestitures. On Slide 9, you'll see the same format for operating earnings with our previous 2020 reporting on the left hand side and recast results on the right. You'll see the same business unit changes as we showed on the previous slide. Again, the big difference shown here is the $124,000,000 of corporate costs that are now hitting HiTouch Solutions North America, given its size, scale and use of resources.
The other $5,000,000 of corporate costs remain in the restated other bucket comprised of expenses associated with the divested businesses. As a result of the recast, the Hi Touch Solutions segment generates $1,200,000,000 in operating earnings with endless assortment at 175,000,000 dollars Other ended 2020 with a $48,000,000 loss, which includes $35,000,000 in losses at Cromwell. Total company operating earnings remains unchanged at 1 point profit and operating margins, we again walk from prior segments to the new segmentation. Starting with the High Touch Solutions segment on the left, new High Touch Solutions North America GP margin of 38.2% is 150 basis points higher compared to the old U. S.
Segment. You can see that adding Canada and Mexico had a minimal impact on gross profit. The majority of the impact was our reporting changes to remove intercompany transactions. These transactions were at a gross profit margin lower than external customers. As a result, when removed, our gross profit margin increases in the new segmentation.
When looking at operating margin for Hi Touch Solutions, the GP rate improvement from the intercompany transactions is more than offset by incremental corporate costs and lower operating margins in Canada. This results in Hi Touch Solutions operating margin of 13%, down 140 basis points compared to the prior U. S. Segment. For the Endless Assortment segment on the right, the fee Granger charges to Zoro for U.
S. Supply chain expenses has moved from cost of goods sold to SG and A benefiting gross profit margins by 150 basis points with no impact on operating margin. The standalone Endless Assortment segment had 2020 gross profit margins of 27.6 percent and operating margins of 8%. While the shift to our new segments coupled with the reporting methodology changes has a notable impact on the margins for our go to market models, the performance of these businesses remains unchanged. Slide 11 provides a summary of our 2020 results under our new reportable segment structure.
Given the size and historical performance of some of the businesses, we thought it would be helpful to provide additional transparency. Specifically, within Hi Touch Solutions, we'll continue to highlight U. S. And Canada results as Canada continues to make progress on their transformation. We'll do the same for Monotaro and Zuora U.
S. With that, I'll pass it over to Dee.
Thank you, Irene. With our Streamlight Reportable segment, the path to long term growth comes into clearer focus. Our strategy remains unchanged. In fact, how we run the business today capitalize on the strength of the business model and this resegmentation formalizes this alignment to our financial results. We feel we are well situated to gain share profitably in our High Touch Solutions North American business.
This includes achieving 300 to 400 basis points of sustainable annual outgrowth in the U. S, improving top line performance in Canada and delivering operating margin expansion as GP rates recover and we continue to gain SG and A leverage. In the Ellis assortment business, we expect to continue delivering impressive 20% annual top line growth, while also ramping margins at our Zoro U. S. Business into the high single digits.
These strong growth drivers, alongside a business that generates consistent free cash flow with significant capital allocation flexibility gives us confidence in our ability to deliver strong returns to our shareholders. Our earnings results from these 2 strong connected business models provide the platform to drive consistent value creation. We continue to be the industry leader and we are poised to take share in this large highly fragmented and attractive MRO market. Our diversified end market exposure reduces business risk and allows us to gain market insights and provide a more comprehensive offering to our customers. This unique lens enables us to optimize demand and pricing insights, execute strategic market plans and leverage functional expertise between these two businesses.
We have more levers for organic growth and sustained value creation, which will help to solidify our competitive market position. We expect High Touch North America start over, stop. We have more levers for organic growth and sustained value creation, which will help to solidify our competitive market position. We expect Hi Tec Solutions North America will continue to be a leader in the traditional MRO industry, leveraging decades of deep customer, product and technical expertise. We anticipate in this assortment, we will continue to deliver strong performance through incremental SKU additions, improved marketing and analytics and an innovative customer experience.
Grainger is well positioned for sustained growth and profitability, and we feel confident in the opportunity ahead and the long term success of both models. Underpinning these synergies is our strong financial position as well as our ability to serve customers well and deliver strong returns. And we remain committed to ESG principles driven by our culture, with team members focused on living the Grainger Edge principles and achieving our purpose to keep the world working. With that, we'll open the line for questions.
