Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: You're listening to Bloomberg BusinessWeek with Carol Masser and Tim
Speaker 2: Stenoveek on Bloomberg Radio.
Speaker 1: So something we've already touched upon, and this is this
Speaker 1: letter from sixty CEOs of Minnesota based companies. More than sixty,
Speaker 1: i should say, have called for an immediate de escalation
Speaker 1: of tensions between state, local, and federal authorities as the
Speaker 1: state is reeling from another fatal shooting of an American
Speaker 1: by immigration agents. The chief executive officers of companies. They
Speaker 1: include Target, Best Buy, Landa Lakes, Cargil, General Mills, United
Speaker 1: Health Group, as well as professional sports teams including the
Speaker 1: Minnesota Vikings, among the signatories of the letter that was
Speaker 1: shared yesterday Sunday by the Minnesota Chamber of Commerce. We're
Speaker 1: laying that out for those who are watching on streaming
Speaker 1: and TV just to get to the crux of it though.
Speaker 1: The open letter says, we are calling for an immediate
Speaker 1: de escalation of tensions and for state, local, and federal
Speaker 1: officials to work together to find real solutions. This is
Speaker 1: why Tom Homan is headed to Minnesota.
Speaker 2: Our next guest is head of a company in the
Speaker 2: Great State of Minnesota. We're talking about fasten Now recently
Speaker 2: report earnings, the stock selling off on the day of
Speaker 2: the report, but rallying the day after, the most in
Speaker 2: nine months. That trade reaction had us scratching our heads.
Speaker 2: So we're grateful Carol to have back with us to
Speaker 2: talk about the release of the outlook. The CEO of
Speaker 2: the close to fifty billion dollar market cap company fasten Ow,
Speaker 2: Dan Flornes, is back with us.
Speaker 1: Yeah, so delighted. Let's get to it. Dan, good to
Speaker 1: have you here. Happy New Year. We do love talking
Speaker 1: with you. We feel like we get a great read
Speaker 1: the US economy, the manufacturing world. You've seen a lot
Speaker 1: in your career, and we want to get to all
Speaker 1: of this. But I really do feel like we'd be
Speaker 1: remiss to not ask you about what's going on in
Speaker 1: your home state. And I feel like those who are
Speaker 1: listening might be curious if you were asked to sign
Speaker 1: this letter of CEOs who want a de escalation of
Speaker 1: what's happening in Minneapolis specifically, So can you Were you
Speaker 1: aware that this letter was happening or were you asked
Speaker 1: to sign it?
Speaker 3: Was? First off, Happy New Year, and thanks for allowing
Speaker 3: me to participate today.
Speaker 4: I was not aware of it. We're outstate Minnesota.
Speaker 3: We're about two and a half hours from the Minneapolis
Speaker 3: Saint Paul market, and so it's not uncommon. It's a
Speaker 3: pretty tight knit group up in the Twin Cities, and.
Speaker 4: Was not aware of it going out with that.
Speaker 3: Sid was not surprised by going out and it seemed
Speaker 3: to be pretty common sense of Hey, that's style down
Speaker 3: the heat.
Speaker 1: So would you have signed it though, if asked, Yeah,
Speaker 1: I would sign that. What's We talked so much about
Speaker 1: leadership at this time, and I am curious what you
Speaker 1: see as the responsibility of leaders in the United States
Speaker 1: when we see situations happening where it feels like and
Speaker 1: again I don't want to get political. I don't want
Speaker 1: to take sides, but it does feel like Americans are
Speaker 1: being with some would say is targeted unfairly.
Speaker 3: Yeah, you know, I think as a leader, one of
Speaker 3: our one of our tasks are.
Speaker 4: To create some calm in the air. You know.
Speaker 3: I think back a few years ago when when COVID
Speaker 3: was going on, it seemed like every everybody, every day
Speaker 3: turned everything into a political thing. And sometimes it's the
Speaker 3: case of you know, if you're around a bunch of
Speaker 3: people that that are high at risk in the case
Speaker 3: of COVID, put a mask on if you're If you're not,
Speaker 3: and you don't want to be there, then go someplace else.
Speaker 3: You know, same thing here. Let's try to dial the
Speaker 3: heat down and focus on what we're trying to accomplish,
Speaker 3: not how we can see who can be the most
Speaker 3: boisterous in the in the market of throwing ideas out
Speaker 3: and that that's not both sides of the of the fence, Dan.
Speaker 2: One thing that we're trying to figure out is getting
Speaker 2: a good read on the economy, and you guys have
Speaker 2: such a great read on it, given that you touched
Speaker 2: so many sectors. I mean, if you're using nuts, bolts, screws, anchors, rivets,
Speaker 2: any kind of fastener, industrial janitorial safety supplies, you guys
Speaker 2: do it. On earnings, you mentioned the broader market conditions
Speaker 2: remained mixed. What exactly did you mean by that when
Speaker 2: you say mixed? What's the good? What's the bad?
