UPDATE: MSC exec predicts market share gain from small distributors
Industrial Distribution staff -- Industrial Distribution, 4/8/2008 7:08:00 AM
MSC Industrial Direct Co. Inc. CEO David Sandler told analysts the MRO and metalworking products distributor expects to take market share from small and mid-sized distributors as the economy enters a down cycle.Discussing the Melville, N.Y.-based company’s second-quarter results, Sandler said the downturn is prompting customers to cut back on their MRO inventory. For smaller distributors, which constitute about 70 percent of MSC’s competition, that means deteriorating cash positions and lower margins, he said.
“When this occurs, their value proposition erodes, forcing them to use price as the only tool to maintain their business,” Sandler said. “This is a cycle we’ve experienced many times in the past and we’ve always gained market share.”
MSC posted second-quarter sales of $436.5 million, up 7.9 percent compared with $404.6 million during the same period last year; net income rose 17.2 percent to $47.5 million, compared with $40.5 million during the second quarter of 2007.
“The fiscal 2008 second quarter marked another period of strong performance for MSC in the face of a challenging market environment,” Sandler said in a statement.
“We purchased approximately 2.5 million shares for $96 million in the quarter. We increased our maximum borrowing line under our revolving credit agreement to $150 million, a portion of which was used to finance the repurchase of these shares. Going forward we will continue to invest in MSC’s future growth and we expect cash flows to remain strong as we execute on our model,” executive vice president and CFO Chuck Boehlke said in the quarterly earnings release.
MSC said it expects sales of up to $463 million during the third quarter.
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