- Updates Second Quarter Business and Financial Outlook Including Expected Record-Breaking Sales and Earnings and Comparable Store Sales Growth of 20- 25%
- ·Raises Frontline Team Member Compensation Permanently and Adds New Benefits for Part-Time Team Members; Appreciation Bonus Continued Through June 27
- Announces Launch of Redesigned Website and First Mobile App
BRENTWOOD, Tenn. — Tractor Supply Co. (NASDAQ: TSCO), the largest rural lifestyle retailer in the United States, today provided its financial outlook for the second quarter of 2020, along with the announcement of strategic investments in its Team Members and consumer-shopping experience.
“Over the past few months, Tractor Supply has remained focused on our Team Members, customers and communities. We have taken more than 100 actions in response to the COVID-19 pandemic with an emphasis on the health and safety of our Team Members and customers, while enhancing our capabilities to better serve the essential needs of our customers. Our outlook for record-breaking sales and earnings in the second quarter demonstrates the potential for Tractor Supply to emerge stronger than before as we continue to gain market share and build our business for the future,” said Hal Lawton, Tractor Supply’s President and Chief Executive Officer.
“Today, we have a unique opportunity to grow our business as we roll out new technology and services while capitalizing on our product categories and convenient shopping format. Continuing to build our relationships across our customer base is a top priority for us as we are growing share with existing and new customers, while also reengaging lapsed customers. The investments we are making in our Team Members and new technology and services are done with a commitment to disciplined financial returns and profitable growth as we look for these strategic investments to be offset over time by increased sales, improved gross margin opportunities and cost savings in other areas.”
Second Quarter 2020 Outlook
Building on the momentum in its business in the first quarter of 2020, Tractor Supply continues to experience record sales across its channels, product categories and geographic regions. The Company’s e-commerce business has experienced substantial growth quarter-to-date with many customers choosing Buy Online, Pickup At Store and the new contactless curbside delivery option. While there is still a significant portion of the second quarter ahead, the Company currently forecasts net sales growth of 24% to 29% and comparable store sales growth of 20% to 25%. The Company’s gross profit performance continues to be strong with gross margin expansion anticipated for the second quarter. For the second quarter, the net incremental operating expenses related to the COVID-19 pandemic are estimated to be at the high end of the Company’s previous guidance range of $30 million to $50 million. Diluted earnings per share for the second quarter is forecasted to be in the range of $2.45 to $2.65.
The Company will release its second quarter 2020 earnings news release before the market opens on Thursday, July 23, 2020.
Investments in Team Members
Tractor Supply Team Members are the heart of its relationship with its customers, and they have gone above and beyond to support one another and customers during the COVID-19 pandemic.
In this unprecedented time, Tractor Supply has taken significant actions to support its Team Members including additional COVID-19 paid medical leave, 100% coverage of COVID-19 testing and treatment under its medical plan, and the payment of incremental appreciation bonuses estimated to be approximately $30 million between March 16 to June 27. In addition, frontline Team Members at stores are on track to achieve a record payout of sales bonuses with nearly all store teams anticipated to receive sales bonuses in the quarter. As part of the Company’s most ambitious hiring initiative ever, more than 4,000 new Team Member positions have been added over the last six weeks.
As Tractor Supply continues to prioritize the care of its Team Members both during the COVID-19 pandemic and long term, the Company announces the following enhancements to its compensation and benefits for its Team Members:
- Appreciation bonuses of $2 per hour for all frontline hourly Team Members in stores and distribution centers will be continued through June 27, and Store Managers will receive an incremental $1,000 bonus.
- Permanent wage increases for Tractor Supply and Petsense Team Members across its nearly 2,100 stores and eight distribution centers will go into effect on June 28, including a minimum of $1 per hour raise for all hourly Team Members.
- More than 2,000 frontline salaried managers, including Tractor Supply Store Managers and Distribution Center Managers, will receive annual restricted stock units.
