After an unusual second quarter at Fastenal Co. marked by customers going to physical branches to buy safety products rather than going online to purchase its core fasteners and other items, the multibillion-dollar distributor of industrial and construction products began to see a return to more normal operations in the third quarter.
Sales of safety products like personal protective equipment continued to drive demand—growing 34% year over year in Q3 after surging 116% in Q2, CEO Dan Florness said in a third-quarter conference call with stock analysts last week.
“The trends are telling me the environment we operate in is healing itself, is improving and again safety has provided an incredible bridge as we’ve gone through this,” he said, according to a transcript from Seeking Alpha.
Sharp declines begin to level off
To be sure, the third quarter was still far off pre-COVID overall performance. But some of the steep declines of Q2 started to turn around in Q3. “In the second quarter, our fastener business, our oldest product line, our most mature product line—our product line that really links to what’s going on in the industrial world—sales dropped 16% in Q3 that improved to negative 7%,” Florness said, adding: “And if you look at all the remaining products that aren’t fasteners or safety, they contracted about 8% in Q2, about 2% in Q3.”
But as those sales declines began to taper off, Fastenal also saw its customers return to a stronger focus on ecommerce—which Fastenal defines as web and EDI sales—bringing ecommerce to more than 10% of total sales, the same share it reached for the first time in March. Fastenal didn’t break out Q3 ecommerce sales numbers, but figuring ecommerce at over 10% of sales would put third-quarter ecommerce at more than $140 million. Total Q3 sales increased 2.5% year over year to $1.413 billion.
In addition, Fastenal said its business in internet-connected vending machines—which it doesn’t classify as ecommerce but includes as part of overall digital sales—continued to grow. As of the end of the third quarter, Fastenal said it had 94,395 installed vending machines, up 1.9% from the second quarter and 6.9% from the third quarter of 2019.
Also in the third quarter, Fastenal said it secured a contract to provide the National Hockey League with tools equipment to maintain ice rinks and players’ equipment.
For the third quarter ended Sept. 30, Fastenal also reported:
- A 2.5% year-over-year increase in net sales to $1.413 billion;
- A 1.6% decline in gross profit to $640.6 million, resulting in a gross profit margin of 45.3% down from 47.2%.
- A 3.7% increase in net earnings to $221.5 million.
For the nine months ended Sept. 30, Fastenal reported:
- A 5.7% year-over-year increase in net sales to $4.29 billion;
- A 1.7% increase in gross profit to $1.95 billion, resulting in a gross profit margin of 45.4%, down from 47.3%;
- An 8.3% increase in net earnings to $663.0 million.
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