Hurricanes disrupt Fastenal’s bottom line

US fastener giant Fastenal saw net sales increase $119.7m, or 11.8%, in Q3 2017 (compared with Q3 2016).

With one less selling day in Q3 2017, daily sales increased 13.6% compared with Q3 2016. Thanks to the March acquisition of Mansco, daily sales growth rose 1.3 percentage points. Adjusting for that, organic daily sales increased 12.3% in Q3 2017, compared with Q3 2016.

However, gross profit as a percentage of net sales declined 20 basis points to 49.1% in Q3 2017 from 49.3% in Q3 2016.

Changes in product and customer mix, the inclusion of Mansco (which has a lower gross profit product mix than the Company), the effects of hurricanes during the quarter on some of Fastenal’s Caribbean, Southeastern, and Gulf Coast regions (reducing net sales and gross profit dollars and resulted in an increase in sales of lower margin products) and commodity inflation affected gross profit.

Fasteners contribute over 1/3rd sales for Fastenal

Fastener products represented 35.6% of sales in Q3 2017. Daily sales of fastener products grew 12.1%, with 3.8 percentage points attributable to Mansco. Sales of non-fastener products represented 64.4% of sales and grew 14.6% on a daily basis.

Employee-related expenses rose, in part due to the inclusion of Mansco personnel, as did transport costs with higher average fuel expenses.

Sales to top 100 customers grow

Fastenal signed 4,771 industrial vending machines during the quarter, comparable to Q3 2016, with the installed device count at 69,058 on 30 September 2017 – up 14.3% over September 30, 2016. Vending machine sales continued to grow at a double-digit pace, primarily due to the increase in the installed base.

Fastenal signed 81 new Onsite locations (41 in Q3 2016) and had 555 active sites on September 30, 2017 – 47.6% more than at September 30, 2016. 42 new national account contracts were signed in the quarter and daily sales to national account customers grew 17.3%.

Fastenal added: “Beyond signings (or growth activities), our large customers can provide insights into the trends of our overall marketplace. As recently as the fourth quarter of 2016, weak industrial demand was depressing growth for this group with sales to only 51 of our top 100 customers growing compared to 49 contracting. This dynamic started to improve in the first quarter of 2017, and has continued to improve, including in the third quarter of 2017, with sales to 72 of our top 100 customers growing (50 growing 10% or more), and sales to 28 of our top 100 customers declining (15 declining 10% or more).

“The third quarter of 2017 ended with September daily sales growing 15.3%, we have not seen daily sales growth above 15% for almost three years (late 2014),” said Dan Florness, President and CEO.