Fastenal Company Reports 2010 Fourth Quarter And Annual Earnings
The 'pathway to profit' initiative allows us to focus on the three drivers of our business: (1) store headcount, (2) store (or unit) growth, and (3) average sales volume per store, which ultimately drive our level of profitability. Our original goal was to hit the $125 thousand per month store average by 2012. We believe the duration of the economic weakness could delay the timing of when we achieve the $125 thousand per month average by approximately two years. However, the current economic weakness only serves to strengthen our belief in the 'pathway to profit'.
During 2010, we modified our thought process around the 'pathway to profit' in two regards: (1) we have structurally lowered our cost structure and believe we can hit our profitability target in the 'pathway to profit' initiative before our stores reach $125 thousand per month (see evidence of this in our 'Store Size and Profitability' table later in this release) and (2) we have expanded the universe of 'sales people' we measure from strictly 'store personnel' to 'store personnel' and 'non-store selling personnel'. This latter group includes, among others, the following: (1) national accounts personnel, (2) dedicated sales specialists (manufacturing, government, industry focused, and automated solutions), (3) district sales managers, and (4) regional leaders and others generally engaged in regional sales support. We began to ramp up our investments in both groups beginning late in 2009 and throughout 2010.
Future store openings – In July 2010, we indicated our intentions to open 80 to 95 new stores during the second half of 2010 (or an annualized rate of 6.8% to 8.0%). During the second half of 2010 we opened 82 stores. In 2011, we intend to open 150 to 200 new stores, or an annualized rate of 6.0% to 8.0%.
Store Count and Full-Time Equivalent (FTE) Headcount – Because of our 'pathway to profit', we increased both our store count (opening 7.5% and 8.1% new stores in calendar 2008 and 2007, respectively) and our store FTE headcount. However, the rate of increase in store locations slowed (we opened 5.4% and 3.0% new stores in calendar 2010 and 2009, respectively) and our FTE headcount for all types of personnel was reduced when the economy weakened late in 2008. The number of stores at quarter end, the average headcount at our stores per quarter, the average FTE headcount per quarter, and the percentage change were as follows for the first quarter of 2007 (the last completed quarter before we began the 'pathway to profit'), for the third quarter of 2008 (our peak quarter before the economy weakened), and for each of the last five quarters:
|Store locations-quarter end count||2,073||2,300||2,369||2,392||2,407||2,453||2,490|
|% change (twelve months)||7.2%||2.5%||2.1%||2.4%||4.3%||5.1%|
|% change since Q1 2007||11.0%||14.3%||15.4%||16.1%||18.3%||20.1%|
|Store personnel - absolute headcount||6,849||9,123||8,519||8,404||8,401||8,643||9,048|
|% change (twelve months)||17.9%||-9.9%||-7.8%||-3.7%||0.4%||6.2%|
|% change since Q1 2007||33.2%||24.4%||22.7%||22.7%||26.2%||32.1%|
|Store personnel - FTE||6,383||8,280||7,007||7,004||7,118||7,450||7,611|
|Non-store selling personnel - FTE||616||599||597||594||591||639||712|
|Sub-total of all sales personnel - FTE||6,999||8,879||7,604||7,598||7,709||8,089||8,323|
|Distribution and manufacturing personnel-FTE 1||1,962||2,244||1,768||1,800||1,884||2,007||2,040|
|Sub-total of non-sales personnel - FTE||2,729||3,049||2,469||2,506||2,591||2,733||2,784|
|Total - average FTE headcount||9,728||11,928||10,073||10,104||10,300||10,822||11,107|
|% change (twelve months)|
|Store personnel - FTE||15.2%||-15.1%||-9.7%||-1.2%||5.1%||8.6%|
|Non-store selling personnel - FTE||-2.4%||-2.1%||-1.3%||0.3%||9.0%||19.3%|
|Sub-total of all sales personnel - FTE||13.8%||-14.2%||-9.1%||-1.1%||5.4%||9.5%|
|Distribution and manufacturing personnel-FTE 1||5.4%||-20.3%||-8.7%||1.5%||13.8%||15.4%|
|Sub-total of non-sales personnel - FTE||6.0%||-18.2%||-9.3%||-1.4%||9.4%||12.8%|
|Total - average FTE headcount||11.7%||-15.2%||-9.1%||-1.2%||6.4%||10.3%|
|% change since Q1 2007|
|Store personnel - FTE||29.7%||9.8%||9.7%||11.5%||16.7%||19.2%|
|Non-store selling personnel - FTE||-2.8%||-3.1%||-3.6%||-4.1%||3.7%||15.6%|
|Sub-total of all sales personnel - FTE||26.9%||8.6%||8.6%||10.1%||15.6%||18.9%|
|Distribution and manufacturing personnel-FTE 1||14.4%||-9.9%||-8.3%||-4.0%||2.3%||4.0%|
|Sub-total of non-sales personnel - FTE||11.7%||-9.5%||-8.2%||-5.1%||0.1%||2.0%|
|Total - average FTE headcount||22.6%||3.5%||3.9%||5.9%||11.2%||14.2%|
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