TSCO - Earnings call transcript Q1 2018

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Operator

Good afternoon, ladies and gentlemen, and welcome to Tractor Supply Company's Conference Call to discuss the First Quarter 2018 Results. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of the Tractor Supply Company. And as a reminder, this call is being recorded. I would now like to introduce your host for today's call, Mrs. Mary Winn Pilkington, Vice President of Investor Relations and Public Relations for Tractor Supply Company. ahead. go please Winn, Mary

Mary Winn Pilkington

Thank you, morning, and good everyone. operator,

Greg CEO; Merchandising Steve the and call our our are today CFO. Chief On Barbarick, Sandfort, President Barton, our Kurt Officer; and

Safe these financial we and the Harbor cases, Litigation Before In uncertainties, and Act This statements including certain XXXX. performance future are company. beyond may of me many to that let reference are Reform provisions the subject of Private uncertainties begin, the under risk control. Securities contain forward-looking and call operating the significant risk our

the prepared in limit for any remarks, update After question, necessary. one differ follow-up forward-looking Although are assurance the the any only call will actual company expectations as believes Commission. with Tractor if questions no accurate expectations may be such it reflected of no in not date give to the later forward-looking Investors discussed. obligation remain statements and prove at statements to risk we could the at can its call and issued and the the this or reasonable, to to expectations. your reflected in correct, assume that that a filings those from the from call. release The actual open materially information your discussed of will Please the in cause forward-looking are our materially should in company's today the this up undertakes operative questions. press Securities differ time. information one statements Important statements of is related will results contained end Supply Exchange that and included factors results

I'll your for the well. call follow-up available to an Our goal is after keep to hour. be I as appreciate call cooperation. the

pleasure to to the Now Greg. it's over call my turn

Gregory A. Sandfort

and regarding comments results strategy our the initiative. I'll call year. you, highlights, Thank several for of open ONETractor our financial our financial a Kurt operational few through merchandising first Steve XXXX that, then And additional on the outlook today's morning will the by providing will we joining and of will regarding the Winn, everyone start and questions. a take you highlights call quarter the today. of financial for and marketing detail following call and good and us provide to the review Mary for

I've elements first pleased how that we already, As stated controlled with successfully team are those our the in through and very were managed we quarter, the control.

as achieved in were comparable results well ticket. a broad-based across the regions sales Our store and strength And by positive increases comp all quarter. both divisions merchandising driven four geographic transactions average in as all

quarter quarter X% sales Our the represent consecutive first results third of a store running comp comp. above

In markets. conditions despite over these of our the sales season late the arrival across results spring quarter many ideal than of achieved less first given addition, the course the of we

our you with individual shared that the develop believe consistently the have the we should As years, given have quarters can be the where will over our business viewed on across sales quarter. by seasonality we not halves, impact

merchandise everyday season to Tractor we product living rural sales our April, thus our current a look trends to where the a With for am cool Although and customers basic of lifestyle. weather confident continued on and we strong experience strong and our have many unseasonably I still we know are spring/summer the markets pleased spring to am needs markets far like We well-positioned experienced in traffic position capitalize in-stock us. selling in Supply in I warmer of assortment, conditions. with have their ahead

resonating attractive, convergence that the defensible, of our and our updates physical storefronts understand continued and customers. experience and and the with are shopping online digital also to in-store are We our

with both increased touch highlights last sales year. in X.X% to compared first and as count ticket first the the me let for Comparable transaction a quarter, few average quarter store now So the quarter on in increasing first quarter. the

of This was year sales EPS we've open billion strategy X.X% has and Net Petsense. And $XXX And the shareholders been in quarter dividends our $X.XX, positive. and share to at both XX%. we are Diluted repurchases an that of traffic quarters guidance. continued confirming new count $X.XX stores we Supply the of performance our out increase for to our to returned through XX our the million Tractor quarter. upon increased based cash combination customer XX marks full quarter as year-to-date, financial

Tractor of locations, four Now new the into Petsense's million the X,XXXth program the of increased first let's We in opening stores more opened North national operational Supply Carolina. now the last highlights some quarter. our members, an and Petsense We Mocksville, loyalty for look Tractor year. April since Club Supply XXX% of Neighbor's at our entry increase in XX celebrated X.X We including Florida than quarter. launch of this store over

our broaden and base customer new business. serve mobile customer ordering fragmented the our significant market, capabilities with fulfilled our expectations. and than our capabilities position to stockyard of growth exceptional in in stores, digital Neighbor's marks see incredibly continued increase anyone store our Between in our stores, the believe uniquely base and quarter business. e-commerce Online, Buy our stores quarter This continue our over POS, during base strong and opportunities that sales Store, experience XXrd and our share at growth better of this our delivery XX% as exceeding e-commerce to consecutive And we this market play in fulfillment in of our Pickup time. and to direct orders expand Club, double-digit Online, in Store Online, e-commerce Pickup to Store of combination Pickup a the role program, our we our us key quarter nearly We Buy of are Buy being to

infrastructure is offering to growth, we foundational profitable products engagement, most and capabilities. enhancing around aligned customer-centric clearly and our As core stated, our strategy relevant objectives: and four have ONETractor building our the driving services customers,

we profit growth years. for and sales coming our solid the drive building in momentum believe and are momentum will We ONETractor stronger strategy, ultimately behind this

We prioritized capital with is to our continue our our well focus. business, dedicated take as increase as stores insight to supply approach of long-term to a In in and customer our capital keeping chain. new to initiatives spending balanced managing the service store-level XXXX an

