The Brentwood, Tenn., based retailer managed to overcome an uneven contribution from Mother Nature in its December-ending fourth quarter and report same store sales growth of 3.1%, better than the 1.9% analysts had been projecting, though still on the low end of the company's previously stated targets of 3% to 5% annual comps growth.
That translated into a slightly better than expected fourth-quarter bottom-line performance of 94 cents a share, compared with analysts' projections of 92 cents. Revenue in the quarter also came in slightly ahead of forecasts.
Still, the uneven weather had a pronounced impact on the company's sales trends, and makes its operational acumen critically important.
Warmer than historic weather patterns in most of the country in the first two months of the fourth quarter stymied some of the urgency for early season buying of cold weather products such as log splitters and stoves. Weather trends regressed to the mean in the final month of the quarter, as cold set in around the country, prompting an uptick in sales of cold weather products.
Tractor Supply's sales prospects looked a bit more dire back in October when the company revealed its third-quarter results, as its top line then missed estimates and sales comparisons actually showed a decline, instead of the uptick that analysts had been anticipating.
The stock of Tractor Supply, which carries a $10 billion market cap, retreated 25% from its May high of $97 to its late October low at $61. Shares are up nearly 5% in Thursday's trading in response to fourth-quarter results, at $75.75 a share on heavy trading volume.
For Tractor Supply, weather can be a double edged sword. Not only is the company warehousing its inventory of wood burning stoves in a distribution center rather than on a sales floor when the cold weather fails to evidence itself, but sales of some of its next-season products - whether apparel, or planting or other gentleman farmer merchandise - can get pulled into the earlier quarter, which ends up skewing the comparisons for subsequent quarters.
Tractor Supply recently announced that it opened its 1,600th store location, and though it has slightly scaled back its store expansion plans, still eyes an eventual chain of 2,500 stores. The company, which bills itself as a rural lifestyle retail chain, situates its store locations in rural communities just outside metropolitan areas, proximate with its customer base of recreational farmers, people who keep livestock as pets, and contractors and small farm businesses. It nominally competes with the likes of Home Depot (HD) - Get Report and Lowe's (LOW) - Get Report , and to a lesser extent Wal-Mart (WMT) - Get Report , though its business model and store locations tend to distinguish the brand from those names.
In addition, it's regarded as relatively insulated from online competition, as its mix of immediate need products, such as pet food, and bulky to ship items, such as power generators and tractor parts, don't translate as easily to the e-commerce model. That, in part, explains why, its uneven sales performance notwithstanding, the stock continues to trade at a robust 23 times trailing earnings.