Tractor Supply (TSCO) Tops Q2 EPS by 44c, Revenues Beat; Offers 3Q EPS/Revenue Guidance Above Consensus

Tractor Supply (NASDAQ: TSCO) reported Q2 EPS of $2.90, $0.44 better than the analyst estimate of $2.46. Revenue for the quarter came in at $3.18 billion versus the consensus estimate of $2.92 billion.

• Net Sales Increased 35.0%; Comparable Store Sales Increased 30.5% with Strong Double-Digit Growth Across All Product Categories and Regions; Triple-Digit E-commerce Growth
• Diluted Earnings Per Share Increased 61.1% to $2.90
• Company Provides Third Quarter 2020 Outlook and Outlines Select New Growth Initiatives

“In a highly dynamic environment, the Tractor Supply team delivered record results for the second quarter. At all levels, our team’s dedication to supporting each other and our customers is a true reflection of Tractor Supply’s Mission and Values in action,” said Hal Lawton, Tractor Supply’s President and Chief Executive Officer. “Thank you to all of the Tractor Supply Team Members for their resilience and determination during these trying times. We believe our performance in the second quarter demonstrates the strength of our business and long-term growth potential.”

Lawton continued, “As we attract new customers and gain market share, now is the time for us to build on Tractor Supply’s Out Here lifestyle assortment and convenient shopping format. Over the last few months, we have successfully rolled out new technology and services such as curbside pickup, same day/next day delivery and our first-ever mobile app. We are excited today to announce our Field Activity Support Team (FAST) and several new technology and service enhancements that are being implemented across the enterprise. Additionally, we are beginning work to transform our side lots and mature stores to improve space productivity, bring our latest merchandising strategies to life and advance our efforts to remain nationally strong while locally relevant. These strategic growth initiatives are guided by our commitment to disciplined financial returns and sustained profitable growth.”

GUIDANCE:

Tractor Supply sees Q3 2020 EPS of $1.15-$1.35, versus the consensus of $1.13. Tractor Supply sees Q3 2020 revenue of $2.3-2.42 billion, versus the consensus of $2.18 billion.

The impact that the COVID-19 pandemic will have on the broader economy and the Company’s fiscal 2020 results remains uncertain.

Commenting on the Company’s outlook, Kurt Barton, Tractor Supply’s Chief Financial Officer and Treasurer, said, “Amid an extremely dynamic and uncertain environment, the Tractor Supply team is executing at a very high level. The uncertainties impacting our outlook include but are not limited to: the level of virus control including the duration and degree of quarantine measures and the possibility of a second-wave outbreak; how macroeconomic factors evolve such as funding of additional consumer stimulus and the impact of the crisis on consumer shopping patterns and consumer’s income levels; and the incremental costs of doing business as an essential, needs-based retailer in the current environment. Against this backdrop, we are focused on supporting our Team Members, customers and communities and being excellent long-term stewards of the Company.”

COVID-19 related costs will continue to impact the business and are estimated to be approximately $15 million to $20 million in the third quarter. Additionally, as noted above, the Company has prioritized strategic growth initiatives which will also impact the cost structure and are estimated to be approximately $15 million in the third quarter. As previously disclosed, the Company announced permanent wage and benefit changes that will cost approximately $13 million in the third quarter.

The Company now forecasts capital expenditures to be approximately $300 million to $325 million compared to its previous range of $225 million to $275 million for fiscal 2020 as the Company increases capital spending to support the strategic growth initiatives described above. For fiscal 2020, the Company now expects to open 75 to 80 new Tractor Supply stores. The Company anticipates opening 10 new Petsense locations compared to its previous outlook of 10 to 15 new stores. The timing of new store openings in some areas may be delayed as a result of the COVID-19 pandemic.

Tractor Supply’s strong balance sheet, coupled with its robust operating cash flow, provide the Company with significant financial flexibility. The Company is in a very strong liquidity position with current cash and cash equivalents of approximately $1.3 billion and no amounts drawn on its $500 million revolving credit facility as of July 22, 2020.

For earnings history and earnings-related data on Tractor Supply (TSCO) click here.

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