Tractor Supply (TSCO) 23 Oct 202020 Q3 Earnings call transcript

Company Profile

Participants

Robert Mills	EVP and Chief Technology, Digital Commerce & Strategy Officer
John Ordus	EVP & Chief Stores Officer
Harry Lawton	President, CEO & Director
Kurt Barton	EVP, CFO & Treasurer
Seth Estep	EVP & Chief Merchandising Officer
Mary Pilkington	SVP, IR & Public Relations
Chuck Grom	Gordon Haskett
Karen Short	Barclays Bank
Michael Lasser	UBS Investment Bank
Robert Ciccarelli	RBC Capital Markets
Christopher Horvers	JPMorgan Chase & Co.
Steven Forbes	Guggenheim Securities
Oliver Wintermantel	Evercore ISI
Peter Keith	Piper Sandler & Co.
Bradley Thomas	KeyBanc Capital Markets
Simeon Gutman	Morgan Stanley
Daniel Imbro	Stephens Inc.
Peter Benedict	Robert W. Baird & Co.
Seth Sigman	Crédit Suisse
Joseph Feldman	Telsey Advisory Group
Zachary Fadem	Wells Fargo Securities
Matthew McClintock	Raymond James & Associates
Brian Nagel	Oppenheimer

Call transcript

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Mary Pilkington

Good morning and in honor of the 40,000 team members of Tractor Supply, welcome to our third quarter 2020 Enhanced Earnings Event. Thanks for taking the time today to join us and I do hope you're all staying safe and well. And on behalf of all of us at Tractor Supply, I also want to thank frontline workers around the country, including our own team members who work so hard to ensure that our stores can continue to provide our products and services to the communities we call home. Today, we have a packed agenda.

First, we're here to discuss our third quarter results with Hal Lawton, our CEO; and Kurt Barton, our CFO. our joined into of of greater key to be who executive Tractor we'll initiatives go plans. will detail support that, by TSC's members team, Supply's After long-term company's on some

their will your they there period take be extensive questions. an Following Q&A presentations, when will

available Our we financial goal involve as a A to Time. considered In be hour safe some the our and that many cases, irtractorsupply.com statement. take statements the session replay the note, ask webcast are about to allow as performance forward-looking. at control. for of and the session risks actual will you our Central Such Q&A I'd uncertainties is road, we by risks our of materially. Please to harbor plan noon, could our to to business, beyond well under Q&A operation today But cause may we like make results Presentations. regarding and down conclude statements be and discussions, uncertainties get an website the and note that on number our event of of presentations far these too Events and before differ

only and in select release results forward-looking statements Commission. its to believes at statements reflected and use the non-GAAP end and will company in or any forward-looking reconciliation appendix describe information will call. differ which be or included the our The the measures, assurance as of actual to today's today in from factors Although may the the the presentation the update measures that filings IR remain expectations we materially contained later measures of risk with it Because your reflected the in that this press operative is discussed. the of is date directly the included statements cause in our information on prove differ provided are undertakes Investors to Securities company's correct performance, you its to to materially those expectations results webcast. obligation can Exchange forward-looking these discussed reasonable, section from that accurate a this we've such the could of no expectations. are comparable issued expectations Thank time. webcast in this actual business website time and and as of of give should of Tractor no statements any any Important be assume a its not most Supply will at GAAP part posted of attention. for

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Harry Lawton

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campaign, our with awareness of our continues performance. new driver be along growth, significant customer brand to a Our

have triple-digit its a resonated continued our stores. comps nearly business picked continues to to our e-commerce to e-commerce The sales, overall our doubling of penetration Our capabilities of work e-commerce XX% has drive And as our improve customers. with in with omni increase sales significantly our year-over-year. certainly we done up percentage

customer XXX,XXX For almost has example, app in our since had downloads recently launch launched July. our

at business continued record levels. perform For the third quarter, our to

up ticket transactions supporting the needs-based over poultry safes, performance lawn sales, for selling driven are excellent both we of by and products they sales retailer, power in generators, need sales growth. animals, comparable front-engine as essential third our their customers categories with zero-turns, like top-performing and these trailers and robust had zero-turn us categories we XX% And we in their agricultural store of land quarter had the XX.X%. had pet take our to for feeding, Net an their our pets. care ticket and riders. As in last and with The Much fencing, our feed up second our categories. quarter, year were balance across good food, we bird families, season and big were extended strength seasonal along garden equipment in competencies outdoor forage, and core like tractors, an

board, the categories, our consumable, quarter. CUE of the including businesses Our the We're reoccurring second mid-teens pet acceleration products, business, XX% in in across usable comp which core high had represent performance and the from our edible growth food. share strength these an gaining in sales range, and

locations, products incremental Tractor to their of engage significant importantly, million and for unlock. our reengaged at on at fastest convenient younger, customers as Tractor shopping have We they start identified and the selection they positive On new pandemic. The most more growth and feedback our skew represent and comments female new amongst customers ever These to shopped at shopping continue from us More the reengaged with XX patterns and history. customers stores. with since new customers with shopping more such company's rate than customers and opportunities positive larger experiences basis, combined slightly include baskets. Supply Supply than higher-income a the the of in have previous us

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Kurt Barton

details greater highlights time, shareholder our update. part I quarter good and Hal value. more I'll of then third you, the Thank strategy morning, and will of that go to focus At financial with come share back you as through our generate everyone. on

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conditions like much we the the addition, had In contributing sales the quarter to second quarter, for weather ideal also comp performance.

year-over-year our PLCC for also in credit we big growth strength our quarter to The while highlight seeing in achieve label standard ticket strong private tender in from the card continue growth is our sales. Another that largest financing came sales.

a customers. a our increase X% driven this demand in on as profit result an is points. frequency by basis product categories of in reward see the and our a Gross them of promotions price. of level This of was confidence to with program, growth low of increase XXX program focus was sales our the strong XX.X% of resonating both and and That's continue clearance, quarter. our third a strong We in as everyday us reduction that principally for percentage providing depth lower

which speak expenses, in quarter. third favorable and prior benefited such later. the carrier including sales Selling, during beginning domestic the bit third also to P&L import increased percentage from transportation depreciation and fourth amortization, did the prior We to costs. in the compared the a of that begin lower in I'll shift of costs see as a quarter, and net as were XX.X% fuel to quarter. domestic will costs, flow inputs imports as to our a to begin through meaningful year's and costs administrative We cost most carrier general the And year,

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profitability. to Turning

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Moving our quarter. for guidance fourth now the to

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third the expect this than We lower quarter strong for fourth to sales we a profitability at momentum as delivering albeit level continue, quarter. and the forecast

COVID-XX, on the we unique quarter it's restrictions by the view halves levels better did for the level elections. a the last uncertainty distancing heightened benefits, believe related year. the at look are quarter. to and social Due potential include fourth elevated always to shelter-in-place to to the our providing government we how of situation measures, stimulus continue to of Factors business impact incremental of our similar to We November duration and unemployment contributing and the

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Harry Lawton

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Mary Pilkington

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Mary Pilkington

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Mary Pilkington

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Mary Pilkington

Thank you, John.

to Now break. is a pause give press very quick good a you and time

you Officer our role here Technology return. will back presentations Out for healthy our Barton and our in We'll So in Kurt strategy return, expanding conclude share Rob Life a Chief when shareholder digital's few strategy Here CFO Mills minutes. we will on delivering see details with

Mary Pilkington

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Robert Mills

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Mary Pilkington

some from digital certainly exciting team. developments are our There coming

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into to Here's a deeper that take our CFO, Kurt dive Barton, subject.

