Shares in Tractor Supply (NASDAQ:TSCO) surged 11.7% in February, according to data provided by S&P Global Market Intelligence. The move marked yet another volatile month for the company. For example, the company's stock soared 13% in August but also slumped more than 12% in December.
The reason for all the volatility? In a nutshell, Tractor Supply has been reporting better-than-expected results, but its stock has also been subject to fears around tariffs connected with the U.S.-China trade dispute.
The company sources products from China, so higher import tariffs are likely to hurt Tractor Supply's margin. And if U.S. farm income is negatively impacted by China imposing tariffs on crops like soybean, the company's revenue could get hit.
If the fears over tariffs are significant, they certainly haven't been realized yet. In fact, conditions appear to have improved through the company's 2018. For example, management started the year expecting comparable same-store sales growth of 2% to 3% but actually reported 5.1% growth for the full year. Moreover, the company ended the year on a high note with comparable same-store sales growth of 5.7% in the fourth quarter.
CEO Greg Sandfort noted that it "was our best annual comp store sales growth in six years" during the earnings call. Moreover, the period has been accompanied by growth in transactions and average ticket prices. Sandfort disclosed that both had increased in the fourth quarter and in the full year: The average transaction value was $47.03 compared to $45.67 in the same quarter of 2017.
Aside from the ongoing threat of some impact from tariffs, investors should also keep an eye on how the 80 new Tractor Supply stores and 18 new Petsense stores opened in 2018 perform in 2019. The store openings have increased the company's overall selling square footage by 5%.
In fact, the new stores are a large part of the reason why management expects reported sales growth of 5% to 7% compared to organic sales growth of 2% to 4%. Given the 5.7% organic sales growth reported in the fourth quarter, management's guidance looks a little conservative, so don't be surprised if there's some more outperformance in 2019.