After the market close (05/26/20), Tractor Supply (TSCO) provided an updated outlook for Q2 highlighted by a continued surge in top-line trends. TSCO now expects Q2 comparable sales growth in the range of +20-25% vs. a current Street forecast for just +3.9%. We expect gains to be broad-based and driven by various outdoor categories – consistent with our latest checks in the home improvement space. Further details follow below:
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Following recent earnings reports across restaurants, leisure, and hardlines retail, we are publishing updated estimates and price targets for each of the following: Brinker International (EAT), Brunswick (BC), Chipotle (CMG), Domino’s Pizza (DPZ), Dunkin’ Brands (DNKN), Harley-Davidson (HOG), McDonald’s (MCD), O’Reilly Automotive (ORLY), Polaris (PII), Restaurant Brands Int’l (QSR), Starbucks (SBUX), Tractor Supply (TSCO), and YUM! Brands (YUM), Amazon (AMZN).
Earlier this morning (04/23/20), Tractor Supply (TSCO) reported full first quarter results following the company’s April 7th business update. Comp sales in the period improved +4.3% (consistent with prior communications) following a sharp acceleration in March and better trends across spring seasonal merchandise. Initial commentary suggests continued sales strength into Q2 - in line with our broader checks across the home improvement space (through April 17th). We await additional details on this morning’s 10AM ET conference call.
This AM (1/30), TSCO reported 4Q SSS of 0.1% missing Cons of 2.4%. Expectations were low due to 3rd party CC data. Margins were in-line despite the topline miss. EPS of $1.21 missed Cons $1.23 and our $1.25. 2020 guide of 1.5% to 3% SSS missed consensus of 3.1%, while EPS missed by 4% at the midpoint. Shares were -1.5% vs -0.5% for the S&P 500.
With concerns over the Coronavirus spreading, we think US Retailers will likely be viewed as near-term relative safe-haven stocks given limited direct exposure to China. However, should the virus spread into a pandemic, especially in China, we see a greater impact to US retailers from indirect supply chain exposure or US GDP growth.
To help gear up for 2020 we analyzed 2019 performance, identified 10 key themes into 2020, analyzed post Q3 earnings reaction, and analyzed the key issue facing each stock under coverage into 2020.
This morning (10/25/19), TSCO reported 3Q results. Results were largely in line with Consensus. SSS of 2.9% fell short of Consensus 3.1% but beat our 2.0%. EBIT and EPS ($1.04 vs our $0.99) beat us primarily on better gross margin expansion. Shares were up 3% vs flat for the S&P 500.
Two weeks ago, we assumed broader coverage of Hardlines and Internet Retail and issued four deep dive reports including a downgrade of LOW to Peer Perform and reiterated HD, BBY, and W at Outperform. We also assumed coverage of AMZN, ULTA, WSM, RH, TSCO, and SHW (see our 1-page tear sheets here). Finally, we utilized the broader coverage as an opportunity to reposition our legacy auto part retail coverage and downgrade AAP to Underperform and upgraded ORLY to Outperform.
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