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Tractor Supply (TSCO) Q4 Earnings Beat, Sales Lag on Soft Comps
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Tractor Supply Company (TSCO - Free Report) has reported fourth-quarter 2023 results, wherein the bottom line beat the Zacks Consensus Estimate, while sales marginally lagged the same. Both metrics declined year over year. Results have been affected by the soft comparable store sales (comps) performance and the absence of the additional week compared with last year.
Tractor Supply’s earnings of $2.28 per share fell 6.2% year over year but surpassed the Zacks Consensus Estimate of $2.22. In 2023, the company reported earnings of $10.09 per share, up 3.9% year over year.
Net sales declined 8.6% year over year to $3,659.8 million, in line with the company’s expectations. Sales also marginally missed the Zacks Consensus Estimate of $3,661 million. The decline can be attributed to the absence of the extra week compared with the prior-year quarter. Additionally, the top line was affected by a soft comps performance, offset by robust sales at new stores.
Tractor Supply Company Price, Consensus and EPS Surprise
Comps declined 4.2% year over year and were wider than our estimate of a 3.7% fall. The company’s comparable average transaction count dipped 2.7% year over year, while the comparable average ticket fell 1.5%. The comps decline was mainly due to soft sales of cold weather products, discretionary categories and big-ticket items, offset by sturdy demand for core year-round merchandise, including consumable, usable and edible products.
In 2023, the company’s sales rose 2.5% year over year to $14,555.7 million, with flat year-over-year comps.
Shares of Tractor Supply declined 1.2% in the pre-market trading session on Feb 1 mainly on the soft fourth-quarter 2023 results. The Zacks Rank #4 (Sell) company’s shares have risen 15.1% in the past three months compared with the industry’s 23.5% growth.
Image Source: Zacks Investment Research
Costs and Margins
The gross profit dropped 5.2% year over year to $1,293.1 million. Our model predicted gross profit of $1,281 million, reflecting a 6.1% year-over-year decline. Meanwhile, the gross margin expanded 129 basis points (bps) to 35.33%. The execution of everyday low-price strategy, gains from the Neighbor’s Club loyalty program, reduced transportation costs and disciplined product cost management aided margins, partly offset by an unfavorable product mix.
Selling, general and administrative (SG&A) expenses, including depreciation and amortization, as a percentage of sales, expanded 113 bps year over year to 26.2%. In dollar terms, SG&A expenses, including depreciation and amortization, declined 4.5% year over year to $958.8 million. The higher SG&A expense rate resulted from planned growth investments, including higher depreciation and amortization, the opening of a distribution center, and the impacts of higher medical claims and fixed cost deleverage.
The operating income was down 7% year over year to $334.2 million in the fourth quarter. Meanwhile, the operating margin expanded 16 bps to 9.13%. We estimated an 8.6% decline in operating income for the fourth quarter, with an operating margin contraction of 10 bps.
Financial Position
The company ended 2023 with cash and cash equivalents of $397.1 million, long-term debt of $1,729 million, and total stockholders’ equity of $2,149.8 million. It also provided cash flow from operating activities of $1,334 million in 2023.
In 2023, the company incurred a capital expenditure of $753.9 million. For 2024, management estimates a capital expenditure of $625-$700 million.
In the fourth quarter, Tractor Supply returned $221.8 million to shareholders, including the repurchase of 0.5 million shares for $110.4 million and quarterly cash dividends of $111.4 million. In 2023, the company returned $1.05 billion to shareholders, comprising share repurchases worth $597 million and a cash dividend of $449.6 million.
Store Update
In the fourth quarter, Tractor Supply opened 19 Tractor Supply stores and three Petsense by Tractor Supply stores. However, it closed one Tractor Supply store. In 2023, the company inaugurated 70 Tractor Supply stores and 13 Petsense by Tractor Supply stores. It shut down one each of Tractor Supply and Petsense by Tractor Supply stores. In 2023, TSCO also completed the rebranding of 81 Orscheln Farm and Home stores to Tractor Supply, which were acquired in 2022.
