Tractor Supply Company (NASDAQ: TSCO), the largest rural
lifestyle retailer in the United States (the “Company”), today
reported financial results for its third quarter ended September
30, 2023.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20231026940743/en/
- Net Sales Increase of 4.3% to $3.41 Billion with a Comparable
Store Sales Decline of 0.4%
- Diluted Earnings per Share Growth of 11.0% to $2.33
- Underlying Customer Trends Remain Solid with Growth in Active,
Reactivated and New Customer Counts for the Quarter
- Company Reaches Significant Milestones in Its Life Out Here
Strategic Initiatives with 35% of Chain in Project Fusion Layout
and Completion of More Than 420 Garden Centers
“We delivered solid growth in both net sales and earnings in the
third quarter, although our sales performance was softer than our
expectations. Given this environment, we have updated our outlook
for the year to reflect continued unfavorable seasonal category
performance and discerning consumer spending. Our consistent market
share expansion and positive customer trends underscore the
enduring strength of our business. We are confident in our ability
to navigate in the near-term and remain as excited as ever about
our bright future. I would like to thank our team for their
dedication to our Mission and Values, as this continues to be the
key to our customers’ strong loyalty,” said Hal Lawton, President
and Chief Executive Officer of Tractor Supply.
“As we near Tractor Supply’s 85th anniversary in December, it
serves as a great reminder that we have a long track record of
success as a resilient, needs-based retailer. We are committed to
continuing to adapt to the current consumer landscape and
controlling what we can control. We also remain committed to
executing our Life Out Here strategy and laying the foundation for
the next 85 years. We believe we have a robust, distinct business
model in an attractive market that will continue to be a winning
formula,” said Lawton.
Third Quarter 2023
Results
Net sales for the third quarter of 2023 increased 4.3% to $3.41
billion from $3.27 billion in the third quarter of 2022. The
increase in net sales was driven by contributions from the
acquisition of Orscheln Farm and Home and new store openings.
Comparable store sales decreased 0.4%, as compared to an increase
of 5.7% in the prior year’s third quarter, driven by a comparable
average ticket decline of 0.3% and a flat comparable average
transaction count. Comparable store sales performance reflects
continued strength in core year-round merchandise, including
consumable, usable and edible (“C.U.E.”) products which
significantly outpaced the chain average. This performance largely
offset declines in demand for seasonal goods and big-ticket
items.
Gross profit increased 7.3% to $1.25 billion from $1.17 billion
in the prior year’s third quarter, and gross margin increased 101
basis points to 36.7% from 35.6% in the prior year’s third quarter.
Gross margin continued to benefit from the Company’s ongoing
execution of an everyday low price strategy, complemented by the
use of its Neighbor’s Club loyalty program as a value driver in a
sustained higher-cost environment. The gross margin rate increase
was primarily attributable to lower transportation costs driven by
improvement in the global supply chain and efficiencies from a new
distribution center, modestly offset by negative product mix.
Selling, general and administrative (“SG&A”) expenses,
including depreciation and amortization, increased 5.8% to $909.6
million from $859.4 million in the prior year’s third quarter. As a
percentage of net sales, SG&A expenses increased 38 basis
points to 26.7% from 26.3% in the third quarter of 2022. The
increase in SG&A as a percentage of net sales was primarily
attributable to the Company’s planned growth investments, which
included higher depreciation and amortization and the onboarding of
a new distribution center, as well as higher medical claims and
fixed cost deleverage. During the third quarter of 2023, the
Company completed its strategically planned sale-leaseback of 10
Tractor Supply store locations, benefiting SG&A by
approximately 70 basis points, net of transaction and repair costs.
Additionally, the increase in SG&A was partially offset by an
adjustment to the useful lives of certain store remodel assets
resulting in a one-time benefit to depreciation expense of
approximately 35 basis points.
Operating income increased 11.3% to $340.9 million from $306.4
million in the third quarter of 2022.
The effective income tax rate was 23.0% compared to 22.0% in the
third quarter of 2022.
Net income increased 8.9% to $255.0 million from $234.1 million.
Diluted earnings per share (“EPS”) increased 11.0% to $2.33
compared to $2.10 in the third quarter of 2022. The increase in
diluted EPS includes a one-time benefit of $0.08 per share from the
adjustment to the useful lives of certain store remodel assets.
