Remarkable Retail

Tractor Supply's Remarkable "Life Out Here" Growth Story with CEO Hal Lawton

Episode Summary

Our guest this week is Hal Lawton, the President & CEO of Tractor Supply Co, a truly remarkable retailer that has delivered some of the strongest results of any brand during the past few years.  We explore Hal's diverse journey from McKinsey, to Home Depot, to eBay, to Macy's and on to Tennesee-based Tractor Supply Company. the nearly 85 year old company that now does over $14 billion in annual sales through over 2,150 stores.

Episode Notes

Our guest this week is Hal Lawton, the President & CEO of Tractor Supply Co, a truly remarkable retailer that has delivered some of the strongest results of any brand during the past few years.  

We explore Hal's diverse journey from McKinsey, to Home Depot, to eBay, to Macy's and on to Tennesee-based Tractor Supply Company. the nearly 85 year old company that now does over $14 billion in annual sales through over 2,150 stores. We learn about Tractor's "life out here strategy" and the critical distinction between being a lifestyle retailer vs. a category focused brand. We go deep on the strategic benefits of intense customer focus, strong day in and day out execution, not having larger stores, and embracing the blur of digital and physical. Hal also underscores the importance of constant reinvention and how Tractor stays one step ahead of the customer by investing in their stores and rapidly evolving their business model.  

But first we open with our hot-takes on the past week in retail news, including a surprising US GDP report and how interest rate increases are driving an accelerating slow down in the housing market. We also dig into the very disappointing earnings--and spooky outlook--from Amazon, before turning our attention to Meta, which continues to incinerate cash in its quest to figure out what the Metaverse is. Then we briefly touch on Elon's Twitter takeover and Bed, Bath & Beyond's naming of a "permanent" CEO. 

About Hal

Hal Lawton has served as President and Chief Executive Officer of Tractor Supply Company since January 2020 and is a member of the Company's Board of Directors. During his tenure at Tractor Supply, Hal has led the Company through a period of unprecedented growth while introducing its Life Out Here strategy to drive sustainable growth.

Previously, Hal served as President of Macy’s from September 2017 to December 2019. As President, he had responsibility for all aspects of the Macy’s brand, including merchandising, marketing, stores, operations, technology and consumer insights and analytics. Prior to that, Hal was Senior Vice President, eBay North America from August 2015 to September 2017. In that role, he oversaw all aspects of eBay’s Americas business unit, including marketing, merchandising, operations, business selling, consumer selling and advertising, as well as global responsibility for shipping, payments, risk and trust. Before joining eBay, Hal spent 10 years in various leadership roles at Home Depot, where he most recently was Senior Vice President for merchandising. Hal was responsible for elevating Home Depot’s Internet business. Prior to that, Hal was an associate principal at McKinsey & Co., providing strategic advice to executive teams in consumer-packaged goods and manufacturing industries.

Hal holds dual bachelor’s degrees in Chemical Engineering and Pulp and Paper Science Technology from North Carolina State University and a Master of Business Administration from the University of Virginia. Hal has served on the board of Sealed Air (NYSE: SEE) since 2019. He serves on the NRF Board of Directors and is a member of the Business Roundtable.

About Us

Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his       website.    The expanded and revised edition of his bestselling book  Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at  Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a      Forbes senior contributor and on       Twitter and       LinkedIn. You can also check out his speaker "sizzle" reel      here.

Michael LeBlanc  is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice.   He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career.  Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast,       The Voice of Retail, plus  Global E-Commerce Tech Talks  ,      The Food Professor  with Dr. Sylvain Charlebois and now in its second season, Conversations with CommerceNext!  You can learn more about Michael   here  or on     LinkedIn. 

Be sure and check out Michael's latest venture for fun and influencer riches - Last Request Barbecue,  his YouTube BBQ cooking channel!

Episode Transcription

Michael LeBlanc  00:05

Welcome to Remarkable Retail podcast Season 5, Episode 17. I'm Michael LeBlanc.

Steve Dennis  00:10

And I'm Steve Dennis.

Michael LeBlanc  00:12

And we're presented by MarketDial. I forgot that one, you know why I forgot I'm on the road I'm on a different kit. I sound different. You sound different. Where are you, Steve?

Steve Dennis  00:22

I am. I am at the fabulous JW Marriott Grande, Grande Lakes, which I will say the hotel is lovely, but the marketing is a little bit of a misnomer. The lakes are quite pequeño, muy pequeño. But still nice, (crossover talk) it's still very nice Texas, (crossover talk). Thanks, and yeah, it was yesterday, I did a keynote for the ICSC their Law conference. So, it's the first time I've spoken to a bunch of lawyers by the 1000s. And it went really well. It was a little bit of an interesting audience because essentially, my message was, you need to tell your clients to take more risk. And that's not generally a thing that the legal community loves to hear. Where are you?

