TSCO - Earnings call transcript Q3 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen, and welcome to Tractor Supply Company's Conference Call to discuss Third Quarter 2019 Results. [Operator Instructions] Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Tractor Supply Company. And as a reminder, this call is being recorded.

I would now like to introduce your host for today's call, Ms. Mary Winn Pilkington, Senior Vice President of Investor and Public Relations for Tractor Supply Company. ahead. go please Winn, Mary

Mary Winn Pilkington

Thank you, everyone. Good morning, Vicki.

questions. On and our Kurt today join are us for prepared Merchandising, Q&A SVP our CEO; Greg Sandfort, your up Barton, call we for open the Estep, will will our of call remarks, the Seth session. our the CFO. After

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

that differ statements results may Although be reflected end statements expectations Important statements results in company's could the cause actual reasonable, forward-looking that Securities actual filings will correct, believes any and to press from materially with its reflected the of the of included its expectations those materially and prove such are or no to Commission. issued forward-looking the it expectations. company release assurance risk in from Exchange differ today the are forward-looking can the give at factors and in the

will be is of call that to net agreement. in update operative date that discussed statements amounts an results this Supply adjusted call. operations, In providing information transition this we obligation no at Tractor and in the undertakes executive any impact per only should diluted discussing income the excludes share earnings will of a contained not information as of the remain accurate Investors The discussed. assume later time.

which earnings section the website. Newsroom of available non-GAAP financial You can find in information additional measures is in our our these release, regarding

cooperation. constraints your to your who and number follow-up. Given limit with ask we to want that the I one a appreciate questions you related please people quick participate, of time the

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

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

Gregory Sandfort

thank And to morning, our Winn, results. you, more about Mary quarter good you third hear us for Thank everyone. and joining

line The Tractor the expectations. Supply operating team I'm very delivered a team in with profit growth margin way strong pleased balanced sales and that with our was expansion. quarter the

Today, positioned we on made of have capitalize and the our better our given are we in tools to to business, business. trends grow the investments technology

Our by our comp improved were store regions. results in where comp growth we drove driven had across sales sales solid moisture geographic year. broad-based to regions or normal last We performance

was conditions. in partially was regions modestly This in by chain drought the below there offset average some were where even that or moisture, normal sales performance comp trends the below

to continue sales strength traffic, strongest categories in average comparable sales the accompanied growth core assortments, increases merchandising round our in in with categories. and solid both summer year We spring experience ticket and across our saw growth and with we our

differently weather play across for These our every demand quarter At year moisture that hurricanes we temperatures and even before patterns, out markets. products can sell. conditions alter as Tractor Supply, levels, the from will vary will

or made no was our adjustments to our customers. the chain, store quarter serve necessary be marketing, merchandising supply exception, This it teams operations, whether

job excellent of managing to an the Our did the supply chain teams demand business.

a of health seasonal the by business. our to customer ability I'm our Overall, core trends capitalize on Supply. a encouraged is geographic Tractor of underlying and Our and strength competency

X.X% a quarter. stores quarter last on let now X.X% quarter the Net Comparable for $X.XX third So as year. third quarter, third $X.XX comment also for to compared the comping in me increased the increased to few highlights positive. billion with the sales

transactions in grew at and average comp X.X% ticket the increased quarter. Our X.X%,

our of nimble stores and merchandise online. a well well of management. lineup as our average was team ticket Our overall both growth as with great in positively impacted And customers, our for by price X.X% our retail prepared was

X by XX.XX% EPS increased despite to margin adjusted was improved improved improved on and adjusted by $X.XX, points XX X.X% an margin XX $X.XX. EPS points. and Gross a basis headwinds. profit Diluted basis to basis points tariff basis, Operating

our have upon performance Based year-to-date, we updated guidance. our

Our range $X.XX. guidance, an $X.XX on EPS maintaining forecast $X.XX of basis, while we midpoint our are fiscal full-year now is And narrowing the share. to adjusted for $X.XX year to per XXXX the to

the Now, let's the and operational highlights of Petsense several look at new location. We stores one Tractor for opened XX quarter. Supply

of is which supply This Township, quarter our store, included the Ohio. in Berkshire celebration Tractor located X,XXX

service continue well to through perform and to selling focus legendary metrics customers. GURA our on Our providing our

our high. GURA experience scores quarter, an at customer were third the all-time For

to Buy business, online our This XX% too e-commerce about exceptional come marks Pickup quarter growth customers to making our we encourage growth orders, resulting Store customers consecutive continue experience with store of up our XXth This to in an strong into and Online incremental of in pick in our quarter the double-digit purchase. sales program.

illustrates and the assets and XX% greater our our than role the in be our of of delivery Buy Between the our our to combination Pickup of in orders This e-commerce their Online fulfillment fulfilled at Store store stores, importance to direct continue of key stores. e-commerce business.

our this convenience greater a Importantly, cost to and with way efficiency. effective customers is serve speed,

when we quarter. are the very in So performance reviewed, pleased with our third

planning of committed turn right to leader I for our Kurt, Directors. time progress is of a Supply. And the search is I taking would before the to to we on call the like Tractor the are future CEO of we update Board's select you the Board need top ongoing, search. the for over And to as Succession priority the

the winning. here of and Board along continue am highly retail leadership to in be to still value. is the talented leader This achieve commitments will make comes, believes In transitions. with time I And drive meantime, and specifically team. long-term rest the business, engaged for on team our shareholder ranch the knows retail smoothest to committed assist delivering will and adding farm while that leadership, confident way we knows will new to our when goal the the of the the new in I whatever I be

over And now with that, the turn call I'll to Kurt.

