Bloomberg Audio Studios, podcasts, radio news. Fasten All shares rising as much as six point four percent earlier in the session. They're up right now three point four percent. It's a new all time high for the company after they reported net sales for the second quarter that came in in line with estimates from analysts, up eight point six percent over the same period last year. This is a fifty
two billion dollar market cap company. They distribute construction and industrial supplies think nuts, bolts, screws, anchors, rivets, and other fasteners, as well as industrial janitorial and safety supplies, cutting tools as well. The company sells to builders, manufacturers, governments, and more so. Really, it's a great read on the entire industrial and manufacturing economy, specifically here in the US. We've got with us the CEO of fasten All, Daniel Flornes.
He joins us from Winona, Minnesota. Dan, welcome to Bloomberg Business Week. Daily shares up today, Shares up more than twenty five percent so far this year, new all time high. In the earnings release, though you said that quote the market conditions remain sluggish. What conditions specifically?
You know? We sell to a wide range of customers and industries as as you mentioned across North America and in twenty six countries in total, book mostly in North America. Our customer base has been relatively subdued for the last several years. In the fall of twenty twenty two, we saw some indicators saying it was going to slide, and we felt that as we moved into the second and third quarters of twenty twenty three, and it's been really
weak since then. About thirty percent of our business is very production centered business within manufacturing.
So are there any signs that that part of the business is improving, that those customers are seeing sentiment improve. Are you hearing anything from them?
I think the biggest sign that we're seeing is the the knife has stopped dropping. You know, we were trying to catch that falling knife for a two year period. When I talk to our district and regional leadership throughout the throughout the world, the feedback I hear is, you know, they're not talking about this two hundred thousand dollars a
month customer whose business is off sixty seventy percent. You have a much more stability now might be stable at a lower level than it would have been two years ago, but it's much more stable and so it allows our inherent growth to shine through.
So we've really been in this prolonged downturn, especially in the industrial economy. Are you seeing any particular green shoots or signs of inflection, and if so, which markets are you most optimistic about.
Yeah, so we're seeing some green shoots for us, we're seeing some We are seeing some impact and energy. However, I would say that's probably more us taking market share than it is a lift in the tide. But twenty five percent of our business is outside of the industrial and within there we're selling. We're doing quite well. I hear a lot of commentary from our folks with data
centered builds with you even warehousing customers. And we've made really good inroads over the last three years into the government sector, and that primarily was an offshoot of COVID. During COVID, when supply chains blew apart, we stepped in to serve a lot of that market when they were not being served, and those folks have remembered that and we've grown our business there.
So we need to, of course talk about terrriffs. How have tariffs really changed your thinking about product sourcing? Particularly for fasteners, which we know, of course are primarily sourced in China Asia. What other options are you evaluating to mitigate the tariff impact here?
You know?
So back in twenty eighteen, we did some short term moves of our supply chain, but it was fairly limited because you just can't change There's so much QC involved with vetting out cut suppliers that you couldn't move it fast enough. What we had done quietly over the last five six years is continue in that progress because the tariffs that were put in place in twenty eighteen were sticking and we expected more of it to happen, and we wanted to better diversify the supply chain for our customer.
We did look at a lot of options. There aren't a lot of options within North America. We looked at some options of doing some manufacturing ourselves. The problem is the economics still didn't work. So it was really for us more about diversifying supplier base in general.
Are the economics of that going to work now in this new tariff regime? I think during the first Trump administration the goal was to move things out of China, but as many companies are learning right now, it doesn't matter if it's China, Vietnam, or India. If it's not in the United States, there is going to be a terrify on it. At least that's what it seems like is going to be the case.
Yeah, economics still do not work, and uh and and and part of the challenge there isn't just the economics, it's the amount of time. When we were researching it very in depth two and a half years ago, one of the one of the challenges is it's easy to find a site. It's relatively easy to get a building up and get a supply chain set up. When I say relatively easy, I mean timeframe of what it takes
to do it. The most challenging aspect was the equipment, the production equipment of how many how many months it would take to get that And so that aspect really pushed us to look more at geographic dispersion of supply chain sourcing because because the economics are are still very challenging.
So how much of what you sell right now is actually made in the US?
If I look across what we're sourcing, what our supply our branded suppliers are sourcing. We've always estimated less than fifty percent is coming from the US.
