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Will Growth Initiatives Keep Tractor Supply (TSCO) Attractive?
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Tractor Supply Company (TSCO - Free Report) looks well-poised for growth, thanks to progress on its Life Out Here Strategy. Robust product demand, e-commerce strength and its Neighbor's Club loyalty program have been contributing to its strong performance for the past several quarters. Sturdy demand for everyday merchandise, including consumable, usable and edible products, as well as year-round products, bodes well for TSCO’s comparable sales (comps) growth.
However, TSCO has been witnessing rising inflationary and supply-chain issues. Higher product cost inflation and transportation costs have been hurting Tractor Supply’s gross margin.
The Zacks Consensus Estimate for TSCO’s 2022 sales and earnings suggests growth of 10.7% and 11.3%, respectively. It has a trailing four-quarter earnings surprise of 10.2%.
Backed by robust trends, the Zacks Rank #2 (Buy) company has outperformed the industry and the sector in the past year. Shares of TSCO have gained 0.6% in a year against the industry and the sector’s declines of 23.1% and 27.3%, respectively. The stock also compares favorably with the S&P 500’s decline of 17.6% in the same period.
Image Source: Zacks Investment Research
Factors Aiding Growth
Tractor Supply is expected to retain its momentum in the quarters ahead, driven by its efforts to integrate its physical and digital operations to offer consumers a seamless shopping experience. The company’s ‘ONETractor’ strategy, aimed at connecting stores and online shopping, has been a key driver. TSCO’s omni-channel investments include curbside pickup, same-day and next-day delivery, a re-launched website, and a new mobile app. Management is likely to reach more than $2 billion in sales by 2026.
The company has been progressing well with its Life Out Here Strategy, which is based on five key pillars — customers, digitization, execution, team members and total shareholder return. Earlier, TSCO launched the Field Activity Support Team and implemented various technology and service enhancements across the enterprise.
As part of the plans, the company revised the long-term financial growth targets for 2022-2026. Management envisions net sales growth of 6-7%, while comps are expected to grow 4-5%. The operating margin is expected to be 10.1-10.6%, up from the earlier mentioned 9-9.5%. Earnings per share are likely to grow 8-11%, up from the previously stated 8-10%.
Tractor Supply’s focus on its growth initiatives, which include the expansion of its store base and the incorporation of technological advancements to induce traffic and drive the top line, is another advantage. The company is on track with Project Fusion remodels and Side Lot transformation to remain nationally strong and locally relevant. This will also help improve store productivity by bringing the latest merchandising strategies to life. Management anticipates transforming the side lots into 100 locations in 2022. These have been significant investments in stores.
Management remains optimistic about its growth prospects in 2022, driven by continued momentum in sales, cost-control measures and better inventory. The company expects net sales of $13.95-$14.05 billion for 2022, with comps growth of 5.2-5.8%. The operating margin is anticipated to be 10.2%. Net income is expected to be $1.07-$1.09, with earnings per share of $9.48-$9.60. The view does not include the impacts of the Orscheln Farm acquisition as it is currently subjected to customary closing conditions.
Conclusion
The aforementioned strengths indicate that Tractor Supply is well-placed to retain momentum in the long term despite inflationary product costs, supply-chain issues and transportation costs.
Other Stocks to Consider
Here are some other top-ranked stocks to consider — Ulta Beauty (ULTA - Free Report) , Chico's FAS and Designer Brands (DBI - Free Report) .
Ulta Beauty, a leading beauty retailer in the United States, currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 32.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 13.7% from the year-ago period’s reported figure. ULTA has an expected EPS growth rate of 13.9% for three-five years.
Chico's, an omni-channel retailer of women's private branded casual-to-dressy clothing, intimates and complementary accessories, currently flaunts a Zacks Rank #1. CHS has a trailing four-quarter earnings surprise of 249%, on average.
The Zacks Consensus Estimate for Chico's current financial-year sales and EPS suggests growth of 19.6% and 112.5%, respectively, from the year-ago period’s reported figures.
Designer Brands, a retailer of footwear and accessories for women, men, and kids primarily in North America, currently carries a Zacks Rank #2. DBI has a trailing four-quarter earnings surprise of 55.1%, on average.
The Zacks Consensus Estimate for Designer Brands’ current financial-year sales and earnings suggests growth of 6.9% and 23.5%, respectively, from the year-ago period’s reported figures.
