Tractor Supply Raises Outlook As Triple-Digit Online Sales Growth Drives Record Q1 Results

Rural lifestyle retailer Tractor Supply said stronger than expected online sales and fewer discounts helped to pave the way for record first-quarter results and a more bullish full-year outlook.

For the three months ending March 27, the Brentwood, Tennessee based operator of over 2,100 Tractor Supply and Petsense stores in 49 states said sales rose 42 percent to $2.8 billion, with same-store sales rising 39 percent and the company’s eCommerce unit delivering its fourth consecutive quarter of triple-digit growth.

The retailer also noted that it saw growth of at least 30 percent in all geographic regions and that its average transaction count and average ticket size rose 21 percent and nearly 18 percent respectively.

“The Tractor Supply team delivered an exceptionally strong start to the year, and our comparable store sales growth exceeded our expectations,” CEO Hal Lawton said, acknowledging Tractor Supply’s 42,000 employees who made it possible despite the ongoing threat of the pandemic.

Driving The Tractor

Lawton, who was previously the president of Macy’s before assuming the top job at Tractor Supply 16 months ago, has moved quickly during his short, COVID-hindered tenure to bolster sales and service and customer retention efforts via increased digital offerings, in-store demonstrations and convenience services such as curbside pickup.

In the latest quarter, the company said it also benefited from strong demand for consumable, usable and edible products as well as robust growth for seasonal categories.

Lawton has also pushed for tight cost controls that were reflected in the company’s Q1 profit which rose nearly 50 percent to $984 million, as well as a one-and-a-half percentage point improvement in profit margins which pushed above 35 percent.

“The increase in gross margin was primarily attributable to a lower depth and frequency of sales promotions, less clearance activity and favorable product mix,” the company’s earnings statement said, noting that those factors were “partially offset by higher transportation costs as a percent of net sales.”

Green Chutes

The record results come at a time when shares of Tractor Supply have doubled in the past 12 months and are trading at an all-time high with a market valuation of $21 billion — or about four times larger than Macy’s, even though the department store does roughly double the sales.

“Based on our strong performance in the first quarter, the positive macro factors and robust customer retention trends, we are raising our financial outlook for the year and now expect to deliver diluted EPS in the range of $7.05 to $7.40 per share,” Lawton said.

At the same time Tractor Supply also increased its annual guidance on four other key metrics including net sales, comp stores sales, operating margins and net income.

To reach those goals, the retailer has committed to spend up to $550 million on capital expenditures to open 80 new Tractor Supply stores, 10 new Petsense locations and do 300 to 400 store transformations and remodelings.

“We believe our resilient business model with a differentiated and loyal customer base, our strategic investments to capture growth opportunities and the strength of our balance sheet position us to capitalize on the momentum in our business in 2021 and beyond,” Lawton said.