Tractor Supply Company’s fiscal Q1 was dragged down by customers not spending as much on their cats and dogs as they would in a more robust economy, according to CEO Harry Lawton, who spoke with analysts on the retailer’s quarterly earnings call.

This is especially true for dog owners. Historically, dry kibble has been a core product, but customers are moving increasingly to more adjacent areas of the store’s portfolio.

Overall, Tractor Supply posted Q1 net sales of $3.59 billion, a 3.6% increase year over year, powered by 40 new store openings, even as comparable store sales rose just 0.5%. Still, digital sales at Tractor Supply were a bright spot in Q1. The growth online follows recent investments Tractor Supply has made in AI and omnichannel delivery.

Tractor Supply is No. 87 in the Top 2000 Database rankings. The database tracks North America’s largest online retailers, measuring their annual ecommerce sales and more.

How digital sales helped Tractor Supply’s Q1 earnings results

Tractor Supply posted strong digital sales results in Q1, with Lawton reporting more than 20% digital growth driven in large part by the company’s expanding Final Mile delivery network, which saw double-digit volume increases year-over-year.

“Our digital business also continues to perform at a very high level with strong double-digit growth in the quarter,” Lawton said. “And we saw meaningful increases in traffic along with improved conversion, reflecting the strength of our omnichannel experience.”

Seth Estep, executive vice president and chief merchandising officer, also heralded the company’s digital progress.

“We are accelerating our digital capabilities to better serve pet customers and capture reoccurring demand,” Estep said.

He added that Tractor Supply’s online pet business grew mid-teens in Q1, led by subscription, which grew by triple digits. That drove new customer acquisition, strong retention and increasing repeat purchase behavior in core consumables. The company, he said, is aggressively scaling fresh and frozen pet products, moving from approximately 80 stores today to more than 250 stores by the end of May, with a path to 700 stores by year-end.

“While still early, we are encouraged that approximately one-third of customers purchasing fresh pet in our pilots are either new or reactivated to the category at TSC, demonstrating the traffic-driving potential of this segment,” Estep said.

All of the pet portfolio is being promoted online, where Tractor Supply is seeing growth. In addition, the retailer is leveraging its last-mile delivery network. There, it is trying to improve the fulfillment experience and lower cost, particularly for large-format pet food.

Areas of growth for Tractor Supply

Meanwhile, Tractor Supply made targeted platform improvements spanning navigation, subscriptions, order management and checkout. Moreover, its online pet business grew with the subscription segment surging triple digits.

Colin Yankee, executive vice president and chief supply chain officer at Tractor Supply, credited Final Mile hubs, now numbering around 200 with 176 more planned, as a core enabler of digital demand, particularly for large-format and bulk orders that competitors struggle to fulfill at scale. Yankee called the Final Mile hubs and what they can deliver “amazing.”

“We’ll go put a Final Mile delivery hub in and all of a sudden, we’ll see 250 bags of shavings get ordered, 75 16-foot fence panels, just these big orders that nobody else can deliver at scale nationally like we can — and something we’ve never been able to do — and our customers are really responding to it,” Yankee said.

He added that the Final Mile enables demand while offering efficient and lower cost per delivery.

“We saw it in the volume in Q1, delivery volume was up double digits compared to last year,” Yankee said. “All signs point to this being a massive enabler for us digitally and on direct sales.”

Tractor Supply’s competitive advantages

R.J. Hottovy, head of analytical research at Placer.ai, said Tractor Supply is succeeding by leaning into its rural roots.

“It differentiates itself by focusing on specialized, rural lifestyle products for farmers and ranchers that companies like Amazon or Walmart often overlook,” said Hottovy. “Unlike home improvement retailers, they also offer expert, localized advice and product assortments.”

The company can also fill niches online that other companies can’t or don’t.

“Tractor Supply offers niche livestock and agricultural supplies online that aren’t usually stocked by major online competitors,” he stated. “They also offer specialized services like an online pet and animal pharmacy.”

Hottovy said that in addition to building out its physical store footprint by roughly 100 stores a year, the company is also investing in its own last-mile delivery fleet to better serve hard-to-reach rural areas. And that will unlock more customers for the chain.

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