Thank you. Ladies and gentlemen, at this time, we'll be conducting a question and answer session. Our first question comes from Ryan Merkel with William Blair. Please state your question.
Hey, everyone. Thanks for all the details. My first question is on the endless assortment gross margins. Can you just walk us through why the drop in 2019? And then what is the outlook for this business in 2021 beyond?
Yes. Thanks, Ryan, for the question. You're talking about the drop in endless assortment margins from 2019?
Yes. 2018 to 2019, the gross margin fell from 28.6% to 27.7% in the endless assortment. I'm just kind of wondering what the real run rate is going forward and you can improve it off the 27.7% or 27.6% in 'twenty or is it sort of more of just a flat outlook?
I think I would look at it as more of a flatter outlook. There were a lot of moving pieces kind of going back. And if you think about it, 2018 2019, Zoro was still kind of building up from there. We did have we have changed some processes more recently in 2020. And as a result of that, the GP for Zoro now is fairly consistent.
So I would count that more as an anomaly than anything that you should build into a model moving forward.
Okay, that's helpful. And then switching to the high touch business, the 40.8% gross margin in 2019, is that the right metric, long term plus or minus? Or might there be some investment in large accounts that you discussed previously?
So this is Dee. I would say our goal long term is to try to work our way back to levels like we were in 2019. That is our long term goal. What's really interesting today, I would say, is when you look at what's going on with a lot of customers, they are continuing to make sure that they're priced competitively and priced right. So we continue to respond But as we've talked about our subsequent improvement related to GP coming off of 2020, We want to continue to look forward to expanding our gross margins in High Touch North America.
Perfect. Thanks, Pete. Appreciate it.
Our next question comes from David Manthey with Baird. Please state your question.
Back to the endless assortment business, as you referenced in 2019, there were a number of investments you made in products and systems and processes and so forth. Going forward, should we expect to see a sawtooth pattern of investment followed by a rebound on stronger growth in that segment because of Zoro or the investments that you made in 2019? Does that set you up pretty well for the medium term that we won't have to see that those periods of investment that hurt
profitability? Yes.
I would say that we've taken the larger investments that we need to make specifically in ZURO. They're continuing to of course expand their customer base. But some of the investments we made related to their product information system and other information and supply chain tools, those investments, at least in the short to mid term, have been made.
Okay. And then a number of times on this call you referenced these two segments and you've talked about them as being connected, and I think that was intentional. I'm just wondering why that is. And second, and I guess it's a separate question, but I'm wondering about the growth initiatives we might hear about in Endless Assortment. It just feels like it's all about adding products and web search optimization and so forth.
Is there anything else beyond that that we'll be hearing about in the quarters ahead?
I will say, we continue to talk about the facts, especially when you think about Monotaro, their expansion of their DC and supply chain capacity as they continue grow significantly. On the Zurow side, they use the scale that we have already invested in the U. S, primarily the U. S. Supply chain to assist them.
So I would see DC capacity investments continue specifically related to Montero. I would say both of them, if you think about that model, it is a model that is intuitive to customers. It's simpler purchasing processes, but customers are looking for online tools and insights. So I could see the endless assortment model continue to invest in its ability to provide insights to customers based upon the products that they are purchasing.
Yes. And Dave, if you think about the fact that we've specifically talked about we hit low single digit op margins for Zoro and then would expect mid the fact that we would be making some modest investments, but the big investments are behind us.
I appreciate it. Thank you.
Our next question comes from Chris Snyder with UBS. Please state your question.
Thank you. So, when I look at the 2018, 2019 recast financials for the new other segments, I'm assuming this includes Fabry and China in addition to Cromwell. I think collectively these businesses were slightly unprofitable in 2018. But could you provide any color as to how Cromwell fared in 2018 on a standalone basis to help us model it out? And is there a pathway to Cromwell becoming a profitable business again?
Or is it more viewed as a cost center of sorts to help support the Zoro U. K. Ramp?
