TSCO - Earnings call transcript Q2 2021

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Operator

Good morning, ladies and gentlemen, and welcome to Tractor Supply Company's Conference Call to discuss Second Quarter 2021 Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. We ask that all participants limit themselves to one question and one related follow-up. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Tractor Supply Company. this being reminder, a as call recorded. is And introduce for Mrs. -- would now host call to like call I your your for today's Mary President for Winn Vice and Pilkington, Relations Public of Tractor Investor Company. Supply Senior go please Winn, conference. ahead Mary your with

Mary Winn Pilkington

for you, to the do you join Thank safe staying I time all and taking are everyone. today and Good morning, hope operator. Thanks us well.

your Hal prepared questions. supplemental our website Kurt on Barton, call After our to remarks, On and will Officer and up release. Estep, Chief the session. made available our will for Seth CEO note for call our today's EVP join a accompany Lawton, our that we've presentation today the the we are Please open Merchandising slide CFO. Q&A us earnings

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

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

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

call for Thank to now, you will available call time Hal. to it's the attention after We morning. be and for And over my pleasure turn this follow-up. the your

Hal Lawton

to this Winn, joining Mary and morning. for everyone us thank you, you Thank

out needs Our lifestyle. be The XX,XXX their challenge you through other, call vendor ongoing supply Life communities customers and measures, the as we members were great say and the go their you based there dependable Out together been support as we for cumbersome our risen XX to to necessary thank Thank Here chain together the to supply I thanks in retailer, strategy, network. the safety Supply another quarter. and team volumes, and months supplier supplier team challenges our Here home. team Out has our team has health numerous lifestyle. than over to Out surging Tractor Here digital in more disruptions, essential commitment our the of a for out last as customers an the The investments, but including lot to each roll more. able as to Together, the global worked the customers we to the the overcome supply our chain also to for each partners dependable chain would to to like

second underlying of we have as momentum approximately quarter In XX% the the months or quarter the XXXX, in through of are first now the sustain. comping we $X are the billion. XX sales and of pandemic, continue trends to Over remained all our XXXX, pleased first the comp, of this grew

achieved our and XX% a strong the stack. as store very two-year we quarter quarter, team a Looking expectations Tractor at performance the for sales Supply exceeded second comparable the a XX.X% growth delivered that

Supply's Tractor again Our yet results prove competitive unique advantages.

for supplier Out dependable our Our the relentless as lifestyle company. being is Here purpose in embedded on a the focus

in Our Here early is days. still the Life strategy Out

are positive initiatives. our trends from seeing We

momentum. committed by in our are key We team customers. our remain a the differentiator to excited believe members investing competitive with We they as are we

Just XX,XXX minimum hourly tenured nearly hour. of we our also raised $XX.XX members team and to increased pay wage month, last for our per store

do, Our Supply way continue in also our driving right forward. a to team only team is. our special it thing a make members role place members in their recognize to Tractor that Investing the not is is business to it

quarter X% sales by second and $X.XX. Comparable driven net grew turning XX.X%. increased ticket Diluted our of of increase comparable count increase earnings XXXX, approximately of share transaction grew XX.X%, per X.X%. results to Now, for to store the sales a our average XX%

Importantly, the business foundation is of our robust. underlying

For the quarter, had cause. positive every week

and categories. Our product regions broad growth based across was

We gain stores. categories, online across and continued to all share in

over with QX, instance, usable, experienced sales. we in our E-commerce year e-commerce than and growth For represents in customers. And recorded well edible under resonated store has mobile e-commerce that XX% more we downloads its capabilities our our has comparable over our quarter our categories our of consumable, done year, overall and above already store comparable sales. work of sales. The the have improve was million app last certainly to a now X.X just largest-ever

we outlook share strong our and revised earnings call. on year. year-to-date, the the more for in with for later will the details are our Kurt our balance raising coupled our Given of outlook guidance year, performance the sales

in acquisition We benefit transaction on will the pending and of Orscheln FTC the we cooperatively to customers our Farm working and look offer Home second pricing. their with product with this that Regarding February, are forward request. improved we competitive announced

traffic our balanced I customer like that today. you behaviors remain update on key shared both observations to would a Overall, metrics and market customer very and healthy, our data with We and research have our increasing at on based previously spending of rate.

