The overall weakness of the consumer has been felt by most major retailers. It’s led to lowered guidance overall and decreased sales in grilling.
The one retailer that has been bucking this trend is Tractor Supply. They’ve been moving more heavily into grills recently and it’s paid off for them with growth in the category.
They’re the largest rural lifestyle retailer, so they may give them an advantage by filling a market need in grilling. Tractor Supply reported Q3 earnings today, and their strength in grilling and patio heaters has continued.
As Hal mentioned, our third quarter top-line results were consistent with our expectations and in line with the results in the first half of the year. We saw continued strength in big ticket sales, while our discretionary categories remained pressured. Our seasonal category performance, exclusive of big ticket, was in line with chain average at a modest decline to prior year.
Kurt Barton, CFO of Tractor Supply
Similar to the first half of the year, we saw strong performance in seasonal categories such as live goods, mulches and soils, grilling, and wildlife supplies.
Not only did they see strength in grills, but they saw strength in big ticket purchases in general. That’s a dynamic we haven’t seen play out at any other retailers.
In big-ticket, highlights include Massimo golf carts, Liberty Safes, Tractor Cam cameras, even Ember patio heaters, and Blackstone Grills.
Hal Lawton, CEO of Tractor Supply
The Chief Merchandising Officer, Seth Estep, was asked specifically how they’ve managed to have growth in big ticket purchases when other retailers haven’t.
I would start with just the product lineup itself. I think the merchants have done a fantastic job of line structure in these categories where we are offering quality, high-value products across multiple brands, bringing innovation. We are working on differentiation with exclusive features and they’re really built and tailored to our customer, right, and their customer needs with kind of the large animal or the large acre ownership across a lot of our customers.
The next thing I would say is just some of the strategic inventory investments that Kurt mentioned earlier as well. When we exited Q2, we made sure we saw some of the strength here and we’re looking at the weather patterns and we placed inventory in those — in these categories to make sure that we can continue to maintain that as we went after it.Seth Estep, Chief Merchandising Officer of Tractor Supply
And then the last thing I would just say is private-label credit card. Our private-label credit card momentum has been very strong, with that, our supplier base are partnering with us to continue to drive that. And when you just kind of combine those things together, whether it be the lineup itself, the value quality proposition, designing programs specific to the lifestyle of our customer, and then coupling that with things like our offerings, both with private-label credit cards and leveraging our Neighbor’s Club, it’s really a combination of all those together that’s really playing on it.
Neighbor’s Club is Tractor Supply’s loyalty program. They’ve effectively relied on the data from it to drive business in their stores.
Newness Sells
A common theme across all manufacturers and retailers that we cover is that new and innovative products continue to sell. Consumers are more cautious with their spending, but they’ll still pay for newness. This was touched on in Seth Estep’s remarks above, but it was mentioned multiple times throughout the earnings call.
I would describe the sentiment of our customer as relatively stable as supported by the recent jobs report and the current unemployment rate of 4.1%. Consistent with prior quarters, our consumer continues to be judicious with their spending focused on innovation, newness, and needs-based products.
Hal Lawton, CEO of Tractor Supply
Growth in Online
Both Home Depot and Lowe’s noted growth in their online sales in their previous quarter. You can add Tractor supply to the list of retailers that is seeing success.
Our digital sales continue to outperform with double-digit growth. The team has made substantial improvements in search and checkout. We continue to accelerate our digital sales with platforms that set the standard for our customers and rival best-in-class retail experiences.
Hal Lawton, CEO of Tractor Supply