Michael LeBlanc  01:07

I am in rainy Vancouver right beside a very large body of water overlooking, overlooking the Pacific here in Vancouver, I just wrapped up emceeing the Retail Council of Canada is Retail West Conference, which was, we had a fantastic roster of speakers and Christine Day who's been a guest on our show. And I wrapped it up, wrapped it up with some chitin and chatting, and she said hello. So, Christine, of course from the House of LR&C. And we were chitin and chatting on the stage about all kinds of different things. So yeah, it's a great, great event. So, that's again, that's why we sound a little bit different. We have a great episode coming up we have an exclusive interview with Hal Lawton from Tractor Supply. And you knew and met Hal and he was kind enough to join us on the mic. What a fantastic story and, and what amazing lessons that we'll be able to share with our listeners.

Steve Dennis  02:00

Yeah, I got connected to Tractor Supply about four years ago when Greg Sanford was the CEO. I worked with Greg at Sears, and I did a little presentation for their executive team and subsequently talked about Tractor Supply quite a lot in my book. And then yeah, I reached out to Hal, who I did not know, to see if he might come on the podcast and miraculously, 

Michael LeBlanc   02:25


Steve Dennis   02:26

He said, he said yes, but he also invited me out to Nashville to speak at an event of his and so yeah, I've been spending a fair amount of time at Tractor Supply world during the last few months. So yeah, great. He's a really amazing guy and the Tractor Supply story is a super, super interesting one. So, I'm sure our audience will enjoy it and learn a lot.

Michael LeBlanc  02:48

Yeah, fantastic. Even if you don't know that much about the brand, you've probably heard of it. But you'll learn lots about it and great lessons and great insights. So, we'll get to that right after the news. It's been a super, super busy week. Where should we start? Let's start on the economic situation. We are not always an economics podcast, but so relevant to our audience, what say you have the economic tea leaves?

Steve Dennis  03:10

A huge, huge week, I mean, surprisingly, least to me, the US economy had positive GDP growth. And most folks, you know, as this recession narrative tends to take and has been taking hold. This was a bit of a surprise, but you have to kind of unpack the component pieces of it. And a fair amount of that was, was driven by services, and by government spending and some other categories. We definitely saw slower consumer spending growth, and a huge decrease in, in housing related investments. 

Steve Dennis    03:27

And then we kind of put that with some of the other information we get around, for example, mortgage rates in the US are now above 7%. That's the highest in 20 years. One of the things I saw in one of the stories I read was just somebody quantifying, you know, what does that mean in terms of, kind of the effect on disposable income. And if you've got a $300,000 mortgage, that means you're paying $710 more a month than you would have had you gotten a mortgage back in January. So, if you think about new homeowners, or maybe somebody with a variable interest rate that you're not, that's a lot of money, not too surprisingly, with the mortgage rates going up. We saw both new home sales tumble as well as I just saw right before we got on air here that pending sales for all homes. So, that would be existing in new homes and had a huge decline as well. So, just a lot, a lot going on. The other thing I was going to mention briefly under the category of ship not happening, (inaudible), I just loved puns. The Port of Los Angeles handles the fewest amount of import containers in the month of September, it's the most recent data says is the Great Recession.

Michael LeBlanc  05:01

Let's see earnings seasons, I guess it started right. I don't know, I'm not sure we have. Well, we have one to talk about that to Amazon, right. They, they talked about their earnings, and you know what, (crossover talk), what makes you of that? 

Steve Dennis  05:11

Yeah, it was a big earnings week for a lot of the tech firms. So, we're not really quite into the heart of retail earnings that'll come in a few weeks. Amazon is on the calendar schedule, not the January year-ending. So, they report a little bit earlier. But yeah, it was a pretty rough week for tech stocks. But yeah, Amazon reported, and on the positive side, they did return to overall profitability. And they did return to double digit sales growth. But for the most part, I would say their earnings announcement was, was a bit of a train wreck, and the stock is down pretty big were recording this on Friday. And when I looked (inaudible) a few minutes ago, the stock was down about 12%. Actually, the stock is down 50% from its high. So, that's pretty significant. 

Steve Dennis    05:19

But a few just quick things to mention, that going into too much detail. AWS, which of course is the big profit driver, historically there at Amazon had a pretty good quarter, but the growth is slowing down. And there's a lot of speculation on what's going on there. Whether that's really kind of macroeconomics, or just you know, it's a big business. Sales are not going to grow at 30 to 35%, forever. So, I'm not sure what to make about that. But the retail segment really continues to be kind of a mess. The profits, well, sales were up actually, pretty decently. The North American segment was up about 20%. But the operating income was negative and was a pretty big swing from a year ago. 

