Tractor Supply’s Record Q2 Reflects Price Hikes, Growth of ‘Needs-Based Merchandise’

Pointing to a combination of price increases, growing consumer demand for “needs-based consumable merchandise,” and its strongest-ever eCommerce sales, rural lifestyle retailer Tractor Supply said Thursday (July 21) it had delivered record second-quarter results.

While the Tennessee-based operator of over 2,000 stores plus a website and app said it had booked record sales and earnings for the three months ended June 25, the retailer also said it was raising its full year forecast due to its ability to offset most of the impact it has faced from significant product inflation as well as higher transportation costs.

“We believe Tractor Supply is uniquely positioned for growth with a resilient, domestic business model that has stood the test of time, despite our outlook for a highly inflationary and volatile environment,” Tractor Supply CEO Hal Lawton told investors and analysts in a statement and on the company’s earnings call.

In raising its full year forecast, the retailer said its confidence was based, in part, on consistent, ongoing sales performance as well as the visibility of its cost structure and inventory.

“We remain very confident in our growth outlook and our Life Out Here strategy,” Lawton said, adding that structural tailwinds like rural revitalization, homesteading and self-reliance and pet ownership would continue to be beneficial.

Inflation and Heatwave

Like all retailers, Tractor Supply is struggling to balance higher costs and price hikes against the tighter household budgets and changed spending priorities of its customers, many of whom are increasingly living on paycheck-to-paycheck terms.

With its broad mix of products and services and a growing base of brands and stores that are tagged to add another 70 to 80 namesake locations and 10 more Petsense shops in the second half, the 85-year-old retailer said it was able to capture broad based market share without providing specific data.

Officially, Tractor Supply said total revenue grew 8.4% to $3.9 billion in Q2, its comparable store sales growth slowed to 5.5% compared to 10.5% a year ago.

In addition, Lawton pointed out that while its transactions fell 2% last quarter, its average ticket size rose 7.5% to $63.52, but warned that the ongoing heat wave broiling much of the nation has, and will continue to be, a factor.

“May was our strongest month. June was solid and modestly above the quarter’s comp, in spite of record-breaking heat, which has continued into Q3 and will limit the sales upside in the current quarter,” said Lawton, who came to TSCO from Macy’s in January 2020 following stints at eBay and Home Depot.

Digital and Loyalty

According to Tractor Supply CFO Kurt Barton, the second quarter was the company’s largest eCommerce quarter ever and marked the 39th consecutive period of double-digit growth.

“Our eCommerce grew approximately 7% in April, we had solid performance with double digit sales for May and June combined,” Barton told analysts, “Our mobile app continues to ramp with double-digit growth and represented about 15% of total digital sales in the quarter.”

In addition, the retailer said it now has over 26 million members in its Neighbors Club loyalty programming, which it said were actively being converted into “online power users.”

Over the past 12 months, shares of Tractor Supply have risen 13%, compared to a 10% slide by the S&P 500 and a 35% decline by the S&P Retail ETF, leaving it with a market value of approximately $22 billion.

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