MSC Industrial at Jefferies Conference: Strategic Focus on Growth

On Wednesday, 03 September 2025, MSC Industrial Direct (NYSE:MSM) participated in the Jefferies Mining and Industrials Conference 2025. The company highlighted its strategic initiatives amid a challenging market environment, with a focus on digital transformation and customer-centric growth. Despite facing hurdles in heavy manufacturing, MSC Industrial reported positive trends and outlined plans to capture market share and enhance operational efficiency.

Key Takeaways

• MSC Industrial reported a 2.5% growth in its core customer base in June.
• The company is leveraging digital transformation, including AI, to optimize processes and improve customer operations.
• MSC aims for mid-single-digit growth and 20% or better incremental margins.
• Implant and vending programs are key growth drivers, with implant sales making up 18% of total sales.
• MSC is focusing on transparency in pricing strategies to mitigate demand destruction.

Financial Results

• Core customer growth showed sequential improvement, with June experiencing a 2.5% increase.
• The new e-commerce platform, launched at the end of the fiscal second quarter, demonstrated early improvements in conversion rates and average order size.
• MSC aims to achieve growth of 400 basis points or more above industrial production (IP) and drive 20% incremental margins or better.

Operational Updates

• MSC completed a web pricing realignment and launched an upgraded e-commerce platform.
• The company enhanced its marketing program and optimized seller coverage over the past year.
• Implant signings grew over 20% year-over-year, now comprising 18% of sales, while vending signings increased by nearly 10%.

Future Outlook

• MSC is targeting top-line growth at a flat IP, with aspirations to exceed this by 400 basis points.
• The company plans to continue high-touch programs and leverage its productivity pipeline to drive supply chain improvements.
• MSC is focusing on enhancing manufacturing customers’ operations through technology and AI.

Q&A Highlights

• MSC emphasized transparency in tariff-related pricing increases and aims to help customers offset inflation through productivity improvements.
• The fragmented market presents opportunities for MSC to capture organic market share, leveraging inventory availability and working capital investment.
• Digital adoption remains a priority, with enhancements in website search and product navigation to improve customer experience.

For a detailed understanding of MSC Industrial’s strategic plans and performance, readers are encouraged to refer to the full transcript below.

Full transcript - Jefferies Mining and Industrials Conference 2025:

Chirag Patel, Analyst, Jefferies: Session here with MSC Industrial. I’m Chirag Patel. I cover the machinery, multis, and distribution space here at Jefferies along with Steve Volkmann. It’s our pleasure to have Eric Gershwin, the CEO of MSC Industrial, and then Ryan Mills, Head of Investor Relations. I was going actually start out with a quick little overview of the company and the business, and then let’s jump right into the meat of it.

Eric Gershwin, CEO, MSC Industrial: That sounds great. Thank you for having us, Shurai. So

Chirag Patel, Analyst, Jefferies: just a brief overview of the business trends that you’re seeing currently, the dynamics that you’ve kind of laid out in your latest earnings call that are kind of important to be mindful of at this point?

Eric Gershwin, CEO, MSC Industrial: Yeah, sure. And so thank you again for hosting us. Sharag, as a reminder, we reported out

Chirag Patel, Analyst, Jefferies: Out fiscal

Eric Gershwin, CEO, MSC Industrial: So we have maybe a clarification if anybody is new to the story. We’re fiscal calendar that runs September to August. So we are in day two of fiscal twenty six, off to a rocking start here. We gave so we gave an update on our third quarter results on July 1. So our third quarter would have been I’ve got to get myself even oriented March, April, May.

And I would describe it as so we sell, in a little backdrop on the company, industrial distributor selling over 2,000,000 SKUs, primarily into heavy industry and manufacturing end markets in particular. So about 70% virtually all of the company’s sales are North American. 70% of our sales, plus or minus, are into the manufacturing sector, which has been soft and our end markets in particular soft for the last eighteen to twenty four months. We did highlight that in our fiscal third quarter, we started to see some sequential improvement. So we were a little under flat, which by no means is anything to write home about.