Kurt Barton

good Greg, morning, you, Thank and everyone.

highlights key of through us some me remainder with walk taken the year. let the our the through quarter, important for you has of outlook of the details, along financial Greg As

we growth ideal XXXX, of had We the comp with solid the All of strong, of quarter third the summer were and started team quarter performance. capitalized on positive, best trends. seasonal sales the out store the July X.X%. as periods having September For

As performance. we benefit same reoccur move impacted through the prior the quarter, our XX not in points hurricane dry of the did hot and along both to lapping extent, our with basis year, which weather,

garden, same We September's line supplies, pet the exited quarter lawn our as such expectations year. in lines and of big store These growth with emergency sales by same offset feed, comp sales. softness product hardware. - At the negatively performance in UTVs with the time, in strength are beginning We was negatively and animal experienced and our from ticket the riding categories lawn our impacted impacted mowers response categories.

for Although log quarter lapping equipment, were we ticket flat we safes, the chain of X-point above were in big XXXX. and splitters our average quarter had sales strength third the as mowers, in comps

As weighted we an and impact to latter the store new performance. the overall quarter of part this on sales were openings anticipated, our did have

effective $XXX.X product strategic gross improvement to Gross The had X.X% was points price increases with manage global For highly our XX sourcing a and of to increased margin initiatives profit XX.XX%. retail management basis to the cost strong team third including quarter, million. tariffs.

year-over-year. promotions Our targeted consistent relatively were

profit of sales net reduction initiatives we benefited industry from freight from chain and percentage as rates. expense a addition, improvement supply in our In lower

and Including as to York, XX.X%. New by associated executive increase sales our percentage Frankfurt, the an XX depreciation with costs increase accounted in facility a of was point basis member basis investment attributable and distribution store XX to team new extent, agreement, XX amortization, transition SG&A, incremental a net points in for basis increased The wages. to lesser about primarily points of which

in by costs percentage were comparable of increases offset compensation sales, lower SG&A and net incentive well the a occupancy as store partially sales. from other leverage year-over-year These as in as increase

the Excluding adjusted SG&A increased agreement, to XX.X%. executive the by of basis points XX impact transition

Importantly, mentioned, adjusted of had operating basis as expansion XX in basis points X and margin on Greg points third the an basis. we quarter

quarter, points rate tax effective about tax from as basis was Our in compensation. a share-based impacted year's increased prior favorably the benefit the XX year-over-year by XX.X% third to rate

on is support in and cash growth due XXXX increase of have our a record balance end, inflation, At billion, inventories flows The the including to trends principally increase of the third operations. from as $X.XX flow, to impact our from basis quarter in track quarter. sheet the per everyday store merchandised from to our business. continue were cash balance the sheet positive strong merchandise an as Now well fast we tariffs, about we generating turning strong a X.X%

very of with inventory. our We're the comfortable quality

our allocation. We returning share change remain a positioned As quarter, well cash disciplined take our we and shareholders to to through the the capital to while fourth of dividends, enter to approach committed seasons. maintaining advantage of repurchases the we're

are third quarter, X to returned $XXX about the quarterly the totaling of cash ratio times we of debt-to-EBITDAR. through of a $XXX through shares dividends our to have X.X managing common repurchase $XXX shareholders We leverage million for stock million million and approximately Year-to-date, adjusted million.

program of repurchased we our billion XXXX, the inception Since repurchase our in of $X.XX common share over stock.

end. was Our the of remaining $X.X authorization billion repurchase share quarter as approximately

turn guidance. now our to Let's

updating are year-to-date, performance financial XXXX. our our Given for outlook we

earnings net sales X.X%, For of to and on diluted store of share adjusted net income rate to of $X.X operating $X.XX of comparable the per and to billion million and of $X.XX. $X.XX to adjusted $XXX $X.XX to now margin year, million, billion, anticipate of share X.X%, $XXX earnings X.X% an to $XXX million, growth sales net we $XXX basis, to per diluted income $X.XX of million X.X%

exclude to the guidance million year, of our executive net to impact million of EPS compared $XXX transition the for share adjusted repurchases We income expect million $XXX Both about the $XXX agreement. of to adjusted after-tax prior and $XXX million. now

shares. For shares about outstanding forecasted be million XXX to modeling are average purposes, weighted

for spending XX.X%. the We million continue anticipated year, $XXX is capital the to in million and be of of approximately effective to to rate XX.X% forecast the tax to range in $XXX range our

Our for deployment over last priorities the have years. very capital consistent several been

the initiatives. is and growth opening priority new Our of stores ONETractor first into support business the to long-term back reinvestments our

stores to new And Supply Tractor open Petsense remain our value we are We through on shareholders quarterly for to and share track new committed XX stores. continued lasting XX repurchases. dividends and creating anticipated approximately

