Fastenal Co.

Q2 performance: strong, high-quality growth with margin durability - Daily sales grew +14.7% YoY in Q2 (up from +12.4% in Q1), driven by share gains (not demand tailwinds). - Operating margin improved ~5 bps YoY despite inflation pressures—margin consistency attributed to SG&A leverage and disciplined cost control offsetting gross margin headwinds. - Customer quality improved materially: contract count up +7% YoY and customer sites spending ≥$50k/month up +16.5% YoY with revenue +26% from that growing cohort (durable revenue profile).

Technology / “services” momentum: digital & FMI are leading indicators - Digital sales (DSR) +16.2% YoY, reaching 61.6% of total sales (up 60 bps vs last year). - Company-wide digital outlook: 2026 DSR forecast 63%–64%, slightly below an original target (~66%)—management says it’s not slowing adoption; rather non-digital sales are growing alongside as Fastenal wins larger accounts. - FMI weighted devices signed +8.3% (to 109 weighted devices/day), totaling just under 7,000 devices in Q2; FMI sales are 44.6% of total sales (up ~60 bps).

Pricing / price-cost: improving but still a headwind (incremental margin pressure) - Pricing realized about 2.9% in the quarter (~4.5% on a stack basis), but net price-cost remained negative. - Gross margin headwinds: contracted ~75 bps YoY, with price-cost ~40 bps of that; management said price-cost improved ~10 bps vs Q1 and intends to continue chipping away. - Management expectation: incremental margins are currently constrained; they aim to return toward mid-20s incremental margin as price-cost normalizes, but timing is uncertain due to cost inflation.