But I think we’re starting to see a little bit of sequential improvement. And I think which I’m sure we’ll get into, but most notably the most encouraging part was we there’s three customer types that we talk about publicly. Our core customer, which is around mostly made up of small and medium sized businesses, which is around half of the company’s sales. The second customer type is our national accounts customer base, and third being public sector, which is around 10 of company sales. So I think most notable about our third quarter was seeing the most sequential improvement in our core customer base, which is heavily levered to manufacturing, even more heavily levered to metal cutting manufacturing, which is kind of the roots and the bread and butter of MSC.

It’s been a customer base where we’ve underperformed for a number of years and have put a full court press on revitalizing or as we call the reenergizing that base, started to see some sequential improvement. Since that point, and then I’ll stop, Sharag, but we did share you mentioned July or June, July, we did share so our fiscal because we’re on a fiscal calendar, our June is a five week month and runs through actually ran through the July 4 week. So when we had reported our third quarter results we gave an estimate for June. We were still in the midst of that last week that had June at about flat, which was continuing this slight progression. We ended up we shared we actually came in considerably stronger that final week than we were expecting.

So June ended up coming in at positive 2.5 growth. And the color we added was that July, which at the time when we haven’t shared anything since, was that July wasn’t finished, that we we were remaining in positive growth territory was was how we put it. So I would see, you know, environment is certainly not exactly booming. Customers are cautious. It’s a little bit uncertain still, but we are starting to see little bit of positive trending there.

Chirag Patel, Analyst, Jefferies: That positive trend that you saw through the JuneJuly time period, is that still primarily based on the core customers, that dynamic, or are we seeing a little bit more on the national account side?

Eric Gershwin, CEO, MSC Industrial: So we didn’t put color on the breakout, and we will come October. But I think the core customer I mentioned, we’ve got our eyes on that because it is 50% of the company’s revenues. It is the highest margin part of the business where we have underperformed. We’ve had several programs that have been in flight for a while now aimed at reenergizing it. So it’s definitely where we have our eyes on and, you know, we’ll give more color.

But between tariffs, which I’m sure we’ll get to, and pricing along with per customer, I brought it up. You know, we feel like both of those are encouraging signs as we now look into 2026 of prospects.

Chirag Patel, Analyst, Jefferies: And I guess the other thing I was looking at was the idea of the pricing dynamic. In distribution, there’s definitely a nice little favorable pricing trend historically. What are you kind of seeing right now in just underlying pricing? And then what are you taking as far as actions on tariff side of the equation? And remind me, don’t think you quantified the number or maybe you did and I missed

Eric Gershwin, CEO, MSC Industrial: it already. So part yes, part no. What we did so our fiscal second quarter so third quarter was July 1. Our fiscal second quarter, we reported the morning pre market after Liberation Day was post market. And I think if I track back to that moment in time, which was just impeccable timing, out of the gate I would say pricing had been slower to come by, meaning price increases slower to come by than we were expecting.

And just to be clear, out of our revenue base, roughly three quarters of our business is we are not the importer of record, where we’re selling an industry brand for resale as a distributor. And then there’s a quarter where we’re direct sourcing. And some of that quarter we’re direct sourcing domestically here in The United States, and then somewhere we would be an importer of record. When I say pricing was slower going out of the gates, we saw in a normal inflation cycle when there’s an impetus like this, we would see our branded manufacturers move pretty quickly and pretty aggressively on price increases. And because of the way things have played out with all the toing and froing, most of the manufacturing base was reluctant to move out of the gate.

So this is going back the April timeframe. So what we had done at the time was we did move in a targeted way on products where we were the direct importer of record and seeing a tariff increase. We reported on July 1 that we, for the first time, moved in a broader way. Outside of that, where we did start to see manufacturers move on their list price increase, we described it as a low single digit was the color that we put on the increase. You know, I would say since that time there certainly has been probably more of a firming up and a building momentum around our supply base, putting pricing through.

