On Oct. 12, industrial and construction supplies distributor Fastenal reported its 2023 third-quarter financial results, which showed continued deceleration in net sales and profit compared with the same three-month period in 2022.

For its 3Q, Winona, Minnesota-based Fastenal reported more than $1.84 billion in net sales, a 2.4% increase over the same period in 2022. In 2023’s second-quarter financials, reported in July, Fastenal posted year-over-year sales growth of 5.9%, which also was down compared to 9.1% year-over-year sales growth reported in 2023’s first quarter.

As one of the first publicly-traded industrial distributors to report its earnings each quarter, Fastenal’s financials are often viewed as a bellwether for the overall U.S. industrial economy. Sales for the month of September were flat compared to the prior month, the company said.

Daily sales in 3Q 2023 increased 4.0%, while gross profit increased 2.6% to $826.5 million, according to a company news release. Operating income increased 2.0% during 3Q to $379.2 million, while net earnings increased 3.8% over the same period last year to $284.6 million.

“We experienced higher unit sales in the third quarter of 2023 that was primarily due to growth at our Onsite locations, particularly those opened in the last two years,” Fastenal said. “This more than offset the impact of softer end market demand on our manufacturing customers and lower revenues to construction and reseller customers. Foreign exchange negatively affected sales in the third quarter of 2023 by approximately 10 basis points.”

Pricing Impact

Fastenal said the impact of product pricing on net sales in 3Q 2023 was “modestly positive, consistent with historical trends,” as compared to the impact of product pricing on net sales in 3Q 2022 of 550 to 580 basis points. Incremental pricing actions over the past 12 months have been of “modest scope,” resulting in mostly stable price levels through 3Q 2023.

The company said it experienced increasing divergence in the performance of its fastener versus non-fastener product lines in 3Q 2023. Fastenal cited two reasons for this: 1) Fasteners are more heavily oriented toward production of final goods than maintenance, which results in “greater susceptibility to weaker manufacturing end markets. ” 2) Pricing for fasteners has decelerated at a faster pace than non-fastener products, the company said.

Other notes from Fastenal’s 2Q23 earnings report:

By product line:

• • During 3Q 2023, daily sales of fasteners dropped 2.0%, compared to 18.2% growth seen in 3Q 2022. Fasteners accounted for 32.1% of sales during the quarter, a 2% drop from 3Q 2022.
  • The DSR for safety supplies was a positive 9.2% during 3Q, compared to 12.4% during the same quarter last year. Safety supplies’ accounted for 21.4% of sales during the quarter, compared with 20.5% in 3Q 2022.
  • Among “other” products, the DSR change was 6.8% positive, compared with 15.4% during 3Q 2022. Other products accounted for 46.5% of sales during 3Q 2023.

By customer end market:

• 3Q 2023 sales to heavy manufacturing increased 9.0%, compared with an increase of 25.4% during the same quarter last year. Heavy manufacturing customers accounted for 43.2% of sales during the quarter, compared with 41.3% during 3Q 2022. Other manufacturing sales grew 2.5% during the quarter, compared with 19.1% during 2022’s third quarter.
• Sales to nonresidential construction dropped 7.2%, a decrease from the 5.2% growth seen during 3Q 2022. The group accounted for 9.1% sales during 3Q 2023, compared to 10.2% last year.
• Daily sales to resellers dropped 6.9% during 3Q 2023, while sales to all other end markets increased 8.1%, compared with a 4.3% drop in the same quarter in 2022.

By customer category:

• National account sales grew by 8.6% during 3Q 2023, down from the 20.3% growth seen during 3Q 2022. Those accounts made up 60.8% of sales during 3Q 2023, compared to 58.0% during the same quarter in 2022.
• Non-national account sales dropped 1.9% during 2023’s third quarter, compared with 9.9% growth in 3Q 2022. Those accounts made up 39.2% of sales during 3Q 2023, compared to 42.0% in the same period last year.

Vending:

• Fastenal signed 93 new Onsite locations (defined as dedicated sales and service provided from within, or in proximity to, the customer’s facility) during 3Q 2023, resulting in 268 year-to-date signings of new Onsite locations.
• The company had 1,778 active sites on September 30, which represented an increase of 13.5% from the same date in 2022.
• Daily sales through our Onsite locations, excluding sales transferred from branches to new Onsites, grew at a low double-digit rate in 3Q 2023 over the third quarter of 2022. This growth was primarily due to contributions from Onsites activated and implemented in 2022 and 2023. Based on the signings in the first nine months of 2023, Fastenal expects to sign approximately 350 new Onsite locations for the full year.

eCommerce & digital footprint:

• The company’s digital footprint in the third quarter of 2023 represented 57.1% of sales, an increase from 49.5% of sales in the third quarter of 2022.
• FMI sales grew at 13.0% during 3Q 2023 — 14.8% for daily sales — to $760.4 million.

Employee & Branch Count:

• Fastenal ended 3Q 2023 with a total employee headcount of 22,862 — up 0.2% compared to 2Q23 and up 3.8% year-over-year.
• The company ended 3Q 2023 with a total branch locations count of 1,615 — down 20 from 2Q23 and down 5.9%) year-over-year. The company opened three new branches during 3Q 2023 and closed 23.
• Including active Onsites, Fastenal ended 3Q 2023 with a total in-market locations count of 3,393 — up 0.9% from 2Q23 and up 3.4% year-over-year. The company activated 79 new Onsite locations in 3Q 2023 and closed 29.