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It’s good to be Tractor Supply. The retailer is on a multiyear winning streak, posting record sales and profits and grabbing market share from a long list of competitors.
Tractor Supply yesterday reported that its net sales for the fourth quarter were up 20.7 percent and comps increased 8.6 percent as it saw gains in both the number of transactions and the average ring. The chain’s annual net sales rose 11.6 percent and its same-store numbers improved by 6.3 percent.
CEO Hal Lawton speaking yesterday on the company’s earnings call said, “We’ve now posted three consecutive years of exceptional sales growth. The highlight of this phenomenal track record continues to be the consistency of our results and the broad-based strength of our performance. Including new stores in the 53rd week, our revenue on a three-year basis has increased about 70 percent, with a three-year comp stack of 46.5 percent.”
Mr. Lawton said that Tractor Supply has used the past three years to make key investments that have positively affected its top and bottom lines.
“We’ve invested nearly $1.7 billion in our stores, distribution centers, technology and other strategic initiatives as part of our Life Out Here strategy. We also have significantly improved our operating capabilities, including relaunching our Neighbor’s Club program, creating our field activity support team, expanding our mobile footprint and delivering on the increased volume of our consumable, usable and edible products,” he said.
Tractor Supply increased its overall customer satisfaction scores for all four quarters of 2022.
Mr. Lawton said in an interview yesterday with CNBC that Tractor Supply’s position as a lifestyle retailer puts it in competition with “thousands and thousands of different types of retailers.” The chain, he said, has been making market share gains across the board in both dollars and units.
Tractor Supply’s CEO is hopeful about consumer spending because of his chain’s “Life Out Here” positioning and his view that “inflation has peaked.”
He added, “We’re seeing less cost of goods increases in both frequency and in magnitude. The freight market is starting to turn and we’re optimistic that as we head into 2023 inflation will begin to moderate.”
Tractor Supply broke ground on its tenth distribution center in the last quarter to further support higher volumes in existing stores, plans for new locations and its acquisition of the Orschein Farm and Home chain.
DISCUSSION QUESTIONS: How long can Tractor Supply keep its winning streak going? How will moderating inflation affect Tractor Supply and its record of market share gains?
15 Comments on “Tractor Supply is just getting started with its market share grab”
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Tractor Supply has been a quiet success story for many years — people are paying attention now. Given Tractor Supply’s unique store footprint, which is in more rural locations, they have become embedded in communities across America. They continue to refine their offerings and seem to get stronger despite the challenges most other retailers face. While inflation will impact their results — like most other retailers — their product mix and market position (i.e. little competition in many markets they’re in), give Tractor Supply an edge. I’m very bullish on this retailer.
Tractor Supply is a great retailer. It understands its customers and is operationally efficient. It has long been a destination for those who need farm and ranch products, especially those with smallholdings. However it has also been broadening its reach to more general customers who need outdoor products, something that has been supported by investments in digital and improving stock levels and ranges in stores. One of the big advantages of Tractor Supply is that it has local locations: in many rural areas it’s far easier to nip to Tractor Supply for things than it is to go to Home Depot, Lowe’s or other larger stores.
Tractor Supply has been around for a while now, evaluating the market, investing in people and listening to their customers. They have added relevant items to their assortment and use digital to keep a pulse on their customers. They are becoming more of a retail center in the rural areas they serve.
Tractor Supply has done an excellent job finding an underserved gap in the retail landscape. They built a strong presence in rural, underserved markets using a formula that almost always wins: laser-sharp focus on their value prop of the right products for their customer and great prices.
I believe there is still a lot of room for them to expand as they grow into the exurbs and suburbs. With their assortments and prices, they can compete well with established outdoor and home improvement competition. I believe their business has a lot of upside, and they will continue to see strong growth, even in a recession.
Tractor Supply is likely to keep its momentum going because they deliver on all essentials of remarkable retail. Unlike so many struggling retailers, they have a laser-like focus on who their customer is, what their brand is for, and how they will deliver a memorable experience. Hal was a recent guest on the podcast and does a great job explaining why they win.
