Rural goods retailer Tractor Supply (NASDAQ:TSCO) fell short of analysts' expectations in Q4 FY2023, with revenue down 8.6% year on year to $3.66 billion. The company's full-year revenue guidance of $14.9 billion at the midpoint also came in slightly below analysts' estimates. It made a GAAP profit of $2.28 per share, down from its profit of $2.43 per share in the same quarter last year.
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Tractor Supply (TSCO) Q4 FY2023 Highlights:
- Market Capitalization: $24.28 billion
- Revenue: $3.66 billion vs analyst estimates of $3.68 billion (0.5% miss)
- EPS: $2.28 vs analyst estimates of $2.22 (2.8% beat)
- Management's revenue guidance for the upcoming financial year 2024 is $14.9 billion at the midpoint, missing analyst estimates by 0.9% and implying 2.4% growth (vs 3% in FY2023)
- Free Cash Flow of $168.9 million, down 58.6% from the same quarter last year
- Gross Margin (GAAP): 35.3%, up from 34% in the same quarter last year
- Same-Store Sales were down 4.2% year on year
- Store Locations: 2,414 at quarter end, increasing by 81 over the last 12 months
Started as a mail-order tractor parts business, Tractor Supply (NASDAQ:TSCO) is a retailer of general goods such as agricultural supplies, hardware, and pet food for the rural consumer.
Specialty RetailSome retailers try to sell everything under the sun, while others—appropriately called Specialty Retailers—focus on selling a narrow category and aiming to be exceptional at it. Whether it’s eyeglasses, sporting goods, or beauty and cosmetics, these stores win with depth of product in their category as well as in-store expertise and guidance for shoppers who need it. E-commerce competition exists and waning retail foot traffic impacts these retailers, but the magnitude of the headwinds depends on what they sell and what extra value they provide in their stores.
Sales GrowthTractor Supply is larger than most consumer retail companies and benefits from economies of scale, giving it an edge over its competitors.
As you can see below, the company's annualized revenue growth rate of 14.9% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was solid as it added more brick-and-mortar locations and increased sales at existing, established stores.
This quarter, Tractor Supply missed Wall Street's estimates and reported a rather uninspiring 8.6% year-on-year revenue decline, generating $3.66 billion in revenue. Looking ahead, Wall Street expects sales to grow 3% over the next 12 months, an acceleration from this quarter.
Number of StoresWhen a retailer like Tractor Supply is opening new stores, it usually means it's investing for growth because demand is greater than supply. Tractor Supply's store count increased by 81 locations, or 3.5%, over the last 12 months to 2,414 total retail locations in the most recently reported quarter.
Taking a step back, the company has opened new stores quickly over the last eight quarters, averaging 5.5% annual growth in new locations. This store growth outpaces the broader consumer retail sector. With an expanding store base and demand, revenue growth can come from multiple vectors: sales from new stores, sales from e-commerce, or increased foot traffic and higher sales per customer at existing stores.
Same-Store SalesTractor Supply's demand within its existing stores has generally risen over the last two years but lagged behind the broader consumer retail sector. On average, the company's same-store sales have grown by 3.1% year on year. With positive same-store sales growth amid an increasing physical footprint of stores, Tractor Supply is reaching more customers and growing sales.
In the latest quarter, Tractor Supply's same-store sales fell 4.2% year on year. This decline was a reversal from the 8.6% year-on-year increase it posted 12 months ago. We'll be keeping a close eye on the company to see if this turns into a longer-term trend.
Key Takeaways from Tractor Supply's Q4 Results It was good to see Tractor Supply beat analysts' gross margin and EPS expectations this quarter. That stood out as a positive in these results. On the other hand, its revenue slightly missed estimates as its sales volumes fell 2.7% and prices fell 1.5%. Furthermore, its full-year 2024 revenue and earnings guidance was underwhelming as it projected flattish same-store sales. Overall, the results could have been better. The stock is up 1% after reporting and currently trades at $227 per share.