Kurt Barton

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focus is total Here shareholder Out return. our sustainable Life Our in on strategy grounded strong delivering and

to and and to plan from make given by differentiated humbled others, which testament extremely as heard core year-to-date, performance is a gain to true share. We market to performance are financial resources, Hal durable our our investments enable strong significant financial our operating have to strong business. we us And and you continue

free strong on These enables important My the strategy allow our and we with Fusion, and on side to pandemic. We investments strengthen sustainable to will and been business discussing us enable are and goal confident this Tractor performance strengthen by behavior believe How disciplined platform our both I return has in the rating. as and credit line with share stronger margin-driving first We on flows deliver critically and TSR. plan how consumer capital I durable resilient highlight a has caused build return. indicate growth and we red growth deeper that our the excess by and really Supply, investment-grade the is finally, advantage. strong sustainable that when as graph. also tailwind balance will our we investments such to other that healthy repurchases. shown Side dividends will shareholders to our know. strong emerge And our you. how and us can created us will Nobody of to commitment for I stewardship the long cash will that ball to organic the to and then highlight normalcy on Lot financial planned have insights our crystal cash sheet a through shift our interest COVID make don't FAST, even the and supports initiatives foundation provide lasts, to will pandemic reinforce our a

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Mary Pilkington

our Thank into you, Kurt. of Out hope and lot you've Well, some information that today our a shared you with we've is certainly Here Life gained insight strategy.

few remarks, for Now Hal Lawton. a takeaways and closing here's

Harry Lawton

the Here Out We are about all lifestyle.

I leader in have we is on hope execute a I strong and remarks, bit. business to resilient joining look Here competitive Our away forward our part Life effectively that model for prepared And committed strategy. out Life us your that an market being lives. advantage, opportunities integral culture with our omnichannel compelling Out Here today to a strategy you questions take close we're and the Thank a that we we is of our you to a our as and capabilities, focused are with Out growth resources them answering allocating just have customers'

Mary Pilkington

right Our we'll step is first, executive the We'll But corner. session Q&A for around away panel break. a right back. quick be

Mary Pilkington

presenters the session of notes Instructions]. and Supply's back enhanced Tractor assembled housekeeping take to Q&A Welcome are couple earning today's your A first. [Operator they of to event. ready We've questions.

Kurt and of Lawton; our Merchandising Seth Officer, introduction Hal team: Barton; a just Chief quick Chief Mills. Technology President John For Rob Ordus; Treasurer, Chief Officer, CEO, Estep; anyone in, Stores CFO, tuning Officer,

line take let's a have We folks our so first question. standing of by,

First Wells up is Fadem Fargo. from Zach

Zachary Fadem

hosting today, well for event Thanks really done. great a

more of for today. question for compares you're comp would And X%-plus then X% changes gap the that towards you've impact quantifying long-term like to discussed hoping initiatives me other So about to urbanization, to the us, due factors structural, how first impact the about what I'm you assign could X% pet talk bridge are And outlook. ownership COVID? previously. and rising you external on This the the

Harry Lawton

would thanks of morning anticipate what for then COVID. we top that to Kurt way on depending that. that and I'll COVID better that. -- with changes uncertainty, will period the tried will lot Zach, behavior of user a and of pace It of we be of And the really trends adoption COVID joining seeing. and outline for us part a parameters is with presentation the our see COVID the vaccine vaccine, impacting how year. we're we'll the be is a say of of earnings that think I in comp to the longer, more of structural U.S. for view, take the next great. will enhanced economy then Yes, our this kind the I start are What afterwards. kind as to here, from think is, that, we great you lot create dealing it's some pandemic of day. a that part could -- of longer The his of the It the be mentality effectiveness consumer

and frequently, year-to-date, this XX about as kind COVID. even investment to ownership home, going on. at an there that high. If are annuity more of an in birds. Those think because we've million post to sold and Work from that's continue you your adoption going you're all-time home Pet streams example, are continue

guidance add today. we productivity starting do to from top that had And then been we're comes down existing as it. of the So is and But both as once then -- a continued of normal inside routine and settling from out end the also group X% get about store the to that's what if growing rate. to digital our COVID, the base previous we the store we're think seen of months kind as we've confident the our initiatives outside our business that, already store existing the going get to on that operating base in run starting to store that that. period there's then we're we're business. becoming but base, initiatives think That it get back be of about well growth to would the that to from of the our XX top maintaining of we but long-term more our sustaining on post And some announcing customer we new continuing of also of more at kind X%, that have we're levels

know, over you comps. been quarters have got, I quarters last over XXX% two And As we've think, double-digit growth. XX of the

out. see we play so that continuing And to

very feel of that So waterfall we previously about based X% on kind initiatives. our to to increase X% comp good from guidance of X% the of

Zachary Fadem

the Got to margin Obviously, to X% to tough compares next given 'XX this the from quickly during about frame it. to fiscal 'XX, appreciate year right XX% step-down the I'm I investments, bit X.X%. X% after X.X% curious EBIT that. expectations and moving the if or of of step-up looks be a the long-term in near-term way And the to a is then margin transition year. this both. or period This investments

Kurt Barton

is In been in uncertainty this regards there's this this I'll does saying we've long cycling how when that lasts it pandemic, to Zach, Yes. question. to our as Kurt. specific XX-month of COVID a take long-term very and that target, begin.

focus but may on some it. this into us of are What being share most achieve optimal And shareholders. share margin got impact we be But margin we the exactly to you've line in primary growth some XXXX We the value X.X% of long-term believe of overall to in earnings to a our that us. gave level of that heard our noise strong sweet to our sales range market target variability from can would begin And gaining certainly has X.X% on sustainable may fall and that initiatives We the top there sustain opportunity have that business level. gives this a really top XXXX, the operating spot it. feel good X% and on our bit per performance X.X% have for like is only level that operating growth. a could and to not little for able and a then a so

line margin. And both term so that our focus is top on revenue the in operating long and

Mary Pilkington

Okay.

our and next have question Baird. question Peter Benedict is We from at that

Peter Benedict

event. on. done, helpful well Thanks particularly very with for going doing everything this Extremely

this. into that's in little you I years. if first Wondering play the billion you you've where if -- doing my a but your TAM through kind in My bit That's do potential opportunity. remarks. for current see gains, $XXX a question. the that's how rental, the for as I past, that? the could out bit, guess, the unpack thanks thinking part TAM, tool of kind I'm talked question, of that, So most you here that services threw know And moving most if like of about just next first the the you're curious things few Hal,

Harry Lawton

and I Yes. Peter comments. on joining and Good for here morning, us earnings day enhanced thanks the our appreciate

of numerous the X gains where we've part disasters what of understand also laying the COVID, as are. natural future be that Over these the can at dealing levels, that been opportunities started total months, of last share the is really and where the had with -- both been X elevated to for kind of with, And to also market? volume company. our operating And us with addressable we've kind foundation our to preparing responding allows dealing and and

understanding size those in each each spent are we markets that digging good of bit of of the participate also our then about time thinking those where markets and so of what categories, really a we And categories, address. the we really in

with one with of One a have share really, presents And a lot market, nice billion we in. So cut a but opportunity categories opportunity, of that kind participate really rural-suburban to of work, that large market. of kind lot a at $XXX for opportunity after we growth stores. the our in our significant grow amount front where of our also doing continue percent about, a to that to with it's opportunity to do we XX-ish to We $X,XXX that's and came continue there's opportunities of one build there's our we've digital stores assets. more us. And there's of to think to think dominantly talked existing target. footprint And we through as

relates bit some the categories, think could there's the where categories and of in some talk Seth making he it going investments it that we're toss to big to growth. and a As to little we I'm about

