Tractor Supply Company Reports First Quarter Results
Earnings per Share Increased 19.0% to $0.50; Sales Increased 10.2% to $1.47 Billion; Comparable Store Sales Increased 4.9%
/EINPresswire.com/ -- BRENTWOOD, TN--(Marketwired - April 20, 2016) - Tractor Supply Company (NASDAQ: TSCO), the largest rural lifestyle retail store chain in the United States, today announced 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."
Mr. 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
Included in this forecast are additional expenses related to the first year of operations for the new Casa Grande, Arizona 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 53
Conference Call Information
Tractor Supply Company will be hosting a conference call at 5:00 p.m. Eastern Time today to discuss the quarterly and full year results. The call will be broadcast simultaneously over the Internet on the Company's website at IR.TractorSupply.com.
Please allow extra time prior to the call to visit the site and download the streaming media software required to listen to the Internet broadcast.
A replay of the webcast will also be available at IR.TractorSupply.com shortly after the conference call concludes.
About Tractor Supply Company
At March 26, 2016, Tractor Supply Company operated 1,521 stores in 49 states. The Company's stores are focused on supplying the lifestyle needs of recreational farmers and ranchers and others who enjoy the rural lifestyle, as well as tradesmen and small businesses. Stores are located primarily in towns outlying major metropolitan markets and in rural communities. The Company offers the following comprehensive selection of merchandise: (1) equine, livestock, pet and small animal products, including items necessary for their health, care, growth and containment; (2) hardware, truck, towing and tool products; (3) seasonal products, including heating, lawn and garden items, power equipment, gifts and toys; (4) work/recreational clothing and footwear; and (5) maintenance products for agricultural and rural use.
Forward Looking Statements
As with any business, all phases of the Company's operations are subject to influences outside its control. This information contains certain forward-looking statements, including statements regarding sales and earnings growth, estimated results of operations, capital expenditures, marketing, merchandising and strategic initiatives and new store and distribution center openings in future periods. These forward-looking statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to the finalization of the Company's quarterly financial and accounting procedures, and may be affected by certain risks and uncertainties, any one, or a combination, of which could materially affect the results of the Company's operations. These factors include, without limitation, general economic conditions affecting consumer spending, the timing and acceptance of new products in the stores, the timing and mix of goods sold, purchase price volatility (including inflationary and deflationary pressures), the ability to increase sales at existing stores, the ability to manage growth and identify suitable locations, failure of an acquisition to produce anticipated results, the ability to successfully manage expenses and execute our key gross margin enhancing initiatives, the availability of favorable credit sources, capital market conditions in general, the ability to open new stores in the manner and number currently contemplated, the impact of new stores on our business, competition, weather conditions, the seasonal nature of our business, effective merchandising initiatives and marketing emphasis, the ability to retain vendors, reliance on foreign suppliers, the ability to attract, train and retain qualified employees, product liability and other claims, changes in federal, state or local regulations, potential judgments, fines, legal fees and other costs, breach of information systems or theft of employee or customer data, ongoing and potential future legal or regulatory proceedings, management of our information systems, failure to develop and implement new technologies, the failure of customer-facing technology systems, business disruption including from the implementation of supply chain technologies, effective tax rate changes and results of examination by taxing authorities, the ability to maintain an effective system of internal control over financial reporting, and changes in accounting standards, assumptions and estimates. Forward-looking statements made by or on behalf of the Company are based on knowledge of its business and the environment in which it operates, but because of the factors listed above, actual results could differ materially from those reflected by any forward-looking statements. Consequently, all of the forward-looking statements made are qualified by these cautionary statements and those contained in the Company's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. There can be no assurance that the results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business and operations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
FIRST QUARTER ENDED
-------------------------------------
March 26, 2016 March 28, 2015
------------------ ------------------
% of % of
Sales Sales
------- -------
Net sales $1,467,797 100.0% $1,331,352 100.0%
Cost of merchandise sold 973,353 66.3 886,747 66.6
---------- ------- ---------- -------
Gross profit 494,444 33.7 444,605 33.4
Selling, general and administrative
expenses 352,672 24.0 321,476 24.1
Depreciation and amortization 33,577 2.3 30,282 2.3
---------- ------- ---------- -------
Operating income 108,195 7.4 92,847 7.0
Interest expense, net 1,125 0.1 866 0.1
---------- ------- ---------- -------
Income before income taxes 107,070 7.3 91,981 6.9
Income tax expense 39,402 2.7 33,941 2.5
---------- ------- ---------- -------
Net income $ 67,668 4.6% $ 58,040 4.4%
========== ======= ========== =======
Net income per share:
Basic $ 0.51 $ 0.43
========== ==========
Diluted $ 0.50 $ 0.42
========== ==========
Weighted average shares outstanding:
Basic 133,630 136,347
Diluted 134,709 137,735
