A strong growth streak over the last few quarters had investors feeling confident heading into Tractor Supply's (NASDAQ:TSCO) fiscal second quarter, which includes its peak spring selling season. The rural lifestyle retailer three months ago posted robust sales gains thanks to higher shopper spending and an expanding network of stores. Those successes were offset slightly by sluggish customer traffic rates.

Let's take a closer look at how those trends shifted during the all-important second quarter.


Q2 2019

Q2 2018



$2.4 billion

$2.2 billion


Net income

$219 million

$207 million






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

What happened this quarter

Tractor Supply's sales growth pace slowed when compared to the prior quarter but surpassed management's full-year guidance. Profitability held up well, too, although customer traffic continued to slow.

A tractor at work on a farm.

Image source: Getty Images.

Highlights of the quarter include:

  • Tractor Supply's 6% revenue growth came from the combination of 15 new stores opened in the quarter and a 3% uptick in sales at existing locations, or comps. The comps metric marked a slowdown from the prior quarter's 5% boost but was on the high end of management's expectations for the full year. Comps gains included 2% higher spending and a 1% increase in customer traffic.
  • Gross profit margin held steady at 35% of sales thanks to firm pricing, robust demand for seasonal products, and fading pressures from freight cost spikes.
  • The retailer opened a new distribution facility, and expenses related to that launch pushed selling expenses slightly higher. As a result, operating income landed at $288 million, or 12.2% of sales, compared to $273 million, or 12.4% of sales, a year earlier. Lower tax expenses mostly offset that decline so that net margin dipped only slightly, to 9.3% of sales from 9.4% last year.

What management had to say

CEO Greg Sandfort highlighted the chain's broad-based success in a key selling period for the business. "Comparable store sales growth of 3.2%," Sandfort said in a press release, "was driven by improvements in our average ticket and positive [customer traffic] counts, along with growth across all geographies." The company made more progress in its ONETractor strategy of delivering a seamless multichannel shopping experience, Sandfort said, including by adding a new distribution center and expanding its store base by 25 locations through the first half of 2019.

Looking forward

Tractor Supply updated its sales and profit outlook for the fiscal year. There was no change in the high end of the range that executives issued back in late January, for either revenue or earnings, but management boosted the low end of each range to reflect the healthy growth so far in 2019.

Specifically, comps are now on pace to rise by between 3% and 4% rather than the prior 2% to 4% prediction. Profit margin is still targeted to land at about 9% of sales, but the higher sales gains will lead to net income of between $562 million and $575 million. Tractor Supply's prior forecast had profits ending up between $555 million and $575 million. The company still plans to add about 80 new Tractor Supply locations in 2019 and as many as 15 new stores under the Petsense brand.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.