Speaker 4: Well mixed?
Speaker 3: From the standpoint, we focus a lot on the Personing
Speaker 3: Manager's Index, Okay, published by the ISM, and that's been
Speaker 3: sub fifty for thirty six of the last thirty eight months,
Speaker 3: so from the standpoint of the economy has not given
Speaker 3: us any lift.
Speaker 4: We are getting good traction in the marketplace.
Speaker 3: And we finished out the last half of twenty twenty
Speaker 3: five with double digit growth. That's really an exercise of
Speaker 3: taking market share more than the wind is to our backs.
Speaker 1: And I know we've talked about this too, Dan with
Speaker 1: you about being in a prolonged downturn in the industrial economy.
Speaker 1: Any green shoots that you were seeing or signs of
Speaker 1: an inflection and a and if so, I'm just curious
Speaker 1: what markets might you be optimistic and which are maybe
Speaker 1: running weaker than you anticipated, and maybe we'll continue to
Speaker 1: this year.
Speaker 3: Yeah, this is a little bit an anecdotal answer, so
Speaker 3: I apologize for that. We're seeing in some of the
Speaker 3: published data some industrial production numbers improving late in the year.
Speaker 3: We aren't seeing that directly in our business, But for
Speaker 3: us November December is a seasonally week period, so that
Speaker 3: doesn't surprise me that we won't see it. So don't
Speaker 3: know if there's some green shoots there. I can tell
Speaker 3: you this from my travel if it's a business that's
Speaker 3: linked to certain industries and data center is an example
Speaker 3: from a recent trip I had on the East Coast
Speaker 3: where I was visiting a mechanical contractor and their business
Speaker 3: was on fire and seventy percent of their activity was
Speaker 3: around data centers.
Speaker 1: So that's the good part, right, and that that's the
Speaker 1: good part that story. We keep hearing about the AI
Speaker 1: build out, the data center build that you saw it firsthand.
Speaker 1: It's real, it's.
Speaker 4: Real, it's real.
Speaker 3: In fact, I spent a big chunk of my time
Speaker 3: having conversations with our district leaders. We have about two
Speaker 3: hundred and forty district managers. They each run about a
Speaker 3: thirty five million dollar business. You had them all up,
Speaker 3: that's an eight billion dollar fastenal. So I had a
Speaker 3: conversation with our team in Atlanta this morning, one of
Speaker 3: our district managers, and most of his discussion was about
Speaker 3: business pickup. He's seeing his market because of data centers.
Speaker 4: Now.
Speaker 3: Atlanta is unique in that it's one of a handful
Speaker 3: that are really being impacted by that build up.
Speaker 2: What is the pricing power, Dan that the company has
Speaker 2: right now? Because historically during periods of inflation, you've been
Speaker 2: able to be pretty aggressive with price increases, I think
Speaker 2: people would argue you weren't as aggressive as you could
Speaker 2: have been in twenty twenty five. What's the barrier to
Speaker 2: pushing price more aggressively.
Speaker 3: Well, you know, the one barrier is the size of
Speaker 3: the customer, the nature of the pro how much of
Speaker 3: it is production centered versus maintenance centered. And because when
Speaker 3: it's production centered business, you have customers buying a very
Speaker 3: large volume of nurow band of skews, and their price
Speaker 3: sensitivity is different than if it's MRO and they're buying,
Speaker 3: you know, one hundred dollars of this and one hundred
Speaker 3: dollars of that.
Speaker 1: You know. One of the things I want to ask
Speaker 1: you to there was a story on my read in
Speaker 1: this morning Dan in terms of Volkswagen saying that they're
Speaker 1: going to their head plans for a possible out factory
Speaker 1: in the United States. They're not progressing due to President
Speaker 1: Donald Trump's tariffs and unsuccessful talks for local incentives. So
Speaker 1: we have certainly seen an administration that talks about all
Speaker 1: the investment money coming into the US, and I think
Speaker 1: we here at Bloomberg continue to try and figure out
Speaker 1: how much of this is actually going to play out.
Speaker 1: You can say you're going to invest, and then there's
Speaker 1: the reality of actually building facilities. First of all, ty Reffs.
Speaker 1: And I know we've talked about this with you in
Speaker 1: the past, and forgive me if I'm repeating, but you're
Speaker 1: thinking about outsourcing. How have tariffs changed that, especially when
Speaker 1: it comes to fasteners, I think primarily sourced from China
Speaker 1: and Asia. So I'm just curious how many of it's
Speaker 1: been shifting for you.