Dividends declared per common share
outstanding $ 0.20 $ 0.16
========== ==========
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
March 26, 2016 March 28, 2015
--------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 74,501 $ 57,133
Inventories 1,470,691 1,370,965
Prepaid expenses and other current
assets 80,858 64,967
--------------- ---------------
Total current assets 1,626,050 1,493,065
Property and equipment:
Land 87,005 80,705
Buildings and improvements 838,336 713,132
Furniture, fixtures and equipment 534,335 466,663
Computer software and hardware 187,477 161,884
Construction in progress 37,137 52,523
--------------- ---------------
Property and equipment, gross 1,684,290 1,474,907
Accumulated depreciation and
amortization (828,789) (725,155)
--------------- ---------------
Property and equipment, net 855,501 749,752
Goodwill 10,258 10,258
Deferred income taxes 55,798 49,385
Other assets 16,921 19,550
--------------- ---------------
Total assets $ 2,564,528 $ 2,322,010
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 582,745 $ 585,551
Accrued employee compensation 10,994 9,483
Other accrued expenses 178,747 180,829
Current portion of long-term debt 10,000 -
Current portion of capital lease
obligations 1,081 441
Income taxes payable 29,830 28,684
--------------- ---------------
Total current liabilities 813,397 804,988
Long-term debt 238,641 60,000
Capital lease obligations, less current
maturities 21,761 8,761
Deferred rent 86,960 80,946
Other long-term liabilities 51,066 52,437
--------------- ---------------
Total liabilities 1,211,825 1,007,132
--------------- ---------------
Stockholders' equity:
Common stock 1,354 1,347
Additional paid-in capital 613,686 544,042
Treasury stock (1,528,892) (1,185,030)
Retained earnings 2,266,555 1,954,519
--------------- ---------------
Total stockholders' equity 1,352,703 1,314,878
--------------- ---------------
Total liabilities and stockholders'
equity $ 2,564,528 $ 2,322,010
=============== ===============
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended
--------------------------------
March 26, 2016 March 28, 2015
--------------- ---------------
Cash flows from operating activities:
Net income $ 67,668 $ 58,040
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 33,577 30,282
Loss on disposition of property and
equipment 80 (47)
Share-based compensation expense 5,269 4,999
Excess tax benefit of stock options
exercised (3,090) (8,181)
Deferred income taxes (604) 359
Change in assets and liabilities:
Inventories (186,316) (255,515)
Prepaid expenses and other current
assets 6,652 1,477
Accounts payable 155,496 214,728
Accrued employee compensation (31,690) (27,573)
Other accrued expenses (15,879) (8,074)
Income taxes 31,234 24,429
Other 157 1,389
--------------- ---------------
Net cash provided by operating
activities 62,554 36,313
--------------- ---------------
Cash flows from investing activities:
Capital expenditures (36,732) (48,767)
Proceeds from sale of property and
equipment 20 265
--------------- ---------------
Net cash used in investing activities (36,712) (48,502)
--------------- ---------------
Cash flows from financing activities:
Borrowings under senior credit facility 475,000 110,000
Repayments under senior credit facility (375,000) (50,000)
Debt issuance costs (1,380) -
Excess tax benefit of stock options
exercised 3,090 8,181
Principal payments under capital lease
obligations (246) (90)
Repurchase of shares to satisfy tax
obligations (843) (1,078)
Repurchase of common stock (99,102) (47,945)
Net proceeds from issuance of common
stock 10,041 20,948
Cash dividends paid to stockholders (26,714) (21,828)
--------------- ---------------
Net cash (used in) provided by
financing activities (15,154) 18,188
--------------- ---------------
Net change in cash and cash equivalents 10,688 5,999
Cash and cash equivalents at beginning of
period 63,813 51,134
--------------- ---------------
Cash and cash equivalents at end of period $ 74,501 $ 57,133
=============== ===============
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 791 $ 464
Income taxes 8,642 8,979
Supplemental disclosures of non-cash
activities:
Property and equipment acquired through
capital lease $ 5,218 $ 4,122
Non-cash accruals for construction in
progress 15,652 21,181
Selected Financial and Operating Information
(Unaudited)
FIRST QUARTER ENDED
--------------------------------
March 26, 2016 March 28, 2015
--------------- ---------------
Sales Information:
------------------------------------------
Comparable store sales increase 4.9% 5.7%
New store sales (% of total sales) 5.3% 6.2%
Average transaction value $ 42.48 $ 42.08
Comparable store average transaction value
increase 0.7% 0.8%
Comparable store average transaction count
increase 4.2% 4.8%
Total selling square footage (000's) 24,498 22,810
Exclusive brands (% of total sales) 31.7% 32.2%
Imports (% of total sales) 12.3% 11.5%
Store Count Information:
------------------------------------------
Beginning of period 1,488 1,382
New stores opened 36 41
Stores closed (3) (1)
--------------- ---------------
End of period 1,521 1,422
=============== ===============
Pre-opening costs (000's) $ 2,511 $ 2,767
Balance Sheet Information:
------------------------------------------
Average inventory per store (000's) (a) $ 914.0 $ 905.5
Inventory turns (annualized) 2.94 3.02
Share repurchase program:
Cost (000's) $ 99,102 $ 47,945
Average purchase price per share $ 83.70 $ 80.42
Capital Expenditures (millions):
------------------------------------------
New and relocated stores and stores not
yet opened $ 22.5 $ 20.7
Information technology 6.8 6.5
Existing stores 4.4 2.7
Distribution center capacity and
improvements 3.0 18.4
Corporate and other - 0.5
--------------- ---------------
Total $ 36.7 $ 48.8
------------------------------------------ =============== ===============
(a) Assumes average inventory cost, excluding inventory in transit.
Anthony F. Crudele
Chief Financial Officer
Christine Skold
Vice President, Investor Relations
(615) 440-4000
Investors:
John Rouleau/Rachel Schacter
ICR
Media:
Alecia Pulman/Brittany Rae Fraser
ICR
(203) 682-8200
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