The Company repurchased approximately 0.6 million shares of its
common stock for $135.4 million and paid quarterly cash dividends
totaling $112.0 million, returning $247.4 million of capital to
shareholders in the third quarter of 2023.
The Company opened 17 new Tractor Supply stores and four new
Petsense by Tractor Supply stores and closed one Petsense by
Tractor Supply store in the third quarter of 2023.
Fiscal 2023 Financial
Outlook
The Company is updating its fiscal 2023 financial guidance to
reflect its performance through the third quarter along with its
expectations for the remainder of the year.
For fiscal 2023, the Company now expects the following:
Updated
Previous
Net Sales
$14.5 billion - $14.6 billion
$14.8 billion - $14.9 billion
Comparable Store Sales
Flat
+1.3% - +2.5%
Operating Margin Rate
10.1% - 10.2%
10.2% - 10.3%
Net Income
$1.10 billion - $1.11 billion
$1.12 billion - $1.15 billion
Earnings per Diluted Share
$10.00 - $10.10
$10.20 - $10.40
The Company continues to forecast capital expenditures for the
year in the range of $800 million to $850 million. Capital
expenditures reflect the implementation of the development program
for new store growth that is fully funded through the sale of
existing Company-owned stores. Additionally, capital plans for 2023
include opening a total of approximately 70 Tractor Supply stores,
completing the conversion of Orscheln Farm and Home stores to
Tractor Supply, continuing Project Fusion remodels and garden
center transformations, building its 10th distribution center and
opening a total of 10 to 15 new Petsense by Tractor Supply stores.
The updated fiscal 2023 guidance also includes the benefits (both
realized and expected) of the previously announced sale-leaseback
transactions.
Conference Call
Information
Tractor Supply Company will hold a conference call today,
Thursday, October 26, 2023 at 10 a.m. ET. The call will be webcast
live at IR.TractorSupply.com. An investor presentation will be
available on the investor relations section of the Company’s
website at least 15 minutes prior to the conference call.
Please allow extra time prior to the call to visit the site and
download the streaming media software required to listen to the
webcast.
A replay of the webcast will also be available at
IR.TractorSupply.com shortly after the conference call
concludes.
About Tractor Supply
Company
For 85 years, Tractor Supply Company (NASDAQ: TSCO) has been
passionate about serving the needs of recreational farmers,
ranchers, homeowners, gardeners, pet enthusiasts and all those who
enjoy living Life Out Here. Tractor Supply is the largest rural
lifestyle retailer in the U.S., ranking 291 on the Fortune 500. The
Company’s more than 50,000 Team Members are known for delivering
legendary service and helping customers pursue their passions,
whether that means being closer to the land, taking care of animals
or living a hands-on, DIY lifestyle. In store and online, Tractor
Supply provides what customers need – anytime, anywhere, any way
they choose at the low prices they deserve.
As of September 30, 2023, the Company operated 2,198 Tractor
Supply stores in 49 states, including 81 stores acquired from
Orscheln Farm and Home in 2022 that will be rebranded to Tractor
Supply by the end of 2023. For more information on Tractor Supply,
visit www.tractorsupply.com.
Tractor Supply Company also owns and operates Petsense by
Tractor Supply, a small-box pet specialty supply retailer providing
products and services for pet owners. As of September 30, 2023, the
Company operated 195 Petsense by Tractor Supply stores in 23
states. For more information on Petsense by Tractor Supply, visit
www.Petsense.com.
