Tractor Supply Company saw fourth quarter sales decrease 8.6 percent to $3.66 billion, compared to $4.01 billion in the fourth quarter of 2022. The company said the prior year’s fourth quarter included an extra sales week as part of the company’s 53-week calendar in 2022, which negatively impacted the period-over-period sales performance by approximately 5.6 percentage points. The decrease in net sales was also attributable to a decline in comparable store sales, partially offset by positive sales contributions from new stores. 

Comparable store sales decreased 4.2 percent for the period, on top of an increase of 8.6 percent in the prior-year quarter, driven by a comparable average ticket decline of 1.5 percent and a comparable average transaction count decline of 2.7 percent. Comparable store sales performance reflects continued strength in year-round consumable, usable and edible (CUE) categories, offset by softness in cold weather products, discretionary categories, and, to a lesser extent, big ticket items. In the fourth quarter of 2022, comparable store sales benefited approximately 200 basis points from a late December winter storm.

Gross profit decreased 5.2 percent to $1.29 billion from $1.36 billion in the prior-year quarter, while gross margin increased 129 basis points to 35.3 percent of sales from 34.0 percent in the prior-year quarter. The gross margin rate increase was attributable to ongoing lower transportation costs and disciplined product cost management, modestly offset by a negative product mix. Gross margin continued to benefit from the company’s ongoing execution of an everyday low-price strategy, complemented by using its Neighbor’s Club loyalty program.

SG&A expenses, including depreciation and amortization, decreased 4.5 percent to $958.8 million from $1.00 billion in the prior year’s fourth quarter. As a percentage of net sales, SG&A expenses increased 113 basis points to 26.2 percent from 25.1 percent in the fourth 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. These factors were partially offset by a decrease in incentive compensation and the completion of a previously announced sale-leaseback of five Tractor Supply store locations. The sale-leaseback benefited SG&A by approximately 40 basis points.

Operating income decreased 7.0 percent to $334.2 million from $359.2 million in the fourth quarter of 2022.

The effective income tax rate was 23.1 percent compared to 22.4 percent in the fourth quarter of 2022.

Net income decreased 8.5 percent to $247.9 million from $270.9 million. Diluted EPS decreased 6.2 percent to $2.28 a share compared to $2.43 a share in the fourth quarter of 2022. The benefit of the 53rd week contributed approximately $0.16 to diluted EPS in the fourth quarter of 2022.

The company repurchased approximately 0.5 million shares of its common stock for $110.4 million and paid quarterly cash dividends totaling $111.4 million, returning $221.8 million of capital to shareholders in the fourth quarter of 2023.

The company opened 19 new Tractor Supply stores and three new Petsense by Tractor Supply stores and closed one Tractor Supply store in the fourth quarter of 2023.

Fiscal Year 2023 Results

  • Net sales for fiscal 2023 increased 2.5 percent to $14.56 billion from $14.20 billion in fiscal 2022.
  • Comparable store sales were even with the prior year versus a 6.3 percent increase in fiscal 2022.
  • Gross profit increased 5.1 percent to $5.23 billion from $4.97 billion in fiscal 2022, and gross margin increased 92 basis points to 35.9 percent from 35.0 percent in fiscal 2022.
  • SG&A expenses, including depreciation and amortization and asset impairment, increased 6.0 percent to $3.75 billion from $3.54 billion in fiscal 2022. As a percent of net sales, SG&A expenses increased 86 basis points to 25.8 percent from 24.9 percent in fiscal 2022.
  • Operating income increased 3.1 percent to $1.48 billion compared to $1.43 billion in fiscal 2022.
  • The effective income tax rate was 22.7 percent compared to 22.5 percent in fiscal 2022.
  • Net income increased 1.7 percent to $1.11 billion from $1.09 billion, and diluted EPS increased 3.9 percent to $10.09 from $9.71 in fiscal 2022. The benefit of the 53rd week contributed approximately $0.16 to diluted EPS in fiscal 2022.

In fiscal 2023, the company repurchased approximately 2.7 million shares of its common stock for $597.0 million. The company also paid quarterly cash dividends totaling $449.6 million during fiscal 2023, returning $1.05 billion of capital to shareholders.

During fiscal 2023, the company opened 70 new Tractor Supply stores and 13 new Petsense by Tractor Supply stores and closed one Tractor Supply store and one Petsense by Tractor Supply store. In 2023, the company rebranded 81 Orscheln Farm and Home stores to Tractor Supply, which it acquired in 2022.

Fiscal Year 2024 Financial Outlook
The company is providing its financial guidance for fiscal 2024. This outlook is based on what the company can reasonably predict. For fiscal 2024, the company expects the following:

  • Net Sales: $14.7 billion to $15.1 billion
  • Comparable Store Sales: -1.0 percent to +1.5 percent
  • Operating Margin Rate: 9.7 percent to 10.1 percent
  • Net Income: $1.06 billion to $1.13 billion
  • Earnings per Diluted Share: $9.85 to $10.50
  • Capital Expenditures, Net of Sale-Leaseback Proceeds: $625 million to $700 million
  • Share Repurchases: $575 million to $625 million

Capital plans for 2024 include opening approximately 80 Tractor Supply stores, continuing Project Fusion remodels and garden center transformations, completing its 10th distribution center and opening 10 to 15 new Petsense by Tractor Supply stores. The fiscal year 2024 EPS guidance also includes benefits from the company’s ongoing sale-leaseback transactions, which the company anticipates will align with the prior year’s transactions.

Image courtesy Tractor Supply