Kurt Barton
Executive Vice President, Chief Financial Officer and Treasurer at Tractor Supply
Thank you, Hal and hello to everyone on the call. At the halfway mark for the year, the Tractor Supply team has started fiscal 2022 with strong performance that came in ahead of our expectations. We are very pleased with the consistency and the strength of our top line performance. This quarter, retail price inflation contributed about 12 points to our comparable store sales as the team continues to navigate the ongoing cost pressures across the supply chain. We continue to see increasing costs in the commodity inputs in our product categories as well as underlying variables like higher labor wages and transportation costs impacting our vendor partners.
Comp transactions declined 2.0%, which was slightly below our expectations, as we anticipated pressure from cycling the benefits of stimulus in the prior year. We experienced incremental headwinds from the delayed start to the spring and the drought conditions in the latter part of the quarter. Complementing the commentary Hal shared on the cadence of the quarter, all regions of the country delivered positive sales comps. The geographic diversification of our store base worked to our advantage this quarter. We did experience softer performance in select regions of the country impacted by the drought. In particular, the Far West and Texas home out regions, which while positive, lagged the chain average. The South Central and South Atlantic were our best performing regions.
Turning to our digital performance, the second quarter represented our largest e-commerce quarter in net sales ever. On the back of 39 consecutive quarters of double-digit growth, our e-commerce grew approximately 7%. Excluding April, we had solid performance with double-digit sales for May and June combined. Our mobile apps continues to ramp with double-digit growth and represented about 15% of total digital sales in the quarter. Petsense continues to perform well with comp sales growth above the company average.
Turning now to gross margin. For the second quarter, our gross margin declined by 24 basis points to 35.5% of sales. This was primarily attributable to three factors, significant product cost inflation, higher transportation costs and to a lesser extent, product mix, given the robust growth in key products. We continue to experience broad-based inflation, domestic and import freight costs have increased substantially year-over-year as well as fuel costs. As we shared last quarter, we expect many of these inflationary trends to continue into the second half of 2022.
I continue to give the team a lot of credit for the remarkable job they are doing, between tracking and forecasting freight and the coordination of retail price increases at the store level, they have been nimble. The team has effectively manage these cost increases at the SKU level through our price management actions and other margin driving initiatives. The team has also been working to capture efficiencies in the supply chain to reduce miles, continuing the 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 22.1%, an improvement of 19 basis points. This improvement was primarily attributable to more normalized incentive compensation and the moderation of COVID-19 response costs, as well as leverage in occupancy and other costs from the increase in comparable store sales. These items were partially offset by investments in store wages and our strategic growth initiatives, which includes a step up in our depreciation and amortization. Compared to the second quarter of 2021, operating profit margin was essentially flat contracting by only 4 basis points.
Net income improved 7.1% to $397 million and diluted EPS increased 10.7% to $3.53. We remain committed to returning cash to shareholders. During the second quarter, we returned $291 million to shareholders through the combination of share repurchases and higher cash dividends. This brings our total cash return to shareholders through the first six months of the year to $691 million.
Turning to our balance sheet, merchandise inventories were $2.5 billion at the end of the second quarter, representing an increase of about 21% in average inventory per store. Consistent with the first quarter, this increase is primarily attributable to inflation. We believe the quality and the composition of our inventory is excellent and that we are in great shape as we go into the second half of the year. If anything, we are pursuing more inventory as there are categories we are working to improve our in-stock position. To provide more clarity on this, on a three-year basis, our units per store inventory has increased single-digits, while sales are up over 60%.
Moving now to our updated guidance for 2022, which is detailed in our press release we issued this morning. We are raising our financial outlook for the year given our strong performance year-to-date, as Hal mentioned earlier. This now includes net sales in the range of $13.95 billion to $14.05 billion, with comparable store sales growth of 5.2% to 5.8%. For the year, we now forecast the operating profit margin around 10.2%. This represents the midpoint of our previous guidance of 10.1% to 10.3% of sales.
While higher costs have handicapped some upside, at the same time, we believe we are able to mitigate pressures on the downside. Diluted EPS is anticipated to be in the range of $9.48 to $9.60 compared to our prior guidance of $9.20 to $9.50. Please note that our fiscal 2022 guidance includes a benefit for the 53rd week, which is estimated to be approximately 1.5 percentage points of net sales and $0.15 of diluted EPS.
As you model the second half of the year, let me address two items. First, for both the third and fourth quarters, we would anticipate that our comp sales growth would be consistent with our first half of the year. As Hal mentioned earlier, the extreme heat and drought conditions are continuing into the third quarter and we forecast these conditions will limit upside to sales. Second, I want to address the cadence of operating profit. We anticipate the earnings cadence between Q3 and Q4 to be more in line with historical trends.
For operating profit margin in the second half of the year, we forecast flat to slight contraction. The performance in the fourth quarter is forecast to be positive year-over-year, with the third quarter experiencing some contraction. The variation between the quarters is predominantly a function of gross margin. Specifically, the third quarter will experience greater mix pressures from the strength we are seeing in C.U.E. and higher transportation costs. Both of these factors we first experienced in the fourth quarter of last year. Store compares naturally ease in the fourth quarter.
For the second half of the year, we expect inflation to be consistent at an elevated level. With as much inflation pressure we are seeing in our business, we continue to closely watch comparable average ticket and transactions. In times of rising inflation, we anticipate that the breakdown of comp sales growth will trend to higher ticket performance from inflation, offset by transactions. The impact on transactions is pronounced this year, especially as we lap the prior year's benefit from stimulus.
As a reminder, the prospective acquisition of Orscheln Farm and Home is not included in our guidance. We continue to work collaboratively with the FTC towards a positive resolution and hope to have an update soon. Accordingly, we are limited in the comments we can make about the transaction at this time.
In summary, we are very pleased with our performance in the second quarter and our outlook for 2022. The resiliency of our business has been proven over time. We have an amazing track record of navigating the challenges of the external environment. As evidenced by our ongoing market share gains, the team is executing at a very high level. Our financial outlook for the year is delivering on the key drivers of our long-term algorithm that we shared in January, accelerated sales growth, strong earnings and increased cash return to our shareholders.
With that, I will turn the call back over to Hal.