Tractor Supply Company Reports Record Second Quarter 2010 Results

BRENTWOOD, Tenn., July 21 /PRNewswire-FirstCall/ -- Tractor Supply Company (Nasdaq: TSCO), the largest retail farm and ranch store chain in the United States, today announced financial results for its second fiscal quarter ended June 26, 2010.  

Second Quarter Results

Net sales increased 12.6% to $1.07 billion from $946.5 million in the prior year's second quarter.  Same-store sales increased 6.1% compared with a 2.7% decrease in the prior-year period.  This same-store sales increase was broad-based and driven by continued strong results in core consumable categories, including animal and pet-related products, as well as agricultural and seasonal products, including outdoor power equipment.

Gross margin increased 18.7% to $358.8 million, or 33.7% of sales, compared to $302.2 million, or 31.9% of sales, in the prior year's second quarter.  The improvement in gross margin is primarily due to expanded direct product margin, continued improvements in shrink and a decrease in the LIFO charge. The direct margin improvement resulted from strategic sourcing and more effective pricing and markdown management.

Selling, general and administrative expenses, including depreciation and amortization, improved to 22.2% of sales for the second quarter compared to 22.6% of sales in the prior year's second quarter.  This 40-basis point improvement as a percent of sales was primarily due to sales growth and expense control.  

Net income for the quarter was $76.5 million, or $2.05 per diluted share, compared to $54.8 million, or $1.50 per diluted share, in the prior year's second quarter.

The Company opened 19 new stores in the quarter compared to 13 new store openings in the prior year's second quarter.

Jim Wright, Chairman and Chief Executive Officer, stated, "We are pleased that our record results for the quarter far exceeded expectations, as we announced earlier this month.  We achieved substantial sales and earnings growth as well as gross margin expansion and expense leverage. Through strategic inventory planning, allocation and management, we were prepared and able to capitalize on favorable weather patterns while supporting strong demand for seasonal merchandise. We continued to leverage our operating performance and financial foundation to drive shareholder value." 

First Six Months Results

For the first six months of 2010, net sales increased 11.3% to $1.78 billion from $1.60 billion in the first six months of 2009.  Same-store sales increased 4.7% compared to flat in the first six months of 2009.  Gross margin increased 16.8% to $587.7 million, or 33.1% of sales, compared to $503.2 million, or 31.5% of sales, in the first six months of 2009.  

Selling, general and administrative expenses, including depreciation and amortization, increased 9.0% to $450.9 million, or 25.4% of sales, compared to $413.8 million, or 25.9% of sales, for the first six months of 2009.  

Net income for the first six months of 2010 was $85.8 million, or $2.31 per diluted share, compared to net income of $55.2 million, or $1.51 per diluted share, for the first six months of 2009.  

During the first six months of 2010, the Company opened 38 new stores and closed one store compared to 41 new store openings, one relocation and one closure during the first six months of 2009.

Company Outlook

As reported in the Company's recent business update release, for fiscal 2010 the Company anticipates net sales to range from $3.49 billion to $3.53 billion, same-store sales to increase 2.5% to 3.5%, and net income to range from $4.00 to $4.10 per diluted share.

Mr. Wright concluded, "Our ability to generate outstanding results consistently demonstrates that Tractor Supply Company is a growth company that is able to succeed in varying economic climates. We have positioned the Company to prosper in a challenging retail environment. At the same time, we believe we will take advantage of any increase in consumer confidence as we continue to benefit from our strategic initiatives.  We look forward to the second half of 2010 and beyond as we remain dedicated to serving our growing niche of customers living the rural lifestyle."

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 through August 4, 2010.

About Tractor Supply Company

At June 26, 2010, Tractor Supply Company operated 967 stores in 44 states.  The Company's stores are focused on supplying the lifestyle needs of recreational farmers and ranchers.  The Company also serves the maintenance needs of those who enjoy the rural lifestyle, as well as tradesmen and small businesses.  Stores are located in towns outlying major metropolitan markets and in rural communities.  The Company offers the following comprehensive selection of merchandise: (1) equine, pet and small animal products, including items necessary for their health, care, growth and containment; (2) hardware and seasonal products, including lawn and garden power equipment; (3) truck, towing and tool products; (4) work/recreational clothing and footwear for the entire family; (5) maintenance products for agricultural and rural use; and (6) home decor, candy, snack food and toys.

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 estimated results of operations 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 general economic conditions affecting consumer spending, the timing and acceptance of new products in the stores, the 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 and negotiate favorable lease agreements on new and relocated stores, the ability to manage expenses, the availability of favorable credit sources, capital market conditions in general, failure to open new stores in the manner 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, potential legal proceedings, management of our information systems, effective tax rate changes and results of examination by taxing authorities and the ability to maintain an effective system of internal control over financial reporting.  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.

(Financial tables to follow)

SOURCE Tractor Supply Company