TSCO - Earnings call transcript Q4 2019

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Operator

Good morning, ladies and gentlemen and welcome to Tractor Supply Company's Conference Call to discuss Fourth Quarter and Full Year 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.

call recorded. this reminder, a is being As

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

Mary Winn Pilkington

everyone. Good Thank morning you, David.

On our Lawton CEO; Merchandising prepared for open call former are remarks, Greg Kurt Barton your Hal Advisor; for the us up Estep, join of and we'll will Strategic and today our questions. our the Sandfort, call session. our CEO CFO. SVP Seth After the question-and-answer

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

uncertainties these are our cases, control. many risks beyond In and

the of reasonable are such Although results from expectations. reflected the and expectations forward-looking assurance be differ company materially and its or to statements no can believes forward-looking in prove correct that its statements any may expectations give actual will

the Securities that factors the from these filings risk in related included could statements materially today results the Commission. to are those issued and the release with forward-looking end cause press and at of Exchange differ actual company's Important

time. in information accurate Supply in contained any assume later this operative takes as information update not The date call. no to discussed call only Tractor Investors remain the a at should is obligation discussed. of that this will statements

agreement. per the the transition impact amount the providing net that of discussing adjusted income and In of share diluted earnings operations, results be we'll executive exclude

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

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

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

Gregory Sandfort

call today. on everyone morning joining Winn. Mary you, who's Thank the us Good

discuss moment thorough at we Lawton for to on CEO. right a to as engaged our comprehensive take a announced leadership Before I'd and Supply company joined officially change in identify mid-January Hal results, in Tractor we this next growth. you like board update The CEO and and President in in search that fourth the the quarter the the chapter December. leader company's

believe CEO excited very right company. cultural am Hal Board leader Hal growth great I multiple the the tremendous for Macy's. importantly, more Supply. I a including Hal for and experience brings next is chose Tractor Home Depot, the is as he that the retailers eBay future across And and fit our of

be to transition. will will through As out my very we this be and My as August have expectation board previously May. company is communicated, an available that and advisor will Hal to through I serve continue term smooth the a

believe the will be Tractor as unique earnings company a As as I an retail. my serve company The been Company special this want Supply. other reiterate the culture honor with I and with in in call, privilege hands no of Tractor to last CEO a like Hal, has a that is great Supply is it to CEO.

a out has life here. is live company our helping The customers leadership place passionate team in about strong that

years, I has is ahead. Tractor in the While tremendous Supply made progress opportunity chain recent considerable believe there

our Hal And a before quarterly turn and for few to over call comments now address outlook. the results I'll we

Harry Lawton

Tractor morning, at Good Thanks to Greg. everyone. great It's Supply. much, be so

results has achieved I For leadership remarkable the admired my and many Under his have company. to career, retail this follow years in honored I'm team watched footsteps. and Greg's in

successful chains at at customer also and data, unprecedented retailers execution, differentiated flexible an for merchandising retail experience. need will technology, but As a retailers, disruption continue you at same experiencing are excel Leading acutely to to key be and customer however, the aware is industry only supply reinvention not the service productivity. speed. The and

more X,XXX of very our balance our high by that and substantial a supported online secret by and sauce customers brand generation. sheet Supply part scale, sites, loyalty culture has cash business Tractor stores an complemented incredible model is flow than a that is With with strong significant our

At differentiated we our an competencies part a well-positioned more have integral and even lives. to set robust experience, Tractor are Supply, a of of become customers'

to forward. the I'm Tractor place team opportunity on excited the to One business foundation to drive has build about in the continue the

our the We year. on XXXX on delivering plans our are coming initiatives and committed to for executing

announced. customers. Supply and months, I distribution The learning future. team been coming in engaging and I and look our In you time out members very our be Tractor team weeks has stores to spend since the forward as in was I'll with the transition and listening the me welcoming with centers,

And the call now Greg. to over I'll turn back

Gregory Sandfort

Hal. you, results. for to and year solid a with let's Tractor sales Thank XXXX was And move earnings. on now the Overall, record Supply

our job we for team on great topline result, expectations a While a the operating controlling expansion delivered manage. XXXX as margin the meet not the profit the quarter those and of of the did And quarter we fourth both things could did year.

the categories. factor The temperatures, our was hampered ability sales topline our fourth with sales on in results unfavorable the seasonal to our unseasonably many we weather seasonal warm negatively numerous impacted Across quarter were drive weighing most markets quarter of which in in trends. significant

Tractor I customer that the over if time, As exist. influence customers' purchasing a will there little Supply you relatively shopper with that the need doesn't shared consistently decision needs-based and have is is demand-driven

other six over Christmas the to a softer as heard we trends, impulse days our Given gift-giving customers' believe fewer activity the purchase than and on degree had traffic to from purchases. unable have the we And traffic between the -- ancillary I capitalize impacted prior year Thanksgiving greater anticipated. stronger were retailers trends you or

experienced again with And change, my a quarter fourth and quarter the the with the Over XXXX the was Supply, case sales when arrived returned. temperatures have seasonal also as first before years of seasonal impacts I XX of Tractor in the XXXX. always demand

which health sales our as in solid with solid underlying ranch farm generated overall comp in of the our of line Despite increases our sales, historical round remains business year by our and norms. comp the categories, core evidenced expectations continued strength the and store softness

executed teams how effectively clearance supply and planning exposure. chain, teams across our The inventories price operations, margins optimization leveraged The reacted proud well placement. very quarter. effectively had this disciplined We control business. to to the retail our managed throughout quarter am minimized I and fourth and managed our and we merchandising store capabilities team preserve of cost

few year. me a let full financial Now, highlights touch the and the on quarter for

