Tractor Supply (NASDAQ:TSCO) shareholders endured a bumpy ride in 2019. The stock had been up nearly 40% at one point in the year, but that rally lost steam, and investors ended the year with modest returns that were well below the broad market's 29% surge.
Shareholders will have an opportunity to reassess the business when the rural lifestyle company announces its fiscal fourth-quarter results and issues its first outlook for the year ahead. Let's look at the key trends to watch in that report, set for Jan. 30, that might determine where the stock is heading in 2020.
The analyst consensus expects Tractor Supply to boost revenue about 5% this quarter to $2.25 billion. That's about the same pace the retailer's top line expanded in the fiscal third quarter, but revenue growth won't tell the whole story.
Instead, keep an eye on comparable-store sales for a clearer picture of consumer demand. Tractor Supply upgraded its outlook in July to target comps growth between 3.0% and 4.0% for the year but narrowed that range in October to between 3.2% and 3.4%. Investors will find out soon whether growth is still slowing as it did in the third quarter when comps growth fell to 2.9%, down from 5.1% in the prior-year period.
Within that metric, investors will want to see a balance between customer traffic gains and higher average spending. Yet shopper volume is especially important given that its growth has slowed to below 1% compared to a 2% boost in 2018.
Spending and earnings
The earnings outlook is positive but with some important caveats. Tractor Supply is expected to announce earnings of $1.23 per share, good for year-over-year growth of 11%. That figure will be influenced by tax changes and one-time charges, though, so it's more useful to follow operating margin.
Operating profit has held steady at about 9% of sales through the first nine months of 2019, even though the retailer has spent more cash on its omnichannel transition. That success is due to Tractor Supply's merchandising strategies that include targeted price increases and the marketing of more profitable niches like pet supplies and riding lawn mowers. Management said back in October that they were "very comfortable" with the quality of their inventory heading into the fourth quarter, so expectations are for profitability to stay steady as Tractor Supply closes its fiscal year.
Meet the new boss
CEO Greg Sandfort retired in early January after a 12-year run with Tractor Supply, and this week's report will be a key opportunity for investors to hear from Hal Lawton as he steps into the leadership role. Lawton was recruited in part because of his experience managing an omnichannel retailing approach at Macy's, so he'll likely stress that continued transition this week.
One of the new CEO's first duties will be to look ahead and issue an outlook for fiscal 2020. That forecast will be followed closely, since it will help determine whether investors can expect a second straight year of slowing -- but positive -- sales growth from the company.