TSCO Tractor Supply Company

 

Tractor Supply Company (NASDAQ: TSCO), the largest rural lifestyle retailer in the United States (the “Company”), today reported financial results for its second quarter ended June 29, 2024.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20240725392237/en/

• Net Sales Increase of 1.5% to $4.25 Billion
• Comparable Store Sales Decrease of 0.5%
• Diluted Earnings per Share (“EPS”) of $3.93
• Company Updates 2024 Financial Outlook

“We are pleased with our second quarter EPS results that were in line with our outlook. My sincere appreciation goes out to our more than 50,000 Team Members for living our Mission and Values every day as we focus on taking care of our customers and each other. The team continued to execute extremely well, upholding the high standards we set for ourselves every day. At the halfway point of the year, we have made significant progress on our Life Out Here strategy. We continue to create more separation between us and our competition, thanks to our Team Members and the meaningful relationships they have with our customers,” said Hal Lawton, President and Chief Executive Officer of Tractor Supply.

Lawton continued, “We are confident that we have the right plans in place to win with our customers given the strength of our second half operational initiatives. We remain excited about the significant market share growth opportunities ahead of us as we focus on the continued creation of long-term value for our shareholders.”

Second Quarter 2024 Results

Net sales for the second quarter of 2024 increased 1.5% to $4.25 billion from $4.18 billion in the second quarter of 2023. The increase in net sales was driven by new store openings, partially offset by the decline in comparable store sales. Comparable store sales decreased 0.5%, as compared to an increase of 2.5% in the prior year’s second quarter, driven by a comparable average transaction count decline of 0.6%, partially offset by a comparable average ticket increase of 0.1%. Comparable store sales results reflect strength in seasonal merchandise including big ticket, partially offset by declines in year-round discretionary categories. As expected, consumable, usable and edible products were modestly negative with positive unit growth offset by average unit price pressure.

Gross profit increased 2.7% to $1.56 billion from $1.51 billion in the prior year’s second quarter, and gross margin increased 43 basis points to 36.6% from 36.2% in the prior year’s second quarter. The gross margin rate increase was primarily attributable to ongoing lower transportation costs along with disciplined product cost management and the continued execution of an everyday low price strategy. These improvements in gross margin rate were partially offset by growth in big ticket categories, which have below chain-average margins.

Selling, general and administrative (“SG&A”) expenses, including depreciation and amortization, increased 4.1% to $994.2 million from $955.4 million in the prior year’s second quarter. As a percentage of net sales, SG&A expenses increased 58 basis points to 23.4% from 22.8% in the second quarter of 2023. The increase in SG&A as a percent of net sales was primarily attributable to planned growth investments, which included the onboarding of a new distribution center and higher depreciation and amortization, as well as modest deleverage of the Company’s fixed costs given the decline in comparable store sales. These factors were partially offset by productivity improvements and strong cost control. During the second quarter of 2024, the Company’s ongoing sale-leaseback strategy benefited SG&A by approximately 12 basis points, net of transaction and repair costs, from the sale of two Tractor Supply locations.

Operating income was $561.5 million in the second quarter of 2024 compared to $559.3 million in the second quarter of 2023.

The effective income tax rate was 22.7% compared to 23.0% in the second quarter of 2023.

Net income increased 0.9% to $425.2 million from $421.2 million. Diluted EPS increased 2.6% to $3.93 compared to $3.83 in the second quarter of 2023.

The Company repurchased approximately 0.5 million shares of its common stock for $139.2 million and paid quarterly cash dividends totaling $118.5 million, returning a total of $257.7 million of capital to shareholders in the second quarter of 2024.

The Company opened 21 new Tractor Supply stores and three new Petsense by Tractor Supply stores in the second quarter of 2024.

Fiscal Year 2024 Financial Outlook

Based on year-to-date performance and its outlook, Tractor Supply is updating its financial guidance. For fiscal year 2024, the Company now expects the following:

 

Updated

Previous

Net Sales

$14.8 billion to $15.0 billion

$14.7 billion to $15.1 billion

Comparable Store Sales

(0.5%) to +1.0%

(1.0%) to +1.5%

Operating Margin Rate

9.8% to 10.1%

9.7% to 10.1%

Net Income

$1.08 billion to $1.12 billion

$1.06 billion to $1.13 billion

Earnings per Diluted Share

$10.00 to $10.40

$9.85 to $10.50

Conference Call Information

Tractor Supply Company will hold a conference call today, Thursday, July 25, 2024 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 more than 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 293 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 June 29, 2024, the Company operated 2,254 Tractor Supply stores in 49 states. 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 June 29, 2024, the Company operated 205 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, value creation, customer trends, new stores and distribution centers, property development plans, return of capital, and financial guidance for 2024, including net sales, comparable store sales, operating margin rates, net income, earnings per diluted share, capital expenditures and plans, share repurchase, and sale-leaseback transactions. 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, 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, including our upcoming Quarterly Report on Form 10-Q for the quarter ended June 29, 2024, which will describe additional risks relating to the scrutiny of our social and environmental strategies, initiatives and targets and our policies related thereto, which could adversely affect public perception of our business, employee morale, customer or stockholder support and have a material adverse effect on our business, liquidity, financial condition, and/or results of operations. 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, upcoming Quarterly Report on Form 10-Q for the quarter ended June 29, 2024, 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)

