Tennessee-based Tractor Supply Company, which claims to be the nation’s largest rural lifestyle retailer and ranked No. 32 in the National Retail Federation’s Top 100 retailer list in 2023, just ignited a firestorm of controversy in some circles as it sought to avoid one in others.
Late last week, just as Pride Month festivities were dialing down, Tractor Supply announced it was eliminating all diversity, equity and inclusion (DEI) roles at the company, retiring current DEI goals and no longer submitting data to the Human Rights Campaign, an LGBTQ+ advocacy group. Instead, it will refocus on its internal Team Member Engagement Groups to mentor, network and support the business.
In addition, it will no longer sponsor “nonbusiness” activities such as pride festivals and voting campaigns and return its focus to “rural America priorities,” such as education, animal welfare, veteran causes and “being a good neighbor.” And land and water conservation efforts are now a priority, as it withdraws previous carbon emission goals. The company’s DEI and ESG goals were codified in September 2021.
Tractor Supply reacted post-haste after Robby Starbuck, with some 500,000 followers on Twitter/X, launched a campaign on June 6 calling for a boycott of Tractor Supply. He and his team determined the company’s existing DEI and ESG policies didn’t align with the priorities of the company’s more conservative customer base.
According to the Wall Street Journal, Tractor Supply management moved quickly to “quash criticism before the controversy was seized on by conservative media,” with Tractor Supply’s “swift and decisive reversal” the result.
Afterwards, Starbuck took a victory lap – “A massive victory and a massive turning point in the fight to end wokeness in the place, dismantle DEI and eliminate ESG to bring sanity back to corporate America,” he said in a June 27 (Twitter/X) post. Others condemned the company’s about-face – “Tractor Supply Co. is turning its back on their own neighbors with this shortsighted decision,” Eric Bloem of the Human Rights Campaign said in a statement.
Yet it can be seen as Tractor Supply getting back to retail business fundamentals; that is, serving customers well without the distractions of non-core activities that don’t advance business objectives.
Tractor Supply Statement
Here are highlights from the Tractor Supply company statement:
“For more than 85 years, Tractor Supply has been focused on one thing…serving ‘Life Out Here.’ Every day, our 50,000 Team Members take care of our customers like family. We deeply value our relationship with our customers and the communities we call home.
“We are passionate about being good neighbors in our hometowns because without you, we would not be what we are. It is imperative to us that our customers’ hard-earned dollars are taking care of our Team Members and the communities we all love.
“As you supported us, we have invested millions of dollars in veteran causes, emergency response, animal shelters, state fairs, rodeos and farmers markets. We have also invested in the future of rural America. We are the largest supporter of FFA and have longstanding relationships with 4-H and other educational organizations.
“We work hard to live up to our Mission and Values every day and represent the values of the communities and customers we serve. We have heard from customers that we have disappointed them. We have taken this feedback to heart,” the company stated
And it added, “Rural communities are the backbone of our nation and what make America great. We are honored to be a part of them.” Tractor Supply provided no further comment to my request and full disclosure: I live in Lancaster County, PA, Tractor Supply country.
Results Of The ‘Life Out Here’ Strategy
Since joining the company in 2020 coming from Macy’s, CEO Hal Lawson has defined and continued to scale the company’s “Life Out Here” strategy.
Essentially, Tractor Supply serves customers who live off or close to the land and its core customers reside in America’s heartland and outside urban centers. You won’t find one of its roughly 2,250 Tractor Supply stores in New York City, Chicago, Los Angeles or Philadelphia but plenty in rural areas and other states.
Throughout Lawson’s tenure, the company has racked up any number of prizes, most recently ranked first in customer satisfaction in the specialty retailer category according to the American Customer Satisfaction Index (ACSI
American Customer Satisfaction ETF
It gets plenty of kudos from Forbes, including being named to Forbes’ 2024 Customer Experience All-Stars list as well as its 2024 Best Customer Service, Best Brands for Social Impact and America’s Best Large Employers lists.
