Posted January 6, 2021

MSC's Q1 sales fall 6.3 percent

MSC Industrial Supply said its net sales of $771.9 million for the first quarter of fiscal 2021 decreased 6.3 percent from $823.6 million last year.

Net income of $38.5 million, or 69 cents per diluted share, fell from $65.8 million, or $1.18 per share, in the same period last year.

"Our fiscal first quarter reflected building momentum for our Mission Critical initiative against the backdrop of a challenging but improving environment. We saw continued sequential improvement in sales of non-safety and non-janitorial product lines, while sales of safety and janitorial products, anchored by our PPE program, grew roughly 20 percent," said Erik Gershwind, president and chief executive officer. "That momentum continued into December, which we forecast at 2.4 percent growth over prior year. Inside of the company, we made solid progress against our growth initiatives. We also saw strong execution on the pricing and purchasing fronts, yielding a 30 basis point sequential improvement in gross margin in the quarter despite a headwind from some large PPE sales."

Kristen Actis-Grande, executive vice president and chief financial officer, said average daily sales were $12.5 million for the quarter and gross margin was 41.9 percent. She added that MSC's goal is to cut $90 million to $100 million of gross cost through fiscal 2023 versus fiscal 2019.

"Our reported operating margin was significantly impacted by a $26.7 million asset impairment charge resulting from growing uncertainty over our ability to secure deliveries of nitrile gloves for which we prepaid in September and have not yet received. We are, of course, pursuing all possible paths to either secure the gloves or a refund of our prepayments," she said. "From the outset of the pandemic, we have been successful in procuring critical PPE supplies to support our customers. We remain pleased with our PPE program, which has consisted of hundreds of global supply transactions leading to substantial revenues and the ability to support our customers during the pandemic."

Gershwind added that two goals to be achieved by the end of fiscal 2023 are growing at least 400 basis points above the Industrial Production Index and achieving return on invested capital (ROIC) in the high teens. "We have five growth initiatives powering our market share aspirations, and we are executing significant structural cost reductions that we expect will improve operating expenses as a percent of sales by at least 200 basis points. As we move towards the middle of our fiscal 2021, we are encouraged by the momentum that is building inside of the company, and this is evidenced both by improving operating numbers and the increasing pace with which we are operating the business. We are also encouraged by an environment that, while challenging, is showing some positive indicators, with good news on the vaccine and the recently passed stimulus package hopefully improving the economic outlook over the coming quarters," he said.