BRENTWOOD, Tenn. — Tractor Supply Co. (NASDAQ: TSCO) announces financial results for its fourth quarter and fiscal year ended December 28, 2019.
- Fourth Quarter Net Sales Increased 2.7%; Fourth Quarter Comparable Store Sales Increased 0.1% on top of 5.7% comparable store sales growth in the same period last year
- Fiscal Year Net Sales Increased 5.6%; Fiscal Year Comparable Store Sales Increased 2.7%
- Fourth Quarter Diluted Earnings per Share (“EPS”) Increased 9.0% to $1.21; Fiscal Year Diluted EPS of $4.66 and Adjusted Diluted EPS of $4.681
- $696.0 Million of Capital Returned to Shareholders Through Share Repurchases and Quarterly Cash Dividends in Fiscal 2019
- Company Provides Fiscal 2020 Diluted EPS Outlook of $4.90 to $5.10
Greg Sandfort, Tractor Supply’s Strategic Advisor and retired Chief Executive Officer, effective January 13, 2020, commented, “Overall, 2019 was a solid year for the Tractor Supply team as we achieved record revenue and net income. While our comparable store sales performance for the fourth quarter was below our expectations, the weakness was driven principally by the effect of a period of warmer than expected weather impacting the sales of seasonal products and softness in several holiday discretionary categories. Despite the sales trends in the quarter, the Tractor Supply team executed well, controlling what we could control. This performance resulted in earnings per share in line with our guidance range as the team delivered gross margin expansion accompanied with disciplined cost management. I am optimistic about the future of Tractor Supply and where Hal and the team will lead the Company in the future.”
Hal Lawton, who was named Tractor Supply’s President and Chief Executive Officer, effective January 13, 2020, said, “I would like to thank Greg for his outstanding leadership and dedication to Tractor Supply over the last 12 years. As we move into 2020 and beyond, Tractor Supply is well positioned to build on our strengths, and I am excited about our opportunities for growth. At Tractor Supply, we have a differentiated customer experience, a robust set of competencies, and are well positioned to become an even more integral part of our customers’ lives. In the coming weeks and months, I will be focused on listening and learning from Tractor Supply team members and working with the leadership team to position Tractor Supply for continued long-term success.”
Fourth Quarter 2019 Highlights
Net sales increased 2.7% to $2.19 billion in the fourth quarter of 2019 from $2.13 billion in the fourth quarter of 2018. Comparable store sales increased 0.1% versus an increase of 5.7% in the prior year’s fourth quarter. The comparable store sales results included an increase in comparable average ticket of 1.8% and a decrease in comparable transaction count of 1.7%. The comparable store sales performance in the fourth quarter was primarily driven by strength in the consumable, usable and edible categories, which were generally in line with the Company’s expectations.
This performance was offset by weakness in cold weather seasonal and holiday discretionary categories. Softness in the cold weather seasonal categories such as heating equipment and insulated outerwear were impacted by the unseasonably warm weather in December which was the sixth warmest in 125 years. Emergency response categories were negatively impacted as the Company cycled hurricane-related sales from the fourth quarter of 2018. In addition, holiday discretionary categories were pressured by six fewer selling days between Thanksgiving and Christmas compared to last year, which had a greater impact on sales than the Company had anticipated.
Gross profit increased 3.6% to $741.8 million from $716.3 million, and gross margin rate increased 26 basis points to 33.8% from 33.6% in the prior year’s fourth quarter. The increase in gross margin was primarily attributable to a reduction in freight expense as a percent of net sales and, to a lesser extent, effective management of direct product margins.
Selling, general and administrative (SG&A) expenses, including depreciation and amortization, increased 2.9% to $551.4 million from $536.0 million in the prior year’s fourth quarter. As a percent of net sales, SG&A expenses increased three basis points to 25.2% from 25.1% in the fourth quarter of 2018. The increase in SG&A as a percent of net sales was primarily attributable to deleverage in store personnel, occupancy and other costs, including depreciation, from the decrease in comparable store sales and incremental costs associated with the new distribution facility in Frankfort, NY. These SG&A increases were partially offset by a decrease in incentive compensation as well as disciplined cost management.
The effective income tax rate was 22.3% compared to a rate of 22.2% in the prior year’s fourth quarter.
Net income was $144.2 million, or $1.21 per diluted share, compared to net income of $136.9 million, or $1.11 per diluted share, in the fourth quarter of 2018.
The Company opened 30 new Tractor Supply stores and five new Petsense stores in the fourth quarter of 2019. Additionally, in the fourth quarter of 2019, the Company closed one Petsense store.
Fiscal 2019 Results
Net sales increased 5.6% to $8.35 billion from $7.91 billion in fiscal 2018. Comparable store sales increased 2.7% versus a 5.1% increase in fiscal 2018. Gross profit increased 6.3% to $2.87 billion from $2.70 billion, and gross margin increased by 22 basis points to 34.4% from 34.2%.
SG&A expenses, including depreciation and amortization, increased 6.4% to $2.13 billion, and as a percent of net sales, SG&A expenses increased to 25.5% compared to 25.3% in fiscal 2018.
The effective income tax rate was 22.3% compared to a rate of 22.1% in fiscal 2018.
For fiscal 2019, net income was $562.4 million, or $4.66 per diluted share, compared to $532.4 million, or $4.31 per diluted share, in fiscal 2018. Excluding the after-tax impact of an executive transition agreement in the third quarter of fiscal 2019 of approximately $2.3 million, or $0.02 per diluted share, adjusted net income for fiscal 2019 was $564.7 million, or $4.68 per diluted share.
The Company repurchased approximately 5.4 million shares of its common stock for $533.3 million and paid quarterly cash dividends totaling $162.7 million, returning $696.0 million of capital to shareholders in fiscal 2019.
During fiscal 2019, the Company opened 80 new Tractor Supply stores and eight new Petsense stores and closed one Tractor Supply store and three Petsense stores.
Fiscal 2020 Outlook
The Company is providing the following initial guidance for the results of operations expected for fiscal 2020:
|Net Sales||$8.75 billion - $8.90 billion|
|Comparable Store Sales||+1.5% - +3.0%|
|Operating Margin Rate||~8.9%|
|Net Income||$575 million - $595 million|
|Earnings per Diluted Share||$4.90 - $5.10|
|Capital Expenditures||$225 million - $275 million|