TSCO - Earnings call transcript Q1 2019

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Operator

Good morning, ladies and gentlemen and welcome to Tractor Supply Company’s conference call to discuss First Quarter 2019 Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. We ask that all participants limit themselves to one question and one related follow-up. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Tractor Supply Company. this being reminder, a as call recorded. is And Company. introduce for President today’s would Tractor Investor now Mary host to like Supply for Relations Vice I call, your Winn and Public Relations of Pilkington, Mary Winn, please ahead. go

Mary Winn Pilkington

Thank everyone. you, and David morning good

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

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

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

for We will the available after be follow-up. call

to turn over my the to is Now, call it pleasure Greg.

Greg Sandfort

on joining Mary call morning to the and today. good Thank everyone Winn us you,

both and really comparable great Supply. counts. by ticket average a We was quarter first in start delivered Tractor strong driven transaction sales increases store XXXX Our for continued

executed move supply weather Our allocating of did merchandising, country controlling operations, across had team sales, were capitalize the the varying margin effectively a comparable we the and Tractor and that through Supply The well expenses, control. regions the planning as than those SG&A performance store anticipated team great on job trends elements products placement. successfully We our better balanced across quarter. managed our to in store and our chain gross

regions well were both Our product results geographic as strength sales in in average and as ticket comparable positive all store increases transactions categories driven quarter. across and the major by broad-based achieved comp all

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

shareholders of increased let the compared quarter the and transaction sales as highlights quarter average billion count first ticket touch the in Now, quarter as first for year. me store quarter Net to first X.X% X% to through Comparable to are XX.X%. was for And to the share year financial dividends our in combination our returned stores. the an $X.XX, we confirming EPS open guidance. full increase continued we $XXX year-to-date, cash of strategy our upon of We sales the increased the $X.XX on few and performance new repurchases last both increasing. million based with Diluted quarter.

highlights take of of a the operational the at some let’s Now, quarter. look

We stores began Supply new York product shipping opened the Tractor and stores center distribution Our in Northeast. X Petsense location. XX to in Frankfort, New

e-commerce quarter business. of This double growth XXth strong sales quarter in consecutive marks our our digit

and us this label capabilities ordering Stores, and personalization, Online customer Delivery Store, Pickup continued in-store in Direct Stockyard to serve fulfillment growth of quarter competitive we orders our base rollout in private with positioned to our stores to the the believe in Pickup and broaden opportunities market. to Online uniquely to Pickup role in our time. credit fragmented With we Buy the the base point customer our share continue experience we our card combination fulfilled play in And and Online of better e-commerce strong Club majority a see Buy our digital are market key anyone Store capabilities increase Between kiosk and of Neighbor’s Store being than of the During and significant program. base Buy stores the our sale expand as mobile over store our business. e-commerce at our

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

continued take long-term managing approach in focus. balanced business, a to the our We to keeping

future, think to much I recognize is have we As we progress it how to important the look made.

in for to our have invested seamless to support our of stores enhanced digital sales a on capitalize We experience. and convergence infrastructure capabilities, physical the shopping

And with as and a year-over-year building down We key future we turnover our our for have core wages strengthened foundation I our result members. investments with are a team strong store new is growth well capital for including of believe initiatives the an prioritized service spending capital company. In dedicated as XXXX as supply our to of stores increase customer is chain. our to insight and

our service. stores, in to teams to task shift from our and customer their driving investing are efficiencies strengthen We so our technology focus maximize execution can in

process of continues have upwards estate pleased with for modeling be our supply the tractors to over and we store X,XXX potential our support new productivity shared we As And time. real to returns. continue store with you location

preferences driven track we opening tractor new positions Petsense XX products the choose. a of ONETractor XXXX and store stores remain While half in well to meet it and anywhere because have strategy our of of unique want and believe the I us shopping new they locations. has and an experience in need on new for our seamless anyway shifted our demand stores XX easy customers to XX they anytime, immediate they to more supply the a open bit of timing second to number year, the

more to chain I call supply the Now merchandising, Steve for several of regarding and marketing will turn the initiatives. detail over

Steve Barbarick

Thanks, good Greg morning and everyone.

Our encouraging. are very quarter first results

traffic. well ongoing as increases that average the our the was customers. This of categories experienced we in regions. growth was trends plans broad as with For resonating and events continuation by as comp growth our quarter customer geographic We our based number the of driven sales the merchandising all across are in product experienced ticket marketing both

In or our addition leveraged moderate spring the winter it regions. right more and network us the chain well all chain weather products we the. which executed on in was our that across capitalizing across south, supply the teams lingered at the were store Whether with markets weather teams our effective key right to fronts supply The various in allowed temperatures like time. there for customers arriving be during

comp experienced sales continue of a benefit our X to us quarter factors in X% quarter. year resulted to in in execute As performance representing the ability of X.X%. stack the XXXX the gains first a we the for Many company of

average along was product some Our growth management, big with driven commodity mix, retail in inflation. X.X% strong ticket in ticket of growth by strength price

traffic that on We sales forage. animal us continued products strong feed for drive many heating, repeat customers with depend pet stable experience are in to in and to notable categories our lubricants, of These consumable strength and products, stores. our our