And is that going to stay stable in this new tarif regime.
I suspect it will.
Okay, So I know fast and all raised prices back in April, especially as a result of tariffs. Historically, I mean the company has been able to pass on pricing costs. What should even the feedback here from customers? Has there been much pushback in terms of the ability and appetite for customers, frankly to take on additional pricing, especially as we head into the second half of the year.
First off, we sell into a very competitive market. There is always pushback. The real challenge in the equation is his communication. And one thing that helps in our supply chain, we're directly sourcing from the manufacturer that's producing the product, more so than most of our competitors in the market place, just because of our scale and so we have the ability to see into the future farther than a lot of our competitors, and it puts us in a position
to communicate very well. It puts us in a position to take steps as the inventory is turning. Unfortunately, the one unfortunate part of that it also can create a fatigue for your customer, and I would say our customer is at the fatigue point right now of where it has. It's become challenging, but it always is and it's all about communication and trust.
We're speaking with fastin now. CEO Dan Flornes Company reported earnings earlier, shares our higher reach a new record today. Shares up right now by about three point seven percent. I want to talk a little bit about the One Big Beautiful Bill Act that became law on the fourth of July this year. In the press release for your earnings, you didn't mention it, but big picture, what does it mean for your customers and for your business?
You know, big picture sort it means for our customers is if you look at some of the depreciation rules and the timing, it's it's it makes it very advantageous to make capital investment. And so that's that's the biggest piece that we see impacting our customers because our customers have, especially on the manufacturing side, an incredible amount of infrastructure that they're investing in, and so anything that allows them to depreciate faster and to improve their return profile is
advantageous for our marketplace. And that's a that's a key element that we talked about in the release.
I know that you talked a little bit about to US manufacturing your own products in the US and your suppliers doing it, But I'm wondering about your customers and the way that these so called America First policies might help them reshore manufacturing back to the US. Are you seeing any evidence or hearing discussion of your customers beginning to move manufacturing back to the US.
You know, I would say it fairly limited, but again, that's not something that happens in six months that you set up. We've had some customers set up assembly operations, which you can do in a much shorter timeframe as opposed to peer production where you're manufacturing components yourself or you're changing your supply chain to more domestic type supply. But what we've seen is a lot more willingness of making investment even beyond the manufacturing capacity in the short term fast.
And I was refocused on growing with larger customers. What are the key drivers there in What additional investments do you need to make to enable growth with those customers.
Yeah, so a position we've put ourselves in for a number of years is we have very aggressively made investments, and this was starting back fifteen plus years ago of slowly building an infrastructure to move the supply chain and
closer and closer to the point of use. And what that involved for US is investing in a tremendous amount of vending infrastructure and in more recent years a lot more RFID type infrastructure to measure product movement within a facility so that you don't have to to with human capital physically observe product being diminished. You can monitor it
electronically and remotely. And so we've made extremely large investments over the last ten plus years in vending technology, and I'm pleased to say that vending technology is all manufactured in the United States.
Yeah. I was surprised when I went to your website earlier today as I was preparing for this, to see those those vending machines. It's not something that I've run into and certainly in my life, but it's pretty cool to see that.
Not just it's a snack machine.
Yeah, that's that's what I was thinking. It's like, it's a snack machine, but you can't eat what's in there, so exactly. Okay, Hey, we've got about a minute left, and I just want to talk numbers real quick. Gross profit up forty five points to forty five point three percent, up from forty five point one percent over the second quarter of last year. You said it was partially offset by higher import duty costs and higher fleet and transport costs. Are those costs in your view going to stabilize.
The uh? They're going to continue to rise because because of the way our supply chain works, we carry a fair amount of inventory because we have such dispersion in our locations, so we carry quite a few months of inventory. So that's going to keep ratcheting up as we're on a fiful basis inventory. So is that inventory continues to turn, that willatina ratchet up a little bit as we move into the third and fourth quarters and into twenty twenty six.
What really helped us during the quarter and what drove the improvement our gross margin? Set aside teriffs for a second, right, We've put in place a faster expansion starting last summer to widen our inventory, and that's really what drove our margin this quarter.
Dan Florinas, CEO of fasten All, really appreciate you joining us. Shares up today New All time highs three point eight percent right now,