As we store we estate new update to process our continues Supply last recent potential and our locations you quarter, to real with shared with of returns. and the pleased modeling Tractor X,XXX upwards be over for time, our continue productivity to support

on track open For store new Tractor XX stores new XXXX, XX are we locations. Petsense and to

something is data and Our our web, with new than ranking shoppers growth in by sales outstanding our across they and store, retailer, really likely one XX mobile more assessing number a to in resonating how given out our included of experiences progress recommend XX,XXX of. the ForeSee ranked survey, a as are customers Based our websites proud on from we're retail evidenced website survey.

positions the being as a experience. initiatives. seamless believe turn to call marketing our So and customers strategy I'll said, preferences the ONETractor us regarding evolve for easy meet immediate-need details well Steve I over company, and merchandising our With have an several our of for demand-driven, unique shopping now that as we more products in to

Steve K. Barbarick

brief morning, a update moment making merchandising everyone. Thanks, take initiatives I a morning to the wanted give on we're to this quarter. Greg, that and just through our progress first on and product performance good

ticket. in solid sales we As all experienced of walls traffic comp store performance, store. store as increases average positive well Greg by the sales a both four mentioned, as We during the driven quarter, had across comp

feeding and are treats, on These livestock feed stable bird growth and and in to small had unit as repeat and stores. animal continue our our well and strong drive We to customers usable, and that strong dollars we us sales the traffic quarter, products. sales as our consumable, forage, food categories such edible as across experience C.U.E, pet for products. depend And during categories

the quarter's This commitment Out the those basic reflects customers needs the supplier that to being Here most lifestyle. maintenance for performance dependable of live

strength addition in products. business, footwear, portable seasonal colder than apparel C.U.E. such strong livestock quarter also as along categories sales long-sleeve of to with normal the during the for winter and drove temperatures removal heating, snow We experienced In demand equipment, merchandise. our

we categories of early compared our company in temperatures sales country, of businesses. the garden, spring-like in sales. a part colder the of southern the and by signs the north. see delay did experience We However, toward such Departments did the underperformed equipment, end lawn positive offset to as ag-related quarter, as as power but spring was in well that

in-stock and is great position we're temperatures sales Our the when shape in prepared capture normalize. these to

of the Turning and chainsaws Husqvarna-branded added the of We first early to with category, led log anticipate by our of our resonated the remainder woodcutting the in new exclusive-branded brand exceeded line sales merchandising the has programs the initiatives, The splitters our we're pleased customer Husqvarna year. growth and quarter. launch through base for expectations. continued new we with the

our We or categories sustainable be customers. continue considered would in to experience to living growth that self-reliant

carrying example, and products, of assortment season. to expanded increased poultry beekeeping refined assortment in spring stores supplies, goods our we've the of going For our live number the of

as to as experienced for We sales share an new strong of as In comp we addition pet to food. of high-quality market at with growth affordable price. and our brands food pet exclusive looking Xhealth gain these unit UNTAMED products, brands dollars customers continue well are

brands the throughout these and We year. inventory, value will with strong assortments broader a support proposition,

Chick And their with conducted strong poultry brand. a our is the brand to novice for quarter, décor to we seasoned of very exclusive And customers during start a spring, Supply and offer annual care retail with about We had the successful also Every arrival We talk our to Days holiday everything with Shed new lineup the the importance ducklings. We off our of Our spring Tractor chicks décor. a of the base. keeper for look needs of resonating a live theater. season forward lot event. flock. customer or Red season farmhouse-themed we're backyard

an an available poultry carry chicken of products line stores Our online. with care expanded and extensive assortment

rates We category. have sell-through and attachment within this great had

and team strong continue sales from assortments we website. existing new continues online merchandise. expand mentioned, Greg to drop-ship As our our that with to The traffic can see vendors and

that over online up can Our SKUs purchased. are to be assortments now XXX,XXX

food our look also supporting example experience, to as customers' the to ONETractor a for our test strategy. understanding learn This During with preferences customer and behavior a subscription our pet gain effort is purchasing. and integrate launched the online on of online TractorSupply.com of quarter, greater great a we in we

expectations. We increased are data for convenience focused understand using better their our analytics on by to customers providing

one for national insights the have rollout Neighbor's our a more gain data Club, personalized shopping now customers. to anniversary allow we of for of we year As to experience

identify gain wallet will of with Our relevance analytics new allow board share now loyalty approach, to CRM have customers drivers to continue our accelerate and process pets our Tractor to design on the important they we Vice we out customer messages, profiles the a most the of Club better we're that our Supply and customers know them. support what's that understanding care With our the passionate us to their about. will and segmentation It Neighbor's content, of this in these a that and of the brand. we our reinforce offers greater members. learn refining opportunity their customers most our We're increase animals, and specific about of is build are engagement. demonstrates able customer we capabilities to and what of to engaged to them When and President team to

show our Specifically, our responsiveness targeted members to higher messages.

information in and example, more that in campaigns ultimately Tractor our messaging nice drive customers traffic our rates improvement provide targeted value campaigns increase shopping rates. Supply. drove targeted These click with and e-mail double-digit recent For will a open of

a we forward, differentiated customers, their not look engagement for and season, that our will live them solid approach As believe terms. but to only and we customer products delight selling life are ready on a surprise we with allow

turn I the Now, Kurt. call over will to

Kurt D. Barton

good and everyone. morning, Thank Steve, you,

XXXX, ticket. had X.X% of first of comp our the solid by average increase in a growth was which count we transaction increase store and For X.X% X.X% quarter sales driven in comp a

store additional January For months sales comp increase were quarter, selling the of to day January and was basis the highest in New an the we the close Petsense this being were quarter, day points chain added incremental average. open selling on strongest for we Year's as to the comp our benefited the overall. We Day quarter. with estimate first performance time. comp from XX March our about