So, you know, as we look ahead, we normally try to be very selective in how often we go to market with price increases. Just we have a cadence with our customers. I would say this is not normal times, though. So, you know, certainly if conditions warrant and continue, we would consider moving again during the calendar year and early in our fiscal ’twenty six, if warranted.

Chirag Patel, Analyst, Jefferies: You know, pricing is one aspect of it. There’s always a fear on the opposite side of demand destruction kind of associated with that. Are you seeing anything on that front at this point?

Eric Gershwin, CEO, MSC Industrial: You know, so far I would describe and I’ll go back to the comments we shared in July, which the environment cautious but stable. So it’s not like things have dropped off a cliff. It’s not like things have really inflected in terms of the environment. Cautious but stable is what I would describe. You know, I I would say most of our customers are understanding everyone sees the headlines and reads the news.

They understand that where tariffs are in play, prices will go up. Mhmm. I I think the trick for us, and and and it’s been received, I wouldn’t say favorably because no one likes pricing, but empathetically is that number one is, you know, we’re trying to be transparent and to focus pricing on where there’s tariffs and not make it broad based, which keeps our credibility high with our customers. The second thing is the conversation with the customer immediately turns to what are you as a distributor going to do to help me offset the inflation? Where are you going to help me find productivity?

And that actually plays into MSC’s strengths pretty well because, you know, our our one of the things we anchor ourselves in is being able to go and work with our customers on their plant floor to help them find productivity improvement. So that’s been part of the discussion every time, and I think that’s why it’s been reasonably well received. So to get back to your question about demand destruction, I would say we would characterize the environment as stable. So no major demand destruction to do of note. Very good.

Chirag Patel, Analyst, Jefferies: And I guess I wanted to kind of touch into the market environment and the end market dynamics that you’re seeing, specifically starting with the heavy manufacturing side of the equation. What’s kind of the expectation? What are you seeing currently play out of that? We’re at the bottom of the ag cycle, seems to be a little improvement in construction side of the equation. What are you guys seeing?

Eric Gershwin, CEO, MSC Industrial: So, yeah, and I’ll preface it by giving you the porch we sit on, which is I mentioned 70% manufacturing. As you said, Chirag, most of that’s heavy manufacturing. And there’s five top end markets that are the bulk of the manufacturing for us, which is machinery and equipment, which would capture ag as part of that primary metals fabricated metals, which would be where machine shops and job shops would play automotive and aerospace. And if I look at the last eighteen, nearly twenty four months, it’s been a slog in heavy manufacturing with the notable exception of aerospace.

Chirag Patel, Analyst, Jefferies: Okay.

Eric Gershwin, CEO, MSC Industrial: I would say of late you know, just a proof point. One of the indicators that we track that’s been remarkably correlated to MSC performance over time has been something called the MBI, or the Metal Working Business Index. So for those familiar with the PMI survey that’s administered by ISM, it’s a sentiment survey, 50 being neutral, greater than 50 growth and less contraction. It’s very much fashioned along those lines but geared towards the metalworking end markets. That reading had been negative for, I want to say 24, Ryan?

’24, Yes, 25 straight

Ryan Mills, Head of Investor Relations, MSC Industrial: the exception

Eric Gershwin, CEO, MSC Industrial: of March. One month. And you know, looked back over the course of as long as that survey’s been administered decades. We’ve never seen that before. I I would say you know, I mentioned cautious but stable right now.

There’s probably, from our view, more upside than there is downside from where we sit right now. It’s just been most of the end market’s depressed for a while. We certainly think that once we do get through tariff noise that a lot of the administration’s push to bring manufacturing back to The United States will be good for the economy, good for us. Mhmm. Some of the tax work that could stimulate reinvestment and, you know, interest rates.

The outlook is probably, as I said, more upside than downside in the next twelve to eighteen months.

Chirag Patel, Analyst, Jefferies: So we are kind of waiting on the uncertain macro for customers to kind of unlock a little bit of the opportunity as we go forward then?

