Despite some "temporary weather-related hiccups" in January and February, market conditions overall continue to improve for MSC Industrial Direct (NYSE: MSM). "We would not characterize the core business as growing like gangbusters," CEO Erik Gershwind said in the company's second-quarter investor call. But improvements in government spending and metalworking have created a "moderate growth environment."
Customers remain "appropriately cautious with their spending," Gershwind said, but they are exhibiting more confidence in continued growth. In addition, government sector sales posted double-digit growth in February and March after a year of sluggishness following last year's sequestration.
But one of the primary drivers of MSC's 16.2 percent growth during its second quarter was the acquired Barnes Distribution North America business, which accounted for 76 percent of the sales growth. That said, when compared with its own sales a year ago, BDNA sales were down slightly in the second quarter.
April 22 marks the one-year anniversary of the acquisition. (Read more in The Impact of the MSC Industrial Supply-Barnes Deal.)
"Our primary focus, for now, remains on operations integration, achieving cost synergies and setting the customer service foundation for growth," Gershwind said. During the quarter, MSC closed two distribution centers and is on track to close BDNA's Cleveland, OH, headquarters by September 2014. Associates from the Cleveland location will be relocated to MSC's new Davidson, NC, headquarters.
While the raw numbers surrounding BDNA's integration aren't demonstrating sales increases yet, "I'm very encouraged by what I'm seeing in terms of the activities that I'm confident are going to drive the results in the future," Gershwind said.
The three primary areas offering this encouragement, according to Gershwind, are customer service, sales force profiling and training, and cross-selling. There's still a lot to be done in these areas, Gershwind said, and observers should see a "more robust focus" on these areas over the next few quarters.