The categories and offset an XX.X%. by For first margin to was basis attributable costs. primarily in diesel maintenance higher in seasonal centers, long-term our sell-through at in driven quarter, strategic primarily sales increased due SG&A to increased members temperatures, points distribution from the and team winter investments to increase the gross amortization, increase colder transportation the gross margin expenses from stores higher our percentage by and basis store-level for cost both utilities cost support infrastructure extended by basis XX specific partially that XX strong year. to of growth to of depreciation in and estimate in balance initiatives. We XX in first as of the fuel rates XX.X%. reoccur to points a investment that and The the net factors carrier increase are anticipated to Including quarter wages this increased is the not of increase about points was

Our points. U.S. December credits was rate in Tax quarter The Act approximately our basis to first the signed reduced the effective decrease into first and XXXX tax by rate decreased XXX law Jobs the state was tax discrete some of that driven effective XX.X% estimate and by in income Cuts and realization tax federal which we quarter.

Now and to our balance sheet flow. cash

the of of end, merchandise X% at inventory inventory, quality. great as finance Our from is was a are continues specifically to per-store an quarter. basis We working capital, with quarter At accounts our leverage payable we XXXX inventories XX.X% first were the our believe $X.XX improve about shape and end our in very the its on quarter. billion, increase comfortable and first our

progress, for to and spring our the to remain dividends summer As shareholders capital We seasonal to selling take disciplined to committed allocation. a we season returning spring share well-positioned growing through to advantage the and our are maintaining cash while of repurchases demand products. approach continues

have our in nearly million inception we $X.XX common stock. of program outstanding, shares about $X.X $XX.X the we repurchased X.X common XXXX, of repurchase and $XXX.X quarterly the billion For paid dividend stock our Since repurchased share a for quarter totaling common million per of of million. share our

million Our remaining $XXX approximately the share authorization repurchase of quarter as was end.

to Turning outlook. our now

over made sales in forecast $X.XX or increase of range range an not have the X% to X% year Net X% sales and income of We our X%. sales any continue store Comparable changes $X.XX full for to million, of we XXXX. billion in $X.XX. the the as to continue outlook cadence, $XXX net earnings billion, to as to of XXXX fiscal in the to in outlook million store and anticipate earnings year with share the half Also, $XXX per the in XXXX diluted and performance our second compared into of came of range consistent first $X.XX to sales to half. we to of comp stronger earnings terms in

to of potential to prolonged As a experienced the of expect the for some spring-related delay later with spring, the in in we to of sales start season, a timing season we the the products shift regions. have

XXXX, the continue our year to half year year. of Given the expect to sales we half the the the at in below be and guidance for comparisons first the comp or full above guidance full range in year range second of

margin gross the down to slightly of expect be the flat for rate We year. to remainder

rate margin expect year, to quarter, percentage the continue as quarter, first of points that a of of balance the we in items For the basis sales the first approximately around and difficult we in specific XXXX, keeping lapse fourth the SG&A quarter a excluding gross the to net the gross on as comparison XX the of an mind quarter both discrete increase for comparison and the of SG&A margin easier have bit trends given our for shift more SG&A. XXXX of the fourth on however, a

strategy, a and income fiscal long-term disciplined of greater into Please our our over the first mind rate, priority ONETractor growth towards the is low first business balance to tax of to a quarter to anticipate the being through our discrete as opening We XXXX a capital items the impact committed For the items quarter reinvestments year. our do we range have end of forecast initiatives. back in the range. XX.X%, it effective tax of of first albeit these new the on support continue keep and quarter we year, XX% not smallest remain reappearing stores with allocation to the the

XX remain XXXX For distribution York. XX about and new Supply New we on stores, completion open our substantial track stores, center Frankfort, new Tractor Petsense in of to new

shareholders through value for repurchases. lasting creating continued quarterly to and committed dividends also are our We share anticipated

turn to Now call to the Greg. back I'd like

Gregory A. Sandfort

our And to how during say Thank first efforts am team's reinforce is of XXXX. entire I'd of appreciative you, quarter like and to I what you, Kurt. thank the I'd like

values bring as they Our mission customers. XX,XXX and more lifestyle every Out team life Here to than members our our day serve

wonderful Mary have be members, and exceptional I team by that, to lines am for We like team. now Winn, which a to we operated a business proud the on niche With addresses questions. unique their would open

Mary Winn Pilkington

All right. please. we questions, can Alex, open up for

Operator

Michael of ahead. go Thank Lasser you. take And from question our Please we first will UBS.

Michael Louis Lasser

for lot morning. question. my Thanks good a Greg, taking

Gregory A. Sandfort

Michael. are Hey, How you?

Michael Louis Lasser

good. morning, Good

a traffic doing You guys to quarter, were your last first outlined but in year. good that the initiatives a also lot lot of contributed very you performance

very should growth the that moving traffic best time you how was quarter the and we think some forward? seen the traffic So the is in drove saw in we've sustainable improvement about in first what strong how that

Gregory A. Sandfort

I'll about Steve supplier, dependable first and may with that we Michael, being season. winter extension the and take most talk an in selling of one quarter deal the saw follow-on. clearly the We the

our see is to weather, able being as When to sell, that what perform inventory so that that you've The reload and many it type with feed through as I those are to, So chain need got businesses and were business forage. accelerate being continued well. I'll well able address drove call nimble the your appropriately by available And we footsteps generated react we as C.U.E. quarter. supply food you're think footsteps. going and those to they of having move people needs what who of this,

what, is have being would want would must footsteps. you to the say, tell add? I customer you in-stock, Steve, there drove something you being So I for our probably

