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Tractor Supply (TSCO) Retains Momentum on Growth Initiatives
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Tractor Supply Company (TSCO - Free Report) is on a growth track, backed by its focus on integrating its physical and digital operations to offer consumers a seamless shopping experience. It is persistently focusing on its growth initiatives, which include the expansion of its store base and the incorporation of technological advancements to boost traffic and drive the top line.
Additionally, the company’s Life Out Here Strategy, ‘ONETractor’ Strategy, Neighbor’s Club membership program and healthy product demand bode well.
These traits have been driving this Zacks Rank #3 (Hold) company’s performance. The Zacks Consensus Estimate for 2024 sales and earnings per share (EPS) is currently pegged at $15 billion and $10.17, respectively, indicating growth of 3.1% and 0.8% year over year.
Shares of this retail farm and ranch store chain have gained 9.9% in the past year compared with the industry’s 6.9% growth.
Image Source: Zacks Investment Research
What’s Driving the Stock?
Tractor Supply has been gaining from consistent market share expansion and positive customer trends. In addition, the company has been gaining from the execution of the everyday low-price strategy and reduced transportation, which aided margins in the fourth quarter of 2023.
For 2024, the company expects net sales of $14.7-$15.1 billion compared with $14.6 billion delivered in 2023. It expects gross margin expansion of 40-60 bps on gains from continued supply-chain efficiencies and effective cost management, while operating margin is anticipated to be 9.7-10.1% for 2024. The company envisions earnings per share of $9.85-$10.50, with share repurchases worth $575-$625 million for 2024. It delivered earnings per share of $10.09 in 2023.
Tractor Supply is on track to expand its Out Here lifestyle assortment and convenient shopping format to gain new 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 plans, it revised the long-term financial growth targets for 2022-2026.
Management still envisions achieving net sales growth of 6-7%, while comps are expected to grow 4-5%. The operating margin is now 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 projected 8-10%. Earlier, the company launched the Field Activity Support Team and implemented various technology and service enhancements across the enterprise. It aims to improve space productivity, bringing the latest merchandising strategies to life and advancing efforts to remain nationally strong and locally relevant.
Given the changing consumer trends, Tractor Supply is focused on integrating its physical and digital operations to offer consumers a seamless shopping experience. Incidentally, the company remains on track with the ‘ONETractor’ strategy, which is aimed at connecting stores and online shopping. Its omni-channel investments include curbside pickup, same-day, next-day delivery, a re-launched website and a new mobile app.
Also, the buyout of Orscheln Farm and Home and store openings bode well. Its Neighbor's Club program added over four million new customers, accounting for 77% of digital sales in 2023, driven by continued favorable trends and higher retention. The company’s digital business reached another year of record sales, generating more than $1 billion in annual sales for the first time.
Moving ahead, management looks forward to mirroring the in-store legendary service and the digital experience via personalized and conversational commerce. It aims to leverage AI technologies to boost search, redesign checkout and add a new refreshed homepage on personalization.
Additionally, Tractor Supply is persistently focusing on its growth initiatives, which include the expansion of store base and incorporation of technological advancements to induce traffic and drive the top line. The company is well positioned to expand store base, remaining on track to increase its domestic store to 2,500 in the long term.
Headwinds on Path
Tractor Supply is reeling under higher depreciation and amortization, the opening of a distribution center, and the impacts of higher medical claims. Also, cost inflation is concerning. Due to these factors, selling, general and administrative (SG&A) expenses, including depreciation and amortization, as a percentage of sales, expanded 113 bps year over year to 26.2%. The higher SG&A expense rate resulted from planned growth investments, including higher depreciation and amortization, the opening of a distribution center, and the impacts of higher medical claims and fixed cost deleverage.
In 2024, the company anticipates gross margin expansion to offset SG&A, driven by a mid-teens increase in depreciation and amortization and higher investments. Also, the distribution center network is likely to pressure SG&A by nearly 10-15 bps.
Moving ahead, management anticipates a gradual slowdown, with the risk of a harder recession. For 2024, Comps are likely to come between a decline of 1% and growth of 1.5% compared with a 6.3% increase last year.
Stocks to Consider
Some better-ranked companies in the Retail-Wholesale sector are American Eagle Outfitters (AEO - Free Report) , Deckers Outdoor (DECK - Free Report) and DICK'S Sporting Goods (DKS - Free Report) .
American Eagle, a specialty retailer of casual apparel, accessories and footwear for men and women, currently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 22.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for American Eagle’s current financial-year sales and earnings suggests growth of 2.1% and 4%, respectively, from the prior-year reported levels. The consensus mark for AEO’s earnings per share has moved up 1.9% in the past seven days.
Deckers Outdoor, a leading designer, producer and brand manager of innovative, niche footwear and accessories, currently sports a Zacks Rank #1. DECK has a trailing four-quarter earnings surprise of 32.1%, on average.
The Zacks Consensus Estimate for Deckers Outdoor’s current financial-year sales and earnings suggests growth of 15.7% and 38.6%, respectively, from the year-ago reported numbers. The consensus mark for DECK’s earnings per share has moved up 1% in the past 30 days.
DICK'S Sporting, which operates as a major omni-channel sporting goods retailer, currently carries a Zacks Rank #2 (Buy). DKS has a trailing four-quarter negative earnings surprise of 0.04%, on average.
The Zacks Consensus Estimate for DKS’ current financial-year sales and earnings suggests growth of 4% and 3.1%, respectively, from the year-ago period’s actuals. The consensus mark for DKS’ earnings per share has moved up 0.6% in the past 30 days.
