Why This Matters to Distributors: MSC’s overhaul shows how distributors are cutting overlapping sales roles, leaning on AI for growth and tightening supplier alignment to drive margin and organic growth in a slow, uneven demand environment.
MSC Industrial Supply Co. said a sweeping overhaul of its sales and service organization, combined with new supplier-led growth initiatives and expanded use of AI, is beginning to reshape its operating model after a disrupted fiscal second quarter.
The distributor of metalworking and MRO products reported fiscal second-quarter sales, up 2.9% year over year but below expectations, as weather, a partial federal government shutdown and internal restructuring weighed on performance.
For the quarter ending Feb. 28, net sales increased 2.9% to $917.8 million from $891.7 million a year earlier. Operating income rose 4.1% to $64.8 million from $62.2 million, while net income attributable to MSC increased 8.1% to $42.5 million from $39.3 million.
For the first six months of fiscal 2026, net sales increased 3.5% to $1.88 billion from $1.82 billion in the prior-year period. Operating income rose 4.8% to $141.0 million from $134.5 million, while net income attributable to MSC increased 9.7% to $94.3 million from $85.9 million.
Executives said the quarter reflects a transition period, with operational changes now largely complete and early signs of improvement emerging later in the period.
“Growth acceleration is our primary objective,” president and CEO Martina McIsaac said.
At the center of MSC’s strategy is a redesigned sales and service structure aimed at eliminating overlap and improving accountability. McIsaac said the prior model had become inefficient, particularly for large customers, where “2, 3, 4 or even 5 MSC representatives” could be supporting the same account.
The company consolidated roles and aligned its service organization geographically with its sales structure, affecting about 130 customer-facing associates.
“This consolidation was complex and could not be achieved without some level of relationship change in the field,” McIsaac said.
The transition created short-term disruption, especially among national accounts and large core customers, where responsibilities shifted across teams. The impact was amplified by winter weather that delayed planned customer handoffs and by higher-than-expected attrition tied to changes in compensation and performance expectations.
“We’re seeing in March, what we had hoped to see in February,” McIsaac said. “So, we lost some time.”
She said the company is also pushing a more performance-driven sales culture.
“Hunting and complacency is no longer part of our compensation plan,” McIsaac said.
Despite the disruption, MSC said sales trends improved late in the quarter. National accounts, which were flat overall, improved to low-single-digit growth in February and mid-single-digit growth month to date in March, according to McIsaac. Core customers also exited the quarter with positive volume growth.
A key element of MSC’s forward strategy is deeper supplier collaboration, supported by data and AI. McIsaac highlighted a recent supplier growth forum that brought together more than 1,000 MSC employees and 400 suppliers.
The company held more than 3,000 prescheduled meetings focused on identifying untapped opportunities across its product and customer base.
“In just 3 days, these strategic conversations translated into nearly 10,000 opportunities totaling close to $500 million in combined near-term and long-term potential,” McIsaac said.
MSC is also expanding the role of AI in internal operations. McIsaac said its planning and procurement team has been “focused on improving our planning processes, embracing AI and embedding it into our daily work,” while operations teams continue to drive productivity improvements inside distribution centers.
She said AI will also play a role in future cost management efforts.
“We’ll look at automation and AI in the facilities and in the office,” McIsaac said. “We’re absolutely committed to challenging our cost structure.”
MSC has reduced headcount by more than 400 positions over the past 12 months. While the latest sales restructuring is complete, McIsaac said the company plans to refill some roles and add direct sellers as growth improves.
The company continues to invest in its solutions business. Interim chief financial officer Gregory Clark said installed vending machines increased 8% year over year to about 30,400, while the number of in-plant programs rose 9% to 423.
Sales through vending and in-plant programs each increased 8% and accounted for about 20% of total company sales.
Clark said MSC is also refining that business by shifting lower-return in-plant programs to more cost-effective service models, improving overall returns.
Margins improved despite the slower sales growth. Gross margin rose 10 basis points to 41.1%, driven by pricing actions and improved pricing discipline, while adjusted operating margin increased to 7.5% from 7.1% a year earlier.
Pricing remains a key factor, particularly in metalworking products tied to rising input costs. McIsaac said MSC continues to see supplier price increases related to tungsten and carbide cutting tools.
“Since we talked to you in January about tungsten, we’ve taken about — we’ve seen price increase notices that range from between 7% to 15%, so the prices continue to climb,” she said.
She added: “We’re starting to see a little bit of supply constraint now.”
The company expects additional pricing actions in the coming months, but it is also seeing early signs of volume recovery tied to improved execution and customer engagement.
Looking ahead, MSC forecast fiscal third-quarter average daily sales growth of 5% to 7% and adjusted operating margin of 9.7% to 10.3%.
Executives said customer sentiment remains stable despite geopolitical uncertainty and rising costs. McIsaac said customers are focused on ensuring supply availability rather than pulling back on demand.
“They see demand picking up and they want to make sure that their supply is secure,” she said.
MSC said the broader goal is to emerge from the transition with a more efficient sales model, stronger supplier alignment and greater use of data and AI to drive growth.
“We’re building an engine that will deliver sustainable organic growth for the long term,” McIsaac said.
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