Steve Dennis    05:35

When you look at Amazon, they've got three big operating segments that they report their breakout, AWS, they break out in North America, and they break out International. Now North America international includes retail, and retail, its physical stores, its own first-party sales, and its third-party sales. But it's also advertising. And it's also subscription services. And so, it's hard to completely know what's driving what because they don't give a level of granularity around profitability. But what I would say overall, is if you look at North America, and you look at International, both of which are losing quite a bit of money, and seeing their operating losses widen, I think it's reasonable to assume the advertising business, which is large and it continues to grow, is highly, highly profitable. So, if you look at everything else, that suggests it is not very profitable. 

Steve Dennis    06:11

Now, there is this argument, which I know we've gotten into a little bit, that you really can't separate advertising form, from retail. That's sort of the combined business model. But I (crossover talk) think there is evidence, yeah, but you know, you really can't have retailers as a loss leader, if you know, your overall business combined doesn't make money, like that still doesn't seem to be a good, a good combination. 

Michael LeBlanc   06:28


Steve Dennnis    06:29

But anyway, it's, it's, it's hard to tell how much of this is really huge cost structure issues we've talked about. And they talked about how they still got too much capacity and distribution. And they're starting to make some efforts to get their costs down, they have hiring freezes and things like that. But you'd still think even with some of those challenges with the sales growth they've experienced and how mature this business is, that you would see more, more profitability, particularly since advertising is going to be amazingly profitable. So, not, not a great picture. And I guess the last thing I'd say about it is they pretty much signaled trouble ahead, they expect that their holiday season is going to be the worst that they've had in a long time and just generally said a bunch of things. If you listen to the analysts call as I did that, they're pretty worried about the immediate future and, and basically said they're not sure how it's going to turn out, which doesn't, isn't, you know, doesn't inspire a ton of confidence.

Michael LeBlanc  09:07

Yeah, no kidding. And (inaudible) the AWS information is interesting. It's one of the first dips I've seen in their reporting their confidence. Now that could be you know, they got some pretty big competitors going after that business, or maybe AWS becomes a little bit of a bellwether of the economy, like you look for key indicators. Maybe Amazon sales, slipping indicates retail, maybe AWS indicates a broader thing. So, it's, 

Steve Dennis    09:40


Michael LeBlanc   09:41

They do, they are a size of which it does become, you know, basically a key indicator to other things. Not directly a retailer kind of sorta yes, Meta they had an earnings, how shall we say trainwreck, the metaverse cash is flowing? What's, what's going on? Well, I guess I know what's going on. They're making a big business bet. If we, if we step back and understand what's happening, they're making a massive bet that the Metaverse, their Oculus, the devices will be the change to their business that takes it to the next level. That's, you know, that's how I would assess what they're trying to accomplish. Yeah. Would you agree? 

Steve Dennis  10:09

Yes, I agree. But I think before we do that, we should have a moment of silence for Mark Zuckerberg who sadly lost $32 billion in market value this week in his own personal stake. And that is such a sad story that I do think we should show a little bit of respect for that. They have spent I think it's $15 billion so far on building up the metaverse and that they are, they're going forward, undaunted, and a lot of strong statements about how much money they're going to plow into that. And let's say Wall Street was not, not too happy with that. 

Steve Dennis    10:39

The other thing that's going on, which I think also speaks to what Google reported, is that digital advertising spending is, is definitely, I guess, you could say nicely moderating, if you're, if you're affected by the, the changes, the privacy, Cookie changes from, from Apple. So, that was also another thing that was not a very good story. So, you know, there is this big bet on the future of the Metaverse, which I don't think any of us think is likely to pay out anytime soon. And then just kind of the headwinds around the shift in well, the shift in users to places like TikTok, but also just the shift in digital advertising away from the guys like Facebook and Google

Michael LeBlanc  11:27

Well certainly when we're at the conferences, we attended, you know, particularly a good thing back to Groceryshop the retail media networks, big selling point out to, you know, encouraging the brands to pull money away from the platforms and move them to retailers. So, I'm sure I'm not sure how much of that is happening. But it certainly is not a helpful trend. Again,

Steve Dennis  11:45

Yeah, (crossover talk), I mean, (crossover talk). Yeah, I think outside of Amazon, it's still relatively small, but it's actually growing at an accelerating rate. So yeah, that's, that's not a favorable trend, either.

Michael LeBlanc  11:57

What do you make of all this, these changes to Twitter? And any, any thoughts on that that would be relevant to our audience?

Steve Dennis  12:04

Yeah, Twitter's not, this is one of the issues right, that Elon now, aka the chief Twit, is now, 

Michael LeBlanc  12:12

Did you see that sink thing? Did you see that sink video, (crossover talk)?Oh my God that's the joke of the week.

