Fastenal, the Winona, MN-based distributor of industrial and construction materials has announced its Q1 results, ending March 31, 2022 and the results suggest this major company has been able to brush off market challenges and emerge on a positive note.
The company, #4 on the annual ID Big 50 List, reports net sales increases of 20.3% in Q1, compared to the same period in 2021. The company attributes these sizable gains to improved unit sales across most products, “resulting from continued improvement in business activity.” Fastenal also cited weather as a factor, adding that the absence of last year’s adverse weather was responsible for an increase of 100 basis points.
“The first quarter of 2022 continued to experience strong, economically-driven growth in underlying demand for manufacturing and construction equipment and supplies,” Fastenal said in a press release.
The company adds that gross profit, as a percentage of net sales, increased to 46.6% in the first quarter of 2022 from 45.4% in the first quarter of 2021, partly due to pricing actions taken in the second half of 2021 and first quarter of 2022. Fastenal says inflation was a driver impacting, particularly, fasteners and transportation services. The company says it will “continue to take actions aimed at mitigating the impact of product and transportation cost inflation as the need arises in 2022.”
From a product standpoint, Fastenal’s three main categories – fasteners, safety and other (which includes tools, cutting tools, among others) – all showed strong growth. Specifically, says the company:
Fastener daily sales increased 24.6% over the first quarter of 2021, and represented 34.3% of net sales in the first quarter of 2022; fasteners represented 32.5% of net sales in the first quarter of 2021.
Safety product daily sales increased 15.3% over the first quarter of 2021 and represented 21.0% of net sales in the first quarter of 2022; safety products represented 21.5% of net sales in the first quarter of 2021.
Other products daily sales increased 14.8% over the first quarter of 2021 and represented 44.7% of net sales in the first quarter of 2022; other products represented 46.0% of net sales in the first quarter of 2021.
Fastenal also notes that profits improved in its safety category because mass buys of COVID supplies have scaled back. The reason, says the company, is that the large, multi-quarter commitments for these types of supplies typically came at smaller margins, whereas today COVID-related product buys – and subsequent margins for Fastenal – were back to pre-pandemic levels.
Fastenal says employee-related expenses comprise as much as 75% of its total operating expenses, and those costs increased 22.9% in the first quarter compared to the same period the year prior. The company says increases in base pay as well as higher bonus and commission payments were one driver, along with higher costs for profit sharing and healthcare. During the past 12 months, the company says it has increased full time headcount by 864.
Fastenal signed on 106 new Onsite locations (sales and service offerings provided from within, or in close proximity to, the customer's facility) in Q1, bringing its total active sites to 1,440. This represents an increase of 12.1% from close of Q1, 2021. Says Fastenal, “Daily sales through our Onsite locations, excluding sales transferred from branches to new Onsites, grew at a better than 20% rate in the first quarter of 2022 over the first quarter of 2021.”
Fastenal's first quarter earnings topped Wall Street expectations and are often considered a bellwether for industrial activity.