MSC will fend off increased online competition by focusing more on customer services like metalworking advice, CEO Erik Gershwind said today.

The market is showing stronger demand for industrial products from distributor MSC Industrial Supply Co., as an uptick that started in recent months continued through March, CEO Erik Gershwind said today.

And as total sales inched up 2.9% year over year for the fiscal second quarter, e-commerce sales performed even better. E-commerce sales increased 6.4% to $420.86 million, accounting for 59.8% of total net sales of $703.78 million, MSC reported today.

MSC is benefitting from growing optimism in the industrial economy.
Erik Gershwind, CEO, MSC Industrial Supply

The company’s market environment “continues to show improvement as the momentum that began a quarter ago, sustained,” Gershwind said today on a conference call with stock analysts, which is recorded on its website. He noted that “growing optimism in the industrial economy” has also continued over the last two quarters. That optimism, he added, appeared to be particularly strong among customers of MSC’s metalworking products, one of its core categories.

MSC’s e-commerce transactions—which include sales on its website, MSCDirect.com; through internet-connected vending machines at client locations; and through EDI—have been rising steadily as a percentage of total sales. In the comparable quarter a year ago, e-commerce accounted for 57.8% of total sales.

But MSC isn’t resting on its laurels as an e-commerce powerhouse, Gershwind said. When asked about how MSC was handling increased online competition from other industrial products suppliers, he said he hadn’t seen any recent sharp increases in e-commerce competition but that MSC was working hard to differentiate as a provider of services not commonly offered online by other distributors.

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“The whole digital competition remains a threat,” he said. MSC, No. 74 in the B2B E-Commerce 300, is responding by continuing to build on such services as its team of more than 100 metalworking experts who advise buyers of its industrial metal-cutting tools on the best products and procedures for their projects. “Our metalworking experts and our salespeople help customers improve their manufacturing operations,” he said, adding that such service has proven to make customers loyal.

Gershwind said MSC added 25,000 SKUs to its inventory in the quarter, bringing its net inventory total to more than 1.5 million SKUs available online. He added that MSC routinely updates its inventory mix by checking what’s new from suppliers and what customers are searching for on its website and requesting in its network of about 100 branch outlets across 40 states.

For the second quarter ended March 4, 2017, MSC reported:

  • Net sales of $703.78 million, up 2.9% from $684.12 million in the year-earlier quarter;
  • Gross profit of $314.56 million, up 1.9% from $308.79 million;
  • Net income of $53.56 million, up 8.1% from $49.53 million.

For the first half ended March 4, MSC reported:

  • Net sales of $1.390 billion, down a fraction of percentage point from $1.391 billion in the year-earlier quarter;
  • Gross profit of $623.30 million, down 0.7% from $627.76 million;
  • Net income of $107.85 million, up 3.2% from$104.55 million.

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