Tractor Supply Gains 22.8% in a Year: Buy or Hold the Stock?

Tractor Supply Company TSCO has been doing well for a while now, recording a gain of 22.8% in a year. TSCO stock has significantly outpaced the Retail - Miscellaneous industry’s 2.7% growth. In the same time frame, the broader Retail-Wholesale sector grew 32.5% and the S&P 500 index increased 24.9%.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.Growth Strategies Aid TSCO’s RallyTractor 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.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 surpasses 38 million and, as a percentage of sales, touched a record 80%. 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.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.TSCO Price PerformanceImage Source: Zacks Investment ResearchTSCO Stock’s ValuationGoing by the price/earnings ratio, Tractor Supply stock is currently trading at 25.96 on a forward 12-month basis compared with 17.65 for the industry. The stock is trading higher than its five-year median of 22.88.Image Source: Zacks Investment ResearchBumps in TSCO’s Growth PathDespite such growth catalysts, Tractor Supply is reeling under 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. 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.ConclusionTSCO has been making cost-saving and other initiatives to bolster growth. Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for 2025 sales and earnings per share (EPS) is currently pegged at $15.68 billion and $2.17, respectively. These estimates indicate corresponding growth of 5.4% and 6.4% year over year. For 2026, the consensus mark for sales and EPS is $16.67 billion and $2.41, respectively, indicating a jump of 6.3% and 11.2%, year over year. Tractor Supply currently carries a Zacks Rank #3 (Hold).Key Picks in RetailWe have highlighted three better-ranked stocks, namely Deckers DECK, Boot Barn BOOT and Urban Outfitters URBN.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 15.6% from the year-ago figure. DECK delivered an average earnings surprise of 36.8% in the trailing four quarters.Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently sports a Zacks Rank of 1. The company delivered a trailing four-quarter earnings surprise of 7.2%, on average. The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 14.9% from the year-ago figure.Urban Outfitters, a fashion lifestyle specialty retailer, currently sports a Zacks Rank of 1. URBN delivered an average earnings surprise of 22.8% in the trailing four quarters.The consensus estimate for Urban Outfitters’ current financial-year sales indicates growth of 5.7% from the year-ago figure.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. 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