Fastenal Co. is big on internet vending machines—but not yet as big as it wants to be.
The wholesale distributor of industrial and construction supplies posted a 10% year-over-year increase in net sales to more than $1.3 billion in the first quarter, and it said a primary driver of that growth—with a sales rate of increase in the high teens—was its network of 83,410 internet-connected vending machines installed as of the quarter’s end on March 31.
To spark even more growth, Fastenal has set a goal of increasing its number of deployed vending machines by as much as 30%, to more than 108,000.
‘More focused approach’ on growth drivers
In recent years, Fastenal “started the transition to a much more focused approach on some of our growth drivers, particularly breathing some new life into vending,” CEO Daniel Florness said
April 11 on a first-quarter earnings conference call with stock analysts, according a transcript from Seeking Alpha.
“On vending, our goal is to do 23,000 to 25,000” new installations this year, with more than 5,600 signed already in the first quarter, he said on the call. “We need to sign roughly 100 every day to get at the high-end of that number. If we sign 90 every day, we’re at the low-end of that number. We were just shy of 90 in the first quarter, but in the month of March, we rounded up to 100. We were at 99.6 per day. So we’re off to, I think, a nice start.”
Fastenal says its cost of purchasing new vending equipment was a major contributor, along with expansion of its distribution centers, to its 83.3% increase in first-quarter expenditures on property equipment to $52.8 million from $28.8 million a year earlier. For the full year, the company expects such capital expenditures to amount to as much as $225.0 million, up nearly 35% from the prior year.
20% growth in 2018
Last year, Fastenal said its vending machines produced year-over-year growth of more than 20%.
The internet-connected, product-dispensing vending machines are typically placed at customer locations, where workers can retrieve items ranging from metal-cutting tools and lubricants to work gloves and shop aprons.
To retrieve items, employees of a Fastenal customer log into the vending machine for authorized access. As they remove products, an internet sensor records the transaction and updates financial and inventory records. The corporate customer can access an online dashboard to view records of transactions and check that individual employees and departments purchased items within their authorized budgets. Fastenal also monitors inventory levels in each machine, which gets re-stocked by the distributor’s staff.
For the first quarter ended March 31, Fastenal reported:
● A 10.4% year-over-year increase in net sales to $1.31 billion;
● An 8.2% increase in gross profit to $624.7 million, resulting in a gross profit margin of 47.7%, down from 48.7%;
● An 11.4% increase in net earnings to $194.1 million.
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