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Tractor Supply (TSCO) Earnings & Sales Beat Estimates in Q1

Zacks Equity Research

Tractor Supply Company TSCO reported impressive first-quarter 2019 financial numbers. Both earnings and sales surpassed the Zacks Consensus Estimate and improved year over year. Furthermore, management reaffirmed its outlook for 2019.

Q1 Highlights

Tractor Supply’s earnings came in at 63 cents per share, which surpassed the Zacks Consensus Estimate of 56 cents. The bottom line also increased nearly 10.5% year over year. This uptick can be attributed to the company’s robust growth initiatives that include the ONETractor plan. Broad-based sales growth across the company’s unique model too aided the quarterly results.

Net sales grew 8.3% to $1,822.2 million and outshined the Zacks Consensus Estimate of $1,807 million. This year-over-year improvement was driven by rise in comparable-store sales (comps). The metric improved 5% from 3.7% in the year-ago period. While comparable store transaction count grew 1.8%, average ticket improved 3.2%.

Tractor Supply Company Price, Consensus and EPS Surprise

Tractor Supply Company Price, Consensus and EPS Surprise | Tractor Supply Company Quote

Furthermore, traffic and sales growth were aided by the company’s ongoing efforts to build customer loyalty and enhance digital capabilities. Also, comps gained from improvement across all geographic regions and major product groups as well as strength in everyday merchandise groups and higher demand for winter seasonal products.

Margins & Costs

Gross profit rose 9.1% year over year to $615 million, with gross margin expansion of 26 basis points (bps) to 33.8%. This uptick was backed by robust sell-through of winter seasonal products along with gains from its price management program, somewhat offset by higher transportation costs.  

Selling, general and administrative (SG&A) expenses including depreciation and amortization,  as a percentage of sales, grew 21 bps to 28.1%. Higher costs related to a new distribution facility in Frankfort, N.Y. as well as escalated store and field team members’ incentive compensation owing to sturdy year-over-year performance led to the upside. Also, investment in store team member wages remained deterrents. These expenses were somewhat offset by lower occupancy and other costs.

Financial Position

Tractor Supply ended the quarter with cash and cash equivalents of $102.2 million, long-term debt of $605.7 million, and total stockholders’ equity of $1,485.6 million.

In the reported quarter, the company returned $192.9 million via share repurchases worth $155.3 million and dividends of $37.6 million. Additionally, it incurred capital expenditure of $28.8 million and used cash flow from operating activities of about $13 million.

For 2019, the company continues to expect capital expenditure of $225-$250 million.

Store Update

In the first quarter, Tractor Supply opened 10 namesake stores and one Petsense store. As of Mar 30, 2019, the company operated 1,775 Tractor Supply stores across 49 states and 176 Petsense stores.

Guidance

Management remains impressed with the company’s quarterly results that witnessed higher profits, comps growth and greater sales. Further, Tractor Supply expects to balance investments between new store growth and ONETractor initiative alongside investing in everyday businesses for providing a seamless experience to customers. Going into the second quarter, management remains confident about benefiting from spring selling season.

Tractor Supply continues to project net sales of $8.31-$8.46 billion, with comps growth of 2-4%. Operating margin is still estimated to be 8.9-9%. It envisions net income of $555-$575 million for 2019, with earnings per share of $4.60-$4.75.

 



Price Performance

In the past three months, this Zacks Rank #3 (Hold) stock has gained 16.7%, outperforming the industry’s 12.3% growth.

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