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Will Growth Initiatives Keep Tractor Supply (TSCO) Attractive?
Tractor Supply Company (TSCO - Free Report) looks well-poised for growth, thanks to progress on its Life Out Here Strategy. Robust product demand, e-commerce strength and its Neighbor's Club loyalty program have been contributing to its strong performance for the past several quarters. Sturdy demand for everyday merchandise, including consumable, usable and edible products, as well as year-round products, bodes well for TSCO’s comparable sales (comps) growth.
However, TSCO has been witnessing rising inflationary and supply-chain issues. Higher product cost inflation and transportation costs have been hurting Tractor Supply’s gross margin.
The Zacks Consensus Estimate for TSCO’s 2022 sales and earnings suggests growth of 10.7% and 11.3%, respectively. It has a trailing four-quarter earnings surprise of 10.2%.
Backed by robust trends, the Zacks Rank #2 (Buy) company has outperformed the industry and the sector in the past year. Shares of TSCO have gained 0.6% in a year against the industry and the sector’s declines of 23.1% and 27.3%, respectively. The stock also compares favorably with the S&P 500’s decline of 17.6% in the same period.
Image Source: Zacks Investment Research
Factors Aiding Growth
Tractor Supply is expected to retain its momentum in the quarters ahead, driven by its efforts to integrate its physical and digital operations to offer consumers a seamless shopping experience. The company’s ‘ONETractor’ strategy, aimed at connecting stores and online shopping, has been a key driver. TSCO’s omni-channel investments include curbside pickup, same-day and next-day delivery, a re-launched website, and a new mobile app. Management is likely to reach more than $2 billion in sales by 2026.
The company has been progressing well with its Life Out Here Strategy, which is based on five key pillars — customers, digitization, execution, team members and total shareholder return. Earlier, TSCO launched the Field Activity Support Team and implemented various technology and service enhancements across the enterprise.
As part of the plans, the company revised the long-term financial growth targets for 2022-2026. Management envisions net sales growth of 6-7%, while comps are expected to grow 4-5%. The operating margin is expected to be 10.1-10.6%, up from the earlier mentioned 9-9.5%. Earnings per share are likely to grow 8-11%, up from the previously stated 8-10%.
Tractor Supply’s focus on its growth initiatives, which include the expansion of its store base and the incorporation of technological advancements to induce traffic and drive the top line, is another advantage. The company is on track with Project Fusion remodels and Side Lot transformation to remain nationally strong and locally relevant. This will also help improve store productivity by bringing the latest merchandising strategies to life. Management anticipates transforming the side lots into 100 locations in 2022. These have been significant investments in stores.
Management remains optimistic about its growth prospects in 2022, driven by continued momentum in sales, cost-control measures and better inventory. The company expects net sales of $13.95-$14.05 billion for 2022, with comps growth of 5.2-5.8%. The operating margin is anticipated to be 10.2%. Net income is expected to be $1.07-$1.09, with earnings per share of $9.48-$9.60. The view does not include the impacts of the Orscheln Farm acquisition as it is currently subjected to customary closing conditions.
Conclusion
The aforementioned strengths indicate that Tractor Supply is well-placed to retain momentum in the long term despite inflationary product costs, supply-chain issues and transportation costs.
Other Stocks to Consider
Here are some other top-ranked stocks to consider — Ulta Beauty (ULTA - Free Report) , Chico's FAS and Designer Brands (DBI - Free Report) .
Ulta Beauty, a leading beauty retailer in the United States, currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 32.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 13.7% from the year-ago period’s reported figure. ULTA has an expected EPS growth rate of 13.9% for three-five years.
Chico's, an omni-channel retailer of women's private branded casual-to-dressy clothing, intimates and complementary accessories, currently flaunts a Zacks Rank #1. CHS has a trailing four-quarter earnings surprise of 249%, on average.
The Zacks Consensus Estimate for Chico's current financial-year sales and EPS suggests growth of 19.6% and 112.5%, respectively, from the year-ago period’s reported figures.
Designer Brands, a retailer of footwear and accessories for women, men, and kids primarily in North America, currently carries a Zacks Rank #2. DBI has a trailing four-quarter earnings surprise of 55.1%, on average.
The Zacks Consensus Estimate for Designer Brands’ current financial-year sales and earnings suggests growth of 6.9% and 23.5%, respectively, from the year-ago period’s reported figures.