Higher Sales, Lower 2Q Profits for Fastenal

WINONA, MN -- Higher unit sales from its larger customers and Onsite locations helped Fastenal Company, a distributor of industrial MRO, janitorial and construction supplies, achieve second-quarter sales of $3.8 billion.
 
The company posted a second quarter profit of $590 million, or $1.03 a share, compared to a profit of $593 million, or $1.04 a share, on sales of $3.74 billion in the same period last year.

Fastenal has three categories: fasteners [including those used in original equipment manufacturing (OEM) and maintenance, repair, and operations (MRO)], safety supplies, and other product lines, the latter of which includes eight smaller product categories, such as tools, janitorial supplies, and cutting tools.

The company said it continued to experience a divergence in the performance of its fastener versus its non-fastener product lines in the second quarter of 2024, which it believes relates to three factors.

First, fasteners are more heavily oriented toward production of final goods than maintenance, which results in greater susceptibility to periods of weaker industrial production.

Second, pricing for fasteners has decelerated at a faster pace than non-fastener products.

Third, we continued to experience relatively faster growth with warehousing customers due to market share gains, product mix, and easier comparisons. This factor primarily benefited Fastenal’s safety product line.

Gross profit, as a percentage of net sales, decreased to 45.1% in the second quarter of 2024 from 45.5% in the second quarter of 2023. The gross profit percentage was primarily impacted by two factors.

First is an unfavorable customer and product mix, which reflects relatively stronger growth from large customers, including Onsite customers, and non-fastener products, each of which tend to have a lower gross profit percentage than the overall business as a whole.

Second, as disclosed in the April 2024 earnings call, the company incurred short-term inefficiencies in its supply chain to support certain warehousing customers, “which we believe will contribute to our future growth in this end market. We expect these inefficiencies will ease as we move through the third quarter of 2024 and normalize as we approach the fourth quarter of 2024.

“These factors were partly offset by favorable leverage of organizational/overhead costs, primarily due to greater utilization of domestic transportation resources as we move more product to support current stocking levels. Price-cost did not meaningfully impact gross profit percentage during the second quarter of 2024.”

The company has assets of $4.6 billion, and liabilities of $1.2 billion.