This improvement needs-based of enter our our strongest performance with quarter. customers the our as operating and through of out continues profit we given store had in our year-to-date life impact the could trends comp seasonal we expectation, the sales margin anticipated here year, having results as performance. recall, the in year. half half year such, live comparable Now Being the second third to first the be our sales retailer, a store

not do XXXX, the about prior benefit that to basis in or conditions mind a For quarter hurricane keep that please we in we point year, the ideal of XX fourth anticipate model lapping including are a reoccur. from

store sales X.X% given are comparable quarter the lapping the Our fourth around transaction growth we that of the XXXX. driver XXXX ticket in with transactions anticipates be being growth, will primary of flat, forecast for of quarter of fourth the centered that

making confidence performance in business. our We in investments are with and XXXX supported entered beyond. forward ONETractor this have I believe third view, for that about looking strategy to the the year delivering and quarter right long-term and this results we strong we our were our a

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

Gregory Sandfort

Well, thank you, Kurt.

engagement; ONETractor core me enhancing most remain let building and infrastructure we're progress products and relevant our the objectives; customer-centric growth; to the focused driving and making capabilities. four on profitable foundational strategy, Now these and our on services; we turn offering

key the with include Stockyard supply Supply engagement. pleased our of our rollout specific in Neighbor's our Club enhancing card mobile initiatives our investments We and traction chain. credit Kiosk point-of-sale, The such we're growth capabilities of and our gaining with Tractor offering as chain-wide are examples and

very measured our strategy, our ticket higher program, of penetration Club the to customer part by growth, greater average be from by these our continues data are we the as are As program health increased membership ONETractor we Neighbor's sales of rich sales, and receiving and actioning loyalty frequency of robust customers.

be rates continues In and addition, retention and to customer segment in spending. ranch both strong farm core our

specific program category to is build message Club loyalty data based Neighbor's share engagement allows and personalized This be spending. Club customers. The over members. their frequency on wallet Neighbor's us specific us our while approach to groups The our with amplifying allowing our drive agile, us time to allows to in all strength target of of

year-round five days of TSC recent goal days. Supply the customer was program this reward our drive significant promotion, this build on support in sense categories. new Tractor It excitement just were promotion. for growing with the acquisition card example, able and core time PLCC the credit our With promotion, new For for was to rewards our to and upfront card reinforcing sign-ups X% limited of the offer, urgency a we

that to customers successful appeared new Supply We as stores. XX,XXX that XX,XXX over previously file customers XX,XXX event. existing not Tractor customers cut acquiring and new our in in pet Tractor had during the were our Supply purchased

of new things post-purchase addition, we've have these are These reminders program. customers. our and recent outreach campaigns In such replenishment pet just things follow-up examples across our initiated as loyalty of for

Supply current most We look-alike are managing finding likely not message the our to and that customers We also intelligence, And the customer. individual targeting. artificial only to customers of resonate we social we through with categories technology customer new optimize Tractor customers each target can data purchase media our they that are where individual our but to these and are use new with messages channels.

transforming relevant will that's our overall in effectiveness create messages to We spend. our and our and improve initiatives, customized now the customers that marketing for and have ability

be Neighbor's drive growing loyalty. a brand continues to and asset Our Club growth to transformational, membership

with With provide assortment one-year as and overwhelmingly a rates, retention with continues website. customer of have the SKUs positive be customers tail allows one-year a of nearly on - we our long kiosks to strong our feedback the us now Stockyard to XXX,XXX product retention strong rollout

the incremental expansion base. the level, has for Stockyard of majority the been proven mobile are with driving store of now store kiosks the our point-of-sale kiosks, The these a of rollout At in tool implemented along sales.

card Tractor driving offering building ONETractor The loyalty. sales our Supply and credit by strategy supports

and more supports increase see credit average our and the spend. financing frequently private-label visit our continue card customers offer card use we We that data have our as offers to stores more compelling the a of credit higher across-the-board,

loyalty We have Tractor continue $X card Club become a key now wallet. Neighbor's to our our invest $XXX program for enhanced most rewards credit of Supply essentially, card anticipate to card, reward. tool the holders. in the a able the private to our drive label on to and time, spend and will relationship importantly, Over with Cardholders every increase rewards our that deepen credit in we they are X% program this customers, earn share

let So part an brands From are me strategic offering. of our initiatives. overall few now, briefly merchandising perspective, important merchandise highlight a exclusive a

segments value products a price to Our better our of and with quality is to goal business good, provide at loyalty our best customers. across build and

packaging across exciting plans our and product categories line have exclusive We brands. for extensions, new refreshed

We an third for Ridgecut. exclusive on had the quality quarter, gap a to durability assortments For the introduced close new line value national we brand opportunity Ridgecut proposition example, during Workwear Workwear in exceptional our the labeled we an versus with brand product recognize the outstanding that comparison. category. designed is and

finding the value exceeding brand who and of well expectations received customers our quality Ridgecut our still While unmatched. early, is it by is are the Ridgecut being and

in exclusive of dog lineup & Further Miranda and initiatives from packaging include Xhealth Treats an brand in expansion exciting pet MuttNation Lambert. new supplies our singer, and brand, equine Country food partnership Music SKUs Feed with of

leading categories that relevant brands offering also to exclusive committed across national to our customers. are to are we addition In brands, product

products. us walk-behind the power excited this models being equipment select Looking national store of of and beginning mowers power sector, the mowers, in are Toro equipment in launch zero-turn leader online, both the outdoor They XXXX. ahead, in very of and include spring will we for portable about

commitment A to products the similar We and customer. growing land. our lifestyle needs to productivity of their committed philosophy increase stores that and developing its investing help and offerings this rural to with continually everyday Toro the on customers product meet innovative efficiency Company are in drives

new overall the partnership of both premier positions strengthen strategic to our provides for opportunity products. providers customers alignment, meaningful as and shared Given outdoor to a this companies commitment

the needs they team with an customer. XX,XXX in and Tractor end both QX and needs. we customers' members and work the Petsense prepared more day morning, a To this wrap store hard dedication product approaching, offerings company meet than the with for our season meet relevant to lifestyle as I solid Supply rapidly want and the in are every online fall Out seasonally the coming performance Here across up winter our to conversation for of to our thank and

for to we'd Winn, the like Mary that now with open And lines questions.

Mary Winn Pilkington

Okay. you for five on the want instructions Vicki, the questions? polling to

Operator

will [Operator question ahead. Zach Please Fadem Instructions] we the Fargo. take first go from And Wells with

Zach Fadem

having trade whether you've impact regions, consumer there in around been hoping noise some particularly other of think regions. general? can seen the your are in there's clear the lot any farming focus there Greg, any a macro So, war disparity your softness, little about factors or in you or these and business out manufacturing macro out around if a here talk of headlines I'm on you Maybe an or the air bit.

Gregory Sandfort

I'm Kurt comment give and to you over or to follow-up I morning, with turn Zach, may him some going that two. let thoughts. question And this a

Kurt Barton

is Zach, hi, Kurt. this

Just as needs. before, the Supply Tractor a reminder primary production economy farmers you've question, doesn't heard us serve the from as on ag

For those we lifestyle with do ag our typical needs production their customer. farmers, we serve just like

indicated, so you there on closely as income economy we've And less appear recognized negative. as as economy, that to imagine, well. we Yes, be overall would local and pressure ag would and is you've the it in there is watch acknowledge,

As at those seeing our our and today, just with markets. we customers look we're business that not

be Our core to customers continue strong.

performing region, ag that both ag where economy As quarter the heaviest example, and the the third average of change. on the for the there is strong in one economy, presence and Midwest Midwest the region outperforming is year-to-date

we're to important, very economy. a the So, the excited and we're doing about a trends. in supply, drive change is lot It seeing We'll not to in real this carefully. our Tractor needs watch meet we've ag point for it what at business be got customer but

Zach Fadem

comp, could through heading the three that on of And leverage profit XXXX? investments Maybe you and the now then point on considering improvement some starting quarter, cycling opportunities into through? initiatives your your especially are us this you're roll to update margin the sub walk a us improvement

Kurt Barton

on mean I you've key Yes, Zach, - hit the hit you've there. items

continue targets, sales of past our long improvement term. growing we at investments comp to we We target X% in our are that have, efficiencies. the towards the both And believe, line yet move as over initiatives and with in the the traction top plateauing made that long-term we plus but driving profit

continue We're we We efficiency top And strong point from course, that line, believe as leverage with that getting with of labor see a plus well transportation. comp target our as we're in on there then, X% of sales. can benefits opportunity real we a productivity. effort going around the anticipate is to the X% and long-term

Operator

Brad will from a We KeyBanc Markets. now question take Thomas with Capital

Brad Thomas

this you credit private to trends big could about last the big card performance want about new I bit maybe of talk And little how the color issue ticket the was performing from standpoint little or year. about in the ask back, has a a more in been product Could maybe you're stepping an weather quarter? Thanks. lapping items. if you label as a its add rollout some

Kurt Barton

Brad. those card. This Kurt. is label big Sure, ticket I'll credit and questions, both take private

big that lot the quarter. during a far is the really we as ticket liked ticket, about big there As category

it vary based important seasonal theme can on The is, demand shifts.

one So categories ticket impact log as was from the and UTVs in an That safes And strong are offset area items, specifically an has turn tariffs. generators. such by mowers, and saw X-point in that also big splitters, highest we the performance quarter, UTVs of zero equipment.

the the I generator challenging response on compares and mentioned, side. were Generators, Greg as emergency

overall prior driving continues third performance credit lapping core us last year's in you're it, pretty was leverage you higher card look than quarter ticket. a strong, average more to when year. ticket still performance at big-ticket, give chain the big When the label of private So big of

accounts strong of X% applications, card, performance, label excited metrics strong our tender metrics are a open in far up growth mentioned, since to very of those double-digit we're our private all Greg and the credit As step-up our as lot and meaningful growth, in see showing as reward. a launch

Club it we're this very So, and initiative, sales. do a with both Neighbor's said, excited continue to drive and it's about loyalty can We've with what we'll multi-year drive and our integration overall initiative.

Operator

Capital RBC question And Scot the with come from Ciccarelli Markets. next will

Scot Ciccarelli

to I not from I in but hurricanes, you - you weather XXXX know had again, had XXXX. always kind cycle but there's So, tailwinds some basis do thinking and - would hi. How do you include had meaningful when you of pretty volatility, know also guys just the points more two points, of what a would comp basis be, ? that about XXX back kind of i.e., the add years. tailwind that over kind normalized you're you of guys last you XXX

Kurt Barton

Kurt. is an than just Yes, regards Florence on of was comparison impact both consider the we year-over-year year Yes. those. Scott, hurricane. We to less do. this Dorian frame-up I'll hurricane, was. In the this of

impact. with Florence As hit year we the that actually you basis know, some last And that post year, unlike Dorian to XX you didn't we But called saw we did point Hurricane response a Dorian. about preparedness get and not was benefit land see out follow-up last on us.

at your look to the between that three-year in to XX at quarter. the But two, on years, we about when at we look it, few headwind strong year-over-year important Net recognize point third last you that over the point as XXXX, well. comp. Because and is in hurricanes basis two and the had basis hurricanes point look is a XX a about we stack it

that. when we the it's did in look business. reflecting consideration, of and I And it real greater on core take than and that at on overall think in that challenge the do was healthy comparison The to guidance, our

Operator

We'll go with Keith Peter to Piper Jaffray.

