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Will Tractor Supply's Initiatives Help Sustain Momentum?

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Tractor Supply Company (TSCO - Free Report) remains well positioned for growth due to smooth progress on its strategic plans, which include store expansion and technological advancements. Further, the company’s sustained focus on expanding its core business in key markets, along with efficient inventory management, remain significant growth drivers.

Tractor Supply leverages an extensive network of stores to penetrate into target markets, which in turn enables it to generate healthy sales and gain market share. In line with this strategy, the company recently introduced its 1,600th store in Brentwood, CA. Management also targets opening about 100 Tractor Supply stores in 2017. Clearly, the company remains on track to attain its long-term domestic store growth target of 2,500 stores.

Coming to technological advancement, the company’s revamped website and enhanced omni-channel network highlight its focus on improving IT security and strengthening customer relations.

Moreover, Tractor Supply recently acquired Petsense LLC—a leading specialty retailer of pet supplies and services—in a bid to fortify its presence in the flourishing pet specialty space. This acquisition opens up opportunities to tap the roughly $60 billion pet market, which remains poised to grow due to the solid pet ownership fashion and owners’ growing kindness toward them. We believe Tractor Supply is likely to benefit from Petsense’s impressive growth history and network, alongside leveraging its own knowledge of the pets business.

Also, the company is progressing with its constant investments in new systems—including demand planning, improved pricing and inventory allocation— which are directed toward generating supply chain efficiencies in order to better manage global inventories. For 2017, the company has lined up several new products and category resets in the stores for the first half of the year. Additionally, it remains focused on the execution of its digital priorities, lending the support needed to bolster growth at its merchandising, customer facing and logistics capabilities.

Driven by the aforesaid factors, the stock has outpaced the Zacks Consensus Estimate in all the trailing four quarters, with an average of 3.1%. Moreover, Tractor Supply has outperformed the Zacks categorized Retail – Miscellaneous/Diversified industry in the past six months. While the stock edged up 4.1%, the industry dipped 0.6% over the same time frame.

However, the company’s seasonal business remains a hurdle, as unseasonable weather may have a material impact on its operational results in the peak selling periods. Further, stiff competition from local, regional and international players, as well as volatility in raw material prices remain major threats to the company.

Tractor Supply shares space with Big 5 Sporting Goods Corporation (BGFV - Free Report) , MarineMax, Inc. (HZO - Free Report) and Dick's Sporting Goods, Inc. (DKS - Free Report) .

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