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Tractor Supply moved some production out of China amid tariffs, exec says

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Tractor Supply moved some production out of China amid tariffs, exec says

Tractor Supply Co. has moved production for some of its exclusive brands out of China as it tries to mitigate the impact of tariffs from an ongoing trade war between the U.S. and China.

"We are fully dedicated to our strategic sourcing initiatives but some of the things that we are doing based off the tariff environment, we have shifted some things back domestically as well as to other countries where we find opportunities that first and foremost can meet our quality expectations and meet the standards of our exclusive branded product," Seth Estep, the retailer's senior vice president of GMM said during an Oct. 24 call discussing the company's third-quarter results.

Tractor Supply will continue to build its private label brands across multiple categories including livestock feed, pet products, and workwear as it continues to focus on expanding its product offerings, Estep said.

The retailer has also partnered with Toro Co., a company that manufactures outdoor power equipment, to further that goal. The partnership, which was announced on Sept. 5, allows Tractor Supply to be the exclusive retailer for select Toro farm and ranch equipment.

Following the partnership, the retailer remains open for similar partnerships as it continues to expand its product offering, according to Estep.

"From a core merchandising philosophy perspective, as merchants, we are always out there looking for what leading brands and what partnerships can we go after that can be extremely meaningful to our customer base and the lifestyle that we serve," Estep said.

Earlier this year, the U.S. Food and Drug Administration listed one of Tractor Supply's private-label brands, 4health, as one of the grain-free dog food brands that could be linked to heart disease. Estep told analysts that following the announcement the retailer is seeing a "little bit of shift out of some of the holistic natural grain-free products and into more of that pet specialty science-based formulations." The retailer will launch new formulas under the 4health line in the coming weeks, Estep said.

"We are really looking at 4health as a key differentiator [going forward] to really drive and protect our pet food business," Estep said.

Responding to an analyst's question about the impact of softer macro trends in some farming and manufacturing-focused regions on the company's business, Kurt Barton, Tractor Supply's CFO and executive vice president, said the company is not feeling any pressure and that its core customer base remains strong.

"As we look at our business today, we are just not seeing that with our customers [in] those markets," Barton said. "[For example], in the Midwest region where there is the heaviest presence of the ag economy for both the third quarter and year-to-date, that Midwest region is performing strong and outperforming the average chain."

The company's executives also updated analysts on the continued search for a new CEO. Greg Sandfort, Tractor Supply's current CEO, said the company is looking for a candidate with experience in both physical and online retail to help grow the company's business, but there's not a "big rush" to fill the position.