Dive Brief:

• Tractor Supply Company expects its expenses to increase $30 million to $50 million during the second quarter as a result of the ongoing pandemic. Changes to employee pay and benefits, as well as changes to cleaning and operations, are contributing to the rising costs, company executives said on an earnings call last week.
• "The bulk of these costs, about 80% roughly, is labor-related or benefits-related," Kurt Barton, the company's CFO, said on the call. "Most of the remaining 20% is for supplies and safety and cleaning."
• The low end of the range ($30 million) assumes the measures would be in place throughout April and May. The high end ($50 million) assumes measures would be in place throughout the entire second quarter, Barton said.

Dive Insight:

The numbers from Tractor Supply highlight how expensive it can be for companies to adapt to safe operations during a pandemic.

Increased labor cost comes as the result of an incremental $2-per-hour raise for hourly workers, extended paid sick leave for anyone who reports flu-like or COVID-19 symptoms and complete coverage for anyone who undergoes COVID-19 treatment, executives said.

Tractor Supply has also increased hiring to keep up with demand for services, including delivery and buy-online, pickup in-store (BOPIS).

"We embarked on our most ambitious hiring drive ever, with plans to fill more than 5,000 full time and part time team member positions across our stores and distribution centers," company CEO Hal Lawton said on the earnings call.

As overall retail sales have fallen, "there's a bigger piece of the pie for those retailers that are open," Lawton​ said. Net sales for the company increased by 7.5% in the first quarter compared to the same quarter last year.

Expanded delivery options were cited as one of the reasons for the increased safety-related expenses in the company's quarterly earnings press release. Working with Roadie, Tractor Supply was able to expand same-day delivery from 20% of its stores to all of its locations in three weeks, Lawton said.

"I believe the crisis represents an opportunity for us and we are moving rapidly to capitalize on those opportunities," Lawton said​, explaining the investment in the new delivery modes along with curbside pickup.

Tractor Supply declined to comment on how its operations had changed as a result of increased sanitation measures.

John Vanderpool, vice president of paint at True Value, told Supply Chain Dive earlier this month that its manufacturing facility had started producing hand sanitizer and making it readily available for its employees on the floor. True Value also implemented an expanded cleaning schedule.

"We have a deep clean every evening from 6 to 8:30 in the factory and also in the offices, and that seems to work pretty well," he said.