MSC Industrial Supply Co., a North American distributor of metalworking and maintenance, repair and operations (MRO) products, reported its fiscal 2025 first quarter results, revealing a decline in sales and profit metrics against the prior year. Specifically, net sales for the quarter ended November 30, 2024, totaled $928.5 million, down 2.7% compared to $954.0 million for the same period last year, surpassing prior guidance for a 4.5% to 5.5% decline. The decline in sales was attributed to lower volumes, partially offset by the benefits from acquisitions.

The company’s operating income for the first quarter decreased to $72.3 million from $101.6 million year-over-year. The reported operating margin dropped to 7.8% from 10.6% a year earlier. Adjusted operating income, factoring out restructuring and other costs, stood at $74.6 million, with an adjusted operating margin of 8.0%, compared to 10.9% in the prior year quarter.

Earnings per share (EPS) also saw a significant decline, with diluted earnings of $0.83 compared to $1.22 in the previous year. On an adjusted basis, EPS was $0.86, down from $1.25 year-over-year. Free cash flow conversion for the quarter was notably strong at 179% of net income, reflecting cash flow generation of $101.9 million.

The gross margin was reported at 40.7%, reflecting a decrease of 50 basis points from the same quarter last year, influenced by higher priced inventories. Adjusted operating expenses rose to approximately $304 million, up $14 million from the previous year primarily due to personnel-related costs and operational investments.

Looking ahead, MSC Industrial expects average daily sales for the second quarter to decline between 3% and 5% year-over-year. The company anticipates adjusted operating margin in the range of 6.5% to 7.5%, with projected gross margin expected to be approximately 40.8%.

In terms of the company’s financial position, it reported net debt of about $463 million, equivalent to approximately 1.1x EBITDA. Working capital remained a favorable source of cash, contributing positively to operating cash flow, with capital expenditures continuing at a rate of $20 million for the quarter and approx. 100% free cash flow generation as a percentage of net income projected for the fiscal year.

These financial results reflect MSC Industrial’s current operational conditions which are characterized by a transition phase, with management focused on initiatives aimed at restoring growth and enhancing productivity across its operations.