X.X% fourth sales quarter, sales In strong record year increase X.X% as continued we in the comparable sales. sales store lapped billion in For increased increased positive reach a net quarter. store the and comparable year, prior X.X% $X.XX a the to

increased through share EPS And diluted was the quarterly cash $X.XX. dividends year the shareholders. full For $X.XX, X% of we the quarterly this $XXX our to cash EPS consecutive for million that and adjusted combination the diluted to fourth returned increased year, ninth We've quarter, the repurchases our $X.XX. shareholders was EPS diluted dividend for was And and year. for

Supply of kiosk XXXX. stores the We and completed In Petsense We We terms of made mobile to across the our in-store operational our stockyard X,XXX eight count increasing highlights on to solid locations, stores. opened all stores many XX rollout of new progress chain. strategic over and store ONETractor POS for initiatives. Tractor technologies

million as retention Club Neighbor's exited and year of program experience loyalty membership members with nearly to continued approaching a we We approximately the rate robust XX%. XX a

In our channels. various throughout also great improve value we digital high made to and addition, progress customers of targeting look-alike customers

once again and to sales invest business and our quarter the for grew dot-com in continued We digits double strong year.

enhanced Frankfort significantly the support Club a card Our continued new members. we our York was to ramp-up our private our label in center store reward of credit distribution to growth X% new New in completed back with program Northeast. the And Neighbor's

also And Certification to making U.S. for LEED second Certification We XXX a Silver year Most for Tractor named Sustainable was LEED our third this facility Barron's in the achieved Supply fleet. Companies the row. in Silver this facility,

solid built has the handle summarize, for Supply. team a Tractor robust and the plan XXXX. year And was a to So, a has good for on business XXXX

And has Tractor our the a farm growth. has our over the been All is of been customers, grown has team team Supply mail-order that a years' Tractor business time, country. total as our members, XX catalog ranch shareholders as passionate to accomplished over and In the foundation at our communities, from largest retailer effort. well in my Supply tenure to commitment XX-year

to I watch growth to will a the my Hal express to excited and members nearly done. Petsense and and years. coming XX,XXX team want appreciation team the Supply progress and Supply across in I'm the And provide the job that Tractor for well gratitude for Tractor

for outlook on XXXX over to Kurt, who for now provide XXXX. turn financial call will our more our and results I the details will

Kurt Barton

you've you the your friendship for entire accept Greg. Supply On for done my of for Tractor thank your Thanks, thanks all the years. XX team, behalf many Please and leadership. for last

for into results quarter right and get the the the let's Now, fourth year.

demand weather-driven and a that customers, help of right they core price. for can us. mission it Tractor that, can then with different sales growth the right we are sometimes, be works at at little the and quarter What against there Supply. our the Every is need time Sometimes at products is our

footwear, in Greg as Offsetting core was forage equipment, safes heating by driven animal as toys. what strength health. insulated sales livestock and shared and such generators, continued sensing with comparable on such ranch feed, categories build strength our rubber our was categories, performance you, To softness in farm outerwear and store this

retaining Within of trends breadth Of we sales consumables, data product are from retail pet our the impacted offering. customers, shows of grain-free industry the by our food trade trend significance, our unit down average category given was products. that across the category our

sold, In tonnage continued comp total of pounds food. pet increase pounds to drive the as we of quarter, or

on a were XXXX, down the pet quarter. store of mentioned, The to our performance. trends benefit Greg cycle well, continue We with categories half response in impacted unfavorable third in to XXXX, mid-single categories up until in fourth the we from anticipate trade first of hurricane big ticket As the the the emergency would lapping quarter supplies basis. our trend coupled digits comparable

across negative we we year air weather basis estimate from believe two-thirds comp softer from fourth points sales impact experienced weather. the expectations. you the This We compressors. versus represented of warmer results the quarter, about with miss stoves generators, XXX that, shared benefited Last and about comp safes, year, by our in we the

a quarter, percentage sales increased XX.X%. to to management from gross the market the initiatives statement, of lesser product income increase a direct overall by margin work our to team's effective the expense the fourth as XX tariffs. they as mitigate and net the of impact down driven margins, extent, in This freight points basis was reduction reduction for primarily our and cost of Moving a

deleverage to percentage York. and and store SG&A the basis XX.X%. quarter sales facility in a store of associated increase new performance comparable Including primarily amortization, as to for with three the the fourth points given New depreciation sales attributable Frankfort occupancy The costs personnel and costs and other distribution was increased incremental

these offsetting compensation were decrease by in well incentive as increases as SG&A disciplined team. a cost the Partially management

balance its quality. Looking we we in sheet, good shape our our are with at inventory and comfortable believe very is

year, we coming into wrap-up we're the As months season. enter the well-positioned spring transition winter the and to

In Total in XXXX, year. growth investments prior generated areas were the million, stores, we supply and about as with oriented operations chain the capability million an $XXX digital of being increase new and from XX% XX% being maintenance $XXX cash infrastructure. capital of of related this expenditures approximately such XX% remaining over

to while maintaining times our to dividends to through a repurchases adjusted allocation. a cash We're of debt capital committed shareholders managing approximately ratio to returning X remain our We approach to EBITDAR. and disciplined leverage share

majority ladder. with maturity debt And a comfortable is very fixed we're rate. of debt our our The low

of year, our the common we stock. For million repurchased shares nearly fiscal X.X

