Rural economies recover faster from COVID than other areas to benefit Tractor Supply

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TSCO’s Q1 results, Tractor Supply Co.’s -0.99% got a boost from its core customers in rural areas, which the company said were less affected by the pandemic and are recovering more quickly. than in other geographies. “The fastest growing customer segment is our core farm and ranch,” said Hal Lawton, the retailer’s chief executive, during the first-quarter earnings call, according to a FactSet transcript.

“This segment is very healthy, as rural economies, for the most part, were less affected by the pandemic and are recovering at a more pronounced and robust rate.” Tractor Supply reported what Lawton called a “record performance” in the first quarter. Lawton also attributed the results to a few other factors, including a 400 basis point shift to a younger demographic between the ages of 18 and 45. This group, which had been slow to buy homes, was “shocked” by the pandemic and began to do so. See: Lowe’s plays a bigger role for professionals with the launch of new amenities. Plus: Walmart Expands Program to Benefit Multiple Vendors “There continues to be a net migration out of urban areas, driven largely by the millennial segment,” Lawton said on the call. “The most robust growth in homeownership is in the millennial cohort, with growth occurring in rural and suburban areas. We believe that growth in this customer segment has staying power and could be (a) structural change for us. ”Pet owners are also a strong demographic for Tractor Supply, and pet ownership skyrocketed during the pandemic. For Tractor Supply, that means sales of pet food and shampoo also increased. “[W]We sold 11 million birds last year and half of those birds went to new customers, ”Lawton said. “And it only shows a category like poultry, in which we are by far the market share leader … it went through a renaissance last year and continues this year in our stores.” Y: Petco CEO Highlights Pet Industry Resilience as COVID-19 Drives Rise in Adoption. Analysts at Raymond James said that Tractor Supply is on a long-term path to making profit for shareholders due to its rural focus as well. “We look forward to Tractor Supply continuing to showcase the strength of the brand … with the growing importance of land and home care, increasing consumer adoption of DIY projects … and increasing pet ownership.” , the analysts wrote. Raymond James rates Tractor Supply stock with a strong buy and raised the stock price target to $ 215 from $ 175. UBS analysts highlighted the 20 million members of Tractor Supply’s Neighborhood Club loyalty program. “While Tractor Supply has undoubtedly attracted customers in suburban and exurban areas, its membership base is equivalent to ~ 75% of all rural households (assuming 20% ​​of American households live in rural areas),” the analysts wrote. UBS rates Tractor Supply’s stock as neutral and raised its price target from $ 180 to $ 190. Wedbush noted that this success comes at a cost. Watch: How the pandemic changed investment habits for different generations “The strength of Tractor Supply’s supply chain has allowed the company to capitalize on strong demand and do a good job meeting customer expectations,” analysts said. “That said, you are incurring some additional costs related to this endeavor, including freight / logistics and labor. These costs are real (and most are not transitory) and limit the continuous flow of higher short-term sales. “Wedbush rates Tractor Supply’s stock as neutral and raised his target price to $ 190 from $ 180. Tractor’s stock Supply have risen 34.2% year-to-date, while the S&P 500 SPX index, + 0.07% has risen 11.7% over the period.