With Q1 report, Fastenal looks ahead to expansion in 2016
Fastenal Company had modest revenue growth to report for the first quarter ended March 31, 2016, but things are looking more promising for its national footprint.
Among other updates, the company announced that it was moving forward with approximately 40 to 60 new store openings this year after several years of holding back on expansion (and even contracting its store base). That's an increase of 2% over the number of stores as of Dec. 31, 2015.
However, the company said it would hold back on hiring more people after adding 1,668 employees in 2015 (except for vending support and IT development). Store employee count has actually dropped by 303 in 2016 so far.
"We expect to continue to hold back on headcount additions until daily sales growth rates move closer to mid-single digits," said the company in a statement.
Net sales for the quarter came in at $986.7 million, up 3.5% year-over-year. Net earnings took a step back, however, decreasing 1.1% to $126.2 million.
Other good news that the company reported: national account signings are maintaining a strong pace, with 50 new contracts in the first quarter of 2016 up considerably from 35 in the year-ago period.
Fastenal also continued to expand its Onsite business, or dedicated sales and service provided from within the customer's facility. The company is looking to sign 200 Onsite customer locations in 2016 -- there have been 48 signed so far in the first quarter.
However, the fastener business itself has continued to contract due to lessening demand. Fastenal put it this way:
"This business is split about 60% production/construction needs and about 40% maintenance needs. The former is a great business, but it can be cyclical because about 75% of our manufacturing customer base is engaged in some type of heavy manufacturing. The sale of production fasteners is also a sticky business in the short-term as it is expensive and time consuming for our customers to change their supplier relationships. While our customer base values the capabilities we bring to the table, in the last seven quarters this group of customers has seen a contraction in its production and therefore its need for fasteners. During this time frame, our fastener product line has seen its daily growth decrease from about 10% growth in the last six months of 2014 to about 6% contraction in the fourth quarter of 2015 and about 2% contraction in the first quarter of 2016. Said another way, our market share gains continue to be strong, but the contraction in purchases from our existing customers, plus some price deflation, has eliminated our growth and created contraction, which lessened from the fourth quarter of 2015 to the first quarter of 2016."
Daily sales for the company's non-fastener business experienced growth of about 18% in the last six months of 2014, contracted to about 2% growth in the fourth quarter of 2015, and improved slightly to about 5% growth in the first quarter of 2016.