This page has been archived and commenting is disabled.

Fastenal CEO: "The Industrial Environment Is In A Recession - I Don’t Care What Anybody Says!"

Tyler Durden's picture




 

You know things might not be going particularly well when you’ve had three CEOs in the space of nine months, and that’s exactly what’s happened at nuts and bolts maker Fastenal which named current CFO Daniel Florness to the top spot on Tuesday.

The move came after the company reported meager top and bottom line results for Q3 this week. 

It’s not very difficult to understand why the company's business has come under pressure. The slump in crude prices has put an enormous strain on its energy-related operations. Here’s some color from Credit Suisse who notes that in September, Fastenal saw its first Y/Y sales decline since 2009:

Not surprising, FAST indicated the industrial outlook has deteriorated in particular during the month of September. In fact, September, was the first month since 2009 in which FAST experienced y/y declines. Along with the stronger dollar, FAST noted continued oil and gas headwinds, and heavy manufacturing. By geography, Texas took a step down and FAST noted slowing growth in Canada. Of FAST's top 100 customers, 44 saw top line declines. Of the 44, 32 were negative by more than 10% and 17 were negative by more than 25%. FAST does not expect to see any improvement for the next several quarters and believes the industrial environment is in a recession.

Now hilariously, Credit Suisse somehow managed to take that strikingly bad assessment and turn it into this title: “SteadFAST In the Face of Adversity.” But hey, it’s the sellside so it’s not like they were going to tell you to sell it. 

Anyway, what struck us was the rhetoric on the call, especially the retort from new CEO Daniel Florness when William Blair analyst Ryan Merkel (no relation to any “pure hearted” German “lion mothers”) made the mistake of calling the current environment “non-recessionary”:

Merkel: Then just lastly, Fastenal growing zero percent here in September and in a non-recessionary environment, it’s pretty surprising, I think, for a lot of us. But if we just step back and we think about quantifying some of the headwinds, and I don’t want to put words in your mouth but it seems to me, oil and gas customers are probably down, what, 30% this year. It might be a 3% headwind to sales. And then what about exports? I’ve got to think that’s an even bigger impact, but you tell me - and we’ve also got FX as a one-point headwind.

 

Florness: Yeah, a couple things. First off, the premise of the question, I would argue that anybody selling into the industrial market is not selling into a non-recessionary environment. We are--

 

Merkel: I agree. I agree with you there.

 

Florness: The industrial environment is in a recession - I don’t care what anybody says, because nobody knows that market better than we do. You know, we touch 250,000 active customers a month. 

 

Right now in the third quarter, 44 of our top 100 customers are negative. We have not lost any business with that group. They are negative in their spend. In some cases, they are negative because their business is very negative and they are somewhat negative with us. 

 

Of that 44 that were negative, 32 of them were negative more than 10%. Of that 44 that’s negative, 17 of them were negative more than 25%. That’s a sign of a recessionary environment.

So, two very simple, yet very critical takeaways:

  • the industrial sector is in a recession,
  • whatever you do, do not suggest to Dan Florness that Fastenal's lackluster performance is related to anything other than the pitiable condition of the US economy
 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 10/14/2015 - 15:56 | 6668320 Gilnut
Gilnut's picture

As a former member of the so-called middle class I got one thing to say.  Welcome to the party bitches!!!  We never left the recession from 08'.

Wed, 10/14/2015 - 16:03 | 6668375 alphamentalist
alphamentalist's picture

but obama said...

Wed, 10/14/2015 - 16:05 | 6668388 bania
bania's picture

"we touch 250,000 active customers a month"

so do some working gals. big deal.

Wed, 10/14/2015 - 16:18 | 6668414 ZerOhead
ZerOhead's picture

What a whiner... if sales are down he's supposed to borrow some money to buy his own shares with.

Wed, 10/14/2015 - 17:03 | 6668661 Stuck on Zero
Stuck on Zero's picture

The CEO should retool the manufacturing equipment to make ammo. That will be a growing market for some time.

Wed, 10/14/2015 - 18:04 | 6668854 ali-ali-al-qomfri
ali-ali-al-qomfri's picture

and not a mention that Banks are buying up all available supplies of nails for nail guns, thought that alone would carry them through.

