Tractor Supply (TSCO 0.15%) is a unique retailer and one that has successfully resisted the rise of Amazon (AMZN 1.97%) and e-commerce.
In this episode of "Beat and Raise," recorded on Jan. 27, Fool contributors Will Healy and Brian Withers discuss Tractor Supply's fourth-quarter earnings report and why the retail stock has such a strong track record.
Brian Withers: Will is back, this time with Tractor Supply. Yes. One of my favorite retailers.
Will Healy: Yes. I think this one's a little bit more familiar with everyone in the audience. They have operated about 2,000 stores and are into rural lifestyle. They also operate about 175 Petsense Stores too as well. Anyway, they brought in $3.3 billion in revenue. For Q4, that was up 15%. That beat estimates and they also beat estimates for their earnings. Earnings per share came in at $1.93, up 68%. Very nice bump there.
The outlook for fiscal 2022, $13.7 billion (in revenue) up 8%. Not quite as high as 2021 where it was up 20%, but it's a beat in estimates nonetheless. Like I said, for the fiscal year, revenues up 20%, income, 35%. Pretty solid numbers.
A few years ago this was a slower growth company, but with all the changing trends, people are becoming more interested in agriculture in general. A lot of people don't know this but the average age of the American farmer is almost 58 years old, so in addition to all the inflation pressures we've had recently, there's really concerning demographic trends and we all need to eat. I think we all want the average age of the farmer to come down.
But, nonetheless, that trend is helping Tractor Supply, greater than 10% same-store sales for the seventh consecutive quarter, dividends, 77% higher. It's now $3.68 cents per share annually, which is a yield of about 1.7%. That's a massive increase. Excuse me. This is another indication of how well the company has been doing recently and they also authorized $2 billion in share buybacks.
Moving onto concerns, one concern that stuck out with me was inflation contributed about 700 basis points or 7% comparable-store sales so when you factor that in the comparable-store sales aren't quite 10%, but it's still a fairly solid number when it comes to that. As you can see on the chart, the stock is up about 41% over the last year and that handily beat the S&P 500.
There's so many tailwinds with this industry. There's the inflation and I think there's just more interest in farming in general, now that you have wine and you have cannabis. But I think from what I've seen, a lot of people just care more about where their food comes from. I think this has kind of sparked a greater interest in agriculture.
Especially with the pandemic, you have people moving out to the ex-suburbs, the area beyond the suburbs where they can buy a few acres and participate in this rural lifestyle. Tractor Supply fits these customers like a glove I think. It fits in perfectly with their needs.
Withers: Yeah, there may be a megatrend there of people moving out of cities and certainly for many jobs now, you can remote work from anywhere is why not get some land and have some horses and grow some corn and become a local Tractor Supply Company customer?
Healy: Yes. Get some chickens, have your own organic eggs, It solves several problems all at one time.
Withers: Yeah. For members not familiar with this company, this trend here of beating the market over the past year, this is what the company does every single year. You look over the last five years and it's up about 180% versus the S&P up 100%. If you look at the last decade, it's up 425% versus 300% with the S&P.
I think these guys have done a tremendous job of fending off Amazon for one and then just through retail malaise and retail stocks with brick-and-mortar have taken a tremendous hit. But these guys are really focused on their customer, the out there customer and they've done a ton of things during the coronavirus to make it easier for them to shop.
Whether it's curbside pickup or expanding their online presence and Hal Lawton, the new CEO, came on just before the coronavirus in late 2019 and he's been a breath of fresh air for the company and has really committed to employees. Raising their pay and he immediately came in and said "We're going to hire another 6,000 employees across our employee base." As people are out sick or you need more people to wipe down things or carry product out to cars for customers, it's just done a tremendous job. I just can't say enough about, as a retail brick-and-mortar company, these guys are just stellar.
Healy: You have to remember too that they have 2,000 stores or almost 2,000 stores across the country. These are mainly in ex-suburbs or small towns. I'm not going to say that e-commerce is unimportant, but they sell a lot of items you want to buy in person, and plus, chances are if you're in a rural area or semi-rural area, you have a Tractor Supply nearby, it's not that hard to show up at the store. You're not quite as dependent on e-commerce.