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

repurchase share of authorization $X.X remaining billion approximately year-end. Our as was

for the to will across continue build business. foundation to our now Turning strong we on XXXX, success long-term

strategic initiatives ever-evolving to growth. allowing exceed on focused further our us us expectation are customers, position for and Our

core relevant our products The lifestyle for services plans. merchandising the at is offering of and customer of our rural

introduction industry-leading the brands. differentiated of We continue and will

strong more as this Coming Toro the be about into the Toro our has energized a launch existing spring opportunity attract reputation to resonates us customers. is with with really brand and with season, for the provides quality that customers. very the our relevant team brand new of The customers

equine further In Crown added lineup. industry-leading already category. our across Triple enhance and category solidify majority the Cadet have We as Troy-Bilt. are in addition the of our lineup garden the brand and product strong also destination a we with round our help of our offering the broader will of stores a brands these and expanding Cub position premier feed, Combined, our out assortment lawn this in premium to

New space growth refine productivity by specific category assortment help across our product technology to the for plans SKU will be mix. and implemented and drive localization chain

shopping selective be expansion as and with such store enhance addition, for within on equipment. Carhartt brands workwear, experience winning the to livestock looking feed an Purina outdoor store we'll power In in a Husqvarna through emphasis in

is imperative offerings. brands customers brands our and role we products play with the low our in an it stores continue Overall, price that merchandise at our important to expect. everyday Exclusive

expect see and line portfolio. extensions to brand across exclusive our You can refreshes newness through brand

new For example, exclusive expanded footwear Ridgecut, our brand and be workwear will accessories. into

initiatives to through with more an our play a Our on personal Club our connecting level. drive Neighbor's role loyalty program customers in important

receiving continue program. our that and Our Tractor relevance, loyalty. to program is to customer actioning we from to rich are loyalty engagement we We're Supply Club the will Neighbor's elevate greater a loyalty drive transformational asset data

be increased by as to greater average and ticket sales, customers. these robust continues of frequency program very membership our of penetration by health sales growth, measured higher The

our by to our strong rates spending. growth, addition, customer, across and largest continues core and retention farm sales In is which ranch be group

ahead, to enabled on target us Looking communication allow our efforts marketing one-on-one artificial to basis. a scale intelligence our tools

customized products a welcome services a program. offer existing new customer and to customer, to to Our customer, the communication is or Club engage Neighbor's an lapsed being

to Our private be us. win card continues label credit for a

to With our out earn cardholders September are of every The rolled and rewards competitive spend members X% of at loyalty team they on end more the that to $XXX for easier card. a communicate. the able XXXX, $X now is Club we Neighbor's proposition in for addition reward

of growth XXXX an with robust penetration all annual reward the exited We've rate X% seen tender penetration. sales rollout with metrics approaching tender the applications, since positive. We across and

a Tractor expand card we In penetration XXXX, credit we have stores that our our credit to the enhancements and spend. customers as anticipate capitalizing average on frequently more visit the program card Supply higher know

today support organization of our there some where and with to drive the I've business. initiatives areas the to much our extend strategic are is What leadership shared Across in the you markets. work position underway to our focused team's just the

financial XXXX. to turn our now outlook Let's for

the X%. expect We sales be of $X.X increase the billion X.X%. is X% net to of $X.XX in sales range anticipated growth Comp billion, to approximately of to to in range store an X.X%

year line openings the anticipate we We Tractor trends to stores be anticipate The new first our of more should historical new cadence XX XX the openings Petsense XX opening about in locations. year. Supply and store with of this balanced in as new half more

expectation pressure gross digital forecasting Our for in is pressures ongoing improvement to chain supply margin space. our modest wage investments We're XXXX. slight on SG&A and in due and

profit Our business in our mitigate outlook ability time. on and includes help progress cost pressures to reinvest the to our over back improvement plans

is ensuring priorities our basis. highest strategic all are to We spending committed a to directed sustainable on our

$X.XX in our million diluted per profit around operating clear For centered is the to income to of anticipate be Net a year, $X.XX we to forecast on X.X% emphasis maintaining margin with $XXX million or the rate. margin $XXX range share.

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

cadence mind model to you year. factors XXXX, our key As please of in keep the

Our business expected half compares in stronger the performance be the as year of ease. to is second our

The the first on operating and is XXXX to of the year correspondingly, the profit. of lowest comp have quarter most pressure forecasted performance

year's and income anticipate diluted first to the earnings As be quarter net such, quarter. share flat to we prior per

lap the share, cycling driving do latter cost portion year. from toughest comps until factors discrete of incremental we Significant executive this QX a center $X.XX and transition that Frankfort our of about the distribution the of include performance the cost per not

is seeing the of amount first a the the significant unseasonably continue into ahead we year weather trends January, and us. of quarter Although, there warm are

expect line, million. be effective the million approximately XX.X%, XX.X% we Interest below this tax that to to of discrete anticipated in Moving rate our $XX to not in tax $XX received forecast to as we is is be XXXX year. benefits to to range reoccur expense the do

distribution Depreciation in addition the first in our of increase center we rate our the is to cycle below This depreciation step-up expense XXXX. recent is as run X%. from estimated of new quarter to the X%

range such, of growth half of be growth rate in As with year. the the higher year towards the first the lower second of half the will the the end

our For range to share to anticipated $XXX repurchases $XXX are year, million the from million.

shares purposes, of we've million average For assumed XXX XXXX. about weighted outstanding modeling million XXX to shares in

is long-term with support capital towards spending growth. from anticipated two-thirds to Our initiatives to going million $XXX range of that million spending to $XXX roughly

a to allocation strategy. disciplined We remain committed capital

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

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

That now concludes our prepared remarks.