Wed, 10/14/2015 - 22:16 | 6669610 jerry_theking_lawler
jerry_theking_lawler's picture

or guillotines. whichever is easier for them to retool too. Both will be in demand soon.

Wed, 10/14/2015 - 16:42 | 6668527 Sudden Debt
Sudden Debt's picture

I used to have a insider at fastenal untill he got fired last year who was a data analyst.

The shit these guys know about the industry in general is UN FUCK ING BELIEF ABLE!!

They know what companies will do in 6 to 12 months as they're in their production lines and in the setup of those lines.

If anybody wants to boost or drop production, they know it because the basic fasteners for those products need to be ordered in advance.

 

I made a shitload of money on that guy :) To bad he's gone...

Now I've got one who works for Grainger :) He's even better!! :)

 

But on a side note, both companies are so badly run and both have such a bad managment structure where politics rules over knowledge that they are losing customers and market share on smaller companies. 

They're both in no way a true indicator of the economy but rather a sign how giants go down because of overexpansion.

Wed, 10/14/2015 - 20:49 | 6669362 Colonel Walter ...
Colonel Walter E Kurtz's picture

Our firm has recently bought about $300 worth of rope from Grainger. First purchase from them (on our credit account) in about  10 years. So I'd say we are up about a gazillion percent in our year over year purchases from them, so be on the look out for a banner next quarter out of them.

Just trying to look out for you. Buy now, while it's low.

Thu, 10/15/2015 - 03:15 | 6670018 californiagirl
californiagirl's picture

We buy tooling primarily from MSC Industrial, another large supplier for the manufacturing industry. Our rep told us a few weeks ago that he was seeing a real slowdown across many of his long-time customers, large and small that started in the summer and did not pick up as usual in September.  He seems to echo what Fastenal says about the industrial market. 

Wed, 10/14/2015 - 16:54 | 6668609 Zymurguy
Zymurguy's picture

they got nothing on the TSA

Wed, 10/14/2015 - 21:51 | 6669559 Buck Johnson
Buck Johnson's picture

I know, it's just now hitting the rest of the people and institutions and guess what they can't lower the interest rates anymore.  Where fucked.

 

 

Wed, 10/14/2015 - 15:56 | 6668321 SILVERGEDDON
SILVERGEDDON's picture

Fuck it - I am going all in bullish back up the truck - nail guns don't work without these guys making nail gun food. 

Buy Moar ! 

Wed, 10/14/2015 - 16:07 | 6668399 herkomilchen
herkomilchen's picture

Buy Fastenal.  I like this guy's pluck.  Just kidding.  Sell Fastenel.  Its business is going to get f*cked.

Wed, 10/14/2015 - 21:54 | 6669567 NoPension
NoPension's picture

Our local Fastenal, until it closed , would hire cute chicks with nice tits that did not know a screw from a nail from a bolt.
I mean they were dumb a pine knots.
I would walk in, they would say " hi!, can I help you?"
I'd say " nope, I doubt it" . Then proceed to just wander the store to find what I needed. Before I learned, I would ask for this or that. They would usually cock their pretty littl heads and give me a stupid look, or say no. Then I would go in the back and find what I needed, that she just said they did not have.
Super overpriced too. But no other options in my area, so I paid the piper.
By the way, I don't think they make shit. They just resell.

Thu, 10/15/2015 - 13:21 | 6671678 Head_Shots_Work
Head_Shots_Work's picture

+1 for "dumb as pine knots" - love that. Also - pine knots are great for starting fires!

Wed, 10/14/2015 - 15:56 | 6668329 lehmen_sisters
lehmen_sisters's picture

I remember when all those government funded projects started a few years back, people thought it would just stay like that once the money ran out. How can you be so stupid? I was like 19 when that was going on and common sense told me " once the easy money stops, this shit will stop"...Wish i had a trading account back then.

Wed, 10/14/2015 - 15:56 | 6668331 JustObserving
JustObserving's picture

More QE and NIRP will fix everything - for a few weeks.

Wed, 10/14/2015 - 15:58 | 6668335 ebworthen
ebworthen's picture

Think bolts, screws, brackets, nails, hinges - and "un-hinged" from lift-off!

