Tractor Supply reports 2010 fourth quarter and full year results

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BRENTWOOD, Tenn. — Tractor Supply Company, the largest retail farm and ranch store chain in the U.S., recently announced financial results for its fourth fiscal quarter and fiscal year ended Dec. 25, 2010. Additionally, the company provided its current outlook for fiscal 2011.

Fourth quarter results

Net sales increased 19.7 percent to $1.03 billion from $862.5 million in the prior year’s fourth quarter. Same-store sales increased 13.1 percent compared to a 0.7 percent increase in the prior-year period. This same-store sales increase was broad-based and driven by continued strength in consumable, usable and edible products, principally animal and pet-related merchandise.

Seasonal items, predominantly heating and insulated outerwear, also performed well during the quarter. Gross margin increased 18.6 percent to $336.9 million, or 32.6 percent of sales, compared to $284.2 million, or 32.9 percent of sales, in the prior year’s fourth quarter.

Gross margin

The decline in gross margin percentage primarily resulted from higher transportation costs and mix of merchandise, partially offset by improved direct product margin. The ongoing direct product margin improvement resulted from strategic sourcing, inventory management, and more effective pricing.

Selling, general and administrative expenses, including depreciation and amortization, improved to 25 percent of sales for the fourth quarter compared to 26.2 percent of sales in the prior year’s fourth quarter. The improvement as a percent of sales was primarily attributable to strong same-store sales.

Net income for the quarter was $50.2 million, or $0.67 per diluted share, compared to $37.3 million, or $0.51 per diluted share, in the prior year’s fourth quarter. All references to per-share amounts reflect a two-for-one stock split that was effective Sept. 2, 2010.

Method change

Effective at the end of the fourth quarter, the Company changed its method of accounting for inventory from last-in, first-out to the average cost method. The Company has applied this change in method of inventory costing retrospectively to all prior periods presented in this release in accordance with accounting principles relating to accounting changes.

The Company opened 27 new stores and closed two stores in the quarter compared to 18 new store openings and no closed stores in the prior year’s fourth quarter.

Full year results

For fiscal 2010, net sales increased 13.5 percent to $3.64 billion from $3.21 billion in fiscal 2009. Same-store sales increased 7.0 percent compared to a 1.1 percent decrease for fiscal 2009. Gross margin increased 15.5 percent to $1.20 billion compared to $1.04 billion in 2009. As a percent of sales, gross margin was 33.1 percent compared to 32.5 percent for 2009.

For fiscal 2010, net income was $168.0 million, or $2.25 per diluted share, compared to net income of $119.7 million, or $1.63 per diluted share, for fiscal 2009. All references to per-share amounts reflect a two-for-one stock split that was effective Sept. 2, 2010.

During fiscal 2010, the Company opened 74 new stores and closed three stores compared to 76 new store openings, two relocations and one closure in fiscal 2009.

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