Seth Estep

of one perspective, the that's we're of the and really put a total big strong in going think billion like category up over earlier to these you garden industry where data Hal. out think To going in way. about to Peter. with Hal in Thanks, the Yes, long focus that's there, coming as we by in it the the $XX some and Thanks, market, the the Yes. about out And investments. size a center. utilized today where for OPE make investments that cap, showed time I excluding we're lawn that's and, merchants garden we've been have that's addressable we point the when there. mentioned, where traditional

today can when So for that of point in we that's we we're digits where $XXX there, are share growth. out opportunity go we revenue low and million where every think about single get,

use different So animal, backyard, our after drives to it going activity be that that going to what basket. that again, and whether that utilizing to home aisles market at the as as with really categories, store. areas drive things we've are garden, that's think DIY and of base, then in we we've points those really lawn points all tools and we expansions, for right? where share we after looked we about we're aisle laid in in have looked with -- pet and whether go Take And data obviously, how in we've vendor these out build and analytics really Fusion a around to go invest trends out be that's and whether category that -- partnered be about think where the it DIY, those really we've gone and there pet and figure out the in today, the where the our are at footprints, animal and advantage setting current

bit the how looking little a strategies we're of helps how that TAM and our hopefully, accordingly. category kind in at building So we're

Peter Benedict

consignment guys does. Just sure goods? that That to approaching the go the are you attack Are margin going profile, you're how on that. curious to the just curious with model? Are own going kind I of center, Seth, going return garden just And sticking live you guess, how business. you and to

Seth Estep

yes, it's variation. Peter, a

we're garden in as that I much out, mean, are rolling of Again, phases area. experts as partnered We this this. well outside with resources in So initial some very the we're I this to out and of there an we've store have go earlier, growers XX% for current know identified that these centers. we base mentioned we that opportunity we over think build our

also, well some So going then center other to It it by the kind really like open of driver big different of up outdoor product. basket. things obviously, very as that can that's live other not as how But type just the we of those then or as in segment build margin other be decor, it's themselves. goods build product goods the be footstep component. owning thing the whether grilling, to are live be of But garden accretive categories really it one whether -- well, varies scan-based we'll kind will the

Mary Pilkington

We'll our Okay. on to go question our at Forbes question Guggenheim. next from and next comes Steve

Steven Forbes

And the again, to here. visual really representation see great

question the to I the side pertains So thank wanted lots. to you it with start a multipart all for effort. as

XX% Seth, cadence or initiative. we Hal have by year within And So you Is to XXX, the expect the be Is of expect speak done? all goal XXXX? the completed time seasonal? spring, could laid you behind to that out for XX% maybe the by to XXX stores -- should five be by done all program to frame that if where that to we should stores

Harry Lawton

on earlier better laid utilize to side as and well. opportunity, again, out very joining his Steven side day pad today. and opportunity lot, bullish the And the prepared foot our I stores. our of square opportunity earnings that for the really relates it Seth on And we're us the outside per concrete very lot, thanks expand enhanced Yes, to the thought sales in remarks significant

cadence, you've and remodel relates where We're range being to -- starting XX% and doing that feel muscles more kind making the to year. for Seth of you've now got to said, things. building through the accomplish. in muscles, go. as working a to do we permitting virtual to XX% those good But sorts able new building have town we're in got this of that of year And stores that this and halls -- as progress the muscles somewhere it looking tailor we stores. of we're those learning got very we're that and that, we've adapt flywheel COVID, got those to around stores lot We've got great lot building you've that about a As we're built of real a context and to meetings

Next do midway year as to relates through year, next rollout season. the said those I a said were we we'll of of bit and stores better once X, our And just what certainly prepared beyond. spring into move little our the X getting of we based of at And has will side those get have have kind roll it and for frame. the next QX applicable as our years will we aspirations QX. X our least up do believe, running terms we time half over in -- year But then as XX% through Seth vary sense stores he XXXX and addressing and capability. lot. We remarks, addressing of in in have the forward, on aspirations capacity anticipate X remainder are to what of and we in then and it his X-year for we of in And advance capacity and capabilities outlook, out X-year a of XX% learnings happen a all

Steven Forbes

COVID pet a you, would customer just of on about this trends all the of just of speak excitements particular with ongoing ownership the to at and on importance gains both new hear category, around follow local sort and love and for share to level existing sort Would here. your post in to right trends. as Hal. pet Then love think thoughts up ownership the category the this you pet Probably food

Harry Lawton

Yes, absolutely.

So pet, first really to I on clear. want be

context certainly, gaining share We industry that tide the share that there, the in in tide. category. are And there's while gaining rising in are pet food gaining of and we rising pet share a

both their of at pet pets. the around reinforced pet As you in really mentioned, their you've humanization homes got combined because ownership highs the people all-time with are more

was the in of our that's Kurt for from I a is And a It's we store. as part a our significant basket it's And transactions. in it consequently, the in QX. business. volume high-kind-of-teens the comps double-digit in talked so about drives build to And driving customers category It QX, CUE very what in we core business, it drives for the our call important cart-starter us. mid footsteps, It up category. mentioned strategically believe CUE it,

So we of a is in step-up business. We improvement both a business reacquired pet our part QX that CUE improvement It from new was the customers, in our and driven QX. a see that business trend the to by our higher being by existing significant did in seeing also repeats saw driven our in increased seen We're new us. number baskets our and seeing transactions customers. of with rates existing customers a but shopping their the past. from customers, and we're than in much customers And strong at category larger are pet we've our

of a it's and drivers triple-digit happening customers are big comps. of Supply one-and-done homes or those And business online, in to the majority pet vast our on that the also future one Tractor qualitatively, ship Also in that's two-and-done as plan patterns. shopping direct is people's So the our both a indicate even online pickup they but store. their not in incorporating

strategically our to It's So online we customer and share business. all feel stores and like pet we've got a the in both gaining across are strong us that we base. important

Mary Pilkington

We'll next at All to Stanley. Simeon on you is our right. move from Gutman thank question Well, Morgan much. very which

Simeon Gutman

looks the a so Were year of and -- is Because of spending And is first big additional a how growing the it fast, but Mary by thinking is makes in you're lot that there's it how strategic way, you've said By year. COVID very this -- this, influenced much Hal, done? my the question move, At you watch financial. this investments Winn well just capital. picture plan so ago? spending job out. sense moment, my a step-up. will business Good question irrespective of these like and is my the mouth The

growth like to it's return they as going like And faster going you're the looks be so but are as today. EPS it -- is where slow. incremental maybe yes, growth, And good can't the revenue get it to looks

of that sort can you all if together. So take

Harry Lawton

Yes, Simeon.

few So hit a things.

of working this operating we I'd say through off by stimulated First been strategy much the how the COVID. were on at last we've was our same as X time months.

We're So confident position in parallel strength. so. say to stronger is do from the a more interrelated. much emerging really are committed do a we would investing What from we're than we two were that much recognize company we that will the and I pandemic of

cases X our single thing every and base now the kind were then that NPV all of initiatives guidance one, EPS, previously. of at business As investments. implications modeled what generate done it I into, that we've to are. of much every long-term initiatives And remind would months than a are numbers the say X in -- things: the And the every that and single you higher kind investments, in certainly, did X we're we X And of roll NRRs ago. second that kind ago, we're those. We've or they the kind it they generate they what years of up is those of at we single say, know delivered relates we've to And I'd confident one today. of operating we're the strategies for our the and one you healthy returns We of and one the shareholder business. those the value TSR

Simeon Gutman

cycle? And is later throughout it does it the heavier then and and margins on? same -- Or shape it investment the upfront accelerates growth the EPS of is the

Harry Lawton

Go Go Yes. ahead. ahead.

