Rural lifestyle retailer Tractor Supply Co. saw another quarter of increased sales as do-it-yourself trends and hobbies remain popular among consumers amid warmer temperatures and fewer pandemic-era restrictions.
The $22 billion company’s net sales increased 13 percent year-over-year to $3.2 billion in the second quarter, and comp store sales increased 10.5 percent driven by a 4.5 percent increase in transactions and a 6 percent increase in average ticket size.
The increase in sales was driven primarily by growth in everyday merchandise, including consumable, usable and edible products, as well as steady demand for spring and summer items.
Chief Financial Officer Kurt Barton said consumable, usable and edible products represent “the strength of our core business and what drives trips to the store.”
Tractor Supply also saw a record sales quarter in its eCommerce business, which CEO Hal Lawton attributed to the focus and attention the company has put on digital capabilities in part because of the pandemic.
Additionally, the Tennessee-based company has seen 1.6 million downloads of its app in the past year, with the app now accounting for 10 percent of the retailer’s eCommerce sales.
“Tractor Supply has thrived over the past 15 months,” Lawton said. “We continue to operate from a position of strength and are committed to investing in the business.”
‘Once In A Generation’
Tractor Supply also noted that its newly revamped Neighbors Club loyalty program added 5 million new members in the past year, bringing the total membership level above 21 million.
Barton noted that Neighbors Club members spend about three times the amount that non-members spend. In April, Tractor Supply redesigned its loyalty program to add features and benefits for customers.
The retailer is also seeing “significant growth” with millennial shoppers, and Lawton said he believes this growth has staying power.
“The types of trends we’re seeing can simply be described as once in a generation,” Lawton said, adding that it’s up to Tractor Supply to capitalize on them in order to keep existing and new customers engaged.
The CEO noted that macroeconomic trends also point to some good news for Tractor Supply, including a “rural revitalization,” omnichannel adoption and a “self-reliant lifestyle movement” led by gardening, backyard poultry and pet adoption.
“Overall, our customer metrics … are very healthy, with both traffic and spending increasing at a balanced rate,” Lawton said.
Increased Outlook
Despite lapping “challenging” sales comps and increased transportation costs, Barton said Tractor Supply expects sales to be even better than previously projected based on patterns that have emerged over the first six months of the year.
Whereas the company previously projected comp store sales to increase by 5 percent to 8 percent in 2021, Barton said Tractor Supply is now expecting an 11 percent to 13 percent increase, which would bring net sales to over $12 billion. This is the second quarter in a row in which the retailer raised its outlook.
“We have a unique opportunity with the positive customer trends and momentum in the business,” Barton said, adding that Tractor Supply will continue to invest in store and supply chain labor in order to meet customer demand.
Among the investments is $550 million of capital expenditures to open 80 new Tractor Supply stores, 10 new Petsense locations, and 300 to 400 store remodels aimed at enhancing the consumer experience and increasing customer retention.
So far, 160 stores have been remodeled with a new layout, and Lawton said customer feedback has been “overwhelmingly positive.” In surveys fielded by Tractor Supply, customers have reportedly noted that the stores are easier to navigate and merchandise selection is improved.