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Can Tractor Supply's Strategic Efforts Help Offset Headwinds?
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Leading retail farm and ranch store chain in the United States, Tractor Supply Company (TSCO - Free Report) has been facing a challenging economic backdrop at the agricultural and energy sectors for quite some time. Evidently, the company has delivered unsatisfactory performance in the first half of 2017.
Let’s Delve Deep
We note that the company has witnessed negative earnings surprise of 1.6% in the second quarter of 2017, after in-line earnings in the previous quarter. Also, its top line has missed the Zacks Consensus Estimate in the most recent quarter. Though comparable-store sales (comps) increased 2.2% in the second quarter, comps growth was hurt to an extent of about 60 basis points (bps) due to lesser sales days this quarter compared with second-quarter 2016.
Additionally, the company’s margins have remained under pressure, largely on account of higher freight expenses. Consequently, gross margin decreased 60 basis points (bps) and 10 bps in the first and second quarters of 2017, respectively. Going forward, gross margin is anticipated to be flat to down in 2017. Also, operating margin is expected to decline in the band of 80 – 100 bps.
Markedly, management has stated that it witnessed favorable trends in early third quarter, given the continued solid demand for spring season products, thanks to favorable weather. Despite this, the company lowered its full-year 207 outlook owing to an unimpressive first-half performance. Thus, net sales are anticipated in a band of $7.13–$7.19 billion compared with $7.22–$7.29 billion, projected earlier.
Further, comps growth is now guided in a range of 1.1–1.7%, down from the previously guided range of 2–3% growth. The updated comps view includes a negative impact of about 30% from deflation. Moreover, earnings per share are envisioned in a band of $3.22–$3.27 compared with its old forecast of $3.44–$3.52.
Will Tractor Supply’s Initiatives Revive Performance?
Tractor Supply’s growth initiatives including expansion of store base and incorporation of technological advancements to improve traffic and drive top line are noteworthy. In fact, the company leverages an extensive network of stores to penetrate into target markets, which in turn, enables it to generate healthy sales and gain market share. Also, it remains on track to attain its long-term domestic store growth target of 2,500 stores.
Tractor Supply, which shares space with Five Below, Inc. (FIVE - Free Report) , KAR Auction Services, Inc. (KAR - Free Report) and Sally Beauty Holdings, Inc. (SBH - Free Report) remains focused on integrating its physical and digital operations to offer consumers a seamless shopping experience as well. In sync with this the company remains on track with its One Tractor initiative, which is aimed at connecting store and online shopping.
Though the company’s initiatives might spark a turnaround, it might take some time.
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It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Can Tractor Supply's Strategic Efforts Help Offset Headwinds?
Leading retail farm and ranch store chain in the United States, Tractor Supply Company (TSCO - Free Report) has been facing a challenging economic backdrop at the agricultural and energy sectors for quite some time. Evidently, the company has delivered unsatisfactory performance in the first half of 2017.
Let’s Delve Deep
We note that the company has witnessed negative earnings surprise of 1.6% in the second quarter of 2017, after in-line earnings in the previous quarter. Also, its top line has missed the Zacks Consensus Estimate in the most recent quarter. Though comparable-store sales (comps) increased 2.2% in the second quarter, comps growth was hurt to an extent of about 60 basis points (bps) due to lesser sales days this quarter compared with second-quarter 2016.
Additionally, the company’s margins have remained under pressure, largely on account of higher freight expenses. Consequently, gross margin decreased 60 basis points (bps) and 10 bps in the first and second quarters of 2017, respectively. Going forward, gross margin is anticipated to be flat to down in 2017. Also, operating margin is expected to decline in the band of 80 – 100 bps.
Markedly, management has stated that it witnessed favorable trends in early third quarter, given the continued solid demand for spring season products, thanks to favorable weather. Despite this, the company lowered its full-year 207 outlook owing to an unimpressive first-half performance. Thus, net sales are anticipated in a band of $7.13–$7.19 billion compared with $7.22–$7.29 billion, projected earlier.
Further, comps growth is now guided in a range of 1.1–1.7%, down from the previously guided range of 2–3% growth. The updated comps view includes a negative impact of about 30% from deflation. Moreover, earnings per share are envisioned in a band of $3.22–$3.27 compared with its old forecast of $3.44–$3.52.
Will Tractor Supply’s Initiatives Revive Performance?
Tractor Supply’s growth initiatives including expansion of store base and incorporation of technological advancements to improve traffic and drive top line are noteworthy. In fact, the company leverages an extensive network of stores to penetrate into target markets, which in turn, enables it to generate healthy sales and gain market share. Also, it remains on track to attain its long-term domestic store growth target of 2,500 stores.
Tractor Supply, which shares space with Five Below, Inc. (FIVE - Free Report) , KAR Auction Services, Inc. (KAR - Free Report) and Sally Beauty Holdings, Inc. (SBH - Free Report) remains focused on integrating its physical and digital operations to offer consumers a seamless shopping experience as well. In sync with this the company remains on track with its One Tractor initiative, which is aimed at connecting store and online shopping.
Though the company’s initiatives might spark a turnaround, it might take some time.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>