Despite market pressures, including increased tariffs, the industrial products distributor said its market remained strong in the fiscal quarter ended Dec. 1, as e-commerce sales increased 8.7% from a year earlier.

MSC Industrial Supply Co. posted an 8.7% year-over-year increase in e-commerce sales for its fiscal first quarter, as total sales rose 8.2% despite increased tariffs and other market pressures, MSC said today.

“Despite some of the recent headlines and choppiness in the financial markets, the U.S. industrial economy remained strong” in the quarter, Erik Gershwind, president and CEO, said on a conference call with investment analysts.

Tariffs and price increases

He said that MSC—which specializes in selling metal-cutting tools and other industrial supplies companies used to repair, maintain and operate facilities—was able to increase its prices to absorb an approximately 5% increase in its cost of goods sold that had resulted from increased tariffs on products sourced directly or indirectly from China. But Gershwind also cautioned that MSC will “watch what happens in March” with an expected hike in tariffs to 25%, and that MSC expects to “implement a meaningful price increase” next month.

Q1 e-commerce sales in the first fiscal quarter ended Dec. 1 accounted for 60.1% of total sales, up from 59.8% in the year-earlier quarter, MSC tells B2BecNews. Figuring those percentages, e-commerce sales increased 8.7% to $499.790 million, up from $459.60 million, as total sales increased 8.2% to $831.60 million from $768.56 million. MSC said these increases in e-commerce were primarily associated with its internet vending machines and, and did not include e-commerce sales associated with the company’s acquisitions over the past year and a half of industrial supplies distributors Deco Tool Supply Co. and All Integrated Solutions, or AIS.

MSC includes in its definition of e-commerce all sales made through its e-commerce sites, including its flagship, EDI transactions, vending machines, vendor-managed inventory programs and other hosted systems and electronic portals.


Vending—more sales, tighter margins

Gershwind noted that the internet-connected vending machines, which MSC places at customer sites to sell items ranging from drill bits to work gloves, showed particularly strong growth in the quarter. “More encouraging is that we’ve accelerated our vending signings and implementations, which bodes well for future growth prospects,” he said on the conference call, according to a transcript from Seeking Alpha.

Rustom Jilla, MSC’s chief financial officer, however, noted that, while vending “is one of our sort of strong positives in terms of revenue growth,” vending “does come through at a lower gross margin.”

For the fiscal quarter ended Dec. 1, MSC reported gross profit of $357.99 million, up 6.8% from $335.07 million a year earlier, resulting in a gross profit margin of 43.0%, down from 43.6%. It also reported net income of $74.23 million, up 24.6% from $59.59 million.

The company’s formal corporate name is MSC Industrial Direct Co. Inc., but it generally goes by MSC Industrial Supply Co., the name of its primary division.


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