Mary Winn Pilkington

Kurt. the for line questions. open David, now you, we'll Thank

Operator

Michael And we'll with question from take Lasser first our UBS.

Q - Michael Lasser

my Thanks and for Good Greg luck. best lot a morning. congratulations. Hal of question taking And

A - Lawton Harry

Thank you.

Lasser Michael - Q

on traffic. My is question

as You're the it suggesting year that goes will on. improve

we So, going really when to can is expect traffic that get better?

Barton Kurt - A

quarter is The throughout are any Michael, mentioned, look headwind trends the and the in to significant Kurt. transition the business consistent that in the trends. XXXX. Greg saw as really more very as were particular Tractor about of fourth we we we quarter core XXXX. seasonal And been and the as the has this for traffic related And at Supply into face weather traffic compares more headwinds XXXX,

even and out ahead toughest looking pointed be of conditions. of we Outside you, the weather in to traffic in ideal able traffic the on both quarter compares less ticket ease thus we've I comps than January to from So the half in second that, drive indicated seen to to to and far the XXXX, compares more anticipate and what first year. in

Lasser Michael - Q

argue in have the a that on be X% in and in to X% the X% how X% from X% guide X.X% plus forward comp might growth target, to growth comp historically context moving question And still reasonable -- traffic initiatives growth relied the some maybe really place given that a Is to traffic much this the the slower. guidance over expectation X% been year a from Because run? in ticket. long-term little traffic market's quarter follow-up long -- that of putting may quarter the many a signal is may fourth how the for

- Gregory Sandfort A

initiatives long-term I we one that to both, either on not have continue we'll our in Michael, to plans us we able about reasonable. the with balance share, as year long-term drive to see market play But the the particular expect trying For to initiatives of would traffic well. part be that that merchandising talked specific in going from more any those a ticket of would say key anticipate and the be and to a we long-term in XXXX but also is that

Q - Lasser Michael

much you and Thank luck good again. very

Operator

go to we'll next Sachs. with And Goldman Kate McShane

Luthra - Chandni Q

that margin Hi. Thank opportunity it you at to ends I understanding about behalf Luthra This could we Kate of more X% is assume to McShane. keep range? comp SG&A for my Chandni to Thank Is capture both opportunity to your margins guidance. there the safe range? comp margin your flat the And of end low have do the be of you. taking at on you wanted question. guess ask at

Barton A - Kurt

that of we've rate range Kurt. believe and I operating there's of got the number Sure. Low end into we mentioned, that the focused variables place the maintaining flexibility us allow at the margin that. we're The range. very as in ends and in both is This strong on of plans play drivers of And can end top a rate those XXXX. margin

team's flex improvement. bottom to as There that ability sales in the play can and fourth the that down and expenses even there's top as benefit is mix team manage well. into shown profit drive the But from as can quarter, -- well we've at end

end to XXXX on plans we'll got and our for very range margin at operating focused we've believe we around centered be So maintain of that either X.X%.

Luthra Chandni - Q

so energy the And weakness any Thank if you I consumer. economy? you of seeing Thank of terms in quickly much. follow-up you. could signs from the just health of the Are

Gregory A Sandfort -

overhang mix that XX% only take no significant chain This And I'll the from seen our anyway. one. markets. oil the of We've Greg. about really in is it's

we And different that would confidence. like of no tell pretty consumers' within so and be such. always with indicator feed happening trading any down look a may what you indicators We're of That's nothing of not I for that. seeing overall and significant things good

say as I'd So, goes. for right now, she steady

Q - Chandni Luthra

Good Thanks, luck. Great. Greg.

Operator

go Scot we'll next RBC And Markets. to with Ciccarelli Capital

Gonzalez Gustavo - Q

sort from Thank Hi. guys segment? more today. us that Gonzalez is regards actually morning. are you of you Can able any Scot food, products. for I provide kind obviously anything our if just combat taking of This to guess updates what what Gustavo kind sort to to in and away grain-free recent And natural do you're that the on seeing for in on question. Good pet of you trend of trend?

A Estep - Seth

Seth. is This Yeah.

call So due quarter, caused little we earlier retail a and QX similar the very open announcement to on last what decline we've Kurt in the been trends in has DCM the mentioned stated last bit about. to of our grain-free the early that averaging year of

We have got a we've been category approach very robust utilizing. that management

are of the be recent actually stores, our we new see that reset We'll brands benefiting you'll launched continue in respond We'll activity the course XX stores. some as trends. upon to next continue to expanding over over the get also from in have trends. the those items week, next the two to significant And weeks

And well. launching we'll be new brands as

store. So, our coming you'll candidate see

lineup, see You'll new for us. called pet to our continue And and Thrive. a new committed we sub-brand in food future and Xhealth the to growth to with see pet. through evolve engine fully continuing a to continue as pet We're innovation trends

Q - Gustavo Gonzalez

And follow-up. just one unrelated Got Thanks. it.

past something the would looks is recent sense be results up? years it food kind what a XXXX to has pickup deflationary of few our of pet your a kind more in what pet in seeing So manifested trend Is to recently as that of the across of driving kind And general like kind pick your versus in inflation or business? points that so. that data of over

Estep - A Seth

out there, of when say some look would you within are inflationary that Yeah. trend, the that themselves. brands you industry trends the at I that's see I mean, when

some mass it obviously, price at some So, look introductions the mix. grocery, if of their seeing premium the you product to and they're relates of in upticks as

you look down when some and unit from year, across our some the due of of However, of traditional to half did more back at strictly decline portfolio, we just premium trade you super-premium the grain when of the look trade products products. average across the see the versus the retail

at So, point, seeing in that's terms this anything inflation. not we're significant of

Q - Gustavo Gonzalez

Thanks Got it. for it That’s guys. me.

