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Tractor Supply (TSCO) Q1 Earnings & Sales Beat on Solid Demand

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·5 min read
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Tractor Supply Company TSCO has posted robust first-quarter 2022 results, wherein both the top and bottom lines improved year over year and surpassed the Zacks Consensus Estimate. Despite the ongoing supply-chain constraints and adverse impacts of Omicron, results gained from strength in the Life Out Here Strategy and healthy demand for its product categories. Consequently, management retained its 2022 view.

Tractor Supply’s earnings of $1.65 per share improved 6.5% year over year, surpassing the Zacks Consensus Estimate of $1.40.

Net sales jumped 8.3% year over year to $3,024.1 million and beat the Zacks Consensus Estimate of $2,904 million. The improvement was driven by an increase of 5.2% in comps, led by growth of 6.7% in comparable average ticket, which offset a 1.4% decline in comparable average transaction count.

Also, sturdy demand for everyday merchandise, including consumable, usable and edible products, as well as robust winter seasonal categories, contributed to comps growth. However, the company noted that the spring season started on a dull note. Tractor Supply witnessed solid double-digit sales growth in the e-commerce business, delivering the 39th consecutive quarter of an increase.

Shares of the Zacks Rank #2 (Buy) company have gained 19% in the past year against the industry’s 21% decline.

Zacks Investment Research
Zacks Investment Research


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Margins & Costs

The gross profit rose 7.4% year over year to $1,056.5 million, while the gross margin contracted 29 basis points (bps) to 34.9%. Pricing efforts and other initiatives to drive margins partly offset cost inflation, higher transportation costs and unfavorable product mix.

Selling, general and administrative (SG&A) expenses, including depreciation and amortization, as a percentage of sales, improved 11 bps to 26.9%. In dollar terms, adjusted SG&A expenses, including depreciation and amortization, rose 7.8% year over year. Leveraged occupancy and other fixed expenses, lower COVID-19 pandemic response costs, and reduced incentive compensation aided the metric. This was somewhat offset by increased wage rates and investments in strategic efforts.

Operating income advanced 6% year over year to $244.3 million in the first quarter. Meanwhile, the operating margin contracted 18 bps to 8.1%.

Financial Position

Tractor Supply ended the first quarter with cash and cash equivalents of $405.4 million, long-term debt of $986.9 million, and total stockholders’ equity of $1,790 million. In the first quarter of 2022, the company incurred a capital expenditure of $112.4 million and generated a cash flow from operating activities of $59.1 million.

Tractor Supply returned $399.7 million to its shareholders in the first quarter, including $296.2 million to repurchase 1.4 million shares and $103.5 million for quarterly cash dividends.

Store Update

In the quarter under review, the company did not open any stores due to the adverse impacts of the pandemic and challenges in the construction industry. As of Mar 26, 2022, it operated 2,003 Tractor Supply stores across 49 states and 178 Petsense stores in 23 states.

Management remains on track with its store-opening initiatives. It plans to open 75-80 Tractor Supply stores and 10 Petsense stores in 2022.

Tractor Supply Company Price, Consensus and EPS Surprise

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

Tractor Supply Company price-consensus-eps-surprise-chart | Tractor Supply Company Quote

2022 Outlook

Driven by the solid quarterly results, management retained its guidance for 2022. The company expects net sales of $13.6-$13.8 billion. Comps are likely to grow 3-4.5%. The operating margin is anticipated to be 10.1-10.3%. Net income is expected to be $1.04-$1.08 billion. Earnings per share are likely to be $9.20-$9.50. The view does not include the impacts of the Orscheln Farm acquisition as it is currently subjected to customary closing conditions.

The 2022 guidance includes an additional week or 53rd week, which is likely to contribute to sales and earnings to the tune of 1.5 percentage points and 15 cents, respectively.

Other Stocks to Consider

Here are three other top-ranked stocks to consider — Nordstrom JWN, Designer Brands DBI and Buckle BKE.

Nordstrom, a leading fashion specialty retailer in the United States, presently sports a Zacks Rank #1 (Strong Buy). JWN has a trailing four-quarter earnings surprise of 13.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Nordstrom’s current financial-year sales and EPS suggests growth of 5.7% and 180%, respectively, from the year-ago period’s reported numbers.

Buckle, the retailer of medium to better-priced casual apparel, footwear and accessories for fashion-conscious young men and women, presently has a Zacks Rank #2. BKE has a trailing four-quarter earnings surprise of 45%, on average.

The Zacks Consensus Estimate for Buckle’s current financial-year sales and EPS suggests growth of 8.8% and 1.7%, respectively, from the year-ago period’s reported numbers.

Designer Brands, which designs, produces and retails footwear and accessories, currently carries a Zacks Rank #2. DBI has a trailing four-quarter earnings surprise of 112.8%, on average.

The Zacks Consensus Estimate for Designer Brands’ current financial-year sales and EPS suggests growth of 6.5% and 8.2%, respectively, from the year-ago period’s reported figures.


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Tractor Supply Company (TSCO) : Free Stock Analysis Report

Nordstrom, Inc. (JWN) : Free Stock Analysis Report

Buckle, Inc. The (BKE) : Free Stock Analysis Report

Designer Brands Inc. (DBI) : Free Stock Analysis Report

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