Willard Oberton – President, Chief Executive Officer
CFO will be new CEO
“I’d first like to start out telling you how happy the board, Fastenal board and myself are to announce Dan as our new CEO.’
Fastener business now negative but we don’t think we’re losing share
“As you know, it’s been a difficult quarter for Fastenal. Talked a little bit about our sales – September slowed down slightly, and really it’s a story of industrial fasteners and the slowness within or the slowdown within that part of our business. In the first quarter, we grew our fastener business 5.5%, not great but market taking share, and then by the third quarter it dropped to negative 4.4, driven by not only volume but also some deflation in the markets, weak steel prices. We do not believe we are losing share. Actually, we believe we are still taking some share, not at the rate we would like to take or expect, but still taking share”
We need to make our own luck
“The attitude at Fastenal, the mindset that we’re in right now is a mindset of we need to create our own luck. We’re not economists; we don’t know what the economy will do over the next two to three quarters, but we’re not real optimistic that it’s going to bounce back quickly, so we need to create our own luck as an organization. ”
Deflation we experienced this year will help margin comps in 2016 as inventory is marked lower
“our inventory turns about twice a year. That’s our overall inventory. Our fasteners turn slower than that, and so the deflation has been a full this year. It’s hurt our top line, it’s hurt our gross margin, but we really haven’t seen much of the benefits through our cost of goods because that inventory was coming on our shelves, and if you think about the pace of our business, if our business is growing faster than we expect, that inventory is turning a little faster. If we’re growing a bit slower, that inventory stretches out a little bit. But that bodes well for us going into 2016. That will be a friend to our business.”
I’m not real optimistic
“personally, I’m not real optimistic when I look at everything going on in the world, and that’s the way the thinking is, is let’s create our own luck. If I’m wrong, I’ll be the happiest guy in the room, but right now when you look at election year, you look at the turmoil in the Middle East, China, and many other parts of the world, weak economy in Europe, there’s nothing that points–it doesn’t like oil is going to come back, and corn is probably low for a long time. There aren’t a lot of strong economic indicators that are going to push us up”
This is not a non recessionary environment
“First off, the premise of the question, I would argue that anybody selling into the industrial market is not selling into a non-recessionary environment.”
Daniel Florness – Executive Vice President, Chief Financial Officer
Put great people in a low cost organization
“if you put great people closer to customer and you have a business model with a low–with a structurally low operating cost, you can compensate people fairly for what they are doing and you build a great machine over time, and you build a great organization over time.”
Our customers have been hit hard
“the reality of it is, in 2015 we, our customers have been hit hard by the slowdown in the oil and gas sector, and hit hard by the strength of the U.S. dollar and the ability of our customers to compete effectively across the globe.”
Some geographic areas hit harder than others
“If I looked at individual regions around the country, there is a lot of similar stories to our business. It’s just that you have some geographic areas that are getting really–hit really hard, and those areas are big areas for us”
Saw some things worsen in September
“We were disappointed by the September number as well. With 10 days left in the month, it was looking to be slightly negative, as we saw, and so it wasn’t a case of strong finish, weak finish, that kind of thing. It was pretty steady throughout the month. It was more pronounced in certain geographic areas, like I talked about. Like I say, I look around the country and I see a lot of positive things, but saw some things that did worsen.”
Business is slow
“Business is slow, and I don’t think it’s going to–I don’t see anything externally that’s going to cause it to pick up in the next three months, so Will’s point of we need to make our own luck.”
The industrial environment is in a recession, I don’t care what anybody says
“The industrial environment is in a recession – I don’t care what anybody says, because nobody knows that market better than we do.”
44 of our top 100 customers are negative
“Right now in the third quarter, 44 of our top 100 customers are negative. We have not lost any business with that group. They are negative in their spend…Of that 44 that were negative, 32 of them were negative more than 10%. Of that 44 that’s negative, 17 of them were negative more than 25%. That’s a sign of a recessionary environment”