Fastenal Operating Margin Reaches 21.5% as Sales Growth Accelerates

The Tip Desk · November 5, 2026 · 3 min read

Daily sales rose 15.5% in the third quarter, and operating margin expanded 90 basis points year over year to 21.5%.

Fastenal Company (FAST), a global leader in supply chain services, reported daily sales growth of 15.5% in the third quarter ended September 30, 2026, faster than 14.7% in the second quarter and 12.4% in the first quarter.

Net sales were $2,463.3 million, up from $2,133.3 million a year earlier, when both periods had 64 business days. Daily sales were $38.5 million. The company said the quarter reflected share gains with larger customers, pricing actions, and broad-based demand across core end markets.

Product pricing added about 240 basis points to net sales, after 290 basis points in the second quarter and 350 basis points in the first. Foreign exchange reduced sales growth by about 10 basis points, after contributing about 10 basis points in the year-ago quarter. The company attributed the sales increase to improved customer contract signings since the first quarter of 2024, product pricing, and a modest improvement in industrial production in the first nine months of 2026.

Operating margin expanded to 21.5% from 20.7% a year earlier, a 90-basis-point improvement, after 21.0% in the second quarter and 20.3% in the first. Operating income was $530.8 million. Selling, general, and administrative expense leverage more than offset customer-mix-related gross margin pressure, the company said.

Gross margin recovered to 44.8% of net sales from 44.6% in the second quarter, after a 75-basis-point year-over-year decline in that prior period. A continued shift toward larger customers reduced gross margin by about 50 basis points. Price/cost reduced gross margin by about 30 basis points, an improvement of about 10 basis points from the second quarter. Gross margin benefited from direct sourcing savings, supplier rebates, and tariff refunds; about 20 basis points of that benefit reflected favorable timing.

SG&A expenses were 23.3% of net sales, a 130-basis-point year-over-year improvement. Employee-related expenses improved 90 basis points as a percentage of sales, with base pay leveraging through higher labor productivity. Occupancy-related expenses improved 50 basis points on fixed-cost leverage. Other SG&A rose 10 basis points, mainly from higher fuel and general insurance expense, partly offset by joint marketing with suppliers.

Contract-customer daily sales grew 18.8% year over year, versus 7.8% for non-contract sales; contract sales were 76.5% of the mix. Heavy manufacturing daily sales grew 20.2%, versus 13.2% for other manufacturing; total manufacturing was 76.6% of sales. Direct materials daily sales grew 18.6%, outpacing indirect materials at 14.3%. Non-residential construction daily sales grew 12.0%, which the company said was the sixth consecutive quarter of growth in that end market.

Net income was $401.6 million, up 19.7% from $335.5 million a year earlier. Diluted earnings were $0.35 a share, compared with $0.29. The income tax rate was 24.4% of pretax income.

Operating cash flow was $421.6 million, or 105.0% of net income, versus 115.3% a year earlier, as larger cash use for accounts receivable and inventory reflected strong sales growth. The company returned $328.4 million, or 81.8% of net income, through $298.2 million of dividends and $30.2 million of share repurchases. Total debt was $100.0 million, or 2.4% of total capital, at September 30.

Weighted FASTBin and FASTVend signings were 7,484 machine-equivalent units, up 6.2% year over year. The company lowered its 2026 signing goal to 27,000–29,000 MEUs from 28,000–30,000. FMI sales were $1,121.3 million, or 44.8% of net sales; Digital Footprint sales were $1,536.5 million, or 61.4% of sales. Property-and-equipment investment, net of sales, was $71.8 million, or 2.9% of net sales. The company still expects 2026 investment of $310.0 million to $330.0 million.