of run relevant. through So let's insights most some are that the

more and ever per seeing are Tractor shopping than continued spending money Supply than we than strength these making customers are base. customer ever. our are More trips First, customers broad, more and trip across are ever

the of months. us retention have strong XX last seeing are We customers over shopped that

high-value we've run of new about continue is X a to The trends. Club to relaunch about conversion program. is X million downward to spending, rates are most our In outpacing comping rate and Year-over-year, grown the with from XX%. customers. base of and non-members running with average. added step-up year-to-date, XX% a rate rewards of at nearly Club retention significantly program. spending. been Neighbor's running north times accounted We've the of historical they Neighbor's of spending the of above rate members for a prior to well Neighbor's customers members, about valuable are loyalty program our that's our our where they upward Club program our by retention our sales in in the any Our we've the resonating customer chain XX% migrating customers members points-based the The above

New the significantly compared joining Neighbor's acquiring rate skew customers new program a are growth customers millennial are to last seeing core as the significant to above shoppers. year. the And we in of our nearly our Club younger. at We're from XX%, rate are continuing customers

years Our trends with XX quarter. the first of this were XX quarter for the customer old cohorts years line in age to

in legendary we're generation. customer keeping that like customer seeing last We with new are the product Much once these a important to service, customer segment trends the aspects to We described power. staying engaged in-stock as a convenient believe our of types customers to can quarter, this believe our has key simply and as place and be in growth existing such service levels to assortment, brand. shop, continue

hobbies consolidation, On the trip such omnichannel gardening, and like adoption, and key work self-reliant including in as and rural adoption. a favor, remained revitalization, macro our the movement, lifestyle front, economy strong to poultry, trends pet trend backyard continue DIY and

environment Where been advocating increases necessary, cost elevated the to we remains our customers. through of we offset. import, cannot cost the and domestic wages, freight, pressures are While taking labor team merchant pass for some across that has the aggressively commodities, price

to elasticity We trends. product job are closely focused doing navigating team are environment. on we The unit monitoring ensure excellent that the an is this price

few the unprecedented we navigated Over months, past conditions. have

opens over XXXX. and quarter that, of Out now relevant. strategy back depth to drivers review in Out outlook Here And Kurt half of the give up, to the our the and incredibly the other remains come the our back I on Life country call more to insight lifestyle second with before I'll turn Here As

Kurt Barton

and call today. you, to Hal, the hello everyone on Thank

my of the some many the shared full and second the on Hal details into like performance our for around financial the in on call time our today, quarter, As specifics go I year. to outlook increased would

our We initiatives. strategic the resilience These and are very results performance. our pleased with strength business of demonstrate our and

is growth. were health the usable, is and regions geographic major store of store cadence, of June and A of merchandising had comp structurally the the sales this edible business strength performance. and We comp advantaged. categories our the April example great believe the strongest For in quarterly All all underlying consumable, our sales months products.

the represent and of strength what core the drives products our trips store. business C.U.E. Our to

and in C.U.E. seeing of dog were every Of animal. row, retention greater quarter had livestock and consecutive growth store we than companion poultry, fifth among a dry species the comp such XX%. strong strongest sales subcategories all XX%. feed, across the above with our Key food of livestock as comp categories note, For are sales new rates customers

category customers homesteading a retention poultry, the species new category. new animal Tractor rate the to of example, for For the has Supply hallmark highest and for

by comp above continue to categories, the average. prior were performance ticket which was year, driven mowers, against chain growth vehicles strength utility in zero-turn safes, and going big significant This Our in strong the have sales trailers.

inflation point XXX comparable in to store point XXX sales basis about Lastly, contributed quarter. to basis the

three Year-over-year, quarter a the XX.X%, points. XX second gross basis was margin decrease principally drivers Our items. gross margin rate were of

all cost experiencing. that retail First, freight higher of is

a C.U.E. relaunch impact initial Club And normalized product loyalty an program. Second, third, our mix. of from the Neighbor's more

of to XX support to program management the with which the half field or received launched continue vendor Of to strong year. as for cost favorability initiative, points our and we we as everyday price to partially other funding our note, basis the inflation in these the low last guidance, true pricing categories. was for offset product strategy frequency activity committed and we second we approximately in continue mitigate factors depth impact Consistent benefit pressures. our and look are of FAST from promotions teams Our demand see being to see

