Tractor Supply Co. Discusses Growth Strategies and Market Oppt'ys at Baird Global Consumer, Tech & Svcs Conf. 2025

Key Takeaways

TL;DR: Tractor Supply is executing a multi-pronged growth strategy—w/ strong comp and new store growth, strategic initiatives under its Life Out Here 2030 plan, and next-gen programs in direct sales, final mile delivery, and PetRx—to capitalize on a growing rural market and a $225B TAM. Tariff pressures and pricing adjustments remain manageable, while seasonal trends and digital innovations further enhance their competitive edge.

• Performance & Growth Drivers
  • Rev. & Scale: Expected sales > $15B this year, w/ a market cap just under $30B; rev. has doubled over the past 5 years.
  • Growth Mix: Approx. equal contributions from new store growth and comp sales—w/ new store count increasing by 90 stores this year and targeting ~100 new stores per year going forward.
  • Long-term Targets: Mgmt projects 6%-8% rev. growth, w/ new stores contributing ~2.5%p and comp sales driving an additional 3%-5% growth. They aim for OP margins of 10%-10.5% and total shareholder returns in the 10%-12% range.
  • Strategic Agenda: The Life Out Here 2030 strategy, launched in Dec., builds on proven initiatives (Fusion remodels, Garden Center, Neighbor’s Club) plus new levers (direct sales, PetRx, final mile capabilities) to expand both rev. and market reach.
• Consumer Trends & Spending Patterns
  • Biz Segments: Tractor Supply’s sales are divided into three buckets:
    • Consumable, usable, and edible products (40%-45% of biz) – incl. animal feed and pet food (largest seller of bagged animal feed in the US w/ 20%-25% market share).
    • Surrounding mass merchandising items like hardware and apparel.
    • Big-ticket products – such as riding mowers, trailers, gun safes, and seasonal items (log splitters, snow throwers).
  • Pricing & Demand: Despite a deflationary environment in the last 18 months for commodity items (e.g. stable corn prices now at ~$4.50), mgmt forecasts a return to positive unit retail pricing in key commodity categories like dog food during H2. Seasonal improvements are already boosting demand as weather conditions improve.
• Total Addressable Market & Competitive Landscape
  • Expanded TAM: Recently raised to $225B, w/ the core market estimated at ~$195B—benefiting from secular rural migration and millennial-driven changes in housing and lifestyle trends.
  • Competitive Position: Tractor Supply is the only large national player in farm and ranch w/ 2,300 stores compared to competitors w/ 150-200 stores. Although channels such as pet specialty, apparel, and home improvement also compete, Tractor Supply’s unique rural lifestyle positioning provides a defensible moat, despite attention from rivals like Lowe’s and AMZN.
• Tariff & Pricing Dynamics
  • Tariff Impact: Over 60% of products are U.S.-manufactured, minimizing tariff risks. Mgmt is applying “2018, 2019 playbooks” to diversify sourcing and negotiate w/ manufacturers; tariffs are “not an existential crisis.”
  • Pricing Adjustments: Notable modest price step-ups in MAP-based, heavy steel, and aluminum products; however, these have not resulted in significant unit reductions. Mgmt remains prepared to adjust assortments or pricing as necessary.
• Next-Gen Initiatives
  • Direct Sales: Launching a dedicated direct sales org. w/ 600-800 field reps focusing on larger-scale customers (e.g., those w/ 20+ acres). This initiative could contribute an estimated $1B in incremental sales by 2030.
  • Final Mile Delivery: In-sourcing home delivery is already active in 250-300 stores (~10% of the base) to boost customer satisfaction and operational efficiency. The goal is to enable final mile delivery in nearly all stores by 2028.
  • PetRx Expansion: Following the $100M acquisition of Allivet (earning ~$100M rev.), Tractor Supply plans to integrate pet Rx svcs using its 40M+ Neighbor’s Club members, targeting a potential $1B biz by 2030.
  • Retail Media: W/ digital sales exceeding $1B, the co. is leveraging on-site and off-site ad platforms. Q1 retail media sales in 2025 already outpaced the full-year performance of 2024, highlighting rapid engagement from CPG vendors.
• Mgmt Commentary & Insights
  • CEO Hal Lawton emphasized that “we haven’t given back any of those sales” and highlighted the balanced approach to growth between transactions and ticket increases.
  • CFO Kurt Barton noted that 2025 will be a “transition year” yet reiterated strong conviction in achieving the long-term growth algorithm laid out under Life Out Here 2030.

Overall, Tractor Supply remains well-positioned to capitalize on a robust and growing rural market while effectively managing tariff challenges and leveraging innovative next-gen initiatives to drive both top-line growth and margin expansion.

Call Q&A

• Peter Benedict: What is big ticket to Tractor Supply and how has the consumer been spending on that recently?
  • Harry Lawton: Big ticket items include riding lawn mowers, trailers, gun safes, log splitters, and snow throwers. Consumers have been cautious but spending has held up well. There was a slight pullback in March and April due to weather, but sales improved w/ better weather.
• Peter Benedict: Can you discuss the addressable market and competition in the rural market?
  • Harry Lawton: The TAM is about $200B, w/ 40% in the historic farm and ranch channel. Tractor Supply is the only large national player, w/ competitors being smaller co-ops and regional chains. Rural migration and millennial trends are driving market growth.
• Peter Benedict: How are you dealing with tariffs?
  • Harry Lawton: Tariffs are not an existential crisis for Tractor Supply. Over 60% of our biz is U.S.-manufactured. We diversify sourcing, negotiate w/ manufacturers, and adjust assortments as necessary. We updated guidance to allow for various scenarios.
• Peter Benedict: How do you see pricing today on the commodity front and tariff-impacted front?
  • Harry Lawton: We've been in a deflationary environment for commodities like animal feed and dog food. We're starting to see positive inflation in these areas for the second half of the year. Tariff impacts are expected more in the second half.
• Peter Benedict: Have you seen any movement in price based on tariffs and any elasticities?
  • Harry Lawton: There have been subtle price movements in map-based products, mostly steel and aluminum. No significant elasticity or unit reductions observed yet.