Tractor Supply CEO: Outlook is still strong despite drought conditions
Brutally hot temperatures and a persistent drought across the Great Plains and West haven't altered Tractor Supply's sales trajectory for the rest of the year, CEO Hal Lawton told Yahoo Finance Live at Goldman Sachs's 29th annual retail conference on Wednesday.
Lawton explained that although drought delayed spring for many of the company's consumers, "our business has been eerily consistent, stable, and resilient throughout all this year.”
Tractor Supply stock popped more than 3% in midday trading on Wednesday following Lawton's comments.
The lifestyle retailer focuses on the "gentleman farmer," or more affluent farm owners that need things like cow feed and Carhartt jackets, and operates more than 2,016 stores across 49 states.
According to the CEO, the retailer hasn't been swept into the "discount wave" rippling through the retail industry — notably in apparel — at the moment.
Still, Tractor Supply's core customer has battled through a lot this year, from sky-high inflation for commodities to intensifying drought conditions in some parts of the country.
A two-decade-long drought has gripped parts of the American West and Southwest, in particular, leading to water cuts, crop damage, and higher costs for farmers. But to Lawton's point, that hasn't slowed the business at Tractor Supply.
In late July, Tractor Supply reported that second-quarter sales rose 8.4% while operating profits increased by 8.1%. The company lifted its full-year earnings-per-share outlook to $9.48-$9.60 from $9.20-$9.50 previously.
Tractor Supply "has gained customers through the pandemic by being an ‘essential’ retailer," Oliver Wintermantel, analyst at Evercore ISI, said in a note to clients. "Comps stay [positive mid-single digits] in 2022/23 and margins stay above 10%. The market still believes in one of the last unit growth stories in Hardlines. Structurally improved operations enable TSCO to grow loyal market share. FCF and shareholder returns are attractive."
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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