QUOTE AND NEWS
Benzinga  Apr 22  Comment 
Tractor Supply Company (NASDAQ: TSCO) reported better-than-expected results for the first quarter. The Brentwood, Tennessee-based company reported a quarterly profit of $58 million, or $0.42 per share, versus a year-ago profit of $48.8 million,...
Market Intelligence Center  Mar 24  Comment 
After Monday’s trading in Tractor Supply Co (TSCO) the algorithms behind MarketIntelligenceCenter.com's Artifical Intelligence Center picked out a trade that offers a 5.21% or 36.60% (for comparison purposes only), while providing 3% downside...
Clusterstock  Mar 10  Comment 
Tesco arguably had one of the toughest years in its existence in 2014 after Britain's largest supermarket said it overstated its profits by £250 million ($377 million) in September. However, it looks like the new CEO, who joined on 1 September...
Market Intelligence Center  Mar 3  Comment 
A covered call identified by MarketIntelligececenter.com's patented algorithm on Tractor Supply Co (TSCO) could yield about 6.24% (16.76% annualized, for comparison purposes only) in 136 days. Pair a long position in the stock with the Jul. '15...
Forbes  Feb 26  Comment 
The latest tally of analyst opinions from the major brokerage houses shows that among the components of the S&P 500 index, Tractor Supply (TSCO) is now the #96 analyst pick, moving up by 1 spot.         This rank is formed by averaging...
Benzinga  Feb 25  Comment 
In a report published Wednesday, Morgan Stanley analyst Simeon Gutman reiterated an Equal-Weight rating on Tractor Supply Company (NASDAQ: TSCO), and raised the price target from $84.00 to $92.00. In the report, Morgan Stanley noted, "We regard...
Market Intelligence Center  Feb 18  Comment 
Option-trade picking algorithms patented by MarketIntelligenceCenter.com found a trading opportunity with Tractor Supply Co (TSCO) that should provide a 3.89% return in just 58 days. Sell one Apr. '15 call at the $85.00 level for each 100 shares...
Market Intelligence Center  Feb 13  Comment 
For a hedged play on Tractor Supply Co (TSCO), MarketIntelligenceCenter.com’s option-trade picking algorithms recommend the Apr. '15 $85.00 covered call for a net debit in the $81.02 area. That is also the break-even stock price for the covered...
Market Intelligence Center  Feb 6  Comment 
MarketIntelligenceCenter.com's patented trade-picking algorithms have identified an attractive covered-call trade on Tractor Supply Co (TSCO). Look at the Apr. '15 $85.00 covered call for a net debit in the $80.80 area. This trade has a duration...




 

Tractor Supply Company (NASDAQ:TSCO) operates retail farm and ranch stores in the United States and is the largest company in terms of revenue in its market. TSCO stores are located in rural communities and suburbs outside metropolitan areas. Despite its name, Tractor Supply Company does not sell large-scale farming equipment. Instead the retailer offers a comprehensive selection of farm and ranch-related merchandise and supplies, including livestock and pet products, tools, lawn and garden equipment, and work apparel. In addition to branded merchandise made by other manufacturers, Tractor Supply Company also sells its own private label products under 15 different brands. The company earned $3.2 billion in revenue and $155 million in net income in 2009.[1]

Tractor Supply Company operates more than 900 store locations. To complement its expanding base of brick-and-mortar stores, Tractor Supply Company has also spread its operations into e-commerce as it launched its online store. One major factor in the retailer's revenue growth is the unpredictable weather patterns associated with each season. The spending habits and budgets of Tractor Supply's customers vary with the success of their farms, which is often dictated by the weather.

