Tractor Supply (NASDAQ:TSCO) posted earnings result this week that included a return to growth following last quarter's rare decline. However, the rural lifestyle retailer lowered its sales and profit outlook for the full year.

More on that 2017 forecast in a moment. First, let's look at how the big-picture results stacked up against the prior-year period:


Q2 2017 

Q2 2016 

Year-Over-Year Change


$2.02 billion

$1.85 billion


Net Income

$161 million

$156 million






Data source: Tractor Supply.

What happened this quarter

Sales gains sped up to a 9% rate from 7% last quarter as the company benefited from more favorable weather conditions and a critical boost in customer traffic. Profitability shrank due to increased costs.

A farmer at work on his tractor.

Image source: Getty Images.

Other highlights of the quarter include:

  • Comparable-store sales rose 2.2% to reverse the prior quarter's decline. That growth came entirely from higher customer traffic, while average spending per visit held flat.
  • Gross profit margin was unchanged at 35% of sales.
  • Expenses spiked higher by 12% to outpace the 9% sales boost. Management attributed the increase to extra investments in the stores, especially on employee wages. Tractor Supply also directed cash toward building out its e-commerce infrastructure.
  • The company added 14 stores to its base to bring its total to 1,630 locations.
  • Its Petsense segment added eight new shops.
  • Bottom-line profitability dipped to 8% from 8.4% in the year-ago quarter. Over the broader six-month period, Tractor Supply's net margin slipped to 6.2% from 6.8% of sales.

What management had to say

Management described a healthy sales rebound that lifted nearly all parts of the operations this quarter. "We experienced broad based positive sales trends across our business and were pleased to see improved performance across many of our major departments," CEO Greg Sandfort said in a press release. Executives cited healthy demand for year-round products, especially those in the livestock and pet categories.

Tractor Supply is also encouraged by progress it has made integrating the digital sales channel with the business. For example, it is rolling out buy-online-pickup-at-store functionality that shoppers are embracing. "As the connection between our stores and online presence strengthens," Sandfort explained, "we see evidence that our initiatives to provide our customers one seamless shopping experience are contributing to our top line results."

Looking forward

Given the highly seasonal nature of its business, management only updates its outlook every six months, and that creates the potential for wide revisions as industry conditions shift. 

In comments about the second half of the fiscal year, executives sounded a cautiously optimistic tone by stating they're seeing strong demand for spring seasonal products into the first few weeks of the third quarter. "We believe we are positioned to take advantage of an extended spring selling season," management said.

However, it's clear that the slow start to the year will be a drag on overall 2017 results. Tractor Supply's new guidance calls for comparable-store sales growth to range from 1.1% to 1.7% rather than the 2% to 3% range it had originally forecast.

The top of management's broader revenue forecast was also pulled back to $7.19 billion from $7.29 billion. Net income will range from between $413 million and $419 million, meanwhile. That outlook ensures a profit decline from last year's $437 million as the retailer struggles with weak -- but still positive -- customer traffic trends.

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