In reporting its 2022 first quarter financial results and follow-up earnings presentation with analysts, industrial distribution giant Fastenal shared some eye-opening stats that show the company’s considerable digital growth over the past year — and that the company is now greatly outperforming what it did even compared to the mostly pre-pandemic quarter of 1Q 2020.
The Winona, Minnesota-based company posted January-March 2022 sales of $1.70 billion that jumped 20.3% year-over-year, and 24.7% vs. 1Q 2020. It’s that latter two-year comparison that the company notes is still very valuable, given that nearly all of 2021 was still heavily impacted by demand impacts from COVID-19.
The same goes for profits. Fastenal’s 1Q 2022 gross profit was up 23.3% year-over-year and up 24.6% vs. the same quarter in 2020; gross margin of 46.6% improved 120 basis points year-over-year and was flat vs. 2020; operating profit of $358 million jumped 27.7% year-over-year and 32.0% vs. 2020; while net profit of $270 million likewise jumped 28.0% year-over-year and 33.1% vs. 2020.
In a nutshell, the company’s 1Q financials considerably outperformed the same period of a year ago and the last “pre-COVID” quarter of 1Q 2020 — though that quarter did start to see headwinds in March.
And digital is driving most of that growth. Fastenal said that sales through its digital footprint (Fastenal Managed Inventory and non-FMI e-commerce) comprised 47.0% of total 1Q sales, up from 46.4% in 4Q 2021; 39.1% in 1Q 2022 and 34.9% in 1Q 2020. That’s a jump of 12.1 percentage points in just two years, and the company said its goal is to hit 55% within 2022, which would be yet another hefty increase over the next nine months.
Further out, Fastenal digital could ultimately account for 85% of its sales, though no timetable for that was mentioned.
“We’re gearing our supply chain and have been gearing our supply chains to support that kind of business in the future,” president and CEO Dan Florness said in the April 13 earnings call.
Fastenal Managed Inventory
Within FMI — comprised of FASTStock (scanned stocking locations), FASTBin (infrared, RFID and scaled bins) and FASTVend (vending devices) Fastenal signed 106 new Onsite locations during January-March — a company quarterly record and up from just 44 in 4Q 2021. It brought the company’s active Onsite count to 1,440, up 12.1% year-over-year, and Fastenal looks to sign 375 to 400 Onsites for 2022.
The company signed 5,329 weighted devices in 1Q, up from 4,683 a year earlier, and ended March with an installed base count of 94,425 devices, up 10.9% year-over-year. At its current rate, Fastenal will likely crack the 100,000 installed mark in early 4Q.
The other side of digital is Fastenal’s non-FMI e-commerce channel, which saw 1Q sales rise 55.6% year-over-year, outpacing 4Q 2021’s growth of 48.2%. Large customer-oriented EDI was up 56.2% in 1Q, while web sales were up 53.9%. The company noted that its e-commerce business hit a new milestone during March, topping $100 million in net sales.
Speaking of March, it was another strong month for the company, as net sales of $633 million jumped 19.1% year-over-year overall and on a daily sales basis. Sales in the U.S. increased 19.2% year-over-year, improved 21.0% in Canada/Mexico and 9.8% to the rest of International. By end market, sales to manufacturing customers grew 25.2% (25.8% in February), while sales to non-residential construction customers grew 11.1% (19.5%).
By product line, March sales of fasteners grew 25.2% year-over-year (28.0% in February); safety sales grew 14.5% (18.8%); and all other sales grew 16.1% (17.3%).
By customer type, March sales growth at Fatsenal’s national accounts grew 24.0% (26.0% in February) and daily sales to non-national accounts grew 13.0% (16.0%). During the month, 88.0% of Fastenal’s top 100 national accounts were growing, nearly level with 89.0% in February and significantly up from 60.0% in March 2021. Meanwhile, 75.7% of Fastenal’s public branches were growing in March, just shy of February’s 76.9%.
On the labor front, Fastenal ended March with a total headcount of 21,167, up 1.0% from just a month earlier and up 3.1% year-over-year. That increase comes despite the company downsizing by another 39 net branch locations in Q1 to a total branch count of 1,760, which is down by 243 from the end of 2020. However, Fastenal opened six new branches during 1Q, which is the most it has opened in a quarter since 3Q 2016. The company’s overall in-market locations count has remained essentially level over the past three years, ending 1Q at 3,200 as its active Onsites count has offset the reduced branch count.
MDM at Fastenal Expo this week
The timing of Fasteneal’s 1Q report is a great segue to give our readers a heads up that I’ll be spending Tuesday-Wednesday (April 19-20) at Fastenal’s 2022 Expo in Nashville. There, I’ll get to have one-on-one conversations with a number of company leaders, including an executive roundtable, where I look to gain far more insight on what I covered above.
I’ve been invited to the event in the past, but the dates just never worked out. So, like I’ve been able to do at Grainger Show in the past, I’m excited to see this company from the inside, so-to-speak, and learn first-hand how this innovative major distributor seems to always be a step ahead of the curve. In its 1Q presentation, the company said the expo’s format will “be more focused on supply chain solutions.”
Expect follow-up coverage from my time at Fastenal Expo in both MDM’s Update and Premium newsletters.