Introduction
Tractor Supply Company (TSCO) is a retail chain that has become synonymous with the rural lifestyle. With over 2,000 stores across 49 states, the company has built a loyal following among farmers, ranchers, pet owners, and hobby agriculturalists. Tractor Supply‘s widespread success may lead some to wonder—is it a franchise? Can you open your own Tractor Supply store?
In this comprehensive guide, we‘ll answer those questions and take a deep dive into Tractor Supply‘s business model, history, financials, and future outlook. As a retail industry analyst with over two decades of experience studying consumer trends, I‘ll also share my expert perspective on what has driven Tractor Supply‘s rise and where the company may be headed next.
What Is Tractor Supply?
Tractor Supply Company is the largest operator of rural lifestyle retail stores in the United States. The company offers a wide range of products for home, land, pets and animals, including:
- Livestock and pet feed and supplies
- Farm and ranch equipment
- Workwear and footwear
- Lawn and garden supplies
- Tools and hardware
- Truck and towing accessories
- Home decor and gifts
A typical Tractor Supply store is over 15,000 square feet and stocks around 15,000 to 20,000 products. Stores are strategically located in towns outlying major metropolitan markets and in rural communities. As of December 25, 2021, the company operated 2,003 retail stores in 49 states under the names Tractor Supply Company, Del‘s Feed & Farm Supply, and Petsense.
History and Growth
Tractor Supply was founded in 1938 as a mail-order catalog business offering tractor parts to farmers. In 1939, the company opened its first retail store in Minot, North Dakota. Over the next few decades, Tractor Supply slowly expanded its retail footprint and product offerings. Key milestones include:
- 1959: Opens 100th store
- 1964: Acquires NASCO farm supply stores
- 1969: Begins trading on the NASDAQ exchange
- 1986: Hits $1 billion in annual sales
- 1994: Completes initial public offering on NASDAQ
- 2002: Acquires Del‘s Farm Supply stores
- 2004: Opens 500th store
- 2016: Acquires Petsense pet specialty retailer
- 2017: Opens 1,700th store and exceeds $7 billion in sales
- 2020: E-commerce sales grow 73% during COVID-19 pandemic
- 2021: Surpasses 2,000 stores and $12 billion in revenue
As this timeline shows, Tractor Supply has maintained an impressive pace of growth, both organically and through strategic acquisitions. Over the past decade, the company has delivered revenue growth at a compound annual rate of 8.2%.
Business Model and Strategy
So how exactly does Tractor Supply make money? The company‘s business model is relatively simple: purchase products from a network of suppliers and sell them to consumers through retail stores and online. Tractor Supply does not manufacture any of its own products, but it does offer a growing roster of exclusive brands like 4health pet food, Bit & Bridle horse tack, and Countyline farm equipment.
Tractor Supply‘s target customer is someone who enjoys the "Out Here" lifestyle—whether they live in a rural area, own a farm, or simply enjoy activities like gardening, hunting, fishing, or raising animals. The company estimates that its addressable market is 47 million households across the country. To appeal to this customer base, Tractor Supply focuses on stocking the right product selection for each local market.
"We localize our assortment to fit the needs of those markets so that we have the right products at the right store at the right time," said CEO Hal Lawton in a 2021 earnings call. For example, the company may stock more snow blowers in the Northeast and more portable generators in hurricane-prone Florida.
This localized approach extends to Tractor Supply‘s real estate strategy as well. Rather than following the big-box model of building stores in highly populated areas, the company targets small towns and rural communities. A typical Tractor Supply store is located in a community with a population of 3,000 to 6,000 people within a 15-mile radius. This allows the company to establish a large trade area and dominate rural markets where there is less competition from other retailers.
Financials and Market Position
Tractor Supply has been one of the best-performing retail stocks over the past decade. Since 2011, the company‘s share price has appreciated at a compound annual rate of 21%. Over that same period, revenue has grown from $4.2 billion to $12.7 billion while net income has climbed from $222 million to $997 million.
