Tractor Supply Company
) 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
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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
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,
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
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.
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.
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
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.
American Apparel Inc.
Foot Locker Inc.
). While Barnes & Noble holds a Zacks Rank #1 (Strong Buy),
American Apparel and Foot Locker carry the same rank as Tractor