Fastenal Co. reported fastener sales declined 2.6% to $449.7 million (32.9% of overall sales) in the opening quarter of 2020.

“March sales of our fastener products declined 10.1% on a daily basis as industrial activity slowed, while our safety business grew 31.0% on a daily basis as we were able to source and deliver critical personal protective equipment (‘PPE’) supplies to the marketplace,” the company stated.

In addition, government business was up 31.1%, with sales to healthcare organizations more than doubling.

Overall Q1 sales increased 4.4% to $1.37 billion, “driven by higher unit sales related to our growth drivers, most notably contribution from industrial vending and Onsite locations, and from increases in certain products later in the quarter related to the coronavirus pandemic.”  Higher product pricing to “mitigate the impacts of general and tariff-related inflation” also contributed to the increase.

“Business activity in January, February and the first half of March remained sluggish, as it had been through much of the latter half of 2019,” before weakening in March due to government action to combat the pandemic, the company stated. 

“While the company’s facilities and in-market locations continue to operate, our branches did restrict public access and many of our Onsite locations were closed or operated at a meaningfully diminished capacity (approximately 120 out of 1,136 North American Onsite locations were closed on March 31 because the customer was closed).”

Gross profit declined 110 basis points to 46.6% in Q1, hampered by the impact of product and customer mix.

“At the start of the first quarter of 2020, the overall impact of mix was moderating and was heavily a function of a shift toward larger, lower margin customers as a result of our success generating sales growth through our growth drivers.  In March, this customer mix remained a factor but the widening growth differential between higher-margin fastener sales and lower-margin safety sales produced a greater product mix impact.”

Q1 operating income rose 3.8% to $271.3 million, with net earnings up 4.4% to $202.6 million.

Fastenal signed 4,798 industrial vending devices during the quarter, increasing its installed device count 10.4% to 92,124. Daily vending sales grew at a low double-digit pace.

The company also signed 85 new Onsite locations, increasing its active sites 24.8% to 1,179. Daily sales through Onsite locations  grew at a mid single-digit rate.

“New revenue from relatively new active locations continues to offset the impact of weak demand on more mature sites as well as the temporary closing of certain sites where customers suspended operations.”

Fastenal’s employee headcount grew 0.8% to 22,131 from the previous quarter, including a 1.4% gain in full-time employees to 19,235.

In March Fastenal acquired certain assets of vending specialist Apex Industrial Technologies LLC for an undisclosed sum.  Apex developed the software, designed the equipment, and built the vending equipment supply chain that have helped Fastenal achieve success with its vending program.

In connection with this transaction, Fastenal purchased a perpetual use of key patents, designs, software and licenses, as well as direct access to the supply chain.  Web: Fastenal.com