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Tractor Supply Banks on ONETractor Strategy, Stock Up 28%

Zacks

Tractor Supply Company TSCO looks quite appeasing on the back of its solid store-expansion efforts and technological advancements. To offer consumers a seamless shopping experience, the company targets integrating its physical and digital operations through the ONETractor initiative.

A glance at the company’s price trend so far this year reveals that this Zacks Rank #3 (Hold) stock has surged 27.5% against the industry’s 3.1% decline. Let’s delve deep.

Factors Aiding the Stock

Tractor Supply’s ONETractor strategy aims at driving overall growth, building customer-centric engagement, offering suitable products and services, and reinforcing core infrastructure capabilities. In addition, the company is reaping benefits from its mobile point-of-sale and Buy Online Pick Up in Store capabilities. Meanwhile, it has been consistently expanding its Neighbor’s Club loyalty program, which outpaced its targeted membership growth goals in 2018.


In second-quarter 2019, the company reported 28th straight quarter of double-digit e-commerce sales growth. Tractor Supply’s steady expansion of its Stockyard kiosk initiatives is an added positive. Management expects all these strategies to play a major role in enhancing the company’s omni-channel network and driving the top line.

Coming to store-growth efforts, Tractor Supply recently opened its 1,800th store in Berkshire Township (Sunbury), OH. This store marks a milestone in the company's growth trajectory and is the 93rd flagship outlet in the state. Also, it highlights the company’s smooth progress with the ONETractor initiative. Moreover, the company remains on track with its growth target of reaching to 2,500 domestic stores in the long term. Also, it leverages an extensive network of stores to penetrate into target markets, which in turn, enables Tractor Supply to generate healthy sales and gain market share.

Impressively, Tractor Supply opened 25 namesake stores and two Petsense stores in the first six months of 2019. For the current year, the company expects to open about 80 namesake and 10-15 Petsense stores. Store expansion is likely to keep Tractor Supply’s sales momentum alive throughout 2019 and beyond.

With the Petsense buyout, Tractor Supply has fortified its presence in the flourishing pet specialty space. Currently, the company is focused on expanding the Petsense format in certain geographic markets. Petsense stores have been delivering positive comparable-store sales (comps), which continued in the second quarter and were in line with the company’s average. Petsense stores remain focused on building long-term customer loyalty by using digital marketing methods to engage customers, revamping the website and enhancing customer rewards program.

Driven by the aforesaid factors and solid second-quarter results, Tractor Supply raised the lower end of its sales and earnings view for 2019. The company now estimates earnings per share of $4.65-$4.75 compared with $4.60-$4.75 guided earlier. The projected range depicts growth from $4.31 earned in 2018. Also, sales are now projected to be $8.40-$8.46 billion, with comps growth of 3-4%. Earlier, it anticipated net sales of $8.31-$8.46 billion, with comps growth of 2-4%.

All these solid efforts including ONETractor strategy and impressive view for 2019 highlight Tractor Supply’s solid prospects. The company also boasts a robust surprise trend. It delivered a positive earnings surprise in six of the trailing eight quarters, with a fifth straight sales beat. Further, a VGM Score of A with an expected long-term earnings growth rate of 11.2% appear encouraging.

3 Key Picks in the Same Space

Hibbett Sports Inc. HIBB has an expected long-term earnings growth rate of 10.9%. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Regis Corporation RGS has an expected long-term earnings growth rate of 7.5% and a Zacks Rank #1 at present.

Office Depot, Inc. ODP, which presently carries a Zacks Rank #2 (Buy), has an expected long-term earnings growth rate of 11.1%.

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