Tractor Supply Earnings and Revs Rise Y/Y - Analyst Blog

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Tractor Supply Company ( TSCO ) reported first-quarter 2014 earnings per share of 35 cents, which was 12.9% higher than the prior-year quarter. However, it came below the Zacks Consensus Estimate of 37 cents by 5.4%. Results benefited mainly from improvement in both the top line and margins. Also, this farm and ranch store retailer reiterated its outlook.

Revenue

Net sales in the quarter improved 9% year over year to $1,183.7 million, while it was below the Zacks Consensus Estimate of $1,207.0 million. The year-over-year rise in the top line was primarily driven by strong comparable-store sales (comps) performance. However, sales were adversely affected by deflationary trends and soft sales from the spring merchandise.

Quarter in Detail

Tractor Supply's comps climbed 2.2% year over year, as against a 0.5% increase in the prior-year quarter. The rise was driven by robust performances in core consumable, usable and edible (C.U.E) products, particularly winter and animal or pet-related merchandise.

Gross profit escalated 12.5% to $396.2 million compared with $352.1 million in the prior-year quarter. Gross margin expanded 110 basis points (bps) to 33.5%, primarily on the back of strong execution of its strategies related to price management of C.U.E. products, even in the presence of deflationary headwinds. Further, the company benefited from robust winter goods sales, facilitating lesser markdowns.                  

Selling, general and administrative expenses (SG&A), including depreciation and amortization, as a percentage of sales, rose 70 bps to 26.8% due to higher distribution center, store-level and occupancy expenses associated with extreme winter, on products related to snow removal, building repair and other utilities.  

On a stand-alone basis, SG&A expenses rose 11% to $290.3 million, in dollar terms, while depreciation & amortization expense came in at $27.2 million, 19.9% higher than last year.

Higher gross profit slightly offset by increased SG&A expenses, caused operating income to rise 15.9% to $78.7 million, while operating margin improved 40 bps to 6.7%, against 6.3% in the prior-year period.

Financial Position

Tractor Supply ended the quarter with cash and cash equivalents of $47.8 million, compared with a little over $57 million at the end of the prior-year quarter. As of Mar 29, 2014, stockholders' equity was $1,204.6 million, compared with $1,030.2 million as of Mar 30, 2013.

Store Update

In the first quarter of fiscal 2014, Tractor Supply opened 32 new stores, compared to the addition of 22 stores in the comparable prior-year period. This quarter marked the opening of the company's 1300th outlet, situated in Bullhead City in Arizona. As of Mar 29, 2014, the company operated a total of 1,308 stores in 48 states.

Looking Ahead

Following a stable quarter, Tractor Supply re-affirmed its fiscal 2014 outlook for all components. The company continues to expect its 2014 net sales to range from $5.62-$5.70 billion, with comps expected to improve 2.5%−4.0%. Moreover, Tractor Supply still anticipates 2014 earnings per share in the range of $2.54 to $2.62. Currently, the Zacks Consensus Estimate stands at $2.62 per share, just in line with the company's prediction.

Capital spends in fiscal 2014 continue to be expected in the $240 million - $250 million range. The company expects to allocate its capital expenditure to open about 102 to 106 new stores and towards the construction of the new Store Support Center, which is slated to open in 2014.

Management remains satisfied with this Zacks Rank #2 (Buy) company's quarterly performance, after battling the extreme weather, which reflects Tractor Supply's potential. The company remains focused on managing inventories, timing of shipments and its marketing strategies in order to exploit selling opportunities during the coming spring season.

Other Stocks to Consider

Other players in the retail industry, which look attractive at current levels, include Barnes & Noble Inc. ( BKS ), American Apparel Inc. ( APP ) and Foot Locker Inc. ( FL ). While Barnes & Noble holds a Zacks Rank #1 (Strong Buy), American Apparel and Foot Locker carry the same rank as Tractor Supply.



AMER APPAREL (APP): Free Stock Analysis Report

BARNES & NOBLE (BKS): Free Stock Analysis Report

FOOT LOCKER INC (FL): Free Stock Analysis Report

TRACTOR SUPPLY (TSCO): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: APP , BKS , FL , TSCO

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