At Fastenal Co., a distributor of fasteners and other industrial and construction supplies, net sales increased 7.9% year over year in the second quarter in large part because of growth in its internet-connected vending machines, the company said yesterday.

CEO Dan Florness cited the growth in vending sales as an important part of the company’s efforts to continue increasing market share “at a pretty good clip” in a fragmented industrial supplies distribution market.

Fastenal said its daily sales processed through the vending machines “grew at a low-teens pace” in the second quarter, and that the company had 85,871 vending machines as of the end of the quarter on June 30, up 12.9% from a year earlier. Fastenal also said it signed contracts for 11,042 vending machines through the first half of the year, and that its goal is to reach from 23,000 to 25,000 signings this year.

Industrial vending machines, an increasingly popular sales channel among several industrial distributors, are located at customer locations and dispense products ranging from drill bits and power tools to work gloves and safety glasses. Customers log in to the machines to retrieve products; the machines then record the transaction online and process replenishment orders.

In many cases, Fastenal places vending machines at the Onsite product inventory management systems it operates at or near customers’ facilities. Fastenal said its sales through its Onsite locations “grew at a high-teens pace in the second quarter, and that it finished the second quarter with 1,026 active Onsite locations, up 34.8% from a year earlier.

Important to market share growth

Investments in the vending machines contributed to a 122% increase in spending on equipment and property to $119.6 million in the first half, Fastenal said. Florness, on a conference call with stock analysts yesterday, indicated that the vending and OnSite developments are crucial to the company’s continued growth in market share.

“Our intention is to continue to invest in those things that allow us to gain market share,” Florness said on the conference call, according to a transcript from Seeking Alpha, adding: “We believe that we continue to gain market share … at a pretty good clip.”

For the second quarter ended June 30, Fastenal reported:

• Total net sales increased 7.9% year over year in the third quarter to $1.37 billion;
• Gross profit increased 3.8% to $641.2 billion, as gross profit margin decreased to 46.9% from 48.7%, a decline Fastenal attributed to changes in customer and product mix, net inflation resulting from increased tariffs and other pressures;
• Net earnings fell 3.1%% to $204.6 million.

For the six months ended June 30, Fastenal reported:

• Total net sales increased 9.1% year over year to $2.68 billion;
• Gross profit increased 5.9% to $1.27 billion, as gross profit margin decreased to 47.3% from 48.7%;
• Net earnings increased 3.4% year over year to $398.7 million.

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