Yes. I'll start by talking about 2018. And you're right, Chris, that the prior year numbers did include Fabry in China. And essentially, Cromwell in 2018 was closer to breakeven. I think there was a modest loss.
So we do believe that we can return
to profitability. I'll let Dee comment on that. Yes. If you think Cromwell experienced the same pandemic impacts in the U. K.
Or similar that we had in the U. S. The main difference is the end markets they serve, some of the sub segments, specifically Aerospace, as you well know, were significantly impacted and they are weighted toward customers in that segment and those segments really have not stable. Those customers really have not stabilized. And so we expect Cromwell to get back to profitability as we work through the pandemic and as those customers start to return and their businesses start to return to more normal.
They are of course spending time with other customers and looking to take share in other markets as well that are doing a little bit better in the U. K. Through this pandemic. So again, longer term, we expect them to get back to profitability, but they still have a way to go because some of their larger customers are still struggling through the pandemic.
Appreciate that. So the company plans to buy back $600,000,000 to $700,000,000 of shares in 2021, which is a very meaningful amount. So I guess my question is, what is the ability or willingness to increase this? And I ask because it does not seem like the Grainger Equity is getting credit for the Monotaro position or even a premium valuation for Zoro and there could be an opportunity to capitalize on this dislocation?
Sure. What I would say is we are really looking to the implications of time related to the implications of the monetarral value. So I'll let you guys continue to work on that calculation. We are very focused on serving our customers well, making sure that we are investing in the right things with both of these models to ensure long term out growth in the market. And yes, we have cash and we have deployed our cash to invest back into the business, but also to return our profits back to shareholders and we continue to do so.
We believe the range of $600,000,000 to $700,000,000 is still in our sweet spot right now.
Thank you. Our next question comes from Christopher Glynn with Oppenheimer. Please state your question.
Thank you. Good morning. I was just referring to Slide 18, as you point out, recreated from the Q4 U. S. Segment slide.
I'm curious what degree or proportion of improvement you're expecting in terms of mix and the inventory adjustments. So for instance, if we call the difference between 2020 2019 100%, Just looking directionally in 2021, are you does this slide contemplate like maybe half the inventory adjustments attenuate and the balance would normalize in 'twenty similarly to the pandemic and non pandemic product mixes?
Yes. Thanks, Chris. So I guess, I would start out by saying on Slide 18 that essentially it's the same trajectory as we had talked about on the Q4 call. And to your point, when we talked on the Q4 call, we talked about 2 primary impacts that are going to help us coming out of the pandemic from a GP lens. And the first of which you mentioned is the mix aspect.
And we're anticipating in that trajectory that we would get back to about 20% pandemic, non pandemic mix from the highs of around 28% at the highest point in the pandemic. Mentioned was around inventory. So we talked about the mark to market inventory adjustments that we took in the Q4 and we are expecting to have some impact in Q1 and Q2. We've factored that into these numbers. So by the time we get out of the second quarter and launch into the second half of the year, we should be in a pretty good place from that standpoint.
Okay. And then for the follow-up, as endless assortment in Zoro in particular is adding millions of SKUs a year to pursue that 20% growth level that's been so sticky. Would product write downs necessarily become a more frequent part of the conversation around how endless assortment is operating through that SKU addition environment?
If I'm understanding you correctly, we are not seeing any product write downs as the endless assortment model continues to take share in the marketplace. Maybe clarify that a little bit, if you would.
I think you heard it correctly, D.
Okay. Okay. Yes.
It was just yes, it seemed like the pandemic product was almost predictable if I had thought of it, which it wasn't, but the shock and environment getting all these SKUs out to market. And it just struck me that there's kind of a parallel there of sorts in how Zoro is really continuously ramping the volumes.
Yes. One of the things to remember too, Chris, is that when we were in the heat of the pandemic, the Granger supply that we had was really allocated to large contract customers, specifically in government and healthcare. So Zoro had a more limited ability to access those products. Okay.
Thank you. Our next question comes from Nigel Coe with Wolfe Research. Please state your
question. Thanks. Good morning. I wanted to just dig into the mid single digit margin for Zoro in 2021. And I think of mid single digits as being a 3 handle to a 7 handle in that range.
