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Tractor Supply Company (TSCO - Analyst Report) reported third-quarter 2013 earnings per share of 46 cents, which was 31.4% higher than the prior-year quarter. Moreover, it beat the Zacks Consensus Estimate of 41 cents by 12.2%. Results benefited mainly from improvement in both the top line and margins. As a result, this farm and ranch store retailer provided an upbeat outlook.

Quarter in Detail

Net sales in the quarter improved 13.4% year over year to $1,208.1 million and beat the Zacks Consensus Estimate of $1,191.0 million. The year-over-year rise in top line was primarily driven by strong comparable-store sales performance and favorable weather conditions.

Tractor Supply reported same-store sales increase of 7.5% compared with 2.9% in the prior-year quarter. The rise was driven by robust performances in core consumable, usable and edible (C.U.E) products and seasonal merchandise.

Gross profit rose 16.4% to $415.7 million, compared with $357.2 million in the prior-year quarter. Gross margin expanded 90 basis points (bps) to 34.4% in the quarter driven by the company’s key margin-driving initiatives and lower markdowns, partly negatively impacted by the mix shift to low-margin C.U.E products.

Robust growth of same-store sales and better cost containment related to store operating expenditure resulted in a 20 bps reduction in selling, general and administrative expenses (SG&A), including depreciation and amortization, as a percentage of sales, to 26.0%. The SG&A expenses, as a percentage of sales, included a one-time cost of 40 bps related to relocation of the company’s Southeast distribution center and corporate data center. Excluding this, SG&A expenses as a percentage of sales would have been leveraged by 60 bps.

Consequently, operating margin during the quarter rose 110 bps to 8.4%, against 7.3% in the prior-year period. Operating income rose 30.7% to $101.7 million from $77.8 million in the prior-year quarter.

Financial Position

Tractor Supply ended the year with cash and cash equivalents of $46.0 million, compared with $70.2 million at the end of the year-ago quarter. As of Sep 28, 2013, stockholders’ equity was $1,184.5 million, compared with $1,054.2 million as of Sep 29, 2012.

Store Update

In the quarter, Tractor Supply opened 23 new stores and shut down 1 store, compared with 17 store openings and the closure of 1 store in the prior-year quarter. As of Sep 28, 2013, the company operated a total of 1,245 stores in 47 states.

Management Guidance

Tractor Supply raised its 2013 net sales guidance, projecting sales in the range of $5.12–$5.17 billion, with comps expected to improve 4.2%−5.0%. Earlier, the company was expecting sales in the range of $5.10–$5.17 billion and comps growth of 4%–5%. Moreover, Tractor Supply now anticipates 2013 earnings per share in the range of $2.24 to $2.27, up from the previous guidance of $2.18 to$2.22. Currently, the Zacks Consensus Estimate stands at $2.24 per share, which may see upward revision following the company’s higher guidance.

Other Stocks to Consider

Tractor Supply currently has a Zacks Rank #3 (Hold). Other companies performing well in the retail space include Cabela’s Incorporated (CAB - Analyst Report), Marinemax Inc. (HZO - Snapshot Report) and Five Below, Inc. (FIVE - Snapshot Report). All these stocks carry a Zacks Rank #2 (Buy).

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