Additionally, the Company will now offer a new benefit package for part-time Team Members, including medical, vision and dental coverage, paid sick time and life insurance.
The anticipated impact of the permanent benefit changes is estimated to be approximately $55 million in incremental compensation annually.
Investments in Enhanced Consumer Shopping Experience
In light of COVID-19 and changing customer shopping behaviors, Tractor Supply has accelerated previously planned investments in technology to provide a more convenient omnichannel shopping experience through its redesigned e-commerce site and a new mobile app.
Over the course of the second quarter, the Company is relaunching its website at www.TractorSupply.com. The new website will position the Company for rapid digital growth by leveraging a modern web architecture including a docker and containerization strategy that will be enabled by Microsoft Azure, HCL, Redhat and SOLR. The new website will enhance and simplify the e-commerce journey for the customer and give Tractor Supply the ability to introduce new digital capabilities into the market much more quickly. As customers continue to utilize omnichannel conveniences, such as contactless curbside pickup for Buy Online, Pickup At Store and same-day delivery, the relaunched site will help to ensure Tractor Supply can deliver on their expectations.
Additionally, Tractor Supply will launch its first-ever mobile app in late June. This app will be built in a React Native open source mobile application framework, initially created by Facebook which is a leading industry framework for mobile apps. The benefit of the solution will support the ability to deploy a common code base across Android and iOS devices, which will allow Tractor Supply to improve its time to market with new capabilities. The app features the Company’s Neighbor’s Club loyalty program with a focus on personalized and more intuitive shopping experiences, including integration of contactless curbside pickup for Buy Online, Pickup At Store. With more than 70% of the Company’s e-commerce traffic coming from mobile devices, the app will provide a better customer experience and additional functionality. The Company anticipates iterative releases of the app to continuously add new capabilities and improve the customer experience. Once issued, the Tractor Supply app will be available in the Apple and Android app stores.
As an essential, needs-based retailer, Tractor Supply continues to take multiple actions to assist its Team Members, customers and communities with the impact of COVID-19. With a focus on the health and safety of its Team Members and customers, Tractor Supply has implemented the following measures over the past several weeks:
- Provided increased personal protective equipment for Team Members;
- Instituted temperature checks for Team Members;
- Implemented a wellness self-check for all Team Members, including a reminder at each daily clock-in;
- Installed plexiglass barriers at cashier stands;
- Added a dedicated greeter at each store to assist with social distancing and increased sanitization;
- Installed social distancing signage;
- Instituted additional sanitizing protocols;
- Enhanced its medical coverage for Team Members with the addition of 100% coverage of COVID-19 testing and medical treatment under its medical plan;
- Waived cost-sharing for telehealth visits for any reason under the Company’s medical plan, helping Team Members limit potential exposure in physician offices and giving needed relief to medical facilities;
- Donated $500,000 to the existing Tractor Supply Employee Assistance Fund to assist Team Members most impacted by COVID-19;
- Established the Tractor Supply Company Foundation with a donation of $1.5 million committed to the growth and development of rural areas with an initial focus on COVID-19 recovery efforts; and
- Contributed $250,000 to the New York State COVID-19 First Responders Fund.
Tractor Supply continues to offer extended paid sick leave of up to two weeks for all Team Members affected by COVID-19. Team Members who self-report contagious, flu or COVID-19 symptoms that keep them out of work; are part of a mandated or self-imposed quarantine; are impacted by the temporary closing of a location due to the outbreak; or have a confirmed case of COVID-19 will continue to be paid during that time.
Additionally, Tractor Supply has prioritized capital spending to accelerate initiatives to enhance safety and convenience for customers, including upgraded Buy Online, Pickup At Store capabilities; Buy Online, Deliver From Store across 100% of its stores; Contactless Curbside Pickup; Contactless Payment; and additional Mobile POS devices in all stores. All of these initiatives have been commenced or accelerated in the last 60 days.