12/23/2013 1:48:00 PM
NEWS BRIEFS
Fastenal Blames “Weak” Fastener Performance For Lower Q4 Expectations
Calling 2013 “a building year for Fastenal, not a year of ‘Fastenal-like growth’, the Fastenal Co. downgraded expectations for the fourth quarter of 2013.
The company said that from May to November its store headcount grew 12.6% to 11,421. But while daily sales have grown — 5.7% in September, 7.7% in October and 8.2% in November — the company said its growth profit has not increased sufficiently to pay for the employee expansion.
The company listed the following reasons for the downgrade:
Sales – “Our manufacturing sales are improving, driven by customers engaged in light and medium duty manufacturing (largely related to consumer products). However, the heavy manufacturing component of our business began to weaken late in 2012 (this consists of large OEM fastener customers largely related to construction, military, and mining equipment), and this weakness has intensified in recent months. This heavy manufacturing group represents approximately one quarter of our manufacturing business, and it has been experiencing negative growth for much of the year.”
Employee costs – “The expansion of our store headcount (discussed above) and the increase in our field leadership (from May to November, we expanded our district manager group by over 27%) were known events, we just need more gross profit growth to fund this expansion. These costs have been partially offset by lower incentive pay and lower profit sharing contributions, but this doesn’t change the basic math – we need a better gross profit picture to fund the expansion.”
Gross margin – “The first drivers are lower utilization of our trucking network and lower supplier incentives. These are expected to naturally correct themselves in the new year as seasonality lifts our utilization and supplier incentives (which are typically aligned with the calendar year) reset for 2014. The final components relate to product mix (fasteners carry our highest gross margin and have had a weak 2013) and a very competitive marketplace.”
Nevertheless Fastenal expects net earnings per share to improve in the final quarter.
“If we were given the opportunity to repeat 2013 with the benefit of complete hindsight, we would have expanded our headcount sooner and would have been willing to forego short-term earnings.” ©2013 GlobalFastenerNews.com
Related Stories:
Share: