Tractor Supply Company Reports Third Quarter 2019 Financial Results
Net Sales Increased 5.4%; Comparable Store Sales Increased 2.9%Diluted Earnings Per Share (“EPS”) of $1.02; Adjusted Diluted EPS of $1.041$611.2 Million of Capital Returned to Shareholders Year to Date Through Share Repurchases and Quarterly Cash DividendsCompany Updates 2019 Financial Guidance1 See “Use and Reconciliation of Non-GAAP Financial Measures” below.BRENTWOOD, Tenn., Oct. 24, 2019 (GLOBE NEWSWIRE) — Tractor Supply Company (NASDAQ: TSCO), the largest rural lifestyle retailer in the United States, today announced financial results for its third quarter ended September 28, 2019.“Tractor Supply once again delivered strong results in the third quarter, driven by the strength of our team’s execution and their ability to be nimble through varying seasonal conditions. Our solid comparable store sales growth of 2.9% for the third quarter was in line with our expectations, with improvements in both our comparable average ticket and transaction count. Importantly, our operating profit margin improved in the third quarter through gross margin expansion initiatives. We have updated our full year guidance for 2019 and are on track to deliver against our commitments. We remain excited about the opportunities ahead to meet our customers’ needs and deliver increased value for our shareholders,” said Greg Sandfort, Tractor Supply’s Chief Executive Officer.Third Quarter 2019 Results
Net sales for the third quarter 2019 increased 5.4% to $1.98 billion from $1.88 billion in the third quarter of 2018. Comparable store sales increased 2.9%, as compared to an increase of 5.1% in the prior year’s third quarter. The comparable store sales results included increases in comparable average ticket of 2.3% and comparable transaction count of 0.6%. Comparable store sales growth was geographically broad-based, driven primarily by strength in everyday merchandise, along with growth across spring and summer seasonal categories.Gross profit increased 6.3% to $694.2 million from $653.1 million in the prior year’s third quarter, and gross margin increased 28 basis points to 35.0% from 34.7% in the prior year’s third quarter. The increase in gross margin resulted primarily from the strength of the Company’s price management program and a reduction in freight expense as a percent of net sales. Selling, general and administrative (SG&A) expenses, including depreciation and amortization, increased 6.5% to $532.4 million from $500.0 million in the prior year’s third quarter. As a percent of net sales, SG&A expenses increased 26 basis points to 26.8% from 26.6% in the third quarter of 2018. The increase in SG&A as a percent of net sales was primarily attributable to incremental costs associated with the new distribution facility in Frankfort, N.Y., an executive transition agreement and, to a lesser extent, investment in store team member wages. These SG&A increases were partially offset by lower year-over-year incentive compensation as a percentage of net sales, as well as leverage in occupancy and other costs from the increase in comparable store sales. The impact of the executive transition agreement in the third quarter of 2019 was approximately $2.9 million or 15 basis points, as a percent of net sales. Excluding the impact of the executive transition agreement, adjusted SG&A expenses were $529.5 million, an 11 basis point increase in SG&A expenses as a percent of net sales compared to the third quarter of 2018.The effective income tax rate in the third quarter was 22.2% compared to 21.5% in the prior year’s third quarter. Net income increased 4.6% to $122.1 million from $116.8 million, and diluted earnings per share increased 7.4% to $1.02 from $0.95 in the third quarter of 2018. Excluding the after-tax impact of the executive transition agreement of approximately $2.3 million, or $0.02 per diluted share, adjusted net income for the third quarter of 2019 was $124.4 million, or $1.04 per diluted share.The Company opened 25 new Tractor Supply stores and one new Petsense store and closed one Tractor Supply store and two Petsense stores in the third quarter of 2019.First Nine Months of Fiscal 2019 Results
Net sales for the first nine months of 2019 increased 6.6% to $6.16 billion from $5.78 billion in the first nine months of 2018. Comparable store sales increased 3.6% versus a 4.9% increase in the first nine months of 2018. Gross profit increased 7.2% to $2.13 billion from $1.99 billion, and gross margin was 34.6%, compared to 34.4% in the first nine months of 2018.SG&A expenses, including depreciation and amortization, increased 7.7% to $1.58 billion and increased as a percent of net sales to 25.6% compared to 25.4% for the first nine months of 2018. Adjusted SG&A expenses as a percent of net sales for the first nine months of 2019, which excludes the impact of the executive transition agreement, were also 25.6%. The effective income tax rate in the first nine months was 22.2% compared to 22.1% in the first nine months of 2018. Net income increased 5.7% to $418.2 million from $395.5 million, and diluted earnings per share increased 7.8% to $3.45 from $3.20 for the first nine months of 2018. Excluding the after-tax impact of the executive transition agreement of approximately $2.3 million, or $0.02 per diluted share, adjusted net income for the first nine months of 2019 was $420.5 million, or $3.47 per diluted share.Year to date through the third quarter, the Company has repurchased approximately 4.9 million shares of its common stock for $490.0 million and paid quarterly cash dividends totaling $121.2 million. During the first nine months of 2019, the Company opened 50 new Tractor Supply stores and three new Petsense stores and closed one Tractor Supply store and two Petsense stores.Fiscal 2019 Outlook
