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Tractor Supply Q4 Earnings Beat

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Tractor Supply Company (TSCO - Free Report) reported fourth-quarter 2013 earnings per share of 68 cents, which was 23.6% higher than the prior-year quarter. Moreover, it beat the Zacks Consensus Estimate of 65 cents by 4.6%. Results benefited mainly from improvement in both the top line and margins. As a result, this farm and ranch store retailer provided a favorable outlook.

Tractor Supply’s earnings per share for fiscal 2013 came in at $2.32, rising 22.1% from $1.90 earned in fiscal 2012 and beating the Zacks Consensus Estimate of $2.29.

Despite reporting strong fourth-quarter and full-year earnings results, the company’s shares tumbled 4.7% in the aftermarket trading hours, after closing 2.4% lower in yesterday’s trading session.


Net sales in the quarter improved 10.0% year over year to $1,415.1 million, while it remained below the Zacks Consensus Estimate of $1,427.0 million. The year-over-year rise in top line was primarily driven by strong comparable-store sales performance and favorable weather conditions.

Net sales for the year increased 10.7% to $5,164.8 million, while it missed the Zacks Consensus Estimate of $5,175.0 million.

Quarter in Detail

Tractor Supply reported same-store sales increase of 3.5% over the 4.7% increase 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 13.0% to $479.7 million compared with $424.6 million in the prior-year quarter. Gross margin expanded 90 basis points (bps) to 33.9% driven by the strong execution of its strategies related to price management of C.U.E. products, markdown management and strategic sourcing. Further, the company benefited from a mix shift to higher-margin seasonal winter products, which paid off due to the favorable colder weather resulting in lesser markdowns.                  

Selling, general and administrative expenses (SG&A), including depreciation and amortization, as a percentage of sales, rose 20 bps to 23.5% due to higher costs associated with the relocation of the company’s Southeast distribution center and corporate data center. On a stand-alone basis, SG&A expenses rose 10.2% to $305.7 million, in dollar terms, while depreciation & amortization expense came at $27.0 million, 19.5% higher than last year.

Higher gross profit slightly offset by increased SG&A expenses caused operating income to rise 17.9% to $147.1 million, while operating margin improved 70 bps to 10.4%, against 9.7% in the prior-year period.

Financial Position

Tractor Supply ended fiscal 2013 with cash and cash equivalents of $142.7 million, compared with $138.6 million at the end of fiscal 2012. As of Dec 28, 2013, stockholders’ equity was $1,246.9 million, compared with $1,025.0 million as of Dec 29, 2012.

Store Update

In the fourth quarter, Tractor Supply opened 31 new stores, bringing the company’s total stores openings for the year to 102. Further, the company closed down 2 stores during the year. Moreover, fiscal 2013 marked Tractor Supply’s entry into 3 new states, Arizona, Nevada and Wyoming, expanding operations to 48 states.

As of Dec 28, 2013, the company operated a total of 1,276 stores in 48 states. Going forward, the company remains focused on expanding its presence in the West.

Management Guidance

Following a positive end to fiscal 2013, Tractor Supply provided its outlook for fiscal 2014 giving out projections for sales, comps, earnings and capital expenditures. The company expects its 2014 net sales to range from $5.62–$5.70 billion, with comps expected to improve 2.5%−4.0%. Moreover, Tractor Supply anticipates 2014 earnings per share in the range of $2.54 to $2.62. Currently, the Zacks Consensus Estimate stands at $2.67 per share.

Capital spends in fiscal 2014 are expected to be in the $240 million – $250 million range. The company expects to allocate its capital expenditure to open about 102 to 106 new stores and towards the construction of the new Store Support Center, which is slated to open in 2014.

Other Stocks to Consider

Tractor Supply currently has a Zacks Rank #2 (Buy). Other companies performing well in the retail space include Conns Inc. (CONN - Free Report) , KAR Auction Services Inc. (KAR - Free Report) and Sally Beauty Holdings Inc. (SBH - Free Report) . While Conns holds a Zacks Rank #1 (Strong Buy), KAR Auction and Sally Beauty carry a Zacks Rank #2 (Buy).

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