Speaker 3: Yeah, so you are absolutely correct, Most of the fasters
Speaker 3: in this country, in North America in general come from
Speaker 3: Northern Asia, China primarily obviously huge impacts. And for us,
Speaker 3: what it's meant is over about for about the last
Speaker 3: six years, seven years, we've been actively expanding our ability
Speaker 3: to import fasters because there's still.
Speaker 4: Not a lot of domestic production.
Speaker 3: And so when I think back to twenty eighteen, our
Speaker 3: primary sourcing entity was based in Shanghai with a secondary
Speaker 3: location in southern Taiwan. Today we have personnel in Bangkok,
Speaker 3: we have personnel in India, and that's where all of
Speaker 3: our growth and movement of sourcing personnel has occurred over
Speaker 3: the last seven eight years to just broaden our ability
Speaker 3: to be a little more agile and where you source from,
Speaker 3: depending on the geography, it's going.
Speaker 2: Into So that's on the sourcing side, But what about
Speaker 2: on your customer side and about customers moving manufacturing back
Speaker 2: to the US. Are you seeing that happen or hearing
Speaker 2: discussions of that.
Speaker 3: Yeah, I guess you know, anecdotally, Yes, I can't say
Speaker 3: that we've seen a tremendous influx. What I would say
Speaker 3: is I hear less about stuff leaving than maybe I
Speaker 3: would have, you know, ten years ago or five years ago.
Speaker 3: And that in itself is a win from the standpoint
Speaker 3: of production. But you know, a lot of it is
Speaker 3: folks are getting closer to where the end customer is
Speaker 3: for a lot of our customers. And so when I
Speaker 3: see customers expanding production facilities in North America, and I'll
Speaker 3: say more broadly than North America rather than just the
Speaker 3: United States, you you need the service more efficiently the
Speaker 3: local market.
Speaker 1: Which makes sense, which we've seen that trend right happening.
Speaker 1: I feel like over time, Hey, Dan, you mentioned about
Speaker 1: maybe less companies leaving the US. Speaking of leaving, you
Speaker 1: are stepping down as CEO come July. You've been CEO
Speaker 1: since twenty sixteen. You were CFO before that. Going back
Speaker 1: to two thousand and two, you've been there a long time,
Speaker 1: and I know last time you were on, I asked
Speaker 1: you a question about this cycle, and I was not
Speaker 1: very kind. I got yelled at by my team because
Speaker 1: I think I gave you twenty seconds, but I want
Speaker 1: to we do get yelled at.
Speaker 2: You get twenty five seconds.
Speaker 1: Now, No, no, no, you've got almost two minutes. How
Speaker 1: do you describe this cycle, because it's it feels unusual.
Speaker 3: Well, it's unusual in that, you know, you hear about everything,
Speaker 3: Whereas in years past there was so much of this
Speaker 3: political stuff that went on, but most of it, if
Speaker 3: you weren't in the midst of it, you were oblivious
Speaker 3: to and you just you just you went around about
Speaker 3: your life. Now everybody hears about everything when it happens,
Speaker 3: So that's just a lot more noise on the flip side.
Speaker 3: What's what's really different is I mentioned on that conversation
Speaker 3: with the team in Atlanta this morning, we were talking
Speaker 3: about data centers and one of the people on the calls,
Speaker 3: he leads our business in the southern US. He said, Hey, Dan,
Speaker 3: I'm gonna flip your something, and he punched in a
Speaker 3: bunch of questions and he came back with a twenty
Speaker 3: nine page report on the data center industry in the
Speaker 3: United States, and so I read through a bunch of it.
Speaker 4: It's it's actually pretty accurate and pretty good.
Speaker 3: I mean, there's stuff in that I could pick apart,
Speaker 3: but it's pretty good.
Speaker 1: Yeah, I know, well, you know, Okay.
Speaker 2: Now, so Dan still had to do the reading though
Speaker 2: it didn't read the report for him.
Speaker 4: So I probably would have, but I'm old school, I guess.
Speaker 1: Is that just quickly, I know, this is truly like
Speaker 1: thirty seconds. Is that the most transformed of changed you
Speaker 1: think we'll see over the next decade is just the
Speaker 1: continued impact of AI and things like CHATCHYPT and everything
Speaker 1: else connected. Just your quick thought on that, Yeah.
Speaker 3: Because I mean, when I think of our business, we're
Speaker 3: selling tens of thousands of different parts to customers every day,
Speaker 3: and the ability to improve the visibility for folks sourcing
Speaker 3: all that stuff is an incredible efficiency tool.
Speaker 1: All right, Dan, come back soon, especially before you leave
Speaker 1: in the summer. Dan, faston, Dan, Thank you,