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When $$$MR. MARKET$$$ was little, he had a tractor he rode up and down Maple Terrace.
It didn’t look exactly like this:
but you probably get the idea. Now I knew the rule was never to ride it past the white fence or risk the peril of going down the hill into Maple Street but of course when Fritzy wanted to ride it, he took it across Maple Street up onto Midvale and who knows where afterwards. So when $$$MR. MARKET$$$’s old man asked him what happened to the tractor, $$$MR. MARKET$$$ said that Fritzy took it.
The thing that was so Armenian about all of this is that $$$MR. MARKET$$$ grew up in the city. Why anyone would need a tractor:
is really beyond me. But, having said that, there is a lot of demand for farm stuff these days and, sure enough, where there’s demand there’s an opportunity to make money.
Today I bought Tractor Supply Company (TSCO) at 60.88. I will sell it in 4 – 6 weeks at 70.20. Here’s why I like TSCO:
Oh my goodness…look at the freakin chart. It’s up 75% in the last 52 weeks and it just goes up and up and up. For at least the ninth straight quarter, Tractor Supply’s earnings came in above ANAL-ysts estimates. This 73 year old “feed & seed” retailer grew sales to a record $3.638 B in 2010 – an increase of 13% over 2009. In addition, the growing retailer reported record net income of $167,972 M - a year over year increase of around 40%. The company has very little long term debt (1.316 M); consequently, there is no S&P or Moody’s rating.
Here is their simple but effective strategy:
· Growth company in a unique niche
· Serves a lifestyle, a desirable demographic
· Limited and fragmented competition
· Experienced, energized and focused leadership team
· Positioned to grow to 1,800 domestic locations
Tractor Supply supports a lifestyle as the largest operator of retail farm and ranch stores in the United States. They have a track record of solid financial performance and more than adequate opportunity to continue to grow and improve the business. Tractor Supply customers are home, land, and pet owners, likely to have above average income and less consumer debt. They live in areas less impacted by housing issues and continue to support the philosophy that proves the “rural lifestyle” is attractive.
These stores are nothing special. The average inside size is 16,600 sq ft. – retail inside and 18,000 sq ft outside. They have convenient locations and are easy in / easy out.
It seems like the niche that they have captured is that people need “feed & seed” at reasonable prices but they really would rather not deal with the hassle of going to Home Depot or Walmart for it. These little stores really fit the bill.
At March 26, 2011, Tractor Supply Company operated 1,027 stores in 44 states. The Company's stores are focused on supplying the lifestyle needs of recreational farmers and ranchers. The Company also serves the maintenance needs of those who enjoy the rural lifestyle, as well as tradesmen and small businesses. Stores are located in towns outlying major metropolitan markets and in rural communities.
The Company offers the following comprehensive selection of merchandise: (1) equine, pet and small animal products, including items necessary for their health, care, growth and containment; (2) hardware, truck, towing and tool products; (3) seasonal products, including lawn and garden items, power equipment, gifts and toys; (4) maintenance products for agricultural and rural use; and (5) work/recreational clothing and footwear.
So…what’s the secret?
A Look Back at 2010
· Grew and Improved the Business
· Record Sales of $3.64 Billion (7.0% comp sales)
· Comp Transaction Count Increase of 7.4% (vs. 5.3%)
· 60 bps Gross Margin Improvement
· 140 bps EBIT Margin Improvement (to 7.3%)
· Exceeded 3x Inventory Turns (3.09x…up 21 bps)
· Quarterly Cash Dividend Program Initiated in February
· 2-for-1 Stock Split in September
2011 Expectations
· New Stores: 80-85
· Sales: $4.00 Billion - $4.07 Billion
· Same-Store Sales: 2.5% - 4.5%
· Operating Margin Improvement: 20-30 basis points
· EPS: $2.54 - $2.62
· Capital Expenditures: $150 Million - $160 Million
· Includes new Franklin, KY distribution center
With a strategy of:
· Winning with strategic plans and passion
· Demonstrating proven ability to manage variables
· Focusing on growth
· Stores and Sales
· Margins
· Earnings
· Generating significant cash from operations
· Returning value to shareholders
TSCO is one of the best positioned and most highly differentiated retailers in the market. Gross margins are expected to grow through physical expansion, price optimization, and strategic sourcing. TSCO started off 2011 with an impressive quarter. The company delivered Q1 EPS of $0.24, above the ANAL-ysts’ $0.16/share prediction. This is driven by same store sales growth of over 10%. Farm incomes are rising, there is modest inflation (about 1%-2%) and there are still pent up recession sales waiting to happen. Tractor Supply’s product offering and value is unmatched in its markets and their loyal customer base is returning while new customers are being hatched every day.