For our margin XXXX rate QX XX above quarter was basis comparison, our XX.X%. of about points this gross still rate

improvement expense pandemic this fixed QX providing was SG&A quarter. occupancy our comparable to increased offset X.X%. by of lower profit margin the offsetting store XXXX operating rates, in and $X.XX, as margin in hours labor This attributable the are Our on expense ratio, was our with incremental amortization, Diluted of profit good income The Much initiatives. costs to primarily XX strategic well to Out initiative Life was wage increase to SG&A our rate, basis sales. team. second from compensation, performance customer investments to X.X%, we incentive great for expense costs increase other $XXX service, COVID-XX and points gross Partially leverage were Net as benefiting our margin ensure XX.X%. basis higher like quarter when including Here points million, increase favorably store of FAST gross an and our was leverage response was additional depreciation SG&A decreased ratio improved our labor XX.X%. an costs and in EPS XX.X% SG&A approximately compares of with XX%. the Operating X the

the reflects remains our increase principally at impact billion second a in end Turning representing sales growth quarter, per to merchandise XX% strong, $X.XX average with the which sheet, were inventory the inflation. of now The support trends to along of the balance increase robust store. inventories

equivalents chain $X.XX vendors with quarter to our at borrowings meet high billion demands. of customers' no a very on are cash our finished and We level cash executing and $XXX current revolver. million Our and the supply the

and updated plan aware we measure the on now uncertainty remain consumer of XXXX the the impact and tailwind, for range There and XXXX, in the provide fiscal we that based continue COVID-XX roll the our looking structural on additional guidance to will business Moving nature have in and to as our necessary. potential pandemic the remain is for further broader while adjust ahead, the fiscal of nimble vaccine of some our confidence trends can a out fiscal economy, XXXX outcomes still results. we

of XXXX. half the half acquisition and note see Our of the Home updated positive momentum the of prospective Orscheln included continuing our businesses in we year guidance in into and is guidance. reflects the strong that Please not second result the Farm in our the

know with to we what XX%. of sales guidance $XX.X of backdrop the our a against updating the So to we of billion net comparable sales are range XX% growth $XX.X today, store in to range billion

a sales, This earnings is an share. to X.X% previous $X.XX forecast of we guidance. forecast year, operating $X. in the range $X.XX X.X% EPS $X.XX to range up to a from to compares step of Diluted of of prior For diluted our margin our per now

trends the We have a customer positive opportunity momentum in unique with and the business.

in We we service meet are supply committed look to to provide chain store legendary to as expectations. investing labor our customer and customers'

of and continue sales third are higher the activity keep we comp Much well represented where in sales continue and products. to quarter. like prior third margin C.U.E. fourth quarter where results the mix product gross to as performance challenging margin a gross the with the quarter, earnings clearance few due strength the comps, strong favorable and costs expect lap or points While of the continued quarter promotional expecting Please sales. the a C.U.E. cycle in to as both will in in we year the higher fourth minimal portion we benefited mind, transportation year products decline second the positive we in half of we from than back smaller

assumes to promotions guidance holiday year during in QX, the to season. comparable Our back QX some activity shift normalizing last promotional seeing with

We adjust consistency our gross we of impacts a to continue effectively margin. hallmark and prices. to are shift C.U.E. flow mix goods a Supply. free to The seeing promotions we dealing a from to from be pullback cash transportation our elasticity consumers of believe increases, strength are see benefit in significantly we of Tractor continue cost balance our we as and price of navigating sheet the costs, less While higher with and are

growing investments repurchase. We shareholders customer raised share combination experience. to projects store higher for to to costs in and technology capital and the remain million of outlook spending returning now to through $XXX $XXX We construction material a million the be to for our have cash reflect range committed of raw and the for dividend increased

combination with of repurchases first anticipated returned performance XXXX. For carrying in a billion positive through are up, with a XXXX, the we see half we into the half share and will second wrap shareholders to share $XXX our of repurchases track approximately million year for mark in and $XXX year To dividends. pleased very of milestone This remain the to on momentum range of million. the $X

to continue and We relevance both share today and over build market time.

Fusion customers about are ahead the new our stores, excited remodels lot We better and our investments from of side to us transformation. Project serve

digital support driving I'll back strong supply commerce, in to of over for to our returns our chain strengthening are We long commitment and growing With the shareholder our all term. call that, turn Hal. the

Hal Lawton

thrived over Thanks, has Tractor months. Kurt. the last Supply XX

a operate investing are to continue We of strength from and position the in business. committed to

