MSC Industrial Supply kicked off the latest quarterly financial earnings reporting period for major industrial distributors on Wednesday, and its figures illustrate a much-improved MRO and metalworking products market in terms of demand.
The Melville, NY-based company reported its 2021 third quarter sales, covering the three months ended May 29. MSC totaled Q3 sales of $866 million, up 3.8 percent year-over-year and up 11.9 percent sequentially from Q2. In its fiscal Q2 and Q1, MSC's sales fell 1.5 and 6.3 percent year-over-year, respectively. On an average daily sales-basis, MSC's Q3 sales increased 2.2 percent year-over-year. The company said safety and janitorial product sales sunk 42 percent year-over-year in Q3, while sales for the rest of the business jumped 21 percent — improving sequentially each month during the quarter.
On the profit side, MSC's Q3 operating profit of $129 million jumped 17.1 percent year-over-year and dwarfed the $28 million it had in Q2 as operating margin increased 160 basis points year-over-year to 14.8 percent. Q3 adjusted operating margin was 12.6 percent. Q3 gross margin of 42.3 percent dipped 10 basis points year-over-year, but improved 30 points from Q2, leading to total Q3 net profit of $94 million that jumped 21.5 percent year-over-year — far more than the $18 million it had in Q2 and $38.5 million in Q1. The company said the sequential gross margin increase was driven in part by solid execution of a March price increase.
"The economic environment improved significantly and most of our manufacturing end markets turned positive during our fiscal third quarter," said Erik Gershwind, MSC president and CEO. "Total company sales returned to growth and, while muted by PPE-related comparisons, our non-safety and non-janitorial product lines grew 21 percent. Execution on our Mission Critical initiatives continued at a high level and we have lifted our expectations both in terms of gross and net savings for fiscal 2021.”
MSC said its ongoing Mission Critical cost savings program netted about $12 million in Q3 savings, following savings of $9 million and $8 million in the previous two quarters, respectively. The company is now expecting the program to generate full-year 2021 gross cost savings of approximately $40 million, and MSC is targeting savings of $90 million to $100 million by the end of its fiscal 2023 against a 2019 baseline.
During its Q3, MSC's monthly sales were as follows:
- March - $328 million, with average daily sales down 0.7 percent year-over-year
- April - $273 million, with average daily sales up 16.0 percent year-over-year
- May - $266 million, with average daily sales down 6.4 percent year-over-year
Turning to June, the company reported preliminary sales of $316 million, with average daily sales up 15.4 percent year-over-year.
Other notable statistics from MSC's Q3 2021 (March-May):
- On June 2 during its Q3, MSC announced that it had acquired a majority interest of Wm. F. Hurst Co., a fellow metalworking and MRO supplies distributor based in Wichita, KS, for an undisclosed amount.
- Geographically, MSCs year-over-year sales by region increased 0.8 percent in the Midwest (+0.9 in Q2); fell 4.3 percent in the Northeast (-3.0 in Q2); increased 3.5 percent in the Southeast (-5.8 in Q2); dipped 0.3 percent in the West (-6.1 in Q2); and surged 33.1 percent in International & Other (+34.4 in Q2)
- By customer type, MSC's Q3 average daily sales to manufacturing customers jumped 18.8 percent, following declines of 4.9 and 13.5 percent in the previous two quarters, respectively. Daily sales to non-manufacturing customers fell 21.9 percent in Q3, following gains of 6.6 and 10.8 percent in the previous two quarters.
- Excluding subsidiaries All Integrated Systems (AIS) and MSC Mexico, 60.2 percent of MSC's total Q3 sales came via e-commerce, up from 59.2 percent in Q2 and trailing Q1's 60.7 percent
- MSC ended Q3 with a total associate headcount of 6,294, down slightly from the 6,267 it had at the end of Q2 and down 4.4 percent year-over-year
- MSC's ended Q3 with a net debt of $732 million, up 17.2 percent year-over-year