Tractor Supply Company, the largest retail farm and ranch store chain in the United States, today announced financial results for its third fiscal quarter ended September 24, 2011.
Third Quarter Results
Net sales increased 17.9% to $977.8 million from $829.1 million in the prior year's third quarter. Same-store sales increased 11.5% compared to a 5.0% increase in the prior-year period. The same-store sales increase was driven by continued strong results in core consumable, usable and edible (C.U.E.) products, principally animal- and pet-related merchandise; seasonal heating products and emergency response merchandise related to Hurricane Irene. Additionally, same-store sales were favorably impacted by higher selling prices due to inflation in key C.U.E. categories.
Gross margin increased 18.8% to $327.6 million, or 33.5% of sales, compared to $275.7 million, or 33.2% of sales, in the prior year's third quarter. The increase in gross margin reflects improved direct product margin, partially offset by increased transportation costs and product mix. Direct product margin increased as a result of improved inventory management, strategic sourcing, private branding and pricing.
Selling, general and administrative expenses, including depreciation and amortization, improved to 26.5% of sales compared to 27.5% of sales in the prior year's third quarter. The improvement as a percent of sales was primarily attributable to strong same-store sales and expense control with respect to store operating costs.
Net income for the quarter was $42.7 million, or $0.58 per diluted share, compared to net income of $29.9 million, or $0.40 per diluted share, in the third quarter of the prior year.
The Company opened 12 stores, relocated one store and closed one store compared to opening nine stores in the prior year's third quarter.
Jim Wright, Chairman and Chief Executive Officer, stated, "During the third quarter, we generated double-digit increases in both sales and earnings on top of last year's record results while improving gross margin and leveraging SG&A costs. This strong performance, which also included positive ticket and traffic, reflects the impact of our strategic initiatives and our ability to respond to our customers' everyday rural lifestyle needs. Additionally, we executed exceptionally well and successfully managed through the inflationary environment. We are delighted that we continue to experience broad-based strength across the business."
First Nine Months Results
Net sales increased 14.9% to $2.99 billion from $2.61 billion in the first nine months of 2010. Same-store sales increased 8.5% compared to a 4.8% increase in the first nine months of 2010. Gross margin increased 15.8% to $1.00 billion, or 33.5% of sales, compared to $866.7 million, or 33.3% of sales, in the first nine months of 2010.
Selling, general and administrative expenses, including depreciation and amortization, increased 12.3% to $762.5 million, or 25.5% of sales, compared to $679.2 million, or 26.1% of sales, for the first nine months of 2010.
Net income was $152.2 million, or $2.05 per diluted share, compared to net income of $117.8 million, or $1.58 per diluted share, for the first nine months of 2010.
The Company opened 54 new stores, relocated two stores and closed one store compared to 47 new store openings and one store closure during the first nine months of 2010.
Based on strong performance in the third quarter, the Company raised its financial expectations for fiscal 2011. Net sales are expected to range between $4.15 billion and $4.17 billion compared to the Company's previously expected range of $4.10 billion to $4.14 billion. Same-store sales for the year are now expected to increase 6.5% to 7.0% compared to the prior expectation for an increase of 5.0% to 6.0%. The Company now anticipates net income will range between $2.85 and $2.89 per diluted share compared to its previous guidance of $2.75 to $2.82 per diluted share.
Mr. Wright concluded, "Our track record of consistently generating strong results demonstrates that we are benefiting from our strategic initiatives which, collectively, have strengthened the structural foundation of the Tractor Supply Company business and brand. As we look ahead, we are well-prepared for the upcoming fall, winter and holiday selling season and believe that our merchandising and marketing initiatives will allow us to gain market share. With the right strategies, capital structure and team in place, we are confident in our outlook for 2011 and our ability to continue to build on our momentum for the long-term."
Conference Call Information
Tractor Supply Company will be hosting a conference call at 5:00 p.m. Eastern Time today to discuss the quarterly results. The call will be broadcast simultaneously over the Internet on the Company's homepage at TractorSupply.com and can be accessed under the link "Investor Relations." The webcast will be archived shortly after the conference call concludes and will be available through November 2, 2011.