Wed, 10/14/2015 - 15:58 | 6668337 cowdiddly
cowdiddly's picture

Fastenal CEO: We're Screwed

Wed, 10/14/2015 - 16:05 | 6668387 alphamentalist
alphamentalist's picture

Fastenal CEO: America's Screwed

Wed, 10/14/2015 - 16:17 | 6668453 Ignatius
Ignatius's picture

Well, thank God unemployment is only 5%.

Wed, 10/14/2015 - 15:59 | 6668345 kliguy38
kliguy38's picture

Drink the koolaid...sitdown and STFU

Wed, 10/14/2015 - 15:59 | 6668348 tommylicious
tommylicious's picture

SUM BITCH!

Wed, 10/14/2015 - 16:00 | 6668356 HenryHall
HenryHall's picture

How can there be a new recession when we are already in a depression??

Wed, 10/14/2015 - 17:48 | 6668805 Sam Spade
Sam Spade's picture

It's the recession within the depression.

Wed, 10/14/2015 - 22:18 | 6669618 jerry_theking_lawler
jerry_theking_lawler's picture

repression???

 

or decession???

Wed, 10/14/2015 - 16:01 | 6668361 Bryan
Bryan's picture

He better avoid nail guns and such in the future.  TPTB don't appreciate the negative press.

Wed, 10/14/2015 - 16:02 | 6668363 LetsGetPhysical
LetsGetPhysical's picture

It's racist to suggest there could be an economic downturn during Obama's reign. How dare he!?!?  

Wed, 10/14/2015 - 16:03 | 6668371 CheapBastard
CheapBastard's picture

"Yes we can!"

 

 

Wed, 10/14/2015 - 16:03 | 6668373 Rainman
Rainman's picture

Interesting coincidence ....September was the month the peeps got notified their ObamaScare premiums were going up 25%.

Wed, 10/14/2015 - 20:59 | 6669399 Colonel Walter ...
Colonel Walter E Kurtz's picture

Right you are Rainman.

Our firm can accept a 5% increase for our crappy "grandfathered" plan for another year....or elect to upgrade to a compliant plan at a 50% increase!

What would you do? Oh and let me add, the company is in the hole for the year and has zero overhead salary expenses. I think the 50% increase should be chosen...you know, to help the children and all.

 

Thu, 10/15/2015 - 04:07 | 6670036 californiagirl
californiagirl's picture

You are  one of the lucky ones. Our Grandfathered Healthcare was cancelled. We didn't have a choice to keep it at any rate. So were many of the small businesses in my neck of the woods. I was forced to move to an ACA plan and tell my employees they would get less coverage with higher out-of pockets (particularly if something big like emergency room, surgery, hospital stay, or cancer happens), all for higher premiums. We were very limited in our choices because so many of the ACA plans had cut their reimbursement rates to doctors by 30% to 50% so the doctors were dropping the networks like hot potatos. Almost all the Obamacare plans had such tiny networks it would have been cruel to select them for the employees. In addition, all the employees with families were slammed. Under the old plans there were basically 3 rates: single, married with spouse, and family. Under Obamacare they calculate the rate for each member of the family and then add them up. It really impacted families with more than one kid. Ended up with a Gold PPO, with buy-up option to Platinum. All the HMOs had miniscule networks which will mean waiting a long time for appointments.

Thu, 10/15/2015 - 09:00 | 6670484 kralizec
kralizec's picture

Yeah 25% is a deal.  Medicare going up 52% for 15M so the other 35M can hold at current premiums, no COL for either...O-Care exchanges every state facing steep increases, only the worst cases signing up is driving it the imagined mass migration of healthy young folks to spread that pain never came and hospitals still getting hammered with free care and charity care cases...

The designed failure is working perfectly, obviously the call will go out soon for government single-payer solution, then we can really plunge into the abyss.

Wed, 10/14/2015 - 16:03 | 6668374 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

Finally, a CEO that speaks the truth.

 

Industrial, Retail, Commercial, Residential, CAT, Baltic Dry Index, et cetera, are in the greater depression that will become

the Greatest Depression just before it morphs into the Mother-Of-All-Depressions.

