Tractor Supply, with record sales and increased market share, raised its forecast for the months ahead. It is looking to woo more customers with a new Visa card, as its farm-life-loving customers struggle with financial pressures.
Net sales for the third quarter gained 8.4% to $3.27 billion, up from $3.02 billion in the third quarter of last year. Comparable store sales increased by 5.7%, and it says it gained market share in every category.
Net income increased 4.3% to $234.1 million, up from $224.4 million.
“Our 'Life Out Here’ strategy is gaining traction and widening our competitive moat, and we are excited about the many growth vectors ahead,” says Hal Lawton, Tractor Supply’s president and chief executive officer.
Extreme drought and adverse weather events in much of the country did weigh down results, says the Brentwood, Tennessee-based company.
It completed its purchase of Orscheln Farm and Home. And the 2,100-store chain now expects that in the year ahead, annual sales will be between $14.06 billion and $14.12 billion, the first time it will top the $14 billion mark. It expects annual comparable store sales to rise between 5.4% to 5.8% for the year.
In the coming quarter, it anticipates a fourth-quarter comparable sales gain of between 5% and 7%.
The company also says it’s launching a new co-branded credit card. The Tractor Supply Visa will offer many of the same perks customers get from its private-label card.
But it also sweetens the offer with extras such as cashback on gasoline purchases.
It also gives cardholders all the benefits that come with the retailer's Neighbors Club loyalty program, which now includes 27 million members. Those customers tend to have higher incomes and account for more than a third of sales.
Seth Basham, who follows the retailer for Wedbush Securities, writes that Tractor Supply’s results are slightly above consensus expectations.
He notes that its sales gain is driven primarily by needs-based consumables, usable and edible businesses. “Continued strong performance in these categories reflects ongoing structural tailwinds, including rural revitalization, homesteading, self-reliance and pet ownership.”
Basham, who continues to give the stock a neutral rating, notes a concerning decline in the sale of big-ticket items and a decrease in the average units per transaction.
But Tractor Supply continues to “execute well on its longer-term initiatives, and its heightened scale is enabling it to take advantage of secular headwinds.”