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Fastenal Executives See a Silver Lining in September

Oct. 14, 2024

CEO Dan Florness on the outlook for 2025: ‘What’s the probability of it taking another step down?’

Was September the start of the industrial economy’s turnaround?

If you ask the leadership team at Fastenal Co., the answer is a very qualified ‘Maybe.’ Speaking to analysts Oct. 11 after the distributor of industrial and construction supplies reported third-quarter results, CEO Dan Florness said Fastenal “finished the quarter stronger than we started it” even though Hurricane Helene disrupted sales late last month. Adjusted for an extra selling day this year, total daily sales rose 1.9% year over year—which includes Helene’s impact—and those from manufacturing customers climbed 3.0%.

Florness and CFO Holden Lewis said Fastenal teams are taking market share and have done a good job signing up and building business on site with customers. That, they said, is the main driver for Fastenal’s improving momentum. But Lewis also noted that macro commentary from the field is improving slightly nearly two years into a dragging manufacturing slowdown.

“If I think, for instance, about our Midwestern markets in particular, a couple of them actually said, if anything, it was a little bit weaker in September,” Lewis said. “But then there are a whole bunch of markets that said it was kind of stable [and] a couple said that maybe there was a little bit of improvement. […] Now, I would say the last few quarters had been more universally pessimistic. So it does represent an uptick of sentiment.”

Minnesota-based Fastenal finished the third quarter with nearly 2,000 active customer sites, an increase of about 12% from a year earlier, as well as 1,600 branch locations. The company booked a quarterly net profit of $298 million, up slightly from the prior-year period, as sales rose 3% to $1.91 billion. Florness said he and his team are continuing to invest steadily in its infrastructure and technology systems so it can be ready to grow profitably when demand growth returns.

Noting that many of Fastenal’s customers began to see business turn down in late 2022 and that they then had to absorb another slowing—or at best, a grinding stasis—last year and this year, Florness said the odds are turning in Fastenal’s favor.

“Ask yourself, what’s the probability of it taking another step down and creating a whole bunch of headwinds for us? Or the probability of it staying […] a weaker environment but staying the same or marginally improving? Again, not going back, but just marginally improving,” Florness said. “Of those three scenarios, personally, I think the second and third have a greater probability.”

Shares of Fastenal (Ticker: FAST) rallied roughly 10% Oct. 11. In midday trading Oct. 14, they were up slightly to $76.94. They’re also up about 10% over the past six months, pushing the company’s market capitalization past $44 billion.

About the Author

Geert De Lombaerde | Senior Editor

A native of Belgium, Geert De Lombaerde has been in business journalism since the mid-1990s and writes about public companies, markets and economic trends for Endeavor Business Media publications, focusing on IndustryWeek, FleetOwner, Oil & Gas Journal, T&D World and Healthcare Innovation. He also curates the twice-monthly Market Moves Strategy newsletter that showcases Endeavor stories on strategy, leadership and investment and contributes to other Market Moves newsletters.

With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati in 1997, initially covering retail and the courts before shifting to banking, insurance and investing. He later was managing editor and editor of the Nashville Business Journal before being named editor of the Nashville Post in early 2008. He led a team that helped grow the Post's online traffic more than fivefold before joining Endeavor in September 2021.