Leading national distributor of industrial and construction supplies, Fastenal Company (FAST), released its sales information for the month of July. The company once again reported year-over-year decline in daily sales.
Fastenal’s daily sales growth rates came in at 2.9% for the month of July, much lower than the 6% reported in June. The sequential improvement seen in the month of June could not be repeated in July. The daily sales growth rate was also significantly down from the daily growth rate of 12.1% in the corresponding prior-year month. One less selling day in the quarter due to the Jul 4th holiday led to the decline. Moreover, weak sales on the day following the national holiday also took a toll on top-line growth. Foreign exchange further dragged the July daily sales by 0.2%.
The company has been witnessing a consistent decline in daily sales growth rates for the past few quarters. The declining daily sales rates are due to lower sales of its fasteners product line which are being hurt by end-market slowdown and broader economic uncertainty.
Fastenal serves customers in the manufacturing and non-residential construction markets. Both the markets reported disappointing July sales. Daily sales to manufacturing customers (representing almost 50% of revenues) grew only 2.1%, but that to non-residential construction customers (representing 20% to 25% of revenues) declined 0.1%. While soft fastener sales were responsible for the meager increase in the former case, weakness in the non-residential construction market and the government policy uncertainty and sequestration in the U.S. contributed to the drop in sales in the latter.
Fastenal carries a Zacks Rank #4 (Sell). Other companies in the sector that are doing well include Liquidators Holdings, Inc. (LL), Builders FirstSource, Inc. (BLDR) and The Home Depot, Inc. (HD). While Lumber carries a Zacks Rank #1 (Strong Buy), The Home Depot and Builders FirstSource carry a Zacks Rank #2 (Buy).
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