I love Mr. Lawton’s positioning “Tractor Supply’s is a lifestyle retailer!” This has resonated well with its loyal base and continues to differentiate the company from competitors. This is indeed a winning formula!
I believe the business will continue to flourish — I have been bullish about Tractor Supply for many years.
Tractor Supply knows who they are and who their customers are. The key to continued success will be to mine the geography where they can be successful. Their market share gains not only come from the expansion of appropriate geography but knowing their particular customers better than the retailer’s focus on a more general crowd.
All I can say is hats off to these guys for figuring out a niche that no other retailer figured out was even there. In a recent survey we did, people LOVE Tractor Supply — they love the stores, the people, the product, you name it, and whoduhthunkit that there was a rural market void somewhere between Walmart and the dollar stores? I love when this happens at retail and, honestly, they have so little presence now, they’ve got a long, long way to go before saturation. Big fan, keep it rolling TS!
Hal Lawton has been a world-class leader for Tractor Supply. It is really simple. There is a clear value proposition, the company invests in its people with training and hires the right fit, and the company is hyper-focused on the customer. TSC has invested in technologies that are relevant to its market. The good-better-best pricing model has allowed the company to shield itself from severe inflationary pricing. The competitive advantage is that the stores are where the customers are. Hyper-personalization. The store design is a small footprint and has a curated assortment to meet the needs of each specific market.
I had the honor of working on a strategic project at Tractor Supply in the late 1990s. They always had their attention laser focused on the customer. The company never shied away from investing, which it prioritized to bring value to its customer. The Life Out Here strategy tied together the many strategic initiatives and improved internal capabilities. None of their competitors can match the inventory controls that Tractor Supply has in this unique category.
I had the good fortune of interviewing Hal Lawton just as he was starting out at Tractor Supply. The customer focus is part of this picture, and yes, the company is definitely customer centric. However, the leadership is oriented towards their employee workforce. In his first few years at TS, Mr. Lawton visited hundreds of stores and thousands of associates, supporting them, engaging with them, and most importantly, understanding their biggest issues. This leadership drive and the heavy focus on their native associate workforce has been one of the most well kept secrets of their success. The motivation to help the customer comes naturally. Regardless of inflationary pressures or other challenges, TS leaders are firing on all cylinders — especially the turbo nitro ones that compose the employee base.
Add me to the list of Tractor Supply fans! They are winning because they maintain a clear understanding of their predominantly rural customer base. At the same time, they are technology-forward.
In case you missed it at NRF, Al Lettera, SVP, IT at Tractor Supply Company shared facts in a session with T-Mobile about how the retailer is using wireless and Wi-Fi tech to level-up customer experiences.
Team members are equipped with handheld devices that connect them to shopper profiles and store processes. The connectivity extends to the parking lots and the side lots where BOPIS happens, and the data from all those interactions is being mined to power faster, better merchandising decisions.
Yes, inflation and other economic challenges may be easing a bit, but Tractor Supply seems positioned to succeed even in challenging times.
This may sound kind of naive, even frivolous, but I wonder if their name might present a problem as they broaden their reach to a national level: when a certain amount of effort has to go into explaining “we don’t just sell tractor supplies,” it seems like you’re starting from behind. (Just a few weeks ago we were discussing whether Designer Shoe Warehouse going by DSW was telling us something about their messaging.)
That having been said, they’re a hot brand right now: when I’ve heard of something, its marketing has reached down to the uninformed. 🙂
Tractor Supply has carved out a segment where they don’t go head-to-head with many retailers. The brand is clear. The shopper path makes sense. Merchandising is orderly. Pricing is affordable. And the people are nice.
If they can keep this up, they can grow for man years to come, serving the communities that make sense to their business model. TS is a good retailer.
This is a classic American success story. Build where there are few competitors and leverage your strengths to build a stronger market position as you reinforce your positioning in each market and at retail as a whole.
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Tractor Supply is just getting started with its market share grab – RetailWire
