Tractor Supply Weathering COVID-19 Storm
Tractor Supply cemented its status as an essential retailer in the first quarter, posting solid results and accelerating digital efforts to achieve social distancing.
The rural lifestyle retailer said its same store sales increased 4.3%, it opened 20 stores and rolled out a home delivery program during the first quarter ended March 28. Total sales increased 7.5% to nearly $2 billion and net income increased 9% to $83.8 million while earnings per share increased 12.7% to 71 cents.
“Tractor Supply delivered solid results in the first quarter, and second quarter sales are off to a strong start,” said Hal Lawton, Tractor Supply’s president and CEO. “Across our business, we have taken more than 100 actions in response to the COVID-19 crisis with a focus on being preemptive and proactive. Tractor Supply has a strong and resilient business model, and we are confident we will emerge from the crisis even stronger.”
To ensure that is the case, Lawton said the operator of 1,863 Tractor Supply and 180 Petsense stores has implemented a number of liquidity conservation measures that have become common through the retail industry. For example, Tractor Supply suspended is share repurchase program on which it spent $263.2 million in the first quarter. It borrowed $200 million under a feature of its credit line and entered into an amendment on the credit facility to borrow an additional $350 million. The company also suspended earnings guidance, but did not suspend or reduce its dividend payment, which was set at 35 cents a share in the first quarter and resulted in an expense of $40.8 million.
Going forward, the company expects to incur increased expenses of $30 million to $50 million for what it described as, “the net incremental costs of doing business as an essential, needs-based retailer in the current environment.” These incremental costs totaled $7 million in the first quarter and were related to employee bonuses, medical and sick leave coverage and sanitation and safety supplies, according to the company.
Lastly, Tractor Supply said it remains committed to a new store growth plan that involves 80 Tractor Supply and 10-15 Petsense stores this year, but said the timing of the openings in some areas could be delayed. Capital expenditures for this year will range from $225 million to $275 million.
The company is also making it so that shoppers who choose to avoid stores or simply prefer delivery have those options. The company entered into a partnership with Roadie, a crowdsourced delivery services provider, to offer same day delivery from all stores. The company began testing Roadie services three years ago, but with the COVID-19 situation it moved to quickly expand the service to the 80% of stores where delivery was not offered.
“Many national retailers struggle to reach rural customers. Everyone wants access to flexible, cost-effective delivery options – not just folks in major cities,” said Marc Gorlin, founder and CEO of Roadie. “Not only did Tractor Supply need to ramp up service in almost exclusively rural markets, but in this crisis, they needed to do it in a matter of days, not months. Our model gives retailers almost unlimited scalability, whether they sell lawn equipment or llama feed.”
Roadie is fully integrated into Tractor Supply’s e-commerce website and back-office systems so that customers receive real-time status updates and can track their deliveries from the store to their door.