Eric Gershwin, CEO, MSC Industrial: I think so. I think and we’ll get to it, Sharag. From our standpoint so I think that’s right in the macro. We do feel like there’s a real self help story at MSC both on the revenue and the operating margin line, whereby we don’t feel like we should need to see a really robust macro in order to drive growth. If we get just some stability based on some of the things we have going on, you know, we would expect to grow.

Chirag Patel, Analyst, Jefferies: Got And we’re talking about a stable kind of quarter over quarter kind of client base or customer base currently. Is there any sort of inventory issues that you’re worried about from the customer standpoint at this point? Or

Eric Gershwin, CEO, MSC Industrial: We think that, you know, we gauge this all the time with our customers that for the most part, inventory levels are appropriately sized from what we can tell and that customers are ordering as they need it. So I would say it doesn’t feel like again, there’s not a lot of downside in terms of destocking. If there were to be an inflection, usually there’d be a build in inventory that we could benefit from if that were to happen. So I would say, again, probably sized right with more upside than downside if there’s improvement. Very good.

Chirag Patel, Analyst, Jefferies: And then we touched a little bit on the end markets, but one of the big things is the strategic efforts that you guys are making internally on the digital side of the transformation. I kind of want to touch on that first and then talk through some of the other changes that are happening at the business level.

Eric Gershwin, CEO, MSC Industrial: Yes, sure. So I think probably the biggest headline here, I mentioned the core customer and reenergizing growth in the core customer, which not only hits the revenue line but would generate leverage and improve the margin profile for sure. We’ve had you know, there’s four initiatives that we’ve had in flight for the past two fiscal years that are pretty much behind us now, which means that we’re at the point where we would expect to be able to begin to harvest benefits. So the first was realigning our public facing web pricing. That was completed last fiscal year, and there’s still fine tuning being done.

But for the most part, that would be behind us. The second being upgrading our e commerce experience and web platform, which was a while in the making. The new platform is pretty much live as of the end of our fiscal second quarter. The third initiative being accelerating and enhancing our marketing program using some technology, which that is now in flight. And the fourth being optimizing seller coverage, which also has been done over the past year or so.

So we feel like most of the ingredients are there. It’s always difficult to time out. You know, some of these things, like when we install some of our high touch programs, we install a vending machine, we put an implant program in place. We can predict pretty much by month how that ramps. These programs, there’s a little bit of betting on the come in terms of seeing the improvement.

But, you know, I would say we began last fiscal quarter seeing some early signs of progress that have us encouraged. And I’m happy to, you know, touch on any of those four.

Chirag Patel, Analyst, Jefferies: Yeah. And actually I do want to kind of delve in a little bit deeper into those. But one of the things I want to look on the overarching side is that, you know, those actions that you’ve taken, what’s kind of the expectation for how that should translate to market share gain as you kind of look through that?

Eric Gershwin, CEO, MSC Industrial: MR. So the biggest proof point, I think, for the public world is going to be this is going to be our overall growth. So our if we expect to grow and historically have at 400 basis points above the industrial production index. Now that’s inclusive of volume and price, but that would be overall. More specifically, I mentioned the core customer, restoring that segment to growth, you know, in a stable environment, so call it a flat IP environment, I think will be a good marker as to progress.

And then and then, you know, obviously we’re measuring carefully, particularly our e commerce upgrade and our marketing efforts. We have several KPIs for each of those two programs that we’re tracking carefully to say, are they doing what they’re supposed to be doing? Are we seeing traction that should lead to improvement in the core customer?

Chirag Patel, Analyst, Jefferies: Got you. What’s a good way to kind of track and get a sense for the impact that your enhanced Web kind of Web site and e commerce platform is getting us?

Eric Gershwin, CEO, MSC Industrial: So there’ll be a couple of ways that you’ll be able to easily see. One is going to be the core customer growth, which we report on quarterly. So we gave the color in our fiscal third quarter that, again, I mean, getting close to flat is nothing to write home about. But we did see from Q2 to Q3, the core customer sequentially in average daily sales grew. It was the fastest grower in our business.

And that was when that was the first quarter in which the new web platform was in market. So that was encouraging. We also publicly we produce we publish our digital our ecommerce revenues. So so you could see our total revenues and revenues as a percentage of sales. Mhmm.