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

tools categories as such businesses, hardware. to our truck also consumable products, across broad-based experienced strength addition and towing we and In

traffic quarter. weather solid such benefited wood in Lastly, and weather posted cutting, We trends sales equipment. store favorable categories outerwear from during power cold as gains insulated the outdoor

positive products, and in experienced positive seasonal comps addition, and garden the for products equipment power Lawn all spring In comp lawn will categories. quarter. equipment, outdoor we cutting accessories

represented strong in The XXth double-digit quarter first quarter consecutive our of e-commerce. comps

Store, to Key Online, overall fulfillment visits and store business. Our at are and visits, breadth Buy locator of Pickup e-commerce demonstrates conversion investment in our our the positive. were stores. our and the e-commerce of in assets our metrics as orders such rate Store combination of our their our along unique capabilities fulfilled in is searches driving role importance of approximately XX% e-commerce Direct all the This and store Delivery of Between offering sales. with

cost year. a greater convenience a to this was Importantly, customers way our efficiency. and serve first is quarter solid effective the to All-in, the speed, with start

be with everyday forward, to the basics. we As to customers committed look we providing our continue

have of we stores across and online. planned strong addition, our newness In a assortment

are set chain. Our across spring the assortments

outdoor have an and carry sign including new Husqvarna, all expanded live relevant annual We Tractor resets is for and line needs novice product expanded online. Every forward spring, the customers live poultry product offer spring of of our their of assortment backyard everything offering Tractor garden, Supply power across Supply, categories of and goods equipment, available We as assortments with support lawn keeper customer. the lifestyle Days arrival such localized At chicks delivering an and to and Chick of care the our arrival chicken that of an to look where products a flock, seasoned stores or ducklings. poultry care event. extensive while

team, a organizational to our we committed As capabilities. building are

Club Our stockyard focused to an relevance member as expanding include building offering, driving kiosks Neighbor’s card this engagement, credit areas team quality private our well coming of royalty solutions. and enhanced year mobility label as the

opportunity and growing our brand excited royalty to Neighbor’s the and asset Tractor Supply. results to a continue it This We program long-term Club for be transformational is drive represents.

process automate We will that efforts. implementing technology of the further are personalization in our

to running be at rate nearly quarter, positive. very last noted retention continuing XX% we with As our consistently feedback X customer year is

sales our customer customers. in year members per post average Our Xx are the enrollment Club with up shopping Neighbor’s

with foundation designed the XXXX, time. effectively wallet our allows content customer out drive and This and and data, our of With manage basket key artificial relevant frequency map drive segments. to personalization interactions, intelligence. grow Using timely in deliver established to we segmented segments the Club customer share customer our are of and our approach can personalized members opportunity plans across leveraging and lifecycle over Neighbor’s

store the customers, we to of investing private card share we Over customers of our Club responded to to card training our increased customers. our addition This time, become have the in on key our to drive and Neighbor’s loyalty credit our offerings. our the relationship card year, tool label deepen program, benefits team increase a TSC In anticipate members for are our wallet. will our enhanced with

sales. a customers an anticipate end the year rollout spend of incremental and the Our visit per year. At complete holders, We across tool are a additional more. kiosks for stockyard stores research the shows our the credit Xx level, store that driving by chain become TSC card proven have

our make Lastly, supply we chain. continue to investments across

the Our New Customer facility increase for fulfillment will during Frankfort speed the our to orders. center Direct to began quarter. The shipping replenishment and Frankfort, York stores our distribution newest stores in first support

believe the across in reducing on allow our our while total a will of to are products turn for to opened better selling locations. we and with solid inventory ready support our over products customers, differentiated season not number new we the them their approach call of live mixing fast-turning total only Just North centers This but position Carolina to life center last a that in we Kurt. engagement network delight week, and brings I also mixing a store. the to terms. will X now customer summary, In in-stock surprise

Kurt Barton

Steve Greg and heard and expansion. you, balance quarter resulted am Steve, what I top morning our in from have good profit Thank that everyone. operating growth, and the SG&A across Echoing margin you improvement performance the with line first in pleased

All quarter of of comp Petsence transaction in average. ticket. sales by X.X% a quarter store with increase count increase strong and chain growth which line comp in the in was the was positive XXXX X.X% months and increase our sales comp first comp store we average were For driven of had X.X%

sales incremental from XX a rates Frankfort, seasonal the sell SG&A XX.X%. gross For expectations first through in strong a increase strength was The line increased XX gross and strong member and York leverage well SG&A winter in team SG&A the other of in team in sales members in offset from depreciation as to to was occupancy for to categories were points lesser the price of reoccur year-over-year our increases in with store should assumptions partially increase basis associated and Specific margin All-in, percentage which rate up percentage by control SG&A carrier quarter modest store to not the estimate comparable quarter. management extent The increases costs, a at Including from offset attributable operating incentive balance increased of performance the as attributable increase primarily first which same about for the principally partially our sales. points net XX the New transportation and helped investment These wages. in were of program. net by increase. Frankfort center amortization margin were that These points distribution the continued our the and of center profit driven by the basis of expense with primarily is of our were the percentage we to distribution to to by our ramp new of increased XX.X%. contribute our distribution costs and in guidance. the a pleased as we of costs with de-leverage center, in increase basis as of compensation the That startup underlying field sales year. as the higher to

