Tractor Supply Company is readying a refresh of its loyalty program after recording another quarter of soaring sales.
The company reported fourth-quarter net sales increase of 31.3%, with comp-store sales growing 27.3%. It also achieved the milestone of exceeding $10 billion in sales for the fiscal year, recording increased sales from existing, new and reacquired customers.
Sales were driven by customer spend shifts toward creating their own experiences and developing a more self-reliant lifestyle, said Kurt Barton, EVP, CFO and treasurer.
Tractor Supply anticipates capital spending to range from $450 million to $550 million in 2021, with more than 80% of it allocated toward growth initiatives. The vast majority of the CapEx increase is attributable to new in-store initiatives and supporting technology for its Life Out Here corporate strategy.
Store fleet plans for 2021 include opening 80 new Tractor Supply stores and 10 Petsense stores, as well as remodeling 150 to 200 stores as part of its Project Fusion initiative increasing space productivity. Around 150 to 200 stores will also execute Project Side Lot program, which transforms storage locations to outdoor shopping areas while simultaneously improving buy-online-pickup-in-store (BOPIS).
“While still very early with both of these projects, we continue to be very excited about the sales trends we're seeing from the first tranche of Fusion remodels and Side Lot transformation projects,” said Hal Lawton, Tractor Supply president and CEO. “And, importantly, the customer feedback has been overwhelmingly positive. Given the size of our store base, these initiatives represent [a] multi-year opportunity to continually refresh our store base and drive further comp sales.”
Digital Investments Ahead
Looking at its digital capabilities for the first half of 2021, Tractor Supply is focusing on ship-from-store, SEO, contactless payment options like Apple Pay and Google Pay, in-store and online subscriptions, and its recently launched Pet Rx platform.
It also has plans in place for an upgrade of its Neighbor's Club loyalty program by mid-year, which it expects to drive incremental customer retention and provide strong incentive to grow customer share of wallet.
The company exited 2020 with nearly 19 million Neighbor's Club members. More than 11 million new identified customers and over 6 million reactivated customers shopped at Tractor Supply, and plans ahead include engaging them with new capabilities, marketing and product offerings.
Lawton also revealed details from its customer checkout survey that asks customers about their top criteria for selecting to shop at Tractor Supply. While responses are typically such factors as price, location convenience, product in-stock and customer service, the No. 1 and 2 criteria over the last six months have been cleanliness and safety.
“Never in my 20-plus years of retail, have I seen those two criteria at the top of a customer's decision-making criteria,” Lawton said. “And so that's why we've invested so much in those areas.”
Given the strong trends in its companion animal categories and the recent growth in pet ownership, Tractor Supply intends to grow its standing as a pet resource. Efforts will include expanding its self-serve Pet Wash locations across 150 to 200 stores and the build-out of 50 to 75 additional pet wellness centers.
Currently, about 1,600 stores have vet services in-store through mobile vet clinics, and pet prescriptions can be fulfilled online beginning this quarter. Its mobile app, launched last spring, now also offers on-demand veterinary advice via call, chat or email.
The company will, however, reduce the reduce the number of new Petsense store openings planned over the long term and expects to close 10 to 15 stores in 2021. Despite this move, Lawton noted that the business was doing well overall, and it remains committed to growing and investing in it.
In addition to naming Matthew Rubin as senior VP and general manager for Petsense last week, Tractor Supply Company will still open 10 new Petsense stores this year.
“I look forward to sharing with you more about the Petsense strategy as Matthew comes in. And it has an opportunity to engage and chart the future of the company, and we're very pleased with the performance,” Lawton noted. “The stores are doing well. The website's doing well. … We do know Pet Online is doing well and you can look at the industry data, and I know Matthew will be looking into [shifting toward e-commerce] as a way to accelerate our efforts there.”