FASTENAL COMPANY
Earnings jumped 17% to
Sales for the quarter rose 10.3% to
"The team was successful in sourcing hard-to-find safety products and bringing this product to our existing customers, but of equal importance — maybe greater importance to new customers; customers — we don't traditionally do much business with, and I'm thinking of hospitals and first responders when I talk about that group,"
"And I think that was demonstrated this quarter in both our ability to move quickly on rein in expenses, but also to move quickly on finding sort of supply of critically needed safety products."
Daily sales jumped 10.3% in the second quarter, rebounding from a decline that began in the fourth quarter of 2018, when daily sales growth was 13.2%.
The second quarter was heavily influenced by actions taken by governments and businesses around the world to address the COVID-19 pandemic, which influenced the company's efforts in several ways.
First, the company assisted the needs of governments, first responders, and critical infrastructure entities by supplying sharply increased demand for PPE products.
Second, the company managed the effects of business closures and the reduction in general economic activity based on the response of governments and businesses to the pandemic, which resulted in lower sales in the second quarter of 2020 in the company's traditional branch and onsite operations, and by extension their vending business.
Taking these two variables together, sales of PPE more than offset the decline in the company's traditional business, producing the net sales increase in the second quarter of 2020.
A lesser contributor to sales growth in the second quarter was higher product pricing as a result of increases implemented throughout 2019 and in the first six months of 2020 to either broadly mitigate the impacts of general and tariff-related inflation in the marketplace or to address product-specific changes in cost.
Pandemic-related events also produced shifts in the mix of business in the second quarter. Fastener daily sales declined 16.4% and accounted for 26.0% of total sales.
Safety daily sales, including PPE, grew 16.3% in the second quarter and accounted for 34.0% of total sales.
Other products' daily sales declined 7.5% in the second quarter and accounted for 40.0% of total sales; other products represented 47.3% and 48.0% of total sales in the first quarter of 2020 and the second quarter of 2019, respectively.
From an end market standpoint, manufacturing and non-residential construction end markets were down 9.4% and 10.3% on a daily basis, respectively, when compared to the second quarter of 2019, while government business was up 266.7% on a daily basis with sales to health care organizations, a subset of government, more than quadrupling.
Vending and onsite signings bottomed in April, and while they have not returned to pre-COVID levels they did improve in May and June. These signings will continue to support our ability to gain market share.
The company signed 3,483 vending devices in 2Q20 with an ending installed base of 92,615 devices, a 7.9% gain over 2Q19. Product sales through our devices fell low-double digits. Poor economic activity and idled operations reduced per unit throughput.
The PPE surge delivered low gross margins and higher working capital, which the company expects will normalize in the third quarter. The pace of normalization is uncertain, however, as it will be linked to the trajectory of the pandemic.
For an update on how the coronavirus pandemic has affected the kiosk industry, click here.
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