Consolidated Statements of Income

(Unaudited)

(in thousands, except per share and percentage data)

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

June 29, 2024

 

July 1, 2023

 

June 29, 2024

 

July 1, 2023

 

 

 

% of

 

 

 

% of

 

 

 

% of

 

 

 

% of

 

 

 

Net

 

 

 

Net

 

 

 

Net

 

 

 

Net

 

 

 

Sales

 

 

 

Sales

 

 

 

Sales

 

 

 

Sales

Net sales

$

4,246,622

 

100.00

%

 

$

4,184,695

 

100.00

%

 

$

7,641,456

 

100.00

%

 

$

7,483,920

 

100.00

%

Cost of merchandise sold

 

2,690,996

 

 

63.37

 

 

 

2,669,926

 

 

63.80

 

 

 

4,864,976

 

 

63.67

 

 

 

4,799,243

 

 

64.13

 

Gross profit

 

1,555,626

 

 

36.63

 

 

 

1,514,769

 

 

36.20

 

 

 

2,776,480

 

 

36.33

 

 

 

2,684,677

 

 

35.87

 

Selling, general and administrative expenses

 

884,903

 

 

20.84

 

 

 

853,158

 

 

20.39

 

 

 

1,738,338

 

 

22.75

 

 

 

1,681,393

 

 

22.47

 

Depreciation and amortization

 

109,265

 

 

2.57

 

 

 

102,279

 

 

2.44

 

 

 

213,558

 

 

2.79

 

 

 

199,512

 

 

2.67

 

Operating income

 

561,458

 

 

13.22

 

 

 

559,332

 

 

13.37

 

 

 

824,584

 

 

10.79

 

 

 

803,772

 

 

10.74

 

Interest expense, net

 

11,612

 

 

0.27

 

 

 

12,343

 

 

0.30

 

 

 

23,514

 

 

0.31

 

 

 

25,023

 

 

0.33

 

Income before income taxes

 

549,846

 

 

12.95

 

 

 

546,989

 

 

13.07

 

 

 

801,070

 

 

10.48

 

 

 

778,749

 

 

10.41

 

Income tax expense

 

124,650

 

 

2.94

 

 

 

125,755

 

 

3.01

 

 

 

177,707

 

 

2.33

 

 

 

174,427

 

 

2.33

 

Net income

$

425,196

 

 

10.01

%

 

$

421,234

 

 

10.07

%

 

$

623,363

 

 

8.16

%

 

$

604,322

 

 

8.07

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

3.95

 

 

 

 

$

3.85

 

 

 

 

$

5.78

 

 

 

 

$

5.51

 

 

 

Diluted

$

3.93

 

 

 

 

$

3.83

 

 

 

 

$

5.75

 

 

 

 

$

5.47

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

107,730

 

 

 

 

 

109,426

 

 

 

 

 

107,838

 

 

 

 

 

109,735

 

 

 

Diluted

 

108,235

 

 

 

 

 

110,041

 

 

 

 

 

108,381

 

 

 

 

 

110,411

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share outstanding

$

1.10

 

 

 

 

$

1.03

 

 

 

 

$

2.20

 

 

 

 

$

2.06

 

 

 

 

Note: Percent of net sales amounts may not sum to totals due to rounding.

Consolidated Statements of Comprehensive Income

(Unaudited)

(in thousands)

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

June 29, 2024

 

July 1, 2023

 

June 29, 2024

 

July 1, 2023

Net income

$

425,196

 

 

$

421,234

 

$

623,363

 

 

$

604,322

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) / income:

 

 

 

 

 

 

 

Change in fair value of interest rate swaps, net of taxes

 

(1,382

)

 

 

778

 

 

 

(2,113

)

 

 

(1,059

)

Total other comprehensive (loss) / income

 

(1,382

)

 

 

778

 

 

 

(2,113

)

 

 

(1,059

)

Total comprehensive income

$

423,814

 

 

$

422,012

 

 

$

621,250

 

 

$

603,263

 

Consolidated Balance Sheets

(Unaudited)

(in thousands)

 

 

 

