Soaring demand for masks, gloves and other safety gear offset declines in industrial parts to keep sales and profits rising at Fastenal Co. through summer and early fall.
The Winona-based company, whose early results every three months are often seen as a bellwether for the manufacturing sector, said Tuesday its third-quarter profit rose 3.7% to $222 million on improvements across all its product lines.
Sales were up 2.5% to $1.4 billion. And the decline Fastenal experienced in sales of fasteners and other industrial supplies when the coronavirus outbreak spread this spring was nearly over by September.
“The environment we’re operating in is healing itself,” Dan Florness, the company’s chief executive, told investors and analysts on a call.
The sales of industrial supplies and safety products account for around half of Fastenal’s revenue. And when manufacturers shut down as the virus spread in March and April, sales of the products used inside factories plunged. But almost as quickly, the sales in Fastenal’s safety products line took off, more than doubling in the second quarter from the year-ago period.
In the third quarter, sales of safety products such as masks and other protective equipment were still up sharply, around 34%, but were no longer “in the stratosphere,” Florness said.
“Safety [products] provided us a bridge between where the economy was before COVID-19, as the economy shut down and where it is now,” he said.
Sales of industrial products were down 7% in the latest quarter compared to a 16% decline in the second quarter.
While the company’s latest per-share profit beat analysts’ forecasts, Fastenal shares fell 4% after the results were announced Tuesday in part because its gross profit margin fell. Executives attributed the lower gross margin to declining prices and profitability for protective equipment.
Even with Tuesday’s drop, Fastenal’s shares are up about 27% for the year, compared to a 9% gain in the S&P 500 index.
The company did not shut down operations at any time since the pandemic began and, because of the nature of its distribution operations, only about 5% of its workers can work at home.
Through September, 344 out of Fastenal’s 21,000 employees had tested positive for COVID-19.
“Our group of employees have been taking responsible steps to protect themselves, their families and the customers they serve while providing much-needed supplies to the marketplace,” Florness said.