Fastenal Gross Margin Disappoints Again in 3Q - Modern Distribution Management

Log In

Fastenal Gross Margin Disappoints Again in 3Q

CEO: Several factors including competitive pricing pressure drove the decline.

In Fastenal's second-quarter conference call, CEO Will Oberton highlighted a "disappointing trend" in the company's gross margin. Oberton repeated that sentiment during Fastenal's third-quarter call, saying he was "very disappointed" with the company's 51.7 percent gross margin, which declined from the second quarter to the third, according to a press release.

According to the release, 85 percent of the quarterly decline was transactional, and 40 percent of that transactional drop was due to product mix. Oberton said fasteners, which grew only 1 percent during the quarter, carry the highest margin of any product Fastenal sells. "On the other side of that, our non-fastener products grew about 12 percent roughly. And they're traditionally lower-margin product, so there's a mix issue going on there," he said.

"Another mix issue that we're facing right now is customer growth," Oberton said. "We're getting better-than-average growth or better growth out of our large customers and slower growth out of our small customers. And the larger customers, again, are the lower-margin customers."

Buyer behavior and competitive pressure also impacted margin in the third quarter, as customers pushed for lower prices. "The customers are pushing us very hard, and many of our competitors are responding to that just as Fastenal is," Oberton said.

Oberton refused to offer guidance on future gross margin during the call, but he said that if the economy doesn't turn around, competitive pressures from both its competitors and its customer base will remain the same. "So we don't … foresee a lot of change over the next three to four months."

Fastenal CFO Daniel Florness said Fastenal's vending program has helped to drive its high-margin private label brands. Oberton spoke with MDM about Fastenal's vending program in Fastenal’s Vending Evolution.

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!


articles left

Want more Premium content from MDM?

Subscribe today and get:

  • New issues twice each month
  • Unlimited access to, 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
  • 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



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
  • 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.