Tractor Supply Company Reports Third Quarter 2010 Results

BRENTWOOD, Tenn., Oct. 20 /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 third fiscal quarter ended September 25, 2010.  

Third Quarter Results

Net sales increased 10.9% to $829.1 million from $747.7 million in the prior year's third quarter.  Same-store sales increased 5.0% compared with a 5.1% decrease in the prior-year period.  This same-store sales increase was broad-based and driven by continued strength in consumable, usable and edible (CUE) products, principally animal and pet-related merchandise.  Seasonal warm-weather items and apparel also performed well during the quarter.

Gross margin increased 13.5% to $279.1 million, or 33.7% of sales, compared to $246.0 million, or 32.9% of sales, in the prior year's third quarter.  The improvement in gross margin is primarily due to expanded direct product margin and a decrease in the LIFO provision partially offset by increased transportation costs. The direct product margin improvement resulted from strategic sourcing, markdown management and more effective pricing.

Selling, general and administrative expenses, including depreciation and amortization, improved to 27.5% of sales for the third quarter compared to 28.1% of sales in the prior year's third quarter.  This improvement was primarily due to sales growth and expense management.  

Net income for the quarter was $32.0 million, or $0.43 per diluted share, compared to $22.0 million, or $0.30 per diluted share, in the prior year's third quarter.  All references to per-share amounts reflect a two-for-one stock split that was effective on September 2, 2010.

The Company opened nine new stores in the quarter compared to 17 new store openings and one relocation in the prior year's third quarter.

Jim Wright, Chairman and Chief Executive Officer, stated, "We are pleased that our results for the quarter reflect broad-based strength across the business and high store traffic in all markets.  We maintained solid in-stock positions and served our customers' rural lifestyle needs as the team continued to enhance execution in merchandising, inventory management, and marketing.  As a result, we exceeded our expectations for the top- and bottom-line while achieving gross margin expansion and SG&A leverage." 

First Nine Months Results

For the first nine months of 2010, net sales increased 11.1% to $2.61 billion.  Same-store sales increased 4.8% compared with a 1.7% decrease in the first nine months of 2009.  Gross margin increased 15.7% to $866.8 million in comparison to the first nine months of 2009.  As a percent of sales, gross margin was 33.3% of sales compared to 32.0% of sales for the first nine months of 2009.  

Selling, general and administrative expenses, including depreciation and amortization, improved to 26.1% of sales compared to 26.6% of sales for the first nine months of 2009.  

Net income for the first nine months of 2010 was $117.8 million, or $1.58 per diluted share, compared to net income of $77.2 million, or $1.06 per diluted share, for the first nine months of 2009.

During the first nine months of 2010, the Company opened 47 new stores and closed one store compared to 58 new store openings, two relocations and one closure during the first nine months of 2009.

Company Outlook

The Company raised its expectation for net sales for fiscal 2010 to a range of $3.53 billion to $3.55 billion compared to its previously expected range of $3.49 billion to $3.53 billion.  For the year, the Company anticipates same-store sales will increase 4.0% to 4.5% compared to its previous expectation of an increase of 2.5% to 3.5%.  The Company now anticipates annual net income to range from $2.09 to $2.13 per diluted share compared to its previous guidance of $2.00 to $2.05, which reflects a two-for-one stock split.

Mr. Wright concluded, "In 2010, we have demonstrated our ability to grow and improve the business while driving shareholder value.  With the right strategies, capital structure and talent in place, we are increasingly confident in our outlook for fiscal 2010 and continuing to build on our momentum for the long-term."

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 November 3, 2010.

About Tractor Supply Company

At September 25, 2010, Tractor Supply Company operated 976 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 décor, 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, on-going and potential legal or regulatory 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