Fastenal Co. is expanding its digital capabilities and shifting its sourcing strategy to navigate rising tariff risks and persistently weak industrial demand, executives said during the company’s Q1 2025 earnings call.
The Minnesota-based distributor reported first-quarter revenue of $1.96 billion, up 3.4% year over year, with daily sales growth of 5%. Net income was flat at $0.52 per share. CEO Dan Florness called the quarter’s performance “mostly self-help,” citing internal execution and customer expansion as key drivers in a market that remains sluggish.
Digital channels, including vending, ecommerce, and electronic data interchange — accounted for 61% of total sales, up from 59% a year earlier. Fastenal aims to increase that share to between 66% and 68% by October. The company has now deployed 130,000 Fastenal Managed Inventory (FMI) devices across 25 countries, supporting customers’ point-of-use needs through automated replenishment.
“We need to get better at ecommerce,” Florness said. “There’s probably a 20% lift in spend if we can make it easier for every department at a customer to order from us instead of going elsewhere.”
Fastenal also continues to expand its large-site business. The number of “on-site” customers — locations spending more than $50,000 per month — grew 7% in Q1. The company is prioritizing high-value relationships and shifting away from low-spend accounts under $2,000 per month, which has shown weaker performance since the pandemic.
How Fastenal plans to navigate tariff risks
Alongside its digital push, Fastenal is preparing for new trade restrictions. The company has already begun raising prices in response to recent tariffs on Chinese steel and derivative products, including fasteners, and is readying for the possibility of a proposed 145% tariff on certain Chinese non-steel imports.
Florness said Fastenal began implementing price increases in April, which are expected to contribute 3% to 4% in the second quarter, with the potential to double in the second half depending on how tariffs evolve.
“There’s no silver bullet for a 145% tariff,” he said. “It’s just math. But we can use our inventory and sourcing options to give customers time and flexibility.”
Fastenal is also shifting more inbound shipments directly into Canada and Mexico, where it does about 15% of its business. That move is intended to avoid overlapping tariffs that are not eligible for duty drawback if routed through the U.S. In parallel, the company has significantly diversified sourcing operations outside of China over the past five years.
“If we sourced a fastener from China last year, we’re now looking at whether we can source it from Taiwan, Vietnam, or another supplier,” Florness said. “Our sourcing teams outside China are 10 times larger than they were in 2019.”
Fastenal’s direct relationships with manufacturers also give it better visibility and leverage, said CFO Holden Lewis.
“Many of our competitors are buying through master distributors,” he noted. “We know exactly what’s happening at the source, and that allows us to work through pricing and supply chain disruptions more effectively.”
Customer feedback at Fastenal’s recent expo focused less on politics and more on solutions, Florness said.
“They’re asking us: show us the math, help us plan, and don’t shut us down,” he said. “That’s our job — to be a partner, not just a supplier.”
Florness closed by emphasizing Fastenal’s long-term focus.
“We’re not trying to profit off tariff-driven inflation,” Florness said. “We’re here to solve problems — and to do right by our customers, employees, suppliers, and shareholders.”
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