Fastenal Sales Fall 13.6% in First Quarter

The Fastenal Company, Winona, MN, reported sales for the first quarter ended March 31, 2009, were $489.3 million, a decline of 13.6% from sales of $566.2 million in the first quarter 2008. Profits fell to $48.6 million, a decrease of 28.5%.
 
In the first quarter 2009, Fastenal opened 33 new stores (compared with 53 new stores in the prior-year period).
 
In stores opened greater than five years, sales fell 21.5% in March from March 2008. Sales fell 14.3% in February, and 12.4% in January.
 
Since Dec. 31, 2008, Fastenal has decreased its work force by 6.6%. According to the release, Fastenal "remains practical optimists and we always try to balance long-term opportunities for growth with the necessary short-term reactions to our current reality."
 
The distributor has slowed its store openings to 2%-5% a year, and has stopped adding worker except for store openings or for stores that are growing.
 
The distributor also credits its Pathway to Profit initiative for altering its variable vs. fixed cost structure. "This has helped us today as we navigate through the current economic environment," the distributor reported.
 
Pathway to Profit Initiative
In April 2007, the distributor announced its plan to "alter the growth drivers" of its business. For most of the past decade, Fastenal says it has used store openings as the primary growth driver - in the past it has opened 14% new stores each year.
 
In April 2007, the distributor started to add outside salespeople into existing stores at a faster rate than in the past. The expansion was funded with the savings from slowing new store openings.
 
Fastenal said the goal was:
1.     To continue growing the business at a similar rate with a new outside sales investment model
2.     To grow sales of the average store to $125,000 per month in the five-year period from 2007 to 2012
3.     To enhance the profitability of the overall business by capturing the natural expense leverage that has historically occurred in existing stores as sales grow
4.     And to improve the efficiency of working capital - primarily inventory - as average store size increases.
 
Freight Model
In 2005, Fastenal introduced a new freight model continue to improve operating performance. The freight model represents a focused effort to haul a higher percentage of products with the Fastenal trucking network (which operates at a substantial savings to external service providers due to the leveraging of existing routes) and to charge freight more consistently in our various operating units.
 
This initiative has positively impacted Fastenal's business over the past several years, the distributor reported, despite changes in average per gallon fuel costs. The average price of a gallon of diesel fuel and a gallon of gasoline decreased by 36.9% and 39.4%, respectively, from the first quarter of 2008 to the first quarter of 2009.
 
More details here.