MSC Industrial returns to sales growth after yearlong slide
The distributor posted a 2.7% rise in fiscal fourth-quarter net sales, its first increase in five quarters.
MSC Industrial Direct (MSM) reversed a yearlong sales decline in its fiscal fourth quarter, reporting a 2.7% year-over-year increase in net sales to $978.2 million. The gain marked the first positive quarterly comparison since fiscal 2024 and contrasted with a 1.3% annual decline for the full fiscal 2025, when revenue fell to $3.77 billion from $3.82 billion.
The turnaround arrived as the industrial distributor navigated persistent margin pressure. Operating income fell 7.3% to $84.3 million, extending a 22.8% annual drop that left full-year operating profit at $301.6 million. Operating margin narrowed to 8.6% from 9.5% in the prior-year quarter, continuing a slide from the 10.2% margin recorded in fiscal 2024. Adjusted operating margin followed a similar path, slipping to 9.2% from 9.9% in the year-ago period and to 8.4% for the full year from 10.7%.
Earnings per share told a more mixed story. Diluted EPS rose 2.0% to $1.01, recovering from a 22.1% annual decline that left full-year EPS at $3.57. Adjusted diluted EPS climbed 5.8% to $1.09, an improvement from the 21.8% annual drop to $3.76. The company said core customer growth outpaced the company average, with both segments returning to daily sales growth in the quarter.
Cash flow remained a bright spot. Free cash flow conversion reached 122% for fiscal 2025, matching the prior year and exceeding the company’s annual target. That performance supported shareholder returns of approximately $229 million through dividends and share repurchases. In the fourth quarter, however, conversion dipped to 104% from 151% in the prior-year period.
Looking ahead, MSC Industrial guided for fiscal first-quarter average daily sales growth of 3.5% to 4.5%, above the 2.7% reported in the fourth quarter. Adjusted operating margin is expected to range from 8.0% to 8.6%, below the 9.2% achieved in the just-completed quarter. The company also projected capital expenditures of $100 million to $110 million for fiscal 2026, up from $92.8 million in fiscal 2025, and free cash flow conversion of approximately 90%, down from 122%.
Costs weighed on the quarter. Restructuring and other charges rose to $4.6 million from $2.7 million in the prior-year quarter, though full-year costs of $11.0 million were below the $14.5 million recorded in fiscal 2024. The company also disclosed a $1.5 million litigation cost tied to a share reclassification case, an expense not present in earlier quarters.