Tractor Supply Company tallied another record quarter, bolstered by the success of its burgeoning loyalty program and digital and store investments.
And as retailers barrel into the holiday season, the company remains optimistic about its ability to meet consumer demand despite myriad supply chain challenges.
As some pandemic-prompted consumer behavior changes settle into more permanence, the lifestyle retailer expects to be well positioned to capitalize on such sticky shifts as increased pet ownership and “rural revitalization.” It’s also gaining share in nearly every category of its business, Hal Lawton said in a call with investors.
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The company reported net sales of $3.02 billion in the third quarter, a year-over-year increase of 15.8%. Comp-store sales grew 13.1% vs. the prior year, marking its sixth consecutive quarter of double-digit comp-store sales growth.
Tractor Supply also recorded double-digit e-commerce increases of more than 40%, and its mobile app has racked up more than 2 million downloads in less than a year to represent more than 10% of its e-commerce sales.
The retailer’s Neighbor’s Club loyalty program, relaunched earlier this year, is exceeding expectations, Lawton said, and now counts more than 22 million members in its ranks. Other impressive figures as a result of the program include:
- Members account for nearly 70% of Tractor Supply Company’s sales.
- Year-of-year sales from members grew more than 20%.
- Members spend more than about three times the rate of non-members.
- Retention rates have exceeded 95% for high-value customers.
“These strong results demonstrate that the changes to Neighbor's Club continue to gain traction with our customers,” Lawton said.
The company, which operates more than 2,000 Tractor Supply and Petsense stores in 49 states, is on track to have 15% of its total store base remodeled by the end of the year as part of its Project Fusion program. It’s halved the amount of time required to complete remodels since the beginning of the year, with the new stores featuring better organization, improved merchandise selection, and easier-to-navigate layouts.
With its Side Lot transformation program, meanwhile, the company expects to have 150 of the new spaces complete by the end of the year. The areas are providing Tractor Supply with more space to offer a wider product range, as well as expand its buy-online-pickup-in-store (BOPIS) capabilities for drive-thru pickup.
Tractor Supply is seeing incredibly high levels of drive-thru behavior from customers, according to Lawton, with some stores seeing up to 75% of BOPIS as drive-thru. The extra convenience factor is in turn driving repeat behavior.
As with Project Fusion, the company has reduced the Side Lot project timeline by about 50%.
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“Post the disruption period, we're seeing [a comp] lift of low single digits for Fusion remodels and mid-single digits for combo stores which have both Fusion and Side Lot remodels,” said Lawton. “We expect continued improvements in these results as the stores normalize, and are forecasting year-one lift of mid-single digits for Fusion and high-single digits for combo stores, which is on track for the expectations we had as we began these projects.”
As with many retailers, Tractor Supply is navigating various supply chain issues and commodity inflation-driven price increases. Kurt Barton, executive VP, CFO and treasurer, noted that costs remain elevated across imports, domestic freight commodities and labor wages, and the retailer has raised prices in some areas to offset this pressure.
As for how it’s positioned for the holiday season in terms of supply, the retailer remains satisfied with where it finds itself, said Seth Estep, executive VP and chief merchandising officer. “We feel really good where we are heading into the holiday season as products flowing in.”