Tractor Supply Sets Pay Precedent Amid Sales Surge
Tractor Supply Company has extended and made permanent some of the pay and benefit enhancements put in place amid the COVID-19 outbreak as its stores continue to set sales records.
The operator of nearly 2,100 stores said it would spend about $55 million in incremental compensation costs annually due to the impact of making permanent key benefit changes. The company estimated it has already spent roughly $30 million on the payment of appreciation bonuses between March 16 and June 27.
The company now plans to extend $2 an hour appreciation bonuses, which became somewhat of a retail industry standard in recent months, to June 27 while paying store managers an additional $1,000 bonus. The company said effective June 28 it would increase hourly pay rates by a minimum of $1 and provide more than 2,000 frontline salaried employees with annual restricted stock awards. In addition, the company said it would now offer a new benefit package for part-time employees, including medical, vision and dental coverage, paid sick time and life insurance.
The moves come as Tractor Supply has seen sales surge during its second quarter which began on March 29. In an update to investors on May 26, the company forecast same store sales would increase between 20% and 25% and total sales, which includes the benefit of new store openings, would increase between 24% and 29% during the quarter. The company also said its e-commerce business has experienced substantial growth quarter-to-date with many customers choosing buy online, pickup at store and a new contactless curbside delivery option.
“Our outlook for record-breaking sales and earnings in the second quarter demonstrates the potential for Tractor Supply to emerge stronger than before as we continue to gain market share and build our business for the future,” said Hal Lawton, Tractor Supply’s president and CEO. “Today, we have a unique opportunity to grow our business as we roll out new technology and services while capitalizing on our product categories and convenient shopping format. Continuing to build our relationships across our customer base is a top priority for us as we are growing share with existing and new customers, while also reengaging lapsed customers.”
Lawton went on to add in a message clearly directed at investors wary of incremental costs that, “the investments we are making in our team members and new technology and services are done with a commitment to disciplined financial returns and profitable growth as we look for these strategic investments to be offset over time by increased sales, improved gross margin opportunities and cost savings in other areas.”
The reference to technology investments is significant because Tractor Supply said it accelerated previously planned investments in technology and would relaunch its website in the second quarter along with its first-ever mobile app.
The new website is said to position the company for rapid digital growth by leveraging a modern web architecture including a docker and containerization strategy that will be enabled by Microsoft Azure, HCL, Redhat and SOLR. The new website will enhance and simplify the e-commerce journey for the customer and give Tractor Supply the ability to introduce new digital capabilities into the market much more quickly, the company said.
The new app will be built in a React Native open source mobile application framework, initially created by Facebook. The benefit of the solution will support the ability to deploy a common code base across Android and iOS devices, which will allow Tractor Supply to improve its time to market with new capabilities, the company said.
With more than 70% of the company’s e-commerce traffic coming from mobile devices, Tractor Supply is overdue to launch an app.