Tractor Supply Raises Outlook After a Strong Spring Season

The retailer sees brighter times ahead.

Demitrios Kalogeropoulos
Demitrios Kalogeropoulos
Jul 26, 2018 at 12:49PM
Consumer Goods

The spring selling season took awhile to arrive, but it finally showed up in rural lifestyle retailer Tractor Supply's (NASDAQ:TSCO) results. The company this week posted faster sales gains and an over-20% boost in earnings per share. Management also took the opportunity to raise its outlook for both the top and bottom lines.

More on that rising 2018 forecast in a moment. First, here's a look at how the headline results compared with the prior-year period:


Q2 2018

Q2 2017

Year-Over-Year Change


$2.2 billion

$2 billion


Net income

$207 million

$161 million






Data source: Tractor Supply financial filings. EPS = earnings per share.

What happened this quarter

Tractor Supply capitalized on the spring selling season that started later this year thanks to an unusually long winter in many parts of the country. Solid execution around inventory management and pricing led to a healthy mix of rising customer traffic and increased spending per shopper.

A tractor working a field.

Image source: Getty Images.

Highlights of the quarter include:

  • Comparable-store sales improved by 5.6% to mark a solid acceleration over the 4% rate the company had managed in each of the prior two quarters. Add 25 new stores to the mix, and overall revenue expanded by just under 10%.
  • Customer traffic growth slowed but came in at 1.8%. Tractor Supply also managed a 4% boost in average spending thanks to healthy demand across its product portfolio.
  • Gross profit increased 9.2% to $705 million, which translated into a slight drop in profitability due to increased costs on distribution and fuel.
  • Selling expenses also outpaced revenue as the retailer spent more on labor and on building out its e-commerce infrastructure. As a result, operating income stopped at $273 million, or 12.4% of sales, compared to $258 million, or 12.8% of sales, last year.
  • Tax liabilities plunged, leading to a boost in the bottom-line profit margin to 9.4% of sales, up from 8%.

What management had to say 

CEO Greg Sandfort and his executive team highlighted the company's strong execution during the critical selling period. "We delivered a solid second quarter with broad-based strength across our merchandise categories and geographies," Sandfort said in a press release. While pointing out Tractor Supply's rising customer traffic and average spending metrics, Sandfort noted that "even with a delayed start to the spring season, we were able to capitalize on the selling season for many products as we managed our inventories effectively."

Meanwhile, the impact of rising costs was minimized, management said, by reduced reliance on price cuts and generally strong pricing trends.

Looking forward

Executives backed up their positive comments with an upgraded 2018 outlook that targets accelerating sales and profit gains. Comparable-store sales are now expected to rise by between 3% and 3.5%, up from the prior target range of between 2% and 3%. Tractor Supply's last fiscal year included 2.7% growth on this metric.

Earnings are now predicted to stop between $4.10 per share and $4.20 per share, compared to the prior range of $3.95 per share and $4.15 per share. That result should still include a modest decline in operating profit margin as the company spends more on labor and on its digital growth initiatives. Yet those investments appear to be helping the retailer post solid improvements in its broader operating trends this year.