 

Then, we all die except for maybe a few cavemen in the Rockies at best.

Wed, 10/14/2015 - 16:23 | 6668492 froze25
froze25's picture

The meek shall inherit the earth.  The preppers as well.  The Femma Nazi will go extinct since no one in their right mind will want one of those anywhere near them when the shit hits the fan.  Men will be able to be men again without having State sponsored bigotry directed at them.  I for one am looking forward to it.  Unless of coarse the nut jobs don't nuke the planet in order to save the planet.

Wed, 10/14/2015 - 16:32 | 6668515 JamaicaJim
JamaicaJim's picture

I have a prepper nearby. People laugh him. Not me. I envy his resourcefulness.........and that he will survive....the laughers won't

Wed, 10/14/2015 - 16:04 | 6668377 buzzsaw99
buzzsaw99's picture

don't worry about Florness, he'll get plenty.

Wed, 10/14/2015 - 16:49 | 6668418 ejmoosa
ejmoosa's picture

All anyone had to do to see this recession coming was to look at the drop in corporate profits both before and after taxes.  

When businesses see their profits drop, then begin to right size to restore profits.

 

It really is that simple.

 

Two years ago I recorded this podcast to tell you how to identify a coming recession.

 

http://www.blogtalkradio.com/ejmoosa/2013/01/11/ej-moosa-the-naked-truth...

Wed, 10/14/2015 - 16:14 | 6668435 silverer
silverer's picture

If this keeps up, you won't recognize the US in less than 10 years.  Go long on Amish skills training classes.

Wed, 10/14/2015 - 16:18 | 6668464 venturen
venturen's picture

I don't recognize it now 

Wed, 10/14/2015 - 16:31 | 6668513 JamaicaJim
JamaicaJim's picture

I stood outside a major department store yesterday, waiting for a friend. I watched literally hundreds of people walk in and out.

Fat, tatted up like convicts, slovenly, and mulatto kids in tow with the "BBW's" who ALL had black baby daddies (it seemed)....

TWO.....2.....normal looking people....

 

I agree with you

Wed, 10/14/2015 - 16:35 | 6668523 TBT or not TBT
TBT or not TBT's picture

Did they buy anything?

Wed, 10/14/2015 - 17:25 | 6668726 Falling Down
Falling Down's picture

Reminds me of a recent trip to a Macy's.

Wed, 10/14/2015 - 17:48 | 6668802 TBT or not TBT
TBT or not TBT's picture

Here in the East Bay you hardly run into blacks at all, except at the mall. 

Wed, 10/14/2015 - 23:57 | 6669807 VegasBob
VegasBob's picture

This ain't the country I grew up in. That's for goddamned sure.  If the FSA elects that cunt Hitlery, I'll have to stock up on guns and ammo and head for the boonies.

Thu, 10/15/2015 - 03:44 | 6670039 californiagirl
californiagirl's picture

The Amish will start losing their land as the government uses eminent domain to confiscate it for the red zones of the Wildlands Project map, all part of America 2050 and Agenda 21.

Wed, 10/14/2015 - 16:15 | 6668440 azengrcat
azengrcat's picture

Silly Florness, we can't afford no nuts 'n bolts, this economy is held together with fairy tales and duct tape.

Wed, 10/14/2015 - 16:16 | 6668447 Seasmoke
Seasmoke's picture

So bullish Dow Industrials !!!!....... Forward

Wed, 10/14/2015 - 16:18 | 6668454 venturen
venturen's picture

what an idiot trying to sell something to customers....he needs to carry trade a float on a reverse repo CDS against a derivative basket of HFT to make money. Physical products are for chumps. Heck can't he just borrow $500 Billion at ZERO and buy treasures?

Wed, 10/14/2015 - 16:55 | 6668615 Berspankme
Berspankme's picture

You must be a consultant, no?

Wed, 10/14/2015 - 16:25 | 6668499 GreatUncle
GreatUncle's picture

In 2008 when this all blew up so to speak businesses had 2 choices.

1.) Carry on and pretend everything was fine like the politicians and central bankers were tellin you or ...

2.) Wake the fuck up, get costs under control ASAP for what was going to happen.