Kurt Barton

that with Simeon, I'll slide on lot There's just take time a regards pandemic, do out cadence more the we investing achieve on level to -- exciting first, the impact that return. strength. I be we to to of of are COVID that will time. The cash there's this I'll about investments We've the got said, there's a then Hal this level ahead this EPS we exciting for where to In to it. is to we're go in in the begin these The regards investments to thing at and position frame, there's as to growth, as making the the investments, consistency shareholder try We're cycling. investments, to sustain able investment. total we gave investment this confident during near in to what that the and the really is can of the and X-year and timing, believe going that time is making when long-term it. the can Kurt. to regards through of margin It's term. operating overall the trajectory. But In uncertainty, we're That's return. this try remind provide stepped-up is that expectation right our take the period now that point now. not committing of and business. that peg exciting for point those I'll over a to these of

Mary Pilkington

our go on please. right. to move to at Lasser UBS. We'll We'll next question, All Michael

Michael Lasser

job. nice Very

So expectation get COVID, X.X% on XXX comparing you'd perspective to going fixed X% initiatives X.X% your updated current Project contribution of previously profitability rolled to that lower-than-average to on to leverage with the Lot a points pre going you'll would the from presumably basis XXX out like an the some profitability are from from X% Side in guidance you're the come margin that at incremental offset to comp seem operating costs. that and like to it Fusion that based incremental sales

why margin these be So comp wouldn't given the incremental expectations? higher

Kurt Barton

Kurt. you is this Thank for Michael, question. Yes, the

gave on last I'll the Just I explanation the on earlier. -- build build

for a stepped-up that Lot Fusion in when are opportunity long stores the Side are the to achieve greater step-up. leasehold term. sustain is level It's significant the here our in investments. investments in assets. These this making investments factor growth. make investment, are the we're And particular, investments share, market you of important these The These and

so And burden leases. into the a we've There's financials. baked X-, frame stores have XX-year that these time that X-, in

same think continue And stepped-up level and time able grow compelling algorithm of to be to to during a it's to the margin we business. to of be investment very this produce so this operating able

XXXX. As back in the set that long-term we out last Hal targets mentioned,

business, level to EPS, much our growth -- a shareholders, total the emphasize, certainly I'll it's share be think very If EPS a returning on and the the billion commitment -- business long a say, term, long-term better about our targets. return. offer compelling cash well Overall, $X think previous a beyond greater to of stronger compelling shares those numbers We buyback. while just we're able for $X.X consistent of even of you than dividend greater and level to a have shareholder revenue is a continue focus size to the

Harry Lawton

of only sales Michael, tactically dilutive. I the would is And the are new thing kind that out call not

comes investments and then that the you along that our we're a then that to was. about operating today so and think we relates the it that X.X% to through they target X% If rate particularly business, making, and as to on X%-ish at the speak, really shared to depreciation the same a margin of flowing base with basically are comp capital X% X.X%,

just the case it So I that clarify that's to modeled when out. wanted not we

Michael Lasser

higher through And the follow-up having Okay. detail should it space from shrink and part up Presumably, of the to either the you that the to this about margin? on -- store is be what going is and more how SG&A. Can expensive a Supply That's products that, with as complexity Tractor incremental staffing helpful. more are operational to or think how adds of obsolescence? so we associated to subject running a on that this will of will that. just impact And more D&A both step provide to going geography gross flow

Harry Lawton

Yes. Thanks, Michael.

Lot that the I'm -- we've we've to the made and Side what and the first stores going John out. operational So rolled talk models in about Fusion ask adjustments to just

talk John, come those today. But clear, the to back broader shared then, in about be that. can And numbers maybe to Just we are that Kurt, the you questions. reflected you can geography

John Ordus

And We're so we hours inside what is hours out can in make how what Michael, store. a open we able the team that side of make done a they for all Sure. ago. at efficient team things sure we've we doing together years store. to more the lot that, have look productivity put to of couple is that continue done has we're store

we people of the to is propane taken sure the sure have curbside, have greenhouse that make care and do both also then floor, the we there. there feed staff outside out make to So

to continue more all-time scores it with that look the customer we and in continue efficiency hours, we So to service we those as service make service sure take inside continue we at store, can customer all-time high customer reinvest -- have.

Kurt Barton

When geography, And period believe base things area heard that Yes. gross compare I'll the regards X the hit an out and a we on year to gross our and, in of scale that of rather costs points. really you previous does on able comes John. margin, well just gross There's hit part sourcing. we to time, to take focus have to a some burden that fusion gross to that margin. Thanks, from the the the points and stay pointed the few of X- opportunity in X-year be of and continue the so principally XXXX drive productivity, a the the fast we've of from -- over that is for Starting the capital. will you to number the got that But as supply from the the we it margin, to directional and with as to your in key when leveraging -- to depreciation performance in guide chain program investments, point opportunity from growth business or you opportunities margin, out, is our the today.

So offset initiatives from going area. strong, And on hit profit is promising, very that that to that's strategic SG&A improvement.

SG&A burden So gross we and we to believe we opportunity offset believe the on can margin. the mostly achieve there's

over the plays margin out of time. that of All operating growing modestly to this period

Mary Pilkington

right. you Thank very much. All

comes question next Our Barclays. from Short Karen with

Karen Short

then maybe lot to possible is? and lot of a you have give one on question. questions what of little side the ask and/or color be seeing then couple bit per maybe to other the I foot I And square Could a opportunity. think you range sales the wanted what just on side the on currently you're what

Harry Lawton

initiatives. our the disclosing not this time are at We kind of individual pieces of strategic

store guidance. are capital the and to required say new I in that's our us very combined given can retaining And would of it. But efforts, very Seth providing pleased capital but we're come, over You early today. say composition of and video us time. the updated also allocate a our of to and that you that that's shared from reflected and and omnichannel early opportunity year expect with next with would do kind think hear with results what the comp the our to What Rome, is on But I stores talked in is stores in lot. garden. pleased dollars that do today side lot XXX -- the -- through implemented to we've you customers that them, our a infusion, the we're showed more the the of the with there's big more and the incremental we Georgia results between you conviction we XXX side

it's feed for efficient category participate in #X country. truck largest to that where begin the feed, dog our time left people there. does opportunity customers. day drive-through, is make player and that always we not or trailer are destination are And more bagged going the really do for, mentioned, big have we And us or Seth In drive -- it in the up in as think they that I in with feed for customers we right. process difference a As that the our really the requires feed a the load customer's an to opportunity their is so

a bullish difference the excited, side into make the to and lot And So in we're that keep initiative. that going to already our market in share will gaining be player. investing big #X we're very a ability

Karen Short

helpful. And then just of store. the I Okay. digitization to wanted the That's ask about

that you color that you seems it the little assets? just how the I'm stores are in a wondering if So would more story the haven't on that I many then digitized bit to, guess, like contribute newer think you a a of little to and past. Because about more nuance much could that's give talked how splitting

Harry Lawton

Great. Yes.

to that. review deliver you're we've what the implementations to together kind more So Seth from systems around hear up optimal of come outcomes. going ask I'm that to of specifically, systems macro process through and around our the done him teeing do is done And kind going then implementations to micro kind of we've line