Out that nearly designed is billion see our the strategy attractive opportunity to market. Here $XXX capitalize in Life Our we total addressable on

priorities, proud operate in amid optimizing pandemic especially and stores through the in incredibly our elevated investing and transforming strategic running are am our progress and of online the technology an at store global our lot our has rate. Fusion transformation, how Project and in we We made remodel advancing business team stores. side the I our a

quarter progress share support our are of start team nearly of update The of points the teams team by productivity. of the at Rolled continue base represents our this to members. improve programs the progressing. customer year and last how FAST FAST in more FAST future. me the will let our execution is resets, of allowing into made field court, believe time execution. spend The well Example organization initiatives. seasonal out our is of store in-store X,XXX-plus like team than the with We I'll end-caps, their driving the team XXXX. on to comp on team team. you is merchandising task for largest running XX the third of which the clip higher our XX% body Year-to-date, include store to team task store work strips, and to sales comparable service improve has person an sales the second merchandising programs contribute designed initiatives execution few or in activity center execution planogram year, So, labor great a with of improving store activity, FAST

us reasons our may have more store state of in Turning more store past overwhelmingly in give that customers and new program, to designed has the not our recall, feedback shopped We the been in customer to experience next program is space now new our have positive. base Project with mature Fusion productivity XXX layout Project to Fusion stores remodel art enhance the visit. our the than and the customer

surveys, our intercept out improved and Our navigate shopping merchandise customers things and calling easier cleaner improved better are to and customer factors. like of brighter our remodel are the selection, in they taking in specifically experience organization, note

been the in expectations. customer response we and of majority remodel While our of completed the of are line more the the read very remodel comp pleased lift recently, early our have the running with with is

a size comp this the our opportunity to store drive sales. further Given continually refresh of and our base base, store multiyear is

the our program our is the substantially side there much lot. transformation average. the we inside Another space component of is is our as side of store. as chain of had the space lot productivity outside stores below in The of this productivity space Typically,

greater enter capabilities expansion a at spaces offer multi-year project the investment, an in leverage We product lot drive-thru lawn experience. are enhanced with the of and With offering to shopping through in new our pickup. pickup offering categories, our wider product midst store and an to of side garden offer expanded online, transform and convenience the categories, the a side buy this for lot

services increased new categories, see our brand. customers to to from also versa. at to Tractor even to to continue store more existing continue new center positive the Addition engaged and attract the customers us Supply with the We user vice keep garden existing shopping, effect product halo provides ways a and of and

The our foundation about our test more Our square a Life remains than garden early higher we deal initiatives. these the Here done even Out lot completed remodels, to we expanded we side sales our a transformations we learning transformation and customers' ability laying appetite greater great foot complete we embarked have for job currently XX has about drive a and are the our through excited In significant pilot. our than the XXX initial on lawn XXXX. are of scale and per great side assortment as transformational exit strategy team lot having We opportunity. anticipate of we as

Beyond multi-year Tractor Supply, on seasonal appropriate at customers. up summer season, clean are offerings changeover. initiative, exiting quarter our the with seasonally Wrapping strategic we our the focused always inventory to a having the support with we're

Appreciation We the our all Pet our they on the count fall-centric that for the the we areas Week relevant out customers Whether temperature, in and winter of our and our continue need for products on customers it's product store Across they planograms Here. season. change and Tractor to Deer have place launch for that merchandising engaged. roll on know set, September transition offerings Hunting of plans fall in online, keep to marketing to heating focus or to enhancing the important Life can of Supply the to focus products our Out in our the live

innovation new leveraging across are and and decor. home and grilling, items safes, We

growing both These Ridgecut, addition, existing workwear their customers customers' care parts new of for pets home, land, to customer weather as Across exclusive comes. relevant fall have product expanded our to are shift we into will our In ramp of up we as store, and the categories exciting help women's the new and and retain for will workwear. gears base. products winter to animals and brand colder and be need our all for performance expansions across

front, drive marketing brand On making awareness. continued are we investments our to the

distribute we Out partnership PBR As per on our to host are in-arena content custom season. will branded produce and presence multi-year for on year, for local Professional excited part social Here announce activation. and be Supply the this partner XXX activation during CBS a includes tour partnership also customer Life plans, Tractor the the the over Riders to the and events channels. effective broadcast our a that media of broadcast new pre-show boost flagship The PBR official Bull

demographic. in very sport. attract the are dynamic this and nurture passion support rapidly We we're marketing strong been on growing excited given Again, to and for investing experiencing, we've millennial trends this to to marketing, our continue customers' important

our Given with not customer Supply cohort the familiar next we plans of executing introduce are millennial to may to Tractor generation customers. as be marketing that this brand,

targeting Just help audience focus self-reliance. Pandora, in poultry, new last to streaming called millennials' month, That the introduces on key what like is our support. Here Welcome categories YouTube Life and ahead we campaign launched to and lies channels pet, services. is other we as Out this gardening The campaign new a and backyard stores and lifestyle immediate such

and made to awareness, goal indicates for the we the is results to our since primary show significant and To results this significant resonating performance in strategic with ad delivered We traditional consideration with delivered believe the and this driving relative has year-to-date launch. class we've best it progress in that millennial Early Tractor awareness initiatives. With summarize, audience are drive impression recall strong campaign benchmarks. Supply.

