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Published on 17 Jan 2022 on Zacks via Yahoo Finance

Tractor Supply (TSCO) Looks Poised for 2022 on Growth Efforts


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Tractor Supply Company TSCO looks well-placed for 2022, driven by strength in the Life Out Here Strategy and healthy customer trends. Its e-commerce business and Neighbor's Club loyalty program also bode well. These upsides are likely to continue working well for TSCO, helping it counter escalated cost and supply chain hurdles.

Factors in Tractor Supply’s Favor

Tractor Supply remains focused on integrating its physical and digital operations to offer consumers a seamless shopping experience. The company’s omni-channel investments, including curbside pickup; same-day, next-day delivery; a re-launched website and a new mobile app, have been aiding digital sales. The company witnessed continued momentum in e-commerce with double-digit sales growth of more than 40% in third-quarter 2021. Its mobile app has over 2 million downloads and accounts for above 10% of its e-commerce sales. The company is gaining share across all its categories.In addition, the Neighbor's Club loyalty program remains sturdy, with year-over-year sales increase of 20%. Tractor Supply exited the third quarter with over 22 million Neighbor's Club members, with the latter presently representing for roughly 70% of the sales. The number of high-value per customers of this program rose about 30% in the quarter.It 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. As part of the plan, the company provided long-term financial growth targets for three to five years. Management envisions achieving net sales growth in the bracket of 6-7%, while comps are expected to grow between 4-5%. Further, operating margin is expected in the range of 9-9.5% and earnings per share are expected to grow in the bracket of 8-10%.The company launched the Field Activity Support Team (“FAST”) and is implementing 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 completing nearly 150 Side Lots by the end of 2021. These have been significant investments toward stores, and are expected to boost productivity across the existing and new stores.Tractor Supply also remains on track with its store-opening initiatives to induce traffic and drive the top line. In the third quarter, it opened 12 Tractor Supply stores and three Petsense stores. Management plans to open 80 Tractor Supply stores and 10 Petsense stores in 2021.Driven by these factors, shares of this Zacks Rank #3 (Hold) stock rallied 42.5% in a year’s time against the industry’s decline of 21.3%.

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