Seth Estep

micro so and both Hal we little Yes, currently a Hal. of about that talked the Thanks, Yes. implementing, systems are as mentioned. a earlier on It's some a we level. macro bit

more optimization on space we that some the more aware, as space clustering now as throughout on as to the line be regional as integrated and planogram be that within we merchandising on with again, get through we'll individual well store well the space well as we've our on smarter, whether project call are us that each our assortment those or that of tools as that part processes store implementing a Fusion this all through can, And start and level macro to store micro, embarking through local that a We Project go Yonder right allow those and there. art store on well is projects, like. each level get scientific opening we journey, will as Whether within tool That micro be that. can to being category it, is it, individual starting the floor on it's goes going to software of The of clusters will all really that our store. on, so step better, lot what Blue apply be processes, that in -- stores up that next new systems. that been macro the call accordingly in really big merchandising will look then store as the a -- that on, well and that the tailor plan side clusters of so our better clustering as and comes the what we be review are clusters

now in significant little In addition also We've today to has have knowing have itself it, as flex those what that store. flex too. we really can of out we can space visibility that comp, drive stand-alone XX,XXX, that can that a identify have CADs, where aren't, we good nuances we just are. site-level larger base there a a activity, were there's another than big we site-level now planogram space strategically in Then think space you of now that how store the call system we stores have great that got over that space much, to about to could it's number be today a take piece that be and be -- the two there, flex XXX drive prototype, productivity a CADs flywheel every time, have bit on and where the that systems, the where store spaces don't apply to building those can that it, a planogram that a metrics over some and call might it, stores

Mary Pilkington

Okay. Thank you.

from with Next Grom Chuck question is Gordon Haskett.

Chuck Grom

is the behaving play that shopper of on shopper alone, versus and years. and basket mature second adoption, on in I'm Tractor My how believe, quarter. on XX new curve next and a that maturation curious how frequency million I couple out size question the both over third more customer could is trip

Harry Lawton

and were of on and exception that and between we reacquired QX customers the your of our to the that at a did customer relates kind with QX As meaning as really the at remarked say the new counts opening to new modest And QX, same it attracting customers, pace seeing continued million not were basis, in XX some QX seasonalization customers we pace the new we weekly QX. levels, QX QX. new slow same new customers really point, from to really I'd first off, in is, of between comments, what

embrace to and that as increase are our well Neighbor's there, what's Club, bringing delivering and digital really customers, in our millions stores that also the relevant staying advertising. members our Here legendary both a it's focused on Some are of retaining that our Out but doing CRM into think of we to of And in robust that's a lifestyle that we them activities of continued just that I marketing which lot driven just Lifestyle for our by on new Supply But activities lifestyle. customers customers. service through with and very by people driven those on efforts these Tractor as in it. important We're continue destination marketing shopping the and focusing laser-focused finding people number

I As exceeding life. that I maybe a gives I'd are -- cleanliness transitory scores only also the to the reshop of stores customers more on some with rates not earlier, SAP in that terms him that John, speak little focus us bit more structural-ness bring third with of all-time we having historic those on time. we've there's but in safety to also rates reshop really structural-oriented in versus confidence -- the the new have second had but mentioned let that customer of rates the in our And new know these and customers. customers

John Ordus

Yes.

in environment there are where And time stores. inside spent saw when out coming. we've our cleaning sure started, is we clean on the on we're the in making over-indexing to cleanliness throughout then COVID wanted Monday customers Saturday for throughout since we're Friday to benchmarking sure everything as sure lot we far we've and on all and stores. our that. the that through that as now stores we we're invested invested of a And weekends, time Bathrooms, had cleaned. compared well. a throughout we've our Sunday, saw cleaning. -- some make it seen our So We really to done We of at what wanted bottom want We make to retailers are We've as store top them. other we've in

experience, allowed It as are a we high take into some us fast. them customer task-driven that about customer hired of bit experience As earlier GURA, goes, out five, moved just rolled a we've and task-driven to talked environment. far over little the that people more I it that today, our

this team that love ranchers, We we were throughout are hire talking over in of they basis there We're then And and attitude. live year horse They also investing last is hire our welders, have our stores, driven We are that sell. farmers, for doing up members they year. of GURA out owners. they're that that XX them. what what really our lifestyle. inside the skills GURA other that that's Now What about love to inside the stores. they're where they points is in selling training scores They lifestyle. about do love, store they us

XXX overall up continue they're about Over satisfaction scores then go well. And the points. to X up basis years, as last

Mary Pilkington

you. Thank Okay.

Chuck Grom

great. That's

So actually, some I -- my guess follow-up Kurt. be for would

a You spoke to the operating may next at environment until the minimum. year third be quarter of

you're begin shake the XXXX out I the prints case, if as I'm particularly some comps could So from you these big in that's share. guess how thinking cycle of curious to

Kurt Barton

watch COVID share back or does closely important how this to indication vaccines are bring been looking of begin and level have for are bit the an And when is pandemic look and for the to going we're be -- of us consumer. factor XXXX XXXX. plan, And and we to a therapeutics all at a give playing to The not We key. at little pandemic information. going indications certainly, the and to any multiple I'll of our on Well, but is begin normalcy out. to guidance have Yes. on scenarios beginning

there's say the public, the some And may normalcy that consumer of timing most, we become level want first measurements spending of improve, believe, so And return as to when. when to tell to the therapeutic vaccines that hard behavior. that available it's I the consumer back and the to very

to try plan to we mid- plan, that we may late be that, As XXXX.

think some to so quarter. still, in in those in I and be feel we're half showed positive first year, a the And flattish performance I period And about comp, growth able may X-year as investing they potential some have first and environment, and some the I to as that numbers. the variability quarter, second that on may for And then it. the well, have certainly. as that even that chart in downside of there's whenever strong being there's time indicated strong of the indicated, we planning We

based there's at of half to is you demand that think the on the of at before macro think giving And plan can the point the at still I is best do we lot normalcy for in as any there's And how at this point fade our that begin guidance. about that of XXXX social structure it guys a indications we about some in level year, strength will and so I time, returns. all that a give we emphasis And point this the of a then distancing first and business home.

Harry Lawton

comps. The as -- only staffing in volume we also levels working the Kurt's buying COVID And to is that the with -- dealing well. orders were to with both thing in got as on on levels demand I'll our pandemic programs partners add plans middle our knew November, now we we staffing know frame build we for we QX. year. to we We know COVID a is December demand import we had inventory last we consumers pandemic. time certain meet that coming to QX because of XX% weren't QX And were building domestic into in are that our placed how short and well the inventory partners comments we the as this elevated and We we're are the anticipating meet behave our obviously as of to import when midst

Mary Pilkington

Instructions]. So great always. [Operator questions as

that, with from question Wintermantel Evercore next at So Oliver our ISI. is

Oliver Wintermantel

Yes.

a it's maybe you. It's Kurt, for about So cash question free flow.

next five You years. mentioned $X.X billion over the

buybacks. then the next loaded investments Is there cadence, So few Any or And have is I And into you're just over that the flat share going any years? also more you size, timing? that from back color back-end into buybacks. buybacks, to impact? mentioned then see any -- is share there the wanted there's the if that an on

Kurt Barton

Oliver. Thanks, Yes. Okay.

strategy there's Certainly, investing exciting part will timing we've us there, in organically the Out that million time. into is the And with million cash maybe for business, that over part buybacks. is out in XX% able as really ratio, that shift our free of in Here we strong hit the buybacks, time. our a so period some the We loaded, a temporarily flow. the about. that of between but beginning shareholders. targeting this we've priority, it allocation distribution in the with over flow on we two we've strong, first but couple allocation. center to And be So are investments time payout is share the the strong, a things been it of to did. time, reminder, to pattern $XXX able temporary capital free we've when our of And pandemic, the allocation. really operating planned be back of pause. business. dividends cash the Life capital talking business that there's returning flow as the cash a questions model. of And said all we level on that period come But to buybacks, are for rather purposely on as I planned in or can cash very mentioned, indicated, relatively purposeful, over consistent last just targeting business But then be to our over dividend. cash plan we a our was a is strong of The to as We're to it estimate play, the get $X an then were a pausing consistent see that's important shareholders. The compelling business to in throughout of do quarters, return piece billion it, the that of and into bid we a our to investments leaves we important continued time is as and believe ability to It years general, the think free I'll the flow us $XXX from the a pandemic

we'll information we'll repurchases share talking So and more about our the next on Board in of of timing be have to plans term with that. the the as near in to our weeks, couple the reengage

Mary Pilkington

at Peter our question, on We'll Sandler, Okay. move to please. Keith from is next which Piper

Peter Keith

I know to in it's environment, this A today. some numbers really but difficult great quarter. nice execute

But positioning you on. interesting might guys your you And competitive I have there hear or of pet And enhance the competition. just follow-on, to maybe positioning? enhancing in you're lot what order interested as how at You in to relative a rank high and just specifically the to doing hoping a of competitive competitive then going maybe structurally might share. to those how could investments you gaining talk be feel level, the things positioning in prioritize good you these pet, a was category, about your are it's importance.

