Tractor Supply (TSCO), the largest operator of rural lifestyle retail stores, is a one-stop shop for those seeking anything from gardening products to heavy farming equipment, Steve Mauzy, editor of Wyatt Research's Personal Wealth Advisor.
Tractor Supply has exploited the trend in rural (and suburban) living as well as any retailer. Merchandise offerings include livestock and pet products (47% of revenues); hardware, lawn and garden items, power equipment, gifts and toy products (20%); clothing and footwear (8%); and agriculture (4%).
The firm plans to open approximately 80 new stores in 2020, the same number it has opened each year since 2018. It expects to match that number in 2021, bringing its store total close to 2,000. Management believes it has the opportunity for a base of 2,500 stores. It plans to reach that base by 2025.
Tractor Supply also owns small-box pet-supply company Petsense. There are approximately 180 Petsense stores now and Tractor Supply plans to quintuple that number to 1,000 stores in the coming years.
Unlike the majority of U.S. companies, Tractor Supply’s business has benefited from the change in consumer behavior spurred by the pandemic. 2020 will end as an outlier year for revenue and earnings growth. The former will likely have increased 20% year over year. The latter, EPS, will likely finish up 40%.
Consumers will likely spend more on their homes and pets next year compared with this year. They just won’t spend to generate the same annual growth rate. With that said, investors should invest in Tractor Supply with the idea of playing a long game. The time is worth investing.
Tractor Supply business is supported by two strong, sustainable tailwinds. Consumers have always invested in their homes, and more today are investing in their home than ever. Pet ownership is at an all-time high. Pets have evolved into de facto family members.
Given our emotional attachment to our home and pets, I would bet more consumer spending will be diverted to both. Tractor Supply is the smart bet. Suggested Action: Buy Tractor Supply shares up to $147.
