Why Tractor Supply Company Stock Plunged Today

By Markets Fool.com

Image source: Tractor Supply Company.

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What happened

Shares of Tractor Supply Company (NASDAQ: TSCO) were down 16.7% as of 1 p.m. Thursday, after the specialty retail chain provided a disappointing business update ahead of its participation todayin the Goldman Sachs Annual Global Retailing Conference.

So what

As it stands, third-quarter revenue is now expected to increase 4.2% to 5% year over year, or to a range of $1.54 billion to $1.55 billion, with comparable-store sales ranging from flat to a decline of 1% from the same year-ago period. Net income per share for the quarter is expected to be in the range of $0.65 to $0.67. By contrast, analysts' consensus estimates called for higher revenue and earnings of $1.59 billion and $0.71 per share, respectively.

"While there are a number of economic headwinds impacting consumer spending throughout many of the Company's markets," Tractor Supply's press release states, "the energy producing and agricultural markets are the most impacted."

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Now what

As such, Tractor Supply now expects full fiscal-year 2016 revenue of $6.7 billion to $6.75 billion (down from previous guidance for $6.8 billion to $6.9 billion), including comparable-store sales growth of 1% to 1.7% (down from 2.5% to 3.5% previously). Net income for the year is now expected to be $432 million to $438 million (down from prior guidance for $451 million to $456 million), which should translate to per-share earnings of $3.22 to $3.26 (down from $3.35 to $3.40 previously).

That's not to say Tractor Supply is a broken company. Management has pledged their teams will continue focusing on sales and traffic-driving initiatives, and the company will also prudently allocate inventory and carefully manage expenses as these headwinds persist. Tractor Supply should emerge a stronger company once its industry rebounds. But for now, given its guidance reduction today, it's no surprise to see investors taking a step back.

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