Tailwinds Propel Fastenal as 2015 Begins - Modern Distribution Management

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Tailwinds Propel Fastenal as 2015 Begins

Lower energy prices, private brands bolster distributor's revenue, income.
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Fastenal reported stellar performance in 2014 and the fourth quarter in particular, both of which saw double-digit increases in revenue and net income. Some key reasons behind the company's upbeat year included higher sales from FAST Solutions vending machines and also more employees, all while reducing its store count as part of planned cuts.

During a call with analysts, new CEO Lee Hein and former CEO Will Oberton, who retired last October and now serves as the company's chairman, referred to significant "tailwinds" that benefitted the Winona, MN-based distributor throughout the year, while also positioning the company for a strong 2015.

"One is we still have a tremendous opportunity on upside for our exclusive brands, our private brands," Oberton said. "And other is our transportation costs with (the price of) fuel where it is."

Cheaper fuel showed up in Fastenal's transportation expense, but that wasn't the only area where the company saved money because of lower oil prices; the company's cold-weather locales saw reduced energy bills.

"Energy prices for heating a lot of our locations in the northern half of the country and throughout Canada is a meaningful piece to us," said CFO Dan Florness. "So it gives us some tailwind coming into the first part of the year."

The drop in energy prices does cause some concern for Fastenal, whose sales to oil & gas customers could take a hit as projects get shelved. Another issue still facing the company: its gross margins remain under pressure – and also remain a focus of analysts, who peppered the company's executives about their previously stated goal of 51 percent after the margin fell to 50.48 percent in the fourth quarter.

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