Operator

Okay.

Gutman Next, we'll go Simeon Morgan Stanley. with to

Gutman Q - Simeon

Thanks XXXX Greg, congratulations, first everyone, question and on good luck, and Hal welcome. is My network.

So, the few you're like we a given of make it's It opposed you natural a feels guided a at times. to an look [indiscernible] seeing not the having what as business business to assessment. and number chance today Hal

I on of the making thoughts wanted and confirm then investment initial level business. maybe Hal into time to the has he from the been the just initial and had that hear that over looking And been presenting business thoughts

Mary Winn A Pilkington -

are really having on hard time Mary line. We you hearing your Simeon, Winn. a is this

that to if So you mind, get you can don't we repeat question?

Simeon Gutman - Q

Yeah.

I took Here better? that up handset. Is

Winn Mary - A Pilkington

Modestly.

- Gutman Q Simeon

flat My question on [indiscernible] XXXX margin. that. It -- like the first Okay. feels trend was

get back Okay. I'll the into queue.

Mary Winn A - Pilkington

Thank you. Okay.

just next to we'll on Okay question. the move

Operator

we'll JPMorgan. with Horvers to Next Christopher go

Christopher Horvers - Q

it's it's be great congratulations And be And these Thanks a Greg to it's working great been and -- working on again. you a years good to wonderful with all pleasure morning. career. and really Hal

question both you. to a I'm future of still excited So I put really about here. to wanted everybody's

how you invest the So need think to here? of about do sort

the a out few put online kiosk pick the over money of buy enhancements. have business store last years, into your roll card in up lot loyalty guys You stockyard

in sort think sort need trying of collect right you what a get for you and impact how think the far what things that science So sort are build data to spending? out? you've to -- like of size? to sort and sense data that -- versus like that so click accomplished that of you'd do left there could not Is buckets what big investment do is of of customer something your big is are a box maybe big Just

A - Gregory Sandfort

this Neighbor's And of start wonderful foundation. off initiatives a investments use you're point you that to Greg. mean that with it those Hal. take we're It's -- Club beginning would Chris it scale. some I'll happy is things we're mobile for made saying point me time. be right, a entry by -- for what out jumping terrific of I we've things the we've I a investments. But the the these a are in money seeing whether many this into is stockyard, put or and be wonderful POS that tell what

So take I'll from there I let think you it. Hal,

A - Harry Lawton

Greg. Thanks

First drive business I'm opening in retailer with already forward. as And at the on the incredibly build just special to to foundation place to I'm It's about Tractor. the continue be a off with say saying, I'd said I'd just excited start the opportunity to I real remarks that a clear purpose. excited the team has in

strong are get plan. incorporated those really said to just there's number into our that Greg starting of scale. initiatives a XXXX As We've

a a track and and team strong think management there robust has a realistic place. and I record is of it's plan. success in The prudent team

anticipated. spending it learning really a time for Greg -- -- and as lot in listening stores with right everything team, than distribution I time spending the what I'm relates three my is better week it's is say me. this our had with I'd I'm even only management me, seeing and of our spending now centers. to I'm And

to pleased really time. investor forward with in views weeks the things first evolve, in. -- team over sharing I community the as So, look the I'm our and learn I three more with -- and And

Christopher - Horvers Q

Understood.

lot TBD… sort figuring of where a things little are, and So, in money a put out a bit of so sense in

Lawton Harry - A

No, go ahead.

Horvers Christopher - Q

you I there. to think ahead, go No want add

A - Harry Lawton

fair assessment I to think a that's So, say was I going me to personally.

it executed very -- to as XXXX focused plan. very I we're on executing think our the relates business,

it very opening organized we're As for There's evolves. plan strategy our in a may to as well committed plan. And we'll strategy that updates make transition overlap share any XXXX by more board. targets, a the a myself it purposeful as But that as game and in very in remarks, have place relates we And as Greg said long-term seamless him very with a to XXXX. his we a have clear here. we and you

Q Christopher Horvers -

shortfall as that got so think Okay, the then comp Do follow-up, you of that the weather is maybe suggest do And be And to that expect the think that And the you of weather, you impact underlying of six XXX originally you so X% two-thirds for? the to was was comps it. you you rest a that had the think that, days? business does basis far? XQ do mentioned given call X.X% points. guided to positive that, sort related that

