TRACTOR SUPPLY REPORTS 2Q RESULTS
Aug. 4, 2014
Source: Tractor Supply Company press release
BRENTWOOD, Tenn., July 23, 2014 - Tractor Supply Co., the largest rural lifestyle retail store chain in the U.S., today announced financial results for its second fiscal quarter ended June 28, 2014.
Second Quarter Results
Net sales for the second quarter of 2014 increased 8.8% to $1.58 billion from $1.46 billion in the second quarter of 2013. Comparable store sales increased 1.9% versus a 7.2% increase in the prior year's second quarter. Comparable store sales were driven by continued strength of consumable, usable and edible products (C.U.E.) and solid traffic counts. This was partially offset by deflation, continued softness in our safe category and weaker than expected sales of certain seasonal products primarily in the Northern regions. As the quarter progressed, sales trends accelerated and weather became less of a factor. The softness in sales was principally in the first half of the quarter with the second half being consistent with the company's expectations.
Gross profit increased 8.8% to $550.5 million from $506.1 million in the prior year's second quarter. As a percent of sales, gross margin was flat to prior year quarter at 34.8% as increased transportation costs, mix of products, and the impact of slightly more sales-driving promotions offset the favorable impact of our key gross margin enhancing initiatives and the impact of deflation.
Selling, general and administrative expenses, including depreciation and amortization, increased to 21.5% of sales compared to 21.2% of sales in the prior year's second quarter. The increase as a percent of sales was primarily attributable to lower comparable store sales and higher employee benefit expenses, partially offset by lower incentive compensation expense.
Net income for the quarter increased 8.0% to $133.4 million from $123.6 million and diluted earnings per share increased 9.2% to $0.95 from $0.87 in the second quarter of the prior year.
The company opened 23 new stores in the second quarter compared to 26 new store openings in the prior year's second quarter.
Greg Sandfort, president and chief executive officer, stated, "Sales in our everyday core C.U.E. offerings were strong throughout the second quarter. However, unseasonably cool weather in the early part of the quarter negatively impacted sales of spring seasonal merchandise. As the weather improved midway through the quarter, sales of spring seasonal products improved and have continued to meet our expectations in July. I am proud of how our team responded resulting in our 25th consecutive quarter of increased comparable transaction count. Despite some of the early headwinds, we successfully delivered positive comparable store sales in each month of the quarter while minimizing the impact to merchandise margins. We ended the quarter in great shape from an inventory position and a go-forward merchandise perspective, and feel good about our ability to continue driving sales and earnings growth in the back half of the year."
First Six Months Results
Net sales increased 8.9% to $2.77 billion from $2.54 billion in the first six months of 2013. Comparable store sales increased 2.0% versus a 4.2% increase in the first six months of 2013.
Gross profit increased 10.3% to $946.8 million from $858.2 million and gross margin increased 40 basis points to 34.2% of sales from 33.8% of sales in the first six months of 2013. Selling, general and administrative expenses, including depreciation and amortization, increased 10.9% to $657.0 million, and increased as a percent of sales to 23.7% compared to 23.4% for the first six months of 2013.
Net income increased 8.7% to $182.2 million from $167.6 million and net income per diluted share increased 10.2% to $1.30 from $1.18 for the first six months of 2013. The company opened 55 new stores in the first six months of 2014 compared to 48 new store openings during the first six months of 2013.
Based upon the second quarter results, the company anticipates its fiscal year 2014 results will be at the low end of the previously provided ranges of $5.62 billion to $5.70 billion in net sales, 2.5% to 4.0% in comparable store sales and $2.54 to $2.62 in diluted earnings per share. For the full year, the Company now expects capital expenditures to range between $220 million and $230 million compared to its previous guidance of $240 million to $250 million, including spending to support 102 to 106 new store openings and completion of the new Store Support Center.