Peter Keith

food I dig category. pet wanted to into

that early July, heart an dog grain-free pet certain linked there you food food outperforming during be brands as the including that in and We announced the know call XX had category Xhealth. quarter. could out were to FDA didn't listed So disease

your pet down on trade of is and or announcement any So, any FDA I'm business curious out future from if of out there the had trade Xhealth? grain-free this risk from maybe impact even

Seth Estep

Seth. is this Peter,

pet, trend we the some post announcement, on in really seeing pleased overall. quarter, of So, back things really the animal industry overall a that we're Specific to business, at you're look actually saw pet looking similar yes, that when the with we the to the performance. overall

the natural do that science-based were a of our able pet bit But out formulations. were able box is today. portfolio and little customer holistic the to that our in have into and some more we're we of the of database to what that specialty products we're What with grain-free of shift within broad we capture we seeing seeing what

was category able as to as in that make we're quickly - mentioned well, the One shelf formulations note respond Xhealth, with be well. share Relative utilizing grow to market mentioned management grains. our with sure really continue with to FDA And presence to to grow our we to continues the there. Xhealth, that announcement is the obviously original of Xhealth Xhealth which lineup, segment wholesome largest you

the We Xhealth bit into of SKUs of shift grain-free our are out and little seeing lineup. a original

But of the trends that see the in of over been launched. next Xhealth you'll even will you monitoring formulas Actually, because things couple of a time. response, being is we to have weeks, course see the one of new continue

Xhealth a of pack those of around You're that to differentiator And going we as and look original lineup food at new Xhealth. Most drive really protect forward sizes. key tailored pet our really see business. to going continuing

with overall, performance. So the happy

Peter Keith

pet ask did a to I follow-up want related on food.

ran in to talked at I guess, as quarter. driving this the great a One end One you that known Greg, guys promo Off promos event. quarter So, the Supply of Get the late traffic about a XX% had is Buy you get runs sales. not company Tractor the being

guess concern customers it, a I that guys your pet good number you've acquired you But forward is QX investor that success? of pet is feel you rebuttal out with this of on there out is food. was maybe question that sales a promo ultimately new there is my So, pulled

Gregory Sandfort

that it One a was was from an things. earlier. designed comped week do two an a it event Peter, Yes. event to was, - really

So, we you it. we year's it? said, event the but you event refresh was and how constitution refreshed can really changed of So, good, the know, last

it $X We the cards. for tied of $XXX launch or X% every into also the the with the back

So, we compelling had much a we like offer. more felt

latter things quarter. of the shifted we So, both part to

eight-page of increase put four-page. the said, we that and to promotion, from the more that really well. going consolidated number items We ran we as in were a We tightened let's down and an things footsteps promotion penetration behind up and went be as And to effort out also And it with the worked on fewer played the very and we out happy It wanted see results. can our way drive the we beautifully. we card. exactly if were

means. repackaging from by it different a of It event earlier way that an an just So, last not was was a week year. additional any was event

Operator

Next to Simeon with Morgan Gutman Stanley.

Simeon Gutman

quarter The the question release, I you've mentioned price time. But doing management, is you which the been margin. it gross Can it's what was prominently then helping I for through And gross this higher a it called comp to on program think out as driver. quantify margin gross you optimization prices? how is In is, margin. much extent, long a press price same assume driving

Kurt Barton

Simeon, hi, this Kurt. is

and margin I answer will Let question. address it your gross me just think

it drivers to to as and key is really that I this. package was the management primary want price margin, gross three point I'd There For one.

most as margin. to categories, pricing able allowing both tools retail as merchandise And price really far share management, a across price and do over market to year optimal get is is the is we've has or monitor team the well these advanced And Then the management, gauge intelligence As balance geography as merchant invested between that share great done with as price well we've us tools for market elasticity. competitive job and price margin. so. as combining team balancing last the that to what in the in, into

to that really of leverage to sales our is and make margin on capitalizing we're ability been all that sure So, factor. today a key

is one, probably for the so most price gross management margin, And significant. first the of drivers

benefit I to. referred Second freight that would one be the expense

margin. gross on third then And

gross the centers. our chain. in seeing often are mixing which And in supply that, speak with We to margin being chain, SG&A, in supply new of investments we investments we're from are but benefit don't some the as making

and import centers distribution ability the us opportunities strategic with to new transload new and reduce pricing. centers miles The gives lower stem go sourcing after actually

there. so geography of little bit a there And trade-off is

did chain the excellent real and So, drive an those margin. to that things and three both are line - top the supply the merchandising gross job

Simeon Gutman

for the of bigger in optimization about there assume is related X% follow-up. an price gross or X% isn't this SG&A? or plus, be I or a made that is end sight the point the And And earlier leveraging to in driver. you a levers margin price continues bigger management around

Kurt Barton

in a lot first, evolve be is in margin. gross we'll There's of on little continues part to some and think making chain answer operating it drives a ahead bit our - say next supply tools, SG&A. we've that us. benefit the one And of every be remember over year that runway the recognize, Yes. couple years. I'd and to on margin can on of the on pricing thing We a different I our the - of got be initially important investment investments will headwind of always puts the But

see So, you will that.