- A Kurt Barton

this Kurt. Chris, is

was there So, to take there. We the the miss two-thirds number our what the of related. data based points I'll on of about is fourth estimate expectation on weather impact. in just clarification quarter, the was the that a

specific have items very that we sell. We weather-related

also comp know purchase they customer weather of as seasonal we trip. we for trends in when in categories. on And performance, comes items their Two-thirds our the those items. shift package two additional those the needs-based in There's weather-related would

two that the the there the pet mentioned We feel side remaining balanced is one-third also shopping an less like between AUR shift days. we we expectation -- out in one-thirds. remaining an pretty six was it, from on. so mentioned those The really what round well of impact And

business. the the of in the exists. That's Greg we XXXX. on weather we've comps about into And capitalize talked strong. XXXX. seasonal has our as fundamentally of consistently solid four And you know, business that's as And as the what mentioned take trends opportunity quarters And core is of -- core we merchandise Q performed the all

Q Christopher - Horvers

XQ? On

- A Barton Kurt

compare. this of anticipate earliest And us. on are like part first quarter the a our as still But the not it's Chris, be our of to quarter, conditions I we said, weather lot XQ at quarter ahead have toughest ideal of point. we January

Christopher Horvers - Q

Understood.

A - Kurt Barton

know, transitional And spring. QX. that QX can and winter as have you the out into and quarter is us between transitioning shift transition really you and a of timing QX And of

about of still half the So, quarter the much still and so us. ahead first

Horvers Christopher - Q

you. Thank Best of it. Got luck.

Operator

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

Chuck Q - Grom

foundation days XX for I guess you or the business just how loyalty Good HD one Macy's. I pivot store the succeed? I is you've for guess, only to so. it's optionality do just company margin Greg at to seen operating and think here. ultimately, you Chris' you terms question, about morning. X% both of And Hal, off of luck kind targets, the know the the But Congrats. what are to right with Good with been of of bigger picture, Hal thinking in in

A - Harry Lawton

good Hi, I'm of I here right few a a incredibly in, that, earlier now. to To learning what thrilled doing at Tractor lot listening just weeks morning. be start with and Supply, is said

unique a what answer probably to Tractor and culture attracted Supply. in the way base, it very special strong very space, -- a leading being, think is me with for growth. differentiated be that I a reason explain start a differentiated the for brand, just best true opportunities I would a much to with in retailer customer

that deliver customers. also are I'd investments And to XXXX. results has those made a which benefits seeing years, to those comment that continue And confident number of few scale. with we're the the starting our team in will last of in you're the

think activities become our customers' integral, categories Club pushing that. And lives. there Neighbor's opportunity help more, do us to to even remarks, do the and is, as an my in are also on. into And that things other I are opening we to going said I continue like that

forward excited with as said is But over engaging the be I'm as And appropriate. time community investment very to to I earlier here. I look

Grom Q - Chuck

so, at no thoughts targets or Okay, margins on, initial this point? store

A - Harry Lawton

updates this no targets, We to of time. our have at long-term any

And focused what very we're As our we're XXXX consistent much think still with those. -- is those are I guidance still on.

Chuck - Q Grom

Okay, cultivating can of control over see the guys sales. the four kiosks most next terms when then of quarters Tractor you Can digital? rank in Neighbor's in just fair you've think XXXX, force terms you about up what optionality the on you And Club, that where enough. built relationships

new I know a of hitting brands you got couple Toro.

what Thanks. Just how year, us in you terms control? contextualize think guys you the about can help of

A - Kurt Barton

believe I as Chuck, investments. things on the the we're made and mentioned benefit that, this that controlled lean we've us we Tractor and in is to XXXX Kurt. initiatives look three going we Supply at

relevant products and services. the First is,

in lineup powered is As outdoor season. the prepared our I remarks, my strong, spring/summer into mentioned equipment going

there Triple So the of we'll brands well of Crown. combination the those introduction on as as lean

back. it's we'll we that, into credit And believe strong, label addition momentum reward secondly, got. the momentum And coming is out card asset carry to private the our introduction a In X% sales of fourth that XXXX. off quarter the driving that we've of

the And communicate we're ranked third and with And actioning customers. I'd then, lapse Neighbor's as Club. only with to be potential how able that we mentioned data as to retain not

completely lifestylers got. that that new lifestyle to put and into is half them the digitally a place with the as find then But to we've tool back We a of look-alike engage retailer, XXXX. started in ability

those excited of about that I out in three, came and Ordus guess operations is John store doing throw the with what Way efficiency. their operational I'd program after Tractor team that, And we're

scores of our up And cultures. that, moving out and work it customer customers selling they're of in service taken were to room. as well. earlier And XXXX, back availability from we've where scores introduced the They've product,

And we it's increase positive two if know to those sales.

traction fundamentally So, in there's some we that good believe also program.

Q - Chuck Grom

Very good helpful. and luck. Thanks

Operator

go Forbes we'll to Guggenheim Securities. Steven Next with

Steven Forbes - Q

morning. to… wanted Good I

Lawton Harry - A

Steven. morning, Good

Q - Steven Forbes

fourth performance. provide of a risks …maybe you -- during more cadence revisit if if around little color a the concentrated quarter was traffic weakness could traffic the the where out maybe specific or versus quarter. is in traffic compare December of really is trends average, large can period if quantification us? the like provide It call any mean, you there a or you I sort the Maybe

Barton Kurt - A

two was related. and trends, Steven, up and drivers because to positive December conditions comps mentioned In as out, change traffic real the expected on traffic in comparing the that and were then strong actually against not first, regards weather this weather about primary factors Kurt. heavily in hurricane occurring I'd both Yeah. expected of the is And a forecasted. October in point XXXX the

in as decline the in and heavy traffic. some and expected expectation, So, to saw October good we hurricanes regards November cadence a drive amount of because traffic,

the You for destination. cold in last that extremely customer November coming year. was even ancillary get

was really in not December principally The see traffic December. as weather and cold more was normalized month while expectation So, the the that's traffic expectation where would expectation. we October, was November against down missed our in of both occurred and total

Q Forbes - Steven

And quarter -- represent better weights first the right quick the understand as with monthly the the maybe weather January we conceptualize stay us what you of you if as we out right does just total risk? fourth as a quarter, just a help percentage the follow-up ongoing can look Kurt,

Kurt Barton - A

give Steven, through But we weight month as quarter, past move heavier the don't the specifics. as quarter. we've the said in you the

January the heaviest. and So, percentage three is total March the in the of is weakest

Forbes Steven - Q

Thank you.

