Strategic Advisor to the Chief Executive Officer, Fastenal Co
Fastenal CEO on US Manufacturing, Emerging Tech, Leadership Challenges | Bloomberg Businessweek
Fastenal Company (Nasdaq: FAST) announced last month that Daniel Florness had communicated to the company's Board of Directors his decision to step down from his role as Chief Executive Officer of Fastenal on July 16, 2026. On December 19, 2025, Fastenal's Board appointed Jeffery M. Watts, Fastenal's current President and Chief Sales Officer, to succeed Mr. Florness as Fastenal's CEO effective as of July 16, 2026.
Florness joined Fastenal in 1996 and became CEO back in 2016. He expects to continue to serve as a Strategic Advisor to the firm's incoming CEO until early 2028. Dan joins to discus...
About Daniel Florness
During Fastenal's Q2 2026 earnings call on July 15, 2026, Daniel Florness, the company's CEO, discussed the company's performance and priorities. He stated that he "would have felt a hell of a lot better about the quarter if our incremental margin would have been 24%," noting a challenging gross margin trend. Florness said he told Jeff Watts, the president and chief sales officer, that when a trend is favorable, one should "convince everybody to do the things necessary to keep that trend going." He also described his philosophy as including "love growth" and "incrementals matter," adding that "every problem can be addressed in a simpler way if you're growing." Florness acknowledged that the company paid bonuses tied to growth, which contributed to margin pressure, and he emphasized the need to balance growth with incremental margins to maintain organizational discipline.
Transcript (34 segments)
A
Announcer0:02
Bloomberg Audio Studios podcasts, radio, news. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenc on Bloomberg Radio.
C
Carol Massar0:15
So, something we've already touched upon and this is this letter from 60 CEOs of Minnesota based companies, more than 60 I should say, have called for an immediate deescalation of tensions between state, local, and federal authorities as the state is reeling from another fatal shooting of an American by immigration agents. The chief executive officers of companies, they include Target, Best Buy, Land O'Lakes, Cargill, General Mills, United Health Group as well as professional sports teams, including the Minnesota Vikings among the signatories of the letter that was shared yesterday, Sunday, by the Minnesota Chamber of Commerce. We're laying that out for those who are watching on streaming and TV. Just to get to the crux of it though, the open letter says, 'We are calling for an immediate deescalation of tensions and for state, local, and federal officials to work together to find real solutions.' This is why Tom Hman is headed to Minnesota.
T
Tim Stenc1:10
Our next guest is head of a company in the great state of Minnesota. We're talking about Fastenal recently reported earnings, the stock selling off on the day of the report, but rallying the day after the most in 9 months. That trade reaction had us scratching our heads. So, we're grateful, Carol, to have back with us to talk about the release of the outlook, the CEO of the close to $50 billion market cap company, Fastenal, Dan Florness, is back with us.
C
Carol Massar1:33
Yeah, so delighted. Let's get to it. Dan, good to have you here. Happy New Year. We do love talking with you. We feel like we get a great read on the US economy, the manufacturing world. You've seen a lot in your career, and we want to get to all of this, but I really do feel like we'd be remiss to not ask you about what's going on in your home state. And I feel like those who are listening might be curious if you were asked to sign this letter of CEOs who want a deescalation of what's happening in Minneapolis specifically. So can you, were you aware that this letter was happening or were you asked to sign it?
D
Daniel Florness2:10
Well, first off, happy new year and thanks for allowing me to participate today. I was not aware of it. We're outstate Minnesota. We're about two and a half hours from the Minneapolis St. Paul market and so it's not uncommon, it's a pretty tight-knit group up in the Twin Cities and I was not aware of it going out with that said, I was not surprised by it going out and it seemed to be pretty common sense of hey, let's dial down the heat.
C
Carol Massar2:38
So would you have signed it though if asked?
D
Daniel Florness2:41
Yeah, I would have signed that.
C
Carol Massar2:43
What do we talk so much about leadership at this time and I am curious what you see as the responsibility of leaders in the United States when we see situations happening where it feels like and again I don't want to get political I don't want to take sides but it does feel like Americans are being what some would say is targeted unfairly.
D
Daniel Florness3:07
Yeah. You know I think as a leader, one of our tasks is to create some calm in the air. You know, I think back a few years ago when COVID was going on, it seemed like every day turned everything into a political thing and sometimes it's a case of, you know, if you're around a bunch of people that are high at risk in the case of COVID, put a mask on. If you're not and you don't want to be there, then go someplace else. You know, same thing here. Let's try to dial the heat down and focus on what we're trying to accomplish, not how we can see who can be the most boisterous in the market of throwing ideas out. And that's on both sides of the fence.
C
Carol Massar3:53
Dan, one thing that we're trying to figure out is getting a good read on the economy and you guys have such a great read on it given that you touch so many sectors. I mean, if you're using nuts, bolts, screws, anchors, rivets, any kind of fastener, industrial, janitorial, safety supplies, you guys do it. Um, on earnings, you mentioned the broader market conditions remained mixed. What exactly did you mean by that? When you say mixed, what's the good, what's the bad?
D
Daniel Florness4:19
Well, mix from the standpoint we focus a lot on the IS, the purchasing managers index published by ISM and that's been sub-50 for 36 of the last 38 months. So from the standpoint of the economy is not given us any lift. We are getting good traction in the marketplace and we finished out the last half of 2025 with double digit growth. That's really an exercise of taking market share more than the wind is to our backs.
C
Carol Massar4:50
And I know we've talked about this too, Dan, with you about being in a prolonged downturn in the industrial economy. Any green shoots that you were seeing or signs of an inflection and if so, I'm just curious what markets might you be optimistic and which are maybe running weaker than you anticipated and maybe will continue to this year.