discrete exercises due modestly impact an This XX.X%. tax rate. rate to in incremental the tax came the effective on with stock effective a expectation associated option Our provided primarily our This was at to favorable benefit the for year first tax quarter quarter year-over-year. below full higher

an billion, basis sheet of was a quarter we comfortable about $X.XX Now at quality. end We are its our payable inventory shape store to first first, a accounts increase modest from At the were our great our the very X.X% leverage inventories quarter. in merchandise flow, the improvement end and on balance year-over-year. is believe XXXX with per our and XX.X% of cash

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

we per as million quarter of $XX.X in and share our our share Since common for our stock inception $X.X stock the X.X shares of just common $X.XX million. million our of remaining share billion cash $XXX paid and we of the For repurchase program quarterly XXXX, authorization have was repurchased repurchase million of over end. approximately $XXX.X repurchased common about outstanding dividends quarter totaling the

outlook now to X%. not be in outlook, X%. any XXXX $X.XX X% sales for of X% our to sales we the increase range to the growth have anticipated to year Turning and billion, $X.XX we changes is to range to continue to store net of made in billion our full forecast of an Comp

margin in XXXX. for Our modest improvement expectation remains gross

the We depreciation are forecasting our and to ramp pressure slight pressures distribution up of on higher SG&A wage ongoing expense. due center, new

key progress our of plan time. over to ability reinvest help The outlook mitigate improvement team are focused pressures Our supply the work profit includes is year. has back store streams progress track on our improvement for chain the cost on on in our for plans to business our and made productivity profit The and procurement. great three efficiencies, and indirect plans

of forecast to to growth. $X.XX income annual sales priorities range basis. $XXX spending Comp are per in be anticipate or our to on be sustainable to the Net X% of the fairly our our to store consistent $XXX highest diluted X.X%. share. range million each about million of are anticipated X.X% to to in quarter within strategic is margin $X.XX X% committed We directed a ensuring We range is all operating profit to

we business this manage would encourage in year about between the you first As half half the and think the of with our line always, the as is we how second business. to

the expected half year. As XXXX, Operating in is profit please of key to performance model second growth mind in earnings of the you stronger and the our be growth. profitability to factors keep cadence

and addition, In XX from quarter points a we cycling about basis the will hurricanes fourth both benefit third in be each. of

to tax XX.X%. below the is to range line, in of anticipated XX.X% to the effective be Moving rate our

disciplined to to capital towards of to strategy. to two-thirds allocation anticipated with million from initiatives remain million, capital growth. range committed support long-term Our spending the a We $XXX spending is going $XXX roughly

business Our initiatives. new long-term remains support in of growth opening the first through to stores and the our investing ONETractor priority

execute repurchases. We shareholders XXXX. as pleased are also quarter for continue our we anticipated lasting do would and through we we our we first committed quarterly to what creating to share dividends plans for value consistent with were said and the Overall, do

Now, to to the Greg. back I call would like turn

Greg Sandfort

the the across quarter members first members’ And to team our our way team great Kurt. want a hard to everything thank placing and correlated nearly organization, closing, XX,XXX for in our believe I customers you, to in work the first do. year. start are our consistently Thank their was efforts. results dedication, directly I they out

prices provide at for and Our low of the questions. continue to legendary we foundation commitment to to service like everyday with will open products now that, be great line the Mary growth. And Winn, our would

Mary Winn Pilkington

David?

Operator

first question Michael UBS. we Thank will Lasser with And our take you. Instructions] from [Operator

Michael Lasser

Good morning. my question. Thank for so you much taking

Can what cited some from and benefit both is margin. to You to us around much benefit an price of give in both ticket management how driver your more gross you average opportunity – is more as is and retail it? that there specifics

Steve Barbarick

Sure, Michael. This is Steve.

tools made. and years, analytically talking those pricing where our really us have make helped tools be they have changes, in investing about For been we elasticity to need and assess appropriate

As was recognized the program went say And into we year, advantage restructured and it. we future demand the pricing out in and we really took field assesses as our a that of there feel opportunity that like end would spot in with good elasticity we that have this I we tool. at day, the and so are we it of

tool that to lean that than in it cited the this we forward. and just past. used move we more a We as we will time probably and have we typically it’s system a So have leverage little continue

Kurt Barton

product. question, on team the add excellent were saying. that second to to specific first what capitalizing And of an Michael, In part seasonal was on to job this quarter, your opportunities the first the will margin did is Kurt. regards I winter particularly quarter,

success is little other I to the to into do quarter. have as the gross fully that those quarters some discrete anticipate benefit future as throughout in year. areas a that indicated, we But it’s bit quarters hard the we margin margin were had extend improvement modest to in extending So into QX

Michael Lasser

And north have question year. anything your is first a my forecast very good Is least are were aside from to and Kurt, that – be as year that the mentioned at for you given did did yet some should of first upside unique your you with mindful the the your we maintain quarter modeling second full you guidance there maintained we leads what anything the those to quarter consensus guidance? factors that in of

Kurt Barton

QX we above was a Yes, Michael, on said, the line faced vast expectations and acknowledge as Steve all I mean in for we us. and have clear three year we initial line. we both our still both ahead top said remaining success us and the a as the top of compares quarters on Greg majority of strong bottom tough But

So, out. pointed we anything haven’t really

on it’s think I of thing year. with maintain our our level a the we guidance the Consistent good at just a majority and reminder this point. strong of believe prudent practice, with it’s the to

Michael Lasser

Thank rest you with so the year. of luck much the and good

Kurt Barton

You Thank are you. welcome.