Harry Lawton

today joining the It's had $XXX Yes. benefit of structure. Peter, remarks of profitability thanks quarter. in us. I'd significant favorable market, opportunity opportunity billion our incredibly participating needs-based. that of And demand-driven, and appreciate about we fragmented, we your start player out first in the with for ahead being us very attractive still in a with an scaled had size,

As will expectations about share. we think it expectations need right are focus best-in-class customer. surpassing Out we that what if of that are the we positioning, a a across our and whole the stores, that little about in, the ahead now focus no Lifestyle positioning gaining all make And and do matter categories need, And we share that the gain less capabilities categories more attractive compete of market. that we Out what the our in there out our the confident we are very firmly the believe is substantive we think address we Life competitive are. offerings, to customers' that that, in and is lifestyle And bit about customers' to the competitive sure strategy stay where Here about a that And entire Here are.

data marketing said and We data talk kind our as there. also when look and know I'll a share the earlier, have pet. it of when at we relates we I'll are to and as look and when industry-level going we in we kind I little And that pet, of at gaining overall we our manufacturers. activity Specifically talk on -- customers -- Seth bit merchandising talk what let with with our that about

Seth Estep

Yes.

Hal. thanks, So

out So really had the saw science-based to like project there all some mobile they John really the we we're only in the team are pet then stores and in time next From of space, digital that of now pet obviously but sub-XX% at reset, it, and we brands, product the obviously assortment going XX% some you job reset well has can making full-blown consumer to with value-oriented consumer into then brands space from, our stores. responding of the ways at from in and over there how we're prior team for of Project have yes, a in and this was some introducing can of layouts. products in the to engage really, obviously, space partnered Actually, there of call the obviously, standpoint, not course last talking after like QX, consumable pilot amount year's going that space, exclusive Victor, a our analyzing digital the example, a partnering relationship over looking our lot trends. of the to base. in that with those that spend those really partnerships like -- things, Miranda we're have build industry at the also select with solution of north pet a and and the really clinics, We're their today. leaning partners some single type assortment also stores. them investments after XX Lambert out X,XXX his absolutely MuttNation every that now we a really August clinics getting dynamics Fusion fantastic and try being But for as to consumer, for on resets, new that And continuing done wellness to analyzing a where be of convenient We today, incorporate in and tremendous those with the wash. year. in market vet of category heart grain-free And over to some look go of touched the solution

So...

Mary Pilkington

Okay.

at Chris from JPMorgan. is question Horvers next Our

Christopher Horvers

in question parts. So two I had one

I will, can guess as of First, in and you truly repeating talk classify business se, per crates beds that would adoption about how next the you repeat much some animal nature? year. of that includes and

percentage sort portion of mix the as could Would part what first And business? mentioned around which given chasing of about true cycle question with the you demand side time, XQ is it, comps you positive as -- you COVID mower sticks a is a half comp? and second give would in mix? next is At same lap of the suggest multiyear riding think replacement a do positive mentioning potentially how your cycle the year that XQ that replacement expecting create the other short you short in in cycle of of 'XX. of So buying is what and can you the the

Harry Lawton

us for Again, joining Yes. thanks today.

we feel pandemic about very good on you kind To share of crate goods, a are while can we in to business, mentioned can things on then those. Kurt live As if emphasizing, come certainly your structural a certainly shared, buy And our leaning strong really as gain your transitory. dogs, garden bed, of lot bit very into grilling, an we there's it if that to a it XX% it's in you small more it's small and to in we if the different sorts soils of that bought variety upgrade like ball remarks, and becoming share being larger point, categories a got the to And fertilizers, broadly. at little remarks in power riders, comfortable that bed. ways more Seth much side quarter's and a of you then again. say, about structural have Or broader garden, business. for progresses. of comps of more the But opportunity, very those annuity-type see there's you kind the you're And in as a see his last us you also I'd whether say, And for us might pet, us we're see about to anything, elevated going that outdoor certainly, half more on conclusion, a that. of but being look not

purchases, bigger-ticket start those to So we of kind of to we're offset those drive that sorts as businesses. other the sales some and of comp categories in cycle really those looking for

what to laid only but we're QX, conditions buying the is We're not year. to for a to There's going as see how get I to those as next we out, it. in relates uncertainties, pandemic going economy be, it As into it. it the how sorts for lot on are leaning of it. going And as unemployment, things. said, be, We're then staff Kurt's the stimulus, of economic we'll evolves

we'll that know out of So but a lot leaning there's are there, -- we into QX. uncertainty

Mary Pilkington

question, Okay. We'll Brian is our Nagel move which at next to Oppenheimer. on

Brian Nagel

Great results. Congratulations.

about so keep request. to it apologize. the just question -- my talked presentation to Kurt, you Winn's in lot potential one and with respect I'll a So It's shorter potential nature, after talked term in Mary normalization for about the We your COVID. for I

the guidance and results second third I'm quarter, normalize some at is, QX that's -- behind you Is you starting But the for buying COVID assume comp If historically comp in quarter. your quarter are now, conservatism second the patterns? of apologize, in moderation. in very to clearly, some there's beginning factor I'm whatever a that see that the see in have are I starting likely I sorry, in -- assuming question indication is even is to their consumer strong with a strong that. kind still there, you The look report? to does

Kurt Barton

want take you Do it? to

Harry Lawton

fall able some put out I'll go wanted backyard. log fact, miss approached into seeing to splitters, well to that extended it it. goods, outerwear able approaches. here consumer weren't now approaching going are behavior in. we're spring has to the get spring. to on so patio they They even they're season mentality about of even the furniture. who where think like remarkably some stock-up heaters, And saws And little Yes, as didn't weren't the the And we've not fall as -- as the were consistent. do in behavior, winter simultaneous winter strength goods winter patio with the the of And in They fact, things they're say, those is would they get line, some seasonal and I chain and really that right of more bit and as same think that summer and been strength do as like I seeing speak, they their at and pool to starting people riders all. in in summer, And able no we're off a seen as our of to more weren't and goods they last What in to say take to spring business they in trailing time. the into

So were our month-by-month comps QX in very consistent.

geographies, very across comps Our consistent.

the categories seeing now. of comps level that as in with types saw consistent. Our our the two are previous on customers of based categories, across And moderating season QX continue into from the in that seeing very of same the we're it exception just We're right behavior quarters, here. we

Mary Pilkington

moving our All down Keep questions. right.