That’s gonna be another metric we track. And then we’ll share on an ongoing basis some of the KPIs we look at on both initiatives. We gave a few proof points on our last earnings call. So for instance, with respect to the website, we’re looking at what percentage of the traffic that comes to the website is converting to find what they’re looking for and ultimately place a purchase. And are we seeing those conversion rates go up?

We saw some early encouraging indicators. Yes. On our marketing programs, we’re looking, you know, under the covers at return on ad spend, at conversion rates and effectiveness. And, again, we saw some early proof points. But I think ultimately what you’ll be able to see publicly is core customer growth rate and digital growth.

Chirag Patel, Analyst, Jefferies: Okay. And are you seeing an increase in the wallet share that you’re gaining through the e commerce platform from a customer? Is the enhanced website binding you the extra dollar as well?

Eric Gershwin, CEO, MSC Industrial: So the formula on the webinar, what I would say is we only have publicly one quarter under our belt. So it was early. But there’s basically three metrics in its most simplest form three things we’re tracking. Number one is how much volume are we getting to the site, which is really a marketing effectiveness question. How much volume is coming at what cost?

Two is how is that volume translating into orders, which is conversion rate? And the third is our average order size. Are we seeing an increase in the average order size? And what we noted was that we saw some early signs in terms of improvements on conversion rate and average order size. So, you know, again, early indicators one quarter, but some encouraging signs, yes.

Chirag Patel, Analyst, Jefferies: And moving from that, I wanted to talk a little bit about the vending and implant opportunities. Roughly about 18%, a little under 20% of the total sales at this point. One, how large can that business be for you as you go through it? What’s the advantage of having that kind of a part of the platform?

Eric Gershwin, CEO, MSC Industrial: Yeah, okay. So this is actually the flip side of the core customer story where the company over the last really decade has put a heavy focus on becoming what we refer to as mission critical to our customers, which means going beyond just selling product, shipping it to our customers, loading dock and stopping. But we’ve put a heavy emphasis on expanding the role that MSC plays inside of our customers and particularly our larger customers that value total cost of ownership that want a more integrated relationship where MSC is actually reaching inside of the customer’s plant floor. So if you go to MSC customers today you’ll find an MSC VMI or vendor managed inventory program, managing inventory. You’ll see MSC industrial grade vending machines.

And in some cases, as you mentioned, you’ll see MSC people full time in our customers playing a role anything from procurement to put away to kitting to really being an extra set of eyes and ears for the customers. The implant one in particular has been fascinating. So the program, if I go back to pre COVID, we did a handful of implants. So it would have been low single digits at best as a percentage of revenues, and we did it reactively. Along the way a combination of customer receptivity, COVID kind of put on steroids this idea of a skills gap and a labor shortage for our customers.

We found that we were really tapping into something and we kind of hit the throttle. So implant is now 18% of sales in just a few years. And I think the benefit for the customer is they’re getting arms and legs, they’re getting somebody to give them fresh eyes, bring in new ideas and we’re closing. Mean when I visit customers the single biggest issue continues to be access to qualified skilled labor. We’re helping solve the biggest challenge that they have.

For MSC, there’s an added cost for sure. We’re adding to our fixed cost base because what we’ve seen is when the economy goes down, our in plan associate, our vending machines, the cost is still there, the revenue base drops. But what we are getting is share of wallet, and retention rates are really strong. So, you know, the flip side of that, as manufacturing restores, we should have what we refer to as kind like a coiled spring effect where the fixed cost is already in place and we get the revenue back. So we think it’s it’s it’s pretty good.

The signings rate continues to grow on implants over 20% for vending, Ryan, close to 10%.

Ryan Mills, Head of Investor Relations, MSC Industrial: Yeah, high single digits. On a high base. Yep.

Eric Gershwin, CEO, MSC Industrial: So if I think about runway, there’s plenty of it. You know, to try to put some color on that, our national accounts program as a percentage of revenues, let’s call it mid-30s. And I think many of our national accounts, if the economics can work and be a win win, be potential candidates for an implant program. Not to mention companies we don’t do business with. So I think there’s a lot of runway still.

