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Fastenal Outlines Aggressive Vending Goals for 2013

Fastenal Outlines Aggressive Vending Goals for 2013

January 28, 2013

Fastenal (Nasdaq: FAST), which passed its 2012 goal of signing contracts for 10,000 new industrial vending machines within the first seven months of that year, has tripled its vending goals for 2013. The Winona, MN-based company aims to have 30,000 new vending machines under contract by the end of 2013, or about 2,500 per month, as part of its FAST Solutions program.

Fastenal had 1,925 machines installed with customers as of the fourth quarter 2010; at the end of 2012’s fourth quarter, the company had 21,095 machines installed, an almost 1,000 percent increase over a two-year period. Vending sales made up more than a quarter of Fastenal’s sales in the 2012 fourth quarter.

Fastenal CEO Willard Oberton says vending program growth in 2012 exceeded his expectations. "I was very pleased with the fourth-quarter results," he said during Fastenal's fiscal 2012 earnings results conference call. "We ended up with 20,161 machines for the year. Up until the beginning of January, I didn't think we were going to achieve the 20,000 number."

One way Fastenal will accelerate its vending business this year is trying to increase the number of machines per store. CFO Daniel Florness says while 90 percent of Fastenal stores have at least one vending machine, "it's still in a subset of our stores. We have a lot of stores out there that have one machine or two machines, but it's the subset that have really hit home with it."

While Fastenal will continue to aggressively grow the vending program, it is also focused on profitability by improving how it services vending accounts.

About 45 percent of Fastenal's capital expenditures in 2012 were vending-centered, and the company will continue to invest in the program with a new vending-specific warehouse in Indiana. Oberton says Fastenal, which owns the building in Indianapolis, will retrofit it to centralize the order-picking for vending machines for its stores.

Oberton says he expects the warehouse to improve three aspects of Fastenal's vending business: "One is we'll reduce our labor. It's a far more efficient process. Two is we believe if we do this for the store, they will not need to stock the inventories to improve our inventory turns. And the third is that we believe we'll be able to improve our margins because we'll buy such tremendous volume into one location.”

Another way Fastenal plans to improve vending margins is by fine-tuning the products available in the machines. "What we've identified in some of the vending areas is we put a lot of pressure for people to sign these machines, and sometimes we didn't give the product away, but that's what it would almost look like. So we're going in and we're reconfiguring some of the machines with more profitable product," he says.

Vending will continue to be a priority for the distributor, which has found that customers with vending solutions are seeing 30 percent daily sales growth, which is down from past years but still attractive, according to CFO Daniel Florness. “That growth, to me is a sign of engagement with that customer. Every one of our customers has the potential to spend more money with us, and the real question is how do we position ourselves to get more of that spend and provide more solutions for our customer in the process.”

A transcript of Fastenal’s call is available. 

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