BRENTWOOD, Tenn. — Tractor Supply Company (NASDAQ: TSCO), the largest rural lifestyle retailer in the United States, today announced financial results for its fourth quarter and fiscal year ended Dec. 26, 2020.
- Company Achieves Record Sales and Earnings for Fiscal 2020
- Fourth Quarter Net Sales Increased 31.3%; Fourth Quarter Comparable Store Sales Increased 27.3%
- Fiscal Year Net Sales Increased 27.2%; Fiscal Year Comparable Store Sales Increased 23.1%
- Company Recorded Non-Cash Pre-Tax Impairment Charges of $74.1 million, or $0.49 per diluted share after-tax, related to the Petsense Business
- Fourth Quarter Diluted Earnings per Share (“EPS”) of $1.15 and Adjusted Diluted EPS of $1.641
- Fiscal Year 2020 Diluted EPS of $6.38 and Adjusted Diluted EPS of $6.871
- Company Provides Fiscal 2021 Diluted EPS Outlook of $6.50 to $6.90
- Board of Directors Increases Quarterly Dividend by 30% to $0.52 per share
“We are incredibly proud of all the Tractor Supply team achieved in 2020 including record sales and operating performance for the year. My thanks and appreciation go out to the team for their support of each other, our customers and our longstanding commitment to the rural lifestyle. Our team remained agile in a challenging operating environment as we experienced unprecedented demand and welcomed a record number of new and reengaged customers to Tractor Supply,” said Hal Lawton, Tractor Supply’s President and Chief Executive Officer. “The team has done an exemplary job operating the business at elevated rates in the midst of a global pandemic, all while laying the foundation for our Life Out Here Strategy. Going forward, we believe our resilient business model with a differentiated and loyal customer base, our strategic investments to capture growth opportunities and the strength of our balance sheet position us to capitalize on the momentum in our business in 2021 and beyond.”
Lawton continued, “The 30% increase in our quarterly dividend by the Board of Directors and our recently resumed share repurchase program reflect our strong earnings performance and robust cash flows in 2020 and confidence in our business, as well as our ongoing commitment to total shareholder return.”
Fourth Quarter 2020 Highlights
Net sales increased 31.3% to $2.88 billion in the fourth quarter of 2020 from $2.19 billion in the fourth quarter of 2019. Comparable store sales increased 27.3% vs. an increase of 0.1% in the prior year’s fourth quarter. The COVID-19 pandemic continued to have a significant, positive impact on consumer demand in the fourth quarter of 2020 across all of the Company’s major product categories as customers focused on the care of their homes, land and animals. Comparable store sales for the fourth quarter 2020 were driven by comparable average transaction count and ticket growth of 14.3% and 13.0%, respectively. The comparable store sales results also reflect a strong demand for everyday merchandise, including consumable, usable and edible products, and robust growth for seasonal categories. All geographic regions of the Company had robust comparable store sales growth. In addition, the Company’s e-commerce sales experienced triple-digit percentage growth for the third consecutive quarter.
Gross profit increased 34.2% to $995.5 million from $741.8 million in the fourth quarter of 2019, and gross margin rate increased 75 basis points to 34.6% from 33.8% in the prior year’s fourth quarter. The increase in gross margin was primarily attributable to a lower depth and frequency of sales promotions and less clearance activity, partially offset by higher transportation costs as a percent of net sales.
