To the extent it increases the cost of the customer supply chain, that will manifest itself in our revenue growing little bit faster because we’re pricing that as it’s coming through. But our covenant with our customer is to always have an incredibly reliable source of supply, impeccable quality in that supply and a cost-effective supply chain and we balance those every day.
Holden Lewis: Probably the only thing I would add to that is, our execution wasn’t as crisp as we might have liked during the first period where there was tariffs. Remember, there’s also some ancillary inflation on top of the tariff that was occurring at that time. And we struggled a little bit to sort of capture it all in the moment. I would say that since that, and frankly, because of that period, we made significant investments in the technology that we utilize to understand the environment and communicate internally and externally with sort of the structure of our business and how we kind of manage our pricing and costing processes. And I think that you’ve seen the effectiveness of those changes through this last few years where there’s been very significant inflation and our ability to keep up with it fairly effectively and on time.
And so again, I don’t know what the future holds on that, but to the extent that there’s anything that moves up the cost of product, we think we’re better served to execute effectively than we were five years ago during the last period of time.
Chris Snyder: Thank you. Really appreciate the perspective.
Holden Lewis:
Operator: Thank you. Next question today is coming from Stephen Volkmann from Jefferies. Your line is now live.
Stephen Volkmann: Thank you. Holden, you mentioned in your gross margin comments that you mentioned transportation resources and a little bit of price degradation, I guess. I’m just curious, have you changed your view of the cadence of gross margin as we move into the next three quarters?
Holden Lewis: No, I haven’t. I think my original comment was that you wouldn’t see quite as much mix impact and there maybe some offsets. And so, as we expected to see gross margin down in 2024, it may not be down as much as it has been in historical periods. I think first quarter was representative of that down 20 basis points. And I think that, that narrative still very much holds true. Now, some of the investments that I alluded to, some of those fall in SG&A, some of those falling COGS. And so, I think that there will be perhaps a little bit of a delta in Q2 specifically. I think we sort of addressed that, but by and large, I think that the variables that we anticipated resulting in a, perhaps, more subdued drag on margin in 2024. I still see them very much in place. So, no change to how I feel about gross margin cadence.
Stephen Volkmann: Great. Thank you for that. And then switching back to the customer expo, is that the kind of event where you actually sign up various things like actual revenue comes out of it or is it more of a sort of a customer relationship type building exercise?
Dan Florness: It’s both, but there’s a lot of — one thing that we’re able to do with an event like that is that sometimes the attention of decision makers is a challenge in the process and the communication in that group. The nice thing about the customers show is that we get the right audience in attending and that includes on both Fastenal and the customer side. That’s not one way or the other. It’s also an incredible awareness element from the standpoint of — sometimes seeing and touching vending machine, seeing an RFID setup, understanding how we go to market, talking to some suppliers, talking to other customers. And we also hold quite a few seminars where we’re talking through different pieces. And what we try to convey is the nature of the supply chain you have that comes through Fastenal, why we believe it’s special for you.
Not why Fastenal’s special, why we believe this channel of supply chain, which happens to be Fastenal is special. And there’s deals that get closed as a result of that, but there’s a lot of expansion that gets opened up. And for a number of years ago, I was directly involved with our national accounts team. In that several year period, I had more meetings with customers than I probably had had in the previous 15 years. And the one thing that always amazed me is, we would have a customer that’s doing $20 million a year with us. And I’d come out of that conversation with the direct knowledge of they could triple or quadruple their business with us if they decided to. And what we need to do is, give them a reason to decide to and because we believe we’re the best supply chain partner for — in that marketplace.
And part of it is telling the story and it does a great job. But Dan to directly answer your question, it’s a little bit of both
Holden Lewis: Make no mistake, Stephen, if we have to talk to you about what the impact of the cost is going to be in the second quarter, we do expect a return on it. It may not all happen at the show, but it’s expected to happen shortly thereafter.
Stephen Volkmann: Great. Appreciate that. Thanks, guys.
Operator: Thanks. Your next question is coming from Jacob Levinson from Melius Research. Your line is now live.
Jacob Levinson: Hi. Good morning, everyone.
Holden Lewis: Good morning.
Jacob Levinson: Holden, you mentioned a couple of very broad end markets that have been challenging, I think, for a little while now, fabricated metals and machinery. Obviously, those are pretty broad. And certainly, we’ve got some cycles that seem to be rolling over like ag and truck, but just trying to get a sense of where the negative outliers are today for your trucks.