Let's see, Ciccarelli go at RBC. to we'll Scott

Robert Ciccarelli

So your on comes have what impact lots that your lots, And of on to lot? expectation biggest expecting store? business. Can related the lag tell I the today initiative levels? follow-up you those another guys side have nature is I you that, what your side given sales seems are to be you to expect the to percent the the continue that in sales reaches of question us in-store maybe would to you generate that, your side guess the that since Or from just

Kurt Barton

important remember as you'd has you've that I lot, In storage of Yes. today, is thing productive. side large, walked for It Scott, it's it, view Kurt. is that to bulky think that lot it this the side portion equipment. a agricultural-type the the

of we get able opportunity the productivity of to some on or for lot post initiative great a to is to product that itself so the outside, at at pre areas, we that or don't side this in other product sell see What pace in there. is actual convenience. And be convenient specific equipment the on the create pleasant to of modified the shopping even a aspect the space leverage shopping environment an experience, ag that's business it a that reallocate that for and greater reduced drive-through experience, space shopping -- for a then to capitalize inside

the of as projections going is be that stores encourage And But for one, here's that in going go us. our roll to -- And the see the to we we the between what existing that a first and of in as you so some rounds have But it stepped-up doing the look store will for and And fusion lot really you indicator also we business. to level early, it's can out, space number as talked this say be excitement so for productivity and normal to And that's side drive certainly you that's see what work begin it's our it's a how is see more months it X that trends productivity us opportunity true can the new the to would these certainly and more of of share of it it holistically -- view show the us a to drives in next post-COVID convenience categories stores over the does X, what in hard you store. comps what today. you about. holistic very productivity like. Seth primary to at it's

Mary Pilkington

Okay.

Next up is Matt on with McClintock Raymond our James. Q&A

Matthew McClintock

spend you how your or question customer like simply marketing helps significant asked flexibility And and nimble on. the that current So plan? my the spend with buckets quarters few remain what have some pretty because the new of is on that Should upside last you're I to it flexible are seems to this acquisition.

Harry Lawton

I'm And of just it a flexibility this significant Matt, to turn we've Yes. a that talk areas shown here think over the to little that's about one Rob technology. in minute to I a really going of amount year.

the digital in and that marketing as more soon kind on a their was to customers new print-based hypothesis true. we to from retailers going consideration television-based that going proven a mentioned consumer of thought we that As the plan to right kicked have to areas we've And seen aperture -- certainly, marketing the other traditional what as to you in, in kind plan of to pandemic as marketing, there be shop. open also of be is transitioned dominantly

I to we the on things of to that talk Rob horizon. little I'll Seth importantly, lot a flexibility in a but, done of think agility turn lot demonstrated and digital. some the bit things maybe about of the a we've have

Robert Mills

Great.

with and of the rapidly also And John's around really pillars. as have our rapidly, which We was Hal in look customer's flexibility and in website implementing to leaned earlier curbside is in One expanding the clear as simpler focusing a customer space. making digital the great traffic and uncommon, So COVID, year especially the best-in-class, looking that, really the improve of not our build to to pickup website, into what where this is yes, road mentioned, for the be continue of flexibility delivering agility convenience. is built year will it core but on how home experience that like we lot And navigation, this the would very a IT, example was customer. and product, agility that this started store X online, the to the experience that provider. that adopting coming striving was customer map shopping that a we capabilities very entire across to future, easier And looking base. as where to team for it omni-channel of quickly finding do within and really a the just quality that search digital, very coming obvious with we then even world-class but improving flexibility well the of partnership with the

I've curbside expertise how We're but convenience or and with around that customers, that that XX% times. device The product the we bring same mobile then our second that come more. -- factor of the same our leveraging day. delivering really and our the us deliveries at with customer that video, day and efficiently earlier, to all occurring talked lastly, the about clearly really that for faster on content, through the And the near they leveraging base that customer do of goal much expertise know-how-to more providing trusted within the is to

seen space. throughout agility month, that's impacting stores a more the within deployment online the strategy we've sometimes where year, this You've focused capabilities twice frequent, the our new as well we're changed from as on technology, really doing digital

the that technology advancements about So we're really excited making.

internal it scale have as short-term members and goals. up partners well as We and our flexibility our to aligning team long-term through to

Mary Pilkington

comes to our much, Daniel Thanks move with Matt. question next Stephens. from right. on All so that We'll Imbro

Daniel Imbro

congrats is while thinking app? a last mobile my are looks about investments, how to tool transactional of new about Obviously, And Maybe how and you you're you follow-up digital to or a been like nicely, answer for but customers? research I'll incremental ensure more maybe to a engagement a not tool list. growing a the talk months, few truly can to on it's the it working your it's shift? just the guys it's add sales only channel

Robert Mills

me Right. Do you want it? take to

Harry Lawton

Yes.

Robert Mills

All right. a Thanks lot.

key a has been for our is mobile So part of several strategy. years. It

is first Our told mobile very important. us customers clearly

those that store, we're rapidly the and to device device some shared also And not have provide the tools our provide building it We changing. of -- on We application X a ability it mobile out the and focusing capabilities customer to that pick that mobile months. to very mobile year gate, by was we in to majority site, this selling And the originally and the ensure related transaction basic accelerated within closed is through past but our convenience. and X or traffic comes the of with on can that's content. a up

both. of a bit it's little So

experience come see expertise, for want want shopping service But to knowledge. we time, customer. that a You're Tractor. be clearly, same into for They us with going product that stores the simple, always that a That's at differentiator to for convenient our looking we them.

always that You've us our available. mobile with heard talk be hire app we customers. mobile to always about We them, that how want device

in products available animal extended questions have well really or questions, automation, through adoption. transact. or So cases, as their stores both the some their same being questions coming in they're those a live that's cases, We're then some have assortment, seen they time in interaction; far. at pleased We health and there are other sales at wellness the if can and the what so the we've being, property the so some ask while also always on shift; or and through answer experts, they so ask how to we with both as see incremental from, about

focus convenience additional We in quarters on the have what's next about and really be extreme to play. capabilities coming going with and couple content of I'm excited that focusing

Mary Pilkington

Thanks, everybody the has Rob. Tractor Supply I hope app. downloaded

the you X need Broadband to Coalition. know, rural Project you the American donating that's real download the so communities, thank $X For to Connection download as our taking to And for million, up we're app. time every in a all

comes next at Our question Thomas KeyBanc. Brad from

Bradley Thomas

year. about to the how you're out about and model hoping know to want top of buckets could maybe us give we line trying that talk recognize the a this just on to I at not guidance back play on circle expense ready know point. was But none Congrats of next is we I some going to results. XXXX I great question and

next expenses counting COVID some presumably it, next the year, into I'm As year. roll into of roll the increases wage

year? and disclosed year? are Kurt, about strategic quarter. growth thinking call next million about to time we now can the of there of be as that some you any in for You've And other we should are puts margin investments to $XX $XX million fourth think now the takes items roll or through that those out expense this expected next

Kurt Barton

question. good that's Brad, Yes.

we've you pandemic you it's very And information we're anticipate so up, would out the COVID, looking yet would XXXX. of to of regards you a as some would about how bit anticipate, in COVID framed continue that of fade COVID a similar how XXXX, give into think that move as potentially, we In to let the expenses directional at but normalcy. you me likely incurred

COVID on management. the that vast then as focused John On costs extent the sanitation, would safety, talked contact medical about. And and be case -- majority labor and cleaning, expenses, supplies lesser and the is tracing, of there's sick-related

well. model And benefits, COVID so we you out those would can Yes, see wage as could a how pandemic, the as that costs we transition in dissipate XXXX. that there of permanent into

On capital strategy introduce we just the initiatives, start be out, that growth would would the the laid in depreciation. the primary into spend strategic to the cost and

in initiatives all factor most the burden like would third of significant quarter that we the fourth said which it. the today, FAST was On out ramp-up hiring, would quarter, incur the we training, of rollout we're and strategic pointing the that Program, that in of of and do initial even we

some And of incurs that primary fourth well. and factor a quarter as in it's

something Third we're in as mentioned, And as quarter of initiatives largest may or anticipate. growth piece the was out advertising. Hal we next that's strategic flex the we

level forward, quarterly that's XXXX. to the and about those basis specific to on half talk $XX to lesser the QX same we these in at initiatives strategic going as levels those on items something in a QX, per-quarter million to specific be, year. a may $XX of strategic and are more a So and the it's And be million likely back growth basis, not than initiatives

Harry Lawton

big that's You say to something a compensation, incentive about Kurt, want because swing.