Steve Dennis  12:19

Yeah, he, he, everything but the kitchen sink, I guess. But he included the kit-, I don't know. I don't know. I mean, 

Michael LeBlanc   12:22

It's not going to sink in. 

Steve Dennis   12:24

I think yeah, I think, well, nobody probably wants us to do a whole episode on Elon. But in any event, yes, he is, the deal closed, he paid what I think will turn out to be a stupid amount of money unless he can actually come up with a revenue model that works. And it seems like their all-roads lead to either subscriptions or increased advertising, or likely both. It will be relevant to more retailers. If in fact, Twitter can start to put together a more compelling picture for advertising. But they're not insignificant, but they're nowhere in the game like so many other players are so another watch this space, kind of, kind of thing. The other thing I’ll mention quickly is Elon also tweeted, tweeted this morning or last night, the bird is freed, which then caused Marc Benioff, the CEO of Salesforce to tweet a picture of fried chicken saying the bird is fried. And I don't know if he was just trying to be funny, or that was a comment on the future of Twitter.

Michael LeBlanc    13:24

Yeah, I don't know. 

Steve Dennis    13:26

You can, we'll let our audience decide.

Michael LeBlanc  13:31

These multibillionaires. They have their own ways. I would, I would say stepping back that one of the things they probably need to do that they've already articulated, is get to where we hear like (inaudible) when we spoke to our friends at Alibaba, this super app idea to free up commerce within you know, the way that we see it in China. And if, you know, nobody's been able to accomplish that yet. Maybe Twitter has a shot. It's a long road ahead. But that's one kind of good connection, I suppose back to the, to the retail community. Now back to retail. Bed Bath & Beyond, CEO is now a permanent.

Steve Dennis  14:05

Yes, Sue Gove who has been acting as the interim CEO has gotten the job, quote unquote, permanently. I'm not sure anybody is a permanent CEO at any retailer these days. And I guess all I have to say about it is thoughts and prayers.

Michael LeBlanc  14:19

Just before we get to our great interview with Hal Lawton from Tractor Supply, let's hear from our friends at MarketDial. 

Michael LeBlanc  14:30

Hey, this is Michael. Are you heading to the NRF Big Show in New York in January, Steve and I will be there. In addition to chitin and chatting with our top retail leaders in the industry in the MarketDial booth podcasting studio we will be on stage with Gretchen Ganc, SVP of Strategy and Analytics from the remarkable Container Store. See us live in-person Monday, January 16, 12:30pm. Expo level three, Expo stage three for shift happens, choose remarkable or irrelevance, brought to you by MarketDial.

Steve Dennis  14:57

Well Michael and I are delighted to Welcome Hal Lawton to the show. How are you today?

Hal Lawton  15:04

I'm doing great, thanks. I Appreciate you having me on. I Look forward to the discussion.

Steve Dennis  15:08

Well, you and I, I actually have a, you and I talked about this, I have sort of a long history with Tractor Supply in some respects going way back to my Sears days, where I first heard about Tractor Supply. And I was trying to figure out just what the heck is this company. And then here we are all these years later, where you guys have just become this, I don't know behemoth or (inaudible) this incredible roll. And I got to learn a bit more about what you guys are up to when I was visiting with you a couple of months ago. So, thanks for inviting me to come out to Nashville. But why don't we just get started off with a little bit of background, maybe you could just tell our listeners a bit about your personal and professional journey. And then we'll jump into the growth story that is Tractor Supply Company.

Hal Lawton  15:52

Yeah. And again, thanks for having me on. And I was born and raised in Kingsport, Tennessee. And that's the northeast corner of the state. And I was a math and science kid growing up and my dad worked for Eastman Chemical which is a, and the company has kind of historically been run by chemical engineers and my dad was in finance. But you know, in his world, his paradigm was that chemical engineers ran the world. And so, since I was decent in math and science, kind of one thing led to another. I went to North Carolina State University and got a degree in Chemical Engineering. 

Hal Lawton   16:13

And then I worked as an engineer at a paper mill for a few years after, after undergrad, steel toed shoes, hardhat safety glasses, a great first job to really and you know kind of set me on a path of, in a journey around the notion of you know, stewardship and servant leadership and just really understanding the, the need to empower kind of the frontlines of a business and, and, and such. After a few years of working in a paper mill. I went back to business school at the University of Virginia.