Forward-Looking
Statements
This press release contains certain forward-looking statements,
including statements regarding market share gains, positive
customer trends, new stores and distribution centers, the Orscheln
Farm and Home conversion, property development plans, and financial
guidance for 2023, including net sales, comparable store sales,
operating margin rates, net income, diluted earnings per share, and
capital expenditures. All forward-looking statements are subject to
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, are subject to the finalization of the
Company’s quarterly financial and accounting procedures, and may be
affected by certain risks and uncertainties, any one, or a
combination, of which could materially affect the results of the
Company’s operations. Forward-looking statements are usually
identified by or are associated with such words as “will,” “would,”
“intend,” “expect,” “continue,” “believe,” “anticipate,”
“optimistic,” “forecasted” and similar terminology. Actual results
could vary materially from the expectations reflected in these
statements. As with any business, all phases of our operations are
subject to facts outside of our control. These factors include,
without limitation, national, regional, and local economic
conditions affecting consumer spending; the timing and mix of goods
sold; the timing and acceptance of new products; purchase price
volatility (including inflationary and deflationary pressures),
transportation costs and constraints in the supply chain affecting
timing and availability of merchandise inventory; the ability to
increase sales at existing stores or on our e-commerce platforms;
the ability to manage growth and identify suitable locations; the
ability to open new stores in the time, manner, and number
currently contemplated; the ability to execute definitive
agreements, satisfy closing conditions and close periodically
planned sale-leaseback transactions on a timely basis, on favorable
terms or at all; economic uncertainty, including rising costs for
commodities, raw materials, energy, and finished goods; the ability
to successfully manage expenses and to execute our key gross margin
enhancing initiatives; the ability to open distribution centers in
the anticipated timeframe and within budget; the impact of new
stores on our business; competition, including that from online
competitors; weather conditions; the seasonal nature of our
business; the ability to retain vendors and our reliance on foreign
suppliers; the ability to attract, train, and retain qualified
employees, as well as increasing labor and benefit costs; rising
interest rates; tightening of credit markets; continued domestic
impact of global geopolitical unrest; continued disruption and
uncertainty in the supply chain and shipping channels, including
potential disruption to domestic transportation channels; the
impact of public health issues; difficulties in integration of
Orscheln Farm and Home; potential adverse reactions or changes to
business or employee relationships, including those resulting from
the announcement of an acquisition; significant increases in costs
or significant delays associated with new store openings, remodels,
relocations, or conversion of Orscheln stores; our ability to meet
our sustainability, stewardship, carbon emission, and Diversity,
Equity, and Inclusion related Environmental, Social, and Governance
projections, goals, and commitments; the imposition of tariffs on
imported products or the disallowance of tax deductions on imported
products; potential judgments, fines, legal fees, and other costs;
breach of information systems or theft of employee or customer
data; effective tax rate changes and results of examination by
taxing authorities; the ability to maintain an effective system of
internal control over financial reporting and changes in accounting
standards, assumptions, and estimates; severe weather and the
effects of climate change as well as those factors discussed in the
“Risk Factors” section of the Company’s Annual Reports or Form 10-K
and other filings with the Securities and Exchange Commission.
Forward-looking statements made by or on behalf of the Company are
based on knowledge of its business and the environment in which it
operates, but because of the factors listed above, actual results
could differ materially from those reflected by any forward-looking
statements. Consequently, all of the forward-looking statements
made are qualified by these cautionary statements and those
contained in the Company’s Annual Report on Form 10-K and other
filings with the Securities and Exchange Commission. There can be
no assurance that the results or developments anticipated by the
Company will be realized or, even if substantially realized, that
they will have the expected consequences to or effects on the
Company or its business and operations. Readers are cautioned not
to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company does not undertake
any obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated
events, except as required by law.
(Financial tables to follow)
Condensed Consolidated Statements of
Income
(Unaudited)
(in thousands, except per
share and percentage data)
Three Months Ended
Nine Months Ended
September 30,
2023
September 24,
2022
September 30,
2023
September 24,
2022
% of
% of
% of
% of
Net
Net
Net
Net
Sales
Sales
Sales
Sales
Net sales
$
3,411,980
100.00%
$
3,270,804
100.00%
$
10,895,900
100.00%
$
10,198,342
100.00%
Cost of merchandise sold
2,161,501
63.35
2,104,989
64.36
6,960,744
63.88
6,589,763
64.62
Gross profit
1,250,479
36.65
1,165,815
35.64
3,935,156
36.12
3,608,579
35.38
Selling, general and administrative
expenses
819,311
24.01
772,167
23.61
2,500,704
22.95
2,284,604
22.40
Depreciation and amortization
90,263
2.65
87,236
2.66
289,775
2.66
248,242
2.44
Operating income
340,905
9.99
306,412
9.37
1,144,677
10.51
1,075,733
10.54
Interest expense, net
9,539
0.28
6,226
0.19
34,562
0.32
20,392
0.20
Income before income taxes
331,366
9.71
300,186
9.18
1,110,115
10.19
1,055,341
10.34
Income tax expense
76,365
2.24
66,049
2.02
250,792
2.30
237,499
2.33
Net income
$
255,001
7.47%
$
234,137
7.16%
$
859,323
7.89%
$
817,842
8.01%
Net income per share:
Basic
$
2.34
$
2.11
$
7.85
$
7.32
Diluted
$
2.33
$
2.10
$
7.81
$
7.27
Weighted average shares
outstanding:
Basic
108,774
110,861
109,415
111,660
Diluted
109,342
111,560
110,055
112,461
Dividends declared per common share
outstanding
$
1.03
$
0.92
$
3.09
$
2.76
Note: Percent of net sales amounts may not
sum to totals due to rounding.
