Inside Tractor Supply Co.'s $6 Billion Amazon-Proof Business

Alongside stacks of 50-pound bags of Producer’s Pride Hog Grower pig food and sunshine yellow CountyLine Heavy-Duty Super Spear hay handlers, Steve Barbarick, Tractor Supply TSCO +0.19% Co.’s chief merchant, is rummaging through a bin of weighty grade-5 hexagonal head bolts, the kind commonly used to fasten structural steel. Sure, you could buy similar bolts at Lowe’s or Home Depot HD +0.57% and pay for them individually, but at the Tractor Supply in Thompson’s Station, Tenn. they are sold in bulk and cost only $3.69 a pound. And at those other stores you couldn’t pick up a four-pack of Diamond Classic Heeled Horseshoes on the same trip.
“We always say you can buy everything we sell someplace else, but you can’t find someplace else that sells everything we carry,” says Barbarick.

Nearby, a bearded man in mud-spattered boots and a cherry-red “Make America Great Again” hat is perusing a rack of overalls. He’s the kind of shopper around whose precise needs and habits Tractor Supply has built a $6.2 billion (2015 revenues) business . The typical Tractor Supply customer owns land, keeps pets, raises chickens and drives a pickup. Some are hobbyists, but many of them have professional farming operations, although their holdings are likely measured in acres, not square miles.
Tractor Supply has approached retail’s cardinal rule of “Know Your Customer” as both mission statement and math problem, and in the process has become an (albeit unlikely) lifestyle brand, famed for an in-store experience so satisfying that its rustic-chic brick-and-mortar operations are well fortified against the onslaught of consumers who want to buy everything on their smartphones.
“They are the store for people that actually know what they’re doing, as opposed to do-it-yourselfers or for home improvement,” says Dave Marcotte, who researches retail trends for London-based global consultancy Kantar Retail. “Compressed-air tools, welding torches, pet foods, apparel–all of that stuff is very functional, but it’s associated with people that know what it is. You’re not going there for discovery.”
That laser focus has paid off. The retailer boasted $410 million in net profits last year, a 6.6% margin. Two decades of increasing profits and a stock price that’s climbed 250% in the past five years (to a recent $89.56) have made the company a Wall Street favorite.

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Tractor Supply has 1,500 locations spread across 49 states; the company plans to open around 115 stores in 2016 and about 120 stores per year after that until 2,500 are in operation, mostly in rural or exurban areas. The growth has been largely financed through cash from operations. Long-term debt stands at just $167 million as of the end of 2015.
That expansion is not happening willy-nilly. A wave of data-fueled decision-making takes place long before a new store opens. Potential locations are identified using a model that considers dozens of factors–including the number of tractors and head of cattle in the immediate vicinity–to predict a store’s viability.