The Secret to Fastenal's Revenue Surge - Modern Distribution Management

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The Secret to Fastenal’s Revenue Surge

On-site, vending successes help company post highest sales growth in three years.

Not even two branches getting destroyed by Hurricane Harvey could stop Fastenal from posting its highest sales growth in three years. The third-quarter sales increase was spearheaded by improved markets and continued upswing in the company's chief growth drivers – industrial vending and on-site locations.

"The third quarter of 2017 ended with September daily sales growing 15.3 percent. We have not seen daily sales growth above 15 percent for almost three years," said Dan Florness, president and CEO, in the company's earnings release. "Our growth drivers, combined with a solid economy, are resulting in great growth."

Year-to-date, daily sales growth was 10.1 percent, the first double-digit improvement the company has seen since 2014, though the company's gross profit, as a percentage of net sales, decreased 20 basis points from the third quarter of 2016 due in part to effects of the hurricanes in Texas, Florida and the Caribbean. Harvey, for example, shuttered a pair of branches in Houston, TX.

But strength elsewhere bolstered Fastenal, which signed 4,771 industrial vending machines in the quarter and said revenues generated through the vending machines continued to grow at double-digit pace in the quarter.

The company also added 81 on-site locations, compared with 41 signings in the same period last year, putting Fastenal on track for a goal of 275 to 300 signings for the year. Five years ago, on average, Fastenal was signing about 10 a year. The company currently has 555 active sites, up almost 48 percent year-over-year.

These successes appear to be changing the face of the company, helping move the business closer to customers even as branches close. For example, Fastenal has been investing heavily to support the on-site business, including IT infrastructure.

"As you’ve seen from our filings, we’ve closed some branches in the last 12 months as we’ve done in the last five years," Florness said. "Think of it as not a closing, but think of it as a consolidation. We’ve consolidated two branches because part of the business of one has moved on-site but our local presence continues to grow."



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