Fastenal Company (FAST) released decent sales results for the month of November wherein net sales rose 3.1% year over year to $621.3 million. Currency was a 0.4% headwind.
November daily sales grew 8.2% to $13.1 million, showing an improving trend from growth rates of 2.9%, 7.2%, 5.7% and 7.7% in the months of July, August, September and October, respectively. The daily sales growth was flat from November last year.
Fastenal serves customers in the manufacturing and non-residential construction markets.
Daily sales to manufacturing customers (representing almost 50% of revenues) grew 8.7%, better than 7.6% in October. However, daily sales to non-residential construction customers (representing 20% to 25% of revenues) grew 4.4%, slowing down slightly from 5.4% in October; possibly due to the present slowdown in the housing recovery.
The national distributor of industrial/construction supplies has been struggling with its top line due to lower sales of its fasteners product line which is being hurt by end-market slowdown and broader economic uncertainty. Moreover, the non-residential construction and vending businesses have also been soft for the past two quarters.
In order to improve its top line, stores are being encouraged to focus on improving near-term sales. Fastenal took the strategic decision to increase sales personnel at its stores to boost sales. In the third quarter, the company recruited 400 sales employees; increasing the headcount by 4.6% sequentially. It plans to consistently add store-level employees per month for the rest of 2013.
This strategy aims to free sales managers to focus more on selling which could drive near-term sales growth. Moreover, management temporarily slowed down focus on vending in order to improve near-term sales.
These efforts seem to be paying off as the company saw improving daily sales trends in both October and November.
Moreover, vending is expected to be ramped up again in 2014 once the desired store staffing level is reached. Under the vending program, Fastenal installs vending machines called FAST solutions at customer’s location and keeps it filled with products they need.Moreover, under its new vending improvement program, management aims to improve the quality of vending signings/installs.
In addition, Fastenal has plans to reinvigorate the high-margin fastener business and improve sales performance at under-performing stores. The company also plans to expand its store-based inventory for fasteners, construction and safety products. Moreover, Fastenal hopes to gain from a new pricing system for stores and improved operational efficiency across its distribution network (by adding significant automation).
Fastenal carries a Zacks Rank #4 (Sell). Better-ranked stocks in the building products/ building construction sector include Liquidators Holdings, Inc. (LL), Builders FirstSource, Inc. (BLDR) and CaesarStone Sdot-Yam Ltd (CSTE). While Lumber and CaesarStone carry a Zacks Rank #1 (Strong Buy), Builders FirstSource holds a Zacks Rank #2 (Buy).
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