Lower Product Margins Affect Fastenal Sales
Fastenal Company’s net sales for the quarter ended September 30, increased $34.2, or 2.5 per cent, compared to the third quarter of 2019. This increase was driven primarily by higher unit sales of safety products, where volume moderated relative to the pandemic-driven level of ‘surge’ sales in the second quarter of 2020, but remained elevated relative to the third quarter of 2019. Re-opening of the economy has been accompanied by greater demand for personal protection equipment (PPE), hand sanitizer, and related products, which more than offset continued softness in underlying business activity owing to a generally weak industrial marketplace for products unrelated to mitigating the effects of COVID-19. The impact of product pricing on net sales was immaterial, as price levels were broadly comparable to those of the third quarter of 2019. Gross profit, as a percentage of net sales, declined 190 basis points to 45.3 per cent in the third quarter of 2020 from 47.2 per cent in the third quarter of 2019. The most significant factor behind the decline in the overall gross profit percentage in the period was the impact of lower product margins specifically for a narrow subset of COVID-specific safety products.