Fastenal 2Q13 Earnings Call Notes

posted in: Notes | 1

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Looking at the results for the second quarter, I think the main story is slow sales growth, and we believe that’s really caused by a few things. One is a slow economic condition. It’s very slow out there from an industrial side…

the other would be that we have just become too tight — or we were too tight on adding people in the fourth quarter and for the — basically the last 3 quarters…Our plan going forward to try and address that is to add between 100 and 150 FTE per month for the next 6 months throughout the rest of the year, adding 600 to 900 FTE for the year.”

“we can’t do anything about the economy, but we do have the balance sheet and the strength to go out and add the people to grow the stores.”

“we’ve spent time talking to our store managers and asking them what it would take to free up some time or to get out there and make more calls, and that was the common theme, was, “Hey, give us a little help, we’ll grow the business.””

“The only other item that stood out for me that frustrates me a little bit is on Page 15, our AR grew a little faster than it should. And there’s really 2 dynamics going on there. One is the calendar. Now both June of 2012 and June of 2013 ended on a weekend. So the calendar is similar, so my comment about the calendar might sound a little odd. But what we’re — and I don’t know if this is a post office, logistics thing or what’s driving this, but we’re slowly seeing more and more of our cash come in, in the first 2 and 3 days of the week than what’s historically the norm. Historically, we had a big cash come in on Monday, which is really weekend processing of mail coming through the post office because the goods — most of our cash still comes in via the U.S. mail…So if we held our books open until Tuesday instead of closing on the weekend, our AR would look a lot better. But bottom line is calendar is impacting and just the way the mail comes in is impacting our days…But we’re also getting a lot of hard push from our customers on extending some days, and we’re working on that on a case-by-case basis.”

“part of the — where we went wrong with the decision was I thought that vending was going to be automatically more — it was going to automatically increase the efficiency in our stores. What I was missing on that is the tremendous amount of work to get to the position where it becomes more efficient, which it does, but there’s a lot of work of introducing it and training it and setting it up. And all that work was taking away from sales calls. And that’s what we’re hearing from our managers when we spend time with them. So we’re really getting back on the Fastenal model, the pathway to profit model, add 15% to 20% more — or 15% more hours in the store, and you should get close to 20% more growth. “