Quarterly revenue growth was higher at Lowe's than at its more-urban counterpart Home Depot.
Illustration: David Paul Morris/Bloomberg NewsThey say it’s better to be a big fish in a small pond.
Retail in sparsely populated areas understandably has outperformed those in denser hubs during the pandemic. The trend could continue.
Take Lowe’s, which has a heavier rural footprint than rival Home Depot : Last quarter its revenue grew 10.9% from the previous year compared with its more-urban competitor’s 7.1%. Dollar General saw a net sales increase of 27.6%, while the less-rural Dollar Tree saw a jump of 8.2%. Tractor Supply Co., which is already a primarily rural business, said during its first-quarter earnings call that the more rural the stores, the better the performance was.
While the recent results highlight their relative short-term geographical benefit during the pandemic, some rural retailers seem to have structural advantages with staying power.
Dollar General and Tractor Supply, in particular, have carved out formidable market positions by serving populations that have fewer retail options nearby. Retail has been in decline in small towns: In North Dakotan communities with 2,100 people or fewer, for example, the number of full-service grocery stores declined almost 30% from 2014 to 2019.
Both companies have relatively small-format stores but sell a wide range of items, which means that shoppers can save shopping trips to multiple retailers. Tractor Supply sells goods ranging from tractors, live poultry, pet food and hardware to clothing. Item selection and the small format seem to be important: Small-town-focused Stage Stores, which sells off-price apparel and housewares in a department-store format, filed for bankruptcy last month.
Performance for Dollar General and Tractor Supply was strong even in the years when rural populations were declining. The U.S. rural population fell between 2010 to 2016, according to the U.S. Agriculture Department. During that period, the share prices of Dollar General and Tractor Supply have multiplied by threefold and almost sixfold, respectively, while revenue roughly doubled for both. Sales at large-format Walmart, which is more rural than competitor Target, grew by 15% during that time frame while its more-urban counterpart saw 3% growth.
While Amazon.com seems like an equal-opportunity threat to retailers, rural ones are relatively well-shielded because of e-commerce’s limited reach in remote locations. Tractor Supply also has e-commerce and buy-online or pick-up-in-store capabilities on which it plans to double down. Dollar General’s low-margin business model doesn’t allow for widespread e-commerce, but the company has rolled out a capacity to buy online and pick up in-store.
Both retailers see room for growth. Tractor Supply says it sees potential to have a total of more than 2,500 stores; it had 1,863 as of the first quarter. Dollar General plans to open 1,000 new stores this year.
The demographic trajectory could offer even more of an uplift given Covid-19. While it isn’t clear where exactly the population will be moving, on the margins it seems as though there is an exodus from more- to less-densely populated areas afoot, including suburbanites shifting to rural areas, according to Greg Melich, analyst with Evercore ISI. “In April, we pegged a 60% chance of de-densification, but every day that number has gone up.” Even before the pandemic, urban growth was stagnating, according to the Brookings Institution.
Of course such shifts could be a double-edged sword if a growing population brings in more retail competition, but existing players’ scale could give them a lasting foothold. Don’t be surprised if the small-town retailers continue outshining their big-city counterparts.
Write to Jinjoo Lee at jinjoo.lee@wsj.com
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
"last" - Google News
June 11, 2020 at 06:20PM
https://ift.tt/2YpXtDt
Small-Town Retail’s Shining Moment Can Last - The Wall Street Journal
"last" - Google News
https://ift.tt/2rbmsh7
https://ift.tt/2Wq6qvt
Bagikan Berita Ini
0 Response to "Small-Town Retail’s Shining Moment Can Last - The Wall Street Journal"
Post a Comment