QUOTE AND NEWS
TheStreet.com  Oct 23  Comment 
NEW YORK (TheStreet) -- Shares of Tractor Supply were gaining 15.2% to $70.61 Thursday after reporting third quarter results that beat analysts' estimates. The retailer reported earnings of 55 cents a share for the third quarter, 5 cents above...
StreetInsider.com  Oct 23  Comment 
UPGRADES Goldman Sachs raises Fifth Third Bancorp (Nasdaq: FITB) from Neutral to Buy with a price target of $22. Click Here for more color. Deutsche Bank moves Dow Chemical (NYSE: DOW) from Hold to Buy and adjusts its price target from $57 to...
Forbes  Oct 23  Comment 
In early trading on Thursday, shares of Tractor Supply (TSCO) topped the list of the day's best performing components of the S&P 500 index, trading up 15.1%.  Year to date, Tractor Supply has lost about 9.1% of its value.
Clusterstock  Oct 23  Comment 
When former Unilever executive Dave Lewis took over as Tesco's new CEO in July — three months earlier than expected — he had no idea of the time bomb he was inheriting.  In September, the world's second-largest retailer announced that it...
Clusterstock  Oct 23  Comment 
Tesco chairman Sir Richard Broadbent announced Thursday that he is stepping down, while the company reported results for the first half the year.  The world's second-largest retailer confirmed that it overstated its profits by £263 million, an...
Market Intelligence Center  Oct 3  Comment 
The patented option trade-picking algorithms behind MarketIntelligenceCenter.com's Artificial Intelligence Center have selected a covered call trade on Tractor Supply Co (TSCO) that includes 3.69% downside protection. Sell one contract of the Jan....
Benzinga  Sep 26  Comment 
In a report published Friday, Bank of America analyst Denise Chai reiterated a Buy rating and $80.00 price target on Tractor Supply Company (NASDAQ: TSCO). In the report, Bank of America noted, “Excluding home furnishings (especially PIR and...
Clusterstock  Sep 22  Comment 
Tesco shares are down 8% Monday morning after Britain's biggest supermarket chain revealed that it overstated its profit outlook in the first half of the year by £250 million ($408 million). According to Tesco, the error was "caused by an...
Clusterstock  Sep 8  Comment 
Dave Lewis, the new CEO of Tesco, has a problem: What to do about all the unpaid overtime Tesco's 500,000 staff are working. "The pressure and stress of having to do extra unpaid hours has killed morale and colleagues have had enough of working...




 

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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