Company Overview

Founded as a single store in Minot, North Dakota in 1939, Tractor Supply Company has grown into a major retailer of farm and ranch merchandise in the United States. In addition to Tractor Supply-branded stores, the company owns and operates Del's Farm Supply, a 27 store chain based in the Pacific Northwest selling merchandise comparable to Tractor Supply's product mix. Tractor Supply Company's stores are generally located in rural and suburban areas outside of metropolitan areas, where the retailer targets recreational farmers and ranchers as opposed to commercial and industrial farm operations. Because Tractor Supply Company targets recreational farmers and consumers inclined to the farming and ranching lifestyle, rather than commercial farmers, it doesn't sell heavy farm equipment like tractors and combines; the retailer does sell parts for tractors and trucks, but the majority of its product mix is composed of livestock and pet supplies and equipment, as well as lawn and garden power equipment.

Product segments[2]

  • Livestock and Pet - 39% of net sales
  • Hardware and Seasonal

23% of net sales

  • Truck and Tool - 18% of net sales
  • Clothing and Footwear - 10% of net sales
  • Agriculture - 6% of net sales
  • Gift and Recreation - 4% of net sales

Business Growth

FY 2009 (ended December 26, 2009)[1]

  • Net sales increased 6.6% to $3.2 billion. The increase was primarily from the opening of 75 net new stores. Comparable store sales during the period decreased 1.1%. The decline in comparable store sales was due to declines in sales of big ticket and discretionary items.
  • Net income increased 41% to $155 million.

Trends and Forces

Seasonality of Sales and Fluctuation with Weather Patterns

As a seller of farming and ranching equipment and supplies, Tractor Supply Co.'s revenues are dependent upon local weather patterns, especially in the second and fourth quarter when its customers are preparing for planting and harvest. Whether raising livestock or growing crops, the weather (particularly rainfall and temperatures) is paramount to farmers and ranchers. Droughts or heat waves can ruin a farmer or rancher's crop or herd, eliminating that farmer's need to continue purchasing farm supplies for that season, and sometimes failed seasons can result in financial burdens significant enough to cause a farmer to exit the practice. Since the company's sales peak in the second and fourth quarter, coinciding with farming schedules, any severe weather patterns occurring before or during these periods can seriously detract from TSCO's sales.[3]

Entrance into E-commerce Widens TSCO's Reach

Tractor Supply Company operates an e-commerce store on their website, making their merchandise available to customers in markets without TSCO store locations. Although the company operates over 900 stores throughout rural parts of the U.S., TSCO can reach areas that aren't already serviced by TSCO retail locations by offering their merchandise online. Opening an e-commerce sales channel has been a successful business strategy for many apparel retailers thanks to the wide net cast by online direct-to-customer operations.

Expansion of Private Labels Could Grow Profit Margins

In addition to carrying branded merchandise from nationwide manufacturers, Tractor Supply Company's product mix includes fifteen of its own private label brands and two brands that TSCO controls but does not wholly own. These brands cover all of the retailer's product categories, with each of its private brands specializing in individual areas such as livestock feed, garden tools, and apparel. TSCO does not release sales information for its private brands but most retailers earn significantly (approximately two-three times as large) larger gross and operating margins on private label products. The continued growth of TSCO's private label portfolio through acquiring and creating new brands could lead to greater profitability for the company.[4]

Competition

Tractor Supply Company is the largest retailer specializing in equipment and accessories for the farming and ranching lifestyles. Due to the variety of merchandise sold in TSCO's stores, it competes with a number of retailers and other companies of different specialties:

Home Improvement and Building Supply Retailers: These stores sell similar assortments of tools, lawn and garden power equipment, and gardening and landscaping supplies.

Department Stores and Mass Merchandisers: These stores' vast product portfolios include gardening and lawn supplies and equipment.

Farming Co-Ops: These cooperative ventures supply farmers with seed, grain, livestock feed and farming equipment.

  • CHS (CHSCP)
  • Southern States Cooperative
  • Tennessee Farmers Cooperative



References

  1. 1.0 1.1 TSCO 2009 10-K "Five Year Selected Financial and Operating Highlights" pg. 14
  2. TSCO 2009 10-K "Product Category" pg. 3
  3. TSCO 2009 10-K "Seasonality and Weather" pg. 1
  4. TSCO 2009 10-K "Merchandising" pg. 2-3
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