Fastenal FY 1Q15 Earnings Call Notes

There were things we could control and things we couldn’t this quarter

“The quarter was when you look at it’s really two stories. One of things we can control and things we cannot control. Obviously the things outside our control the currency, weather, oil and gas and the port situation in California. But the things we can control, I think when I look at the Fastenal team I think it was a solid quarter.”

Not happy with single digit revenue growth. (8.8% growth doesn’t sound too bad to me

“But that being said I will always say this that when we see single digit revenue growth, we are not satisfied nor we happy. But with 8.8% growth we did some things and I think hats off to the Fastenal team when you look at some different areas”

Grew head count in stores by 1k people

“we’ve added 1,000 people into our stores. Now most of those heads came in the last half of Q1. January, folks I got to tell you January coupled with the weather affected the kids aren’t back to school. It’s a rough month for recruiting. But in the second half of February and in the month of March, that’s when you started to see the team really start to bring people into the stores.”

It was a tough environment out there

“talk about the environment, tough environment out there. Our sales growth softened as we got deeper into the quarter. Weather hit us hard in the January, February timeframe. Oil and gas and some of our customers that involved with export markets, the currency is — US strong US dollar is not helping export. So our business did weaken as we went through the quarter. You really see it showing up in the industrial, the production side of our business”

The Fastener business slowed more

“Our fastener grew about 6% for the quarter. They were growing 10% and 11% in the third and fourth quarter of last year. So that business really slowdown. We didn’t lose any customers but those customers are producing fewer widgets and therefore they need fewer fasteners. ”

There’s a lot of tentativeness in the marketplace right now

“I think there is a lot of tentativeness in the marketplace right now.”

Everyone is just getting a little nervous

“export and oil and gas. That casts one heck of a shadow; it is not just the folks that are directly involved in that business. If you are in the same geographic area and the manufacturing pace, the manufacturing heartbeat of that area is weaker, everything else is kind of takes a step down. If you are working at industrial business and you are kind of worried about what’s going on your business, people aren’t as quick to other things to buy a car, to buy a thing to make a renovation to their home. People just say let’s wait and hold because I don’t need to replace this television set today. Stuffs like that, you just become a little bit more conservative because everybody is little nervous.”

Deflation makes things challenging

“the lower steel prices, any time you have deflation it creates a challenging environment and we have been in a situation having deflation now for a few years. And so it makes challenging as we go through the year.”

The Canadian dollar has weakened too

“That business there is held up reasonably well. If I am looking at in Canadian dollar. Obviously, the Canadian currency is very much tied to the fact that their economy is tied to extractive industries. And the weakness in oil and gas, weakness in energy in general is not helped their currency. So we are in a local currency basis we are growing reasonably well. But when compared to the USD, that’s what we report in, picture isn’t quite so good”

We don’t know where we are in the weakening cycle

“That the business really weakened in this three months period. We don’t know where we are in the weakening cycle. We don’t know if it is 90% behind us or 50% behind us. We don’t know.”

Local mom and pops still have 70% of the business

“There are a lot of very, very good local and regional distributors out there. And they have probably 70% of the market.”