With a laser-sharp focus on what the customers living out here need to support their lifestyles, Lawson has guided the company from $10.6 billion in 2020 to $14.6 billion last year, though growth began to slow after 2022, increasing only 2.5% from 2022 to 2023 with comparable sales flat.
First quarter 2024 results were positive, up 2.9% to $3.4 billion and it expects to deliver year-end sales in the $14.7 billion to $15.1 billion range, though much of that growth will come from new store openings – it is slated to open 80 more Tractor Supply stores this year. Comparable store sales are projected to range from -1% to +1.5%.
Reading the first quarter results, Lawson saw worrisome signs that called for a recalibration. “Comparable store sales increased 1.1%, as compared to an increase of 2.1% in the prior year’s first quarter, driven by a comparable average transaction count increase of 1.3% and a comparable average ticket decline of 0.2%,” the company stated.”
“Comparable store sales growth reflects strength in seasonal merchandise, partially offset by declines for year-round discretionary categories. Consumable, usable and edible products performed in line with the Company’s overall comparable store sales increase,” it continued.
The consumable, usable and edible segment – what the company calls CUE categories – including repeat-purchase products like pet food, livestock feed and bedding, weed control, and fertilizer, accounted for just over half of company sales last year, so any slow-down there could be a real hit to company performance.
Refining The ‘Life Out Here’ Strategy
Just like any responsible retail executive, Lawson looked at his numbers and listened to the voice of his customers, both of which told him something was amiss. But rather than drag his feet, he listened to those customers, taking decisive action he hopes pays off in the long run.
“Our issue is less around having a number of opportunities,” he said in a presentation at NRF 2024: Retail’s Big Show. “Our issue is much more about prioritization. We’ve got so much opportunity and so much growth ahead of us, we’ve just got to make sure we pick the right thing to invest in, in a stepwise fashion, to make sure it all syncs together.”
The strategic decision to dial back DEI policies and realigned ESG goals toward real-world land and water conservation, rather than existential climate change initiatives, is part of making changes to sync corporate activities and investments to serve business goals.
For example, existing Federal Title VII law prohibits employers from discriminating on the basis of race, color, religion, national origin, or sex, which is defined to include pregnancy, sexual orientation, and gender identity, so Tractor Supply’s DEI decision has no impact on its hiring process or decisions.
Attorney Lindsay Burke, partner at DC-based Covington & Burling specializing in employment law, explained that affirmative action DEI programs are intended to fill a specific gap in a company’s employee base. She spoke to me several months ago in regards to the law after the 2023 Supreme Court decision regarding college admissions programs, not about Tractor Supply or any other company.
“DEI programs are meant to make sure that you’re providing equal employment opportunity, not to make employment decisions on the basis of race and other protected characteristics. Affirmative action programs are meant to be temporary to fix a manifest imbalance.”
Effectively, Lawson has determined DEI has done its job, now it’s onto other priorities that will deliver better service to customers, greater employment opportunities and returns to investors.
Job Done, Now Move On
“What does this say about ESG, DEI and sustainability as key buying criteria for customers or investor values?” pondered Lawrence Heim, editor of PracticalESG.com, CCRcorp’s ESG/sustainability information service.
“This is an example of how complex materiality is, knowing your primary audience, and perhaps a wake-up call about the criticality of business fundamentals (i.e., revenue generation) to operations and investors,” he reflected.
Perhaps more surprising in the Tractor Supply news is not the changes it made but the speed with which it made them.
“Tractor Supply’s consumer base is overwhelmingly rural and traditional values-based,” observed Andrew Crapuchettes, founder of values-based RedBallon job board. “This is a big moment for Tractor Supply and they quickly changed course. I predict this is the first of many.”
While some seek to villainize Lawson and Tractor Supply, I suspect he and the company will be rewarded after the furor dies down.
Lawson answered the hard question about whose interests the company serves: outside special interest groups or the special interests of the company’s core constituencies, including employees, investors and customers? Time will tell whether he made the right call.
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