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Tractor Supply Company (TSCO - Free Report) reported fourth-quarter 2020 results, wherein the top and the bottom lines improved year over year and surpassed the Zacks Consensus Estimate. The company also provided its view for 2021.
Tractor Supply’s earnings were $1.64 per share, which surpassed the Zacks Consensus Estimate of $1.52. Moreover, the bottom line improved 35.5% from the prior-year quarter’s figure.
Net sales increased 31.3% year over year to $ 2,878.3 million and beat the Zacks Consensus Estimate of $2,714 million. The improvement was driven by an increase in comparable store sales (comps) of 27.3%, led by growth of 13% in comparable average ticket and a 14.3% rise in comparable average transaction count.
Comps growth was backed by strength in demand for seasonal categories as well as everyday merchandise, including consumable, usable and edible products. Additionally, the company witnessed triple-digit sales growth in the e-commerce business.
Notably, shares of this Zacks Rank #3 (Hold) company have gained 61.8% in the past year compared with the industry’s 19% growth.
Margins & Costs
Gross profit rose 34.2% year over year to $995.5 million, while gross margin expanded 75 basis points (bps) to 36.4%. Gross margin gained from lower depth and frequency of sales promotions, and lower clearance activity, offset by higher transportation costs as a percent of net sales.
Adjusted selling, general and administrative (SG&A) expenses — including depreciation and amortization — as a percentage of sales rose 46 bps to 25.6%. The increase was driven by incremental costs related to the pandemic, higher incentive compensation due to robust sales and profit performance, and investments in strategic initiatives. In dollar terms, adjusted SG&A expenses, including depreciation and amortization, rose 33.7% to $737 million.
Driven by higher sales and gross margin, offset by higher SG&A expenses, operating income rose 35.8% to $ 258.5 million in the fourth quarter. Operating margin expanded 29 bps to 8.98%.
Financial Position
Tractor Supply ended 2020 with cash and cash equivalents of $1,341.8 million, long-term debt of $984.3 million and total stockholders’ equity of $1,923.8 million. Further, it has no amounts drawn on its $500-million revolving credit facility as of Dec 26, 2020.
In 2020, the company incurred capital expenditure of $294 million and generated cash flow from operating activities of $1,394.5 million.
Moreover, the company returned $517.6 million to shareholders, including $343 million to repurchase 3.4 million shares and for quarterly cash dividends of $ 174.6 million.
Additionally, the company hiked its quarterly cash dividend by 30% to 52 cents per share. The raised dividend will be paid out on Mar 9, 2021, to shareholders of record as of Feb 22. The raised dividend as well as resumed share repurchases demonstrates the company’s strong earnings performance and robust cash flows in 2020.
For 2021, it expects to incur capital expenditure of $450-$550 million.
Store Update
In the quarter under review, Tractor Supply opened 19 Tractor Supply stores and three Petsense stores. It also closed four Petsense stores in the fourth quarter of 2020. As of Dec 26, 2020, the company operated 1,923 Tractor Supply stores across 49 states and 182 Petsense stores in 25 states.
Going ahead, management remains on track with its store-opening initiatives. It plans to open 80 Tractor Supply stores and 10 Petsense stores in 2021.
2021 Outlook
Tractor Supply continues to remain uncertain regarding the magnitude of the pandemic’s impact on the company’s performance in 2021. Nevertheless, it has provided guidance for 2021.
The company expects net sales of $10.7-11 billion for 2021, with comps between a decline of 2% and growth of 1%. Operating margin is anticipated to be 9.3-9.6%. Moreover, net income is likely to be $750-$800 million, while earnings per share are expected to be $6.50-$6.90.
The company’s guidance assumes effective tax rate of 22.5-22.8% in 2020. Moreover, it expects share repurchases in 2021 to reduce earnings per share by 1-2%.
Five Below, Inc. (FIVE - Free Report) presently has an expected long-term earnings growth rate of 21% and a Zacks Rank #2.
Hibbett Sports, Inc. (HIBB - Free Report) , with a Zacks Rank #2, has an expected long-term earnings growth rate of 17%.
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Tractor Supply (TSCO) Beats on Q4 Earnings & Sales, Gives View
Tractor Supply Company (TSCO - Free Report) reported fourth-quarter 2020 results, wherein the top and the bottom lines improved year over year and surpassed the Zacks Consensus Estimate. The company also provided its view for 2021.