Steve K. Barbarick

I add. have to nothing

quarter. the (XX:XX) of was I a assessment think that good

Michael Louis Lasser

think of for sustainable the it's way so Yeah, the right that's rest year? traffic to about the

Gregory A. Sandfort

remarkable about yes total X% as would flat. the were we albeit I one, awesome with plans you needs in regions of a done we've that's saw, a ship, country. the over one's But very would run relatively it's which in an in say think inventory inventory our up the years. because We the the and tight investment to by of the think mean we right customer job that are, the I directed

So any don't. slowdown, I I anticipate really don't

Steve K. Barbarick

share The stores. was think the good is had there, a helpful. I mentioned, in I QX, We've of Michael, traffic add Greg weather our out one would run well And XX as these of got thing businesses up really C.U.E. those of will to quarters. dividends. you lot and businesses a tell focus is I the mentioned, as XX team's around pick continue we in paying Greg C.U.E.

As build are to in we we're Greg mentioned, really priced we're our become right positions continue in-stock and sure better, making folks have and our out assortments, that to get loyalists. that those traffic

So that at for continue. of I when you would core look business, to anticipate, the strength the

Michael Louis Lasser

the question is that and was strong March portion and follow-up middle month, a of going quick that think weather I the expectation drag the on given it eastern my And the moved a country, Kurt was through business. be to was that the mentioned

offset an So as it there or impediment much that where expected? just not was of regions that was as

Kurt D. Barton

is this Michael, Kurt. Yeah.

as everyday mentioned our As we colder able March capitalized weather core see seasons of on month even quarter, we the products. but quarter, to look strength the our of March we're the strength the on at the Greg in of into also month

some that is somewhat was in to the season. business March product weather way So along we a with the offset cold see able delayed the the softness to assess side strength were of core in the we able that spring

Michael Louis Lasser

you much. so Thank

Operator

if Any Maybe the Sigman but from missed online I'm How it's of what seeing much much good Credit may Thank don't next what immediacy? Suisse. much that the Sigman My have is you the quantified How ticket – go ahead. of that. talk general, total you. around around you the it's very first growth about and contributing question comps. store. Seth question it of driven is and is the that? driving items, categories that? growth. Securities see Please just growth? types just things good need, wondering big it's by you're I our morning. actually to and the We is I to online Suisse that And know it like - can of to color in the Thanks Credit Seth tied more this, LLC growing will I. guys the (USA) take

Steve K. Barbarick

look What in different XX this you couple Seth, and and I as growing, business it you from tell our the at double-digit straight would comps. do that a XXXX X% Steve is Yeah. we is online mentioned, of Greg perspectives. And sales, is X% somewhere quarters total it to Barbarick. to of anticipate between got

have, tremendous customers categories up and many when that where to first in The portion Store. that. a out store, talking About you go Greg lot a online to stores half businesses mentioned been in tell reiterate is variety the has that for of And are and want you'll of is have that I work with folks looking of in in members. just benefit Online, the would made, today In cases, business and the the and lot of a already and traveling product fencing we're a importance team of and see business customers our that now since our convenience. there's the Buy our can of Pickup our is I that to that of core pick some them we purchase

ship store store is that store, because are products it don't I grow The and products will many of think within ship four continue today. to to the the convenience. carry element that business of we is next the to walls

convenience grow a are want house, that actually that walls, box and new the the delivered may to customer a shipped customers want for for products well as are into product however vary then as So shipped element both from it looking they coming inside not purchasing, but we're them the some seeing just that of that is the to products our that you home, four they're are have to mix customers good The at incremental perspective. that categories And the really sales business, it. is again, has buying. look And last store or probably that thing box and is any one across There's mentioned, program, of I subscription And like we're our one of we're we're what things category. of here initiate I overall selling Xhealth. as high our small we within mean, interesting really today did, a all specific learning last relatively mention penetration well customers branded part but not portfolio about is the things the a will there a a as that of online, categories as itself. seeing I lot lot products. what those the concentration pretty brands of of are sales as some want. it and

from So one again, - Suisse goes to value it and all whole that really follow-up EPS guidance, color, that I. for the kind of Seth it. for full discrete just that factored wondering the back your brings, Steve. really so guidance first this ONETractor appreciate Securities items original for Okay, the SG&A was Kurt, integrated the Credit the into LLC experience I'm strategy. Thanks Sigman much (USA) quarter, year? One

Kurt D. Barton

Yeah, that's question. a good Seth,

factors part is that three basis is what wasn't and maintenance-related On factors. it was significant weather part – with would There's colder temperatures I that store I is that. to And items. The than not. in expected, say in really higher type brought necessarily occupancy colder XX of the specific other the costs in it part utility, mentioned the points, most

for employee The but XXXX, in the leave, we costs, a couple specific quarter. long-term, is cost the other structure to had to were other medical, related specific that half in part of first of our to specifically corporate that some overall benefits, areas

and spring ramped well be and having import seasonal to centers the transport LLC products Great. us up forward up to lieu Credit of in Seth ramped As to (USA) it. to staged Sigman you to color. East the West - Coast ready Thank that QX. discrete our again, locations, we distribute seasonal specific quickly (XX:XX) Appreciate to Securities right allow gave cost the additional bit little that, a all pre-spring Suisse for I. as

Kurt D. Barton

Yes.

Operator

our Steve Securities. We'll Forbes Guggenheim of ahead. Please from take question next go

Steven Forbes

Good morning.