Based on year-to-date performance, the Company is providing the following updated guidance for the expected results of operations in fiscal 2019:Net sales of $8.40 billion to $8.42 billion, compared to its previous expectation of $8.40 billion to $8.46 billionComparable store sales growth of 3.2% to 3.4%, compared to its previous expectation of 3.0% to 4.0%Operating margin rate of 8.9% to 9.0%, consistent with its previous guidanceNet income of $564 million to $569 million, compared to its previous guidance of $562 million to $575 millionAdjusted net income of $566 million to $571 million, which excludes the after-tax impact of the executive transition agreementEarnings per diluted share of $4.66 to $4.70, compared to its previous guidance of $4.65 to $4.75Adjusted earnings per diluted share of $4.68 to $4.72, which excludes the after-tax impact of the executive transition agreementShare repurchases for fiscal 2019 are expected to be approximately $525 million to $550 million, compared to the Company’s previous guidance of $350 million to $450 million. Weighted average diluted shares outstanding for fiscal 2019 are forecasted to be approximately 121 million.For fiscal 2019, the Company continues to forecast capital expenditures in the range of $225 million to $250 million and plans to open approximately 80 new Tractor Supply stores and 10 new Petsense locations. Conference Call Information
Tractor Supply Company will be hosting a conference call today, Thursday, October 24, 2019, at 9:00 a.m. CT / 10:00 a.m. ET, hosted by Greg Sandfort, Chief Executive Officer, and Kurt Barton, Chief Financial Officer. The call will be webcast live at IR.TractorSupply.com.The call will be broadcast simultaneously over the Internet on the Company’s website at IR.TractorSupply.com. Please allow extra time prior to the call to visit the site and download the streaming media software required to listen to the Internet broadcast. A replay of the webcast will also be available at IR.TractorSupply.com shortly after the conference call concludes.About Tractor Supply Company
Tractor Supply Company (NASDAQ: TSCO), the largest rural lifestyle retailer in the United States, has been passionate about serving its unique niche, as a one-stop shop for recreational farmers, ranchers and all those who enjoy living the rural lifestyle, for more than 80 years. Tractor Supply offers an extensive mix of products necessary to care for home, land, pets and animals with a focus on product localization, exclusive brands and legendary customer service that addresses the needs of the Out Here lifestyle. With nearly 32,000 team members, the Company leverages its physical store assets with digital capabilities to offer customers the convenience of purchasing products they need anytime, anywhere and any way they choose at the everyday low prices they deserve. At September 28, 2019, the Company operated 1,814 Tractor Supply stores in 49 states and an e-commerce website at www.TractorSupply.com. Tractor Supply Company also owns and operates Petsense, a small-box pet specialty supply retailer focused on meeting the needs of pet owners, primarily in small and mid-size communities, and offering a variety of pet products and services. At September 28, 2019, the Company operated 176 Petsense stores in 26 states. For more information on Petsense, visit www.Petsense.com.Tractor Supply Company
Contacts:
Mary Winn Pilkington (615) 440-4212
Marianne Denenberg (615) 440-4345Forward Looking Statements
As with any business, all phases of the Company’s operations are subject to influences outside its control. This information contains certain forward-looking statements, including statements regarding sales and earnings growth, estimated results of operations, including, but not limited to, net sales, operating margins, net income, earnings per share and comparable store sales, and capital expenditures. Other factors affecting future results include the amount of share repurchases, marketing, merchandising and strategic initiatives and new store and distribution center openings and expenses in future periods. These forward-looking statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and 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. These factors include, without limitation, national, regional and local economic conditions affecting consumer spending, the timing and acceptance of new products in the stores, the timing and mix of goods sold, weather conditions, the seasonal nature of the business, transportation costs, including but not limited to, carrier rates and fuel costs, purchase price volatility (including inflationary and deflationary pressures), the ability to increase sales at existing stores, the ability to manage growth and identify suitable locations, failure of an acquisition to produce anticipated results, the ability to successfully manage expenses, including but not limited to, increases in wages, and execute key gross margin enhancing initiatives, the availability of favorable credit sources, capital market conditions in general, the ability to open new stores in the manner and number currently contemplated, the impact of new stores on the business, competition, including competition from online retailers, effective merchandising initiatives and marketing emphasis, the ability to retain vendors, reliance on foreign suppliers, the ability to attract, train and retain qualified employees, product liability and other claims, changes in federal, state or local regulations, potential judgments, fines, legal fees and other costs, breach of information systems or theft of employee or customer data, ongoing and potential future legal or regulatory proceedings, management of the Company’s information systems, failure to develop and implement new technologies, the failure of customer-facing technology systems, business disruption including from the implementation of supply chain technologies, effective tax rate changes, including expected effects of the Tax Cuts and Jobs Act, and results of examination by taxing authorities, the imposition of tariffs on imported products or the disallowance of tax deductions on imported products, the ability to maintain an effective system of internal control over financial reporting, and changes in accounting standards, assumptions and estimates. 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.(Financial tables to follow)