Tractor Supply is an operator of retail farm and ranch stores in the United States. Co. is engaged in supplying the lifestyle needs of recreational farmers and ranchers, as well as tradesmen and small businesses. Co. provides a selection of merchandise including: equine, livestock, pet and small animal products, including items necessary for their health, care, growth and containment; hardware, truck, towing and tool products; seasonal products, including lawn and garden items, power equipment, gifts and toys; work/recreational clothing and footwear; and maintenance products for agricultural and rural use. As of Dec 28, 2013, Co. operated 1,276 retail farm and ranch stores in 48 states.
Tractor Supply’s moat comes from the brand and product mix have built around a loyal following of recreational farmers, ranchers, and those participating in the rural lifestyle. The niche product offering place TSCO in a unique position insulated from competitors that focus on one segment of the market. Tractor Supply’s breadth across categories (equine, livestock, pet and small animal products; hardware, truck, towing and tool products; seasonal products; work/recreational clothing and footwear; and maintenance products) provides a one-stop solution (and destination) for those looking to fill multiple needs across outdoor categories. Tractor Supply is one of few retailers (like HD and LOW) that is truly authentic and creates trust with its target market. The brand is believable and likeable which play well with customer loyalty.
Tractor Supply is helped by core customers purchasing everyday basic needs. Tractor's store count target is now 2,500 (previously 2,100). That's nearly 80% higher than its recently opened 1,400th unit. Management plans to open 110-115 stores in 2015, and subsequently maintain a 120 annual ribbon-cutting pace. Company studies reveal that its customer base has grown, reflecting the consumers' aspirational lifestyles. The company will share more of its cash with investors. Tractor's dividend payout target is 20%-30% of earnings. That suggests annual dividend growth around 15%-20%. The company can repurchase 2%-3% of shares annually. Tractor Supply has a strong growth record and share prices are at fair value.
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Diversified product mix with focus on fast moving consumables
Focused approach towards serving its target market
Improving revenue and profitability
Increasing labor cost in the US
Laws and regulations
Opening of new stores to increase the geographic footprint
Strengthening distribution network
Growing market share of private label goods in the US
Growing customer preference to shop online
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