 

 

June 29, 2024

 

July 1, 2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

394,748

 

 

$

620,031

 

Inventories

 

3,000,033

 

 

 

2,660,052

 

Prepaid expenses and other current assets

 

244,844

 

 

 

297,191

 

Total current assets

 

3,639,625

 

 

 

3,577,274

 

Property and equipment, net

 

2,566,723

 

 

 

2,185,476

 

Operating lease right-of-use assets

 

3,225,156

 

 

 

2,957,792

 

Goodwill and other intangible assets

 

269,520

 

 

 

267,088

 

Other assets

 

83,500

 

 

 

45,193

 

Total assets

$

9,784,524

 

 

$

9,032,823

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

1,436,520

 

 

$

1,272,232

 

Accrued employee compensation

 

69,920

 

 

 

66,181

 

Other accrued expenses

 

557,721

 

 

 

464,267

 

Current portion of finance lease liabilities

 

3,405

 

 

 

2,860

 

Current portion of operating lease liabilities

 

382,111

 

 

 

317,730

 

Income taxes payable

 

94,858

 

 

 

114,194

 

Total current liabilities

 

2,544,535

 

 

 

2,237,464

 

Long-term debt

 

1,730,467

 

 

 

1,727,504

 

Finance lease liabilities, less current portion

 

29,661

 

 

 

32,999

 

Operating lease liabilities, less current portion

 

2,980,876

 

 

 

2,762,877

 

Deferred income taxes

 

54,418

 

 

 

59,157

 

Other long-term liabilities

 

139,235

 

 

 

125,670

 

Total liabilities

 

7,479,192

 

 

 

6,945,671

 

 

 

 

 

Stockholders’ equity:

 

 

 

Common stock

 

1,423

 

 

 

1,418

 

Additional paid-in capital

 

1,349,198

 

 

 

1,283,589

 

Treasury stock

 

(5,717,944

)

 

 

(5,210,524

)

Accumulated other comprehensive income

 

4,680

 

 

 

10,216

 

Retained earnings

 

6,667,975

 

 

 

6,002,453

 

Total stockholders’ equity

 

2,305,332

 

 

 

2,087,152

 

Total liabilities and stockholders’ equity

$

9,784,524

 

 

$

9,032,823

 

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Six Months Ended

 

June 29, 2024

 

July 1, 2023

Cash flows from operating activities:

 

 

 

Net income

$

623,363

 

 

$

604,322

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

213,558

 

 

 

199,512

 

(Gain)/loss on disposition of property and equipment

 

(4,210

)

 

 

(474

)

Share-based compensation expense

 

25,124

 

 

 

30,179

 

Deferred income taxes

 

(10,712

)

 

 

30,916

 

Change in assets and liabilities:

 

 

 

Inventories

 

(354,179

)

 

 

34,626

 

Prepaid expenses and other current assets

 

(33,345

)

 

 

(22,439

)

Accounts payable

 

256,717

 

 

 

(126,400

)

Accrued employee compensation

 

(21,558

)

 

 

(56,795

)

Other accrued expenses

 

19,996

 

 

 

(26,994

)

Income taxes

 

97,319

 

 

 

104,723

 

Other

 

5,270

 

 

 

11,145

 

Net cash provided by operating activities

 

817,343

 

 

 

782,321

 

Cash flows from investing activities:

 

 

 

Capital expenditures

 

(349,818

)

 

 

(349,586

)

Proceeds from sale of property and equipment

 

18,487

 

 

 

761

 

Proceeds from Orscheln acquisition net working capital settlement

 

—

 

 

 

4,310

 

Net cash used in investing activities

 

(331,331

)

 

 

(344,515

)

Cash flows from financing activities:

 

 

 

Borrowings under debt facilities

 

335,000

 

 

 

1,767,000

 

Repayments under debt facilities

 

(335,000

)

 

 

(1,195,000

)

Debt discounts and issuance costs

 

—

 

 

 

(9,729

)

Principal payments under finance lease liabilities

 

(864

)

 

 

(2,805

)

Repurchase of shares to satisfy tax obligations

 

(22,717

)

 

 

(23,121

)

Repurchase of common stock

 

(255,756

)

 

 

(345,653

)

Net proceeds from issuance of common stock

 

28,349

 

 

 

15,252

 

Cash dividends paid to stockholders

 

(237,347

)

 

 

(226,221

)

Net cash used in financing activities

 

(488,335

)

 

 

(20,277

)

Net (decrease)/increase in cash and cash equivalents

 

(2,323

)

 

 

417,529

 

Cash and cash equivalents at beginning of period

 

397,071

 

 

 

202,502

 

Cash and cash equivalents at end of period

$

394,748

 

 

