Even as e-commerce sales grew to 59.8 percent of its overall sales last quarter, MSC Industrial Supply's focus is on moving the business toward "technical, high-touch product lines such that the MSC value proposition becomes way deeper than just price and transact," according to Erik Gershwind, president and CEO.
"The whole digital competition remains a presence," Gershwind said in a call to discuss the second-quarter results. "It remains a threat."
But that doesn't translate into concerns over MSC's visible list prices the way it does for Grainger. Price pressures are certainly high, Gershwind noted, particularly from local distributors who are "getting aggressive." But as activity picks up, he expects some of that pressure to abate on its own. "When our customers are busy, they have less time to price shop. What they really value is getting product in their door fast, which we can do."
To that end, MSC is building up inventory across its network to ensure it is able to continue to deliver on that value proposition.
Overall sales grew just 2.9 percent during MSC's fiscal second quarter. Sales to vending customers (not just through vending) drove most of the increase for the quarter. Sales from Class C Solutions Group also rose, turning positive for the first time in more than two years, Gershwind said.
With "building optimism" among customers, MSC expects sales to continue growing, forecasting average daily sales growth in the third quarter to be around 3.5 percent. Gross margin is expected to be down, in part due to two large technology projects the company is implementing.
"While order volumes are not yet as robust as sentiment, they've begun to turn the corner for most of our customers," he said. "This is true despite the lack of clarity on policy topics such as infrastructure spending, lower corporate tax rates and a more business-friendly regulatory environment."