Condensed Consolidated Statements of Comprehensive
Income
(Unaudited)
(in thousands)
Three Months Ended
Nine Months Ended
September 30,
2023
September 24,
2022
September 30,
2023
September 24,
2022
Net income
$
255,001
$
234,137
$
859,323
$
817,842
Other comprehensive (loss) / income:
Change in fair value of interest rate
swaps, net of taxes
(924
)
3,150
(1,983
)
10,953
Total other comprehensive (loss) /
income
(924
)
3,150
(1,983
)
10,953
Total comprehensive income
$
254,077
$
237,287
$
857,340
$
828,795
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
September 30,
2023
September 24,
2022
ASSETS
Current assets:
Cash and cash equivalents
$
421,693
$
211,241
Inventories
2,834,247
2,678,193
Prepaid expenses and other current
assets
278,174
211,941
Income taxes receivable
—
8,430
Total current assets
3,534,114
3,109,805
Property and equipment, net
2,273,646
1,843,324
Operating lease right-of-use assets
3,084,947
2,803,798
Goodwill and other intangible assets
267,329
55,520
Other assets
44,978
99,281
Total assets
$
9,205,014
$
7,911,728
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
1,412,186
$
1,219,593
Accrued employee compensation
49,957
80,390
Other accrued expenses
454,513
453,747
Current portion of finance lease
liabilities
3,304
3,140
Current portion of operating lease
liabilities
365,189
333,388
Income taxes payable
33,647
4,942
Total current liabilities
2,318,796
2,095,200
Long-term debt
1,728,255
1,077,926
Finance lease liabilities, less current
portion
32,156
35,460
Operating lease liabilities, less current
portion
2,848,385
2,608,832
Deferred income taxes
30,006
39,540
Other long-term liabilities
136,285
113,625
Total liabilities
7,093,883
5,970,583
Stockholders’ equity:
Common stock
1,418
1,414
Additional paid-in capital
1,302,268
1,236,161
Treasury stock
(5,347,302
)
(4,763,862
)
Accumulated other comprehensive income
9,292
12,298
Retained earnings
6,145,455
5,455,134
Total stockholders’ equity
2,111,131
1,941,145
Total liabilities and stockholders’
equity
$
9,205,014
$
7,911,728
Condensed Consolidated Statements of Cash
Flows
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2023
September 24,
2022
Cash flows from operating
activities:
Net income
$
859,323
$
817,842
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
289,775
248,242
(Gain)/loss on disposition of property and
equipment
(27,460
)
1,453
Share-based compensation expense
45,150
38,531
Deferred income taxes
8,082
41,977
Change in assets and liabilities:
Inventories
(147,521
)
(487,001
)
Prepaid expenses and other current
assets
(28,647
)
(47,823
)
Accounts payable
13,554
63,963
Accrued employee compensation
(73,019
)
(29,228
)
Other accrued expenses
(53,795
)
(40,241
)
Income taxes
24,176
13,612
Other
28,308
5,003
Net cash provided by operating
activities
937,926
626,330
Cash flows from investing
activities:
Capital expenditures
(526,723
)
(451,154
)
Proceeds from sale of property and
equipment
57,801
169
Proceeds from Orscheln acquisition net
working capital settlement
4,310
—
Proceeds from sale of Orscheln corporate
headquarters and distribution center
10,000
—
Net cash used in investing activities
(454,612
)
(450,985
)
Cash flows from financing
activities:
Borrowings under debt facilities
1,767,000
120,000
Repayments under debt facilities
(1,195,000
)
(30,000
)
Debt discounts and issuance costs
(9,729
)
—
Principal payments under finance lease
liabilities
(3,606
)
(3,288
)
Repurchase of shares to satisfy tax
obligations
(24,015
)
(28,376
)
Repurchase of common stock
(480,407
)
(608,016
)
Net proceeds from issuance of common
stock
19,853
15,497
Cash dividends paid to stockholders
(338,219
)
(307,951
)
Net cash used in financing activities
(264,123
)
(842,134
)
Net increase/(decrease) in cash and
cash equivalents