D
Daniel Florness5:08
Yeah, this is a little bit of an anecdotal answer, so I apologize for that. We're seeing in some of the published data some industrial production numbers improving late in the year. We aren't seeing that directly in our business but for us November December is a seasonally weak period. So that doesn't surprise me that we wouldn't see it. So don't know if there's some green shoots there. I can tell you this from my travel. If it's a business that's linked to certain industries and data center is an example from a recent trip I had on the east coast where I was visiting a mechanical contractor and their business was on fire and 70% of their activity was around data centers.
C
Carol Massar5:51
So on, go ahead.
D
Daniel Florness5:53
So that's the good part, right? And that
C
Carol Massar5:55
That's the good part. That story we keep hearing about the AI buildout, the data center buildout, you saw it firsthand. It's real.
D
Daniel Florness6:02
It's real. In fact, I had a, I spend a big chunk of my time having conversations with our district leaders. We have about 240 district managers. They each run about a $35 million business. You add them all up, that's an $8 billion fascination with our team in Atlanta this morning, one of our district managers. And most of his discussion was about business pickup he's seeing in his market because of data centers. Now, Atlanta's unique in that it's one of a handful that are really being impacted by that buildup.
C
Carol Massar6:37
What is the pricing power, Dan, that the company has right now? Because historically during periods of inflation, you've been able to be pretty aggressive with price increases. I think people would argue you weren't as aggressive as you could have been in 2025. What's the barrier to pushing price more aggressively?
D
Daniel Florness6:55
Well, you know, the one barrier is the size of the customer, the nature of the products, how much of it is production centered versus maintenance centered. And because when it's production centered business, you have customers buying a very large volume of narrow band of SKUs and their price sensitivity is different than if it's MRO and they're buying $100 of this and $100 of that.
C
Carol Massar7:20
You know, one of the things I want to ask you too, there was a story on my reading this morning, Dan, in terms of Volkswagen saying that they had plans for a possible Audi factory in the United States. They're not progressing due to President Donald Trump's tariffs and unsuccessful talks for local incentives. So, we have certainly seen an administration that talks about all the investment money coming into the US. And I think we here at Bloomberg continue to try and figure out how much of this is actually going to play out. You can say you're going to invest and then there's the reality of actually building facilities. First of all, tariffs and I know we've talked about this with you in the past, so forgive me if I'm repeating, but you're thinking about outsourcing. How have tariffs changed that? Especially when it comes to fasteners. I think primarily sourced from China and Asia. So I'm just curious how any of it's been shifting for you.
D
Daniel Florness8:08
Yeah. So you are absolutely correct. Most of the fasteners in this country, in North America in general, come from northern Asia, China primarily. Obviously huge impacts and for us what it's meant is over about for about the last six years, seven years we've been actively expanding our ability to import fasteners because there's still not a lot of domestic production. And so when I think back to 2018, our primary sourcing entity was based in Shanghai with a secondary location in southern Taiwan. Today, we have personnel in Bangkok. We have personnel in India. And that's where all of our growth and movement of sourcing personnel has occurred over the last seven, eight years to just broaden our ability to be a little more agile in where you source from depending on the geography it's going into. So that's on the sourcing side.
C
Carol Massar9:06
But what about on your customer side, about customers moving manufacturing back to the US? Are you seeing that happen? Are you hearing discussions of that?
D
Daniel Florness9:18
Yeah, I guess, anecdotally, yes. I can't say that we've seen a tremendous influx. What I would say is I hear less about stuff leaving than maybe I would have 10 years ago or five years ago and that in itself is a win from the standpoint of production. But a lot of it is folks are getting closer to where the end customer is for a lot of our customers. And so when I see customers expanding production facilities in North America, and I'll say more broadly than North America rather than just the United States, it's usually to service more efficiently the local market.
C
Carol Massar10:05
Which makes sense, which we've seen that trend happening I feel like over time. Hey Dan, you mentioned about maybe less companies leaving the US. Speaking of leaving, you are stepping down as CEO come July. You've been CEO since 2016. You were CFO before that going back to 2002. You've been there a long time and I know last time you were on I asked you a question about this cycle and I was not very kind. I got yelled at by my team because I think I gave you 20 seconds but I wanted we (laughter)
T
Tim Stenc10:36
We do get yelled at.
C
Carol Massar10:37
You get 25 seconds now.
D
Daniel Florness10:45
Well, it's unusual in that, you know, you hear about everything, whereas in years past there was so much of this political stuff that went on, but most of it, if you weren't in the midst of it, you were oblivious to and you just went about your life. Now, everybody hears about everything when it happens. So, that's just a lot more noise. On the flip side, what's really different is, I mentioned on that conversation with the team in Atlanta this morning, we were talking about data centers and one of the people on the call, he leads our business in the southern US. He said, 'Hey Dan, I'm going to flip you something' and he punched in a bunch of questions and he came back with a 29-page report on the data center industry in the United States and I read through a bunch of it. It's actually pretty accurate and pretty good information. (laughter)
C
Carol Massar11:45
Yeah, I know. Well, you know. Okay, now
Still Dan had to do the reading, though. It didn't read the report for him, so I probably would have, but I'm old school, I guess.
Is that just quickly, I know this is truly like 30 seconds. Is that the most transformative change you think we'll see over the next decade is just the continued impact of AI and things like ChatGPT and everything else connected? Just your quick thought on that.
D
Daniel Florness12:09
Yeah, because I mean when I think of our business, we're selling tens of thousands of different parts to customers every day and the ability to improve the visibility for folks sourcing all that stuff.
C
Carol Massar12:21
Got it.
D
Daniel Florness12:22
Is an incredible efficiency tool.
C
Carol Massar12:24
All right, Dan, come back soon. Especially before you leave in the summer. Dan Florness, thank you.