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Tractor Supply (TSCO) Executes Strategies: On Track for Growth?
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Tractor Supply Company (TSCO - Free Report) has been favored by investors on the back of continued market share growth and progress on its strategic initiatives. Moreover, TSCO has been benefitting from its Life Out Here Strategy, ‘ONETractor’ Strategy, Neighbor’s Club membership program and healthy product demand. Also, the recent acquisition of Orscheln Farm and Home, store-growth initiatives, and comparable store sales growth bode well.
Sturdy demand for everyday merchandise, including consumable, usable and edible products, as well as year-round products, have been contributing to comparable store sales (comps) growth. Further, its store growth plans have been aiding the comps performance over the years.
The company’s focus on its strategic initiatives has been well-reflected in its share price, with the stock outperforming the industry. Although shares of this Zacks Rank #3 (Hold) company have lost 9.5% in the year-to-date period, it has outperformed the industry’s decline of 15.8%.
Further optimism on the stock is reflected by its forward estimates, which suggest notable growth. The Zacks Consensus Estimate for TSCO’s 2023 sales and earnings suggests growth of 4.7% and 5.6%, respectively, from the year-ago period’s reported numbers.
Image Source: Zacks Investment Research
Growth Strategies
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 —customers, digitization, execution, team members and total shareholder return.
As part of the plan, the company has set its long-term financial growth targets for 2022-2026. Management envisions achieving net sales growth of 6-7%, whereas comps are expected to grow 4-5%. The operating margin is expected to be 10.1-10.6% during the said period, with 8-11% growth in earnings per share. The company is also poised to benefit from the launch of Field Activity Support Team (“FAST”), and the implementation of various technology and service enhancements across the enterprise.
Additionally, Tractor Supply is focused on integrating its physical and digital operations to offer consumers a seamless shopping experience through its ‘ONETractor’ strategy. The company’s omni-channel investments include curbside pickup, same-day and next-day delivery, a re-launched website, and a new mobile app.
Tractor Supply exited the second quarter of 2023 with 31 million Neighbor's Club members, driven by all-time high retention rates and the re-launch of the point-based structure of its Neighbor's Club program. The company’s rebranding of Petsense by Tractor Supply and expansion of its Neighbor's Club program to Petsense stores have received positive customer feedback. This move will enable it to gain pet customers for both banners. Management earlier predicted to reach more than $2 billion in sales by 2026.
Tractor Supply is persistently focusing on store growth initiatives, which include the expansion of its store base and the incorporation of technological advancements to induce traffic and drive the top line. As part of its long-term store plan, Tractor Supply targets to reach 3,000 stores in the United States. To achieve this, it anticipates accelerating its annual new store growth to 90 per year in 2025 and 80 stores in 2024. Management intends to open 70 Tractor Supply stores and 10-15 Petsense stores in 2023.
Project Fusion is the company’s state-of-the-art space productivity program built to enrich customer experience in the mature store base. Another key component of the company’s space productivity initiatives is the transformation of its Side Lot. It is on track to complete the Orscheln Farm and Home conversions, as well as the Project Fusion remodels and garden center transformations, in 2023.
The company’s Project Fusion and Side Lot model transformations have been significant store investments. These investments target achieving higher market share, and boost productivity across the existing and new stores. Notably, TSCO boasts more than 700 Project Fusion stores, accounting for 30% of its store base. It continues to experience a positive halo impact from the garden center to the present store and vice versa. The addition of product categories, greater ease of shopping and modern services help the company serve its customers efficiently.
Hurdles on the Way
Tractor Supply has been feeling the pinch of inflation woes and rising costs. The company expects consumer spending trends to remain muted through the remainder of 2023. It is also witnessing higher depreciation and amortization, the opening of a distribution center, and the impacts of higher medical claims.
Key Picks
We have highlighted three better-ranked stocks from the Consumer Staple sector, namely Abercrombie & Fitch (ANF - Free Report) , American Eagle Outfitters (AEO - Free Report) and Urban Outfitters (URBN - Free Report) .
Abercrombie currently sports a Zacks Rank #1 (Strong Buy). ANF has a trailing four-quarter earnings surprise of 724.8%, on average. Shares of ANF have rallied 142.2% year to date.
The Zacks Consensus Estimate for Abercrombie’s current financial year’s sales suggests growth of 10% from the year-ago period’s reported figure. Meanwhile, the consensus mark for earnings per share indicates significant growth of 1,644% from the prior-year period’s actual.
American Eagle has a trailing four-quarter earnings surprise of 43.2%, on average. It flaunts a Zacks Rank #1 at present. Shares of AEO have risen 17.5% in the year-to-date period.
The Zacks Consensus Estimate for American Eagle’s current financial-year sales and earnings suggests growth of 2.2% and 33%, respectively, from the year-ago period's reported figures.
Urban Outfitters has a trailing four-quarter earnings surprise of 19.2%, on average. It currently sports a Zacks Rank #1. Shares of URBN have rallied 34.8% in the year-to-date period.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and earnings suggests growth of 6.6% and 83.4%, respectively, from the year-ago period's reported figures.
