Tractor Supply Company Reports Third Quarter 2011 Results

BRENTWOOD, Tenn., Oct. 19, 2011 /PRNewswire/ -- 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 24, 2011.  

Third Quarter Results

Net sales increased 17.9% to $977.8 million from $829.1 million in the prior year's third quarter.  Same-store sales increased 11.5% compared to a 5.0% increase in the prior-year period.  The same-store sales increase was driven by continued strong results in core consumable, usable and edible (C.U.E.) products, principally animal- and pet-related merchandise; seasonal heating products and emergency response merchandise related to Hurricane Irene.  Additionally, same-store sales were favorably impacted by higher selling prices due to inflation in key C.U.E. categories.

Gross margin increased 18.8% to $327.6 million, or 33.5% of sales, compared to $275.7 million, or 33.2% of sales, in the prior year's third quarter.  The increase in gross margin reflects improved direct product margin, partially offset by increased transportation costs and product mix.  Direct product margin increased as a result of improved inventory management, strategic sourcing, private branding and pricing.

Selling, general and administrative expenses, including depreciation and amortization, improved to 26.5% of sales compared to 27.5% of sales in the prior year's third quarter.  The improvement as a percent of sales was primarily attributable to strong same-store sales and expense control with respect to store operating costs.

Net income for the quarter was $42.7 million, or $0.58 per diluted share, compared to net income of $29.9 million, or $0.40 per diluted share, in the third quarter of the prior year.  

The Company opened 12 stores, relocated one store and closed one store compared to opening nine stores in the prior year's third quarter.  

Jim Wright, Chairman and Chief Executive Officer, stated, "During the third quarter, we generated double-digit increases in both sales and earnings on top of last year's record results while improving gross margin and leveraging SG&A costs.  This strong performance, which also included positive ticket and traffic, reflects the impact of our strategic initiatives and our ability to respond to our customers' everyday rural lifestyle needs. Additionally, we executed exceptionally well and successfully managed through the inflationary environment.  We are delighted that we continue to experience broad-based strength across the business."  

First Nine Months Results

Net sales increased 14.9% to $2.99 billion from $2.61 billion in the first nine months of 2010.  Same-store sales increased 8.5% compared to a 4.8% increase in the first nine months of 2010.  Gross margin increased 15.8% to $1.00 billion, or 33.5% of sales, compared to $866.7 million, or 33.3% of sales, in the first nine months of 2010.  

Selling, general and administrative expenses, including depreciation and amortization, increased 12.3% to $762.5 million, or 25.5% of sales, compared to $679.2 million, or 26.1% of sales, for the first nine months of 2010.  

Net income was $152.2 million, or $2.05 per diluted share, compared to net income of $117.8 million, or $1.58 per diluted share, for the first nine months of 2010.  

The Company opened 54 new stores, relocated two stores and closed one store compared to 47 new store openings and one store closure during the first nine months of 2010.

Company Outlook

Based on strong performance in the third quarter, the Company raised its financial expectations for fiscal 2011.  Net sales are expected to range between $4.15 billion and $4.17 billion compared to the Company's previously expected range of $4.10 billion to $4.14 billion.  Same-store sales for the year are now expected to increase 6.5% to 7.0% compared to the prior expectation for an increase of 5.0% to 6.0%.  The Company now anticipates net income will range between $2.85 and $2.89 per diluted share compared to its previous guidance of $2.75 to $2.82 per diluted share.

Mr. Wright concluded, "Our track record of consistently generating strong results demonstrates that we are benefiting from our strategic initiatives which, collectively, have strengthened the structural foundation of the Tractor Supply Company business and brand. As we look ahead, we are well-prepared for the upcoming fall, winter and holiday selling season and believe that our merchandising and marketing initiatives will allow us to gain market share.  With the right strategies, capital structure and team in place, we are confident in our outlook for 2011 and our ability to continue 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 and will be available through November 2, 2011.

About Tractor Supply Company

At September 24, 2011, Tractor Supply Company operated 1,054 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, truck, towing and tool products; (3) seasonal products, including lawn and garden items, power equipment, gifts and toys; (4) maintenance products for agricultural and rural use; and (5) work/recreational clothing and footwear.

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