Operator

We'll go to Peter Please ahead. go Benedict with Baird.

Peter Benedict

areas looking kind candidate? question the guess for search, point? is just you, That's any in have then Greg, Board what terms speak of you the need departure, CEO And new first Steve's I this with a question. of at a as the any team color precisely can conducting of for you my on to leadership you think within they're

Gregory Sandfort

Yes.

about let question need. your Peter, - address, me Let me first,

to As there not candidate. that were passed a decision things number that on you the made I or probably was a months the good had before was of probably know, he XX Steve, so

been for having I'm for lot of be lot fun to business to honest. to got team, it honest a reports. into - fun to be so It's really And very Even the and I've of have a it's good me. me both just with a you. of lot kind good such. feedback of to it, with - really And the be and a send direct back that's

is I've there and bunch Seth gaps. really others, a no filled this the I've So, got in gaps. also here group.

As they're and you merchants, moving we're very team good know, talented in talented very marketers, forward. general

So, that's addressed that.

and there Board retailer. differently information piece a how lot drive second on is your emphasis really is using looking there you're here The business what's for? data today the a as of to out Yeah, using

we can a that things find in retail of in time bring as part combine some to Tractor that at the someone business. think maybe that two I'm side here that Board, retail there, background those between Board table and some spent physical that more has of some of and that I together deep us talked And space, is, crossed the about the has a digital help can is being and also accelerate to we

But as the I priority said, not this is for rush. right the any in highest big now. Board We're

sure well. I We here committed to I we're this for stay this doing leader diligence very transition want that making a to sure to transition. right be the that company. We long that, need am as to find be make the due as seamless goes to are

have to right. the shareholders, going We this I'm our responsibilities the at sure we do community, And company to make investment whole.

usual, said, and tough pushing now. jump but very of It's business that, are. harder I feeling we as I'm kind And it's the as right back process into really little maybe where good us a component, about that

Peter Benedict

then maybe, for you. And Kurt, one

say strong kind comp dynamics drove most speaking weather was that like You through? you the to then And in last the last my about of That's is think did quarter, some or safe the question. earlier It a are up toughest and year's it the to I early sounds storms, whatnot. job that in XQ. kind of ease that, the of as move of in that comparisons the nice of timing cold quarter

Kurt Barton

solid it the cold was comp the up year's well. and quarter in you strength framed Peter, in earlier Last performance. early weather that had it Yes, drove

back So be could of a cadence the the half different. bit

X.X% about range guidance X.X% our quarter. is implied in And for so to a fourth

feel the And and and Christmas, cadence and given the solid very a Christi land you about tell range Thanksgiving between we thinking to amount but the even Thanksgiving in we've weather guidance year-over-year, weeks optimize would cadence be between continued could in confident that to and Seth quarter. marketing. of to I lands when the comp the X% fourth about different of X.X%

Operator

with McClintock James. Matt to go Raymond We'll

Matt McClintock

pull investors This total of progress next the out range. be see I or just to that this on what lastly XXXX. couple we can talked the There partnerships as with and don't to in one you into meaningful. probably there And to for of? in how acceleration can over levers visibility then sustain of it Should Seth Thanks. comps Toro, is the be more Could just seem is have lot for And of Greg. on merchandising wanted to maybe in a you merchandising X% years? XXXX sales? focus meaningful we Toro XXXX Greg, start is about strategic an it plus brands

Seth Estep

this Seth. is Matt,

our So after, extremely lifestyle base from be meaningful leading looking for and the core the and to out merchandising philosophy perspective, brands that serve. we partnerships what that can as go there we merchants, we customer what are can always

to call the one to we industry. Toro, equipment your that in of going lineups there, we leading, power specific already the question outdoor felt it, So had

about as industry have specifically, well out large go cementing to to we it, and with look think XXXX acreage. comp that able nothing at being the go a and partner beyond, zero-turn can us leader here, the leader it continue as as the which And but as call the partner as, and when you impact is We as in we together. Toro,

this partnership thing to at key across farm will are things after continue exclusive The drive ranch other Other against key look that to continue driving specifically go finding comp newness, to and we in and after, differentiation, we out of drivers continue and other lot just drive there. and as ways XXXX competitors brands, we'll out four of brands. that a a we go is to to newness the exclusive walls look outside such

as are in new be world, also and in of lot goods as adding pet to earlier, do we up. doing feed, are we line new product things a Greg well but driving mentioned line where going our more livestock Ridgecut our of portfolios our

partnerships, key be to strategic looking where drive differentiation. they organization say and we're us to would able for would I yes there overall, standpoint the So to as be meaningful out new always an of

Operator

We'll go to Steve Forbes Securities. with Guggenheim

Steve Forbes

I But a versus month maybe dry or I mentioned some that sort versus performance weather provide the moisture wanted can about the think the quarter think states, quarter those it where whole, XQ of remarks, to the focus last not? comp drought-exposed you states the in we versus on non-moisture. as lower you prepared of in the the abnormally additional the are color on across