As of Dec 30, 2023, the company operated 2,216 Tractor Supply stores across 49 states, including 81 Orscheln Farm and Home acquired in 2022. It also operated 198 Petsense stores in 23 states as of Dec 30, 2023.
Management intends to continue its store-opening initiatives in 2024. The company plans to open 80 Tractor Supply stores and 10-15 Petsense stores in 2024. Under its capital allocation plans, TSCO expects to continue the Project Fusion remodels and garden center transformations, along with the completion of its 10th distribution center.
2024 Outlook
The company plans to continue making investments in 2024 to strengthen its competitive advantage and capture growth opportunities in the market. Management has outlined its guidance for 2024.
For 2024, the company expects net sales of $14.7-$15.1 billion, with comps between a decline of 1% and growth of 1.5%. The operating margin is likely to be 9.7-10.1% for 2024. The company predicts net income of $1.06-$1.13 billion for 2024. Earnings per share are expected to be $9.85-$10.50, with share repurchases worth $575-$625 million for 2024.
The Zacks Consensus Estimate for AEO’s fiscal 2024 sales and EPS indicates 2.5% and 8.6% growth, respectively, from the year-ago period’s reported levels. It has a trailing four-quarter earnings surprise of 23%, on average.
Abercrombie, a specialty retailer of premium, high-quality casual apparel for men, women, and kids, currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Abercrombie’s fiscal 2024 sales and earnings indicates growth of 3.2% and 3.9%, respectively, from the year-ago reported numbers. ANF has a trailing four-quarter earnings surprise of 713%, on average.
Sally Beauty, an international specialty retailer and distributor of professional beauty supplies, currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Sally Beauty’s next financial-year sales and earnings imply an improvement of 2% and 12.4%, respectively, from the year-ago period’s actuals. SBH has a trailing four-quarter earnings surprise of 2.1%, on average.
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Tractor Supply (TSCO) Q4 Earnings Beat, Sales Lag on Soft Comps
Tractor Supply Company (TSCO - Free Report) has reported fourth-quarter 2023 results, wherein the bottom line beat the Zacks Consensus Estimate, while sales marginally lagged the same. Both metrics declined year over year. Results have been affected by the soft comparable store sales (comps) performance and the absence of the additional week compared with last year.
Tractor Supply’s earnings of $2.28 per share fell 6.2% year over year but surpassed the Zacks Consensus Estimate of $2.22. In 2023, the company reported earnings of $10.09 per share, up 3.9% year over year.
Net sales declined 8.6% year over year to $3,659.8 million, in line with the company’s expectations. Sales also marginally missed the Zacks Consensus Estimate of $3,661 million. The decline can be attributed to the absence of the extra week compared with the prior-year quarter. Additionally, the top line was affected by a soft comps performance, offset by robust sales at new stores.
Tractor Supply Company Price, Consensus and EPS Surprise
Tractor Supply Company price-consensus-eps-surprise-chart | Tractor Supply Company Quote
Comps declined 4.2% year over year and were wider than our estimate of a 3.7% fall. The company’s comparable average transaction count dipped 2.7% year over year, while the comparable average ticket fell 1.5%. The comps decline was mainly due to soft sales of cold weather products, discretionary categories and big-ticket items, offset by sturdy demand for core year-round merchandise, including consumable, usable and edible products.
In 2023, the company’s sales rose 2.5% year over year to $14,555.7 million, with flat year-over-year comps.
Shares of Tractor Supply declined 1.2% in the pre-market trading session on Feb 1 mainly on the soft fourth-quarter 2023 results. The Zacks Rank #4 (Sell) company’s shares have risen 15.1% in the past three months compared with the industry’s 23.5% growth.
Image Source: Zacks Investment Research
Costs and Margins
The gross profit dropped 5.2% year over year to $1,293.1 million. Our model predicted gross profit of $1,281 million, reflecting a 6.1% year-over-year decline. Meanwhile, the gross margin expanded 129 basis points (bps) to 35.33%. The execution of everyday low-price strategy, gains from the Neighbor’s Club loyalty program, reduced transportation costs and disciplined product cost management aided margins, partly offset by an unfavorable product mix.