Chirag Patel, Analyst, Jefferies: Got you. Is there we talk about the fixed cost structure to that. Is there a potential for when volumes are good, how does the margin work on that versus for the total company?

Eric Gershwin, CEO, MSC Industrial: It’s the it will be the reverse effect, which means that so Ryan’s been sharing the data that our implant program count is north of 20% growth year on year, and yet our implant revenue base was it 10% last Yeah,

Ryan Mills, Head of Investor Relations, MSC Industrial: it was down high single digits, yeah.

Eric Gershwin, CEO, MSC Industrial: So on a per site it’s down high single digits. Now part of that is because we’re bringing on all these new accounts and the new accounts are smaller in absolute dollars and they’re averaging down. But part of it is also that you get a lot of accounts that, you know, large accounts that are just soft, that have been in plants for a couple of years, we kind of ride the tide with them. But as they restore the volumes to restore, we get very strong incrementals because the costs are all fixed and it’s just pick pack ship costs on the way back up.

Chirag Patel, Analyst, Jefferies: Increasing the signings currently, what’s the ramp up time in a normal condition?

Ryan Mills, Head of Investor Relations, MSC Industrial: Yes. So for the timing we sign an implant for revenue generation beginning to occur typically takes three months. And then from there, you know, we experience a strong ramp in revenue for about six months until we get closer to that contracted spend. So I’d say, on average, about nine months until that implant program is fully ramped. Now to Eric’s point, that implant program is heavily tied to that customer’s production rates.

So if they’re going at one shift, ramp is going to take higher. That ramp is going take longer. And then going back to your original question on the op margin for the implants, when an implant gets to about 2,500,000 in sales annually, you get to a point where you’re flexing your fixed costs at a point where that implant’s operating margin is at or slightly above company average. So that’s what has us excited as we think about a potential recovery because we should benefit from that from both the top line and margin perspective.

Chirag Patel, Analyst, Jefferies: Have you given a number on number of implants that are currently out there? Just a total

Ryan Mills, Head of Investor Relations, MSC Industrial: Yeah. 399.

Chirag Patel, Analyst, Jefferies: Okay. 300.

Ryan Mills, Head of Investor Relations, MSC Industrial: Last last quarter. Alright.

Chirag Patel, Analyst, Jefferies: And so I guess the next piece of this is having done the strategy part, having kind of implemented these actions at this point, what should we be thinking about from the finance part financials part? Or the or as we get volumes back, what are the incrementals that we should be thinking about? What should we be thinking about will drop to the bottom line here at MS?

Eric Gershwin, CEO, MSC Industrial: Yes. So I think the punch line is, as we’re now in fiscal ’twenty six, what we’ve been trying to position the business for is, you know, who knows what happens with the macro. But if environment stays stable, and let’s define stable as a roughly flat IP, we would expect to restore top line growth at a flat IP, and that would be a combination of continuing the momentum and the high touch stuff that has already been working, plus some price from tariffs, plus some improvement in the core customer. You know, we feel like, you know, our aspiration has been 400 basis points or more above IP. We feel like we should be positioned to do that.

So if if if we can grow mid single digits in our fiscal year, we feel like the business is positioned to drive 20% incremental margins or better possibly. And the story there beyond the revenues would be a roughly stable gross margin picture, which we think would be a good outcome. And most notably, on the operating expense line, the last couple of years we’ve had some big step ups in OpEx as revenues are dropping. Those moderate. And on top of that, we’ve done a lot of work in the last two years on rebuilding productivity pipeline that’s we’ve talked a little about it during fiscal twenty five on the supply chain front, but there’s a bunch of stuff behind it that has been building and will build in the numbers.

So we feel like we’re positioned to do at least 20% at mid single digit, which, you know, on a relative basis compared to prior points in history, I think would be a pretty good outcome. And then, of course, if we get any, you know, improvement from the macro, we would expect the incremental margin outlook to get better.

