Fastenal was in the uncommon position Tuesday of being the first major publicly-traded ID Big 50 List distributor to report its quarterly earnings for the latest fiscal quarter period, and the latest figures show that the company's sales considerably narrowed over the summer as its product mix continued to normalized amid the ongoing COVID-19 pandemic.
Fastenal — No. 5 on ID's 2020 Big 50 List — reported 2020 third quarter total sales of $4.29 billion, up 2.5 percent year-over-year (YoY), with daily sales up by that same amount. That compares with Q2 sales growth of 10.3 percent, which was significantly boosted by surge orders for the company's personal protective equipment that rocketed 136 and 120 percent YoY during April and May but have since calmed to gains of 35 and 30 percent in August and September, respectively.
The Winona, MN-based company's Q3 gross profit declined 1.6 percent, compared to growth of 4.7 percent in Q2. The company said the gross profit decline was driven by lower product margins specifically for a narrow subset of COVID-19-specific safety products, where improved product supply has pressured margins. Operating profit of $290.1 million grew 2.9 percent, compared to 14.9 percent in Q2, while total Q3 net profit of $221.5 million was up 3.7 percent, compared to 16.7 percent in Q2.
"The tone of the third quarter of 2020 can best be described as one of normalization following the heavily pandemic-influenced second quarter of 2020," the company said Tuesday. "Activity levels throughout the period remained below those that existed prior to the onset of the pandemic and the related mitigation efforts. Based on trends in vending dispenses and hub picks during the period, however, we believe there was gradual sequential improvement in general business activity each month of the quarter."
That Q3 normalization included net sales of fastener products that represented 30.5 percent of total sales, compared to 26.0 percent a year earlier. And while daily sales of fasteners were down 6.1 percent in September, it was a continued month-to-month gain after bottoming out at -22.5 percent in April. For the quarter, Q3 daily sales of fastener products were down 6.9 percent YoY.
Meanwhile, Q3 daily sales of safety products grew 34.4 percent YoY and represented 23.8 percent of net sales, compared to representing 34.0 percent of net sales in Q2.
"Re-opening of the economy has been accompanied by greater demand for PPE, hand sanitizer and related products, which more than offset continued softness in underlying business activity owing to a generally weak industrial marketplace for products unrelated to mitigating the effects of COVID-19," the company added.
Fastenal's daily sales of other products were down 2.3 percent in Q3 and represented 45.7 percent of total Q3 sales, compared to 40.0 percent of sales in Q2.
On the e-commerce front, Fastenal said Q3 daily sales returned to a pre-pandemic growth in the high 20-percent range, including mid-30 percent in September, with growth driven by its largest customers.\
Vending & Onsite
Fastenal signed 4,680 industrial vending devices during Q3, an average of 73 per day, which is on pace with the 75 per day in Q1 after 54 per day in Q2. The company ended September with an installed device count of 94,395, up 6.9 percent YoY. Fastenal said daily sales through its vending devices declined at a low-to-mid single-digit pace in Q3 compared to a year earlier.
Fastenal signed 85 new Onsite locations during Q3, up from 40 in Q2 and 62 a year earlier. The company ended September with 1,236 active sites, up 14.9 percent YoY. Like vending, daily sales through Onsite locations (excluding sales transferred from branches to new Onsites), declined at a low single-digit rate in Q3.
Fastenal had September net sales of $446 million, up 7.3 percent YoY, with daily sales up 2.2 percent. That compares with August daily sales that were up 2.5 percent. That daily sales figure peaked at 14.8 percent in May before proceeding as up 9.5 percent in June and up 2.6 percent in July.
Other notable September metrics:
- Geographically, Fastenal's September US sales growth was 1.9 percent YoY, identical to August. Sales to Canada/Mexico, which bottomed out at -19.7 percent in April and have grown since, were up 2.4 percent in September. Non-North American sales were up 11.1, compared to 15.0 percent in August.
- By end market, Fastenal's September sales to manufacturing customers — though still down — continued to improve to -3.8 percent, compared to -5.0, -5.5 and -8.2 percent in the previous three months, respectively. September sales to non-residential customers were down 11.3 percent, compared to -13.5 percent in August.
- Fastenal ended September with a total headcount of 20,336, down 7.3 percent YoY and down 8.4 percent from a recent peak of 22.203 at the end of February.