Selling, general and administrative (SG&A) expenses, including depreciation and amortization, as a percentage of sales, expanded 113 bps year over year to 26.2%. In dollar terms, SG&A expenses, including depreciation and amortization, declined 4.5% year over year to $958.8 million. The higher SG&A expense rate resulted from planned growth investments, including higher depreciation and amortization, the opening of a distribution center, and the impacts of higher medical claims and fixed cost deleverage.
The operating income was down 7% year over year to $334.2 million in the fourth quarter. Meanwhile, the operating margin expanded 16 bps to 9.13%. We estimated an 8.6% decline in operating income for the fourth quarter, with an operating margin contraction of 10 bps.
Financial Position
The company ended 2023 with cash and cash equivalents of $397.1 million, long-term debt of $1,729 million, and total stockholders’ equity of $2,149.8 million. It also provided cash flow from operating activities of $1,334 million in 2023.
In 2023, the company incurred a capital expenditure of $753.9 million. For 2024, management estimates a capital expenditure of $625-$700 million.
In the fourth quarter, Tractor Supply returned $221.8 million to shareholders, including the repurchase of 0.5 million shares for $110.4 million and quarterly cash dividends of $111.4 million. In 2023, the company returned $1.05 billion to shareholders, comprising share repurchases worth $597 million and a cash dividend of $449.6 million.
Store Update
In the fourth quarter, Tractor Supply opened 19 Tractor Supply stores and three Petsense by Tractor Supply stores. However, it closed one Tractor Supply store. In 2023, the company inaugurated 70 Tractor Supply stores and 13 Petsense by Tractor Supply stores. It shut down one each of Tractor Supply and Petsense by Tractor Supply stores. In 2023, TSCO also completed the rebranding of 81 Orscheln Farm and Home stores to Tractor Supply, which were acquired in 2022.
As of Dec 30, 2023, the company operated 2,216 Tractor Supply stores across 49 states, including 81 Orscheln Farm and Home acquired in 2022. It also operated 198 Petsense stores in 23 states as of Dec 30, 2023.
Management intends to continue its store-opening initiatives in 2024. The company plans to open 80 Tractor Supply stores and 10-15 Petsense stores in 2024. Under its capital allocation plans, TSCO expects to continue the Project Fusion remodels and garden center transformations, along with the completion of its 10th distribution center.
2024 Outlook
The company plans to continue making investments in 2024 to strengthen its competitive advantage and capture growth opportunities in the market. Management has outlined its guidance for 2024.
For 2024, the company expects net sales of $14.7-$15.1 billion, with comps between a decline of 1% and growth of 1.5%. The operating margin is likely to be 9.7-10.1% for 2024. The company predicts net income of $1.06-$1.13 billion for 2024. Earnings per share are expected to be $9.85-$10.50, with share repurchases worth $575-$625 million for 2024.
Stocks to Consider
Some better-ranked stocks are American Eagle Outfitters (AEO - Free Report) , Abercrombie & Fitch (ANF - Free Report) and Sally Beauty (SBH - Free Report) .
American Eagle, a specialty retailer of casual apparel, accessories and footwear, currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for AEO’s fiscal 2024 sales and EPS indicates 2.5% and 8.6% growth, respectively, from the year-ago period’s reported levels. It has a trailing four-quarter earnings surprise of 23%, on average.
Abercrombie, a specialty retailer of premium, high-quality casual apparel for men, women, and kids, currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Abercrombie’s fiscal 2024 sales and earnings indicates growth of 3.2% and 3.9%, respectively, from the year-ago reported numbers. ANF has a trailing four-quarter earnings surprise of 713%, on average.
Sally Beauty, an international specialty retailer and distributor of professional beauty supplies, currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Sally Beauty’s next financial-year sales and earnings imply an improvement of 2% and 12.4%, respectively, from the year-ago period’s actuals. SBH has a trailing four-quarter earnings surprise of 2.1%, on average.