~ First Quarter Sales Increased by 2.9% to $576.2 Million ~
BRENTWOOD, Tenn., April 23 /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 first fiscal quarter ended March 29, 2008.
First Quarter Results Net sales increased 2.9% to $576.2 million from $559.8 million in the prior year's first quarter. Same-store sales decreased 6.5%, compared with an 8.5% increase in the prior-year period. This same-store sales decline was primarily driven by lower-than-expected sales in big ticket, discretionary merchandise and seasonal merchandise, as compared to strong sales of winter- related merchandise primarily driven by very favorable weather conditions in the prior year's first quarter. Additionally, same-store sales were negatively impacted this quarter by approximately 170 basis points due to one less selling day related to the shift of the Easter holiday from April into March.
Gross margin increased 5.2% to $176.9 million, or 30.7% of sales, compared to $168.2 million, or 30.0% of sales, in the prior year's first quarter. The improvement in gross margin resulted primarily from enhanced product sourcing and the mix of products sold, partially offset by higher fuel-related transportation costs.
Selling, general and administrative expenses, including depreciation and amortization, increased to 30.8% of sales compared to 28.4% of sales for the first quarter last year. The increase as a percent of sales was primarily attributable to lower than anticipated sales and higher occupancy costs. The Company's effective income tax rate increased to 38.6% compared to 37.9% in the prior year, largely due to recent increases in certain state tax rates.
Net loss for the quarter was $1.2 million, or $(0.03) per diluted share, compared to net income of $5.0 million, or $0.12 per diluted share, in the first quarter of the prior year.
The Company opened 27 new stores and relocated no stores in the first quarter compared to 22 new and seven relocated stores in the prior year's first quarter.
Jim Wright, Chairman, President and Chief Executive Officer, stated, "This period is typically our slowest quarter, but a warmer February and a late spring as well as the progressively more challenging economic conditions contributed to the difficult selling environment. We anticipated buying behavior in 2008 would be similar to the second half of 2007; however, our customers became even more cautious with their spending throughout the first quarter. We were able to achieve modest revenue growth on top of our record sales performance in the prior year. Our core consumable categories continue to be well received by our customers, and we are pleased that our initiatives to manage inventory and improve gross margin proved effective during the quarter." Company Outlook To reflect first quarter results and currently anticipated sales trends, the Company revised its fiscal 2008 net sales expectations to a range of $2.98 billion to $3.04 billion from its prior guidance range of $3.01 billion to $3.08 billion. Same-store sales for the year are expected to be approximately flat to 2% compared to prior expectations of an increase of approximately 1% to 3%. As a result, the Company currently expects full year net earnings will be at or slightly below the low end of its previously provided range, which was $2.54 to $2.62 per diluted share.
Mr. Wright continued, "As we evaluate the retail environment, there is much uncertainty. The first quarter demonstrated that the consumer has retrenched, but April-to-date performance has been more consistent with our original 2008 outlook. We will monitor trends closely throughout the second quarter, which has historically been our most important selling season and our most profitable quarter. The results of the second quarter will influence our outlook for the remainder of the year." Mr. Wright concluded, "We are tightly managing costs and further reducing incremental expenses to offset lower top-line expectations for 2008. At the same time, we remain committed to growing the chain and improving the business throughout the year. With our enthusiastic team members and our dedication to serving our customers' rural lifestyle needs, we are very confident that we will continue creating long-term opportunities for our business." 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 simultaneously broadcast over the Internet on the Company's homepage at TractorSupply.com and can be accessed under the link "Investor Relations." About Tractor Supply Company At March 29, 2008, Tractor Supply Company operated 791 stores in 43 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 animal products, including items necessary for their health, care, growth and containment; (2) maintenance products for agricultural and rural use; (3) hardware and tool products; (4) seasonal products, including lawn and garden power equipment; (5) truck and towing products; and (6) work/recreational clothing and footwear for the entire family.