Hal Lawton   16:37

And right around that same time I married my wife, Jodie, we've been married for 24 years. And then after business school, I worked for McKinsey for five years in Atlanta in, in the Atlanta Georgia office. And, then after five years at McKinsey I went to work at Home Depot and spent 10 years at Home Depot. So, that 15-year period was all in Atlanta. And that's where we had our three, our three children were all born there as well. And, you know, while I was at Home Depot, that's really where I kind of fell in love with retail, kind of all the things that come along with retail in terms of proximity to customer, the speed at which you can see changes, the, the thrill of seeing, you know, hourly and daily sales results, over time I found this passion for kind of hard lines retail at, at Home Depot and I had a fantastic career there. I started in strategy and business development, took a consultant entry path and into finance. Then I ran online for a handful of years before eventually moving into hardlines merchandising and, and finishing my career at Home Depot there. 

Hal Lawton    17:32

And then in 2015, after 15 years in Atlanta, we packed things up, and, and moved out to the West Coast. And I ran North America for eBay for three years, in addition to a few global functions, and we lived in the Silicon Valley kind of Bay Area there. And it was just for me a fantastic period of growth and development to kind of live in the epicenter of global technology and to see eCommerce at such a large scale.  Through three years of being at eBay for nearly three years. I moved to New York City where I served as the president at Macy's and I did that for, for nearly three years before joining Tractor Supply in January of 2020. And really coming full circle back to the state of Tennessee because Tractor Supply is headquartered in, in Brentwood, Tennessee, just outside of Nashville and I am humbled by the journey that I've been able to be on and you know, a lot of, a lot of luck and fortune and a lot of great companies along the way and it's, it's really been, you know, the journey has been able to provide some pretty incredible experiences for, from a, for my family and myself.

Michael LeBlanc  19:29

Wow, what a great career journey we've talked to several folks who moved on from McKinsey into retail and it's so interesting, the training you get there and then as you said full circle right back into the, the hard lines business. I love the hard lines business. I spent a bunch of years at BLACK+DECKER. So, I'm more than familiar with the Tractor Supply and for a lot of the listeners, they may or may not be familiar with Tractor Supply, so or if they're familiar, they may not know the full scope and scale. So, tell us a little bit about, a little bit about the scale of the organization and, and profile of your customers, both on the consumer and pro side, you know, maybe they overlap and give us a bit of a 411 on the business. start

Hal Lawton  20:07

To start with, the company was founded in 1938. So, we're coming up on our 85th anniversary. A numerical description of the company will finish this year at around twenty-one hundred and fifty stores, that's 2150 stores, 2150 in 49 states. The only state that we don't have stores currently is in Alaska.We'll exceed $14 billion in annual sales this year. So, the average store makes seven-ish million dollars. And we have over 50,000 team members. So, the average store has 15 to 20 team members in it. We've got what will soon be nine distribution centers for a total of about nine-10 million square feet. And there's another five or 6000 team members in our distribution centers. And so, that's a bit of a numerical description. 

Hal Lawton   20:47

If I'd (inaudible) stepped back, we're a lifestyle retailer and we serve Life Out Here. And, and those words are very purposeful in their use. When we talk to our customers and ask them to describe where they live, what their hobbies are. You know, the type of things they do for fun or what they do for work. Invariably, the words out here are almost always used and what that really means in terms of Life Out Here. These are homeowners, landowners, pet and animal owners, but they live typically in exurban or rural environments typically, live on anywhere from two to 10 acres of land. A lot of times, they'll be described as a kind of hobby farm-ist-, farmers, but it can manifest itself in many ways. And our store is a reflection of that lifestyle. 

Hal Lawton   21:33

We are not a category retailer; we are a lifestyle retailer. So, by contrast, if you think about a Bed, Bath & Beyond or a Best Buy, right, they're very much a category retailer. You know, we have everything from apparel, to pet food to animal feed to agriculture equipment, to, to, to power tools, and truck boxes and trailers, to riding lawn mowers, and live goods and fruits and vegetables. So, it's really, we are, you know, our intention is to be a one-stop shop for the Out Here lifestyle. And we do that, as I said in a little over 2150 stores by the end of this year, with each store being around 18,000 square feet in size. So, a bit like the size of maybe a Walgreens.

Michael LeBlanc  22:49

Right on, right on. And what about eCommerce? So, you got a big background in eCommerce? Is that a significant part of the business for the folks out there?

Hal Lawton  22:57

Yes, it is. We do nearly right around a billion dollars on our website a year. We go to market through, you know, the whole array of channels from our, obviously our website and it manifests itself in a mobile site as well, as well as our mobile application. And about 75% of our billion dollars online is picked up in a store, with two thirds of that picked in store and picked up the other 10-15 points shipped to a store to be picked up and then the remaining 25% is shipped to a customer's home. But it's a, it's a, you know, a very attractive channel for us and very integrated into our overall model.