Selling, general and administrative (SG&A) expenses, including depreciation and amortization and asset impairment, increased 47.1% to $811.1 million from $551.4 million in the fourth quarter of 2019. As a percent of net sales, SG&A expenses increased 302 basis points to 28.2% from 25.2% in the prior year’s fourth quarter. The fourth quarter of 2020 results include non-cash impairment charges for the Petsense business of $74.1 million due primarily to a strategic reassessment of the business and a decision to reduce the number of new store openings planned over the long term and, to a lesser extent, the impairment of long-lived assets at underperforming locations. On an adjusted basis excluding the impact of the discrete impairment charges, SG&A expenses increased 33.7% to $737.0 million, or 46 basis points to 25.6% as a percent of net sales for the fourth quarter of 2020. The increase in adjusted SG&A as a percent of net sales was primarily attributable to incremental costs related to the COVID-19 pandemic, increased incentive compensation due to record sales and profit performance in the quarter with the majority allocated to the store teams, and investments in strategic initiatives. Additional costs incurred due to the COVID-19 pandemic include appreciation bonuses to Team Members in the Company’s stores and distribution centers as well as additional labor hours and supply costs dedicated to cleaning and sanitation to enhance the health and safety of Team Members and customers.
The effective income tax rate was 23.0% compared to a rate of 22.3% in the prior year’s fourth quarter.
Net income was $135.9 million, or $1.15 per diluted share, compared to net income of $144.2 million, or $1.21 per diluted share, in the fourth quarter of 2019. On an adjusted basis, net income was $193.2 million, or $1.64 per diluted share, in the fourth quarter of 2020.
The Company opened 19 new Tractor Supply stores and three new Petsense stores and closed four Petsense stores in the fourth quarter of 2020.
Fiscal 2020 Results
Net sales increased 27.2% to $10.62 billion in fiscal 2020 from $8.35 billion in fiscal 2019. Comparable store sales increased 23.1% vs. a 2.7% increase in fiscal 2019. Gross profit increased 31.0% to $3.76 billion from $2.87 billion, and gross margin increased by 104 basis points to 35.4% from 34.4%.
SG&A expenses, including depreciation and amortization and asset impairment, increased 29.9% to $2.76 billion, and as a percent of net sales, SG&A expenses increased to 26.0% compared to 25.5% in fiscal 2019. On an adjusted basis excluding the impact of the discrete impairment charges, SG&A expenses increased 26.4% to $2.69 billion, or 25.3% as a percent of net sales in fiscal 2020.
The effective income tax rate was 22.6% compared to a rate of 22.3% in fiscal 2019.
For fiscal 2020, net income was $749.0 million, or $6.38 per diluted share, compared to $562.4 million, or $4.66 per diluted share, in fiscal 2019. On an adjusted basis, net income was $806.2 million, or $6.87 per diluted share, for fiscal 2020.
The Company repurchased approximately 3.4 million shares of its common stock for $343.0 million and paid quarterly cash dividends totaling $174.6 million, returning $517.6 million of capital to shareholders in fiscal 2020.
During fiscal 2020, the Company opened 80 new Tractor Supply stores and nine new Petsense stores and closed one Tractor Supply store and seven Petsense stores.
Fiscal 2021 Outlook
The impact that the COVID-19 pandemic will have on the broader economy and the Company’s fiscal 2021 results remains uncertain. Given the nature of the COVID-19 pandemic on the macro economy and the consumer, the Company is planning for fiscal 2021 based on a range of potential outcomes. The Company is providing the following initial guidance for the results of operations expected for fiscal 2021:
|Net Sales||$10.7-$11.0 billion|
|Comparable Store Sales||(2.0%) – +1.0%|
|Operating Margin Rate||9.3%-9.6%|
|Net Income||$750 – $800 million|
|Earnings per Diluted Shares||$6.50 – $6.90|
|Capital Expenditures||$450 million – $550 million|
The Company’s diluted EPS guidance assumes an estimated effective income tax rate of 22.5% to 22.8%.
Share repurchases for fiscal 2021 are expected to reduce diluted weighted average shares outstanding by one to two percent. Anticipated capital expenditures include new store growth of approximately 80 new Tractor Supply and 10 new Petsense store openings.
The Company continues to have a strong liquidity position with current cash and cash equivalents of approximately $1.34 billion and no amounts drawn on its $500 million revolving credit facility as of December 26, 2020.