In terms of market share, Tractor Supply is the largest player in the farm and ranch sector with an estimated 7% share, according to market research firm IBIS World. The company‘s next largest competitor, Rural King, has around 125 stores compared to Tractor Supply‘s 2,000+. Other rivals include regional chains like Atwood‘s, Blain‘s Farm & Fleet, Fleet Farm, and Orscheln Farm & Home, as well as local mom-and-pop retailers.
One key metric that sets Tractor Supply apart is its industry-leading sales per square foot. In 2021, the company generated $541 in sales per square foot, almost double the average for specialty retailers. This speaks to the efficiency of Tractor Supply‘s store model and the loyalty of its customer base.
Here is a breakdown of Tractor Supply‘s sales by product category in fiscal 2021:
| Category | Sales (in millions) | % of Total |
|---|---|---|
| Livestock and pet | $5,415 | 42.5% |
| Hardware, tools and truck | $2,850 | 22.3% |
| Seasonal, gift and toy | $1,955 | 15.3% |
| Clothing and footwear | $1,270 | 10.0% |
| Agriculture | $840 | 6.6% |
| Other | $435 | 3.4% |
| Total | $12,731 | 100% |
As this table shows, the livestock and pet category is by far Tractor Supply‘s biggest, accounting for over 40% of sales. This includes live animals, pet food and supplies, and animal health products. The hardware, tools, and truck category is next largest with around 22% of sales. This segment includes items like power tools, welding equipment, and towing accessories.
One area where Tractor Supply has room for improvement is its e-commerce capabilities. While the company has invested in its digital platform in recent years, online sales still represent a relatively small portion of overall revenue at around 5%. Management has identified e-commerce as a growth opportunity and is working to enhance Tractor Supply‘s website and mobile app, as well as roll out new services like curbside pickup and same-day delivery.
Future Outlook
Looking ahead, Tractor Supply sees plenty of runway for continued growth. The company believes it has the potential to operate 2,700 to 2,800 stores in the U.S., implying around 40% upside from current levels. To get there, management is focused on increasing store density in existing markets while selectively expanding into new states.
In addition to new store openings, Tractor Supply is investing to grow sales at existing locations. The company sees a $300 million opportunity from enhancing the customer experience alone through initiatives like upgraded fixtures and signage, more convenient checkout options, and an expanded loyalty program. Tractor Supply is also experimenting with larger stores that offer a broader product selection, particularly in categories like seasonal decor and outdoor power equipment.
Longer-term, international expansion could be the next frontier for Tractor Supply. While the company currently only operates in the U.S., management has begun exploring opportunities to enter adjacent markets like Canada. Global expansion would open up a much larger addressable market, but also comes with risks and challenges around supply chain, brand recognition, and competition.
Of course, Tractor Supply faces other headwinds as well. Inflation poses a risk to profitability if the company is unable to pass along higher costs to consumers. An economic downturn or recession could pressure consumer spending, particularly on discretionary categories. And the company must continue to adapt to changing customer expectations around convenience, value, and sustainability.
Still, Tractor Supply has proven to be a remarkably resilient retailer through good times and bad. The company‘s unique merchandise mix, loyal customer base, and disciplined operating model should position it well for the future. As CEO Hal Lawton put it, "The more time I spend with Tractor Supply, the more I appreciate the incredible asset we have with our retail stores and our team, and the more conviction I have in our ability to continue to build on our legacy and our commitment to the rural lifestyle."
Conclusion
In summary, Tractor Supply Company is not a franchise, but rather a publicly-traded retailer that owns and operates all of its stores directly. The company‘s consistent growth and financial performance have been driven by a differentiated business model focused on serving rural lifestyle consumers. By curating a localized product assortment, operating an efficient store base, and investing in customer loyalty, Tractor Supply has established itself as the leader in its niche.
While the company faces risks and challenges, it also has significant opportunities for growth through store expansion, e-commerce, and customer experience initiatives. For investors, Tractor Supply‘s stock offers a way to gain exposure to a unique and resilient retail concept. And for consumers, Tractor Supply‘s stores provide a one-stop destination for all things rural lifestyle—whether you‘re a hobby farmer, pet owner, or just someone who enjoys the great outdoors.