Kurt Barton

In transition operations those month key in to team the in the partnered the Kurt. change nimble key being forage, in And the like is to September, is well. the and what in needed. us. like that And shift is season stock conditions, demand. feed The that end really this the To water. and supply there of cooling key to what's of at moves sold anything are reacting and fans, the was Those being Steve, for is and the C.U.E. be dependable merchandising chain Yes, areas. and items

ideal. chain Tractor is example it's And strength not coming be sales and it might helping when another in seasons us most Supply merchandising of or capture out why the

as expectations So, as those to year, right our we're was produce perhaps last ideal but conditions a sales which comp there in nimble. being line weren't moisture, and actually shifting able capitalize solid by with and

Steve Forbes

but then And the drought it's on tailwind - tailwind, I in out a guide hurricane-related is point called fourth a there comp you right, quarter, follow-up any that XX basis fourth implied in just quick well? quarter the topic, impact cycling think as the

Kurt Barton

about the planning might you and I mean, fall, temperature factor be that when the Not really quarter. is about fourth quarter winter. reacting you're think to specific fourth to primary for drought. And

Operator

go to Grom Gordon Chuck with Please And we'll ahead. go Haskett.

Chuck Grom

duration Obviously, pretty important. is comp

for the the categories. new drivers ahead have card, And you doing that place, you wondering just As and about past could to some guys in sort credit of you've Stockyard, I'm the the card, talked online all then, look we if loyalty XXXX, some us product the force remodel rank activity. of in

table Just that's for on Thanks. if the next wondering year.

Kurt Barton

is This Kurt. Yes, Chuck.

are are drivers the I forward heard what correct? Is what XXXX. the comp think I that going - beyond

Chuck Grom

right. that's Yes,

Kurt Barton

ONETractor now, of right of runway a and lot a focus in really in early is there. mean, Okay. the lot Well, phases strategy, I the continues to the be

to continue products competitive beyond. and exclusive brands ability new and Club, spend for credit those complement label drivers and strong brands our and customers, Neighbor's business, So, to what additional with everything Seth theater with to Supply additional card the drive doing complement primary Tractor we're share advantage and private additional are XXXX will deliver brands. are and of really Those doing strength team and the market creating that drive omnichannel our and and in both new national our

Gregory Sandfort

Chuck, let one thing. and with the stock when or in use starts customers that of the on to our make online. physically us product add with us have they when need they they to rely things It me us the shop all trip

earlier, the able by it built be and having capabilities customer's it the to quarter. ONETractor they the all different need year. building Kurt is needs when by to that the So meet if product different strategy, you to was said think back around as - - It's

we in most into nimbleness to built chain But a we supply address that this of is do customers' those move that business what our and states within has can't. now that and needs the ability a company way XX that competition

meeting It's is year-to-year different be to ours when starts stuff. their having it, we've accomplish they that's do, are really difficult expect strength really an to all and they the able the it part and the been not price So, that. of and with to going business. it easy product the It's incredible of demands need because they but

Chuck Grom

rewind and curious and potential mean, were I'm And then People made lot look when back I private talked just some indicators the what about just as a back the trade-down you wondering a XXXX, early today so follow-up. in your recession about then in brands. to business.

are position you could you I that, don't or comps? in be Just wondering the basket Thanks. we any for early signs that trip And what happened then. anything frequency in on something of comps back the that's the think seeing giving

Gregory Sandfort

them noticed the Customers a I'll to store, as value. a product trips it early change give not many recession, little national were number one. in of what and to we former better as back patterns. a they saw purchasing them what two, feeds a Back brands making shifting our call premium on, and into Chuck, the we let instead in look Number buying you we was feeds. We for. insight because branded saw me

count almost up seeing $X not not The our was We're now. this actual the. average of count change any We're quarter. at any seeing and that transaction right and transaction all customer

and core core the it, be call with, to our looks pleased intact. very company of customer are much business we So, very this looks,

will point any again, look And a So, them be first think indicators to seeing something any than there share but this - different I first time, slowdown it will and little of the on from indications standpoint. see will that we're you. don't probably horizon, I not we the is if we the at last with

Operator

go Michael Lasser with We'll to UBS.

Mark Carden

change been questions. It's any you actually growth your potential guys Can today. for and on your lot the taking if speak for Michael there's Thanks Thanks. in Lasser here? Carden to Mark a mindset store

Kurt Barton

has to monitor the potential This a with targeting growth to X,XXX continue of domestically said. that plan to is what this, evaluate And we continue consistent growth We're we've in our and - existing to sales consistent. existing reinvest at to along value stores point, cadence stores this routinely. been is Kurt. be at it continue We pace, our . in store new and drive out with consistent box Store investing

Mark Carden

bit inflation? and commodity a been on bit of And stack. two-year weather then a about for any that then how driving slowed Thanks. on guys and outlook Can much a traffic the growth comments what's related, you talk its

Kurt Barton

Okay.

