Tractor Supply Company TSCO stock has trended up 31.4% in the past year. It has comfortably outpaced the broader Retail-Wholesale sector’s return of 29.7% and the Zacks Retail - Miscellaneous industry‘s growth of 10.2% in the same period. TSCO shares also surpassed the S&P 500 index’s appreciation of 27.9% in a year.

Currently priced at $54.49, the TSCO stock is trading at an 11.4% discount to its 52-week high of $61.53 reached on Oct. 15th. However, it is trading at a 28.7% premium to its 52-week low mark.

TSCO's Price Performance

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TSCO’s Strategies Aid Rally

Tractor Supply’s omnichannel investments, including curbside pickup, same-day, next-day delivery and a new mobile app, bode well. Management aims at leveraging AI technologies to boost search, redesign checkout and add a new refreshed homepage on personalization.

TSCO’s store-growth initiative is focused on the expansion of its store base and the incorporation of technological advancements to boost traffic and the top line. Project Fusion is the company’s state-of-the-art space productivity program designed to enrich customer experience. Management intends to continue its store-opening initiatives in 2024. The addition of product categories, greater ease of shopping and modern services enables the company to serve its customers efficiently.

The company’s Neighbor's Club membership program is also encouraging. As it continues to make investments in the program, it has been seeing strong growth in customer counts and customer retention. In third-quarter 2024, the Neighbor's Club comp sales surpassed the company’s overall sales. Tractor Supply has reached an all-time high in its sales penetration, recording membership of more than 37 million members. 

The company is also focused on improving personalization capabilities, mainly its customer data platform. Digital sales continued to outperform with double-digit growth in the reported quarter. The company has been making major improvements in search and checkout. It has been accelerating its digital capabilities, which have been leading to higher customer engagement and improved conversion rate.

Hurdles in TSCO’s Growth Path

Despite such growth catalysts, Tractor Supply is reeling under higher depreciation and amortization along with the costs related to the opening of a distribution center. Also, cost inflation and a tepid retail sales environment are concerning. 

During the third quarter of 2024, selling, general and administrative (SG&A) expenses, including depreciation and amortization, as a percentage of sales, expanded 119 basis points (bps) year over year, and in dollar terms, the metric rose 6.2%. 

The higher SG&A expense rate resulted from growth investments, which comprised the onboarding of a new distribution center, lapping a one-time depreciation cost benefit in the last year and modest deleveraged fixed costs. The new distribution center was nearly a 25-bps headwind on SG&A for the quarter. Further, the operating income was down 4.8% year over year, with the operating margin declining 63 bps to 9.4% in the reported quarter.

Conclusion

Nevertheless, TSCO has been focused on managing costs. Analysts seem quite optimistic about the company. 

The Zacks Consensus Estimate for 2025 sales and earnings per share (EPS) is pegged at $15.62 billion and $2.05, respectively. These estimates indicate respective year-over-year growth of 4.7% and 6.3%. Tractor Supply currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

We have highlighted three better-ranked stocks, namely Deckers DECK, Boot Barn BOOT and Abercombie ANF.

Deckers, a footwear and accessories dealer, 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 Deckers’ current financial-year sales indicates growth of 13.6% from the year-ago figure. DECK delivered an average earnings surprise of 41.1% in the trailing four quarters.

Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 6.8%, on average. 

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 13.4% from the year-ago figure.

Abercrombie, a leading casual apparel retailer, currently carries a Zacks Rank of 2. ANF delivered an earnings surprise of 16.8% in the last reported quarter. 

The consensus estimate for Abercrombie’s current financial-year sales indicates growth of 13% from the year-ago figure.

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