stronger to we every the company. to time team the We for have a us that from value. and purposeful Tractor will mission a It's and appreciation would open Supply. line pandemic than And for execution at our continue to My now members will to each we of exciting and Tractor with With an XX,XXX more our like build one to strategy emerge goes Tractor actions, stronger Supply confidence questions. their allow dedication our out our operator, Supply. that,

Operator

We'll the [Operator Your Steven Securities. to first Q&A pause Guggenheim from with moment Instructions] compile a roster. Forbes question comes for just

Steven Forbes

Good morning.

Club Neighbor's I focus Hal, relaunch. to the So, wanted on

appreciated tiers? help today the of us Any here. sort any there. spending be tiers that context understand right, would question that you of the program, provide by defined these of two-part members look would are qualify and how you'd provide around to what determined sort If could the we were plus percentage tier, a if some preferred sort at color maybe color better for So, curious of

Hal Lawton

We with Neighbor's Club And now plus created three distribute of we we to it our tiers. XX of programs, try Steve, kind as of all loyalty tried -- reasonably case kind this a levels members. say like proportion discourage and to million of naturally that in create decreasing buckets. three tried would then migration. we downward few kind to encourage would the things. a of I migration also And each tier across upward

As we talked our about Neighbor's for now on Club over call, of members sales. the XX% our account

on rate -- which tier basis. very Club retention on Our is Neighbor's the annualized as are over third rate And our Premium strong an retention -- retention is XX%, Neighbor's spending, members highest Club rates we said, Plus, our the our over the of XX%. there

our than basis. of a spend So a over quarter more average that's $X,XXX daily And increasing significant members on almost members of of trips Club and make thing We've downward Club kind got our that members, Neighbor's upward non-Neighbors make we're on a those final Neighbor's the seeing two year. We're our Club $X.X million I'll is reduced seeing they migration. mention migration. and

months. with robust We're very its X XX million a over seen seeing the XX migration. it's plus outstanding members join So, in last program excellent million retention. members. seeing We're us We've

them, we've to the program. response seen are a and As new we and improving migrate out significant holding positive actually of retentions the roll the

members remarks, are our As mentioned roll the out-comping in Neighbor's program, overall chain out our since average. Club significantly our prepared the

Steven Forbes

context some Just of a probably I basis. on within months, If Thanks. follow-up. customers quick provided think around the trends, rolling percentage a repeating you quarters, XX last repeating And about few

last XX% was it think month. I

of sort running it's a mentioned You at high.

over repeat the from trends So that any we past just XX experience about around the months. think the the customer base, context growth

Hal Lawton

Yes.

remain So high. our trends customer repeat to shopping very continue

quarters to to rates that New below our our customer retention slightly XX%-ish counts quarter XXXX. customer only from our kind similar QX and new last previous counts of continue -- customer in were customer hover and new

the new us, saw those QX. have to us so million, interesting an way X nearly saw on X program. of million retention about rates X kind on Neighbor's on Club of seeing XX good year, -- last in plus million again it we And new is, We lot way the there's We're a those million of think of saw X.X with XX% customers. and last kind customer million customers XX side. for The million joined year, news the we shopped

counts some that's think customer the this quarter, walk then at just if beginning of the about pandemic. are of program quarter Club XXXX as so and seeing second the you nearly just metrics Neighbor's the same outstanding we conversion And that -- to retention, the again new

Steven Forbes

Thank you.

Hal Lawton

Thanks, Steven.