Rising farm income is a factor behind TSCO’s strong top-line growth. Since December 2009, farm income growth has been accelerating and the correlation between that and TSCO sales growth is relatively strong. Farm income has been rising 60%-70% year-over-year for the past several months and that bodes well for continued momentum in the months ahead. The company’s primary investment is in new stores and 26 were opened in the quarter with 80-85 planned for next year.
They are cooking on all cylinders and are making a lot more than just chicken feed.
First Quarter Results
Net sales increased 17.7% to $836.6 million from $710.9 million in the prior year's first quarter. Same-store sales increased 10.7%, compared to a 2.8% increase in the prior-year period. The same-store sales increase was broad-based geographically and across all major product categories. Consumable, usable and edible (CUE) products, principally animal and pet-related merchandise, continued to perform well. Seasonal merchandise also experienced solid sales during the quarter.
Gross margin increased 18.5% to $273.6 million, or 32.7% of sales, compared to $230.9 million, or 32.5% of sales, in the prior year's first quarter. The increase in gross margin reflects improved direct product margin, partially offset by increased transportation costs. The improvement in direct margin resulted primarily from strategic sourcing, solid inventory allocation, effective retail price management and strong sell-through of products, which minimized markdowns.
Net income for the quarter was $18.3 million, or $0.24 per diluted share, compared to net income of $10.6 million, or $0.14 per diluted share, in the first quarter of the prior year.
The Company opened 26 stores in the first quarter compared to opening 19 stores and closing one store in the prior year's first quarter.
So you know what TSCO is and where TSCO has been. So the big question everyone wants to ask $$$MR. MARKET$$$ is where is TSCO going? This one is easy.
The store count has grown by CAGR 9.4% from 764 stores in 2007 to 1001 stores in 2010. If you look at their annual sales over the same period, they have grown 10.4% annually from $2,703 MM to $3,638 MM. So overall sales grows about 10% faster than store growth. It’s a simple CAN’T LOSE formula…build more stores, grow more sales.
When it comes to earnings, they have grown at CAGR 22.0% over the same period, from $1.24/share to $2.25 per share. So the math is really quite simple..take the number of stores that TSCO plans to build, multiply that by 1.1 and you get the annual sales growth. Multiply the sales growth by 2 and you get the earnings growth.
The company says based on strong performance in the first quarter, the Company raised its financial expectations for fiscal 2011. Net sales are anticipated to range from $4.04 billion to $4.11 billion compared to the Company's previously expected range of $4.00 billion to $4.07 billion. Same store sales for the year are now expected to increase 3.5% to 5.0% compared to the original expectation of an increase of 2.5% to 4.5%. The Company now anticipates net income to range from $2.62 to $2.70 per diluted share compared to its previous guidance of $2.54 to $2.62 per diluted share.
So we know TSCO is saying they will add 85 stores in 2011 (they already opened 26 this year, so you know sales growth is front ended – combined with comp sales growth). This means that their 2011 sales will be $4,163 MM. The new sales will generate earnings of $2.84/share. If you take these earnings and multiply it by the PE multiple, you get $2.84 x 27 = $76.68 as the new stock price…which exceeds my sales target. Once again the formula for yet another $$$MR. MARKET$$$ winner.
Here’s what the boss has to say:
Jim Wright, Chairman and Chief Executive Officer, stated, "We are delighted with our record first quarter results and start to 2011 as we continue to experience broad-based strength across the organization. As a result, we achieved our fourth consecutive quarter of double-digit sales and earnings growth. We enhanced our merchandise management across categories and regions, maintained a prudent approach to expenses, and experienced greater productivity from new stores. Through great planning and execution, we believe we are well-positioned for the important spring selling season."
Mr. Wright concluded, "With a solid start to this year, we are confident we are taking the right steps to grow and improve the Company. We are building on our momentum while executing against our plans and investing in the business, which we believe will enable us to continue delivering sustainable growth. We are driving our top-line through key merchandising initiatives while also enhancing gross margin through inventory management, strategic sourcing, private brands and price optimization. Our balance sheet remains strong and we look forward to another successful year."
I gotta feeling that Mr. Wright is probably right. So I’m getting on that tractor and taking this stock higher.