Gregory A. Sandfort

Steve. Good morning,

Steven Forbes

and arrival about programs mentioned Neighbor's Neighbor's relates remarks the prepared national Club, your right, to we're And just Because it you ticket cycled to Buy the in on But both we the two to was to briefly and now how cycle of ticket. programs, here the with I BOPIS, how commentary these as rollout, Online, expect provide trends, right? that You impact think right? additional Club right, on are reaccelerate you maturing part goal them to traffic, expectations? comment relative spring maybe of can and

be appreciated. there color any would So

Steve K. Barbarick

This is Steve. great. Yeah,

me that Let one. take

off, more bit as the more a Buy already think that continue in about value customers that talked that. to We'll I to that Online, gravitate program. over communicate because continue grow will there's that to little Pickup Store great message we think toward And time, people First I've our in and it.

expand. Our has our operations of to will team customer. job said, care we're like that I done taking a continue sure making that, fantastic And as

terms you. In here more Club, now. Neighbor's of there's probably color I can give It has anniversaried

it in XXX that the And some communication because us looking capture the a of alter we're to it's e-mail out down some and able analytics in of geo-target time, as our the well. were while the sales. QX get getting were down into at of customers these even information. customer. us really given to some able for VP front sense who from of of building now to weather customers are to we've whole we're and CRM e-mail those we south, out itself, going got warm longer new these of out was that support, during those could because that the up same QX us have about customers better And digging addresses a of we're talking weather helped hired team the And today. We and and what north And we able we cold all where drive

value. nothing do add longer-term but to going that's So

giving the being Club enrollment confidence all tell of use future. for of you will be segmentation, now at tool And real and driver us shop, into program frequency we've that sales our long by this, haul, Looking that able future. on the that is you we'll all on the to in the a as Neighbor's loyalty able this in the communicate I anniversaried to spend to is customer future

Steven Forbes

but resonating, then relates customer thoughts Obviously, guess how really you, talked can the test, you are DC prop what downstream mentioned know and to or is evolution thinking the network, follow-up. briefly, some about as subscription just capabilities to it provide but BOPIS about to about to Thank delivery? on this choices Analyst the do more expand you but you're relates the value the as of recent that? right? I Day of we think at initiatives you the a I quick going You home your it of

Steve K. Barbarick

we're would very mentioned that store tell or And still we tests this front. that Kurt things. something tell different again. in you forward, delivery Yeah, I a is Steve proactive three that from we toward on we're working in testing. are today. this actually working as you four delivery I on is look will few

using customers of continue these of stores us us to think to to future. just from accommodate as able will customers. a as differentiator into from, to is for to central them for a for looking as they're across to really X,XXX come the initiatives, us So ship those going States what but not many we be their continue needs. evolve be needs for our really stores move to with us I with And real with United hub, well-positioned tell in we the forward we're And the

Steven Forbes

Thank you.

Operator

from Please go next take our ahead. Sachs. Goldman of question We'll Matt Fassler

Matthew J. Fassler

so and good much morning, Thanks guys.

Gregory A. Sandfort

Good morning.

Matthew J. Fassler

the sales to cadence quarter. relates just of question the during first My

was March and on fact January that a commented good March month. You the and

month on did of and, understand your better; expectations? March quarter you of say think do spring expectations weather that net particular, the weather would the relative I winter quarter for well, out are you of as based impact you out in How versus netted products worse. and How products March? obviously the net that for to If the about think the

Steve K. Barbarick

me And with go let a we us about Yeah, start had Matt. we I first with pretty exceeded is got ahead you QX. looked. already cycle normal sales spring, actually What through would figuring we the the year, for put that what that the and we that, sales tell we think comp would probably and behind I had have weeks way of the feeling the four were good when

March traded Supply up business weather I a of up you has at say that will equally. look And between there, that north. kind Tractor building out tell can't I north you we spring nice cold business really stayed that sales a specifically, as done If and job

stores it quite the the some U.S. the every up northern a to get we the we we of and being sale the opportunity season working with north were north. came – had to were of products if spring time, parts to spring of lot part from to of those our vendors upside the were make gave keeping and frankly we that up on southern cold part a from sure weather possible think the when on we to I some able from of up that country. offset spoon-feeding didn't the But benefit nimble get some country, you able look could. to southern the benefit all that We bad. wasn't just At Unfortunately, at March it the play same capture the lot lack enough of

of Here, been and and get we're Out that the question look I to it grass a factor weather and when thing Tractor Now That's making our is warmer, Company, can are forward, The to Supply will as that closely, of one watching strike through that our lives part for of capture sure third and that right we're there at we've any vendors is those quarter. up the northern many if that supply tell sales. or ready as for very the case. spillover we're of now tier cycles those is chain and cycles, you support been big you how me, and be the plenty QX customer prepared here will a here we capture is we into north early through will will grow we anticipate these many what prolonged in having the

Matthew J. Fassler

follow-up. My brief

half care that year? rest update always impact QX, So of comp lowest would indicated thought encouraged to year business fiscal the first I said to the of as Does as expected operating of weather on year. I the you this believe you that to you did at the quarter highest QX the the point think the you first know the QX? that at the of the earnings margin us, you compression. you first that say as and same-store or Do that level sales of time about the do, and have growth the half that morning end statement entered tougher in also you and halves. the still terms is you you to reiterated in given on comment on hold it the stronger relative the had

Kurt D. Barton

say Kurt. have will first first like anticipate than the and Yeah. will in to X% it at be Matt, it's comp to would at/or that. the so We the said annual a this I'll predict it's we to you what really said potentially impact half, today, the that anticipate is second the I early XXXX. back of above higher that the on see when comp the QX, hard halves we Steve that the we've for go season, best a X% half. half range look

pretty that believe accelerates weather. the hits, season with warm we the when fast So spring it

point, hits so period A And that's spillover, particular to us. ahead yet what of to or of seen. the be Steve's whether it does that lot in season