Operator

And to Alright. next, Wintermantel go with Oliver Evercore we will ISI.

Oliver Wintermantel

throughout just good I if understand or the to there it first right in gross of first the we the side. If specifics a transportation the follow-up about going that but the some going margin were in later think of quarter, the morning maybe lap you cost was mentioned headwind guys. with I transportation on want Yes, headwinds tailwind to be rate I I get that the – that in I that the year, is quarter. to those are year? a part think of understand some easier should

Kurt Barton

were of transportation Yes, and the couple a points they Kurt. part question. still mean, transportation Yes, first, I the then of will on your you correct is I are Oliver. on This you last give answer up. year-over-year,

some that transportation. our We pressures and progress had did the even Our cost some the see costs. common quarter the And particularly we with success year-over-year. some are line we costs easing in those of was expectations, of transportation first making area saw with on carrier in also a of in fuel growth

of reducing and the really on rate we also the And reducing is miles. our Our stem on on we progress usage usage is year-over-year this some rate. made down progress third spot saw spot quarter

anticipated on begin all cycle are the be to anticipated the are higher, of will to And transportation. they as we we those back going costs year-over-year year step-ups. those to to So, of some And while to focus in our moderate that in is half continue guidance. slightly begin of

at margin. have than So we anticipate we overall guided point anything really gross on different don’t this see the to significantly

Oliver Wintermantel

Alright. question. one much. very I Thanks stick with

Kurt Barton

Thank you.

Mary Winn Pilkington

Thank you.

Operator

to And next will JPMorgan. Horvers go Christopher we with

Christopher Horvers

Thanks. Good morning, everybody.

played wanted retailers of get this then to year-over-year weather it’s how terms far in year a view played retail the of what’s did northern earlier has in calendar regionally, how and your So out in the about your out thoughts the on and of so south arrive season talking terms it regions have lot spring quarter.

what ahead? and So far have seen just is you curious you so what think

Steve Barbarick

goods is plays as this I tell the our weather Chris we We in would Yes, the in especially some about when seasonal in factor of business they fall and “out always commentary, our who stated talk saw off. you the talk What saw live side in early strength business, some you Steve. comped weather customers also about we that strength here.” both but is

prepared individual can as take product the look tell regions, got for to want will at get to we specifics I fortunately north, spring advantage you we but that the forward. are in So geographically set are continues the I of as us move for season of and dispersed, we we have as go we we it don’t it.

Christopher Horvers

Understood.

the spring seasonal sort in So hit the it been first of and since like really quarter early sounds north the did moving it’s was south then? selling it

Steve Barbarick

that’s…. I think

Christopher Horvers

Okay.

Can or can year. the I what you card forward? the management the second of credit around sort an to topic in think that in in size XQ, buckets growth drove out continue that you you there somehow to are hot that forth it doing able thinking strong improvement sort last and of been lapping so have the between really was ticket quarter drive, are moderate ticket you other the the BOPIS going you what you of ticket that and and how against the comparison is kiosks of think to steps inflected as So price and do up inflation expect do the here about it take

Kurt Barton

Chris, Kurt, a just the highlights on I this is will of couple hit there.

mentioned ticket good a that the positive key average his can the contributors had the of prepared offset that’s But number ticket cost comps there price average in transportation. increases Steve remarks from management strong ensuring in of of benefited big point ticket. that in As was and the particularly on those excellent we areas we some

comps ticket adding credit these to in that the the quarter label overall we got chain initiatives the good of selling on improve going wasn’t we the lap the our along ticket. rest big private are and for confidence to year. future, Our to have units improvement was was really in the ticket areas we our and of with forward contributed also about going basket as one It line with to the able all in in excited our success the card I primary, the average efforts the be continue saw But lap in it key forward, And to the average but particular mean that. efforts the average the the quarters have to we of we and contributed contributors.

Christopher Horvers

You average mean, ticket continue to put increases? up

Kurt Barton

assumption, yes. That’s in our

Christopher Horvers

Have much. a spring. Thanks great Understood. very

Kurt Barton

you. Thank

Operator

with Forbes Steven to go will we next Securities. Guggenheim And

Steven Forbes

comment response season color our selling local customers on and focus the have engaged are far. how if view possible the the ticket and program big just And to seeing relative going ahead usage provide financing really the so competitors Good morning. competitive some spring special you offering here, independents from to those we regarding then Tractor’s sales? like can for the local wanted you from options what the I out so credit special maybe to card offering thus the there, of financing on options

Kurt Barton

is Steven, this Kurt.

progress give credit highlights you couple on private a the label me with the card. of Let

We move repeat we will where metrics on what of you on visits we at positively another from all active are accounts some our look we customers, key our or with are card aagain the strong general excited with expectations, the really progress mix the the give including above those for at look The pleased we in us key tender indications to line metrics those very And number of it. and that double-digits. applications, performance. expected. up continued about on the for I

our offer that and better differently be were will So offered comes with what’s on ticket items we out key financing. spring ticket or were it you is in is this what the throughout last X% year on consistent. certain there, season offers good can choose to a with resonates and in that the differences bigger than financing a bigger see prior resonates late year customers. our And levels where adds And of the selling of a deferred deferred being that, also spring the introduced that segment off last a as there comparison or Those when year to of customers, connectivity consistent resonating our customer well. some deferred year financing financing couple with or correlation on then offers. bit price year-over-year off. And we And believe we deferred

So last even competition we look year we very a the competitive offering in offering than at and has got greater overall, what the second when quarter. have a

Steven Forbes

just then and the can demand March, to maybe quick guidance, incorporated have update on there right into have visibility us the rates, the in a believe you And think in on were if so you anticipated year now better how early, guide, from so follow-up January full year full had I tariff the initial to guide around are the potential when just the revenue increase tariffs the past are to caution, right, year? some impact provided that the so back you we right, the we guidance,

Greg Sandfort

nimble and said tariffs some new of ticket know the offset that be just call the you us perhaps we we advantage. demand pretty and that, we ability or And to or gives that a offset. be that but to go wave felt believe We a the might it how the even what a we with not our yield we tariffs or of on in have believe back the I off a how three last and can that. to coming also Steven, we the we have said yet can an challenge as played layer good competitive was add-on on traffic, what we manage ability there risk have

that we So quarters year. remaining it doesn’t forward the in the anything for really going impact significantly see

Steven Forbes

Thank you.

Operator

next with to go Scott Mushkin And Research. Okay. will we Wolfe

Scott Mushkin

to going, talk taking how so little your become since it’s business? what’s dive pets of going then Thanks the inflation want on didn’t I what And my wanted on some into about experiencing, pet a I get just I data pet a in questions. our are inflationary, follow-up. kind had bit, read you for to Hey, guys. of the business

Steve Barbarick

is Yes, well supply running Overall, Scott, both comps solid as on on side. side we are the food still this Steve. as the

those pet of really are not at not brands around or is around and our assortment, focus to those business. brands, seeing inflation, really our mass grocery overall performance. of significant we are is sell our our private look own been you XX% specific. in if or that brands Our lot differentiated a that necessarily And some exclusive more and total not are but the There it’s company’s we that’s and to it’s the what in material strength channel

Scott Mushkin

I get I That’s there, new update kind which the the perfect. And those out stores replaced? store you – wanted to I performing have most have ONETractor an are also effort want wondering you been remodeling talk a know driving the the am they I but And Thanks. format is on about some incremental sales? then to stores, of of kind versus stores

Kurt Barton

year and all new correct. out into stores, layout test last introduce that Kurt. only to existing in some chain our new new start not Hey, that and Scott. retrofit modify to the roll and is are we with At we appropriate. warrant this where We This we of are in still very continuing would open the of the did it the to a point, in applying and or it’s new to continue but up Yes, stores. larger began isn’t those format the can remodel stores the this are wanted like What about investment it’s with impact the still the stores any expansion, we At also to be learnings existing tell where that just excited further to or though assessing and on we early. do is stores. we stores but you And and format. test will ROI point, return are scale having of taking we investment some retrofit I really performance to it’s stores

Greg Sandfort

kiosk these is given the the us formats. about. I across tell other we do you And within formats gotten stockyard your ONETractor portion expand seen of with a end have most one I what ONETractor had different of seeing results parts things couple And the it’s put think we would excited we have this to us question program benefits stores given confidence there all areas. to themselves, has into we year. to the that of are the to by of But confidence that the

are buy with from technology supporting we customers pickup a comfortable our and it. seeing where So using capabilities. lot a the of with getting really members store, in team standpoint in comfortable the new benefit technology, That’s online, our

Scott Mushkin

guys. Thanks. perfect for the rest Alright, year. of the Good luck

Kurt Barton

Thanks, Scott.

Greg Sandfort

you. Thank

Operator

Morgan Simeon Gutman we with will go next to And Stanley.

Josh Kamboj

new is so few this existing you higher you coming and also factors run-rate are customers Simeon. the In be they obviously Kamboj weather, but your if like that you over for the of some Hi, of a light of there, think are the where capturing large on current do quarters might targeting and Josh customers from? past swathe ignoring

Steve Barbarick

take Steve. is And I will this one. that Yes,

is door We of over unique itself. introduced lot They is of And a Tractor visits, brand you that locator to a I a of think for up look a most vehicles. home and lot a – our significant different to Supply clicks, comp through that being customers. the store lot site, the something probably our the if at brand. you if result you from of And sitting would ones a across actual the transaction the website look at, XX plus the you is there banner ad you last stream growth. traffic introduced the brand. see quarters be are one very you And look pull are in at of it on Company. it’s if click to are Tractor looking is our marketing easy new think tell introduced customers for you There at your to brand front website on new that, is a runs that Supply the of I growth and And I have that good had being right

So, new looking brand to amount really and is we our data a there of is digital I there value the getting customers bring suggest in. my the got our tremendous in Neighbor’s continue scale as to in Club different in who vehicles understanding in opinion at way are, that we have would out customers

So that’s tell would you. I what

Josh Kamboj

Alright, anyway? of have quick wallet you past thank more your outlined. Do quantify follow-up, are those as that engaging a with during sense of are obviously the a you. your able closely in that just you customers a lot have initiatives And customers you share you core to core

Steve Barbarick

That’s us. as always been is space. with are we part for private lot compete a in folks that difficult the reason our of And of

And unique. don’t insights for assess at so as have continue the I point really we is incredibly at but our some specifics any data, reluctant to And initial out have of we this business this we It’s give you. fragmented. very been the point that to have

Josh Kamboj

Understood. Thank you.

Operator

Grom Chuck will we next And to Gordon Haskett. with go

Chuck Grom

Great quarter. guys. morning Good

and sounds but bad? mix GPMI? parts also the on mix quarter the the do was was transportation to ahead I balance the transportation about a gross as the cost gross on parts, of line, like versus margin a it good, second the may up management? be those how margin and big may first back moving sounds size circle the on to looking price in think bit just year, be specifically not I we how wanted And guess not Just to it drag as quarter, like trying little the moving how much am

Kurt Barton

and some only last to driving to some transportation showing in learn through of still are pricing on some and contributors I first and the the two the the impact mix out we but but quarter on was indicated I pressure than being is contributors those about not the And margin capitalizing the the question both the year, manage which factors in demand benefit is margin heard expected we for to QX factor management as continue it Sure, it then really able side sell able winter well particularly things margin exciting and primary during our overall of then those price we as and less excited we key transportation, customer for to in gross right, through all that If to were on that was from gross solid QX Kurt. gross are Chuck, of we this easing were mix on well cost mix pricing in incremental on key what it. costs from versus as price transportation increases a price transportation, and were both that. efficient pass manage manage larger be that were that merchandizing pointed the a of the of sides with line as and quarter

Chuck Grom

time about cycle customer [indiscernible] could more so about you Okay as mapping great. what’s learnt be? of about progression far prepared that you I your your guys life it like talked the gain you remarks out and how card think the in what potentially then royalty think to knowledge wondering customer the on kind start is have over you to And just

Steve Barbarick

we real between spend a the that do in cycle today advertising customers communicate of are only the will Yes have and and this in talk we and to basis personalize taking very them we data all we management long-haul. the for find well. been email our relevant from you to and if we over to them not cross way customers as individual customer customers they of of then they a watching that different we sent benefit track but we a have this talk then last value categories not digital we were and if so XXXX in that more frequency upside scaled only really is purchase in they and the in see within able can that and lifestyle that came these them customer so or And actually amount they of you customers spend that may as to The scale to we giving customer getting time. addresses mature it previously, lapsed, a out Steve. have to able a really I ruling our it their that what had versions have a to really more we customers way that to the we email the were is with campaign able that will so the mass the them and tremendous have we campaign sell e-mails but shift new year-over-year add are we insights give once, better our deliver what into sense implemented grow is that emails spend we us is is the about some just tell on can not welcoming deep tool recently spend categories in the communicating today talking those are life

Chuck Grom

Thanks very much.

Operator

we will with next, to And Nagel Brian go Oppenheimer.

Brian Nagel

good Kurt, Hi morning. nice very quarter.

So congratulations first.

Kurt Barton

Thank you.

Brian Nagel

want of potential I you think was I real essentially QX. mean these is back deal that that but cooperative, it we on type with we first so better in may have how stuck I than is subsequent years, didn’t in have say have lot. a question as at But see with mean year I prior now systems is we weather that it have weather issues look was comp now, question thing, and think The bigger, where are doing but because QX you to so it think now this topic becoming spring guess touched have had knew, correct, that equipped was X% the I so don’t I I during something to your now the many we if And the period weather should around is all where up very assessment another think winter I call a I is obviously that this stock comes other changing, question the question, first more my to talk solid for Tractor – maybe well, we a quarter longer the break quarter? much weather of I

Steve Barbarick

Yes.

look sales that will spring and that think in as I saw very if what We benefit products. product around year like All the some related divisions weather impact. of there core will work help quarter, call is all saw all you saw see I of us think or I technology we you an organization a concert, of products. is and there did tell diffuse at maturation some from regions systems But using strong the and – positive But the we were business benefit our of positive three from products. cold areas comps. country we

mature chain but organization hard would I tell it’s So thing as supply as becomes our we specific Brian, to nimble. you out any an that pick

got have have and We doing in. we the capabilities what systems support that invested we to are

investments. the are results a see we starting those of lot to think I of

Brian Nagel

about look And the that you particularly think of factor impact business the occurred Iowa, I Nebraska the for question Winn’s the have forward either Mary rule, in follow-up states QX how like going have second that way in the in we as your in with flooding the a for Mid-west helpful. then the do may stick terms topics and That’s XXXX?

