Tractor Supply Company (TSCO, Financial), the largest operator of rural lifestyle retail stores in the U.S., enjoyed a strong first quarter.
Tractor Supply operates more than 1,521 retail stores in 49 states, employs more than 21,000 team members and is headquartered in Brentwood, Tennessee. The company is a leading 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.
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 takes a balanced approach to driving sales, growing gross margin, managing working capital and improving efficiencies. Comparable-store sales increased 4.9% and were balanced across product categories and regions. Its 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.
First-quarter results
Net sales increased by 10.2% and were $1.47 billion ($1.33 billion in the prior-year quarter).
Comparable-store sales increased by 4.9% (5.7% increase in the prior-year quarter).
Gross profit increased by 11.2% and was $494.4 million ($444.6 million in the prior-year quarter).
Gross margin improved to 33.7% (33.4% in the prior-year quarter).
Selling, general and administrative (SG&A) expenses, including depreciation and amortization, increased by 9.8% and were $386.2 million ($351.8 million in the prior-year quarter).
Net income increased by 16.6% and was $67.7 million ($58.0 million in the prior-year quarter).
Diluted earnings per share increased by 19.0% and were 50 cents (42 cents in the prior-year quarter).
The company opened 36 new stores and closed three stores.
Expectations for 2016
| Â | Range |
| Capex | To be in the range of $230 million to $250 million |
| Net sales | To be between $6.9 billion and $7.0 billion |
| Net Income | To be between $455 million and $467 million |
| Earnings per diluted share | To be around $455 million to $467 million |
| Comparable-store sales | To be between 3.5% and 5.0% |
Strong attributes of the quarter
- Positive sales trends during the quarter.
- Strong margins.
- Growth in both traffic and ticket.
- Continued execution of price and inventory management strategies.
- Healthy marketing and merchandising initiatives.
Future projections
It plans to expand its Purina feed offering and its position as the first national authorized Purina feed retailer in the U.S. It is growing its 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.
Current focus
- Price management.
- Cost curtailment.
- Focused on shareholder value creation.
- Capital allocation strategy.
- Improving gross margin.
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 more stores and curtailing costs.
If the company continues its current momentum, it is expected to create shareholder satisfaction. That would make TSCO a buy. Investors should consider adding this company to their portfolios.
Disclosure: I do not hold any position in the company.
