Kurt Barton
Executive Vice President, Chief Financial Officer And Treasurer at Tractor Supply
Thank you, Hal, and hello to everyone on the call. The Tractor Supply team has started fiscal 2022 with strong performance that came in ahead of our expectations. On a two-year stack, our comparable store sales were 43.8%. Looking at the cadence of the quarter, January and February were the strongest months with March positive, albeit not a bit rate earlier in the quarter. We benefited from cold weather trends early in the quarter, while spring is late to break across most of the country. Please keep in mind, we were comping ideal weather conditions in the first quarter of last year with an early spring across many of our markets. This quarter, retail price inflation contributed about 10 points to our comparable store sales as the team continues to navigate the ongoing cost pressures across the supply chain. As we shared with you last quarter, we anticipated this would be the toughest compare on transactions as we cycled the largest transaction gain since the beginning of the pandemic in Q1 of last year of 21%.
To illustrate, we were experiencing positive comp transactions until we cycle the last two weeks of the quarter where we clearly saw the benefits of stimulus on transactions in the prior year. As we expected, big ticket decline given the robust performance we were cycling driven by stimulus and the early start to the spring selling season. Last year, as we reported, big-ticket comps significantly outperformed the chain average comps and on a two-year stack, our big ticket performance exceeded the 43.8% comp growth of the chain. We continue to see strong CUE performance with strength in categories such as dry dog food, poultry, feed and heating fuel. For instance, dry dog food achieved over a 20% comp. Petsense performed above the company average, which was in line with our pet performance. Overall, we were very pleased with our top line performance. Turning now to gross margin, which outperformed our expectations. For the first quarter, our gross margin declined by 29 basis points to 34.9% of sales.
The decrease in gross margin is primarily attributable to three factors: significant product cost inflation, higher transportation costs and to a lesser extent, product mix. We continue to experience broad-based inflation while also seeing a step-up during the quarter in key commodities such as grains and oil, domestic and import freight costs have increased substantially year-over-year as well as fuel costs. We expect many of these trends in product cost and freight to continue throughout 2022. The robust growth in our CUE categories, which have a lower gross profit rate did put some pressure on gross margin. The team did a remarkable job of managing these cost increases through our price management actions and other margin driving initiatives. Examples include capturing efficiencies in the supply chain to reduce miles, continuing to limit promotions and leaning into the more efficient value provided through Neighbor's Club. SG&A, including depreciation and amortization as a percent of net sales was 26.9%, an improvement of 11 basis points.
This improvement was primarily attributable to the normalization of incentive compensation, moderation of COVID-19 response costs and leverage in occupancy and other costs from the increase in comparable store sales. These items were partially offset by investments in store wages and incremental costs related to our Life Out Here strategic investments for growth. This includes a step-up in our depreciation and amortization. Please also keep in mind, given our results last year, we were cycling strong SG&A leverage, which benefited from 38.6% comp sales in the first quarter of 2021. Net income was $187 million, and diluted EPS was $1.65 compared to $1.55 in the first quarter of 2021. We remain committed to returning cash to shareholders through the combination of a growing dividend and share repurchases. Last quarter, we increased our quarterly dividend by 77% from $0.52 a share to $0.92. During the quarter, we returned $400 million to shareholders through the combination of share repurchases and cash dividends.
Turning now to our balance sheet, which remains strong and provides us the ability to invest in our business for the long term. Merchandise inventories were $2.6 billion at the end of the first quarter, representing an increase of about 21% in average inventory per store. This increase is primarily attributable to inflation, along with our investment in inventory to support the growing demand. Moving now to our guidance for 2022, which is unchanged. As Hal mentioned earlier, we are reconfirming our guidance for the year. This includes net sales in the range of $13.6 billion to $13.8 billion with comparable store sales growth of 3% to 4.5%. For the year, we forecast an operating margin of 10.1% to 10.3% of sales. We continue to expect diluted EPS in a range of $9.20 to $9.50. We acknowledge that we beat our own expectations for the first quarter and that ongoing inflation should benefit our top line. With the dynamic macro environment as a backdrop, we believe it's prudent to maintain our outlook for the year.
Keep in mind, Q1 is our smallest quarter of the year, and it's great to start out the year ahead of our expectations. We recognize that flowing the first quarter performance through may put pressure towards the top end of our guidance ranges. For those of you who followed us for some time, this is not a new convention to guidance and is in line with how we provided guidance historically prior to the pandemic. We continue to believe the best way to look at our business is not by the quarter, but by the halves of the year. With as much inflation pressures we're seeing in our business, we are closely watching comparable average ticket and transactions. We anticipate that the breakdown of growth may be a bit different than our prior expectations, given the high level of inflation benefiting average ticket with transactions seeing incremental pressure.
Historically, we've experienced trip consolidation by consumers during strong inflationary times. As inflation pressures persist, it puts higher pressure on gross margin, yet provides an offsetting benefit to SG&A leverage. As such, we're maintaining our expectations on our operating margin. As a reminder, the prospective acquisition of Orscheln Farm and Home is not included in our guidance. In summary, we are very pleased with our performance in the first quarter and our outlook for 2022. The team is executing at a very high level we remain committed to investing in the business to retain the loyalty of our longtime and newer customers. Our goals are to maintain our everyday low prices and improve customer service, strengthen our supply chain and grow our digital commerce, all in support of our commitment to drive strong shareholder returns for the long term.
With that, I'll turn the call back over to Hal.