Why This Matters to Distributors: Fastenal’s results show how large-account programs, digital inventory services and contract wins can drive growth even when the broader industrial economy is improving modestly. The quarter also illustrates the margin trade-offs distributors may face as business shifts toward larger, lower-margin customers.
Fastenal Co. reported a 14.7% increase in second-quarter sales as share gains with larger customers, pricing actions and continued expansion of its digital supply chain programs drove growth amid modest improvement in industrial production.
The industrial distributor reported net sales of $2.39 billion for the quarter ending on June 30, up from $2.08 billion a year earlier. Net income increased 15.9% to $382.8 million, or 33 cents per diluted share, compared with $330.3 million, or 29 cents per share, in the second quarter of 2025. Operating income rose 15.1% to $501.8 million, while operating margin remained unchanged at 21%.
Fastenal attributed the growth to improved customer contract signings since the first quarter of 2024, pricing actions, and modest improvement in industrial production during the first half of 2026. Pricing contributed approximately 2.9 percentage points to second-quarter sales growth.
Manufacturing remained Fastenal’s largest market, accounting for 75.9% of sales. Heavy manufacturing led to growth, with daily sales increasing 18.1%, while nonresidential construction posted 17% growth. Fastenal said the construction market recorded growth for the fifth time in the past 15 quarters. Transportation and warehousing customers also contributed to sales gains.
Sales growth continued to be led by larger contract customers. Contract sales increased 17.6% year over year and represented 75.8% of quarterly revenue, up from 73.2% a year earlier. By comparison, sales to non-contract customers rose 7.3%.
The company’s digital supply chain business also continued to expand. Sales through its FMI technology platform, which includes FASTStock, FASTBin and FASTVend, increased 16.4% to $1.08 billion and accounted for 44.6% of total sales. Digital Footprint sales, which combine FMI sales with eBusiness transactions that do not represent FMI billings, rose 16.2% to $1.49 billion, representing 61.6% of quarterly revenue.
Fastenal signed 6,993 weighted FASTBin and FASTVend machine-equivalent units during the quarter and ended June with 140,789 installed units. The company lowered its full-year signing target to between 27,000 and 29,000 machine-equivalent units, down from its previous goal of 28,000 to 30,000.
Gross margin declined 75 basis points to 44.6%, primarily because of unfavorable net price-cost conditions. Customer mix, higher transportation costs, and increased customer rebates also pressured the result. Fastenal said larger customers typically carry lower gross margins but generate higher profit dollars and operating efficiencies. Lower selling, general and administrative expenses as a percentage of sales fully offset the gross margin decline, allowing operating margin to remain flat.
Operating cash flow totaled $265.7 million during the quarter, down 4.6% from a year earlier and equal to 69.4% of net income. Fastenal attributed the decline to higher accounts receivable associated with strong sales growth late in the quarter, including a 20.5% year-over-year increase in June sales. Inventory increased 0.5% from a year earlier, which the company attributed to disciplined inventory management.
Investment in property and equipment, net of proceeds from asset sales, totaled $60.5 million during the quarter. Spending was directed toward facility construction and upgrades, information technology, and industrial vending equipment. Fastenal maintained its expectation of investing between $310 million and $330 million in 2026, including spending to replace its Atlanta hub, improving picking capacity and efficiency, adding trucking capacity and continuing IT projects delayed from 2025.
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