Analyst Note| Jaime M. Katz, CFA |
We don’t plan to make any material adjustments to our $168 fair value estimate for narrow-moat Tractor Supply after incorporating first-quarter results that were largely in line with our pre-print forecast. In the period, comparable store sales rose 5.2%, well ahead of our 1% estimate, supporting sales growth of 8.3% to $3 billion (around our $2.9 billion sales forecast). Notably, retail price inflation contributed around 10 points to comparable store sales, a figure that remained impressive given that the two-year comp stack (43.8%) remained higher than any time since the pandemic began. Retail inflation was also seen in average ticket, which rose 6.7%, however, transactions fell 1.4%, implying trip consolidation from customers. Despite the inflationary environment, Tractor Supply managed costs well, as evidenced by a mere 20-basis-point contraction in operating margin, to 8.1%, helped by lower COVID-19-related costs and employee incentive compensation.