TRACTOR SUPPLY REPORTS 1Q FY18 RESULTS
May 7, 2018
Source: Tractor Supply news release
Brentwood, Tennessee -- Tractor Supply Company (NASDAQ:TSCO), the largest rural lifestyle retail store chain in the United States, reports financial results for its first quarter ended March 31, 2018.
"For the first quarter, we are pleased with our overall performance and how effectively we managed our business. We generated solid increases in both comparable store sales and gross margin, despite a delay in the spring selling season in many of our markets. As we enter the second quarter, we believe we are well-positioned to capitalize on the spring selling season. Looking to the balance of 2018, we remain excited about the opportunities ahead of us as we continue to execute our ONETractor strategy, which we believe will contribute to sustainable long-term growth for our shareholders," said Greg Sandfort, Tractor Supply's Chief Executive Officer.
First Quarter Results
Net sales for the first quarter 2018 increased 7.6% to $1.68 billion from $1.56 billion in the first quarter of 2017. Comparable store sales increased 3.7% compared to a decrease of 2.2% in the prior year's first quarter. The comparable store sales results included increases in comparable transaction count and average ticket of 3.2% and 0.5%, respectively. The comparable store sales growth in the quarter was broad based across all geographic regions. The increase in comparable store sales was primarily driven by strength in everyday merchandise, including consumable, usable and edible products, along with strong demand for winter seasonal categories. These increases were offset by lower sales of spring and summer seasonal products.
Gross profit increased 8.8% to $563.6 million from $518.2 million in the prior year's first quarter, and gross margin increased 36 basis points to 33.5% from 33.1% in the prior year's first quarter. The increase in gross margin was primarily driven by strong sell-through of winter seasonal categories, partially offset by an increase in transportation costs from higher carrier rates and diesel fuel costs.
Selling, general and administrative (SG&A) expenses, including depreciation and amortization, increased 11.2% to $468.9 million from $421.8 million in the prior year's first quarter. As a percent of net sales, SG&A expenses increased 89 basis points to 27.9% from 27.0% in the first quarter of 2017. The increase in SG&A as a percent of net sales was primarily attributable to investments in team member wages at both the stores and distribution centers, higher store level costs due to increased utility and maintenance expenses from colder temperatures and investments in infrastructure to support the Company's strategic long-term growth initiatives. The Company estimates that approximately 25 basis points of the increase in SG&A as a percent of net sales were attributable to items that are discrete to the first quarter.
The effective income tax rate was 20.9% compared to 35.6% in the prior year's first quarter. The decrease in the effective income tax rate was primarily related to the U.S. Tax Cuts and Jobs Act that was signed into law in December 2017. In addition, the realization of discrete federal and state tax credits further reduced income taxes by approximately 200 basis points in the first quarter of 2018.
Net income increased 18.4% to $71.4 million in the first quarter of 2018 from $60.3 million in the prior year's first quarter and diluted earnings per share increased 24.0% to $0.57 from $0.46 in the first quarter of 2017.
The Company opened 15 new Tractor Supply stores and four Petsense stores in the first quarter of 2018 compared to 24 new Tractor Supply store openings and nine Petsense store openings (including the conversion of the two Hometown Pet stores) in the prior year's first quarter.