Tractor Supply Company (TSCO, Financial) is the largest operator of rural lifestyle retail stores in the United States. The company operates over 1,422 retail stores in 49 states, employs more than 21,000 team members and is headquartered in Brentwood, Tenn. Today Tractor Supply is a leading edge retailer with annual revenues of approximately $5.7 billion. It has a large network of stores in convenient locations.
The company offers the following comprehensive selection of merchandise: (1) equine, livestock, pet and small animal products, including items necessary for their health, care, growth and containment; (2) hardware, truck, towing and tool products; (3) seasonal products, including heating, lawn and garden items, power equipment, gifts and toys; (4) work/recreational clothing and footwear; and (5) maintenance products for agricultural and rural use.
First Quarter Results
Net Sales
Net sales climbed by 12.5% and were $1.33 billion (in comparison to $1.18 billion in the prior year's first quarter).
Comparable store sales also witnessed significant increase. It increased 5.7%. In the prior year period it was 2.2%. Increase in both traffic and ticket contributed to this increase. The comparable store sales increase benefited from a solid performance in consumable, usable and edible (C.U.E.) products, including pet and heating consumables.
Comparable store transaction count increased 4.8% and average ticket increased 0.8%.
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There was also an increase of 12.2% in the gross profit, which came to $444.6 million (an increase from prior year period’s $396.2 million.
Gross margin decreased by 10% as a percentage of sales. Higher in-stock position at the beginning of the quarter and increased clearance merchandise activity marked this decrease in gross margin.
Selling, general and administrative (SG&A) expenses
Selling, general and administrative (SG&A) expenses, including depreciation and amortization, increased by 10.8% and were $351.8 million.
It improved by 40% as a percentage of sales.
Net Income
Net income increased 18.9% to $58.0 million from $48.8 million and diluted earnings per share increased 20.0% to $0.42 from $0.35 in the first quarter of the prior year.
New Stores
TSCO opened 41 new stores and closed one store in the first quarter of 2015. There wasn’t any store closure in the prior year quarter. This quarter it opened more stores compared to prior year quarter.
Dividend Increase
TSCO announced quarterly cash dividend 25% to $0.20 per share of the Company's common stock, up from the previous $0.16 per share. The dividend will be paid on June 2, 2015.
Fiscal 2015 Outlook
- The company expects net sales to be in the range $6.2 billion-$6.3 billion.
- Comparable store sales expected to increase 2.5%-4.0%.
- Full year net income for the fiscal year 2015 is expected to be around $2.95- $3.05 per diluted share.
- Capex to be around $240 million-$250 million.
Future Projections
The company plans to spend to support 110 to 115 new store openings and construction of a new Southwest distribution centre in Casa Grande, Arizona to open in fiscal 2015. It plans to expand its Purina feed offering and its position as the first national authorized Purina feed retailer in the United States. It is growing in partnership with this brand. It plans to further solidify its ability to cater to a large base of customers and become the most dependable supplier of products for the 'Out Here' lifestyle."
On a Concluding Note
Tractor Supply is continuing to grow with new stores and improved product offerings. With its current momentum, the company is poised to grow in the near future. It is focusing on opening of more stores and cost curtailment. Investors may consider adding this company to their portfolio.
The company posted appealing first quarter results. Sales increased significantly and were well balanced across all major merchandise categories and geographic regions, driven by increases in both traffic and ticket. The company adopts a balanced approach to driving sales, growing gross margin, managing working capital and improving efficiencies. Their key sales and gross margin initiatives, along with ongoing system enhancements such as demand planning, inventory allocation, and price optimization should continue to benefit sales and margins over the foreseeable future.
If the company continues current momentum, it is expected to create shareholder satisfaction. I would recommend TSCO as a buy. Investors may consider adding this company to their portfolio.
(Source: Company’s Website)
