Fastenal Q2 Sales Tick Up, Store Closures Outpacing Openings

Along with an a slight uptick in sales and dip in profit, the company's vending sales continued to grow while it provided details on a revised goal for 2016 store openings.

Winona, MN-based Fastenal — No. 12 on Industrial Distribution's 2015 Big 50 List — reported its 2016 second quarter fiscal results on Tuesday, in which the company posted a slight uptick in year-over-year sales while its profit dipped. The company also provided details on its store openings and closures, as well as headcount.

Fastenal reported Q2 sales of $1.014 billion, up 1.6 percent year-over-year, while profit of $131.5 million decreased 6.3 percent. Daily sales also increased 1.6 percent. Sequentially, sales total sales increased 2.7 percent from Q1.

Fastenal had June sales of $349 million, essentially identical to a year earlier as daily sales growth was a flat 0.0 percent. Here's how the past 13 months of Fastenal's daily sales growth has been:

  • June 2016: 0.0 percent
  • May 2016: +1.1 percent
  • April 2016: +3.8 percent
  • March 2016: 0.0 percent
  • February 2016: +2.6 percent
  • January 2016: +3.3 percent
  • December 2015: -3.8 percent
  • November 2015: -1.1 percent
  • October 2015: -0.8 percent
  • September 2015: -0.3 percent
  • August 2015: +1.6 percent
  • July 2015: +3.2 percent
  • June 2015: +3.7 percent

Fastenal opened four new stores in June and 10 in Q2 overall, bringing its year-to-date total to 27 through six months. Fastenal opened only eight new stores in the first half of 2016. However, Fastenal has closed or consolidated 34 stores YTD, outpacing its openings. The company said most of those closures/consolidations wre in multiple store markets with expiring leases and that they didn't have a meaningful impact on sales. The company said it currently expects to open 30 to 45 stores total in 2016, down from its goal of opening 40 to 60 stores it stated in its Q1 fiscal report in April. Fastenal's store count at the end of Q2 was 2,605, down 0.6 percent since the end of 2015.

Fastenal ended Q2 with a total headcount of 20,324, up 4.1 percent since Q2 2015 but down 2.0 percent since Q4. In its Q1 fiscal report, Fastenal stated, "We expect to continue to hold back on headcount additions until daily sales growth rates move closer to mid-single digits."

Fastenal said it signed 100 new contracts in the first half of 2016, up from 87 in the same period a year ago. However, the health of its top 100 customers declined, as 53 reported contraction, up from 47 in Q1. Fastenal said from 2011 to 2014, the typical growth vs. contraction ration was 3:1 (75 grew/25 contracted), declining to approximately 1:1 by Q4 2015.

The company said it hopes to sign 200 new Onsite customer locations in 2016, having signed 92 YTD — 48 and 44 in Q1 and Q2, respectively. Of those 92, 55 were operational as of June 30.

In Q1 and Q2 2016, Fastenal signed 4,647 and 4,869 industrial vending machines, respectively. The company's count of installed vending machines at the end of Q2 was 58,346, up 15.3 percent year-over-year and up 5.1 percents ince Q4 2015. Fastenal said vending comprised 44.6 percent of total sales in Q2, with daily sales to customers with industrial vending up 2.7 percent year-over-year. Beyond that, Fastenal said daily sales of non-fastener products to customers with industrial vending grew 5.9 percent YOY, while daily sales of fasteners to customers with industrial vending contracted 5.1 percent.

The company's Fastener line sales as a percent of total sales continued its long-running trend of decline in Q2, with fasteners representing 37.1 percent of total sales. That's down from 37.5 percent in Q1. The company's fastener percentage has declined in all but four quarters since ending 2009 at 49.9 percent of sales. In June, daily fasteners sales declined 5.3 percent year-over-year, while sales of all other product lines grew 3.9 percent. Fastenal said it has experienced about 2 percent contraction in its fastener product line in the first half of 2016.

"Our market share gains continue to be strong, but the contraction in purchases from our existing customers, plus some price deflation, has eliminated our growth and led to contraction," the company said in its Q2 statement. "This contraction lessened from the fourth quarter of 2015 into the first half of 2016; however, it worsened in June."

June daily sales to manufacturing customers declined 2.1 percent year-over-year, while daily sales to non-residential construction customers declined 2.4 percent.

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