Tractor Supply Company TSCO is focused on integrating its physical and digital operations to offer consumers a seamless shopping experience, given the evolving consumer trends. The company’s omnichannel investments bode well. Tractor Supply is reaping the benefits from its Life Out Here Strategy and the Neighbor’s Club membership program.
The major initiatives in the Life Out Here strategy will be TSCO’s Project Fusion and Garden Center rollouts. Such projects are progressing well and hence generating compelling returns through enhanced space productivity. These efforts will be complemented by improved localization capabilities. Moving forward, all the new stores and the fusion remodels will have localized space allocation and assortment depending on their respective archetypes.
TSCO is significantly enhancing its Neighbor's Club offering. As the company continues to make investments in the program, it has been seeing strong growth in customer counts and customer retention. Overall, the membership program surpassed 38 million and, as a percentage of sales, touched a record 80%.
Tractor Supply’s omnichannel investments include curbside pickup, same-day, next-day delivery, a re-launched website and a new mobile app. Management aims at leveraging AI technologies to boost search, redesign checkout and add a new, refreshed homepage on personalization. It has been accelerating its digital capabilities.
Tractor Supply has concluded its buyout of Allivet, a privately held online pet pharmacy. The transaction marks a significant strategic move as it expands the company’s footprint in the growing pet wellness and animal health sector.
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. All the aforesaid efforts are likely to tap higher sales and boost profitability.
Despite such growth catalysts, Tractor Supply has been witnessing 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, rose 5.5% year over year to $1.01 billion. SG&A costs, including depreciation and amortization, as a percentage of sales, expanded 60 bps year over year to 26.8%.
The higher SG&A expense has resulted from growth investments, which comprised the increased depreciation, the onboarding of a new distribution center and modest 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.
TSCO looks well-poised for growth, thanks to its robust business strategies. The company has been making cost-saving and other initiatives to tackle cost issues and boost overall growth.
For 2025, Tractor Supply expects net sales growth of 5-7% year over year. Comps are anticipated to increase 1-3% year over year. It plans positive comp transactions for 2025, with flat to slightly positive average ticket. Earnings per share (EPS) are expected to be in the band of $2.10-$2.22 for the current year, up from $2.04 recorded last year. It envisions EPS growth to be relatively consistent in the first half and second half of 2025.
Chewy CHWY has been benefiting from its e-commerce business, product assortments and innovation efforts. Management has been making technology upgrades for its website and online platforms to drive online sales. Higher product demand, robust consumer engagement and growth in active customers have been steadily contributing to its results. Net sales per active customer and Autoship customer sales have been driving customer loyalty. Additionally, CHWY’s healthcare business bodes well.
Central Garden & Pet CENT is advancing its growth strategy through innovation, e-commerce expansion and cost efficiencies across its Pet and Garden segments. Unique packaging, point-of-sale displays, logistic capabilities and a high level of customer service are the key growth drivers. The company has been strengthening its position as one of the leading companies in the U.S. pet supplies and lawn and garden supplies space.
Home Depot HD is focused on expanding its business and capturing market share. The company has been creating an interconnected experience for customers, enhancing the pro wallet through its unique ecosystem of capabilities and expanding its store footprint. Its interconnected retail strategy and robust technology infrastructure have consistently increased web traffic for quite some time. Improved search capabilities, an enhanced Pro site experience and strong fulfillment capabilities have been driving online conversions.
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