MSC Industrial Reports Flat Q4 Sales, Profit Slide As E-Commerce Continues Growth

MSC credited oil prices and the strong U.S. dollar for its flat sales, while the company's B2B offering now comprises nearly 57 percent of total sales.

Melville, New York-based MSC Industrial Supply Co. – No. 14 on Industrial Distribution's Big 50 List – reported its 2015 fourth quarter and full-year financial earnings on Tuesday for the period ended Aug. 29.

The company posted Q4 sales of $727.4 million, essentially identical to the $726.6 million in had in Q4 2014. It had sales of $745.5 in Q3 this year. MSC's Q4 profit of $59.17 million, however, was a 6.8 percent decline from last year's $63.5 million, following a 2.2 percent yearly decline in Q3 to $63.3 million.

Monthly sales for Q4 were as follows: June - $278.2 million, July - $221.2 million, August - $228.0 million. June had 24 selling days, while July and August each had 20. July (-0.6 percent) and August (-1.6 percent) are the first two months with a decrease in average daily sales in MSC's monthly reporting that dates back to Sept. 2012 in Tuesday's release. The company shows that September 2015 sales were $279.3 million (-1.2 percent), and projects October's sales to be $224.9 (-3.4 percent).

"Our flat fourth quarter sales reflected strong execution in the face of a difficult and deteriorating environment," said MSC President and CEO Erik Gershwind. "The prolonged impact of the drop in oil prices, the strong U.S. dollar and foreign exchange headwinds are all negatively impacting broader manufacturing activity. We continued our share gains despite these market conditions.”

"Countermeasures such as discount optimization, various freight initiatives, and supplier cost reductions offset most of the headwinds from customer mix and soft pricing," added MSC Executive Vice President and CFO Rustom Jilla. "We will continue to implement productivity initiatives and reduce expenses even after investing for growth."

By region, MSC reported sales growth of 3.2 percent in the Northeast and 2.2 percent in the West, declines of 0.4 percent in the Midwest and 0.1 percent in the Southeast, while International & Other had a decrease of 16.6 percent.

Sales to manufacturing customers (69 percent of customer base) had a 1.8 percent decline in Q4, while sales to non-manufacturing customers grew by 5.4 percent.

MSC said its e-commerce sales in Q4 were $412.0 million, or 56.6 percent of total company sales. Q3's e-commerce sales were 56.0 percent of total sales. Last year, Q4 had e-commerce sales of $322.2 million, or 44.3 percent of total company sales.

MSC reported a total employee headcount of 6,642 at the end of Q4, essentially flat compared to Q3's 6,694 and up 66 from the end of 2014. The company's field sales personnel count was 1,972 at the end of Q4, up 28 from the end of Q3 and up 49 from the end of 2014.

The company said it expects Q1 2015 sales to be between $702 million and $714 million, with average daily sales to decline roughly 3.0 percent at the midpoint. Sales in Q1 2015 were $731.1 million.

"As we move into 2016, we remain focused on outgrowing the market and managing those levers within our control," Gershwind said. "We have historically made our greatest strides during economic slowdowns and delivered disproportionate revenue growth and earnings leverage in subsequent periods."

For the full year, MSC reported net sales of $2.91 billion, up 4.4 percent from 2014's $2.79 billion. Profit for 2015 of $231.3 million was down 2.0 percent from last year's $236.1 million.

For the year, 2015 e-commerce sales wre $1.62 billion, or 55.7 percent of total sales. In 2014, e-commerce sales of $1.2 billion were 43.1 percent of total sales.​