Tractor Supply Company reported that net sales for the first quarter of 2023 increased 9.1 percent to $3.30 billion from $3.02 billion in the first quarter of 2022. The increase in net sales was said to be driven by “positive sales contributions from the acquisition of Orscheln Farm and Home, new store openings and growth in comparable store sales.”
Comparable store sales increased 2.1 percent, as compared to an increase of 5.2 percent in the prior year’s first quarter, driven by comparable average ticket growth of 2.8 percent and a comparable average transaction count decrease of 0.7 percent. Comparable store sales growth reportedly reflects “continued strength in core year-round merchandise, including consumable, usable and edible (C.U.E.) products, offset by declines for seasonal goods.” The strongest regions for comparable store sales growth were reported as the South Atlantic, Texas/Oklahoma and Far West where there was less negative impact from seasonal shifts. The strength of these regions was reportedly offset by pressure in the Northeast and Midwest regions due to a mild January combined with a delay in the start of the spring selling season.
“While our first quarter net sales growth exceeded 9 percent, our comparable store sales were below our expectations, primarily due to less favorable spring weather trends,” said Hal Lawton, president and chief executive officer of Tractor Supply. “We remain confident in our outlook given our continued share gains, the results of our year-round product categories and the scaling of our strategic investments. We saw materially softer demand in our seasonal products due to a delay in the spring selling season across most of our markets, notably in the last few weeks of March, and to a lesser extent a mild January. We believe that our customer remains healthy, as evidenced by positive comparable transactions in our last two months, and that we continue to gain market share. As spring has arrived across our markets, we are pleased with the improved sales trends we are seeing. With the majority of the year ahead of us and given our track record of nimbly managing the business, we are confirming our financial outlook for fiscal 2023,” said Hal Lawton, president and chief executive officer of Tractor Supply.”
Gross margin increased 52 basis points to 35.5 percent of sales from 34.9 percent in the prior-year first quarter. The gross margin rate increase was said to be “primarily attributable to the company’s consistent execution of an everyday low price strategy, lower transportation costs and other margin-driving initiatives that were able to more than offset the impact from product cost inflation pressures and product mix from the robust growth of C.U.E. products.”
Selling, general and administrative expenses, including depreciation and amortization, increased 13.9 percent to $925.5 million from $812.2 million in the prior-year first quarter. As a percent of net sales, SG&A expenses increased 119 basis points to 28.1 percent from 26.9 percent in the first quarter of 2022. The increase in SG&A as a percent of net sales was attributable to deleverage given the moderate comparable store sales growth, as well as growth in depreciation and amortization, the onboarding of a new distribution center and the impact of the Orscheln Farm and Home acquisition.
Operating income of $244.4 million was effectively flat compared to $244.3 million in the first quarter of 2022.
Net income decreased 2.2 percent to $183.1 million from $187.2 million in Q1 2022, and diluted earnings per share was $1.65 in the first quarter of both 2023 and 2022.
The company opened 17 new Tractor Supply stores and three new Petsense by Tractor Supply stores in the first quarter of 2023.
Fiscal 2023 Financial Outlook
The company confirmed its fiscal 2023 financial guidance, initially provided on January 26, 2023.
For fiscal 2023, the company expects the following:
Anticipated capital expenditures include plans in 2023 to open a total of approximately 70 Tractor Supply stores, complete the Orscheln Farm and Home conversions to Tractor Supply, continue the Project Fusion remodels and garden center transformations, and open a total of 10 to 15 new Petsense by Tractor Supply stores.
Photo courtesy Tractor Supply