Those who followed 2.) even in a negative situation without bleeding losses all over the place can keep trading far longer than 1.) and I know a few that have unexpectedly gone to the wall and there businesses were not that bad TBH but you have to have light at the end of the tunnel "there ain't any".

Those who followed 2.) though cannot continue this way indefinitely.

Fastenal is there ...

Now does anybody want to be optimistic that business / trade is going to massively expand in the next 5 years because I can't see it myself.

Wed, 10/14/2015 - 22:26 | 6669631 JuliaS
JuliaS's picture

I'm grateful for the extension government provided to its criminal buddies on Wall St. It gave me a chance to stack up on supplies, build up my non-fiat savings, diversify, get a foreign passport and sell much of the household junk that would otherwise be tying me down if I had to move at a moment's notice.

The so called "bailout" made the economy worse, but it had given me the much needed time to gather strength and resources. I'm much better off today than I was in 2008.

... though with the government hunting us dissidents, like we're witches you never know. Never underestimate the threat of stupidity imposed upon you through the barrel of a gun.

Wed, 10/14/2015 - 16:26 | 6668502 besnook
besnook's picture

just a run of the mill inventory recession. as long as winter temps stay in the 70s and there is no snow everything will be fine by spring. dow to 30000!!!!!!

Wed, 10/14/2015 - 16:37 | 6668528 larz
larz's picture

Hey Obama says hes added more jobs than any public servant in the history of mankind and Mr Yellen agrees and we are comfortably past the crisis   who do I believe 

Wed, 10/14/2015 - 19:53 | 6669209 bluskyes
bluskyes's picture

Maybe he's counting churn.

Wed, 10/14/2015 - 16:37 | 6668531 Ohne Deckung
Ohne Deckung's picture

The recession is an illegit child of hope, pitching the day when there will be a come out of it.

Imagine a more rural structure were people is producing their own stuff with what's left of advanced technique to the one, with avoided time consuming work to the other, time they have because not more enslaved in the prisons for to sack down what's called work.

Alienation of work bye bye.

Imagine this could be the landscape we are rushing to with our productivity.

If you do so, would you still speak of a recession.

Wed, 10/14/2015 - 22:48 | 6669679 Iam_Silverman
Iam_Silverman's picture

Somehow Google Translate has failed us.  I don't understand the message in the above post.

It could just be that I am stupid, being a product of the American Education System.

Wed, 10/14/2015 - 16:56 | 6668622 Berspankme
Berspankme's picture

My new business model is selling unicorn skittles autographed by King Putt

Wed, 10/14/2015 - 18:09 | 6668869 Ranting Troglodyte
Ranting Troglodyte's picture

Just to quibble....Fastenal is primarily a distributor, though they have expanded in the manufacturing end in the last few years.

 

That being said, I happen to be in the same business, and am based in Metro Detroit.  Our fiscal year coincides with the Feds, and we were running about 20% above last year up until August.  We saw a 10% drop in August, and saw another 10 or so fall off in September to end our fiscal year.  This month is down from there.  I knew that a slow down would have to come evenutally, and from my world, it's here.  I just hope we don't fall to 2009 levels again. 

 

In response to an above commentator's comment regarding Fastenal and their poor management, I couldn't agree more.  I'm really amazed they can do $4B a year.....though I do really appreciate their ineptness.  As I've said many times, they are our best outside salesman.

Wed, 10/14/2015 - 18:22 | 6668902 TheRideNeverEnds
TheRideNeverEnds's picture

So basically what Fastenal is saying here is the real economy is like their products; an inclined plane wrapped around a cylinder.

Got it.

Thu, 10/15/2015 - 08:23 | 6670317 madcows
madcows's picture

Screwed.

Wed, 10/14/2015 - 19:10 | 6669076 rsnoble
rsnoble's picture

Looking at out of work lists in construction in my area, they have only slightly recovered since 2008.

Wed, 10/14/2015 - 20:19 | 6669282 Teh Finn
Teh Finn's picture

Obviously the Fastenal CEO is a terrorist.

Weeks to months before that company and it's board members get an anal exam from every weaponized alphabet bureau.

Do NOT follow this link or you will be banned from the site!