MSC Industrial Sales, Profit Dip Further In Q2 On Weakened Demand

MSC's declines were nearly identical in size compared to Q1, while its portion of sales from e-commerce ticked up to near 58 percent.

MSC Industrial Supply kicked off another round of quarterly earnings reports as the first of Industrial Distribution's Big 50 List companies to present theirs.

MSC — No. 14 on The Big 50 — reported its 2016 second quarter fiscals for the period ended Feb. 27. The company posted total sales of $684 million, down 3.2 percent year-over-year and down 3.3 percent from Q1. Total profit of $49.5 million was down 4 percent from last year, and down 11 percent from Q1.

The year-over-year sales and profit declines were essentially identical to those in Q1 of 3.3 percent for sales and 4.2 percent for profit. In Q1, MSC had sales of $706.8 million and profit of $55 million.

“The market environment during our fiscal second quarter remained challenging, consistent with continued low levels of demand in the industrial economy and particularly in metalworking and heavy manufacturing," said Erik Gershwind, MSC president and CEO. "Continued share gains, as well as strong execution on our gross margin countermeasures and cost reduction initiatives, helped offset this ongoing weakness.

“In such a difficult environment, I am very pleased with how we have managed the business in the first half of fiscal 2016, and we remain in line with our annual operating margin framework."

MSC said it expects third quarter sales of between $729 and $741 million, and expects midpoint average daily sales to decline roughly 3 percent compared to a year earlier. Q3 sales in 2015 were $745.5 million.

MSC said e-commerce sales accounted for 57.8 percent of total sales in Q2, up from 57.0 percent in Q1 and 55.4 percent in Q2 2015.

Sales to manufacturing customers declined by 5.6 percent in Q2, while sales to non-manufacturing customers grew by 2.6 percent. Manufacturing customers accounted for 68 percent of sales in Q2, down 1 point from Q1.

For its first six fiscal months, MSC profit of $104.6 million was down 4.2 percent from 2015.

Here are MSC's sales for its first seven months of Fiscal 2016, along with how average daily sales differed from a year earlier. The company's fiscal 2016 began in September 2015. 

  • September '15: $279.3 million (-1.2 percent from a year earlier)
  • October '15: $225.0 million (-3.4 percent)
  • November '15: $202.5 million (-5.9 percent)
  • December '15: $227.9 million (-1.6 percent)
  • January '16: $224.3 million (-5.5 percent)
  • February '16: $231.9 million (-2.3 percent)
  • March '16: $281.2 million (-4.8 percent)*

*MSC's March sales are the company's preliminary estimate.

By geography, MSC sales declined in five of six regions:

  • Midwest -4.7 percent (-3.1 percent in Q1)
  • Northeast +1.5 percent (-0.3 in Q1)
  • Southeast -2.8 percent (-3.7 in Q1)
  • West -3.6 percent (-2.2 in Q1)
  • International & Other -16.5 percent (-18.4 in Q1)

Total MSC headcount declined by 0.9 percent from Q1 to Q2, following an 0.8 percent headcount decline from Q4 2015 to Q1 2016. Total headcount at the end of Q2 2016 was down 3.1 percent from a year earlier. MSC's field sales and service personnel count declined by 1.3 percent from Q1 to Q2.

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