Tractor Supply: Early Disappoint Concerning
The narrow-moat company's focus on improved analytics is not matching the speed of changing weather patterns that the company is competing against.
Narrow-moat
For the first quarter, the company reported sales growth of 6.6% to $1.56 billion, tracking about 30 basis points behind the cadence implied in our model. Comparable-store sales contracted 2.2%, hindered by a comparable transaction count decline of 1.4% and average ticket decrease of 0.9% as mismatched weather patterns deflected sales of seasonal merchandise and deflation (which acts as a headwind to comps) affected overall performance. First-quarter earnings per share, now expected to be $0.45-$0.46, fell short of the consensus estimate of $0.53. Given that our full-year estimate (at $3.44) was at the low end of management’s guidance for $3.44-$3.52 and the first half of our model anticipated only modestly positive comp growth (1%-2%), we don’t expect to make a material change to our $80 fair value estimate, and we view the shares as undervalued.
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