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Tractor Supply (TSCO) Executes Strategies: On Track for Growth?
Tractor Supply Company (TSCO - Free Report) has been favored by investors on the back of continued market share growth and progress on its strategic initiatives. Moreover, TSCO has been benefitting from its Life Out Here Strategy, ‘ONETractor’ Strategy, Neighbor’s Club membership program and healthy product demand. Also, the recent acquisition of Orscheln Farm and Home, store-growth initiatives, and comparable store sales growth bode well.
Sturdy demand for everyday merchandise, including consumable, usable and edible products, as well as year-round products, have been contributing to comparable store sales (comps) growth. Further, its store growth plans have been aiding the comps performance over the years.
The company’s focus on its strategic initiatives has been well-reflected in its share price, with the stock outperforming the industry. Although shares of this Zacks Rank #3 (Hold) company have lost 9.5% in the year-to-date period, it has outperformed the industry’s decline of 15.8%.
Further optimism on the stock is reflected by its forward estimates, which suggest notable growth. The Zacks Consensus Estimate for TSCO’s 2023 sales and earnings suggests growth of 4.7% and 5.6%, respectively, from the year-ago period’s reported numbers.
Image Source: Zacks Investment Research
Growth Strategies
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 —customers, digitization, execution, team members and total shareholder return.
As part of the plan, the company has set its long-term financial growth targets for 2022-2026. Management envisions achieving net sales growth of 6-7%, whereas comps are expected to grow 4-5%. The operating margin is expected to be 10.1-10.6% during the said period, with 8-11% growth in earnings per share. The company is also poised to benefit from the launch of Field Activity Support Team (“FAST”), and the implementation of various technology and service enhancements across the enterprise.
Additionally, Tractor Supply is focused on integrating its physical and digital operations to offer consumers a seamless shopping experience through its ‘ONETractor’ strategy. The company’s omni-channel investments include curbside pickup, same-day and next-day delivery, a re-launched website, and a new mobile app.
Tractor Supply exited the second quarter of 2023 with 31 million Neighbor's Club members, driven by all-time high retention rates and the re-launch of the point-based structure of its Neighbor's Club program. The company’s rebranding of Petsense by Tractor Supply and expansion of its Neighbor's Club program to Petsense stores have received positive customer feedback. This move will enable it to gain pet customers for both banners. Management earlier predicted to reach more than $2 billion in sales by 2026.
Tractor Supply is persistently focusing on store growth initiatives, which include the expansion of its store base and the incorporation of technological advancements to induce traffic and drive the top line. As part of its long-term store plan, Tractor Supply targets to reach 3,000 stores in the United States. To achieve this, it anticipates accelerating its annual new store growth to 90 per year in 2025 and 80 stores in 2024. Management intends to open 70 Tractor Supply stores and 10-15 Petsense stores in 2023.
Project Fusion is the company’s state-of-the-art space productivity program built to enrich customer experience in the mature store base. Another key component of the company’s space productivity initiatives is the transformation of its Side Lot. It is on track to complete the Orscheln Farm and Home conversions, as well as the Project Fusion remodels and garden center transformations, in 2023.
The company’s Project Fusion and Side Lot model transformations have been significant store investments. These investments target achieving higher market share, and boost productivity across the existing and new stores. Notably, TSCO boasts more than 700 Project Fusion stores, accounting for 30% of its store base. It continues to experience a positive halo impact from the garden center to the present store and vice versa. The addition of product categories, greater ease of shopping and modern services help the company serve its customers efficiently.
Hurdles on the Way
Tractor Supply has been feeling the pinch of inflation woes and rising costs. The company expects consumer spending trends to remain muted through the remainder of 2023. It is also witnessing higher depreciation and amortization, the opening of a distribution center, and the impacts of higher medical claims.
Key Picks
We have highlighted three better-ranked stocks from the Consumer Staple sector, namely Abercrombie & Fitch (ANF - Free Report) , American Eagle Outfitters (AEO - Free Report) and Urban Outfitters (URBN - Free Report) .
Abercrombie currently sports a Zacks Rank #1 (Strong Buy). ANF has a trailing four-quarter earnings surprise of 724.8%, on average. Shares of ANF have rallied 142.2% year to date.
You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie’s current financial year’s sales suggests growth of 10% from the year-ago period’s reported figure. Meanwhile, the consensus mark for earnings per share indicates significant growth of 1,644% from the prior-year period’s actual.
American Eagle has a trailing four-quarter earnings surprise of 43.2%, on average. It flaunts a Zacks Rank #1 at present. Shares of AEO have risen 17.5% in the year-to-date period.
The Zacks Consensus Estimate for American Eagle’s current financial-year sales and earnings suggests growth of 2.2% and 33%, respectively, from the year-ago period's reported figures.
Urban Outfitters has a trailing four-quarter earnings surprise of 19.2%, on average. It currently sports a Zacks Rank #1. Shares of URBN have rallied 34.8% in the year-to-date period.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and earnings suggests growth of 6.6% and 83.4%, respectively, from the year-ago period's reported figures.