$

620,031

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

Cash paid during the period for:

 

 

 

Interest, net of amounts capitalized

$

30,203

 

 

$

20,462

 

Income taxes cash paid

 

89,875

 

 

 

36,226

 

 

 

 

 

Supplemental disclosures of non-cash activities:

 

 

 

Non-cash accruals for property and equipment

$

61,418

 

 

$

27,031

 

Increase of operating lease assets and liabilities from new or modified leases

 

272,524

 

 

 

260,268

 

Increase of finance lease assets and liabilities from new or modified leases

 

—

 

 

 

450

 

Selected Financial and Operating Information

(Unaudited)

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

June 29, 2024

 

July 1, 2023

 

June 29, 2024

 

July 1, 2023

Sales Information:

 

 

 

 

 

 

 

Comparable store sales (decrease)/increase

 

(0.5

)%

 

 

2.5

%

 

 

0.2

%

 

 

2.3

%

New store sales (% of total sales)

 

2.0

%

 

 

4.8

%

 

 

2.0

%

 

 

4.5

%

Average transaction value

$

63.46

 

 

$

63.56

 

 

$

61.24

 

 

$

61.44

 

Comparable store average transaction value (decrease)/increase (a)

 

0.1

%

 

 

0.6

%

 

 

(0.1

)%

 

 

1.6

%

Comparable store average transaction count (decrease)/increase

 

(0.6

)%

 

 

1.8

%

 

 

0.3

%

 

 

0.7

%

Total selling square footage (000’s)

 

38,383

 

 

 

37,809

 

 

 

38,383

 

 

 

37,809

 

Exclusive brands (% of total sales)

 

26.7

%

 

 

28.0

%

 

 

28.1

%

 

 

29.8

%

Imports (% of total sales)

 

10.9

%

 

 

11.5

%

 

 

11.0

%

 

 

11.5

%

 

 

 

 

 

 

 

 

Store Count Information:

 

 

 

 

 

 

 

Tractor Supply

 

 

 

 

 

 

 

Beginning of period

 

2,233

 

 

 

2,164

 

 

 

2,216

 

 

 

2,147

 

New stores opened

 

21

 

 

 

17

 

 

 

38

 

 

 

34

 

Stores closed

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

End of period

 

2,254

 

 

 

2,181

 

 

 

2,254

 

 

 

2,181

 

Petsense by Tractor Supply

 

 

 

 

 

 

 

Beginning of period

 

202

 

 

 

189

 

 

 

198

 

 

 

186

 

New stores opened

 

3

 

 

 

3

 

 

 

7

 

 

 

6

 

Stores closed

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

End of period

 

205

 

 

 

192

 

 

 

205

 

 

 

192

 

Consolidated end of period

 

2,459

 

 

 

2,373

 

 

 

2,459

 

 

 

2,373

 

 

 

 

 

 

 

 

 

Pre-opening costs (000’s)

$

2,251

 

 

$

4,878

 

 

$

4,613

 

 

$

7,942

 

 

 

 

 

 

 

 

 

Balance Sheet Information:

 

 

 

 

 

 

 

Average inventory per store (000’s) (b)

$

1,138.0

 

 

$

1,032.9

 

 

$

1,138.0

 

 

$

1,032.9

 

Inventory turns (annualized)

 

3.64

 

 

 

3.92

 

 

 

3.41

 

 

 

3.57

 

Share repurchase program:

 

 

 

 

 

 

 

Cost (000’s) (c)

$

140,546

 

 

$

157,448

 

 

$

259,089

 

 

$

354,616

 

Average purchase price per share

$

272.52

 

 

$

222.42

 

 

$

254.81

 

 

$

225.34

 

(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.

 

Three Months Ended

 

Six Months Ended

 

June 29, 2024

 

July 1, 2023

 

June 29, 2024

 

July 1, 2023

Capital Expenditures (millions):

 

 

 

 

 

 

 

Existing stores

$

76.4

 

$

79.1

 

$

134.2

 

$

162.1

New stores, relocated stores and stores not yet opened

 

58.0

 

 

 

28.3

 

 

 

119.7

 

 

 

61.5

 

Information technology

 

35.7

 

 

 

29.2

 

 

 

60.1

 

 

 

51.1

 

Distribution center capacity and improvements

 

19.1

 

 

 

54.1

 

 

 

32.2

 

 

 

73.7

 

Corporate and other

 

3.4

 

 

 

1.0

 

 

 

3.6

 

 

 

1.2

 

Total

$

192.6

 

 

$

191.7

 

 

$

349.8

 

 

$

349.6

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240725392237/en/

Mary Winn Pilkington (615) 440-4212 Joseph Underwood (615) 440-4658 investorrelations@tractorsupply.com