MSC Industrial Direct Company, Inc. ( MSM ) shares are trading lower premarket on Thursday after the company reported second-quarter financial results.

Net sales declined 4.7% year-over-year to $891.7 million, missing the consensus of $899.54 million. Average daily sales declined 4.7% year-over-year. Adjusted gross margin for the quarter was 41.0%, down from 41.5% a year ago.

Adjusted operating income for the quarter declined 34.9% to $63.7 million, with an adjusted operating margin of 7.1%, down from 10.5% a year ago.

Adjusted EPS of $0.72, down 39.0% Y/Y, topped the consensus of $0.68.

As of March 1, the company held $41.276 million in cash and equivalents.

Operating cash flow for the six months totaled $156.3 million, down from $159.9 million a year ago.

The company returned around $60 million to shareholders in the form of dividends and share repurchases during the second quarter.

Erik Gershwind, CEO, noted that the company launched website upgrades and an enhanced marketing campaign. Despite facing a challenging operating environment with industrial demand remaining low, MSC Industrial delivered solid results that fell within its guidance expectations.

He further added that the company is concentrating on executing the Mission Critical productivity and growth strategies, which will strengthen MSC’s market position and help achieve the long-term goals of delivering at least 400 basis points of growth above the IP Index and expanding operating margins to the mid-teens.

Outlook: MSC Industrial expects third-quarter ADS to decline 2%—flat and anticipates an adjusted operating margin of 8.7% – 9.3%.

For FY25, the company expects a free cash flow conversion of ~100% and capital expenditures of ~$100 million – $110 million.

Investors can gain exposure to the stock via TrueShares Active Yield ETF ( ERNZ ) and ALPS O’Shares U.S. Small-Cap Quality Dividend ETF .

Price Action: MSM shares are trading lower by 7.09% at $73.66 premarket at the last check Thursday.

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