Operator

you. And the of comes with Gutman from Thank your Stanley. next question Morgan Simeon line

Simeon Gutman

guess have and has versus to factors is good it? you that outlined the period continue business Hey, quarter. digest doesn't morning you happened really stabilized day, going that growing. the period stabilization earnings a period the Can we My is are we'll that you everyone. have it the to expected yet. at first business and hasn't a digestion Nice to to about need would year, question and the argue versa. deeper therefore, grow still then the vice way What suggests I it relative last but talk that

Hal Lawton

out there States of behaviors. lot it start be customer whether Yes. I'd say, in relates level, economy COVID, that's that certainly variant, out, enhanced cay more Hey at a as October Simeon, of return on track year, and mentality the normal playing that's if not in uncertainty shopping highest continues a at back mobility United the on I'd kind a a showed I how with that case. to globally, with I'd are has the we're say, -- how still certainly the in COVID's on graphic nature. the point earnings and was more delta as to to the to you? bit -- And abrupt some of say, Kurt think bit last you I'd watching our implied all implications

in talking And we've think evolve on our trend. trends we to towards transitory versus we say in think business that XX-XX now view were terms our about of so the and I you way continues I'd if to more back also and them, structural learned structural

those categories as revitalization, you you poultry If we year million birds, example, millennial shopped of We're so pet, customers if to year, like customer, homesteading, as new last last about seeing, about XX of the times, this think that in if prepared Kurt were about said half several his year. rural you of sold with we've again those remarks, think an think customers. as kind poultry outstanding by back coming on retention mentioned us

our fact, other rate animal is or than higher feed In any pet. retention

the than and that Out there we customers the years consumer in feel just and in comp -- our the is strength our exceeded to with and the last that mean, seeing Out orientation in I little resonating incredibly really prepared remarks shows a that is appeal of the the the I I uncertainty customers And billion we confident lifestyle XXXX, think the plus of a between business XXXX resilient we in comps. all kind had down our behavior, like with I began had last talked XX% companies trends that about finished into of and think And of year with certainly our that year And So, QX lifestyle the how did even but beginning and and of were trends we grown and structural say that and I we of Here for a Here we about you still in the new expectations. are momentum appeal comp XX.X%, holding wondering would more that and I really the the to strong. that $X fact us coming many underlying trends, at of certainly October. lot guided QX lifestyle. with flattish kind perhaps of we And and the quarters, we're think would it's QX, my and

Simeon Gutman

Thank you that. for

terms outyears as mentioned it couple relatively was level think how I in XXXX, steps and that these from of CapEx, XXXX? In about Kurt further accelerate a in ago. of had into should spend years it cadence? it you think we up Does Do peak

Kurt Barton

Kurt. Simeon, this is

out, that but the On Fusion chain, that launched drive we consistency pointed where strategy, new with supply the Life got said long-term be we there as grow back may particularly we years, as Here we've distribution new and stores the Out would in we cadence chain our in lot, next in existing as some the productivity over the we variation our when side investment, be targets supply few in centers. October our on

quarters And in in we of in the next the see investment supply looking and so, would emphasize our earlier the last us shifting to couple some years. as importance chain, accelerate our the are you've chain heard of us investments few supply of

And in the And in still thing investments there average the or of timing structural the over our XXXX, importance nature may than supply the of XXXX, recognition is chain. of the period that be about our even we time, of confidence in so the out important but business averages expectation and five-year XXXX, gave. the higher it therefore this

we So XXXX of ensuring emphasize consistent chain. in I potential as on pretty the see strength capital and XXXX our supply

Simeon Gutman

Thank you very much.

Operator

your comes with question UBS. line And next from Lasser the Michael

Michael Lasser

as scale fast products to you Thank are growing morning. be to And going some they're or taking hard as your starting you has C.U.E. been poultry -- not experiencing. success Good no at losses. is particularly where But going -- more question. imagine are or point that my this promotional, for you've been there share It's livestock to

So, several you the at next risk point this in see what quarters? holding do

Hal Lawton

Hey, fact Michael, in stores morning. category we're really I'll that for share joining major and every both have across online. start thanks with We're how taking our call business, and this are Yes, in that we you the the confident.

term say, initiatives they growth, as trucks at growth, both are more visiting look our are existing very prepared be participate If customer I -- are we're I investments transaction it is, above when barely the where say market, attractive would very they in on share more in us. billion between are average of inventory shopping to more gain in We're guidance on members had a us shopping large relates $XXX there out take What There that would actions remarks, customer they we as in ever, or with. comp, our a still our we and -- drive and the are new frequently focused is share of best and that we've more be competed we've are to new not that a of promotional investments there customers you I our to customers, legendary we customer than lot customers, also spending XX%. and just can, create dominantly that our lot are shopping service would profile sure customers. that's kind strong for they ticket whether making out share to showing said the for in team ensure in a our and stock inventory And would primary I to environment, as the experience that's increase the our are directly really very that's when based on anywhere a global don't And it with the to tailored that to lifestyle any of any one-off that competing appeal stores. really really my categories promotions push the year customer, promotional of and because across situation or we in this and no near of we retail QX QX basis I market think in to the expectation that retailer, to is hard and I in an certainly has. or the plus the just I've supply/demand but no keep competitive other us on lifestyle. seen and mindset we with for environment remain our Being uniquely companies, other one is in there. But a category prevail years working really XX medium large for share out also everyone handful retailer. balance year. promotional are play we typically, the that that that compete of benefits over And whole horizon. disrupted near anyone don't anticipate of it's comment would environment I the sort similar little expect in is supply just of to reason the chain their our

