Posted January 21, 2021

MSC to close 73 branch offices in favor of digital hubs

MSC Industrial Supply plans to close 73 branch offices and move to virtual customer care hubs as part of a plan to enhance the in-person and virtual support provided to customers.

The company will move from its branch office network to virtual customer care hubs to provide personalized support to its customers, regardless of their physical location.

The 73 branches earmarked for closure have been closed temporarily due to the COVID-19 pandemic. Sales associates who previously worked in these offices will continue to work remotely through virtual customer care hubs to maintain customer relationships and personalized service in local markets. Included as part of this plan is the reduction of roughly 115 management and other positions within the commercial sales organization that interact infrequently with customers.

The company expects to achieve ongoing annual cost savings of $15 million to $18 million beginning in fiscal 2022, and savings of $7 million to $9 million in fiscal 2021. A portion of the expected savings will be reinvested into customer-facing sales roles that support the company's five growth initiatives: Metalworking, Solutions, Selling the Portfolio, Digital, and Diversified End Markets. To achieve the savings, the company expects to incur total costs and charges related to these actions in the range of approximately?$21 million to?$25 million in fiscal 2021, the majority of which will be in its fiscal second quarter. These non-recurring costs include a one-time impairment charge for the lease right-of-use assets, associate separation benefits charges, and other exit-related costs.

"Today's announcement is another significant milestone in our Mission Critical program. It will support the achievement of our 3-year targets of accelerating market share capture to 400 basis points above the Industrial Production Index and improving ROIC into the high teens by fiscal 2023," said Erik Gershwind, president and CEO. "We are eliminating significant structural cost in keeping with our commitment to reduce operating expenses by $90 million to $100 million and freeing up capital that will fund the needed investments into our five growth initiatives."

Gershwind added that the company is creating a leaner, faster and more agile customer care organization. "Our new structure is breaking down geographic barriers, enabling us to recruit technical talent that can serve our customers wherever they need us. It also positions MSC to help solve the manufacturing skills gap that has plagued the industry.

He said MSC's best-in-class technology platform enables MSC to create economies of scale through a virtual Customer Care network. "Lastly, we are building on the hybrid work model that began with reimagining our Melville, New York, office space. Our associates and customers have confirmed that the work from home model is working and will work well into the future."