Tractor Supply comes in at top end of raised range

Retailer hits marks, but is wary of deflation's impact

Email | Print By Geert De Lombaerde

Tractor Supply on Wednesday reported third-quarter profits of $22.0 million on sales of $748 million. Those numbers were up 38 percent and 2 percent, respectively, from the same period a year ago.

The Brentwood-based company had hiked its guidance earlier this month, citing better inventory and expense management trends. Its final Q3 numbers backed up those claims, as operating margins rose to 4.8 percent from 3.6 percent in 2008. Per-diluted-share profits came in at 60 cents, the upper end of the recently established range.

Still, the macroeconomic environment is proving a challenge to CEO Jim Wright and his crew: Same-store sales fell 5.1 percent and the average transaction value dropped to $40.14 from $44.59 as consumers continue to avoid big-ticket items. In addition, falling prices will hurt Tractor Suppply's ability to further grow its margins.

"Deflation could provide a headwind of approximately 2 percent in the fourth quarter," CFO Tony Crudele said on the company's conference call with analysts.

Wright said his team is committed to open around 75 stores in 2010 and expects consumers to slowly loosen their purse strings.

"The repair cycle will gradually shift to replacement," he said.

Through the first nine months of 2009, Tractor Supply earned $77.2 million, up from $57.2 million. Sales have risen 6 percent to $2.3 billion.

Shares of Tractor Supply (Ticker: TSCO) rose 0.9 percent in after-hour trading Wednesday after falling about 3 percent earlier in the day. Year to date, they've risen about 40 percent.