Tractor Supply company reported that net sales for the fourth quarter of 2022 increased 20.7 percent to $4.01 billion for the period ended December 31 from $3.32 billion in the fourth quarter of 2021. The fourth quarter included an extra sales week as part of the company’s 53-week calendar in 2022, which represented 6.8 percentage points of the 20.7 percent sales growth.

Comparable store sales increased 8.6 percent, as compared to an increase of 12.7 percent in the prior year’s fourth quarter, driven by comparable average ticket growth of 6.3 percent and comparable average transaction count increase of 2.3 percent. Comparable store sales growth reflects continued strength in everyday, needs-based merchandise, including consumable, usable and edible products, winter seasonal goods and year-round product categories. The company estimates comparable store sales in the quarter benefited by approximately two percentage points from the late December winter storm. The acquisition of Orscheln Farm and Home in October 2022 added approximately $80 million to net sales in the fourth quarter.

Gross margin increased 28 basis points to 34.0 percent of sales from 33.8 percent in the prior year’s fourth quarter. The gross margin rate increase was primarily attributable to the company’s price management actions and other margin-driving initiatives that were able to offset the impact from year-over-year product cost inflation pressures, product mix from the robust growth of C.U.E. products and higher transportation costs.

Selling, general and administrative expenses, including depreciation and amortization, increased 21.4 percent to $1.00 billion from $827.5 million in the prior year’s fourth quarter. As a percent of net sales, SG&A expenses increased 14 basis points to 25.1 percent from 24.9 percent in the fourth quarter of 2021. The increase in SG&A as a percent of net sales was primarily attributable to the impact of transaction expenses and early integration costs associated with the Orscheln Farm and Home acquisition. Additionally, the company’s strategic growth initiatives, including related depreciation and amortization, and investments in team member compensation and benefits contributed to the increase. These items were partially offset by a reduction of COVID-19 response costs and leverage in occupancy and other costs from the increase in comparable store sales.

Operating income increased 22.6 percent to $359.2 million compared to $293.1 million in the fourth quarter of 2021. Given the transaction expenses and early integration costs recorded in the fourth quarter of 2022, the impact of the Orscheln Farm and Home acquisition was relatively neutral to operating income in the fourth quarter and reduced the operating margin rate by approximately 20 basis points.

Net income increased 22.4 percent to $270.9 million from $221.3 million, and diluted earnings per share increased 25.9 percent to $2.43 a share from $1.93 a share in the fourth quarter of 2021. The benefit of the 53rd week contributed approximately 16 cents to diluted EPS.

The company opened 39 new Tractor Supply stores and six new Petsense by Tractor Supply stores in the fourth quarter of 2022. In October 2022, Tractor Supply acquired 81 stores from Orscheln Farm and Home that will be rebranded to Tractor Supply by the end of 2023.

Fiscal 2022 Results
Net sales for fiscal 2022 increased 11.6 percent to $14.20 billion from $12.73 billion in fiscal 2021. The fiscal year included an extra sales week as part of the company’s 53-week calendar in 2022, which represented 1.8 percentage points of the 11.6 percent sales growth. Comparable store sales increased 6.3 percent versus a 16.9 percent increase in fiscal 2021.

Gross margin decreased 17 basis points to 35.0 percent from 35.2 percent in fiscal 2021. SG&A expenses, including depreciation and amortization, increased 11.6 percent to $3.54 billion from $3.17 billion in fiscal 2021. As a percent of net sales, SG&A expenses were flat at 24.9 percent compared to fiscal 2021. Operating income increased 9.8 percent to $1.43 billion compared to $1.31 billion in fiscal 2021.

Net income increased 9.2 percent to $1.09 billion from $997.1 million, and diluted EPS increased 12.8 percent to $9.71 a share from $8.61 a share in fiscal 2021. The benefit of the 53rd week contributed approximately 16 cents to diluted EPS.

During fiscal 2022, the company opened 63 new Tractor Supply stores and nine new Petsense by Tractor Supply stores and closed one Petsense by Tractor Supply store. In October 2022, Tractor Supply acquired 81 stores from Orscheln Farm and Home that will be rebranded to Tractor Supply by the end of 2023.

“Tractor Supply had another remarkable year in 2022 as we continued to gain market share and advance our strategic initiatives. For the fourth quarter, while we had an incremental benefit from the late December winter storm, our underlying results were at the high end of our expectations. Our strong results throughout 2022 are directly attributable to the dedication of the more than 50,000 Tractor Supply Team Members who are passionate about Life Out Here. The team achieved significant milestones in the history of Tractor Supply including record sales and profitability and executed meaningful investments to enable future growth. In just over two years since introducing our Life Out Here strategy, we have executed Project Fusion in nearly 30 percent of our store base, built more than 300 garden centers, expanded our digital and supply chain capabilities and grown our Neighbor’s Club membership 47 percent to more than 28 million members. These investments are resonating with our customers as we exited the year with strong traffic growth,” said Hal Lawton, Chief Executive Officer of Tractor Supply.

Lawton continued, “Tractor Supply’s needs-based, the demand-driven business model has stood the test of time with consistent and sustainable growth. As we celebrate our 85th anniversary this year, our future couldn’t be brighter. With a solid foundation, we plan to build on our momentum in 2023. We believe we have the right strategies to manage through the near-term and to deliver long-term compounding growth and value creation.”

Fiscal 2023 Financial Outlook
The company is providing its financial guidance for fiscal 2023, a 52-week year compared to fiscal 2022, a 53-week year. This outlook is based on what the company can reasonably predict at this time.

For fiscal 2023, the company expects the following:

  • Net Sales: $15.0 billion to $15.3 billion
  • Comparable Store Sales: +3.5 percent to +5.5 percent
  • Operating Margin Rate: 10.1 percent to 10.3 percent
  • Net Income: $1.13 billion to $1.17 billion
  • Earnings per Diluted Share: $10.30 to $10.60
  • Capital Expenditures: $700 million to $775 million
  • Share Repurchases: $575 million to $675 million

Photo courtesy Tractor Supply