MSC Slashes Forecast After ‘Softer than Expected’ Quarter

The company’s preliminary Q3 results saw a more than 7% drop in sales.

MSC Industrial Supply office, Houston, April 2021.
MSC Industrial Supply office, Houston, April 2021.

Metalworking and MRO distribution giant MSC on Thursday announced that its recently completed fiscal quarter saw “softer than expected” results — and that it now anticipates a decline in sales for its full fiscal year.

The company — no. 9 on ID’s latest Big 50 — issued “preliminary” results for the quarter ended June 1 and dramatically lowered its forecast from the flat to 5% growth anticipated in late March to current projections of a 4.3% to 4.7% drop in annual sales.

The preliminary net sales of $978 million to $980 million during the most recent quarter would be down 7.1% to 7.3% compared to the previous third quarter, while gross margins were about 60 basis points below MSC’s expectations. Those totals, the company noted, could shift during its ongoing quarterly review process; MSC is slated to officially report its Q3 results on July 2.

MSC CEO Erik Gershwind attributed the drop in margins in part to “unexpected dilution” from its web price realignment — particularly “complexities” that were not uncovered in a pilot phase and “the time it took” to identify the cause of those issues.

Greater headwinds in its product and customer mix also impacted MSC’s margins, while persistent softness in heavy manufacturing and slower-than-expected growth among core customers dented its overall revenue totals.

Gershwind said that the company is responding to the results with “decisive actions,” including “corrective actions” on the web price realignment, changes to its core customer initiatives, and a focus on its strong-performing high-touch solutions — namely its in-plant and vending areas.

“We are determined to execute the next chapter of our ‘Mission Critical’ journey and achieve our long-term goals of growing 400 basis points or more above the Industrial Production Index and achieving adjusted operating margin in the mid-teens,” Gershwind said in the announcement.

Shares of MSC’s stock fell by $8.29 to $76.37 in Friday trading.

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