Steve Barbarick

Steve This Yes. out, a is soybeans perspective the When sales probably possible impacts macro a our again. production, inflation, be interesting doesn’t it consumer specifically it our not impact from it else. any just the yields see corn is because don’t happens anything what more and to but those with than we specific see at jumps on impact is macro think anything data region, the the geography from I we district, stores material will look that thing because

on having don’t necessarily at those we So floods this point see business. material as impact our any

Brian Nagel

it. Got Thanks.

Greg Sandfort

Thank you.

Operator

And next to with Credit we Seth will Sigman Suisse. go

Seth Sigman

it time talked the at store guidance quarter. are like Good at margins how some we better should also past, the guys. expected, the so be so that as for openings you follow-up cadence think will and second the to this great on half, I view the about the that obviously than all just year does have back half, year like, than better into in the and cadence the sounds change about first wanted your sounded same Thanks morning came in quarter now first play the you on out? it half shifting

Kurt Barton

margin Frankfort first And this than ramp the of still will SG&A store it second the In the have first of that the in center. the up more your impacting impact have half impact half. And on a is Kurt. question the will Seth it to part to negatively cadence material is regards not of The distribution on on of side transportation to margin. as the the half. there a shifting bit, begin operating the But some the while still you stronger in than do cadence operating have key and will on it, just line the that center to with I first remind modest half offset you is, that. the initial year of second contributors we on some operating distribution our guide. really anticipate half to second that performance margin has And de-leverage three as

wages or of start last in until higher the most back Secondly transportation on costs mid-year. up the cycle we don’t to half step really of our some year about

of half to benefits the in the for back the continue year. and from the give third, in seeing improvement on that of have lot of now improvement the half better we the we profit the of gives get factors key plan strategically but point not better implementation right really our starting it that flow then the a the year been working we at believe the the So and in offset initiatives opportunity a second on plan Those us it, of stage And through we year. margin in half initiatives. benefits profit compare second are strength operating of in the

Seth Sigman

for the then year and higher, for are follow-up you Maybe you that guidance, comp into can plays comp assume Okay. those year Kurt that. is factored kept it really one hit us is incentive quarter the guidance? able what’s just that and so you guys the neutral headwind, appreciate that’s full to and should a Thanks we you Thanks. that out just for or the that quantify I if incentive numbers was remind the in the how

Kurt Barton

QX the below the center is compensation impact Yes. we a Sure. last distribution its that its The of in QX than impact important level level year. less thing non-recurring that was saw of the compared on cost. and the was factor impact incentive on to less quarter of Slightly

to the point in hit for XXXX. if as our have incentive not plan our for And year with we be So de-leverage which guidance it easier begins for moderate the we line compares. be a year would compensation should

Seth Sigman

Okay, understood. you. Thank

Operator

to next Barclays. with will go And Matt we McClintock

Matt McClintock

yes, and there morning they two because the everyone Hi also prices divergent go of you but questions, congratulations. commodity us overview good how now, commodity just first the of an one are course direction, if you year? going you just quick wondering was about is may on given that pressures an give flooding, right thinking your impacting the of was in us such follow-up cost over kind crop the you wondering business I a I costs, Thanks. going where is overview can have one in oil of just other, give

Greg Sandfort

floods to I it, for inflation to was would saying mean line just North say and with I to I the all with I we am keep that Matt, and was don’t I eye year. to one. for in don’t in last a year, what’s of on this from second that’s happen over expectations first an carry let macro anybody, the would quarter say with really half me the was about there. perspective scare saw that. what basically going a Relative we just what start of got quarter from know the that but

in say And and is, that’s So bit that’s products. some would seeing kind we for are a it a we of steel going forward what where I seeing that seeing some we also in are bit are remainder what we this are little expect gains we little at and of would the year.

isn’t business significant, a modest moderate – there Our lubricant but impact is there.

Matt McClintock

and in by about of helpful. that’s just up Michael’s should X% potential I been to and they would some terms was And I straight out, are we think about stream initiatives building, what your of that going forward, Okay, comps clearly quarters you in it’s driving playing that started think acceleration these are playing Thank are initiatives it stronger say comp clearly inning comps, out X X of leveling or of X forward? a think comp another you. how seven tomorrow in question up talking the wondering because kind today forward, should been Thanks. of going tomorrow, that’s acceleration above Greg great of self here be that off and has going going in follow-up we could terms to just but just or meaning direction trend we be, a

Greg Sandfort

Yes. This is Greg.

you. what is tell I would Here

the about call here most of maturity. talked have anywhere are the they First stages nothing is near And morning. the been all, and of ONETractor of strategy of all different what that maturity, would components I in

embedded. As Kurt profit comments, his of mentioned to in get starting just improvement a really is couple program, PIP the the

there front for a of is these things. in So us of lot headroom

been caution in here would you Steve here we our little has years what years. plus. over we been Kurt over in now XX So XX business always business have has been this years. XX a

that see in half game. is really can You a

get at You initiatives such of it’s probably look way half we our have into what game. put on components we what momentum a got the half as that game, business at second felt That’s these basically gaining look got a But to and towards to that’s and quarter the initially. more you guidance. we it’s not halves and

opportunity ammunition wouldn’t we got say would very I is are any today have pleased And forward. greater forward. earlier, what we number are and are to highlight. to of call all-in with too early said things you year fortunate to Steve believe QX. we as are that The there, working that have I that. they it’s carry I that in But in have to thing We tell all but that start is is one a moving is comps units. the We there that drive can business this seen the basket

Matt McClintock

of Greg Thanks luck. best everyone Great. else and

Greg Sandfort

Thank you.