Michael LeBlanc  23:43

You've had incredible growth and success over the past number of years. You probably got a bit of a bump from the COVID era. I know a format similar to yours here in Canada, we're allowed to stay open when others were closed because of the role in feeding people as you said the hobby farm or farmer you had an important role in that. But stepping outside of that, you know, what are the key differentiators that make the business successful? You describe location assortment, merchandising, your segmentation, if you had to put your thumb on the kind of couple of key things that really have been the key drivers of growth for you in success, what would you say?

Hal Lawton  24:17

Yeah, to your point we've been, we've had a lot of success over the past few years, really kind of in the post-COVID world. Our sales are up in the third quarter, we just completed our third quarter reported earnings results. And our sales on a three-year basis are up 65%. We've been the benefactor of a number of secular trends that have remained structurally sound in the post-COVID world. And examples of those would be kind of this notion of rural revitalization where you've got people that have moved from urban and suburban environments either out to exurban or rural environments. 

Hal Lawton   25:01

The notion of pet ownership and pet adoption, you know, we had a significant uptick in that over the last few years, other trends like homesteading, and they're just really this self-reliance mentality. In many ways, we're the grocery store for our customers' animals. And it's a demand driven needs-based business. And there's just been an elevated and sustained elevated demand in a post-COVID world for our type of lifestyle in, in, in categories that we serve. What I would also say though, while that's been the, the secular trends have been a big driver of our sales growth, they, they're, they represent really, maybe about half of our sales growth, so call it 30, or 40 points of our sales growth, the remainder kind of 25 to 30 points, is really around share gain. 

Hal Lawton  25:30

And it's an area that, you know, we've been very focused on serving our customers in this really dynamic, ever-changing environment that we're living in right now. And making sure that we live up to their needs, and there's, the, that's you know, very simply in being in stock. So, we've been very focused on making sure we have enough inventory to satisfy our customers’ needs, having the lowest price in the market and being and, and being able to provide that to our customers. And then great customer service, you know, we've got our inventories up 35% on a three-year basis, we'd love for even to be up more. Our customer service is running at all-time highs, we've nearly doubled our team member headcount over the last three years. And the same thing on pricing, you know, we move 8 billion pounds of food and feed on an annual basis. And so that scale allows us to be low cost, 

Michael LeBlanc    26:31

Wow, wow. 

Hal Lawton    26:33

To serve in the market, and hold down the inflate-, inflationary pressures as much as possible for our, for our customers. And yeah, I'd say those are some of the big key differentiators we've had. And the big thing as it relates to digital, it's really bringing in an end-to-end customer experience, to our ,to our customers, leveraging everything from our mobile app and the scale to in-store technology, to me-, to just bring that seamless experience that that our customers expect from these national retailers that they also shop at, but haven't historically gotten in a farm and ranch channel,

Steve Dennis  27:09

You know, Hal, one of the things that we talked about after, after your vendor event that you were kind enough to invite me to, was and I don't know if you remember saying this, and I thought was particularly interesting, since you've worked at places like Home Depot and, and Macy's, which are, you know, very large format stores, is you said that the small size or the smaller size of your stores was a key competitive advantage. And I think that kind of fights against the general narrative that, that bigger is better in retail, could you just describe what you meant by that a little bit and why you think it's so important?

Hal Lawton  27:44

I always comment on two things in the history of the company. The first, the most important decision that was made by predecessors in the company was really around our culture and, and, and creating a firm foundation grounded in our mission and values and the notion of servant leadership inside the company. And more than anything, our culture has been the foundation for our success over the last 84 years and will certainly be the foundation for our future as well. 

Hal Lawton   28:12

All that said, if you look tactically at the business model, as we, you and I were discussing, Steve, I think one of the best decisions are the founders of the business, the modern-day founders of the business made was the size of our store. And I think, you know, in retail, if you think about the other ends of the spectrum on the, on this large size spectrum, you know, think about the countless number of retailers that wish their stores were smaller, and you know, they struggle to maintain inventory turns and, and vi-, vibrancy of their inventory in the store. They're struggling to find enough programs to substantiate the square footage, they're deleveraging on headcount and ability to provide adequate customer service and you know, there's, there's some retailers that are doing great with these, you know, big box 100,000 square foot stores, but there's a lot that wish they were substantially smaller. 

Hal Lawton   29:29

You know, there's been a bit of a relief over the last couple of years from that type of perspective in the market, just given everything else that has been going on, but retail will certainly snap back to previous trends. And I think we will again revert back to the discu-, to the dialogue around retailers having too much square footage in their stores being too big. On the other hand, I think you can also be too small, and you know, when stores are 2000, 3000, 4000 or 5000 square feet in size, you struggle to get leverage and that's one of the advantages that big box has is you can leverage this cost of your square footage as you grow sales and achieve higher margins. And you know, the problem we'll say, you know, a small volume, a small square footage store, you know, not to call anyone out, but say take the notion of a typical Ace Hardware or something of that size is that you can't really see scale on, on it either on the sales per square foot, eventually on a sales per square foot you kind of top out, but certainly on the leveraging you have on your fixed costs. 

