Tractor Supply (TSCO) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales increased 1.5% year-over-year to $4.25 billion, with net income up 0.9% to $425.2 million and diluted EPS rising 2.6% to $3.93, driven by new store openings despite a 0.5% decline in comparable store sales.

• Customer engagement remains strong, with the Neighbor's Club loyalty program surpassing 36 million members and record sales penetration.

• Big-ticket categories, such as riding lawnmowers and recreational vehicles, saw strong double-digit growth, while discretionary categories like clothing and decor underperformed.

• Digital sales continued double-digit growth, and the tenth distribution center opened on schedule, supporting supply chain efficiency.

• Over $1 million donated to charities supporting veterans and first responders, and $1.3 million raised for 4-H through the Paper Clover Campaign.

Financial highlights

• Gross margin improved by 43 basis points to 36.6% of net sales, driven by lower transportation costs and disciplined product cost management.

• SG&A expenses rose 4.1% to $994.2 million, representing 23.4% of net sales, mainly due to growth investments and new distribution center costs.

• Operating profit margin was 13.2%, with operating income at $561.5 million and diluted EPS up to $3.93 from $3.83 last year.

• Merchandise inventories rose 10.2% per store, reflecting improved in-stock positions and investment in big-ticket items.

• Year-to-date, nearly $500 million returned to shareholders via share repurchases and dividends.

Outlook and guidance

• Fiscal 2024 net sales expected between $14.8–$15.0 billion, with comparable store sales from -0.5% to +1.0%.

• Operating margin rate forecasted at 9.8%–10.1%, net income at $1.08–$1.12 billion, and diluted EPS at $10.00–$10.40.

• Q3 comp sales expected to be similar to the first half; Q4 has a wider range of outcomes due to weather, election, and holiday season length.

• Ongoing gross margin expansion anticipated in the second half, with Q3 expected to have the best expansion.

• Projected 2024 capital expenditures are estimated at $625–$700 million, net of sale-leaseback proceeds.