MSC Industrial Direct Q3: 10% Sales Growth, Margin Pressure & More

MSC Industrial Direct Company, Inc MSM reported third-quarter FY23 sales growth of 10% year-over-year to $1.05 billion, beating the consensus of $1.02 billion.

Gross margin contracted 220 bps to 40.7%. Adjusted Operating income decreased 1.2% Y/Y to $138.6 million, and the margin declined by 150 bps to 13.1%.

Adjusted EPS of $1.74 missed the consensus of $1.75.

MSC Industrial's operating cash flow YTD was $567.1 million, compared to $135.3 million a year ago. It held cash and equivalents of $58.4 million as of June 3, 2023.

CEO Erik Gershwind said, "Successful execution of our Mission Critical growth initiatives in the third quarter resulted in the fifth consecutive quarter of double-digit sales growth aided by robust Public Sector performance. We delivered average daily sales growth of nearly 12 percent and outperformed the IP index by double digits for the second consecutive quarter."

FY23 Outlook: MSM expects ADS Growth of 10%-11% (prior 5.0%-9.0%). The company expects an Adjusted Operating Margin of ~12.7% (prior 12.7%-13.3%). 

Price Action: MSM shares closed lower by 1.08% at $95.95 on Wednesday.