Tractor Supply still fills hobby farmers' needs

Deseret News (Salt Lake City), Aug 3, 2003 by Karin Miller Associated Press

COLUMBIA, Tenn. -- The only tractors for sale at Tractor Supply Co. are the die-cast models marked for clearance.

But hobby farmers, handy homeowners and animal lovers can get just about anything else they want at these stores that have carved out a successful niche that sets them apart from Wal-Mart, Home Depot and other big-box retailers.

"Our customers are close to the earth, close to the ground. They're self-sufficient, and they need the tools and supplies to do the jobs themselves," said Joe Scarlett, Tractor Supply's chairman and CEO.

Founded in 1938 as a mail-order tractor parts supplier, Tractor Supply now has 458 stores in 30 states, most in small towns and suburbs, and has annual revenues of more than $1 billion and a stock price over $50 a share.

Tractor Supply's typical customer is "somebody who maybe works in the city, lives a couple of miles out, has a couple of horses, two or three dogs, a bunch of cats and maybe some chickens," said analyst Eric Marshall of First Dallas Securities.

Like Carol Anderson, who keeps dogs and horses at her home in Columbia, a small town 40 miles south of Nashville.

"My husband used to come here for everything," she said as she loaded automatic dog watering containers into her gold Chevy pickup. But he's no longer farming, so she shops Tractor Supply twice a month for dog food.

Animal products ranging from squeaky toy cheeseburgers for dogs to horse vaccines account for 30 percent of Tractor Supply's sales.

"That's their largest business. It differentiates them from traditional retail channels," said analyst David Campbell of Davenport & Co. in Richmond, Va.

The company also stocks products, such as welding materials, not typically found among the hardware at Lowe's or Home Depot.

Outside the Columbia store, there are wheelbarrows stacked in a corner, go-carts displayed near the road and red Huskee riding lawn mowers lining the entrance. There are flatbed trailers and a fenced- in lot crammed with igloo-shaped plastic dog houses, coils of barbed wire and pallets stacked with water-softening pellets.

"You can find everything in our store somewhere else, but you can't go anywhere else and find everything in our store," Scarlett said. "The most common reaction we get from people is, 'Wow, we never knew you had all that.' "

Marshall, the First Dallas analyst, said, "They're a textbook case for a good specialty retailer."

The company estimates hobby farmers spend more than $5.5 billion annually on supplies. That's projected to increase as baby boomers return from cities to their rural roots for retirement.

Bob McCormick shops at Tractor Supply "just about every day" because he is fixing up a recently purchased farm. On his latest trip, he picked up gates and posts for his new electric fence.

"It's pretty convenient. They've got so many stores. They've also got a pretty good selection -- I haven't had to order anything," he said.

He also can get advice. Corporate policy dictates that each store employ at least one farmer, horse owner and welder.

The Columbia store also has a plumber, said manager Denise Kyker. "We don't know everything, but somebody here will know the answer to just about every question," she said.

The company, which has 6,200 employees nationwide, attracts qualified people by giving everyone, even part-timers, a bonus if the store meets its monthly sales goal. Managers get additional incentives.

Kyker moved from Alabama as part of the management team snapped up last year when Tractor Supply purchased 87 stores from bankrupt competitor Quality Stores.

Although there are no other large chains for Tractor Supply to buy out, there are growth opportunities. Scarlett said he plans eventually to open stores in California, but most of the expansion will be in the East, where he sees an opportunity for as many as 1,300 more stores.

Tractor Supply was created 65 years ago when parts salesman Charles E. Schmidt made a 24-page catalog on his apartment dining room table in Chicago. The first store opened in 1939 in Minot, N.D., and 99 percent of sales that year were tractor parts.

Now such parts are a tiny portion of the business, although Tractor Supply does stock parts for antique tractors and tow-behind tillers for newer models and sells quite a bit of "John Deere Green" paint.

But one of the biggest struggles for company officials is explaining that Tractor Supply isn't a tractor supplier.

"I've been wrestling with that for 24 years," Scarlett said. "Should we change the name? Well, it may not be correctly descriptive but . . . it works for us."