Fastenal Finding Success With a More-With-Less Model That Leans on Tech
Every public company’s earnings report includes reams of data that often get hastily scanned and moved on from. Looking over Fastenal Co.’s latest report, however, D.A. Davidson analyst Chris Dankert homed in on one specific number on the last page of the distributor’s slide deck.
“Hard not to note is that the sales force headcount is down over 400 heads versus where we were in June,” Dankert said on Fastenal’s conference call Oct. 14. “Can you just kind of put that in context? Is this – are there additional cuts planned? Is this just kind of a good-hygiene reset?”
The decrease (to 15,332 full-time equivalent people, down 2.9% from the end of June) does not suggest a retreat nor is it a precursor to more drops, President and CEO Jeff Watts and CFO Max Tunnicliff told Dankert and other analysts on the call. Instead, the executives added, they reflect something a structural change in how efficiently Wisconsin-based Fastenal does business at many of its more than 90,000 customer sites thanks to process refinements, automation and other technologies that include artificial intelligence tools.
“We’re not going to starve the business to create a better margin quarter,” Watts said. “Maybe in the past – before we were kind of getting all the digital tools and all the different things out to the field – the natural reaction would be, ‘Hey, we landed this account. I need to add two or three heads.’ Now those same managers, they’re calling in and saying, ‘Hey, we don’t need the two or three heads. We need this tool. Now that we have this tool, we can do it with half.’”
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fast slow hare tortoiseTunnicliff told analysts that the progress now starting to show in Fastenal’s results is the result of several years of work on “getting role specialization, putting the work in the right place, automating, using AI” and focusing more on large customers.
“All of those lead to significant efficiencies,’ he said. “This is our ability to grow this business without growing headcount nearly as fast using the tools at our disposal.”
Pressed by D.A. Davidson’s Dankert about specifics on the tools helping to generate these changes, Tunnicliff said the work has focused on efficiencies at the branch level and “kind of went from there up.” Among the changes: An AI tool that has sped up sourcing and quoting times from five days or more to just 15 minutes.
A new tool in Fastenal’s lineup is Rampp.ai, a small venture Watts and his team acquired about five months ago. The three-year-old company develops AI agents that can work across teams and orchestrate strategies and decisions in a way that Watts told analysts is “going to help us grow a lot faster on the tech side.”
Fastenal’s focus on larger customers also has begun to show in its financials. Third-quarter sales of $2.46 billion were up 15.5% year over year while operating income rose 20% to $531 million. Nearly 3,300 customer sites spent at least $50,000 per month with Fastenal this summer, up from 2,771 a year earlier, and the number of sites spending $10,000 or more per month climbed 8% to 13,135.
Sharea of Fastenal (Ticker: FAST) rose slightly to $52 after executives’ earnings report and commentary and closed last week at $51.02. Over the past six months, they have climbed nearly 15%, growing the company’s market capitalization to more than $58 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.