Tractor Supply (TSCO) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales rose 1.6% year-over-year to $3.47 billion, driven by new store openings, while comparable store sales declined 0.2% and net income fell 5.3% to $241.5 million; diluted EPS was $2.24, down from $2.33 due to the absence of a prior-year one-time depreciation benefit.

• Announced definitive agreement to acquire Allivet, an online pet pharmacy, to expand pet Rx offerings and Neighbor's Club benefits, with the deal expected to close in Q1 2025 and be accretive to earnings in 2025.

• Customer engagement remains strong, with Neighbor's Club membership exceeding 37 million and record retention rates.

• Continued investment in store remodels (Fusion format), new store openings, and supply chain enhancements support long-term growth, with 16 new Tractor Supply stores and 4 new Petsense stores opened in Q3 and 54 Tractor Supply stores and 7 Petsense stores year-to-date.

• Provided disaster relief and ongoing support for communities and team members affected by hurricanes, including nearly $100,000 in relief funds.

Financial highlights

• Gross margin increased by 56 basis points year-over-year to 37.2%, driven by lower transportation costs and disciplined product cost management.

• SG&A expenses rose 119 basis points to 27.8% of net sales, mainly due to growth investments, new distribution center onboarding, and lapping a one-time depreciation benefit.

• Operating margin was 9.36% in Q3 2024, down from 9.99% in Q3 2023; net income margin was 6.96%, down from 7.47%.

• Merchandise inventories reached $3.1 billion, with average inventory per store at $1.16 million; inventory turns declined to 3.03.

• Returned over $760 million to shareholders year-to-date via share repurchases and dividends, including $267.6 million in Q3.

Outlook and guidance

• Fiscal 2024 net sales guidance raised to $14.85–$15.0 billion; comparable store sales expected to be flat to up 1%.

• Operating margin rate forecasted at 9.8%–10.1%; net income expected between $1.09–$1.12 billion; diluted EPS guidance of $10.10–$10.40.

• Capital expenditures for fiscal 2024 projected at $625–700 million, net of sale-leaseback proceeds.

• Plans to open approximately 80 new Tractor Supply stores and 10–15 new Petsense stores in 2024.

• Management expects sufficient liquidity from cash, operations, and credit facilities for the next 12 months and foreseeable future.