MSC Industrial Direct Co. Inc. (NYSE:MSM) Q2 2020 Earnings Conference Call - Final Transcript

Apr 08, 2020 • 08:30 am ET


MSC Industrial Direct Co. Inc. (NYSE:MSM) Q2 2020 Earnings Conference Call - Final Transcript


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Erik Gershwind

This is particularly important, because with timely shipping and some creative sourcing we are helping to keep the nation's front lines running while we all battle this outbreak.

We've instituted enhanced safety procedures to safeguard the health and safety of our team, including the use of additional protective equipment and frequent cleanings of our facilities. Given that we're providing essential services to many organizations on the front lines of the response to COVID - 19, we do not have any plans at this time to shut down our customer fulfillment centers. However, we will of course follow the guidance of health officials, and we're in close contact with them across our operating footprint.

We've eliminated essentially all travel in order to ensure health and safety. We are also reducing spending more broadly across the Company, only moving ahead on operating and capital spending that is deemed critical. We've ceased all hiring, cut expenses on items like outside resources, including consulting and more. Looking ahead, we have well-developed contingency plans to reduce costs further if the situation deteriorates from here as it very well may.

I am proud of how our associates have stepped up during this time of unprecedented uncertainty. Our warehouse associates continue getting product at the door every day. Our sales and service teams remain the face of the Company on the front lines with our customers. Our category management team is coming up with miracles to find scarce safety and janitorial products that are keeping our customers going. And our IT team has moved and worked at speed to enable nearly the entire Company with remote access.

We'll share some more detail on our actions later in the call, but I'll now turn to our fiscal second quarter that we closed at the end of February.

During the quarter we continued to progress on our journey to reposition MSC as a mission-critical partner on the plant floor of manufacturing and industrial customers. We remained focused on the three initiatives that we've discussed over the last couple of calls to restore operating margin stability and ultimately expansion. And those are: refining the sales effectiveness plan, improving the profitability of our supplier programs and improving productivity by reducing operating expenses.

First, we continued refining the sales force and preparing to accelerate growth. Sales headcount was roughly flat during our fiscal second quarter. Importantly, though, we increased headcount in the growth areas such as business development or the hunter roles that we've talked about, into CCSG and a couple of other investment priorities. Our new business wins continued at a strong pace and remained on plan. While encouraging, we've realized that the ultimate measure will be our growth gap above market.

Our second initiative is improving the profitability of our supplier programs. Recall that we have negotiated roughly $20 million in annualized profit improvements, split about equally between the back half of our fiscal '20 and our fiscal 2021. The overall program remains on track. We do expect, however, that