Chirag Patel, Analyst, Jefferies: Very good. Can we talk a little bit about the competitive landscape out there in the world? You’re playing against some other large industrial distributors that are out there. Talk about where MSC sits in this. Talk about a little bit about the opportunity that you see.

Eric Gershwin, CEO, MSC Industrial: So yeah, it’s a fascinating market. So the first thing I’d say is just it’s an amazingly fragmented market given its size. So the industrial distribution market is around $250,000,000,000 in North America. And the top 50 distributors have only 35% of the market. So that means 65% of the market.

We’re competing against local regional distributors, kind of MSA by MSA. So there’s a pretty massive runway for share capture. And that can be organic. That doesn’t mean a roll up through acquisition necessarily, but organic market share capture from companies that don’t have the scale, the technology, you know, the capitalization that an MSC or some of our peers would have. So I think there’s a massive opportunity there.

Within that, the niche we’ve attempted to carve out for ourselves, we are really focused on certainly we’re oftentimes known for metalworking, which is about 45% of our revenue is metalworking related products. So cutting tools, abrasives, machine tool accessories. The reason but from our standpoint, we think that the competitive positioning kind of goes beyond metalworking. And it really goes to focus on improving manufacturing customers’ operations. And that means helping them get more products out faster and doing it at a lower cost.

So the reason metalworking is important in that is because compared to other industrial supplies, you know, safety to a degree or janitorial or power tools, we’re the cutting tools, the metalworking supplies actually influence the output of the customer. So they’re really important. So we’re really focused on helping customers improve operations. So we’re doing that with our product offering. We’re doing that with technical experts.

So, you know, relative to peers, we’ve got a large percentage of our sales force, which is in the thousands, with deep machining and manufacturing backgrounds so they can be on the plant floor making recommendations. We supplement them with technology. So we’re using technology, we’re using AI to make them smarter and to bring savings opportunities to our customers. So an example we have something that we’ve referred to publicly, MSC Millmax, which is using data, basically data science to help customers optimize how they machine things. So I would say we feel pretty good about our footprint and our competitive advantage.

I think beyond that I mentioned some of the value added services where we’re reaching inside of our customers operations with vending and implant.

Chirag Patel, Analyst, Jefferies: Got Is there a given the expertise of those local salespeople on the metal side of the equation, does it behoove you guys to also introduce additional products as well to kind of make it a more full kind

Eric Gershwin, CEO, MSC Industrial: of experience or Yeah, I mean we do regularly. So our product portfolio is sitting at two plus million SKUs. So the offering’s robust. It’s constantly getting replenished. I think on the metalworking side it’s kind of like a three part formula that allows us to uniquely bring value to the customer.

Number one is we bring in somebody who’s an expert. Number two is they have a portfolio of products, they’re carrying all the brands. So there’s a degree of objectivity that as a distributor we bring that others can’t bring. And then the third thing, we’re taking these people with a lot of experience and we’re using data and technology to inform them. So we’re mining decades worth of testing data that we have from all of our other customers and we’re putting those at our reps’ fingertips so they can go and not just go on gut feel, which does matter, but also use science.

Chirag Patel, Analyst, Jefferies: Got you.

Ryan Mills, Head of Investor Relations, MSC Industrial: And then the other thing I’d add, Shrug, is if you think about the local and regional in today’s environment, as Eric mentioned, you know, the Denmark has been soft for about two plus years right now. You throw in tariff related inflation. You know, these locals of regionals are struggling and probably bleeding off some working capital. And product availability is the number one thing our customers care about, given, you know, our working capital investment, our breadth of inventory, we’re using that as a lever to gain shares too as well.

Chirag Patel, Analyst, Jefferies: Given that market dynamic, are you seeing those local and regional competitors try to exit? Or what’s kind of the dynamic of that right now?

Eric Gershwin, CEO, MSC Industrial: So I would say what’s fairly they usually don’t exit. They will usually at times there’s an opportunity for acquisitions. You know, I would say that market right now, given interest rates, is fairly subdued. It’s more an opportunity to take market share. So the strong local distributor will typically have a handful of really good customer relationships that under normal times are difficult to penetrate.

