MSC's Spike in Q3 Safety & Janitorial Sales Not Enough to Offset Industrial Weakness

MSC's Q4 is off to an even more challenging start, with preliminary figures indicating June sales fell nearly 15 percent from a year earlier.

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Metalworking, MRO products distributor MSC Industrial Supply reported its 2020 third quarter financial results on Wednesday as one of the first industrial products manufacturers or distributors to share financials that reflected COVID-19 impacts over a full quarter.

MSC — No. 8 on Industrial Distribution's Big 50 List — reported Q3 sales of $835 million, down 3.6 percent year-over-year, while operating profit of $110 million was essentially flat and 13.2 percent of net sales, compared to 12.8 percent a year earlier. Total Q3 profit of $78 million was down a bit from $80 million a year earlier.

The company's Q3 covered March through May. Buoyed by a spike in orders for safety and janitorial products, MSC's May average daily sales jumped 6.3 percent year-over-year. But that wasn't nearly enough to offset declines of 10.5 percent and 5.7 percent in April and March, respectively.

MSC's Q4 is off to an even more challenging start, with preliminary figures showing June average daily sales were down 14.8 percent year-over-year.

Despite COVID-19 business impacts throughout its Q3, MSC's 3.6 percent Q3 year-over-year sales decline was actually better than the company's 4.5 percent decline in Q2 that ended Feb. 29. The company said that weakness in industrial demand was essentially across the board, with sustained and acute softness in metalworking-centric end markets that include automotive, aerospace and oil & gas.

"Our own results for the quarter benefitted from the surge in demand for safety and janitorial products, but this was more than offset by the COVID-19 impacts on the rest of the business," said Erik Gershwind, MSC president and CEO. "The surge in demand for safety and janitorial supplies subsided in fiscal June, while customer re-openings only provided a modest improvement in underlying sales levels. This reflected continuing softness in end-market fundamentals, as well as customers opening very gradually with reduced hours."

MSC's Q3 gross margin was 42.4 percent, with that margin shrinking throughout the quarter as the company achieved strong price realization on its March price increase. Meanwhile, MSC said it had success with its supplier initiatives and saw purchase cost escalation continue to decline.

"We will resume our sales force refinement efforts and restart our business development hiring," Gershwind added. "We are building on the recent gross margin momentum driven by improvements in pricing execution and supplier programs and lastly, we have reinitiated the project focused on aligning our operating model to our new strategy."

Sales breakdown

Geographically, MSC's Q3 sales to the Midwest and Northeast were down only 1.7 and 1.3 percent year-over-year, respectively, while heavy declines were in the Southeast, West at -7.7 and -5.5 percent, respectively. Meanwhile, sales to International & Other were up 12.2 percent, but even that was down from gains of 36.7 and 30.1 percent in Q1 and Q2, respectively.

By customer type, MSC's Q3 sales to manufacturing customers sunk 17.0 percent year-over-year, while sales to non-manufacturing spiked 26.2 percent.


MSC's Q3 e-commerce sales comprised 55.2 percent of the company's total. It was notably below the near 61 percent mark that total was holding at in recent quarters, though the company said the lower e-commerce percentage in Q3 was primarily related to the higher volume of safety and janitorial products not transacting through our the MSC's e-commerce platforms. MSC added that percentage of q3 e-commerce sales excluding safety and janitorial products remained relatively consistent with prior quarters.

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