Fastenal took another step toward its normal — i.e., non-pandemic — sales balance in July with safety product sales increasing 38%, down from its staggering 94.9% growth the month before, and fastener product sales decreasing just -7.5%, up from -11.4% in June.
The Winona, Minnesota-based distributor on Thursday morning reported July sales of $469.5 million, up 2.6% over the year-ago period. The company reported daily sales of $21.3 million, up 2.6% versus a year ago but likely short of investors’ expectations, according to Baird analyst Dave Manthey in a note to clients published Thursday.
By region, U.S. sales grew 2.2% in July. By end market, manufacturing sales decreased 5.5% while non-residential construction sales decreased 9.6%, the company said. Safety sales continued to drive the company’s top line, increasing 38% while fasteners declined 7.5% and “other” declined 3.6%.
The safety sales story continues to dominate headlines for Fastenal. The company saw sales of personal protective equipment (PPE) and general safety gear surge in the second quarter, staking Fastenal to a 10.3% sales increase compared with the same period a year ago, the company reported a few weeks ago.
Safety sales, including PPE, increased 116.3% in 2Q and accounted for 34% of total sales while other products’ daily sales declined 7.5% in the period and accounted for 40% of total sales. Quarterly profit was also up, 16.7% to $238.9 million, placing the company in the upper echelon of essential businesses to successfully pivot during the pandemic.
“Fortunately for us, we were able to find additional business in the second quarter and make some lemonade out of lemons,” CEO Dan Florness said on the most recent earnings call.
Fastenal’s Game Plan
Many expected the worst of the pandemic to be over by now, but even with a surge in COVID-19 cases, some businesses are returning to normal, at least somewhat. Fastenal is among that group, and the company is fully expecting the third quarter’s sales profile to return to normal.
Manthey and his team at Baird are modeling August daily sales to be flat year-over-year, “reflecting further safety moderation to ‘just’ +15.0% and ex-safety sales -3.1%, showing additional moderate [month-over-month] underlying improvement.”
Fastenal does expect safety sales to moderate in the third quarter, CFO Holden Lewis said, although the resurgence in coronavirus cases means it should only be a gradual decline.
That doesn’t mean Fastenal won’t double down on its safety sales efforts. On last month’s earnings call, Lewis said the company is now working hard on turning new customers — those who found their way to Fastenal only because the company stocked PPE, sanitizer and other COVID-19 supplies — into long-term, permanent customers.
“Awareness is part of the game for a lot of these customers,” he said. “They didn’t think of us as a supply chain partner in their space and their industry. They thought of us as, ‘Oh! Those guys have some nuts and bolts.’ I think it’s all about becoming aware of what we can bring to their table. Because at the end of the day, it’s not about what Fastenal does. It’s about the value we can bring to the customer.”
Read more about Fastenal’s playbook in Can Fastenal Build Relationships with New Transactional Customers?
Meanwhile, Fastenal’s headcount continues to shrink. In July, Fastenal saw its total “absolute” headcount decrease 7.9% to 20,400 from the same month a year ago. Full-time equivalent employment declined 9.1% and total “selling” personnel declined 9.9%.
Shares of Fastenal (Nasdaq: FAST) were down slightly — 12 cents, or 0.3%, to $47.94 — at market close Thursday. The company’s next monthly sales release date is Friday, September 4, and its next earnings release date (3Q) is Tuesday, October 13.