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Tractor Supply (TSCO) Retains Momentum on Growth Initiatives
Tractor Supply Company (TSCO - Free Report) is on a growth track, backed by its focus on integrating its physical and digital operations to offer consumers a seamless shopping experience. It is persistently focusing on its growth initiatives, which include the expansion of its store base and the incorporation of technological advancements to boost traffic and drive the top line.
Additionally, the company’s Life Out Here Strategy, ‘ONETractor’ Strategy, Neighbor’s Club membership program and healthy product demand bode well.
These traits have been driving this Zacks Rank #3 (Hold) company’s performance. The Zacks Consensus Estimate for 2024 sales and earnings per share (EPS) is currently pegged at $15 billion and $10.17, respectively, indicating growth of 3.1% and 0.8% year over year.
Shares of this retail farm and ranch store chain have gained 9.9% in the past year compared with the industry’s 6.9% growth.
Image Source: Zacks Investment Research
What’s Driving the Stock?
Tractor Supply has been gaining from consistent market share expansion and positive customer trends. In addition, the company has been gaining from the execution of the everyday low-price strategy and reduced transportation, which aided margins in the fourth quarter of 2023.
For 2024, the company expects net sales of $14.7-$15.1 billion compared with $14.6 billion delivered in 2023. It expects gross margin expansion of 40-60 bps on gains from continued supply-chain efficiencies and effective cost management, while operating margin is anticipated to be 9.7-10.1% for 2024. The company envisions earnings per share of $9.85-$10.50, with share repurchases worth $575-$625 million for 2024. It delivered earnings per share of $10.09 in 2023.
Tractor Supply is on track to expand its Out Here lifestyle assortment and convenient shopping format to gain new 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 plans, it revised the long-term financial growth targets for 2022-2026.
Management still envisions achieving net sales growth of 6-7%, while comps are expected to grow 4-5%. The operating margin is now 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 projected 8-10%. Earlier, the company launched the Field Activity Support Team and implemented various technology and service enhancements across the enterprise. It aims to improve space productivity, bringing the latest merchandising strategies to life and advancing efforts to remain nationally strong and locally relevant.
Given the changing consumer trends, Tractor Supply is focused on integrating its physical and digital operations to offer consumers a seamless shopping experience. Incidentally, the company remains on track with the ‘ONETractor’ strategy, which is aimed at connecting stores and online shopping. Its omni-channel investments include curbside pickup, same-day, next-day delivery, a re-launched website and a new mobile app.
Also, the buyout of Orscheln Farm and Home and store openings bode well. Its Neighbor's Club program added over four million new customers, accounting for 77% of digital sales in 2023, driven by continued favorable trends and higher retention. The company’s digital business reached another year of record sales, generating more than $1 billion in annual sales for the first time.
Moving ahead, management looks forward to mirroring the in-store legendary service and the digital experience via personalized and conversational commerce. It aims to leverage AI technologies to boost search, redesign checkout and add a new refreshed homepage on personalization.
Additionally, Tractor Supply is persistently focusing on its growth initiatives, which include the expansion of store base and incorporation of technological advancements to induce traffic and drive the top line. The company is well positioned to expand store base, remaining on track to increase its domestic store to 2,500 in the long term.
Headwinds on Path
Tractor Supply is reeling under higher depreciation and amortization, the opening of a distribution center, and the impacts of higher medical claims. Also, cost inflation is concerning. Due to these factors, selling, general and administrative (SG&A) expenses, including depreciation and amortization, as a percentage of sales, expanded 113 bps year over year to 26.2%. The higher SG&A expense rate resulted from planned growth investments, including higher depreciation and amortization, the opening of a distribution center, and the impacts of higher medical claims and fixed cost deleverage.
In 2024, the company anticipates gross margin expansion to offset SG&A, driven by a mid-teens increase in depreciation and amortization and higher investments. Also, the distribution center network is likely to pressure SG&A by nearly 10-15 bps.
Moving ahead, management anticipates a gradual slowdown, with the risk of a harder recession. For 2024, Comps are likely to come between a decline of 1% and growth of 1.5% compared with a 6.3% increase last year.
Stocks to Consider
Some better-ranked companies in the Retail-Wholesale sector are American Eagle Outfitters (AEO - Free Report) , Deckers Outdoor (DECK - Free Report) and DICK'S Sporting Goods (DKS - Free Report) .
American Eagle, a specialty retailer of casual apparel, accessories and footwear for men and women, currently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 22.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for American Eagle’s current financial-year sales and earnings suggests growth of 2.1% and 4%, respectively, from the prior-year reported levels. The consensus mark for AEO’s earnings per share has moved up 1.9% in the past seven days.
Deckers Outdoor, a leading designer, producer and brand manager of innovative, niche footwear and accessories, currently sports a Zacks Rank #1. DECK has a trailing four-quarter earnings surprise of 32.1%, on average.
The Zacks Consensus Estimate for Deckers Outdoor’s current financial-year sales and earnings suggests growth of 15.7% and 38.6%, respectively, from the year-ago reported numbers. The consensus mark for DECK’s earnings per share has moved up 1% in the past 30 days.
DICK'S Sporting, which operates as a major omni-channel sporting goods retailer, currently carries a Zacks Rank #2 (Buy). DKS has a trailing four-quarter negative earnings surprise of 0.04%, on average.
The Zacks Consensus Estimate for DKS’ current financial-year sales and earnings suggests growth of 4% and 3.1%, respectively, from the year-ago period’s actuals. The consensus mark for DKS’ earnings per share has moved up 0.6% in the past 30 days.