Three Notable Factors Making Tractor Supply a Retailer Worth Observing Over the Upcoming Decade
Three Notable Factors Making Tractor Supply a Retailer Worth Observing Over the Upcoming Decade
In an unexpected turn of events, Tractor Supply Company has announced ambitious expansion plans that have left retail analysts, including myself, raised an eyebrow or two. As part of its "Life Out Here" strategy, the company aims to open 90 new Tractor Supply stores and around 10 new Petsense by Tractor Supply locations in 2025 alone.
However, this expansion isn't just about increasing store count.
There are three reasons why Tractor Supply is making waves and could potentially craft one of the most captivating retail growth stories of the upcoming decade.
#1 – Tractor Supply's Extensive Store Reach
Tractor Supply has raised its long-term store count ambition to 3,200 locations, moving from its earlier goal of 3,000 and surpassing its current count of approximately 2,200 stores across 49 states. At this level, Tractor Supply would surpass Target and come close to matching Walmart's scale.
Walmart, according to its website, currently operates 3,559 Walmart Supercenters, while domestic Target stores number only 1,963. Tractor Supply's expansion plan places it in an exclusive league.
Few retailers can boast of this nationwide presence and scale (more on this later).
#2 – Expansion of the Pet Category
The expansion into the pet category under its own Petsense by Tractor Supply banner also signals a smart strategic move. By introducing a dedicated pet retail concept alongside its primary business, Tractor Supply is vying to capture market share in one of retail's most resilient and fast-growing segments.
Petsense, as per its website, is focused on catering to the needs of pet owners, primarily in smaller and mid-sized communities. Essentially, Tractor Supply aims to be a more appealing and accessible alternative to Petco and Petsmart in rural areas, much like its current position in comparison to Walmart and Target.
As per the American Pet Products Association (APPA), U.S. pet owners spent a staggering $143 billion on their pets in 2023.
Suffice it to say, that's quite a lot of dog food, or gourmet cheese, if your four-legged friend prefers the finer things in life.
#3 – The Power of Scale Brings Retail Media Opportunities
The most intriguing aspect of these expansion plans is the retail media potential that comes with such a vast geographical footprint. With such a widespread presence, Tractor Supply's advertising footprint would rival or even exceed many other retailers. There are only a handful of retailers that can provide advertising partners with true national reach, and Tractor Supply appears to be angling for a spot in this elite club.
In its most recent quarter, Walmart, for instance, reported that nearly one-third of its overall operating income of $6.7 billion now stems from advertising. By comparison, Tractor Supply's 2023 full-year operating income was approximately $1.48 billion.
In essence, if Tractor Supply can match Walmart's store count and bolster its digital clout with a top-notch online service and a marketplace experience as robust as Walmart's, then Tractor Supply has a substantial amount of untapped profit potential awaiting discovery.
Additionally, Tractor Supply's CEO, Hal Lawton, has a digital background, having spearheaded digital operations at both Macy's and eBay in the past. Lawton appears well-equipped to capitalize on the retail media opportunity.
The Numbers Speak the Truth
However, don't simply take my word for it. The numbers paint a clearer picture.
In addition to its expansion plans, Tractor Supply has also updated its total addressable market size to approximately $225 billion, up from its previous goal of $180 billion. Combine this with projected net sales growth of 6-8%, comparable store sales growth of 3-5%, and anticipated earnings per share growth of 8-11%, the expansion goes far beyond mere store count expansion – they are also planning to grow profitably.
Currently, Tractor Supply ranks #33 on the NRF list of top U.S. retailers based on annual sales volume, raking in just under $15 billion per year. If Tractor Supply reaches the lower end of its projections before 2030, its figure might increase to just under $22 billion. At such a point, based on NRF's current rankings, Tractor Supply would leapfrog into the Top 25 retailers within the U.S. in a mere five short years.
The Final Word
While many may still view Tractor Supply as merely a "rural" retailer, its expansion strategy, coupled with its digitally savvy approach and multiple growth vectors, hints at the emergence of retail's next major player.
The retail industry is always on the lookout for the next big thing, but sometimes the most fascinating stories originate from the most unexpected sources. While urban retailers grapple with saturation and intense competition, Tractor Supply has identified a clear path to growth.
The future of retail might not be penned in Silicon Valley or Fifth Avenue – instead, it might just be penned by the folks catering to the "Life Out Here" that millions of Americans live every day.
Following the announcement of its expansion plans, Tractor Supply Company is seeking to acquire tractor supply store locations in various regions to realize its goal of opening 90 new Tractor Supply stores and 10 new Petsense by Tractor Supply outlets by 2025. (tractor supply, expansion plan)
The expansion of its pet category under Petsense by Tractor Supply also forms a crucial part of the company's growth strategy, aiming to capture market share in one of retail's most resilient and rapidly expanding segments. (tractor supply, pet category)