Fastenal 1Q16 Earnings Call Notes

Daniel Florness CEO

Benefit of extra business day and buybacks

“In the quarter, we grew our sales about 3.5%. We had the benefit of additional business day during the quarter. So on a daily basis, we grew about two. Our earnings per share grew just over 2%, primarily driven by the fact we had bought a considerable amount of our stock in the last 15 months, because our actual earnings were down slightly from a year ago.”

January and Feb were fine but March was weak

“But when I look at March, we’re a little disappointed in the month. The month weakened as we got through it. Easter is part of it. The calendar is part of it, but the month did weaken a little bit and so, it was a soft finish to the quarter. ”

Lower costs starting to show up as inventories have turned

“what we were seeing through most of last year is deflation somewhere in that 1.5% to 2% neighborhood. We are still operating in that zone. As far as the cost coming through, we are starting to see some lower cost now. Our overall inventory turns about twice a year. The fastener piece of our inventory turns slower than that. The non-fastener piece turns faster than that and so some of the lower cost we are starting to see come through our cost of goods now.”

Energy was weak

“the oil and gas areas did continue to weaken when I look at it on a sequential basis and time will tell if some of the recent pricing influence is that positive in the upcoming months, but it continue to weaken.””

It was a weak finish to March

“But setting that aside, the month finished very poorly with five days, six days, seven days, eight days, less than a month, I felt we’d be closer to 2% and the month really deteriorated late. And that’s probably a function – that’s probably described some things that we saw in the patterns of our larger account base, because they tend to be somewhat loaded little bit towards the back end of the month. But, frankly a weak finish.”

Only April and May will start to answer for us what happened in March

“January, February and I can’t quite say that for March, but in January, February, felt more like where we were in October and I think if I look at the last five or six months, I really think the outliers was the extreme weakness we saw in November and December and I think that was a function of companies that’s shutting down around the holidays more extensively than normal. March, only April and May will start to answer for us what really happened in March.”

Sheryl Lisowski