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Q1 2011 Earnings Call
April 12, 2011 10:00 am ET
Ellen Trester -
Willard Oberton - Chief Executive Officer, President and Executive Director
Daniel Florness - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer
Hamzah Mazari - Crédit Suisse AG
Holden Lewis - BB&T Capital Markets
Sam Darkatsh - Raymond James & Associates, Inc.
Robert Barry - UBS Investment Bank
Ryan Merkel - William Blair & Company L.L.C.
Adam Uhlman - Cleveland Research
David Manthey - Robert W. Baird & Co. Incorporated
Brent Rakers - Morgan Keegan & Company, Inc.
Previous Statements by FAST
» Fastenal's CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Fastenal Company CEO Discusses Q3 2010 Earnings - Call Transcript
» Fastenal Company Q2 2010 Earnings Call Transcript
Welcome to the Fastenal Co. 2011 First Quarter Earnings Conference Call. This call will be hosted by Will Oberton, our Chief Executive Officer; and Dan Florness, our Chief Financial Officer.
The call will last for up to 45 minutes. The call will start with a general overview of our quarterly results and operations by Will and Dan, with the remainder of the time being open for questions and answers. Today's conference call is a proprietary Fastenal presentation and is being recorded by Fastenal. No recording, reproduction, transmission or distribution of today's call is permitted without Fastenal's consent.
This call is being audio simulcast on the Internet via the Fastenal Investor Relations homepage, investor.fastenal.com. A replay of the webcast will be available on the website until June 1, 2011, at midnight, Central Time.
As a reminder, today's conference call includes statements regarding the company's anticipated financial and operating results, as well as other forward-looking statements based on current expectations as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements may often be identified with words such as we expect, we anticipate, upcoming or similar indications of future expectations.
It is important to note that the company's actual results may differ material from those anticipated. Information on factors that could cause actual results to differ material from those forward-looking statements are contained in the company's periodic filings with the Securities and Exchange Commission, and we encourage you to review those carefully.
Investors are cautioned not to place undue reliance on such forward-looking statements, as there is no assurance that the matter contained in such statements will occur. Forward-looking statements are made as of today's date only, and we undertake no duty to update the information provided on this call.
I would now like to turn the call over to Will Oberton. Go ahead, Mr. Oberton.
Thank you, Ellen, and thanks, everyone, for joining us today. I'm very happy about the quarter. I think the Fastenal team performed well in the first quarter. We had sales growth of 23%. We were helped by an extra day, but we'll take it. The real exciting thing or the thing that makes us very optimistic about going into the year is our strong sequential trend. The way the quarter played out, we had a good January, and then it went a little bit soft in February. We believe it was due to weather, but then, we came back very strong in March, where our March daily average was 7% higher than our February daily average, much above our normal sequential trend.
For the January to March trend, more historically, we would be up 6.2%. But this year, we're up 8.6%. So moving forward at a nice pace, and we're excited by the progress that we've made.
I feel good about our progress on the gross margin. Our gross margin was up 90 basis points over the first quarter of last year. It was even with the fourth quarter, but a lot of that is geography, and Dan's going to give a better report on that. But we're making nice progress working on our margin, and we're well within our 51% to 53% range that we talk about right in the middle of that.
From an expense standpoint, our SG&A grew at 16.7%. And that's, I believe, they did a really good job or the group did a really good job on that. Labor was up when you put in all the health costs and all the other things, about 26% well above sales growth. But it's really being driven by the rebound of our bonuses, which we're very happy that, that's happening. Bonuses were up more than 100% year-over-year. So if we're going to spend money, that's the place to spend it.
The other expenses, once you take the labor out, were actually flat to slightly down year-over-year, and that's just due to a strong focus on all the details. We learned a lot in the 2009 recession about where we needed to spend money and where we shouldn't be spending money, and it's coming through in the quarterly results in 2011.
From a pretax profit standpoint, we reported 20.1%. The first time that we've been over 20% in the first quarter for well over a decade. So we're proud of that. And it really puts us on a good track for our 'pathway to profit' progress that we talked about in the fourth quarter of being over 20%. So we're really moving towards the goals that we need to hit.
From a future standpoint, what we're looking for going forward, I'll start with a little history on that. At the beginning of 2010 -- really, the end of 2009, the beginning of 2010, we were really working hard to determine where we should invest in growth drivers outside of our normal new store openings. And the decisions we made were to add additional sales people at a higher level -- National Accounts, government sales, Automated Supply or vending and some product specialists, which we did.