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Tractor Supply's (TSCO) Upcoming Distribution Center to Aid Sales

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Zacks Equity Research
·3 min read
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Tractor Supply Company TSCO announced plans to open a distribution center in Navarre, OH, in a bid to better serve customers at stores and online. With an initial investment of $70 million, the facility will bring new jobs. The distribution center, which is likely to be completed by fall 2022, will create more than 375 new full-time jobs by the end of 2023. Post the construction of this state-of-the-art facility, the company will operate nine distribution centers nationwide.

This move is in sync with its Life Out Here Strategy and is expected to serve 250 Tractor Supply stores at full capacity. Moreover, the latest development is estimated to contribute to online sales as well.

Speaking of online sales, the company is benefiting from several omni-channel investments, including curbside pickup, same-day and next-day delivery, a re-launched website, and a new mobile app. This led to triple-digit sales growth in the e-commerce business during third-quarter 2020. Notably, Buy Online Pickup in Store and Ship to Store services acted as key growth drivers, representing more than 80% of online orders.

Further, its newly launched mobile app as well as the Neighbor's Club loyalty program bode well. Consequently, these have been boosting traffic, which, in turn, has been leading to customer acquisitions. Management expects to offer one-day delivery to 99% of its customers in the near term.

Driven by such upsides, Tractor Supply provided upbeat guidance for the fourth quarter. On its last reported quarter’s earnings call, management guided net sales of $2.6-$2.7 billion for the final quarter, with comps growth of 15-20%. Moreover, the company projected earnings per share of $1.37-$1.47.

Apart from these, Tractor Supply is progressing well with the Life Out Here strategy, which is aimed at offering a convenient shopping experience to customers and gaining market share. As part of this strategy, the company earlier provided long-term financial growth targets for the upcoming three to five years. It envisions achieving net sales growth of 6-7%, while comps are expected to grow 4-5%. Further, operating margin is expected to be 9-9.5% and earnings per share are likely to grow 8-10%.

Encouragingly, this Zacks Rank #3 (Hold) stock has gained 46.9% year to date compared with the industry’s growth of 8.9%.



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