Chris Dankert

Chris Dankert asked if the level of price increases taken, comparable to 2022, implies a 5% or more pricing increase for fiscal 2026, seeking context for future pricing strategies. He also questioned whether the projected $30-$40 million SG&A growth for the new year assumes a leveling off of digital and marketing investments, requesting a breakdown of SG&A growth components.

Answer

Martina McIsaac, President and COO, stated that it's uncertain to predict specific pricing percentages for 2026, but the intention is to meet inflation as it comes, with Q1 actions aiming for price-cost stability. Ryan Mills, Head of IR, clarified that the price increases include a low single-digit range from late June and another in Q1, totaling around 4%, with further moves as warranted. Erik Gershwind, CEO, explained that the $30-$40 million SG&A growth reflects variable expenses, normal inflation, and investments offset by productivity. He noted that while e-commerce investments are leveling, marketing investments are increasing due to positive returns in core customer growth.

Chris Dankert asked for clarification on the implied pricing for fiscal 2026, given that recent price increases were on par with 2022 levels. He also inquired about the components of the projected $30M-$40M SG&A growth for the new year, specifically whether digital and marketing investments are expected to level off.

Answer

Martina McIsaac, President and COO, stated that future pricing is uncertain but MSC Industrial Supply intends to meet inflation. Ryan Mills, Head of IR, clarified that a low single-digit increase in June and another in Q1 implies a 4% range, with further moves as warranted. Erik Gershwind, CEO, explained SG&A growth reflects variable expenses, normal inflation, and investment spending, offset by productivity. While e-commerce investment is leveling, marketing investment is increasing in Q1 due to positive returns, with future levels remaining fluid based on observed growth rates.

Chris Dankert asked for quantification of improved customer service levels or subsequent sales growth in regions following supply chain investments, using the Nashville DC as an example. He also inquired about the Motion business's backlog growth, its OEM-centric nature, and expectations for OEM trends and acceleration.

Answer

Executive Vice President and CFO Bert Nappier explained that supply chain investments lead to improved productivity, service levels, and local market growth, citing a Canadian building with double-digit growth post-investment as an example. President and CEO Will Stengel expressed cautious optimism for the Motion business, noting sequentially improving large orders (largely OEM-based) and constructive but cautious customer conversations, indicating a slow recovery through the market's bottom phase.