But when there’s times of disruption, it’s tougher to get product, they’re under financial strain, they’re not carrying as much inventory, maybe they can’t carry receivables as long, it creates a wedge where it’s an opportunity for us to, you know, take market share organically.

Chirag Patel, Analyst, Jefferies: And that market share gain from that kind of an action, how sticky is that at the end of the day? If

Eric Gershwin, CEO, MSC Industrial: it’s it’s if we’re using some of the things I described, the kind of arrows in the quiver of the technical expertise, the inventory management solutions like vending and an implant, it becomes very sticky. The retention rate really shoots up.

Chirag Patel, Analyst, Jefferies: Gotcha. And one of the other things I wanted to kind of cover here while we have a couple of minutes left is just the idea of what’s driving the core customer to kind of utilize some of the tools that you’re providing to them right now. What’s the impetus for them to make that investment in that digital aspect of things? I think if we do it right,

Eric Gershwin, CEO, MSC Industrial: we actually don’t need the customer to do much of anything differently. A lot of the actions for the core customer are around meeting the customer where they’re at with an effective offer, a fair price, and an effective marketing engine that’s compelling them to buy. And so that’s a lot of the work that’s gone on, Chirag. So we’re using a lot of data science and AI to help us do that, both to improve the Web experience, to make our marketing offer sharper and more relevant. So, you know, just to give you an example of what we’re talking about, that if a customer’s on our Web site, as opposed to just following them up with a generic offer, like we’re able to get very specific to see what they’re looking at and follow-up with them with offers that we know are what they’ve already looked at.

Or if there’s an item that’s back ordered and we know that we have, you know, our engine can bring back a recommended alternative that’s an equivalent to follow-up with them, those sorts of things that are really timely. So we want to make it such that the customer doesn’t have to work very hard. That to us is success. One of the

Ryan Mills, Head of Investor Relations, MSC Industrial: things is just our enhanced search and product navigation on the website, making it easier for the customer to find what they’re looking for. It’s something that they value pretty immensely. You know, for instance, a cutting tool could be attributed 200 plus ways. We built that search engine in house by people who know the the native language and speak the industry. And then also streamlining our checkout experience, we reduced the the amount of time or number of clicks by 50%.

So just making it more smoother and seamless to transact on mscdirect.com is another one.

Chirag Patel, Analyst, Jefferies: And if I’m on the website trying to buy a couple products, you know, how is my pricing different from Ryan who buys thousands of products? Is there a difference in the pricing? Yes.

Eric Gershwin, CEO, MSC Industrial: Customer just comes as a guest, they will not see their but most of our customers are logging in or the site’s remembering them. They will see their pricing.

Ryan Mills, Head of Investor Relations, MSC Industrial: But what we did last fiscal year is we went on a SKU by SKU basis and developed a market competitive range for each SKU to make sure that that web price was competitively priced regardless if you’re Ryan at Ryan’s drop shop who has 10 employees or you’re a large manufacturer with a thousand employees where you’re spending a lot.

Chirag Patel, Analyst, Jefferies: Excellent. And I think one last thing I wanted to touch on is just, you know, talked about the stabilization of the core customer. Talk a little bit about what you’re seeing on the national account side of the equation and the penetration that you’ve had, the growth that you see as an opportunity?

Eric Gershwin, CEO, MSC Industrial: Yeah. Think that’s probably, if I look back over the past couple of years, one of the areas that’s actually worked quite well. Most of our national accounts, they’re sophisticated. They’ve got multiple sites. And they’re looking for productivity, whether that’s cost down or improved throughput.

And, you know, all the stuff that we talked about with MSC is resonating there well. So I mean we continue to feel really good about the prospects for the National Accounts business.

Chirag Patel, Analyst, Jefferies: Excellent. Thank you guys so much for the time. Appreciate you coming through.

Eric Gershwin, CEO, MSC Industrial: Thank you for hosting us, Shiroc. Thank you.

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