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Tractor Supply (TSCO) Cheers Investors With Upbeat Q2 Outlook

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Tractor Supply Company TSCO gives a sneak peek into its second-quarter 2022 performance, which ends on Jun 25. Management issued a second-quarter outlook wherein net sales are expected to grow 8%, with year-over-year comparable store sales growth of 5%. Adjusted earnings are envisioned to be $3.48 or greater.

The upbeat guidance can be attributable to improved weather from April and robust sales of its seasonal products. Despite inflationary pressure and global supply-chain headwinds, the company continues to strengthen its need-based, demand-driven business, and manage inventory efficiently.

Tractor Supply also remains focused on enhancing customers’ shopping experience via expanding product offerings, including Garden Centers or the personalization of its digital facilities. Notably, the company has completed more than 200 Garden Centers at its stores and received positive customer feedback for the same. It is on track with the personalization of the ‘My Pet’ mobile app, which will offer a differentiated digital shopping experience.

What’s More?

Tractor Supply is progressing well with its Life Out Here Strategy, which is based on five key pillars, including customers, digitization, execution, team members and total shareholder return. Earlier, the company launched the Field Activity Support Team, and implemented various technology and service enhancements across the enterprise.

It is also on track with Project Fusion remodels and Side Lot transformation to remain nationally strong and locally relevant by bringing the latest merchandising strategies to life. 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.

As part of these efforts, management revised the long-term financial growth targets for 2022-2026. It envisions achieving net sales growth of 6-7% for the aforementioned period, 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%.

Tractor Supply remains on track with its store-opening initiatives to induce traffic and drive the top line. It plans to open 75-80 Tractor Supply stores and 10 Petsense stores in 2022.

Given the changing consumer trends, the company remains focused on integrating its physical and digital operations to offer consumers a seamless shopping experience. It is on track with the ‘ONETractor’ strategy, aimed at connecting store 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 Neighbor's Club loyalty program remains sturdy. Management is likely to reach more than $2 billion in sales by 2026.

 

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Driven by these factors, this Zacks Rank #2 (Buy) stock gained 11.4% against the industry’s decline of 37.2%.

However, TSCO is reeling under higher product cost inflation, rising transportation costs and an unfavorable product mix. The company has been witnessing increased investments in the Life Out Here strategic efforts. Ongoing supply-chain constraints also act as deterrents.

Other Stocks to Consider

Here are three other top-ranked stocks to consider — Boot Barn Holdings BOOT, Dillard’s DDS and Kroger KR.

Dillard’s operates as a departmental store chain, featuring fashion apparel and home furnishings. It presently sports a Zacks Rank #1 (Strong Buy). DDS has a trailing four-quarter earnings surprise of 224.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Dillard’s current financial-year sales suggests growth of 6.1%, while the same for EPS indicates a decline of 33.9% from the year-ago period’s reported numbers. DDS has an expected EPS growth rate of 12.6% for three-five years.

Boot Barn, which provides western and work-related footwear, apparel and accessories, currently has a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 25.2%, on average.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS suggests growth of 17% and 4.4%, respectively, from the year-ago period’s reported figures. BOOT has an expected EPS growth rate of 20% for three-five years.

Kroger, which provides an array of goods ranging from household essentials, groceries and electronics to toys and apparel for men, women and kids, currently carries a Zacks Rank #2. KR has a trailing four-quarter earnings surprise of 22.1%, on average.

The Zacks Consensus Estimate for Kroger’s current financial-year sales and EPS suggests growth of 3.2% and 4.1%, respectively, from the year-ago period’s reported figures. KR has an expected EPS growth rate of 9.9% for three-five years.


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