Hal Lawton   30:26

And so, you know, when you kind of take both ends of the spectrum and kind of come to the middle, this 15 to 20,000 square foot format that we play in, really allows us to scale to $400, $500, $600 per square foot and get really good sales, productivity and space productivity. But at the same time, you know, being that we're in rural America, and typically lower retail costs, in general, real estate costs, in general, we're able to really scale on, on that. And then in 15 to 20,000 square feet, you can provide good customer service, still, particularly with racetrack format, we can put people in each one of the four corners, we've got our covs-, customer service hub in the middle. And so, we're able to provide, you know, best-in-class customer service, in combination with a you know, a business model that provides for sufficient scale and fixed cost leverage. So, anyway, I think it's really the kind of the perfect size format for us to be and, and, you know, we, one of those things we're very fortunate to be, for that to be the case now 2150 stores into, into our format.

Michael LeBlanc  31:10

So, 2150 stores, I imagined growth looks something like getting perhaps more suburban, exurban, you know, the blend, is that blend going to change? And is that going to affect how you merchandise or how you think about size or location is any of that on your mind right now?

Steve Dennis  31:25

You know, you, you joined Tractor from Macy's, a retailer that I think we could probably agree is, had some challenges in terms of getting back on to any kind of profitable growth trajectory. I'm not looking so much for a critique of Macy's. But I'm curious, given the different places you've been in retail, and now all the success that Tractor Supply has been having. Are there any general kind of leadership lessons that you could share with our audience that speaks to strategy or execution or culture or all the above?

Hal Lawton  31:25

We see our future store potential to be 2800 stores in the United States. The profile of those stores won't change much from the ones we have now, which is almost all exurban or rural life.  Sometimes we'll comment that we don't have a store within an hour's drive in New York City, but we have two in Odessa, Texas. And you know, that's just indicative of the type of customer we serve and the geographies that we play in to serve those customers. The one thing I would say is what's evolving in our business, the type of customer that is shopping us. Our unaided brand awareness pre-COVID was in the high 30s. And our unaided brand awareness post-COVID now is in the low 60s. 

Michael LeBlanc   32:05

Wow, that's a big jump.

Hal Lawtonn   32:08

So, we've made significant investments, namely in video adverti-, marketing, both television as well as digital, to drive our brand awareness. And, and as a consequence of that, not only has our core customer continued to shop us through COVID. And also, we've gained share just because of our in stock and our pricing and our customer service in the midst of COVID. 

Hal Lawton   32:25

But we've also captured a new customer, as I mentioned earlier, the notion of rural revitalization. And you've had a lot of, you know, the US population that's moved, you know, 30-50 miles further out from where they've (inaudible) where they were living prior to COVID. And as those customers moved out, they've been dominantly the millennial generation, they've over indexed the millennial generation. They're starting to embrace those typical generational norms that millennials maybe have been putting off for two or three more years than their nor-, than their historical kind of generational norm curve. 

Hal Lawton   32:46

And, you know, they, as they move out, they want to embrace the lifestyle, right, they want to get animals, they want to get pets, they want to still live that kind of organic, sustainable lifestyle. And so, you know, whether it's planting fruits and vegetables, having gardens, you know, they want to, they want to still live that same kind of socio-, that that same responsible lifestyle, even as they move out, and they want to take advantage of the space and, and, you know, begin that kind of next set of whether it's, you know, getting married, buying a house, having children, you know, whatever the case may be, you know, that the millennials are now embracing those generational norms. And that's really benefited us, and I'd say is the biggest trend change in the kind of the profile of our, of our business over the last few years, In my 20 plus years now in retail. 

Hal Lawton   33:23

And Steve, you talk about this quite a bit in, in your writings and, and other, other activities. It's all about staying ahead of the customer. I think businesses that evolve and invest to stay ahead of the customer. You know, retailers continue to be successful today, no matter if they're a five-year-old retailer or you know, like us an 84 year old retailer. Retailers that don't invest in their stores, don't invest in their teams, cut expenses to hit, you know, a particular quarter's numbers, but do it at the expense of you know, long term brand viability are the ones over time that struggle. 