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 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 cycles affecting consumer spending, weather factors, operating factors affecting customer satisfaction, consumer debt levels, inflation, pricing and other competitive factors, the ability to attract, train and retain qualified employees, the ability to manage growth and identify suitable locations and negotiate favorable lease agreements on new and relocated stores, the timing and acceptance of new products in the stores, the mix of goods sold, the continued availability of favorable credit sources, capital market conditions in general, the ability to increase sales at existing stores, the ability to retain vendors, reliance on foreign suppliers, management of its information systems and the seasonality of the Company's business. 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) Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share amounts)
FIRST QUARTER ENDED
March 29, 2008 March 31, 2007 % %
of Sales of Sales
Net sales $576,208 100.0% $559,832 100.0%
Cost of merchandise sold 399,304 69.3 391,652 70.0
Gross profit 176,904 30.7 168,180 30.0 Selling, general and
administrative expenses 163,185 28.3 147,187 26.3
Depreciation and amortization 14,372 2.5 12,013 2.1 Income (loss) from operations (653) (0.1) 8,980 1.6
Interest expense, net 1,223 0.2 925 0.2 Income (loss) before income taxes (1,876) (0.3) 8,055 1.4
Income tax expense (benefit) (724) (0.1) 3,056 0.5
Net income (loss) $(1,152) (0.2)% $4,999 0.9% Net income (loss) per share:
Basic $(0.03) $0.12
Diluted $(0.03) $0.12 Weighted average shares
outstanding (000's):
Basic 37,514 40,228
Diluted 37,514 41,083 Consolidated Balance Sheets
(Unaudited)
(in thousands)
March 29, March 31,
2008 2007 *
ASSETS
Current assets:
Cash and cash equivalents $17,383 $20,440
Inventories 747,531 722,928
Prepaid expenses and other current assets 43,065 32,458
Deferred income taxes -- 10,952
Total current assets 807,979 786,778 Property and equipment, net 345,124 305,975
Goodwill 10,258 10,258
Deferred income taxes 18,041 10,281
Other assets 6,669 7,309 TOTAL ASSETS $1,188,071 $1,120,601
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $360,785 $320,934
Accrued expenses 98,268 110,551
Current portion of capital lease obligations 724 975
Income taxes currently payable -- 1,934
Deferred tax liabilities 1,133 --
Total current liabilities 460,910 434,394 Revolving credit loan 102,500 53,418
Capital lease obligations 2,221 2,602
Other long-term liabilities 56,817 44,861
Total liabilities 622,448 535,275 Stockholders' equity:
Common stock 326 323
Additional paid-in capital 155,606 133,860
Treasury stock (152,900) (21,332)
Other comprehensive loss -- (26)
Retained earnings 562,591 472,501
Total stockholders' equity 565,623 585,326 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,188,071 $1,120,601 * Cash and accounts payable balances have been reclassified to conform to
the current period presentation.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands) FIRST QUARTER ENDED
March 29, March 31,
2008 2007 * Cash flows from operating activities:
Net income (loss) $(1,152) $4,999
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 14,372 12,013
Loss on disposition of property and equipment 55 289
Stock compensation expense 3,151 2,663
Deferred income taxes 61 (1,406)
Change in assets and liabilities,
net of acquisition:
Inventories (111,543) (128,077)
Prepaid expenses and other current assets (180) 4,453
Accounts payable 102,439 91,763
Accrued expenses (17,333) (808)
Income taxes currently payable (5,994) (9,616)
Other 856 476 Net cash used in operating activities (15,268) (23,251) Cash flows from investing activities:
Capital expenditures (26,492) (16,411)
Proceeds from sale of property and equipment 12 87 Net cash used in investing activities (26,480) (16,324) Cash flows from financing activities:
Borrowings under revolving credit agreement 203,051 236,664
Repayments under revolving credit agreement (155,551) (183,246)
Tax benefit of stock options exercised 121 462
Principal payments under capital lease
obligations (253) (296)
Repurchase of common stock (2,851) (21,332)
Net proceeds from issuance of common stock 914 1,370 Net cash provided by financing activities 45,431 33,622 Net increase (decrease) in cash 3,683 (5,953) Cash and cash equivalents at beginning of period 13,700 26,393 Cash and cash equivalents at end of period $17,383 $20,440 Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $1,405 $585
Income taxes 5,182 12,658 * Reclassified to conform to the current period presentation.
Selected Financial and Operating Information FIRST QUARTER
ENDED
March 29, March 31,
2008 2007
(unaudited)
Sales Information:
Same-store sales increase (decrease) (6.5)% 8.5%
Non-comp sales (% of total sales) 9.3% 12.0% Average transaction value $40.61 $41.40
Comp average transaction/value increase (decrease) (2.9)% 1.3%
Comp average transaction count increase (decrease) (3.8)% 7.1% Store Count Information:
Beginning of quarter 764 676
New stores opened 27 22
End of quarter 791 698 Relocated stores -- 7 Pre-opening costs (000's) $2,379 $2,075 Balance Sheet Information:
Average inventory per store (000's) (a) $946 $1,030
Inventory turns (annualized) 2.21 2.31
Financed inventory (a) 47.0% 43.5%
Treasury shares:
Shares purchased (000's) 77 413
Cost (000's) $2,851 $21,332 (a) Assumes average inventory cost, excluding inventory in transit
DATASOURCE: Tractor Supply Company CONTACT: Anthony F. Crudele, Chief Financial Officer, or Randy Guiler, Director, Investor Relations, +1-615-440-4000, of Tractor Supply; or Investors, Cara O'Brien or Erica Pettit, or Media, Samantha Cohen, all of Financial Dynamics, +1-212-850-5600, for Tractor Supply Web site: http://tractorsupply.com/
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