Tractor Supply CEO says Q2 results are 'below expectations'

Tractor Supply Company reported sales for the second quarter 2023 increased 7.2% to $4.18 billion compared to second quarter 2022 sales of $3.90 billion.

The farm and ranch retailer attributed the sales growth to contributions from the acquisition of Orscheln Farm and Home, new store openings, and growth in comparable store sales. 

Comparable store sales increased 2.5%, as compared to an increase of 5.5% in the second quarter a year ago. Comps included an average transaction count increase of 1.8% and comparable average ticket growth of 0.6%. 

Operating income increased 6.5% to $559.3 million from $525 million in the second quarter of 2022.

The Brentwood, Tennessee-based company also posted a net income of $421.2 million for the period. This is a 6.2% increase from a net income of $396.5 million for the same period last year.

While Tractor Supply’s numbers were solid, as the company demonstrated growth across the board, CEO and President Hal Lawton said the outcome was “below expectations.” (Read more of Lawton’s comments on the quarter below.)

During the quarter, the retailer opened 17 new Tractor Supply stores and 3 new Petsense by Tractor Supply stores.

As of July 1, the company operated 2,181 Tractor Supply stores in 49 states, including 81 stores acquired from Orscheln Farm and Home in 2022 that will be rebranded to Tractor Supply by the end of 2023.

At the end of the quarter, the retailer also operated 192 Petsense by Tractor Supply stores in 23 states.

Citing market analysis, Tractor Supply announced that it has established a new target of 3,000 Tractor Supply stores in the U.S., an increase of 200 locations from prior guidance. Tractor Supply anticipates accelerating its annual new store growth to approximately 90 stores per year beginning in 2025, with a step up to 80 new stores in 2024.

To help fund the growth strategy, the company said it plans to periodically execute the sale-leaseback of its existing ownership of 117 stores. According to Tractor Supply, the move will fund the cash required by the new development program and capture the value of its existing real estate.

Tractor Supply has also revised its financial outlook for 2023. The company now expects sales full-year sales of $14.8 billion to $14.9 billion compared to a previous projection of sales reaching $15 billion to $15.3 billion.

Comp projections have been revised to grow of 1.3% to 2.5% from prior expectations of 3.5% to 5.5% growth. 

New projections for year-end revenue have been updated to $1.12 billion to $1.15 billion compared to the earlier outlook of $1.13 billion to $1.17 billion.

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