So, those. take I'll

pre we're the factors, it traffic over and in mentioned, couple quarter. traffic as then And reoccur at lapping comps last I strong years which drive hurricanes third the hurricane, extent, and On the the same post. didn't traffic, the they important drive

there. And traffic in the is patterns so about when you a headwind there there, think

on year-to-date, different is, on patterns growth in had a a an And of of weather level And earlier comp as I hurricane bit a X.X%. the solid QX. nine months traffic quarter have some could there so in, a and mentioned of impact in every bit the we traffic of question, be

fourth inflation. and just looking commodities, commodity to similar this as modest be quarter. play I very mention just that average far for of We're several would for And net base, As ticket. into year-to-date, that's commodity seeing I'll one expect ahead, the factors

input pass-through increases cost the either manufacturing That's costs. increases cost broad-based product seeing in we're impact, commodity-based to Addition of tariffs. or

import So make things; for adjustments as that influx, retail costs, incurring. we reflects price tariffs ticket those well that three the as direct commodity the we're product price broad-based the

Operator

to Securities. with Basham Seth go Wedbush We'll

Seth Basham

up I on have follow ticket the question. a average

impact more a this little tariffs us wouldn't on mind impact giving on then bit the you of rate. comps followed the quarter and color, If by Kurt, any margin on the

Kurt Barton

Sure.

mix increases, the product the I a So things. that. and is cost well pretty of in between just last balance is those of increases, mentioned, ticket and of cost And a quarter one tariffs three piece level this just are balanced

we So in the mentioned expectation factors. out tariffs, level with cost we've generally are increases, just past, it's in trying our of split have, of line to direct as exact of three of I'd and the say And it's one the our about import. XX% products

Seth Basham

second in relates exclusive tick areas direct quarter of categories. it sales or we saw you or those import brands, interpret and mix sourcing of should As those down away from to a intentionally Are products shifting in the that? how we

Seth Estep

sourcing. we dedicated Yes, team, focused obviously, brand really on an entire Seth. No and have so this exclusive - is

to find strategic are are Some to are we of we the we our we based things other fully have things back dedicated we countries opportunities. off initiatives. I environment, But as domestically tariff the where well some shifted mean, sourcing doing some doing, that things the of that

of you can example XXX% you past one think quality QX, exclusive of That first and even barn on direct the historically, to foremost import meet fans. an example standards Give expectations and product, meet about year we point our been have branded product. our your this

to cost business and the us have us more And supply of the actually this to past allowed tariff mitigate efficiencies let throughout quarter. year, Texas in responsive we found a and land impacts be domestic source that some

exclusive So, initiatives. well. But work brand we'll on as our continue strategic drive we'll to continue piece there to a sourcing

Seth Basham

you. Thank

Mary Winn Pilkington

one we've time Vicki, - please. more question, got I think

Operator

with from And Please Chuck Research. that go ahead. come Northcoast will Cerankosky

Chuck Cerankosky

want talk I a about to Greg, little storing. bit

regard fairly you've store manage We already store already base of in you location to Ohio, X,XXX a over What stores. Your you are a kind of the decision? the mentioned then, what And as store the where doing dense have US? we relocations with in lot store informs got footprint. have

Gregory Sandfort

Chuck. Okay,

say been Number I've out there has model a store a And it since or what for and you for at bit company. typically if that to store, it model use It a the has its four robust. about it location that that. performs you achieves forma here little refined and tells one, place inputs. to been overachieves a place Let is either expectations. me store, we That break pro XX you is time the very

some sophisticated other but like where of us stores, some that. very putting a intended in the said, may bit also take store, higher-volume that's of little an It it's look to a only there at just many maybe off do inputs, possibly pressure stores has, cannibalization So area helps wanting to I through model. not and that be a

level we of we've that a same Ironically, over where stores when maybe a market. seem added or taken that cannibalized they $X we intentionally and fairly worth $X prior the period back we were. things, And We've to million million now do another in level, those to the several reach grown normal that of find just market. years, volume the

of that's there put So, time location. is effort a a into lot and store choosing

you as The certain space, replacing are those we within we're probably But as is, we year-to-year, geographic a thing second as many if look store. as relocations, retail a do at of doing the far market now. stores don't new

it one types versus will town. of to things of because we like locations us some from retail north lease shift to in west path when east our or to them for the be of able retail in ability is small the south store Sometimes move And that the gives these happen. the small to those reasons sector purchase to communities, a

I'm not estate that basically value. no a has sitting going of to piece be with real

are relocations XX movements. year. do XX those So, we'll to less types of Most probably a than of those

now, base, the still as may but very it new one model over stores. the pleased adding right continued town with were, store be Sometimes in new still putting the the of generally of said, and where I use performance we from we're

Chuck Cerankosky

And that Or New the that. the part State? bit costs. thank out distribution new drag lastly, is And a a in for margin? transportation some a you function still reduced York facility called of of Kurt in Is center on that

Kurt Barton

that, metrics that year. this the increasing expense, impact they on they're load. are the SG&A. freight is Kurt. is stem When expense. comes and costs, this metrics. rates reasons inventory reducing reduced an helps the on new They new carrier has and hitting the value a with freight of But distribution are three team miles on transportation, drivers the focused and all Chuck, distribution per freight Those costs reducing all to domestic bit of it center Yes, three hitting on primary

Mary Winn Pilkington

a lot. Thanks

you wraps having thank forward around look you join that for And us in up Q&A. your our quarterly today. So Supply. in for XXXX. we Thank January Tractor to interest call. you We joining on for us next will call I our of be earnings

Operator

very you I'd disconnect. like does thank you conference participation and That our for for conclude your to now today. Thank everyone may much.

Tractor Supply (TSCO) 24 Oct 192019 Q3 Earnings call transcript