Just want to make sure that's how you think about it as well. And if that's the case, then we're looking at maybe 200 basis points of margin expansion this year for Zoro. And is that reasonable on a 3 to 4 year basis? And is it volumes as the key driver of that margin expansion? Thanks.
So yes, volume is the key driver for the margin expansion we expect to see coming out of Apturo.
Yes. And Nigel, you're talking about kind of how we're talking about low single digits and the operating margin continuing to migrate up, right?
Exactly, yes. How do you think about how should we think about mid single digits in 2021?
Yes.
Right. Then just the change in supply chain fee at again at Zoro, moving it from gross margin to SG and A. Obviously, at the consolidated level, there's been no change in the way you classify expenses. The gross margin is the same pre and post. Just wondering why the change?
Is there a change in incentive structure? Why that change?
Yes. There is no change in incentive structure. I think when we had the opportunity because we were going through the resegmentation and wanted to take a look at different accounting methodologies, One of the things that we started looking at was that markup. And when you really peel the onion back, it's more reflective of SG and A than it is of GP and COGS. So from that lens, we felt like it was probably a more appropriate way to state the numbers and to put that into GP.
Again, it has no impact on operating margin.
SG and A. Put it into
SG and A from GP, sorry.
Okay, Great. Thanks, guys.
Our next question comes from Hamzah Mazari with Jefferies. Please state your question.
Hey, good morning. Thank you. Just a question for Dee. How are you sort of thinking about reestablishing guidance back? Is it sort of a post vaccine sort of thought process or any kind of key indicators you're looking
going to continue going to continue to look at. And I'd say the barometer for us is really looking at how the pandemic progresses and how we can establish a more consistent outlook. And so what I would say is stay tuned. We expect to get back to providing guidance in the next quarter or 2. And really it is all about looking at more stability in the marketplace.
But don't forget, we will continue to provide transparency and insight into our performance, especially an outlook for the next quarter at the next month at a minimum.
Got you. And there's no change to your view that Q1 2021 is still the bottom for gross margins in the U. S. High touch business. Is that still sort of valid?
Yes, that is still valid. I think taking it back to what we disclosed in Q4 is exactly where we are. We were impacted a little bit by some weather the the market.
Okay, wonderful. Thank you so much.
Next question comes from Kevin Maric with Deutsche Bank. Please state your question.
Hi, good morning. Maybe just taking a step back, a broader question. Has the change in reporting methodology come with any updated thoughts on parts of the business that you've considered non core or maybe the flip side, right, like where you can identify areas within either segment that you feel are either underserved or in need of greater investment? I guess the question is aimed at kind of the next leg of growth and where you guys are headed.
So really, this change was really an accounting change that reflects the growing size and importance of the endless assortment model. We believe in these two models. We believe they have great value because they really serve the varying customer needs that we see out in the market and we're excited about being able to fully implement the Monitaro playbook at Zoro. So this was really an accounting change. We've been operating specifically our supply chain has been supporting the high touch North America solutions business in this way for a number of years.
And we've now recently moved to pulling all the commercial aspects in Hi Touch North America together under one leader, Paige Robbins. And so what that means is that we were already together with the sales and service, but now we've brought our merchandising capability across North America, marketing across North America. So we really feel it will help us serve high touch solutions customer in a more effective way, even more effective way going forward.
Got it. Understood. Maybe, as kind of a related follow-up, just thinking about your geographic footprint and some of the changes over the last few years, are there areas where you look to expand? And if so, does endless assortment or high touch have priority? I guess, in other words, would you need an established high touch presence in order to stand up another endless assortment operation?
I don't believe so. We've gone through a journey here over the last, I would say, 3 to 5 years, right? So I think we're really focused on the geographies that we believe work for us from a high touch perspective. And with that, with those geographies, we're well positioned where we're focusing on endless assortment assets as well.
Yes. And if you think about the U. K, Zorro in the U. K, it's really in its infancy, and we're really starting to ramp that up. And we're learning as we're going.
The good news with the UK is that we do have the supply chain infrastructure there, which is helping us.
With Cromwell. Yes.
Great. Thanks very much. Appreciate it.
Our next question comes from Justin Bergner with G. Research. Please state your question.