Operator

Gutman And Stanley. with Morgan Simeon go next we'll to

Gutman Simeon - Q

Thanks. better Is volume the now?

Lawton Harry - A

Yeah.

Mary Pilkington - A Winn

you. Thank better. It’s

Q - Gutman Simeon

Okay. welcome Greg good you. luck And congratulations Thank And and retirement. in Hal.

- A Lawton Harry

Thank you.

Simeon - Gutman Q

to on question little My the first getting the bit -- level. up leverage at a you closer XXXX, is one talked X% historically X% about

at of getting flattish the with bit guide. than midpoint XXXX least that little less to You're a margins in the

mentioned Kurt, cut are that you're efficiencies you spot? any I getting. in think place? You Have under But some back in you spending any

Barton A - Kurt

this Simeon, is Kurt.

in So, long-term to targets XXXX. regards in

see anticipate margin targets overall in assumed our regards improvement. invest to have we can long-term comp business continuing to Our and targets that opening an X% Supply Tractor operating in of stores, the XX plus

we we and that maintain a expenses did the can year is below help actually operating like business we in and also us flex manage anticipate could in What control QX the make number we we that, we the like can investments that shift necessary in -- margin. can know that where XXXX to

XXXX, that And of we the would will compensation controlled team in year be nimble. lower-than-normal as actually the levels as towards incentive that were if we to QX. the we've And be if an a In like range, have that example. fall were of done scenario, bottom end to and

So, we as the we believe have plans continue And improvement. opportunity can margin grow to long-term margin. business, maintain to that show think the do that even operating we we

Gutman Simeon - Q

pet category. the quick then And Okay. follow-up is the on

there and you the same acquiring know looking still your you about growing because and the you are retaining change. customer customers categories? is retaining rate didn't still talk before that your data at pet customers. your with but comments were careful good, Thanks. you're at I is mean the were a You mentioned, you're you I base you rate? in a are Can at Q if

Seth Estep - A

capabilities out when and look Look QX really, our leverage ability really This has QX, specifically Neighbor's the is Club QX, at been Seth. you strong. for us to in

customers So, we're like to talking specifically through utilization these when that little look-alike. was seeing nice about a gains bit of in tool, acquiring it relates new Kurt

to customers see through gain market go yes, category. acquire So we share and us out continuing the new and

Q - Simeon Gutman

Thanks again. Thanks.

Operator

Credit with Seth And to Sigman next we'll Suisse. go

Q Sigman - Seth

comp and sort you're and is to welcome wanted taking year one as of and change just the follow-up to Hal any to weather largely Hey, morning. guys. Good for we're side, outlook. guess board. of algorithm not comp it consumer. below and this our luck for Thanks the three, question clear still The from I plus. the Greg I half It's seeing long-term to really why. on of in that long-term not that guidance X% a best

that XXXX margin related if could are little why comparison? a comps? just Thanks. is context first range missing where something? follow-up. bit Or so, And more because a just So, have you quarter the And add for you're you I'll on are of setting the just we then

A Kurt - Barton

is Okay. this Kurt. Seth,

we quarter we're business guidance the and into all we at that at as our planned we external. shared the that assumption. year-end XXXX plays look internal factors you we But first some XXXX. As to of as look with realistic Certainly,

GDP customer continues show being signs year. While sign an early to in of healthy, our there's election It's slowing. of XXXX indications

Those consumer. play had the types consider of things XXXX to can that we in into

good that anticipate XXXX. expectation in is presenting drive we we've So, comp long-term We our towards the strong. initiatives what you that prudent to sales fundamentals in are we're reasonable with for got target. momentum, can a But

Sigman Seth - Q

comp than right is outlook, a if potential, to longer-term year? maybe that. for do Thank the that then comps more XXXX? this a you there could flat in And opportunity up words, bit the light why invest think for so constrained In more other that margin you bit an Okay. little set just of be aggressively is

scenarios. where margins back the been up were flat periods go X%, you past to in haven't under really or If comps those

that? love to perspective to color the on margin an guiding you. your any gross are just So, that. then get more on you just Thank And improvement

A - Kurt Barton

trying XXXX number margin that as for Kurt to around of up the And is operating framed we consideration. X.X%, you center is a the things of this part again. mentioned Seth, certainly a our Sure.

answered us be of allow that pressures and offset to with margin. -- to in allow initiatives to able earlier the question, place I the believe an As to got particularly some we've the efficiencies we business, that can wage maintain profit on improvement pressures us

help other we place In business. we initiatives the the in have offset want that make cases, investments in to some of

got make is we've way pulling variables the So us we're right and for the to you a up frame investments. and number I'd allowing it levers of

If to allow the well. it comps were may on we at the the maintain us to as around end, lower X.X% flex

again just work this the manage going ability we're they to have. and to with to and example. flexibility And to I'll and back as going QX we're point time nimble just an levers our that real So, manage and be show

Seth Sigman - Q

Thanks very luck good much and everybody.

