Fastenal (FAST) Q2 2016 Earnings

posted in: Earnings Call, Notes | 0

Fastenal (FAST) cited a weak economic climate in their earnings press release 

“As we indicated last fall, our customers are struggling with a weak economy. During the first quarter of 2016, the impact of seasonal plant shutdowns subsided and the economy showed signs of improvement.  The decline in daily sales growth in May and June of 2016 was driven by continued weakness with our manufacturing and construction customers. This is evidenced by the trends with our top 100 customers and by additional plant shutdowns/slowdowns before and after Memorial Day. We expect the plant shutdowns/slowdowns to continue into the third quarter.”

Fastenal (FAST) CEO Daniel Florness said business has decelerated as we got closer to the summer season

“In the month of April that group of customers grew 6.5%. In the month of May that group of customers contracted about 2%, in the month of June that group of customers contracted about 2.5%. For the quarter that group of customers which grew almost 5%, 4.5% in the first quarter grew 0.7% percent in the second quarter.  When I look at that group of customers, I see that sudden fall of as an example not of the momentum we are building but of slowdowns with the momentum we have built in the past with customers we have had in the past where we have a large market presence and that business fell off later in the quarter.  The perspective part that we failed on is we didn’t react fast enough locally and companywide to that falling revenue in the month of May and June.”

Fastenal (FAST) CEO Daniel Florness highlighted the construction sector for energy as notably weak

“In a construction front we saw slowdown in our energy customers in both May and June. And a piece of that is we’re seeing projects that were still going on from year ago that just are not being replaced. I would not look at that as a temporary one.”