I am HUGE!!
$$$MR. MARKET$$$
www.mrmarketishuge.com
It didn’t look exactly like this:
but you probably get the idea. Now I knew the rule was never to ride it past the white fence or risk the peril of going down the hill into Maple Street but of course when Fritzy wanted to ride it, he took it across Maple Street up onto Midvale and who knows where afterwards. So when $$$MR. MARKET$$$’s old man asked him what happened to the tractor, $$$MR. MARKET$$$ said that Fritzy took it.
The thing that was so Armenian about all of this is that $$$MR. MARKET$$$ grew up in the city. Why anyone would need a tractor:
is really beyond me. But, having said that, there is a lot of demand for farm stuff these days and, sure enough, where there’s demand there’s an opportunity to make money.
Today I bought Tractor Supply Company (TSCO) at 60.88. I will sell it in 4 – 6 weeks at 70.20. Here’s why I like TSCO:
Oh my goodness…look at the freakin chart. It’s up 75% in the last 52 weeks and it just goes up and up and up. For at least the ninth straight quarter, Tractor Supply’s earnings came in above ANAL-ysts estimates. This 73 year old “feed & seed” retailer grew sales to a record $3.638 B in 2010 – an increase of 13% over 2009. In addition, the growing retailer reported record net income of $167,972 M - a year over year increase of around 40%. The company has very little long term debt (1.316 M); consequently, there is no S&P or Moody’s rating.
Here is their simple but effective strategy:
· Growth company in a unique niche
· Serves a lifestyle, a desirable demographic
· Limited and fragmented competition
· Experienced, energized and focused leadership team
· Positioned to grow to 1,800 domestic locations
Tractor Supply supports a lifestyle as the largest operator of retail farm and ranch stores in the United States. They have a track record of solid financial performance and more than adequate opportunity to continue to grow and improve the business. Tractor Supply customers are home, land, and pet owners, likely to have above average income and less consumer debt. They live in areas less impacted by housing issues and continue to support the philosophy that proves the “rural lifestyle” is attractive.
These stores are nothing special. The average inside size is 16,600 sq ft. – retail inside and 18,000 sq ft outside. They have convenient locations and are easy in / easy out.
It seems like the niche that they have captured is that people need “feed & seed” at reasonable prices but they really would rather not deal with the hassle of going to Home Depot or Walmart for it. These little stores really fit the bill.
At March 26, 2011, Tractor Supply Company operated 1,027 stores in 44 states. The Company's stores are focused on supplying the lifestyle needs of recreational farmers and ranchers. The Company also serves the maintenance needs of those who enjoy the rural lifestyle, as well as tradesmen and small businesses. Stores are located in towns outlying major metropolitan markets and in rural communities.
The Company offers the following comprehensive selection of merchandise: (1) equine, pet and small animal products, including items necessary for their health, care, growth and containment; (2) hardware, truck, towing and tool products; (3) seasonal products, including lawn and garden items, power equipment, gifts and toys; (4) maintenance products for agricultural and rural use; and (5) work/recreational clothing and footwear.
So…what’s the secret?
A Look Back at 2010
· Grew and Improved the Business
· Record Sales of $3.64 Billion (7.0% comp sales)
· Comp Transaction Count Increase of 7.4% (vs. 5.3%)
· 60 bps Gross Margin Improvement
· 140 bps EBIT Margin Improvement (to 7.3%)
· Exceeded 3x Inventory Turns (3.09x…up 21 bps)
· Quarterly Cash Dividend Program Initiated in February
· 2-for-1 Stock Split in September
2011 Expectations
· New Stores: 80-85
· Sales: $4.00 Billion - $4.07 Billion
· Same-Store Sales: 2.5% - 4.5%
· Operating Margin Improvement: 20-30 basis points
· EPS: $2.54 - $2.62
· Capital Expenditures: $150 Million - $160 Million
· Includes new Franklin, KY distribution center
With a strategy of:
· Winning with strategic plans and passion
· Demonstrating proven ability to manage variables
· Focusing on growth
· Stores and Sales
· Margins
· Earnings
· Generating significant cash from operations
· Returning value to shareholders
TSCO is one of the best positioned and most highly differentiated retailers in the market. Gross margins are expected to grow through physical expansion, price optimization, and strategic sourcing. TSCO started off 2011 with an impressive quarter. The company delivered Q1 EPS of $0.24, above the ANAL-ysts’ $0.16/share prediction. This is driven by same store sales growth of over 10%. Farm incomes are rising, there is modest inflation (about 1%-2%) and there are still pent up recession sales waiting to happen. Tractor Supply’s product offering and value is unmatched in its markets and their loyal customer base is returning while new customers are being hatched every day.
