Every morning at 5, Barb Bakshis chugs some coffee and feeds her animals--including 30 sheep, 14 chickens and a horse--before slipping on heels and heading to the bank she co-owns. After work, she and husband Mike Zang, a 54-year-old boat salesman, stay up late doing chores on their 150-acre farm in Burlington, Wis. "Yes, I do this for enjoyment," says Bakshis, 43, and laughs. Former suburbanites, the couple bought their century-old farm in 1993 and are learning as they go. When they have questions about lamb birthing, they call their neighbors. And when they need fencing materials or a pressure washer breaks down or they run out of feed, they head to their local Tractor Supply Co. (TSC) store.
Given the work required, hobby farming sounds a bit like hobby coal mining, but it turns out there are a lot of amateur sodbusters like Bakshis and Zang. Which is one reason TSC, based in Nashville, Tenn., expects sales to increase to $2 billion this year. In 2004 profits rose 10%, though in April quarterly net income fell. The company blamed higher costs. The stock, which has roughly doubled since 2003, tumbled briefly but recovered. "We have zeroed in on hobby farmers," says chairman Joe Scarlett. TSC has revived itself by expanding into exurban areas where there's a deepening pool of wealthy customers who farm but are not dependent on agriculture for a living.
TSC's road to the ag lifestyle was not exactly a straight one. Tractor Supply Co. was founded in 1938 as a haven for farmers who needed tractor parts (hence the catchy name). Over the next four decades, TSC strayed off the farm and started peddling everything from sporting goods to Crock-Pots. In the 1970s, conglomerate Fuqua Industries acquired TSC, further diluting the retailer's focus. Scarlett participated in a leveraged buyout in 1982 and floated TSC as a public company in 1994; he owns 14.5% of the common stock, worth about $233 million today.
In the mid-1990s, management began to reassess TSC's market position. "The number of farmers was shrinking," Scarlett says. "We started looking at people who enjoy the rural lifestyle." Baby boomers were beginning to migrate from cities to rural areas, and these new rec farmers were spending $5.5 billion annually on supplies. "Lifestyle" positioning demanded big changes in merchandise. Farmers raise livestock. Lifestyle farmers have pets and ride horses for fun. Farmers buy feed in quantity and cheaply. Faux farmers buy pet "food" and spare no expense. So TSC stocked up on equine products, bird supplies and pet chow. Out went the cheaper-by-the-ton stuff. In came fancier foods like Hill's Science Diet.
The focus on pets coincided with a greater focus on women. Before the switch, only 32% of the customers were women. Yet they purchase 80% to 90% of the horses in the U.S. Improving the selection of pet and equine supplies bumped the percentage of women customers to 50%. It also helped same-store sales increase 9.9% in 2004. Analyst Eric Marshall of First Dallas Securities says of TSC, "They've really figured out how to provide a lifestyle concept and address certain needs of their customers outside the realm of big-box retailers."