Michael Lasser

is quarters? to accelerate quarter. do [indiscernible] last next Where from you the expect go question on follow-up few that during My

Kurt Barton

Yes, Michael, Kurt. this is

on the last the You results stated accurate quarter.

towards and the inflation able now this behavior and this the with deal adjust produced excellent the the are half. inflation points then remind ability elevated this staying anticipate will cost into QX, moderately shifted at from right and throughout And we be related One, pricing back quickly that mentioned, merchants inflation we in XXX elasticity would we but inflation. points quick back and to And in benefit that price give at it principally QX QX in levels. of to in We closer me always they the half back was very year But over year QX, the transportation potentially throughout Hal level the XXX to retail in backdrop our in And increase basis business, in at basis I managing lead as of at to we to we've the principally half, type demonstrates environment, well of XXX and year every the in manage be be non-commodity to less as increases. we appropriately. to the from based ability, the it consumer other would commodities. that the that QX like deflation see to to numbers XXX basis feel their XXX the that got levels Let able year. entered our costs and points, retail expecting the sentiment, inflation throughout higher year environment

Michael Lasser

you Great, much. so thank

Operator

question Haskett. from with And Grom next comes your Gordon Chuck

Chuck Grom

are side going quickly possible XX% and how you the you other stores on the quarters lot of curious you all then I'm us cycle? this few of some accomplish side sales the about question And potentially any to fleet open you've to in to a this belt balance learnings the you spring to XX% morning. format? and going under that My your as give with follow-up, you're apply plan that talked now Side to a Thanks good is Lot. year update the that Is on lot. holding think to it

Hal Lawton

Yes, thanks how Fusion start side call you? hey are for with joining Chuck, both today. lot. I'd and And the out

We last over lot nine results. over Fusions out, mentioned, XX months we've are rolled the transformations And these of very efforts. pleased we've done, XXX side progress We've as to made we a the lot on both done. got of with six over

the brought We're stores, on to lowering in-house. we progress out. lots we've and our individual In the roll the But those it plans costs we on as and format are very work addition with we've opportunity results, iterated keep side management in times that on we optimizing forward. see Particularly kind pleased move to project to every do construction the reducing of made continue several and times the we both. the the -- of lot, with we as

retail, kind all is, it's in say my On we the the think, I'd I in historically same results, typically, what of experiences.

the the long. haven't a after playing and You complete. three start remodel out kind feel get to for remodels the how is good Most reopens remodels store to really of that kind four months lift of been of open and our

than how initial over levels the data case. kind kind But our for waiting out. that have And we're And Fusion forward. we to say very business my to have we that six projects. been see that what prepared of So we're of really I'd the been we over in bullish we pleased results at set start us anticipated more are as significant with to three more destination than that period those of move plays the a of the open we do I But more lot. in mentioned has time, is, are next the even on side that becoming stores around the excitement both more they months of of anticipated we customer on on as in remarks, the even garden and

on of share can around say frame, of majority XX% the how you us should time the over think of really stores lot about directionally and having a relates you time. for long, we'll side five-year As our about the vast I'd But XX%. most the to that I -- over penetration kind -- of hear Fusion the expect kind it more to Fusion of that think stores to

the is around getting think our the ago, on lift continue base. early it. read that Fusion it doing feeling just more we're with the the were bullish of doing the remodel base we're seeing maybe our to for months we're to of I store six even and need They more way project than store kind at were that cost going, done then just

Chuck Grom

you've But I variant, new choppiness I'm is unrelated know that over a helpful. the if just some days any That's And regions very few follow-up of this vaccinations? given past on some apologize. curious, about quick seen delta I in this operate you the

