Tractor Supply Co Still A Best In Breed Retail Following Guidance Cut

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Shares of Tractor Supply Company TSCO lost more than 3 percent in pre-market trade today, after the company’s disappointing quarterly results and guidance. Barclays’ Matthew McClintock maintained an Overweight rating on the company, with a price target of $100. The analyst commented that the latest results were poor but not bad enough to “derail a best-in-breed retailer.”

The EPS estimates for 2Q16 and FY16 have been reduced from $1.28 to $1.15 and from $3.45 to $3.40, respectively, to reflect the updated guidance. Analyst Matthew McClintock noted that seasonal products had adversely impacted the quarter and that the recent pressure on shares presented a buying opportunity.

Quarterly Results

Net sales grew 4.5 percent to $1.85 billion, short of Barclay’s $1.97 billion estimate. Comp store sales declined by 0.5 percent, being adversely impacted by weak seasonal product sales due to unfavorable weather conditions, McClintock mentioned.

Management noted that sales had become more normalized and that the company achieved its strongest sales performance in June.

Gross margin is expected to contract 25-30bps, compared to Barclays’ prior estimate of a 20bps expansion. “Gross margin contraction was driven by product mix and higher transportation costs net of lower diesel prices. As a result of lower comps, we expect the company to experience SG&A deleverage,” the analyst added.

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Posted In: Analyst ColorLong IdeasReiterationAnalyst RatingsTrading IdeasBarclaysMatthew McClintock
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