Tractor Supply’s record second quarter reflects price increases

Highlighting a combination of price increases, growing consumer demand for “needs-based consumable goods” and its strongest-ever e-commerce sales, rural lifestyle retailer Tractor Supply said on Thursday ( July 21) that it had posted record results in the second quarter.

While the Tennessee-based operator of more than 2,000 stores plus a website and app said it posted record sales and profits for the three months ended June 25, the retailer also said it was increasing its full-year guidance due to its ability to offset most of the impact it suffered 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,” said Tractor CEO Hal Lawton. Supply, investors and analysts in a statement. on the company’s earnings call.

Raising its forecast for the full year, the retailer said its confidence rests, in part, on consistent and continued sales performance as well as visibility into its cost structure and inventory.

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

Inflation and heat wave

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

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

Officially, Tractor Supply said total revenue rose 8.4% to $3.9 billion in the second quarter as its same-store sales growth slowed to 5.5% from 10 .5% a year ago.

Additionally, Lawton pointed out that while his transactions fell 2% last quarter, his average ticket amount rose 7.5% to $63.52, but warned that the ongoing heat wave that shakes much of the country has been and will continue to be a factor.

“May was our strongest month. June was strong and slightly above the competition in the quarter, despite record heat, which continued into the third quarter and will limit the upside in sales during the current quarter,” said Lawton, who came to TSCO from Macy’s in January 2020 after stints at eBay and Home Depot.

Digital and Loyalty

According to Tractor Supply Chief Financial Officer Kurt Barton, the second quarter was the largest e-commerce quarter ever for the company and marked the 39th consecutive period of double-digit growth.

“Our e-commerce grew around 7% in April, we had strong performance with double-digit sales for May and June combined,” Barton told analysts. “Our mobile app continues to grow with double-digit growth and has accounted for approximately 15% of total digital sales in the quarter.

Additionally, the retailer said it now has more than 26 million members in its Neighbors Club loyalty program, which it says are actively converting into “online power users.”

Over the past 12 months, shares of Tractor Supply have risen 13%, against a 10% drop in the S&P 500 and a 35% drop in the S&P Retail ETF, leaving it with a market value of around $22 billion. dollars.

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