Kurt Barton

Yes. the compensation. mean point in centers, But record with XXXX. model I of performance real level a compensation. the record-level year, lap provide members way a you incentive our that we built, team getting excited team able a and our talked as mean, often, those be members, distribution portion compensation, the we've incentive actually frontline stores, that incentive to performance out, plans incentive of certainly, super in I for leverage the there's And to us as that XXXX, that that's next strong in are

Mary Pilkington

We'll Suisse right. you, to Kurt. Seth Thank All Sigman Crédit with now. go

Seth Sigman

question. last I'll up as add to want my well. follow congrats I on that

here, we're in favorable year than past more flow-through 'XX you about if this less have or As demand to figure And spending clearly hopefully thinking out been elevated being so we already. trying should the year? be remains next

start continue, some of then but lap the may of incentive have incremental to Some that you'll you'll that, also lap comp, investments coming but in. you'll also some

flow-through expecting And So just the how Tractor effectiveness noted gross would speak we've if hitting offsets specifically year things like Kurt, what some then pressures more those or is the clearly next past in about favorable serve how with less because that, like be But you not you feel and to than about and you incremental recently? alone continue? you the would all less the quarter the headwinds this discounting, year? are also, as fourth promotional offsets to activity seen to also And summarize, helped can we about thinking do that those margin, that.

Kurt Barton

because think principally And there guide a questions you've then the little I heard a in I directional on on would flow-through. XXXX. margin I and QX staying consistent gross bit a and was XXXX Directionally, was XXXX and somewhat towards Yes, I'll Seth, there. two the what the we've maybe with demand demand does product step-up with bit of flow-through question guidance Okay. One on in very on the little stay environment as today, doing seen that creates the is some things so it. you pandemic in of also of as this business seen expenses And shift cost the all a the may we peak for of COVID, out move talked elevated. about, the COVID that goes and for of what the

some on So high the And that there in range in we'll margin, guidance the more going I'd have stay regards In on is the in XXXX, XXXX gross give are a that to albeit level I of you've seen as to -- quarter things flow-through. somewhere fourth gross our quarter. call. specific called out fourth

newer quarter, pointed are quarter the past gross more transportation to the pressures to just things fourth a some it. our promotional-type particularly had fourth performance we strongest that. margin in How season. I the year-over-year growth transitory so out environment XXXX. margin to are gross the may typically began the cycle out, some And of And that's long had on X benefits we'll with some sticks last fourth rate. business and And our year, quarters the as tremendous of then specific quarter there that we impact holiday generally the And to see and play

quarter the to we able pressure of the on fourth promotional anticipate some puts QX less of maintain QX, benefit So that. in to be

low out continue there on not to to and benefit will necessarily to would we going emphasize heavier focus back just I pricing Looking everyday XXXX, a promotional.

anticipate that seen as margin the on late forward. go maintaining So we've we focusing of of benefit do rate much gross

Mary Pilkington

Thank you, Kurt.

go So just it Feldman our we wrap up That question let one Q&A, for line but from little of question. final comes with we'll longer mark X-hour than Joe with TAG. the bit a

Joseph Feldman

the Again, and I'll offer event. quarter congratulations a on good

wanted you within just categories the do think space for, which you're from and most not opportunity So and categories wrap that see analytics with stores. technology up but you I the Fusion, Project the talking product to about

Or if just heard at I just about then pets together I kind but As about with this And of missed biggest could what those all that. upside? most another think what I'm and there's I thinking on is question think it, word like your you're it, I Petsense should where to trying apologize and don't if wondering -- look I tie we the was I'm kind I'm opportunity, thinking for? today categories apparel are of

Harry Lawton

Yes.

walk portfolio through X that kind So must-wins of then and maybe I'll the kind you can turn merchandising it And of the on. your team I'll take focused category Seth. and the Petsense piece to is kind Seth, strategy of

Seth Estep

absolutely. Yes,

Harry Lawton

Yes.

the doing It really too about humanization. of kind good We're It's business and We portfolio business overall well. we're Petsense, the our it and to with doing scale. size the a And Tractor well. adoption Petsense to is to kind reasonably The I'll pet really more Supply guess, category maybe feel really pet very business. and is So Seth, immaterial the strength strategies come, to the turn management in is team I bit is It's on about Petsense, but from it little very continuing grow. is talk to over -- you focusing. of benefiting pleased where it. doing and well.

Seth Estep

absolutely. Yes,

course then we of bit five that this the this -- it really the after. we're fundamental And focused assess just about on. -- actually earlier COVID little So And call to opportunity the some as over a it, even, continued environment. going it process gone of strategies pre-COVID was started -- category yes, areas talked we're and we've really in that throughout there's

convenience to product that but there in piece, to digital the but continue animal. not things is some the of going at stores First in share well. feed other still market-leading we cetera. also win we are delivery, think earlier piece play, large et the as of about our that and Hal with Pet like only going We not to a foremost, talked have our pet significant assortment maintain gain as only animal really status and opportunity well,

Our we at continue They customers that but have love wallet. love of new customers we know animals. not the with and share pet. with We that their to look ability win only win

so And in there we're animal. foremost, and -- first our goal is, win pet and

they're that We're our of make activity, some center going of again to strong is become capitalize obviously our and seen we've going right? on going center as we in -- garden the right? sell, in market those the of all you'll product to workwear, a piece far well about. leverage we've lot also sure those in go aisle, where how to after second see do can of that's respond and early what And continue space, as the and garden that We're to We've the sell as just on And that we look to that tools, garden as how DIY as those obviously seasonal seen authority drive about going not focused talked we're so our what as department to secondary going some exterior here. talked The in that really customer, things to And the out some be it's have like workwear we're we categories just is share continue at inside we like we it's customer really, nature for well to in to limit lift. backyarding lawn today in categories But that go that doing, as we've all only as seen throughout to test. the well the after. after product going then gone things space them.

also market, to you that us the and opportunity opportunity there. grow well you to to our look only we for we categories you at trips traditional believe look not core of that and You we of as through our to start some significant a in consumers but other maintain those the at win just continue look are our that have some that and store those our total count, addressable just the look have, some of at at categories expand trends coming to status really consolidate

to You'll throughout see that life the store. come

that see bit about we in basis. store-by-store, really looking focus Fusion. on on a we're nutshell, want state-by-state that little life we after, serve You'll clustering, for that their we at can there Project it a in region-by-region, store in Talked to we and a that needs, just kind making live their they the lifestyle the so them and sure go on are categories of But terms.

Mary Pilkington

who Great. in took Well, to thank our everyone time question. that's final want I today. to be the call going to

thanks this Supply thank Marianne team Mackenzie your scenes join XXXX We Goldman taking to stay efforts. all you you also to worked again who appreciate were behind IR on speaking Take take January. wanted to PR care of a late great tirelessly time the I to for event. fourth minute And our on some to out questions. Lindsey of those always, call all in the safe. virtually. Tractor look quarter and please Mitchell, day your so Denenberg, As and I to forward and us

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