Rising farm income is a factor behind TSCO’s strong top-line growth. Since December 2009, farm income growth has been accelerating and the correlation between that and TSCO sales growth is relatively strong. Farm income has been rising 60%-70% year-over-year for the past several months and that bodes well for continued momentum in the months ahead. The company’s primary investment is in new stores and 26 were opened in the quarter with 80-85 planned for next year.
They are cooking on all cylinders and are making a lot more than just chicken feed.
First Quarter Results
Net sales increased 17.7% to $836.6 million from $710.9 million in the prior year's first quarter. Same-store sales increased 10.7%, compared to a 2.8% increase in the prior-year period. The same-store sales increase was broad-based geographically and across all major product categories. Consumable, usable and edible (CUE) products, principally animal and pet-related merchandise, continued to perform well. Seasonal merchandise also experienced solid sales during the quarter.
Gross margin increased 18.5% to $273.6 million, or 32.7% of sales, compared to $230.9 million, or 32.5% of sales, in the prior year's first quarter. The increase in gross margin reflects improved direct product margin, partially offset by increased transportation costs. The improvement in direct margin resulted primarily from strategic sourcing, solid inventory allocation, effective retail price management and strong sell-through of products, which minimized markdowns.
Net income for the quarter was $18.3 million, or $0.24 per diluted share, compared to net income of $10.6 million, or $0.14 per diluted share, in the first quarter of the prior year.
The Company opened 26 stores in the first quarter compared to opening 19 stores and closing one store in the prior year's first quarter.
So you know what TSCO is and where TSCO has been. So the big question everyone wants to ask $$$MR. MARKET$$$ is where is TSCO going? This one is easy.
The store count has grown by CAGR 9.4% from 764 stores in 2007 to 1001 stores in 2010. If you look at their annual sales over the same period, they have grown 10.4% annually from $2,703 MM to $3,638 MM. So overall sales grows about 10% faster than store growth. It’s a simple CAN’T LOSE formula…build more stores, grow more sales.
When it comes to earnings, they have grown at CAGR 22.0% over the same period, from $1.24/share to $2.25 per share. So the math is really quite simple..take the number of stores that TSCO plans to build, multiply that by 1.1 and you get the annual sales growth. Multiply the sales growth by 2 and you get the earnings growth.
The company says based on strong performance in the first quarter, the Company raised its financial expectations for fiscal 2011. Net sales are anticipated to range from $4.04 billion to $4.11 billion compared to the Company's previously expected range of $4.00 billion to $4.07 billion. Same store sales for the year are now expected to increase 3.5% to 5.0% compared to the original expectation of an increase of 2.5% to 4.5%. The Company now anticipates net income to range from $2.62 to $2.70 per diluted share compared to its previous guidance of $2.54 to $2.62 per diluted share.
So we know TSCO is saying they will add 85 stores in 2011 (they already opened 26 this year, so you know sales growth is front ended – combined with comp sales growth). This means that their 2011 sales will be $4,163 MM. The new sales will generate earnings of $2.84/share. If you take these earnings and multiply it by the PE multiple, you get $2.84 x 27 = $76.68 as the new stock price…which exceeds my sales target. Once again the formula for yet another $$$MR. MARKET$$$ winner.
Here’s what the boss has to say:
Jim Wright, Chairman and Chief Executive Officer, stated, "We are delighted with our record first quarter results and start to 2011 as we continue to experience broad-based strength across the organization. As a result, we achieved our fourth consecutive quarter of double-digit sales and earnings growth. We enhanced our merchandise management across categories and regions, maintained a prudent approach to expenses, and experienced greater productivity from new stores. Through great planning and execution, we believe we are well-positioned for the important spring selling season."
Mr. Wright concluded, "With a solid start to this year, we are confident we are taking the right steps to grow and improve the Company. We are building on our momentum while executing against our plans and investing in the business, which we believe will enable us to continue delivering sustainable growth. We are driving our top-line through key merchandising initiatives while also enhancing gross margin through inventory management, strategic sourcing, private brands and price optimization. Our balance sheet remains strong and we look forward to another successful year."
I gotta feeling that Mr. Wright is probably right. So I’m getting on that tractor and taking this stock higher.
I am HUGE!!
$$$MR. MARKET$$$
www.mrmarketishuge.com
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