Founded in 1938 as a mail-order catalog business offering tractor parts to America’s family farmers, Tractor Supply Company today is the largest consumer farm specialty retailer in the U.S., serving farmers, ranchers, hobby farmers, rural homeowners, contractors, and tradesmen. Tractor Supply offers a wide variety of products from animal feed to power tools, clothing and footwear to lawn and garden supplies, fencing to irrigation parts, and of course tractor parts. The company’s 500 retail stores are located primarily in rural communities and in towns outlying major metropolitan markets.
With a loyal following, Tractor Supply is well positioned to take advantage of modern homesteading and self-sufficiency trends while at the same time serving full-time farmers and ranchers. Due to its focus on an active do-it-yourself rural consumer (with higher disposable incomes) and many higher-end products not offered at competitors’ stores, Tractor Supply is able to fend off competitors such as Home Depot and PetSmart. The threat from e-commerce is partially offset by the fact that many of the products offered by Tractor Supply are either needed by customers immediately or too expensive to ship.
In its 2015 Stewardship Report, Tractor Supply’s CEO noted that “at Tractor Supply, we share our customers’ love of the land and desire to live more sustainably.” He went on to list new product offerings, including natural feeds, rain barrels, solar gates, and organic seeds.
Sustainability efforts include LEED-certified distribution centers (25% certified), a 50kW solar array at its Tennessee distribution center, installation of energy management systems at stores, and “Green Tractor Teams” tasked with efforts from minimizing landfill waste to starting community gardens. Tractor Supply has a strict policy prohibiting the use of forced or child labor in the manufacturing of the merchandise that it sources, and it conducts more than 300 social accountability audits annually.
For almost a decade, Tractor Supply saw double-digit revenue growth. However, in recent quarters, the company has seen a deceleration in sales, attributable to weakness from its consumer base exposed to the energy and agricultural markets. Concerns about future growth have brought the stock price down to a reasonable level. But Tractor Supply remains a well-managed business with exceptional profitability. We still think Tractor Supply has good growth potential based on its ability to expand its store base into untapped markets, grow its higher-margin private-label goods (~30% of total sales), and increase its sales mix of consumable goods.
Dividend Yield: 1.26%
Stock 52-week Low–High: $61.50–$97.25
Market Cap: $10 billion
www.tractorsupply.comTags: agriculture, LEED, Tractor Supply Company, TSCO