Tractor Supply digs into expansion plans
New York Durable clothing and alternative heating -- these are two of the merchandise categories Tractor Supply expects to grow in 2008.
At an investors’ conference Wednesday, Tractor Supply CEO Jim Wright described the company’s growth plans and explained an expense management program designed to help the farm and fleet retailer succeed in tough times.
The 791-store chain is coming off a year of 3.4 percent comparable-store sales growth. Comps declined 6.5 percent in the first quarter, but in 2008, the Brentwood, Tenn.-based company expects comp-store sales to grow in the 0 percent to 2 percent range.
The chain hopes to expand to 1,400 stores in the next five years. Ninety to 95 stores are expected to open in the current year. With $2.7 billion in 2007 sales, Tractor Supply ranks 11th on the Home Channel News Top 500 Retail Scoreboard.
Speaking to analysts gathered for the Piper Jaffray Consumer Conference in New York, Wright pointed to a “significant upside in clothing,” which currently accounts for 10 percent of the chain’s business. The apparel mix -- emphasizing durability over fashion -- includes brands such as Wrangler and Carhartt.
Also on the upswing is alternative heating through wood, wood pellet, space heaters or auxiliary heating products.
“We are focused to serve consumers who are looking for alternative ways of heating their house,” he said. “We expect heating to be more important to us [this year].”
Wright also described livestock and pet, which he defined as products designed for the health care, training and containment of animals, as “growing at a very significant rate in the last five years.” The category accounts for a third of Tractor Supply’s business.
When asked by HCN whether traditional home center retailers would compete more on the farm-and-fleet turf, Wright made a tongue-in-cheek comment that brought a laugh from analysts: “I think they will find our inventory and turns unacceptable in their current expense models. Please share that point of view.”
Wright further described Tractor Supply’s success in competing with Home Depot, specifically. Two to three years ago, Home Depot tested equine categories, horse feed and an expanded pet section. “We fought that fight in six stores, and we didn’t lose any market share,” he said.
Though Lowe’s has more rural roots than Home Depot, Wright described the Mooresville, N.C.-based retailer as, “for the most part, not in our space.”
“What makes Tractor Supply work is the eclectic mix of product that happens to produce a market basket that’s just a general store for people living their lifestyle,” Wright said. “I wouldn’t doubt that several people will continue to take runs at some of our categories. And when they do, we’ll respond.”
The company responded aggressively to macroeconomic conditions. Wright said he recognized in the first week of February that his customers were in an undeclared recession. “We got the team together and began a very rigorous expense management program,” he said.
The program began with careful payroll management, described by Wright as “by the store, by the week and [linked] to the store’s current sales trends. We’re doing a great job of that.”
Tractor Supply also initiated what Wright called a “hiring frost.” Not quite a hiring freeze, but a policy of limiting non-strategic hires. The company also decided early this year to postpone non-critical projects and cut non-essential capital expenditures. “We’re looking at the ROI on virtually every project,” Wright said.