QX, As the the the But to at comp end QX's in up performance out look we QX performance, year. half guided. we of at could what you you the strongest out, as still still a look for and as and year that being blends comp predict it to first

Matthew J. Fassler

you. Thank

Operator

McClintock from question our of take go will ahead. Matt next Please Barclays. We

Matthew McClintock

Hi, morning, everyone. yes. Good

Gregory A. Sandfort

morning. Good

Matthew McClintock

terms to this think your acceleration talk little of about that improvement on focus that big bit in was business you that about talked what of Kurt bit And a merchandising about most thinking should you'd that how just a ticket wondering can and/or year could forward? a little part I in and looking about? about Steve, tie your specific you. in initiatives and we forward. acceleration what you're standpoint Thank you then going from excited

Steve K. Barbarick

about things. like of about question excited a always because am what getting about getting get lot I I excited I Sure. a

would the I because on. tell a just going are organization of that probably there's frankly much there exciting things window I've I One have, the so many and as in you as is, of time as enthusiasm long having seen things long with energy quite been

products we're few are our product, you, branded brand things move and tell Scotts forward. to and not I with mentioned think exceed of would of categories business earlier, Husqvarna that along terms giving going whatsoever. some really help tools our I other a we're to up continues variety box and I on In a doing There's expectations. And the product within the

that, comment we're that's in these good exclusive And product would behind launch the brands loyalty. our media, stores. whether lot brands. driving of strides a to our The is our even we're In it's more these, addition seeing last really getting on with resonate making of the social whether it's customers and private make and inside of with some brands I them

of many maybe got this concept that ONETractor So you know store. we've

So got, we're up retrofit. to have one new, four opened; far I stores three we've that guess, now

original All of them in are of exceeding sales. forecast their terms

and number with customer from activity There's side. this it's box, as a I'll As the you our of whole there, able future last of and digital going we and to adding XX, of customers, the us being initiatives thing, ONETractor own to wouldn't engagement. into of and move and we've taking our the critical stores ONETractor Greg out and business stores of retrofitting organization. as we're the get last that we're adding box to the got lot XX doing we're think is around fusing so building is this be through to with well we to probably think the our operational our thing place only along The really really product share idea the it with really ONETractor the I new because to consumers all benefit value said brand. concept of very minimize that what online and I well, our our the And going on is side we're forward, our out energy efficiencies. a e-mail reach That's really

will that's seen of still in little price on a brought got see financing to Specifically program the than at a it's we're there. points, competitive really little add lines we the until have think lot that more we program it variety that further ticket, maybe that see that with that resonates the higher into and value what little stores of how we've working opportunity a we things We're are past we a a we with something know get the we of the and But financing customers working But value. season won't a that into OPE have. on. we our

Matthew McClintock

you Thank color. that for

Operator

Simeon from question of ahead. Morgan next Please Stanley. our take will We go Gutman

Simeon Ari Gutman

I to and Steve the weather. morning. want Thanks. Matt something Good asked regarding follow-up commented on

spring cycles and witnessed case, gone lot a of you've this You've lot still a a of hasn't arrived. through I late In patterns. we April have seen and think

fluid we the pent-up number like how instances, on of possible just do demand. same realized in or season? Would about still example? depending sell those the riding very to extent that's pretty So mowers not I about but it's the wanted talk for think I you

Steve K. Barbarick

Yeah.

and thoughts. we couple to A one, that that with start me Let get a question have. question, it's great

it and the a of if comes spring, But season, close different than you organization, even more you I If that tier because in stores say you confined off, we're as season. to certainly were, to insulated in of benefits you lawnmower, which XX I get would just be delay us it's that believe break an would to when do we an buying have geographically your First I so mowers need that states in you little can the country. tell northern the do the I lawnmower. a colder we not end if jackets anxious. the

the rush we're the us, customers come have in believe nimble to of front inventory there time needs within are still going And The vast to enough window is that so we of the our what going in us That's for for the potentially. customers making of the all that of we're capture to sure the key. majority of that knowing we key window Tractor there's this get when be. short

And right so our chain supply now. working is

to continues You weather talk start warmer an as-needed is the transload get and to centers. these on investments heard the basis network as in our Kurt pushing about trigger that And prepared warmer. DC

in to good just that of We position. comes now inventory. upon that we're based make to on the think our in capture solid demand a incumbent I it's So really got sure levels us

Simeon Ari Gutman

any gatekeeper you're the ticket Okay. seeing is weather big the is And then as and on growth offer season TSC from in follow-up we'll the bigger just see infection ticket my if stronger credit out? then card plays related or

Kurt D. Barton

this is Kurt. Simeon,

part able ticket early in we have our tell our Steve seen programs, financing very would sell where to the we've that address are resonates would the monthly with earlier, I a you early customer. ability emphasis started, with partner that very stores season. it's As we you on But the when with may in low believe see, to deferred it's to our and items, it. in key additional with assortments, mentioned regards financing he say new payments and the bigger the upside merchandising, pleased combining while we I and to be the watching

about financing more from end the We where QX of the new will programs. the information to we're at have more benefit able talk

Simeon Ari Gutman

Okay. Thanks, Kurt.

Operator

We take Piper will of ahead. Jaffray. Please from our question go Peter next Keith

Peter Jacob Keith

a Good weather job and nice navigating tough environment. morning, Thanks. guys, Hi.

