Analyst Note| Jaime M. Katz, CFA |
Narrow-moat Tractor Supply posted another banner quarter, with comp store sales up 39%, total sales higher by 42.5% (to $2.8 billion), and operating margin expansion of 260 basis points to 8.3% (well ahead of the 6% we had forecast). Given the still constrained opportunity set for discretionary spend (on-premises dining and travel hesitancy), consumer outlays have continued to flow to firms like Tractor that are focused on the home arena and on the increased ownership of pets, supporting demand. Elevated sales, lower promotional spend, and improved mix led to nearly 150 basis points in gross margin expansion in the quarter, while selling, general, and administrative costs leveraged more than 100 basis points on volumes. Broad-based strength persisted across the business with all regions comping more than 30%, comp transactions rising 21%, and comp ticket higher by 17.6%. Thanks to flawless execution, Tractor Supply continues to elevate its brand resonance with its customer base, surpassing 20 million Neighbors Clubs loyalty members in the period and evidenced by unaided brand awareness that has risen 17 percentage points to 51% over the last 15 months.