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Warm weather costly for Tractor Supply; growth plans intact

1/27/2016

The nation’s largest rural lifestyle retailer had previously warned that warm weather caused weaker-than-expected fourth quarter sales and it quantified the impact on profitability with the release of full financial results on Jan. 27.


The company -- which opened 114 stores last year to end with 1,488 stores -- announced on Jan. 12 that sales increased 3.9% to $1.65 billion while same-store sales declined 1.4%, for the fourth quarter ended Dec. 26, 2015. Net income during the period decreased 0.3% to $111.7 million from $112.1 million, while earnings per share increased 1.2% to 82 cents, from 81 cents.



As was the case with many retailers last fall and through the holidays, Tractor Supply saw demand evaporate for categories that benefit when temperatures normally turn cooler in the fall. That was nowhere near the case last year and especially during the holidays, a period that set a record for the warmest ever since records have been kept. As a result, Tractor Supply experience weak demand in categories such as heating (stoves and fuel) and insulated outerwear, particularly in the Northeast and Midwest regions.



Sales were also impacted by softness in seasonal big-ticket items such as snow blowers, log splitters and generators. The weakness in seasonal categories was partially offset by continued sales strength in year-round basic products such as livestock feed, pet food and hardware.



"While our fourth quarter sales were below our expectations due principally to the record warm temperatures across most of the country, we effectively managed our markdown cadence and inventory flow throughout the period,” said Greg Sandfort, Tractor Supply’s president and CEO. “As temperatures have normalized, sell-through of cold-weather seasonal items has improved. Further, we believe we have a solid plan in place to meet our customers' seasonal needs as we transition to the important spring selling season."



Despite the fourth quarter hiccup, Tractor Supply is looking for same-store sales to grow between 3.5% and 5% in 2016, and sales to reach as much as $7 billion. The company’s physical expansion will also continue with plans calling for capital expenditures in the range of $230 million to $250 million.


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