Tractor Supply Company Reports Third Quarter 2023 Financial Results

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.

• 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 10^th 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.

For the complete press release, click here.

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.

Contact:

Mary Winn Pilkington – Media Relations – corporatecommunications@tractorsupply.com – (615) 440-4212

Source: Tractor Supply Company