Gregory A. Sandfort

Peter. you, Thank

Peter Jacob Keith

related inflation a some impact in with this on to well? like deflation you inflation the give oil note, picking sell, you as that the an And raising price us comps environment update up particularly and price? of could of areas give navigating and maybe on guys could if you're any Now or for steel with how us the drum if you're you quarter or Kurt, maintaining beat

Kurt D. Barton

quarter with I'll In during modest at and items quarter look came for take regards from we inflation see, key areas now start those first the the items, side the Steve a input and quarter say can we've net corn, saw that. steel petroleum, and that first heating. I that specific seen first and from would that of it, and strong continue to then a I'll follow those the let a monitor vary some what inflation we benefit bit. to in Sure. of the we the to we on

we're the a to that inflation we'll net discrete anticipating throughout that to but be some the may year. rest see So modest of continue QX

Steve K. Barbarick

off, is, add would I thing for only the it first about like years. Peter, deflation; seems talking I'm about And going we're deflation talking on (XX:XX)

The the elasticity we we move very, got. that talked made product. we've with these tools the investments toward very are Where ahead given we better of the come all have we're benefits pricing the tools can in One the into us as tools us, a of a closely retails about. lot But of it pricing we've do. insight have prices watching we've

Peter Jacob Keith

that guess give type are around far summer Okay. seeing the Thank of prepared us gives in beyond you And about Kurt, what as extending that you a selling expect follow-up. or you season. as we QX? a out you more that that little look you guys. benefits And could as conference? remarks you some QX talking a are maybe mentioned season into and seeing very you much, certain longer I could then regions see spring detail

Kurt D. Barton

the much referred we've much I you this. latter as as we've as is of seen historically It's as say Sure, today not seen to. what yeah. it's that What would

but and in other season, the us Steve weather prolonged April. February, in also, markets the that, there's geographic comes, also spring well months, few bodes there's historically, the weather selling for last warm have that higher certain that when as that to regards areas. north colder – As seen And to even season March, that and allowing and to spoke we've in moisture

the potential throughout may say and spring to it for the assess year. of at trying these cadence that look where occur we as the you're So sales there is

Peter Jacob Keith

All up great. the right, good sounds Keep work.

Gregory A. Sandfort

Thank you.

Operator

of America. ahead. our go Please next from Suzuki question Bank of take will We Elizabeth

Elizabeth L. Suzuki

I that Can sales as at big any know. else customer anywhere in far get are find or can't percentage of categories live estimate of box the like your what Great. chicks at Good least really you morning. major Walmart, not your retailers, can't you product as at

Tractor So you products how competitive to product compared much more of unique what of Supply much your how categories? sell in traffic is those or

Steve K. Barbarick

you defined And but not of in Steve. product. a the for can out I got that you're we've see that value sure we the this in we've you broken so even Liz, that just strong pet Xhealth, buy and food, way. the following, necessarily reason it is but that And it's food, pet say is and I'm exactly food, it if business pet need right? that And

So we product. know a is third of business in our private-branded

carry the and I'll as Even to a not to Checkerboard. well chains; with things somewhat dealer-based, are addition to is lot In a Bad they as and Supply, of we the ranch that, of Tractor more certain like work do example farm that the but brands to use Mowers. channel our unique MTD, and Purina Boy Tractor extent,

go good come differentiation. focus to you. need almost a and is for through answer Where with up work to most we really specific to on hard I'd try So real

passenger or with So our and is much X-gallon And I'll that's traditionally been differentiates lubricants motor us use we has that many pet that, that's of are you we boxes example to and even where what from one buckets and last consumer is oil. think more the can important us win. big than where focus of leave the chains specialty

to So best that's to can quantify. I do the try

Elizabeth L. Suzuki

can changes? many input pricing Okay, great. are there the you update use And can that pricing How more as a price that nimble now digital that to so you of tools. talked plan using about you be instantaneously? more stores is broadly And your tags

Steve K. Barbarick

And we in we're operates, managing Company. a company. with get it today. works mass not. way feel nimble we how learn is for using a we're way really, it, few as being But and the Supply Tractor understanding the a that's We and read and Probably anytime something today but in pricing I of more position we're categories it be a operate, We're like move Do And rollout of on question. a pretty of pretty a see it. it that tools forward stores. can Great it's we'll digital just tested. get operationally handful soon? test how findings just this We to good the

Elizabeth L. Suzuki

Great. you. Thank

Operator

Horvers will JPMorgan. next go from Please ahead. We question of our take Christopher

Christopher Horvers

Thanks. Good morning.

Gregory A. Sandfort

morning. Good

Steve K. Barbarick

Good morning.

Christopher Horvers

margin is questions out think I the there outlook one of the beyond big XXXX.

of guidance If throughout were perspective the the year. is has that year-over-year, earnings the tax the impact, shaped sort EBIT from deteriorate you that year a back flat declines the and consensus out and roughly way

what you transition inflection past rate around operating So XXXX? the as profit drives

Kurt D. Barton

start is by Kurt. would I Yeah, Chris. saying This this.

that we As we plan are relatively expectations. as with the And first that even at team and we our our XXXX, facing quarter executing the outlook and out line and members pressures couple quarters, cost it's cost ONETractor. look new in investing The we'd in our mean, labor as our We'd levels. into with we're of consistent said our transportation next be laid be well I expectations. wages

the and the leverage question So in we'll key answer things is One, are of investments to a XXXX we've talked hold. that, ONETractor, rebound investments believe the in back the beyond to your step combine number two from in in the tailwinds And and And things. profit those XXXX is these the of our to beyond. the that a up benefit pressures of just cycle and investments, starting about, cost we plateauing where take you begin are operating XXXX. margins with

