Tractor Supply Company, the largest rural lifestyle retailers in the United States, reported financial results for its second quarter ended June 25, 2022.

• Net Sales Increased 8.4%; Comparable Store Sales Increased 5.5%
• Diluted Earnings per Share (EPS) increased 10.7% to $3.53
• Company Raises Fiscal 2022 Financial 2022 Outlook to Reflect Outperformance in the First Half of the Year

"Tractor Supply had a strong second quarter that was in line with our expectations with record results on both sales and earnings. Our team's outstanding focus on serving our customers with the products and services they need to live the Out Here lifestyle allowed us to capture broad-based market share during the quarter," said Hal Lawton, Tractor Supply's President and CEO. 

Lawton continued, "Given the strong performance in the first half of the year, ongoing consistency of our sales performance, visibility into our cost structure and the quality of our inventory, we are raising our financial outlook for the full year. We believe Tractor Supply is uniquely positioned for growth with a resilient, domestic business model that has stood the test of time, despite our outlook for a highly inflationary and volatile environment. Looking ahead, we will continue to focus on controlling what we can control, while making investments in our Life Out Here strategy to strengthen our business and create long term value for our shareholders."

Second Quarter 2022 Results

Net sales for the second quarter of 2022 increased 8.4% to $3.90 billion from $3.60 billion in the second quarter of 2021. Comparable store sales increased 5.5%, as compared to an increase of 10.5% in the prior year's second quarter. Comparable store sales for the second quarter of 2022 were driven by comparable average ticket growth of 7.5%, offset by a decrease in comparable average transaction count of 2.0%. Comparable store sales growth reflects continued strength in every day, needs-based merchandise, including consumable, usable and edible (“C.U.E.”) products and year-round product categories.

Gross profit increased 7.7% to $1.39 billion from $1.29 billion in the prior year's second quarter, and gross margin decreased 24 basis points to 35.5% from 35.8% in the prior year's second quarter. The Company's price management actions and other margin driving initiatives were able to offset the majority of the impact from significant product cost inflation pressures and higher transportation costs. To a lesser extent, product mix from the robust growth of the Company's C.U.E. products were unfavorable to gross margin.

Selling, general and administrative (SG&A) expenses, including depreciation and amortization, increased 7.4% to $861.2 million from $801.6 million in the prior year's second quarter. As a percent of net sales, SG&A expenses improved 19 basis points to 22.1% from 22.3% in the second quarter of 2021. The improvement in SG&A as a percent of net sales was primarily attributable to more normalized incentive compensation and a moderation of COVID-19 response costs, as well as leverage in occupancy and other costs from the increase in comparable store sales. These items were partially offset by investments in store wages and the Company’s strategic growth initiatives.

Operating income increased 8.1% to $525.0 million compared to $485.9 million in the second quarter of 2021.

The effective income tax rate was 23.5% compared to 22.8% in the second quarter of 2021.

Net income increased 7.1% to $396.5 million from $370.0 million, and diluted EPS increased 10.7% to $3.53 from $3.19 in the second quarter of 2021.

In the second quarter of 2022, the Company repurchased approximately 0.9 million shares of its common stock for $188.2 million and paid quarterly cash dividends totaling $102.6 million, returning approximately $290.8 million of capital to shareholders in the second quarter of 2022.

During the second quarter of 2022, the Company opened 13 new Tractor Supply stores.

Fiscal 2022 Financial Outlook

The Company is updating its fiscal 2022 financial guidance to reflect its strong performance in the first half of the year. Fiscal 2022 comprises 53 weeks, one additional week compared to fiscal 2021. The fiscal 2022 guidance includes a benefit for the 53rd week, which is estimated to be approximately 1.5 percentage points of net sales and $0.15 of diluted EPS.

Capital expenditures for fiscal 2022 are currently forecasted to be in the range of $650 million to $700 million, including the opening of 70 to 80 new Tractor Supply stores and 10 new Petsense stores.

The Company’s outlook for fiscal 2022 does not contemplate the impact of the pending acquisition of Orscheln Farm and Home previously announced on February 17, 2021. The acquisition is conditioned on the receipt of regulatory clearance and satisfactory completion of customary closing conditions. The Company continues to work collaboratively with the Federal Trade Commission on the transaction.

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