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Tractor Supply Ended 2018 on a Positive Note

By Demitri Kalogeropoulos – Updated Apr 25, 2019 at 8:33PM

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The retail chain projects higher sales and stabilizing profitability in 2019.

Check out the latest Tractor Supply earnings call transcript.

Conditions kept improving for Tractor Supply (TSCO -0.11%) through most of 2018, as the rural lifestyle retailer hiked its outlook in both its second-quarter and third-quarter earnings reports. The chain kept that positive momentum going at the fiscal year's close, announcing on Thursday robust sales and earnings to conclude a much stronger 2018 than management initially had forecast. Tractor Supply's 2019 outlook assumes further gains on both the top and bottom lines.

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


Q4 2018

Q4 2017

Year-Over-Year Change


$2.13 billion

$1.95 billion


Net income

$137 million

$110 million






Data source: Tractor Supply financial filings.

What happened with Tractor Supply this quarter?

Tractor Supply continued its streak of outperformance, with sales gains and profits exceeding management's guidance for the third straight quarter. Its core operating metrics, including customer traffic, profitability, and store growth, all reflected retailing strength.

A tractor at work in a field.

Image source: Getty Images.

Highlights of the quarter include: 

  • Comparable-store sales growth sped up, reaching 5.7% from 1% in the prior quarter. As a result, the chain landed at 5.1% comps growth for the full year to comfortably beat the range executives predicted in late October of between 4% and 4.5%. Tractor Supply entered 2018 predicting growth of between 2% and 3%.
  • The chain notched sales gains at existing locations that were almost equally split between higher spending and increased customer traffic. An additional 17 stores added to the base contributed to the overall 9% revenue increase.
  • Consistent with trends in recent quarters, gross profit margin slipped slightly due to higher freight and fuel expenses.
  • Selling expenses rose at a faster rate than sales thanks to higher investments in areas like labor and e-commerce. As a result, operating margin fell to 8.5% of sales, from 9.4% of sales a year ago.
  • Lower tax expenses helped bottom-line profits overcome the weaker operating margin, with net income rising to 6.4% of sales from 5.6% in late 2017.

What management had to say

CEO Greg Sandfort highlighted the broad-based retailing wins the company achieved. "2018 was a successful year for Tractor Supply," Sandfort said in a press release, with "great execution throughout the year, including a strong fourth quarter with increases in both comparable average ticket and transaction count."

Executives said they expect the next fiscal year to include further progress transitioning into a multichannel retailing posture. "We continue to build on our ONETractor strategy to provide our customers with a seamless shopping experience anytime, anywhere and in any way they choose," Sandfort explained.

Looking forward

Tractor Supply's initial outlook for the year predicts a steady pace of new store openings, with about 80 locations added in 2019. That boost should combine with increases in comparable-store sales of between 2% and 4% to push sales to $8.31 billion-$8.46 billion compared to $7.9 billion in 2018.

Operating margin is projected to land between 8.9% and 9%, which would mark encouraging stabilization following three consecutive years of declines. That metric peaked at 10.4% in 2015, before the company started allocating more spending toward the online sales channel.

Net income is projected to rise to between $555 million and $575 million in 2019, which would represent a 6% increase over last year's result.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Tractor Supply. The Motley Fool has a disclosure policy.

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