In Distributors’ Earnings, Signs That Demand is Holding Up

Recent quarterly results from two notable wholesalers of industrial and construction supplies show that the manufacturing upswing, suggested by the early-2026 increase in closely watched indicators, looks to have legs. The area of concern, however, appears to be in costs and pricing, with war worries now joining the enduring effects of tariffs.

Leaders of Fastenal Co. reported on April 13 that the company’s daily sales in the three months that ended March 30 had popped more than 12% from early last year. CEO Dan Florness and his team pointed to newly signed business and market-share gains as helping drive that increase. But they also said demand growth from Fastenal’s customer base appears to be broadening out.

'Cautiously Optimistic'

Speaking on a conference call, President and Chief Sales Officer Jeff Watts said he and his team “haven’t seen any pullback” in activity so far in April and are “still cautiously optimistic about the growth continuing.”

Florness expounded on the Fastenal team’s tracking of what percentage of its more than 92,000 locations around the world is growing.

“That’s been in the mid-60s consistently now since last fall,” Florness told analysts and investors. “Whereas, as year ago or more, that was probably down in the low 60s or upper 50s. The closer that is to 70, life gets a lot easier because you’re seeing broad-based support from a geographic standpoint, which typically translates into an end-market standpoint as well.”

Securing the Supply Chain

The comments from Fastenal’s leaders echoed a sentiment voiced by MSC Industrial Supply Co. Inc. President and CEO Martina McIsaac early this month. Asked about how the Iran war might be affecting customers’ activity, McIsaac said many are assessing risks and looking to ensure their access to materials and parts far more than pulling in their horns.

“We haven’t seen any change that would suggest that the demand is slowing down. It’s the opposite,” McIsaac said April 1, after MSC reported its quarterly results. “They see demand picking up and they want to make sure that their supply is secure. That’s what we've seen so far.”

That demand is not (yet?) getting hit by the conflict in the Middle East was corroborated by the latest GEP Global Supply Chain Volatility Index, which was released April 10.

Mukund Acharya, vice president of consulting at GEP, also pointed to the security of supplies as taking primacy in the short-term.

“The war is pushing up costs, triggering stockpiling and creating shortages across supply chains, but it has not yet escalated into a broad-based shock that materially slows global economic growth,” Acharya said in a statement.

Inventory Buffers Add to Cost Pressures

The GEP team said its research shows companies around the world accumulating inventory buffers at their highest rate in three years. That’s adding to cost pressures that both Florness and McIsaac said their teams are wrestling. McIsaac told analysts that MSC is “definitely seeing pressure” from its suppliers and is in turn planning to push through another round of its own price hikes.

“We don’t know where this will end,” she added. “I still would say what I said in January: I don’t think the suppliers have captured all of it.”

Florness said the Fastenal team pushed out year-over-year price increases averaging about 3.5% in the first quarter, which was slightly higher than in the last three months of 2026. But he acknowledged that the company “didn’t move quickly enough” on inflation early this year, which dinged its gross margins by about half a percentage point compared to early 2025.

Paying for Brands

Less of a problem when it comes to pricing dynamics, Florness said, is the prices Fastenal pays for fasteners, which don't have a prominent brand component. Instead, he said, makers of other supplies where brand names matter more have been able to “push pretty hard.”

“The branded suppliers have been very aggressively, in the last six, seven months, raising costs. Some of it, I’m sure, is related to tariffs […] Some of it’s maybe related to true inflation,” Florness said. “What we’re really aggressively doing in the marketplace is arming our customers and our teams with information to make trade-offs.”

In other words: Dear buyer, inflation isn’t going anywhere just yet. Please be prepared to make some more difficult decisions soon.