Tractor Supply Company ( TSCO Quick Quote TSCO - Free Report) launched its largest and ninth distribution center, located in Navarre, OH, which was marked by a grand opening event. This development will help the company to support its expansion plans across the United States and drive growth. Last year, TSCO reached a milestone by surpassing more than 2,100 Tractor Supply stores across the United States and 50,000 Team Members. The company’s sales also witnessed more than 70% growth from the time its first distribution center was opened in 2018. The new facility will meet growing customer demand in the Ohio and Upper Midwest regions. The distribution center will provide for nearly 250 stores, and help fulfill online orders for customers in Ohio, Michigan, Minnesota and other parts of the Upper Midwest region. Also, the move will create 500 additional jobs in the Stark County area. What Else Do You Need to Know?
Tractor Supply is on track to build up on its Out Here lifestyle assortment and convenient shopping format to gain customers and market share. The strategy is essentially based on five key pillars, including customers, digitization, execution, team members and total shareholder return. As part of the plans, it revised the long-term financial growth targets for 2022-2026.
Management envisions achieving 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%. Earlier, the company launched the Field Activity Support Team (“FAST”) and implemented various technology and service enhancements across the enterprise. Tractor Supply is in the initial phase of transforming its side lots and mature stores to improve space productivity, bringing the latest merchandising strategies to life, and advancing efforts to remain nationally strong and locally relevant. Management anticipates transforming the side lots in 100 locations in 2022. These have been significant investments in stores. These are expected to boost productivity across the existing and new stores. Given the changing consumer trends, Tractor Supply is focused on integrating its physical and digital operations to offer consumers a seamless shopping experience. The company is on track with the ‘ONETractor’ strategy to connect stores and online shopping. The company’s omni-channel investments, include curbside pickup, same-day and next-day delivery, a re-launched website, and a new mobile app. Its e-commerce business witnessed high-single-digit growth from the prior year. Tractor Supply added app features such as My Pet and upgraded its in-store mode. The company expanded the program to include Petsense by Tractor Supply stores. The move will enable it to gain pet customers for both banners. The mobile app has also been performing well. Management earlier predicted to reach more than $2 billion in sales by 2026. The company’s store expansion initiatives bode well. It is well-positioned to expand its store base, remaining on track to increase its domestic store to 2,500 in the long term. In the third quarter of 2022, the company opened 11 Tractor Supply stores and two Petsense stores. Management is on track with its store-opening initiatives. It plans to open 60-70 Tractor Supply stores and 10 Petsense stores in 2022. Driven by these factors, management raised its guidance for 2022. The view reflects the recent acquisition of Orscheln Farm and Home, which is likely to contribute $75 million to sales in the fourth quarter and 2022. The company expects net sales of $14.06-$14.12 billion, up from the prior mentioned $13.95-$14.05 billion. Comps are likely to grow 5.4-5.8%, up from earlier stated 5.2-5.8% growth. The operating margin is anticipated to be 10.1-10.15% compared with the previously stated 10.2%. Earnings per share are likely to be $9.55-$9.63, up from the earlier mentioned $9.48-$9.60. The view also includes gains from the 53rd week in 2022, which is expected to contribute 1.5 percentage points to the top line and 15 cents to the bottom line. Shares of this Zacks Rank #3 (Hold) company have gained 2.3% in the past year compared with the industry's 5.5% growth.
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However, Tractor Supply has been reeling under cost inflation and higher transportation costs. The company has also been witnessing elevated costs in the commodity inputs in its product categories. Higher labor wages and transportation costs have been adversely impacting its vendor partners. Management expects rising inflation to persist throughout 2023, with some normalization in the back half of 2023.
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