Fastenal Co., a major distributor of industrial fasteners like nuts and bolts, relies for much of its growth these days on internet-connected vending machines whose sales tapered off in recent years.

“In the last two years, we have lost some steam” in vending machine sales, president and CEO Dan Florness said yesterday in a third-quarter earnings conference call with stock analysts. But after signing about 16,000 new vending clients in each of 2014 and 2015, Fastenal is running at a faster growth rate this year, signing about 4,700 vending clients per quarter and on course to add about 19,000 this year, he said.

“Our run rate has improved,” Florness said. Fastenal now has more than 60,000 vending machines installed at such customer sites as factories warehouses and office buildings.

And with vending machines accounting for about 40% of sales, they played a big role in helping Fastenal post positive revenue growth. Total net sales for the quarter increased 1.8% year over year to $1.013 billion from $995 million. The company, which also processes sales online at Fastenal.com, doesn’t break out total internet sales. It also sells through some 2,600 Fastenal-branded stores.

Internet-connected vending machines, which Fastenal and other industrial supplies distributors place at customers’ industrial plant locations, provide customers with ready access to such products as rivets, nuts and bolts used in manufacturing products or in repairing equipment. They can also be stocked with non-fastener items like safety goggles and work gloves, items that workers may frequently need to replace on the spot in order to keep working. Employees typically enter codes into the vending machines to access and retrieve products; machine sensors connected to the internet record when items are removed to update inventory and financial records, and set in motion replenishment orders.

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Florness noted on the conference call that the vending machines are helping Fastenal to increase sales outside its core product lines of fasteners. “That’s why that business continues to grow mid-single digits in an environment where the peers in that business are contracting,” he said.

Randy Gardiner, president and CEO of Fastenal client Red Dot Corp., says in a case study video on Fastenal.com that the vending machines help Red Dot and its employees better track their purchases and use of Fastenal products while reducing overall spending. Red Dot is a manufacturer of heating, ventilation and air-conditioning systems installed in trucks, buses and other motorized vehicles used for construction, military and other purposes.

Fastenal also reported for the third quarter ended Sept. 30:

  • Gross profit of $499.83 million, down 0.5% from $502.23 million;
  • Net earnings of $126.93 million, down 7.0% from $136.49 million.

For the nine months ended Sept. 30, it reported:

  • Net sales of $3.014 billion, up 2.3% from $2.946 billion a year earlier;
  • Gross profit of $1.493 billion, up 0.3% from $1.488;
  • Net earnings of $384.67 million, down 4.9% from $404.46 million.

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