Tractor Supply revisits outlook after tough first half of second quarter
Tractor Supply is scheduled to provide complete second-quarter results in just under two weeks. But the first half of the quarter was affected by bad weather, which caused softness in sales, particularly in seasonal merchandise, prompting the company to lower its full-year guidance.
Net sales for the quarter increased 8.8% to $1.58 billion from $1.46 billion in the second quarter of 2013. Comparable store sales increased 1.9% versus a 7.2% increase in the prior year's second quarter and were driven by continued strength of consumable, usable and edible products and solid traffic counts. This was partially offset by weaker-than-expected sales of certain seasonal products primarily in the Northern regions, continued softness in its safe category and deflation. As the quarter progressed, sales trends improved and weather became less of a factor, the company said.
The company expects gross margin rate for the second quarter to be flat to prior year, as increased transportation costs and the impact of slightly more promotional activity offset the favorable impact of our initiatives and deflation. Additionally, the lower than anticipated comparable store sales are expected to result in higher than anticipated SG&A expenses as a percent of net sales. As a result, The company expects second quarter net income to be between $0.94 and $0.95 per diluted share.
Based upon the second quarter results, the company anticipates its full-year results will be at the low end of the previously provided ranges of $5.62-$5.70 billion in net sales, 2.5% to 4% in comparable store sales and $2.54 to $2.62 in diluted earnings per share.
"We remain pleased with many areas of the business, including our core C.U.E. offerings and several seasonal categories; however, we were not satisfied with the overall sales of spring seasonal merchandise in the second quarter,” said president and CEO Greg Sandfort. “The challenging spring weather conditions we experienced in the first quarter persisted even later into the second quarter than the prior year. The team responded by effectively managing inventory and increasing marketing initiatives to drive sales; and sales improved as the quarter progressed into June. Traffic trends in the second quarter remained healthy and I am pleased with how our team members in the field, distribution centers and store support center responded to our customers' needs. Despite a solid sales trend in July to date, we cannot be assured at this point that spring seasonal sales will be fully realized. As a result, we believe that we will perform at the low end of our full-year guidance. By effectively managing inventory levels and working with our vendors to develop additional sales driving initiatives, we believe we are positioned to drive sales and provide great values to our customers in the back half of the year."
At June 28, 2014, Tractor Supply operated 1,331 stores in 48 states.