Fastenal Company (NASDAQ:FAST) Q3 2023 Earnings Call Transcript

Dan Florness: Because we consider that our landed cost to the shelf as opposed to when we’re moving it around North America or moving around in our business.

Holden Lewis: Now there’s transportation that does not fall into product costs. Those are our ramp trucks in the field, et cetera. But when you’re talking about the cost of moving things from overseas to domestic, that goes into product cost, as Dan said, it’s part of landed and that gets reflected in our price cost dynamics.

Ryan Merkel: Got it. Okay. That’s helpful. And then sequentially, you think maybe gross margin could come down a little bit more than seasonality. Is that because price-cost is going to decline and the reason there you’re going to lower fastener prices to match the lower product costs or is it also this idea that maybe charging for freight is getting a little bit harder.

Holden Lewis: No. I mean there’s a few reasons why I think gross margin will come in a bit. One of it is the seasonality you talked about. The second thing I talked about a moment ago was simply freight revenues has softened a little bit in the face of a weaker cycle. And again, we have a certain degree of leverage around our freight that works great when the freight revenues are at record levels, and it’s not quite as good when they’re not, that’s another element of it. And then the moderation in price-cost that I anticipate is probably has more to do with the field continuing to make modest adjustments where they’re required by contract or what have you to do so. And again, we’re talking about a relatively small number here. It’s not dramatic. But those are the moving pieces that I see playing out to a slightly weaker fourth quarter gross margin relative to third.

Ryan Merkel: All right. Thank you.

Dan Florness: Thanks, Ryan. I see it’s about 2 minutes before the hour, and I realize everybody on this call has a busy week of earnings conversations to be engaged in. Thank you for your time. Good luck in the fall and my thanks to the Fastenal team. Have a good day, everybody.

Holden Lewis: Thank you everyone.

Operator: Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.