TSC's Secret to Success Is Staying Ahead of Customer Needs as Second Quarter Results Steady
TSC's net sales increased 13.4 percent to $3.6 billion in the second quarter of the year, up from $3.18 billion last year.
Net income increased 9.3 percent to $370.0 million from $338.7 million in the second quarter of 2020, and diluted earnings per share increased 10 percent to $3.19 from $2.90 in the prior year.
Same-store sales increased 10.5 percent, driven by year-over-year transaction volume and year-over-year average unit price growth of 4.5 percent and 6 percent, respectively. This compares to Wall Street analysts' forecasts of a 1.9% same-store sales decline.
TSC said the same-store sales increase was driven by strong growth in everyday merchandise, including consumables, groceries and food, as well as strong demand for seasonal product categories in the spring and summer.
The company reported same-store sales growth in all geographic regions and major sales categories. In addition, the company's e-commerce business had a record sales quarter.
In the second quarter of 2021, TSC opened 11 new Tractor Supply stores and one new Petsense store, and closed four Petsense stores.
In the first half of 2021, TSC opened 32 new Tractor Supply stores and three new Petsense stores and closed 11 Petsense stores.
TSC still expects to open approximately 80 new Tractor Supply stores and 10 new Petsense stores in the current fiscal year.
TSC updated its fiscal year 2021 guidance based on encouraging second quarter results. The company has updated its net sales guidance from a range of $11.4 billion to $11.7 billion to an updated $12.1 billion to $12.3 billion.
Net income estimates have been raised from $820 million to $895 million to $930 million, and diluted earnings per share are expected to be $7.70 to $8.00, up from $7.05 to $7.40.
Same-store sales growth guidance is now +11% - +13%, up from +5% - +8% previously.
On Feb. 17, 2021, TSC also announced plans to acquire rural lifestyle retail chain Orscheln Farm and Home, Inc. this year.
Hal Lawton, President and CEO of TSC, said, "The TSC team delivered exceptionally strong results in both the second quarter and the first half of this year, and our results this year compare favorably even with last year's strong growth.
Given our strong results, the outlook for customer trends and continued market share growth, we are increasing our earnings guidance.
With a resilient business model, continued market share growth and strategic investments to transform the company, we are excited about the significant opportunities ahead of us and remain committed to disciplined financial returns and continued profitable growth."
The outstanding second quarter results could not have been achieved without the millions of new customers TSC acquired in the last fiscal year.
Hal Lawton previously stated at the NRF Retail Convergence Panel that the challenge for all retailers today is to retain these new customers and stay ahead of customer needs.
Hal Lawton said, "We're really doing a good job of retaining new customers. We've invested heavily in digital marketing, and we've increased our national TV advertising. Interestingly, our brand awareness at the beginning of 2020 was a 34 - now it's a 51."
TSC has acquired more than 14 million new customers in the past five quarters. The company's first mobile app has been downloaded more than 1 million times.
Hal Lawton said, "We see that our customer base is changing and evolving. In the first quarter, TSC's client base saw a 4% increase in penetration of millennial clients.
According to a 2021 report by the National Association of Realtors, millennials between the ages of 22 and 40 make up the largest percentage of first-time homebuyers.
This trend has led to increased demand for pet products, gardening and livestock products, according to Hal Lawton.
Hal Lawton says the company has had some success in retaining new customers so far, with 20 percent of new customers returning to shop at TSC within 30 days.
Hal Lawton, who previously served as CEO at Macy's, took over the role of president and CEO of Tractor Supply in January 2020, just weeks before the New Crown pneumonia outbreak.
Since taking over, he has implemented initiatives in response to market changes brought on by the New Crown pneumonia outbreak, a move that led to strong sales growth and a significant number of new customers for the company in the last fiscal year.
We were fortunate to profit from the outbreak and tend to any market trends created or exacerbated by the outbreak," he said.
TSC added a new loyalty program allowance, began offering on-demand pet prescription services, and remodeled more than 150 TSC stores in the first quarter of the year as part of the company's "Live Here Strategy.
At TSC, we used to have a tradition of doing this, but that has really changed as time has pushed on.
We started as a catalog distributor, then we launched brick-and-mortar retail, and over time we grew the business into animal feed, then into pet food, and eventually into a lifestyle retailer.
We will embrace further change in the future to take advantage of new opportunities in retail."
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