Most industry-leading retailers are household names.
In apparel, there is Gap Inc. (NYSE: GPS). In consumer electronics, there is Best Buy (NYSE: BBY). And in home goods, companies such as Home Depot (NYSE: HD) and Wal-Mart (NYSE: WMT) maintain high levels of visibility that fuels interest from consumers and investors.
But behind the scenes, there is a secret retailer that is crushing the competition, seeing huge gains in earnings and jumping higher on the chart. In fact, earnings have been growing so sharply, shares are up almost 100% in just two years. Take a look at the market-beating rally below...
But just because early investors have seen big gains doesn't mean the growth story is over. With the bullish trend still well in play and management confident, Tractor Supply (Nasdaq: TSCO) can continue to grow its store count and still leave plenty of room for investors to profit.
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This little-known industry-leading retailer sells a wide range of products, all the way from consumables such as bales of hay, to larger-ticket items like small tractors, splitters and chainsaws. And with more than 1,150 stores in 45 states and a market cap of $6.5 billion, Tractor Supply is the largest farm and ranch retailer in the United States.
This strong national presence provides the company with excellent geographic diversification. But Tractor Supply's real strength is its strategic decision to focus its operations in key rural areas to capitalize on the secular bullish trend in agriculture. In just the past six months, prices of a number of key agricultural commodities, including corn, beans and wheat, have surged to or near all-time highs. These rising prices have been a boon for farmers, providing them with additional financial resources to spend on capital and consumable goods. That has played perfectly into Tractor Supply's model, providing farmers with a wide range of goods to invest in their farming businesses and spend extra cash.
But even though sales and traffic volumes continue to grow, Tractor Supply is turning its attention to margin expansion, focusing on developing and promoting private-label brands, with an eye to generate 25% of all revenue from in-house brands. The company is also focused on direct sourcing, a strategy that involves streamlining procurement from single sources to negotiate more pricing power. Tractor Supply's efforts in both areas will likely fuel margin expansion and earnings growth.
But as it stands, Tractor Supply is already an earnings powerhouse, beating estimates in each of the past four quarters by an average of 3.4%, in spite of circumstantial challenges related to adverse weather conditions this summer and fall in the Midwest. Looking forward, analysts are projecting full-year earnings of $3.72 per share for 2012, an impressive 24% increase from last year. In 2013, analysts are projecting earnings of $4.35 a share, a very solid 17% growth projection in spite of generally weak domestic and international economic growth.