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Tractor Supply (TSCO) Riding on Initiatives: Time to Buy?

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Tractor Supply Company (TSCO - Free Report) has been benefiting from store growth initiatives, ONETractor plan, effective inventory management and investments in everyday businesses. Also, the company is on track to gain from its sturdy omni-channel efforts. These actions have aided the company’s top and bottom line performances in recent years.

Notably, the company has been witnessing sales and earnings growth for more than two years now. Moreover, the company’s top and bottom line outpaced the Zacks Consensus Estimate in fourth-quarter 2017, marking its second consecutive earnings and sales beat. Results were driven by solid sales and comparable store sales (comps) growth.

Consequently, the stock has rallied 22.9% in the past six months outperforming the industry’s gain of 5.3%. Let’s analyze the factors driving this Zacks Rank #2 (Buy) stock’s performance.



Robust Store Growth Initiatives

Tractor Supply looks well poised to gain from its store growth initiatives, which include store base expansion and incorporation of technological advancements to induce traffic and drive the top line. In addition, the company leverages an extensive network of stores to penetrate into target markets, which enables it to generate strong sales and expand its market share. Evidently, Tractor Supply looks well on track to attain its long-term domestic store growth target of 2,500 stores.

ONETractor Initiative to Drive Sales

Tractor Supply focuses on integrating its physical and digital operations to cope up with changing consumer trends and offer consumers a seamless shopping experience. Incidentally, the company remains on track with its ONETractor initiative that is aimed at connecting store and online shopping. In this regard, Tractor Supply is gaining significantly from its Buy Online Pick Up in Store program while it continues to expand its Neighbor’s Club customer rewards program. Both of these programs are expected to boost the company’s top line.

Also, the company expects long-term results to benefit from its mobile POS and stockyard initiatives. Clearly, these endeavors enhance the company’s omni-channel network along with enriching customers’ experience.

Inventory Management: An Effective Tool

Tractor Supply remains committed toward managing its inventories efficiently over the years. This helps the company to minimize the impact of weather on its business and capitalizes on seasonal demand. Notably, it is focusing on enhancement of IT systems and supply chain, alongside investing in new systems including demand planning, improved pricing and inventory allocation. These investments are mainly directed toward generating supply chain efficiencies in order to better manage global inventories.

Petsense Acquisition Augur Well

In 2016, Tractor Supply acquired Petsense LLC – a leading specialty retailer of pet supplies and services — in order to strengthen its presence in the flourishing pet specialty space.

Also, it complements the company’s existing pets business that operates under the HomeTown Pet stores banner. Notably, this acquisition opens up doors to tap the roughly $60 billion pet market, which remains poised to grow on the solid pet ownership fashion and owners’ growing kindness toward them.

Moreover, Tractor Supply is on track to launch a premium dog and cat food brand, True Source in its Petsense stores. For 2018, the company expects to open nearly 20 new Petsense stores.

In 2018, Tractor Supply expects to balance investments between new store growth and ONETractor strategic initiative. Given the solid results and strong initiatives, management provided an encouraging guidance for first-quarter and full-year 2018.

Final Thoughts

Though Tractor Supply is gaining from its strategic actions, continued cost pressures from rising freight rates and inflationary wage pressures remain concerns. Further, the company is working to strike a balance between initiatives and investments in stores and distribution centers with strict cost disciplines and operational efficiencies.

Nevertheless, going into 2018, Tractor Supply expects to balance investments between new store growth and ONETractor strategic initiative, besides investing in everyday businesses to provide a seamless experience to customers. This will provide significant growth opportunities as the company is likely to expand market share, leverage its physical stores and grow digital capabilities.

Do Retail-Miscellaneous Stocks Grab Your Attention? Check These

Investors interested in same industry may consider Hibbett Sports Inc. (HIBB - Free Report) , MarineMax Inc.(HZO - Free Report) and Sally Beauty Holdings Inc. (SBH - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hibbett Sports delivered an average positive earnings surprise of 25.6% in the trailing four quarters. Shares of Hibbett have rallied 34.4% in the past three months.

MarineMax pulled off an average positive earnings surprise of 612.1% in the trailing four quarters. It has a long-term earnings growth rate of 30%.

Sally Beauty delivered an average positive earnings surprise of 2.8% in the trailing four quarters. It has a long-term earnings growth rate of 6.8%.

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