Fastenal Company (NASDAQ:FAST) Q4 2019 Earnings Conference Call - Final Transcript

Jan 17, 2020 • 10:00 am ET

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Fastenal Company (NASDAQ:FAST) Q4 2019 Earnings Conference Call - Final Transcript

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Executive
Daniel L. Florness

using an internal benchmark or an internal yardstick, I looked at our top 100 customers and this group represents about 25% of our revenue historically. In the first quarter of 2015, about 72% of those 100 customers were growing. By the fourth quarter, that number was 49%. And given our size of our relationship with each of these customers, the change in trends in a window like that is using more about their underlying business than Fastenal gaining or losing market share with that customer. If I look at that same statistic in 2019, we started the year at 81%. We finished the year at 57%. Again, just looking at the percentage of our top 100 customers that are growing with us and I think that's a great barometer on the marketplace.

If I -- yesterday in our Board meeting, one of our Directors asked if you're looking at Q4 and the question was about Q4, my comments to you a second ago was on 2019 in general, what would you give for a grade on the quarter. And without giving it a second of thought I looked at them, I said, you know what, I'll give it a B. And the biggest reason for the B is, we did not leverage our earnings. In other words, our operating income growth was less than our sales growth and I just can't give an A to that performance, so I agreed to the B.

However, if I look at our team, leaders throughout Fastenal and the execution of the team throughout the organization, I think given the subdued activity, as indicated externally in the PMI Index as well as internally in our Top 40 or Top 100, I believe the Blue Team executed well in the fourth quarter. December, as you all know from reading our release, December was a tough month. We grew 1%. The mid-week holiday over Christmas was not our friend. The January and -- been doing this, I've been at Fastenal now for 24 years, and that means they have done just shy of 100 earnings calls. And there's one thing we don't do and we don't talk about current month in the current-month. I'm going to break that rule. January started with a mid-week holiday, the Thursday and Friday, the second and third was not our friend and we really haven't recovered from that. And I expect at this point January will feel a lot like December. I don't know if that means we'll be 1%, but I think it's going to feel like December did.

Our sales team is adamantly opposed to that. They see reasons why we'll do better and time will tell. I genuinely hope they prove my expectation wrong at this juncture in a month, but I'm just sharing that. This has absolutely no bearing on my thoughts for February or for 2020 in general. Time will tell what the economy is going to is going to provide for us and what