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Tractor Supply Company (TSCO - Free Report) is feeling the pinch of a changing retail environment. This Zacks Rank #5 (Strong Sell) is expected to see a decline in earnings in 2017.

Tractor Supply is the largest rural lifestyle retail chain in the United States with 1,630 stores in 49 states and a web site.

Founded in 1938, it focuses on the needs of the rural lifestyle which includes recreational farmers and ranchers as well as tradesmen and small businesses. Their stores are located outside large metropolitan areas and in rural communities.

Despite its name, it sells more than just tractors, including lawn and garden items, toys, work/recreational clothing and footwear, pet and small animal products, hardware, truck towing and tool products and seasonal products.

It also operates Petsense, a small-box pet specialty supply retailer servicing pet owners in small and mid-sized communities. As of July 1, 2017, it operated 160 Petsense stores in 26 states.

Missed in the Second Quarter

On July 26, Tractor Supply reported second quarter results and missed on the Zacks Consensus by 2 cents. It reported earnings of $1.25 versus the consensus of $1.27.

Revenue rose 8.9% to $2 billion from $1.85 billion a year ago.

Comparable sales rebounded off last year's weak results, rising 2.2% compared to just 0.5% in the second quarter of 2016 due to continued strength in year-round products, with the Livestock and Pet categories leading the performance.

Gross margin fell 10 basis points to 34.9% from 35% last year due to higher freight expense from increased diesel fuel prices and a mix shift to more freight intensive products.

It's not throwing in the towel against Amazon, as it has a robust online sales presence and has been strengthening the connection between its stores and its online presence.

Lowered Full Year Guidance

However, in spite of all the good news, the company still lowered its comparable store sales guidance for the full fiscal year to the range of 1.1%-1.7% from 2%-3%.

Earnings guidance was also lowered to a range of $3.22-$3.27 from $3.44-$3.52.

As a result, the analysts slashed full year estimates for 2017. 12 estimates were lowered in the last 60 days pushing the Zacks Consensus down to $3.26 from $3.41.

That's an earnings decline of 0.4% as Tractor Supply made $3.27 last year.

But analysts were also bearish on 2018 as 11 estimates were also cut for that year, pushing the Zacks Consensus Estimate down to $3.58 from $3.81.

Shares Rebound from Multi-Year Lows

After the earnings report, shares tanked to 4-year lows.



But since then, they've rebounded 19.4%.

Tractor Supply isn't that cheap, though. It trades with a forward P/E of 18.4.

Is the worst over?

For investors looking to get into the home retail business they should consider Home Depot (HD - Free Report) . It's a Zacks Rank #2 (Buy) and is expected to grow earnings by 13% this year.

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