Labor Rules Lead to Fastenal Closures - Modern Distribution Management

Log In

Labor Rules Lead to Fastenal Closures

Onsite signings on pace to more than double 2015 signings.
jenel-white
Author
Date

When the new year began for Fastenal, the distributor announced plans to relaunch its aggressive store opening strategy. But with the announced new labor rules redefining exempt employees, Fastenal changed course.

"In our smaller stores, we don’t always compensate above that $48,000 level, because we have folks that are building a business and we are a sales-minded organization," said Dan Florness, president and CEO, in an investor call to discuss third-quarter results. "… Stores under $75,000 a month are marginally profitable, and this damages that."

Fastenal closed 65 stores in the third quarter and has another 32 stores queued for closure in the fourth quarter.

The company doesn't expect the closures to significantly impact sales going forward. Most of the locations have another store reasonably nearby, Florness said. "And as you know from previous conversations, the vast majority of our revenue is business-to-business, with most of it going out our back door" to customer sites.

The bigger impact was on "our thought process as we have gone through this year because of the changing landscape, the reality we live in," he said.

Fastenal is on target to open 35 to 40 new stores by year end in other markets – far lower than anticipated at the beginning of the year but "a good number for us in 2016."

Vending – another target for aggressive expansion at the start of 2016 – has also fallen short of expectations, according to Florness. "Right now our run rate is about a 19,000 run rate versus the 16,000 the last couple of years. This is OK; it's not great."

And sales through vending have weakened, tightening the growth spread between vending and non-vending customers.

"One thing that jumped out for us where we had vending machines that were negative … is the number of employees in the database right now versus a year ago had dropped," Florness said. "The number of employees had dropped about 10 percent."

And when employee count at customers drops that much, that's reflected in their purchases, he said.

On a more positive note, Fastenal's focus on expanding its onsite service has put the company on pace to more than double signings in 2015. "We still have work to do, but I am impressed with the fact that we have signed 133 year-to-date," Florness said. In 2015, it reported 80 – a record year at the time.

Share this article

About the Author
Recommended Reading
Leave a Reply

Leave a Comment

Sign Up for the MDM Update Newsletter

The MDM update newsletter is your best source for news and trends in the wholesale distribution industry.

Get the MDM Update Newsletter

Wholesale distribution news and trends delivered right to your inbox.

Sign-up for our free newsletter and get:

  • Up-to-date news in a quick-to-read format
  • Free access to webcasts, podcasts and live events
  • Exclusive whitepapers, research and reports
  • And more!

2

articles left

Want more Premium content from MDM?

Subscribe today and get:

  • New issues twice each month
  • Unlimited access to mdm.com, including 10+ years of archived data
  • Current trends analysis, market data and economic updates
  • Discounts on select store products and events

Subscribe to continue reading

MDM Premium Subscribers get:

  • Unlimited access to MDM.com
  • 1 year digital subscription, with new issues twice a month
  • Trends analysis, market data and quarterly economic updates
  • Deals on select store products and events

1

article
left

You have one free article remaining

Subscribe to MDM Premium to get unlimited access. Your subscription includes:

  • Two new issues a month
  • Access to 10+ years of archived data on mdm.com
  • Quarterly economic updates, trends analysis and market data
  • Store and event discounts

To continue reading, you must be an MDM Premium subscriber.

Join other distribution executives who use MDM Premium to optimize their business. Our insights and analysis help you enter the right new markets, turbocharge your sales and marketing efforts, identify business partners that help you scale, and stay ahead of your competitors.

Register for full access

By providing your email, you agree to receive announcements from us and our partners for our newsletter, events, surveys, and partner resources per MDM Terms & Conditions. You can withdraw consent at any time.

Learn More about Custom Reports

Request a Market Prospector Demo

  • This field is for validation purposes and should be left unchanged.