A - Lawton Harry

you. Thank

Operator

Baird. And Benedict with go next to we'll Peter

Q - Benedict Peter

quick just going guys. Hi to lot mine of forward to And asked Greg. Thanks. Hal. ones. A look hit have couple I welcome here, I'm of to Congrats with working you. been a

any for going efforts, if to But store XXXX? also I First, on cadence SKU don't know store just how it's timing in the the maybe a within And localization Seth. color it's Seth rollouts? the of

Estep Seth - A

Yes.

within So come stores mean, to to those as to throughout start with do first life you'll the year reset key see target where store. we I the we brands.

leading industry. on build but anchor only also So, in we not it's that to brands make the exclusive goal strong sure with our brands, the

do come there. I so here Toro in store you'll mean, as reset such as you're And to QX, see the we in life as

see to life do You'll Purina our continue to we come as resets. feedback

touch things full throughout year we the planograms. come as cadence So, types those of of will the those

store, in look assortment are up you our process now just we and optimization When finalizing of localization platform. standing localization, our at the

can. be we we out that methodically So making do that obviously prudent as that sure rolling as we'll

key localization, at as suppliers well. has same with we While about the time our team the when on focused partnering some think of really been

rolling -- sure spring make the capitalize. go to we're the take ready take spring going you you season We're here. and that So, to to that we're into set

make depth. the analytics another on as making have can localization sure the at the key the right sales. right team, products the and of we key to suppliers that sure So, their ScottsMiracle-Gro, have on that that is and with such drive we right capitalize That's team partnerships the we leveraging traffic store focused piece

- Benedict Q Peter

then one helpful. Kurt. for that's Thanks. Okay, And maybe

really on But comp do to So know or of so mean, the in envision opportunity for looking it business that maybe that the think is range that X% in way quarters to I Supply. being maybe be or look as I helpful. about Kurt, X.X% below more about reasonable just much. range? above below it year, color seems XQ. Any the any it, Thanks you're Tractor at maybe XQ halves we how for the the does thinking would

A - Kurt Barton

And Peter, and I'd generally, beyond particular high-end low call out quarters. of X.X significance as our to say end quarters. across of but there's any three first I range to that lowest, the mentioned, in is nothing quarter be to about going

Benedict Peter - Q

Okay. much Fair so enough. guys. Thanks

A - Pilkington Mary Winn

David, I the time one end. for more in think question we've got

Operator

go Fargo. All Wells Zach Fadem right. next with go We'll to

- Zach Q Fadem

Thanks for fitting it and I'll quick. me in Hey. keep

plan. the First on two comps? with improvement over profit expansion question three much quarters, past into sub does come EBIT How the that on play particularly

for to what's about further that And you and opportunity then XXXX how talk next curious the could think plan you if about drive productivity?

A - Kurt Barton

procurement year, we've and Kurt. this profit in know, store Zach, been of back On DC we've indirect the as -- is you improvement in the productivity, half in investments made transportation.

out saw the of year, And the be you know, year, to We're the of transportation. side late that that from early transportation back one area the able would half coming half back it. that of drove as benefit it the benefit XXXX. of jump we the on really in key In

the roll excited an had all to had to been to the We're to what tools the the and changes there's team we've categories, but do stores. indirect other the build we standards invest in distribution and in engineered make training we've labor balance about work out a of center, in procurement the to done

that now in it as and areas other is matures out and So those roll train. to the begin opportunity we we three

maturity just in three are other a these in multiyear categories. and benefits So early those their that lot runway of

Zach Fadem - Q

question in ship your just is is this your for Thanks we think then expect an you just this efforts. it. resonates lean sorry, the to in forward? auto economics, the that categories feed an remark. that Got – offering base? a quick on with should then And given and customer on pet area going just And Do

Estep Seth - A

So yes, Seth. this is

implemented the we'll we've correctly. that and do see of it into the year. throughout So obviously we sure some test that long-term continue it an as We subscription-based to opportunity services make

capability move life, hear do But continue obviously So, to to drive more we to that we forward share. the as in make brought we about you'll sure leveraging the anticipate future. we market that

Q - Zach Fadem

Appreciate the time. it. Got

Winn - A Pilkington Mary

you. Thank to I'll Great. now. over Yes, turn it Hal

Q&A of End

Lawton Harry

delighted call Mary made Thanks you will say for continue joining I to am extraordinary this what has our retailer. In want what to everyone closing, make opportunity lead to thank Tractor have once today. And us how the I Supply is Great. again mean Winn. I to and special.

it's our I believe to customers. that company and reason retail clear is a our the business relevant well-positioned a very across has as for being is landscape

to great coming to be commitment will to provide at to strengthen look months. the more the growth. plans in foundation service sharing our forward legendary of Our our continue and our products position I low about prices everyday

Pilkington Winn Mary

have in look we the your a first on any talking joining great quarter call if call around forward Supply have today. for it Thank and day. all will This interest April. in to up. for you you you wrap you questions. will Thank I our and Marianne to be Tractor And

Operator

thank today's We does conclude that for And you your participation. conference.

You may disconnect. now

Tractor Supply (TSCO) 30 Jan 202019 Q4 Earnings call transcript