MSC Industrial Direct's Fiscal Year 2026 Off to a Strong Start

MSC Industrial Direct Co. (MSM) CEO Erik Gershwind and Head of Investor Relations Ryan Mills presented at the Jefferies Industrials Conference. Gershwind discussed the company's fiscal year 2026, which started on September 1, and highlighted the third quarter results, which were reported on July 1. He noted that the company's sales are primarily in heavy industry and manufacturing end markets, with about 70% of sales in North America and 70% in the manufacturing sector, which has been soft.

MSC Industrial Direct Co. (MSM), a leading provider of industrial supplies, reported its third quarter 2025 results, reflecting a period of sequential improvement despite a generally subdued manufacturing environment. The company's fiscal year 2026, which began on September 1, saw a slight year-over-year (YoY) decline in average daily sales (ADS) of 0.8%, but a significant quarter-over-quarter (QoQ) improvement of 7%. This growth was driven by higher volumes and a small price benefit [1].

Key financial highlights include:

- Total Q3 Sales: $971 million, with a YoY decline primarily driven by lower volumes, partially offset by 80 basis points (bps) of price benefit and 60 bps from acquisitions.
- Customer Segment Performance: Core and national accounts showed a decline in ADS, while public sector sales continued to grow. Sequential customer performance improved significantly, with core and other customers up 8.3% QoQ and public sector up 6.2% QoQ.
- Profitability: Gross margin was reported at 41%, an improvement of 10 bps YoY, and adjusted operating margin was 9.0%, up 190 bps sequentially. The company expects gross margins to be 40.9% +/- 20 bps in Q4, outperforming historical seasonal declines.
- Operating Expenses (OpEx): Adjusted OpEx stepped up approximately $22 million YoY to $311 million, primarily due to higher personnel-related costs, resulting in an 180 bps sequential decrease in adjusted OpEx as a percentage of sales.
- Earnings Per Share (EPS): GAAP EPS was $1.02, and adjusted EPS was $1.08, both down from the prior year.

The company's CEO, Erik Gershwind, and Head of Investor Relations, Ryan Mills, presented at the Jefferies Industrials Conference, highlighting the third quarter results and providing an outlook for fiscal 2026. Gershwind noted that the company's sales are primarily in heavy industry and manufacturing end markets, with about 70% of sales in North America and 70% in the manufacturing sector, which has been soft [1].

Outlook and Guidance

For the fourth quarter of fiscal 2025, MSC Industrial Supply expects ADS to be down 0.5% to up 1.5% YoY, with adjusted operating margin expected to be between 8.5% and 9.0%, and gross margins projected to be 40.9% +/- 20 bps. The company is also expecting adjusted operating expenses to decline.

Risks and Challenges

MSC Industrial Supply acknowledged the prevailing macroeconomic softness and discussed potential risks, primarily related to tariffs and customer caution. The ongoing and evolving nature of tariffs creates uncertainty for customers regarding future production levels. The company is staying agile and in constant contact with suppliers and customers.

References

[1] https://www.datainsightsmarket.com/companies/MSM