219,191
(666,789
)
Cash and cash equivalents at beginning of
period
202,502
878,030
Cash and cash equivalents at end of
period
$
421,693
$
211,241
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest, net of amounts capitalized
$
29,011
$
16,130
Income taxes cash paid
215,637
184,887
Supplemental disclosures of non-cash
activities:
Non-cash accruals for property and
equipment
$
20,359
$
43,984
Increase of operating lease assets and
liabilities from new or modified leases
481,177
264,318
Increase of finance lease assets and
liabilities from new or modified leases
450
5,143
Selected
Financial and Operating Information
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
2023
September 24,
2022
September 30,
2023
September 24,
2022
Sales Information:
Comparable store sales
(decrease)/increase
(0.4
)%
5.7
%
1.5
%
5.5
%
New store sales (% of total sales)
4.6
%
2.2
%
4.6
%
2.3
%
Average transaction value
$
59.26
$
59.39
$
60.74
$
60.00
Comparable store average transaction value
(decrease)/increase (a)
(0.3
)%
7.0
%
1.0
%
7.1
%
Comparable store average transaction count
(decrease)/increase
(0.0
)%
(1.3
)%
0.4
%
(1.6
)%
Total selling square footage (000’s)
38,132
33,978
38,132
33,978
Exclusive brands (% of total sales)
29.3
%
29.9
%
29.5
%
29.6
%
Imports (% of total sales)
11.0
%
11.0
%
11.3
%
11.4
%
Store Count Information:
Tractor Supply
(including Orscheln Farm and Home stores)
Beginning of period
2,181
2,016
2,147
2,003
New stores opened
17
11
51
24
Stores closed
—
—
—
—
End of period
2,198
2,027
2,198
2,027
Petsense by Tractor
Supply
Beginning of period
192
178
186
178
New stores opened
4
2
10
3
Stores closed
(1
)
—
(1
)
(1
)
End of period
195
180
195
180
Consolidated end of period
2,393
2,207
2,393
2,207
Pre-opening costs (000’s)
$
2,743
$
2,683
$
10,685
$
5,072
Balance Sheet Information:
Average inventory per store (000’s)
(b)
$
1,114.2
$
1,110.0
$
1,114.2
$
1,110.0
Inventory turns (annualized)
3.34
3.53
3.48
3.80
Share repurchase program:
Cost (000’s) (c)
$
136,778
$
123,626
$
491,394
$
608,016
Average purchase price per share
$
214.45
$
193.70
$
222.20
$
206.95
(a)
Comparable store average transaction value
changes include the impact of transaction value changes achieved on
the current period change in transaction count.
(b)
Assumes average inventory cost, excluding
inventory in transit.
(c)
Effective January 1, 2023, the Company’s
share repurchases are subject to a 1% excise tax as a result of the
Inflation Reduction Act of 2022. Excise taxes incurred on share
repurchases represent direct costs of the repurchase and are
recorded as a part of the cost basis of the shares within treasury
stock.
Note: Comparable store metrics percentages may not sum to total due
to rounding. Note: With the exception of store count information,
new stores sales (% of total sales), total selling square footage,
and average inventory per store, all metrics listed above exclude
unconverted Orscheln Farm and Home stores.
Three Months Ended
Nine Months Ended
September 30, 2023
September 24, 2022
September 30, 2023
September 24, 2022
Capital Expenditures
(millions):
Existing stores
$
84.1
$
90.4
$
246.2
$
226.9
New and relocated stores and stores not
yet opened
10.8
27.6
72.3
58.9
Information technology
35.3
27.8
86.4
76.9
Distribution center capacity and
improvements
46.7
39.2
120.4
85.4
Corporate and other
0.2
0.9
1.4
3.1
Total
$
177.1
$
185.9
$
526.7
$
451.2
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231026940743/en/
Tractor Supply Company Mary Winn Pilkington (615)
440-4212 Tricia Whittemore (615) 440-4410
investorrelations@tractorsupply.com
Tractor Supply (NASDAQ:TSCO)
Historical Stock Chart
From Jun 2024 to Jul 2024
Tractor Supply (NASDAQ:TSCO)
Historical Stock Chart
From Jul 2023 to Jul 2024