BRENTWOOD, Tenn. — Tractor Supply Co. (NASDAQ: TSCO), the largest rural lifestyle retail store chain in the U.S., announces its financial results for its first quarter ended March 26, 2016.
First Quarter Results
Net sales increased 10.2% to $1.47 billion from $1.33 billion in the prior year's first quarter. Comparable store sales increased 4.9% compared to a 5.7% increase in the prior year period. The increase in comparable store sales was driven by an increase in both traffic and ticket, with comparable store transaction count increasing 4.2% and average ticket increasing 0.7%. Sales were broad-based, with all of our major product categories and geographic regions generating positive comparable store sales. Solid performance in consumable, usable and edible (C.U.E.) products, specifically pet and livestock consumables benefited sales. Seasonal products including lawn and garden, riding lawn mowers and fencing also performed very well, driven in part by early spring weather in the first quarter of 2016.
Gross profit increased 11.2% to $494.4 million from $444.6 million in the prior year's first quarter, and gross margin improved to 33.7% compared to 33.4% in the prior year period. The increase in gross margin was driven primarily by improved merchandise margin, which was partially offset by increased transportation costs. The improvement in merchandise margin resulted principally from our key margin initiatives of price management, imports and exclusive brands as well as cost negotiations and vendor support programs.
Selling, general and administrative (SG&A) expenses, including depreciation and amortization, increased 9.8% to $386.2 million from $351.8 million in the prior year period. As a percent of net sales, SG&A decreased by 10 basis points to 26.3%. SG&A benefited from the strong comparable store sales increase and effective expense control and payroll management.
Net income increased 16.6% to $67.7 million from $58.0 million and diluted earnings per share increased 19.0% to $0.50 from $0.42 in the first quarter of the prior year.
The company opened 36 new stores and closed three stores, all of which were Del's stores, in the first quarter of 2016 compared to 41 new store openings and one store closure in the prior year period.
Greg Sandfort, president and chief executive officer, stated, "We are pleased with our results and execution in the first quarter. Comparable store sales increased 4.9% and were balanced across product categories and regions. We know the seasons and weather can influence the timing of when our customers buy certain products, but we also know it is our job to manage the business accordingly. Once again, the team did an excellent job and we believe our first quarter results demonstrate the resiliency of our business model."
Sandfort continued, "Although we are off to a solid start in the first quarter, we recognize the importance of the spring selling season to our first half performance. We believe we have the inventory, people and processes in place to continue to meet the needs of our customers and drive our business."
Fiscal 2016 Outlook
The company is reiterating the following guidance for the results of operations expected for fiscal 2016:
Net sales: $6.9 billion - $7.0 billion
Comparable store sales - 3.5% - 5.0%
Net income: $455 million - $467 million
Earnings per diluted share: $3.40 - $3.48
Capital expenditures: $230 million - $250 million
View additional information and financial tables. Included in this forecast are additional expenses related to the first year of operations for the new Casa Grande, Ariz., distribution center and the continued transition of the company's Del's stores to Tractor Supply stores. The forecast also considers the impact of the additional 53rd week in fiscal 2016. Anticipated capital expenditures include spending to support 115-120 new store openings.