Fastenal Company FAST recently released May sales report, wherein average daily sales or ADS grew 14.8% to $24.7 million, higher than 6.7% registered in April 2020 and 9.7% in the year-ago period. The upside was led by notable gains in safety products. Notably, daily sales on a seasonal basis were up 10.4% compared with the company’s benchmark (historical five-year average) of 1.7%. Given the sales trend through May, Fastenal remains on track to deliver the best quarterly sales performance in its history.
On an organic constant-currency basis, average daily sales were up 15.3% from 7.2% in April. Foreign exchange affected May sales by 50 basis points. Meanwhile, net sales grew just 4.4% year over year to $493.2 million. The figure was up from 6.7% net sales growth in April. Overall, growth rates have improved since December.
End-Market Perspective, Product Lines & Customers
From end-market perspective, manufacturing sales declined 4.2% during the month against 11.5% growth a year ago. Non-residential construction declined 9.8% versus 9.9% growth reported in May 2019. Average daily sales growth rate in both manufacturing and non-residential end markets improved sequentially in May.
Fastenal derives sales from Fasteners, Safety and other product lines. Fasteners witnessed 15.3% decline in sales last month versus 8.1% growth registered in the year-ago period. In April 2020, Fasteners sales declined 22.5%. Safety products grew a whopping 136.3% in May from 119.7% growth in April and 12.2% in the year-ago month.
In terms of customer/channel, National account daily sales growth was 20% from a year ago, given the fact that 39% of the top 100 accounts and 40.7% of public branches are expanding. Also, non-national accounts were up 7% year over year in the month.
Negative customer/product mix, as a result of increased growth of lower-margin national accounts and safety products, along with lower proportion of higher margin fasteners, has been impacting Fastenal’s gross margin over the past three years. This is expected to continue creating near-term gross margin headwinds for Fastenal.
Shares of this Zacks Rank #2 (Buy) company have gained 22.1% over the past three months, outperforming the industry’s 13.7% growth. Although overall weakness in manufacturing continues, Fastenal — which shares space with Builders FirstSource, Inc. BLDR in the same industry — is witnessing a meaningful uptick in overall activity.
Other Key Picks
Other top-ranked stocks in the Zacks Retail-Wholesale sector include Lowes Companies, Inc. LOW and Lumber Liquidators Holdings, Inc. LL, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lowes’ earnings for 2020 are expected to increase 13.5%.
Lumber Liquidators’ earnings surpassed estimates in two of the trailing four quarters, with the positive earnings surprise being 391.9%, on average.
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