Wednesday, July 14, 2010

Fastenal reports sales growth of 20 percent

Sales for first six months increase 13.2 percent; construction still weak

Fastenal, the giant MRO/construction distributor reported yesterday that its second-quarter sales increased a strong 20 percent to $571.2 million, giving impetus to indications that the economy may be showing signs of life. For the first six months of 2010, net sales were up 13.2 percent.

The improvement in the first six months of 2010 continues a trend the company saw in the latter half of 2009, the company said. The slow-down in the final three months of 2008 and all of 2009 relate to the “general economic weakness in the global marketplace.”

Several additional factors positively impacted Fastenal’s sales growth in the first six months of 2010.

The strengthening Canadian dollar (when compared to the United States dollar) added approximately 0.9 percentage points to its daily sales growth and its Holo-Krome business, which was acquired in December 2009. That acquisition added approximately 0.5 percentage points to Fastenal’s daily sales growth.

Here are some of the highlights from Fastenal’s earnings report:.

During the first six months of 2010, Fastenal opened 45 new stores (Fastenal opened 42 new stores in the same period of 2009). The 45 new stores represent an increase of 1.9% since December 31, 2009.

Sales to Fastenal’s manufacturing customers grew nearly 30 percent, improving each month since May 2009 (with the exception of July and December 2009 and April 2010 due to the holiday impact and February 2010 due to the impact of poor weather). This reversed the negative trend which began in October 2008. This improvement has been partially offset by continued weakening in Fastenal’s non-residential construction business in 2009 and in the first four months of 2010. The company’s non-residential construction business enjoyed nominal growth in both May and June 2010.

Non-residential construction customers have historically represented 20% to 25% of Fastenal’s business. The daily sales of this business contracted approximately 14.7% in the first quarter of 2010 and grew 0.5% in the second quarter of 2010. In the first, second, third, and fourth quarters of 2009, the contraction was 6.4%, 19.6%, 25.3%, and 24.8%, respectively. The total sales contraction for 2009 was 19.4%.

Fastenal previously said that its original goal was to hit the $125 thousand per month store average by 2012. “We believe the duration of the economic weakness could delay the timing of when we achieve the $125 thousand per month average by several years,” the company said in a statement.

The company said that based on current economic conditions, it anticipates opening 80 to 95 new stores during the second half of 2010, or an annualized rate of 6.8% to 8.0%. Over the last several years, Fastenal has closed/consolidated eight stores in 2008, ten in 2009, and seven in the first six months of 2010. While it intends to continue this practice, Fastenal does not anticipate closing more than one or two for the remainder of 2010.

Fastenal has reduced its full-time equivalent employee headcount at its store locations 14.0% since its peak of 8,280 FTE headcount in third quarter of 2008; much of this decrease relates to a reduction in part-time hours worked as its absolute headcount numbers related to store personnel declined by 7.9% during this time period.

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