A big weekend for my dad these days consists of mowing the grass at his weekend farmhouse, breaking his much-abused riding mower in the process, and running down to the nearest Tractor Supply (Nasdaq: TSCO) to buy a new fan belt. My dad loves the store, and based on Tractor Supply's recent performance, he's not alone.
According to its first-quarter results, the company is growing quickly. Sales increased 17.7% year over year to $836.6 million, while same-store sales increased a hefty 10.7%. These results led the company to boost its 2011 estimated income to $2.62-$2.70 per share, from the previous $2.52-$2.62 range.
Not just another hardware store
With Home Depot (NYSE: HD) and Lowe's (NYSE: LOW) already saturating the home improvement market -- I live equidistant between two Home Depots, one of which is a mile away from a Lowe's -- some would argue that in spite of Tractor Supply's sales growth, there isn't room for another hardware chain. For a general hardware store, I would agree, but Tractor Supply isn't that kind of business.
Instead of supplying the needs of Harry Homeowner, the store specializes in goods for recreational farmers and ranchers. Think Oliver from Green Acres, but, you know, competent. The company's selection offers more agricultural products than home-improvement supplies. During the 2010 fiscal year, livestock and pet products comprised 39% of Tractor Supply's sales.
In the few categories where the store does compete with big-box home centers, it edges them out by offering a wider selection of products -- 15,500 to 19,000 unique items per location. My dad goes to Tractor Supply for his fan belt because he can select from 15 different varieties, while at Home Depot, he might not find even one that fits his mower.
Since Tractor Supply Company's niche limits its location options to rural areas and small towns, it will eventually run out of domestic growth opportunities, but I wouldn't worry about that just yet. The company estimates that it can successfully operate 1,800 domestic locations. As of March 2011, it had 1,027 stores, with plans to open 80 more during the rest of this year. That leaves Tractor Supply with plenty of acreage still uncultivated.
The Foolish takeaway
The amount of money my dad spends on replacement parts for his mower put Tractor Supply on my watchlist. The ever-increasing sales numbers and room for growth will keep me watching it -- or perhaps even make it a buy.
Interested in keeping an eye on this distinctive retailer's weed-like growth? Add Tractor Supply to your watchlist.
