The distributor’s revenue and earnings reportedly met expectations on Wall Street.

Fastenal on Monday reported another double-digit increase in quarterly sales, but its gross margin slipped in the first quarter of the year.

The Minnesota fastener and industrial supply giant posted net sales of $2.2 billion in the January-March window, up 12.4% compared to the same period last year. Company officials pointed to continued improvement in customer contract signings and a “slight improvement” in industrial production for the increase; product pricing also improved the sales total by about 350 basis points, while foreign exchange rates added another 60 basis points.

Fastenal’s quarterly gross profit of $982.9 million was up 11.2% year-over-year, but gross profit as a percentage of net sales slipped from 45.1% to 44.6% over that span. Officials attributed about 50 basis points of the decline to “unfavorable price/costs,” as well as to “smaller headwinds from transportation and certain customer rebates.”

“Customer mix remained a structural headwind to gross margin,” the company wrote, “as growth skewed toward larger customers that carry lower gross margins but remain positive to operating margin due to strong fixed-cost leverage.”

Fastenal officials noted that its OEM-focused business “slightly outpaced” its MRO operations in the latest quarter amid a larger contribution from sales of its fasteners and “continued strength with manufacturing customers.” The company saw growth across all end-markets, including from key account customers in manufacturing and from transportation and warehousing customers. 

The company reported operating income of $447.6 million and net income of $339.8 million, up 13.6% and 13.8%, respectively. The revenue and earnings totals reportedly met expectations for the quarter on Wall Street.

Fastenal’s March sales, also announced Monday, were up 16.8% overall and 11.5% on a daily average basis.

Source: Industrial Distribution