Hal Lawton    33:59

And, you know, if you were to look at them, the list is long of retailers who have gone out of business. And, you know, I think the one thing that's in common is that they’ve not invested in their stores. And so, the experience in the stores became unacceptable. They began to cut labor. And so, then they lost customer service and you had a downward spiral there, or they didn't evolve their business model to reflect evolving customer's needs, whether that's in the portfolio that they carried in the store, you know, whether its ability to embrace things like omni-channel, you know, or whatever, that whatever the, the nuance is. I mean when I think about our history, 40 years ago, we didn't sell animal feed in a big way. And now, you know, we're far and away the largest seller of bagged animal feed in the country, you know, somewhere between 20 and 25%, market share, depending on the animal. Same thing, 20 years ago, we didn't really sell pet food in a destination like way. And now we're a top five pet food retailer, and, and definitely the biggest share winner over the last three years in the midst of COVID. And now we're, you know, evolving our business, again, to build garden centers and get into the live goods business as a destination. And, you know, I think that's the key thing is, you know, we're also investing in our stores right now to in 2018, we invested $275 million in our business this year, we'll invest $700 million in our business, so almost two and a half times. And you know, the large driver of that increase has been investment in our stores through a, our fusion remodel program with the goal of addressing, of remodeling all 2000 plus of our stores over six years. So, it's about evolving and staying ahead of the customer, adjusting your marketing, adjusting your assortment, making sure your in-store experience stays best-in-class. And I think if you do that in retail, you know, you can continue to serve your customers for a long period of time. But if you don't, they, you know, they can always, you know, choose to shop somewhere else, you've got to earn their business every single day.

Michael LeBlanc  37:19

So, Hal, it's a very impressive story. I mean a tremendous growth; you've already got some roadmaps into where you're growing that you've articulated. But what's next for Tractor? I mean, how do you stay in that kind of growth? You've already, again articulated a growth in gardening and, and acquisition, should we expect more of that? Give us the broader lens on the, on the strategy for growth beyond, you know, the already impressive store count and, and different things like that?

Hal Lawton  37:47

Yeah, we've got, as I said earlier, an incredibly bright past. Of the last 84 years, we've had 31 consecutive years of positive revenue growth. You know, that's through the recession of 2000, and the Great Recession around 2008 and 2009. Certainly, the COVID recession now, but we think we've got an equally bright future. And we're investing heavily in our store remodels, which are giving a strong lift. We're investing heavily in our Neighbors Club program, which is our loyalty CRM program. And we're investing heavily in digital and in our supply chain, to make sure we stay ahead of our evolving customers' needs. 

Hal Lawton   38:11

And we think the best times are still ahead for Tractor Supply. And, you know, we think with, with the new store count growth we've got, with our existing store sales growth that we plan on having billions and billions of dollars of sales growth ahead of us and we put all that under the umbrella of our, what we call our Life Out Here strategy, it's got a five year runway ahead it goes out to 2026-2027 and a very defined amount of investments. And you know, as you can imagine, given our market, our total addressable market is $180 billion and our revenues, 

Michael LeBlanc   38:46


Hal Lawton    38:47

This year will be 40. So, we still have over, under a 10% market share. So, a long runway to execute on our Life Out Here strategy but also as you can imagine a lot of other items on the list for down the road after that too. The possibilities are limitless in ter-, for us in terms of continued growth

Michael LeBlanc  39:12

Well fantastic I mean you've got amazing momentum. You've got a clear eye in terms of the strategy fixed on everything that you're anchored back to this focus on stores and this integration of eCommerce. So, listen it sounds fantastic, and we really appreciate you sharing both your journey and, and more about Tractor Supply it's an impressive organization clearly. And it's great that I get to and the listeners get to learn a whole lot more and, and something that we can pay attention to and probably, you know, you definitely learn a lot from. So, listen, thanks again for joining us on the Remarkable Retail podcast. It's a real treat to hear from you and, and thanks so much, (inaudible) you're really a busy, a busy fella. So, thanks for taking the time out to chat with us and we wish you continued success and a great rest of your day.

Hal Lawton  39:55

Well thank you so much. Again, I appreciate you all having me on. It's been a pleasure to talk with you for the last half hour.

Michael LeBlanc  40:01

If you liked what you heard, please follow us on Apple Spotify or your favorite podcast platform so you can catch up with all our great interviews, like our discussion with Seth Godin on what retailers can actually do to fight climate change. New episodes of Season 5, presented by MarketDial will show up each and every week. And be sure to tell your friends and colleagues in the retail industry, all about us.

Steve Dennis  40:20

And I'm Steve Dennis, author of the bestselling book, ‘Remarkable Retail: How to Win & Keep Customers in the Age of Disruption’. You can learn more about me, my consulting and keynote speaking at

Michael LeBlanc  40:34

And I'm Michael LeBlanc, Consumer Retail Growth Consultant, keynote speaker and producer and host of a series of retail trade podcasts including this one. Plus, the host of the popular YouTube cooking show Last Request Barbecue. You can learn even more about me on LinkedIn or at 

Safe travels everyone.