Christopher Horvers

the energy how about markets talk can ag follow-up, back was go that a Understood. ago, on drag Texas perhaps And those how the and and Are business. Then, describe you performed? as comp? company markets you a couple the markets If total Texas think you line and more energy with was quarter in I average. because that's now last changed outperforming just the years how would

Kurt D. Barton

start in it. parts on with Kurt. And I'll had other the of would quarter, for general Texas This will weather that than that. they first some I more normalized market, say I say the the is of Chris,

a a tailwind, area, neutralize for to that thing Texas-Oklahoma is area. weather see that had not first that and is of at farm actually is from of in nature when factor ago. part impact factor say it's the ag in what we've to or headwind economy look strong to any say we areas, bigger more this of start was the to And the of transition is a QX, I a being handful quarter. the a say I'd in robust performance bit than the point, hard and a of years the anything. saw So this economy And a ag a you And the point. Midwest would And southwest, that of of And weather a said. most last at nothing we're a starting at whether

has performance. ag a the correlation not production ag Our strong in not does customer economy to necessarily impact customer is it have Weather greater to and comp industry. that farm a our

Christopher Horvers

the for luck Good guys. of rest Thanks, spring.

Kurt D. Barton

Thanks.

Gregory A. Sandfort

you. Thank

Operator

our Wolfe take question next Mushkin We go from ahead. Scott of will Research. Please

Scott A. Mushkin

fitting Hey, me Thanks for guys. in.

like at doesn't performance seem their has one I was we you I number outlined. in us the job of fully surprised proxy we Greg, ROIC because really – it just over period. I ONETractor did one the indicator and large a one missing as future all, for equity guess monologue little a go multi-year have a your the been always how So does you doesn't there look great and are initiatives, and that. there's guys think you on ONETractor think wondering management's noticed support I management, doing in have like kind if are I incentivized it look for ROIC. could outlining opportunity that what I framework a longer-term a through you is the and at Maybe seem of when ROIC incentives ingredient the comment was at no but seem to of kind you we

Gregory A. Sandfort

ROIC Scott, or correlation standpoint there's correlation at to into to either it direct an how indirect look ways compensation. from Well a multiple incorporates a

I what company, performance And singular short our of you at designed the or It's look been it's not measures, overall the as the are two We of have look But and And one time-tested compensation if been a itself. think they looked side individual of, we you robust, to very when start a behind at component as you for at of look it know, for literally drives performance. when you program, our have capital. we look company. any measurements to at very allocation a component productive. always process at

You perform to pay. have to

of income better package It but interested one, the it a yes, be in. And start could to item to we have have and look singular of Kurt, we there this isn't want ROIC comment? what It's it's change any to look so at at year. conversation the the of was I I be believe the say ROIC look you others. is package, can the part the if manipulate, every way that one we of reason at element. is the at shareholders net of And one is that And me could to I the line an management, company bottom is certain to entire net also like been factors at because to see elements; income members the I structured, results. combination of listen, the any delivers don't are and point. right (XX:XX) It's time-tested the discussed.

Kurt D. Barton

what is And ROIC focus couple and a The ROIC. we we've thing, and a management core that is is the don't and of initiatives, productivity on part mentioned key and looks accountable and even to, efficiency because you to factors Analyst have build proxy on at at measurements that up only times, ROIC. the as our see the we example, emphasis operational in an Day,

is an example few top for emphasize want ROIC Supply. of just use part within So to that metrics our as to one performance I of Tractor driving

Scott A. Mushkin

Great. Okay.

Mary Winn Pilkington

All right.

go Okay, I'm ahead. Scott, sorry.

Scott A. Mushkin

guys no, No, offline. follow-up Mary you Appreciate fine. I me in. That's squeezing can Winn.

Mary Winn Pilkington

I top the so thing. past just we'll the Sure of know the Operator, gone I there. we've hour, minute a think end call

Greg, think wrap I to want you the up call?

Gregory A. Sandfort

Yeah.

only I growth Let for prospects we're reiterate to but not years that model want the about this and come. that Tractor me to Supply excited is the say for year just business here solid, at

share for take how have how our and shareholder position do to solid longer-term we and our can we of based believe have we strength the have business for nimble shared flexible we with the can we shareholders. with value you, and we company year more market the upon on the over ability and creating focus become develop a As as plan

So with Mary talking very other for if questions you Supply in and to we further you available of any have that, forward Tractor will you to all thank afterwards. your interest be Winn soon. We look

Mary Winn Pilkington

conclude right. Operator, call. now that our will All

Operator

will you conclude that Ladies your conference participation. for gentlemen, you. today's call. Thank Thank and

disconnect. now may You

Mary Winn Pilkington	Tractor Supply Co.
Gregory A. Sandfort	Tractor Supply Co.
Steve K. Barbarick	Tractor Supply Co.
Kurt D. Barton	Tractor Supply Co.
Michael Louis Lasser	UBS Securities LLC
Seth I. Sigman	Credit Suisse Securities (NYSE:USA) LLC
Steven Forbes	Guggenheim Securities LLC
Matthew J. Fassler	Goldman Sachs & Co. LLC
Matthew McClintock	Barclays Capital, Inc.
Simeon Ari Gutman	Morgan Stanley & Co. LLC
Peter Jacob Keith	Piper Jaffray & Co.
Elizabeth L. Suzuki	Bank of America Merrill Lynch
Christopher Horvers	JPMorgan Securities LLC
Scott A. Mushkin	Wolfe Research LLC

Tractor Supply (TSCO) 26 Apr 182018 Q1 Earnings call transcript