Tractor Supply’s earnings were $1.64 per share, which surpassed the Zacks Consensus Estimate of $1.52. Moreover, the bottom line improved 35.5% from the prior-year quarter’s figure.
Net sales increased 31.3% year over year to $ 2,878.3 million and beat the Zacks Consensus Estimate of $2,714 million. The improvement was driven by an increase in comparable store sales (comps) of 27.3%, led by growth of 13% in comparable average ticket and a 14.3% rise in comparable average transaction count.
Comps growth was backed by strength in demand for seasonal categories as well as everyday merchandise, including consumable, usable and edible products. Additionally, the company witnessed triple-digit sales growth in the e-commerce business.
Tractor Supply Company Price and EPS Surprise
Tractor Supply Company price-eps-surprise | Tractor Supply Company Quote
Notably, shares of this Zacks Rank #3 (Hold) company have gained 61.8% in the past year compared with the industry’s 19% growth.
Margins & Costs
Gross profit rose 34.2% year over year to $995.5 million, while gross margin expanded 75 basis points (bps) to 36.4%. Gross margin gained from lower depth and frequency of sales promotions, and lower clearance activity, offset by higher transportation costs as a percent of net sales.
Adjusted selling, general and administrative (SG&A) expenses — including depreciation and amortization — as a percentage of sales rose 46 bps to 25.6%. The increase was driven by incremental costs related to the pandemic, higher incentive compensation due to robust sales and profit performance, and investments in strategic initiatives. In dollar terms, adjusted SG&A expenses, including depreciation and amortization, rose 33.7% to $737 million.
Driven by higher sales and gross margin, offset by higher SG&A expenses, operating income rose 35.8% to $ 258.5 million in the fourth quarter. Operating margin expanded 29 bps to 8.98%.
Financial Position
Tractor Supply ended 2020 with cash and cash equivalents of $1,341.8 million, long-term debt of $984.3 million and total stockholders’ equity of $1,923.8 million. Further, it has no amounts drawn on its $500-million revolving credit facility as of Dec 26, 2020.
In 2020, the company incurred capital expenditure of $294 million and generated cash flow from operating activities of $1,394.5 million.
Moreover, the company returned $517.6 million to shareholders, including $343 million to repurchase 3.4 million shares and for quarterly cash dividends of $ 174.6 million.
Additionally, the company hiked its quarterly cash dividend by 30% to 52 cents per share. The raised dividend will be paid out on Mar 9, 2021, to shareholders of record as of Feb 22. The raised dividend as well as resumed share repurchases demonstrates the company’s strong earnings performance and robust cash flows in 2020.
For 2021, it expects to incur capital expenditure of $450-$550 million.
Store Update
In the quarter under review, Tractor Supply opened 19 Tractor Supply stores and three Petsense stores. It also closed four Petsense stores in the fourth quarter of 2020. As of Dec 26, 2020, the company operated 1,923 Tractor Supply stores across 49 states and 182 Petsense stores in 25 states.
Going ahead, management remains on track with its store-opening initiatives. It plans to open 80 Tractor Supply stores and 10 Petsense stores in 2021.
2021 Outlook
Tractor Supply continues to remain uncertain regarding the magnitude of the pandemic’s impact on the company’s performance in 2021. Nevertheless, it has provided guidance for 2021.
The company expects net sales of $10.7-11 billion for 2021, with comps between a decline of 2% and growth of 1%. Operating margin is anticipated to be 9.3-9.6%. Moreover, net income is likely to be $750-$800 million, while earnings per share are expected to be $6.50-$6.90.
The company’s guidance assumes effective tax rate of 22.5-22.8% in 2020. Moreover, it expects share repurchases in 2021 to reduce earnings per share by 1-2%.
3 Retail Stocks to Watch Out
DICK’S Sporting Goods, Inc. (DKS - Free Report) , which currently carries a Zacks Rank #2 (Buy), has an expected long-term earnings growth rate of 5.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Five Below, Inc. (FIVE - Free Report) presently has an expected long-term earnings growth rate of 21% and a Zacks Rank #2.
Hibbett Sports, Inc. (HIBB - Free Report) , with a Zacks Rank #2, has an expected long-term earnings growth rate of 17%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>