Posted July 10, 2019

MSC sales grow by 4.6 percent

MSC Industrial Supply reported net sales of $866.5 million for the third quarter, a 4.6 percent increase compared to $828.3 million in the same period last year.

Net income of $79.6 million, or $1.44 per share, compared to income of $79.1 million, or $1.39, in last year's third quarter.

"Our fiscal third quarter performance leaves us disappointed. We have seen a step-down in demand since April, while the pricing environment remains uncertain due to the overhang of tariffs and trade. In response to near-term trends, we have implemented a three-part action plan to 1) improve field sales execution and accelerate new account implementation; 2) increase profitability of our supplier programs; and 3) drive increased expense control and productivity," said Erik Gershwind, president and chief executive officer.

Rustom Jilla, executive vice president and chief financial officer, added, "In addition to fiscal third quarter sales below our expectations, gross margin was at the low end of guidance, as purchase cost and mix headwinds offset solid price realization. Our operating expense to sales ratio was slightly above our guidance and last year's third quarter despite the actions taken to reduce headcount and other expenses. All of this translated into earnings per share of 5 cents below our guidance midpoint. As you saw this morning, the Board of Directors increased our quarterly dividend, reflecting confidence in our balance sheet and free cash flow, and a higher hurdle rate on acquisitions going forward."

Gershwind concluded, "We are not happy with our current results and, as a result, we are taking action. We are, however, encouraged by progress in some critical areas. Our pace of account wins is strong, our vending implementations are growing rapidly, and we are deepening our commitment to our valued supplier partners. Finally, our team is committed to executing our plan with urgency as we continue our journey to becoming a mission critical partner on the plant floor."

The company expects net sales for the fourth quarter of fiscal 2019 to be between $835 million and $851 million. At the midpoint, average daily sales are expected to increase roughly 2.2 percent compared to last year's fourth quarter.