Thank you, Dee. Thank you, Irene, and very helpful call you are having this morning.
Thank you.
I have a few questions on Zoro. I guess just to start, could you just remind me the comment you made earlier about the number of items available in Monotaro and Zoro, how many it was for each?
Over 20,000,000 SKUs for Monotaro and a little bit over 6,000,000 SKUs for Zoro.
Okay. And as the Zoro SKUs come up in number towards that Monotaro number, would you expect the Zoro gross margin to sort of trend downward along with lower SG and A to look more like Monotaro's gross margins? Or are there other reasons for that, call it 400 to 500 basis point difference?
Well, I think the way to look at it is the Monitorial business serves they operate in different geographies. They serve different customers. Their supply chain operations, while DC and things like that are different than what you see in Zoro. We have a different customer set. They utilize at least primarily the U.
S. Supply chain today. And so there are inherent differences in the model. So I don't think you can just apply the Monotaro numbers to the Zoro business. I would say over time, I think we talked earlier about a question about gross margins for Monotaro.
They have really started to I mean for Zoro they have started to stabilize here. We do expect to see operating margins improve and we believe that is generated by volume which is generated by SKU additions and having customers find the products that they need on the Zoro site. Not don't want to say that we're going to be able to get to the SG and A leverage that you see kind of with the monotoro model, because that is a different geography and a different slightly different way to operate there out of Japan.
Okay, thanks. That's very helpful. If I could just slip in one last one on Zoro, which is a clarifying question. The Zoro line that you have in your Excel detail posted online, does that for the Zoro sub segment will be slightly weighed down by the inclusion of Zoro UK?
So the line item that's there on the Excel file is actually Zoro US. And in the other endless assortment is Zoro UK, but it's also important to note that in 2020 and in the prior years, we also had Zuora Germany. So that line item now that we've divested Germany moving forward, other endless assortment will be Zuora
UK.
Our next question comes from Chris Dankert with Longbow Research. Please state your question.
Hi, good morning. Thanks for taking my question.
Guess we've talked about Cromwell quite a bit in the past, but now that we've got the new kind of reporting segments, I guess it is a high touch business, why not report in high touch or conversely if it is so necessary to kind of support Zoro UK, why not report it there? It just seems kind of odd to kind of create this reporting island by itself for what is ostensibly going to be part of Granger long term here?
Yes. Thank you. So as we started off, the re segmentation is really an accounting change. And so technically it did not qualify to be combined with the rest of the Hi Tec Solutions business, which is primarily North America. So as a result, we did not take the stance to try to fill it in.
It also is not really being run-in the same manner, which we are running the operations across North America. So yes, it is out there by itself now as you can see. But we also thought that could be a benefit to everyone as we continue to make improvements with the Cromwell business. It will be very clear for you to be able to see the progress that we are making not only with those customers, but with the overall operations. So that was the thought process behind it.
Got it. Thanks for that explanation. And then just one last one for me, more of a modeling question, I suppose. Going forward, you have always been quite transparent in terms of providing volume, price, FX, etcetera, by segment and geography. I guess, is that going to continue going forward?
Is that still the practice?
Yes. For the high touch solutions, we are going to continue to provide that level of detail by geography. I think so we will share for U. S. And Canada.
That way of looking at the underlying drivers of revenue doesn't make as much sense for the endless assortment model. So we're going to probably share color in a different way and we're thinking through the metrics for the endless assortment model. So Zoro's information will probably look a little bit closer to what Monitaro shares than what we do in the U. S. High Touch.
Got it. Got it. Makes sense. Thanks so much.
Our next question comes from Justin Bergner with G. Research. Please state your question.
Thanks for the quick follow-up. The question was asked earlier about what does mid single digit margins mean for Zoro U. S. I guess you exited 20 20 at 2.8 percent operating margins for Zoro. Just to double check, there wouldn't be anything seasonally helping that 2.8% margin in the 4th quarter, would there?
Nothing comes to mind that we'll be seasonally assisting Zoro's OM, no. Okay. That's it. Thanks.
Thank you. And ladies and gentlemen, that does conclude today's question and answer session. And that also concludes today's conference call. Thank you all for your participation. Have a great day.