Tractor Supply Company (NASDAQ:TSCO), the largest rural lifestyle retail store chain in the United States, yesterday provided a business update for the third quarter-to-date and announced its participation in the Goldman Sachs 23rd Annual Global Retailing Conference on September 8, 2016.

Net sales for the third quarter are expected to increase approximately 4.2% to 5.0% to $1.54 billion to $1.55 billion from $1.48 billion in the third quarter of 2015, with comparable store sales ranging from flat to a decrease of (1.0)% versus an increase of 2.9% in last year’s third quarter. Comparable store transaction counts in the third quarter are expected to be slightly positive to flat in comparison to the prior year third quarter.

While there are a number of economic headwinds impacting consumer spending throughout many of the Company’s markets, the energy producing and agricultural markets are the most impacted. Based on the Company’s analysis of quarter-to-date results and trends, management currently believes the weaker than expected sales results have been heavily influenced by three main factors.

  • Energy producing regions are experiencing a decline in comparable store sales and transaction count. The prolonged decrease in oil, gas and coal production appears to be having a broader impact in these regions and influencing consumer behavior in many of the communities that the Company serves.
  • Sales and transaction count are being negatively impacted in those communities that are more dependent on the agricultural industry. While the Company’s sales are not directly dependent on the production farming industry, the third consecutive year of declining farm income appears to be having a broader effect in many of its rural farming communities.
  • The Company is experiencing lower demand for pre-season heating related products such as wood stoves and heating fuel. This has primarily impacted sales trends in the Northeast and could be an early indication of a challenging heating and cold weather products season ahead.

The strongest regional performance quarter-to-date has been in the Southeast and West regions where there is less exposure to the energy and agriculture markets. The Company continues to experience strong demand for many of our basic items, which is supported by chain-wide quarter-to-date mid-single digit comparable store sales in the Livestock and Pet category.

Given the lower sales, the Company expects net income per diluted share for the third quarter to be in the range of $0.65 to $0.67.

Greg Sandfort, Chief Executive Officer, stated, “While the retail environment has become more challenging over the past several months, the most pronounced decreases in our traffic and sales are in energy and agricultural communities. With our customers generally being fiscally conservative, we believe many of them have responded to the economic uncertainty by reducing their purchasing patterns in some of our key geographic regions.”

Mr. Sandfort continued, “The continued strength in sales in the Southeast and West regions and in everyday basic categories such as Livestock and Pet indicate to us that the weaker than expected sales in the third quarter are more related to the challenging economic headwinds rather than our overall merchandise assortment. In this current environment, our teams are focused on sales and traffic driving initiatives in our stores. Over the short term, we are allocating inventory based on sales trends and enhancing our marketing programs, while critically analyzing and managing expenses. From a longer-term perspective, our strategies are focused on driving sustained, profitable growth, meeting our customer needs while increasing value for our shareholders.”

Based upon the third quarter sales and pre-season heating trends and the economic environment discussed above, the Company is lowering its guidance for the results of operations expected for fiscal 2016:

Updated Previous
Net Sales $6.70 billion – $6.75 billion $6.8 billion – $6.9 billion
Comparable Store Sales 1.0% – 1.7% 2.5% – 3.5%
Net Income $432 million – $438 million $451 million – $456 million
Earnings per Diluted Share $3.22 – $3.26 $3.35 – $3.40

All figures in this release are preliminary and remain subject to the completion of normal quarter-end accounting procedures and adjustments, which could result in changes to these preliminary results. Tractor Supply will provide additional information regarding its quarterly results when it reports its third fiscal quarter results on October 19, 2016.

Tractor Supply Company to Participate in the Goldman Sachs 23 rd Annual Global Retailing Conference (Original Source)

Tractor Supply shares are falling 15% to $71.00 in pre-market trading Thursday. TSCO has a 1-year high of $97.25 and a 1-year low of $78.05. The stock’s 50-day moving average is $86.98 and its 200-day moving average is $90.15.

On the ratings front, Tractor Supply has been the subject of a number of recent research reports. In a report released today, Credit Suisse analyst Seth Sigman downgraded TSCO to Hold, with a price target of $72, which reflects a potential downside of -14% from last closing price. Separately, on the same day, Deutsche Bank’s Adam Sindler downgraded the stock to Hold and has a price target of $76.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Seth Sigman and Adam Sindler have a total average return of 2.3% and -10.8% respectively. Sigman has a success rate of 52% and is ranked #1561 out of 4147 analysts, while Sindler has a success rate of 37% and is ranked #3848.

The street is mostly Neutral on TSCO stock. Out of 15 analysts who cover the stock, 8 suggest a Hold rating and 7 recommend to Buy the stock. The 12-month average price target assigned to the stock is $87.00, which represents a slight upside potential from current levels.

Tractor Supply Co. engages in the retail sale of farm and ranch products. It operates retail farm and ranch stores and focuses on supplying the lifestyle needs of recreational farmers and ranchers, as well as tradesmen and small businesses. The firm operates its retail stores under the names: Tractor Supply Company, Del’s Feed & Farm Supply, and HomeTown Pet. Its product categories include livestock and pet, hardware, tools, truck and towing, clothing and footwear, agriculture and seasonal, gift and toy products.