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Tractor Supply's Robust Omni-Channel Initiatives Aid Growth

Tractor Supply Company TSCO is performing exceedingly well, thanks to its solid omni-channel endeavors, including store expansion and technological advancements. The company targets integration of physical and digital operations to offer consumers a seamless shopping experience through the “ONETractor” initiative.

A glimpse of the company’s price trend reveals that this Zacks Rank #2 (Buy) stock has surged 36.3% in a year, significantly outperforming the industry’s 7.7% growth. Apart from its strategic initiatives, this outperformance can be attributed to Tractor Supply’s impressive surprise history. Notably, the company reported earnings and sales beat in four of the trailing five quarters.

Analysts’ optimism on the stock is also reflected by the recent upward trend in the company’s earnings estimate revision. The Zacks Consensus Estimate of $4.29 for 2018 and $4.72 for 2019 has moved up a penny each in the past 30 days. Further, the company has a VGM Score of B and an expected long-term earnings growth rate of 12.2%.

Factors You Should Know

Tractor Supply has been benefiting significantly from the ‘Buy Online Pick Up in Store’ program, while it continues to expand the Neighbor’s Club customer rewards program. Management expects both these strategies to play a major role in driving the top line. The last reported quarter marked the company’s 25th straight quarter of double-digit e-commerce sales growth. Going forward, Tractor Supply expects its mobile POS and stockyard initiatives to boost quarterly results.

With respect to expansion of store base, Tractor Supply leverages an extensive network of stores to penetrate into target markets. This, in turn, enables the company to generate incremental sales and gain market share. Currently, Tractor Supply is on track to attain its long-term domestic store growth target of 2,500 stores. The Petsense acquisition, which complements its existing pets business, also bodes well. Backed by this buyout, Tractor Supply will be able to tap the flourishing pet market, worth roughly $60 billion.

Meanwhile, Tractor Supply is progressing well with the integration of Petsense. Also, the company is on track to launch a premium dog and cat food brand, True Source, in its Petsense stores.

In third-quarter 2018, Tractor Supply opened 23 namesake stores and seven Petsense stores. In the nine months of 2018, it introduced 63 namesake and 14 Petsense stores besides closing one Petsense store. The company remains well on track to reach its target of opening 80 flagship stores and 20 Petsense stores in 2018.

Tractor Supply is also witnessing higher store transaction count, and comparable average ticket and traffic, which are providing a boost to its comparable-store sales (comps) that grew 5.1% in third-quarter 2018. Improvement across all geographic regions and merchandise groups are aiding comps growth as well.

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