Operator

Scot we will RBC Markets. Next to go with Capital Ciccarelli

Scot Ciccarelli

Good guys, morning Ciccarelli. Scot

credit two So very specific program. on I have label questions the private

actually the those what of all, of then label percent using credit of now Supply’s second, are deferred coming advantage card, And from tender First Tractor percent people private of taking of your transactions that the tender? are people what financing. is

Kurt Barton

to bit day the investor with start move at that some more digit card. early. I community just the the well. our when on of to coming will I outside a second we year little add re-launch able And the with is are And May low What targets being historically our the in expectations. mark a belt Kurt, maintains have is with tender. single at good that up very right this in to I Scott single-digit will give on this from we with a have it’s line the It’s still under of growth for initiatives will it as double low have we we progress of that making and we still detail on digit program percentage penetration But plan seen yet we our year-over-year, question. that said

what momentum And strength now, financing. in item, But say growth pushing the much on As are we solid data program. on the seen we the financing particular as lot they specifics I customers don’t would really ticket on it are early have deferred have is that program. financing non-big nor as from well are the financing right the big and a in how as both seen have of versus real in the general, growth ticket standard we sharing the that’s taking in deferred spending I deferred just a

the our we So would the certainly exactly to in resonation financing deferred with with the and is growth general, is where customers that want correlated the program accepting be.

Scot Ciccarelli

Okay.

reason offers? dramatically of financing the has words, is because the in deferred increased So has as it tender the other that as

Greg Sandfort

key the a big part contributors. It’s one of That’s of it.

being like to don’t standard card able the buying Just the and grow on the financing. ticket well we are in outside repeat of big understate visits we deferred that fact want would financing to as

Scot Ciccarelli

Alright. guys. Thanks

Greg Sandfort

Thank you.

Operator

next we Fargo. Wells Fadem And to go will with Zach

Zach Fadem

you utilizing what Could are you into personalization me said you the here play incremental about an targeted more actually more as Hey good Club, you to how morning. opportunity, sales little data for Thanks Neighbor’s promotions talk extend technology, does technology for come to and implementing the are you in. drive today? taking a new mentioned but

Steve Barbarick

the the Club communication amount inventory. that the comes of parameters data guidelines with large program take but value that also directly we test be Steve. set understanding of then AI them Sure. learning through of in. I categories, This will buying and address that to and where have to put product we and to in go mean e-mail able is understand is this we not really Say in just take through personalize to basically who the their SKUs, Neighbor’s their machine through key parameters. good technology some allow see And that’s type will them, us key

trying than to e-mails, rather So just are grouping linked e-mails. do we the some

to That’s get that able to from e-mail mentioned X,XXX as refine can data, and the these to more specific over rates and better and customers. are system out We in to continue will to how responses get I and out the customers. earlier as triggered e-mail time now we work improve versions we communication click more continue

Zach Fadem

in plan, half of benefits indirect with on to talk like and profit how second benefits particularly for all do could of items other out store this what’s quickly the and on the or expect DC this year you then about evolve the And you improvement productivity evolution in it. the then deck Got the spend years? just the terms

Kurt Barton

this Yes. is Sure. Kurt. Zach

it. on we have are track I As with said

that process. efficiencies important know The initiative profit is plan management first it’s our and is is strategy because say process on from the in I automation. on that leveraging focus thing I just the And against point out cutting performance cost the sustainable our contrast would and benefiting – to to would improvement re-engineering, a about

in stores lot of plus the launching on XXX in-store now re-engineering. in are We process productivity. a It’s test

reduction standards pilot are transportation optimizing in on re-engineering management back along distribution flow half start labor in the costs we carrier the at and costs efficiencies the – driving with to in fairly of are and will in and on We believe of on lanes efficiency through one center well we side year. which

like good So long-term to sustainable, making progress the after ability go we are on the program.

Zach Fadem

Got the color. Appreciate Helpful time. it.

Kurt Barton

you. Thank

Mary Winn Pilkington

David, I of the have hour. think top we hit the

to I Ann the to close out joining to our I around on call, Marry in you will be mail you talking forward quarter if call questions. everyone thanks call. July. second any So can We and think have we the and look

our be day. us. on Community can you great here hosting will join March in Investment we Nashville. in Supply hope More interest Day and importantly, Tractor a your you for Thank XX have I

Operator

Tractor XXXX today’s And quarter conference We discuss that to does first results. thank you your Company’s conclude call participation. for Supply

now may disconnect. You

Tractor Supply (TSCO) 25 Apr 192019 Q1 Earnings call transcript