Tractor Supply's Growth Strategies Yield: Apt to Hold the Stock?

Tractor Supply Company TSCO stock looks well-poised for growth, thanks to its sturdy business strategies. The company’s omnichannel investments bode well. TSCO is focused on integrating its physical and digital functions to offer consumers a seamless shopping experience. It is reaping the benefits from its Life Out Here Strategy and the Neighbor’s Club membership program.

Detailing TSCO’s Growth Strategies

Tractor Supply’s omnichannel investments include curbside pickup, same-day, next-day delivery, a re-launched website and a new mobile app. Manage006Dent aims at leveraging AI technologies to boost search, redesign checkout and add a new refreshed homepage for personalization. It has been accelerating its digital capabilities.

Key initiatives in TSCO’s Life Out Here strategy are Project Fusion and Garden Center rollouts. Such projects are progressing well, and hence generating compelling returns through enhanced space productivity. Moving forward, all the new stores and the fusion remodels will have localized space allocation and assortment depending on their respective archetypes.

In addition, the expansion of Neighbor's Club to Petsense by the company has been boosting solid customer engagement. Neighbor's Club membership presently represents above 85% of sales at Petsense, thus experiencing sturdy momentum. Overall, the membership program surpasses 38 million, and, as a percentage of sales, touched a record 80%.

Management has also announced a multiyear strategic licensing partnership with Field &Stream. This June, customers can get various hunting and outdoor Field & Stream branded products. TSCO’s Allivet buyout marks a significant strategic move as it expands its footprint in the growing pet wellness and animal health sector. The aforesaid efforts are likely to tap higher sales and boost the company’s overall profitability.

TSCO Stock’s Valuation

Going by the price/earnings ratio, Tractor Supply stock is currently trading at 24.93 on a forward 12-month basis compared with 16.56 for the industry. The stock’s five-year high stands at 27.91.

Bumps in TSCO’s Growth Path

Despite such growth catalysts, Tractor Supply is not immune to higher selling, general and administrative (SG&A) expenses, including depreciation and amortization, along with the costs related to the opening of distribution centers. Also, cost inflation and a tepid retail sales environment are concerning.

In the most recent quarter, SG&A expenses, including depreciation and amortization, as a percentage of sales, expanded 60 basis points year over year. The higher SG&A expense has resulted from growth investments, which comprised the increased depreciation, the onboarding of a new distribution center and modestly deleveraged fixed costs. Such costs might weigh upon the company’s profitability. TSCO anticipates deflation to be a modest headwind in the first half of 2025.

Conclusion

TSCO has been making cost-saving and other initiatives to bolster growth. Backed by aforementioned growth catalysts, the stock has rallied 8.8% in the past year against the industry’s 4.9% dip.

Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for 2025 sales and earnings per share (EPS) indicates corresponding growth of 5.4% and 6.4% year over year. For 2026, the consensus mark for sales and EPS is $16.67 billion and $2.41, respectively, indicating a jump of 6.3% and 11.2%, year over year. Tractor Supply currently carries a Zacks Rank #3 (Hold).

Key Picks in Retail

We have highlighted three better-ranked stocks, namely Nordstrom JWN, Gap GAP and Boot Barn BOOT.

Nordstrom, a key fashion specialty retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for JWN’s current financial-year sales indicates growth of 1.9% from the year-ago figure. The company delivered a negative trailing four-quarter earnings surprise of 26.1%, on average.

Gap, clothing and accessories retailer, currently sports a Zacks Rank of 1. GAP delivered an average earnings surprise of 77.5% in the trailing four quarters.

The consensus estimate for Gap’s current financial-year sales indicates growth of 1.6% from the year-ago figure.

Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently has a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 14.9% from the year-ago figure. The company delivered a trailing four-quarter earnings surprise of 7.2%, on average.

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This article originally published on Zacks Investment Research (zacks.com).

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