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Fastenal income, sales drop sharply
The company said it still has plans to open more stores in fourth quarter.
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The recession kept the squeeze on Fastenal Co. in the third quarter, as the company posted sharp declines in earnings and revenue. But the Winona, Minn., seller of nuts, bolts and other industrial supplies is planning for the recovery.
CEO Willard Oberton told analysts Monday that, based on "recent sales improvements and our confidence going forward," Fastenal expects to open 25 stores in the fourth quarter. It opened only a dozen new stores in the second and third quarters, including just three in the third quarter.
Assuming the economy remains somewhat stable, company executives said they anticipate adding stores at an annual rate of 7 to 10 percent in 2010. At the end of the third quarter, Fastenal was operating 2,352 stores.
With reduced rental rates on commercial spaces, Oberton said now is a good time to start expanding store locations.
For the quarter ended Sept. 30, Fastenal reported net income of $47.6 million, down 35 percent from a year ago. That works out to 32 cents a share, a penny below the average consensus of analysts. Third-quarter revenue was $489.3 million, down 21.7 percent from a year earlier. Fastenal's stock closed Monday at $38.44, down 95 cents, or 2.4 percent.
About half of Fastenal's business comes from manufacturers, and the company reported that weakness in that sector translated into a 23 percent quarterly sales slide for Fastenal. "Since April, we have seen stabilization in that business and improvement of that business," said Dan Florness, chief financial officer. But he added that sales to manufacturing customers was still down 20 percent in the month of September compared with a year earlier.
The nonresidential construction business supplies about one-fifth to one-fourth of Fastenal sales. That portion of the company's business was down 25 percent in the third quarter.
Government customers increased their purchases with Fastenal by 10 percent in September, which Florness said was partly fueled by increased federal spending.
Fastenal ended the third quarter with a workforce of 12,076 employees, which was 11.4 percent smaller compared with the end of 2008.
Oberton said that the company will "hold very tight" on expenses, including labor.
As the worst of the recession hit Fastenal and its competitors, Oberton said, "We were seeing just crazy pricing," and that "competitors had a lot of inventory and they needed to create cash." Fastenal did some discounting of prices, but he said he thinks the industry may be entering a more normal environment for product pricing.
Liz Fedor • 612-673-7709
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