E-commerce is generating strong sales for multibillion-dollar industrial products distributor Fastenal Co., a trend CEO Dan Florness says he’s pleased to follow with no slowdown in sight.
After meeting with his board of directors about Fastenal’s recently ended fiscal third quarter, Florness said on a conference call with stock analysts that it “was kind of fun to casually mention” to the board “that we now have a $100 million web business within Fastenal” projected for the full year, according to a transcript of the call from Seeking Alpha.
E-commerce is “growing handsomely,” he added. He went on to project a notable bump in expected full-year e-commerce sales by the start of the fourth quarter, when “I can look at that and say that $100 million is now a $110 million business; you can do the math on what that means as far as growth, but it’s seeing substantial growth.”
Based on a projection of $100 million, e-commerce accounted for about 2.7% of net sales for the first nine months of this year.
Florness clarified that he was referring only to sales on the Fastenal.com e-commerce site, and not including sales through electronic data interchange (EDI) or through the company’s internet-connected vending machines that it operates at thousands of customer locations. He added that many of the company’s e-commerce customers take advantage of its Fastenal Express fulfillment program, which offers free and expedited shipping on thousands of products available on Fastenal.com.
Fastenal said, however, that its internet vending program was also growing. Its number of vending devices increased 10.2% in the quarter to 78,706.
Florness also said the tariff war between the United States and China has had a limited effect on Fastenal’s sourcing of products, a little more than 10% of which come from suppliers in China, he said. But he added that the tariffs were adding to overall inflation in its customers’ supply chains, which “has an impact on our business.”
That has squeezed Fastenal’s gross profit margins. “Fastenal’s gross margin disappointed again, and may remain challenged amid inflationary pressure and new tariffs on China-sourced goods,” says Christopher Ciolino, a Bloomberg Intelligence analyst.
For the third quarter ended Sept. 30, Fastenal reported:
- Net sales of $1.28 billion, up 13.0% from $1.13 billion a year earlier;
- Gross profit of $615.8 million, up 10.8% from $55.9 million, resulting in a gross profit margin of 48.1%, down from 49.1%;
- Net earnings of $197.6 million, up 38.1% from $143.1 million.
For the nine months ended Sept. 30, Fastenal reported:
- Net sales of $3.73 billion, up 13.1% from $3.30 billion;
- Gross profit of $1.81 billion, up 11.0% from $1.63 billion, resulting in a gross profit margin of 48.5%, down from 49.4%;
- Net earnings of $583.1 million, up 36.8% from $426.2 million.
Bloomberg News contributed to this report.
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