Hal Lawton

regions, consistent has I'd across to incredibly start on said a consistent week, month. remained over our consistent number -- in XX, now months of month and XX business calls, the to consistent consistent has trends, our we've week with last category that

three lack to past level nation, a driven to certainly I comps, obviously or it's Supply. level exited whether but very think what As and -- sometimes our benefit not we I momentum of of even strong this seen at of actually by hate these national say, we think a with mobility and Tractor positive outbreaks we've that's trends similar year any the at plays as we've the and observed I We regional to we almost said, last -- XX as all all seen pickup, variant comps. delta June positive were months impact as quarter were weeks a on this

that hobbies more it's with that kind their of are folks them their hobbies. are those spending one-stop just time continue for spending and all pets, those doing Supply their they to love they land, homes think that I time at their their more families, they animals, buy demonstrated shop Tractor be when and resource to

as while variant, to from results some wish so the as -- country don't a our it anything, possible, normal perspective. And maybe and as delta business If to return business the potential results a we threat. certainly it upside want fast see to from we

Chuck Grom

luck. Good Hal. you, Thank

Operator

the next comes with Chuck Cerankosky of Research. your line Northcoast question And from

Chuck Cerankosky

into quarters with the lead PDR? past If everyone. look two and could to relationship we the the at you've been tie it Good trends Hal, did over morning, that this advertising you TV and, sales doing

Hal Lawton

do to up November we XXXX our We I the as our last I In it brand of XX And -- an in year. right a awareness want Here to as call, we Life exiting twice are credibility we're do to own in way XX%. by unaided awareness months and mentioned mentioned have was and earning our Out of customers. so customers then later, that we our QX, survey and viewed was think XX%

our XX%, -- core to obviously our a unaided seen a brand XX a it point -- customer, our increase a XX in increase as XX prepared we we've is of as of lot XX% So Much X awareness. point off QX. but that mentioned year-over-year. sorry, of saw remarks, customer a last in mentioned I quarter, customer. And in And the millennial increase continued we is penetration our millennial that in point trend

the into driving our think marketing understanding of kind unaided we're Supply So Tractor and aided stores. and of broadening doing work we in and consumers' is awareness of the driving footsteps aperture

a of category year where We As we are. with XXX resonates customers we with with continue activation excited it really said, a a well customer we board do to it's the our can about strong have areas the And one great activities over partnership our partnership. be will the a and think the country across of that across we're PVR. comp and lot transactions that

campaign Those large places different they in As Facebook customer. are as are all really very on been of the the millennial been And targeted engages YouTube. marketing around a core I with engage are that customer, types millennials. media. -- news Spotify, for we successful know, my media. also majority They And we been The major And media. on up we our also and Pandora, has now, think that's our prepared we mentioned TV, in based. have launched it's until towards remarks, of kind marketing TV of above-the-line the

store. led just marketing awareness what in: they Tractor a to are Out if drive explaining very done customers off and is to hats actually create starter business two, pets, the that gardening, excited footsteps And Here. from Here, and different in they've Out backyard very for We're so do to Life will, our And feedback our backyard of Life They engage those that team kind into of creative about outstanding. who three then categories, the talk initial work all work Supply is and like you about the us called things really drive this Welcome hobbies first concept poultry, that. is might

Chuck Cerankosky

you, Hal Thank

Operator

the your Peter line next Benedict question And from comes of Baird. with

Peter Benedict

Hi, morning good I here. ask first everyone. questions will

plan follow-up idea investments your you maybe XX% on visioning that And of as about that know event us I'm Maybe to slow Kurt, have your first, down some or the to comes the longer so a to the in about pull that, just a curious -- Thanks talked do the relative sales gross in of etcetera. decline. implies magnitude turn flexibility be to second look some about. how even just XQ's give you much. making incremental decline margins. bit, levers margin the are would of half term your I P&L you we of negative The view kind an that or what XX% environment?

Kurt Barton

second profitability our Hey, Peter, and margin thanks enhancement half nimble for of the two ability opportunity. question. questions, then some And to be the and

So, on look frame at up. when margin, it the here's view it we second the half, and operating we how

with more the pandemic we've operating in of gross beat anticipate margin to much Our QX's about half got QX. and where gross QX the We performance visibility margin in the really performance. of really at we view line in very the this gross the margin second was the margin point, similar performance the source

approach. fairly on the is and little get nearest recent more There the into prudent the beyond quarter. more we one year, bit quarter half most or more taken further the we've given of certainty As we've uncertainty always a most a second

recognized For factors, the and fourth inflation disruptions, the the what or we've supply as chain season holiday nature. we've quarter, as level recognized second half, -- well competitive of

operating those as quarter to business on able environment our gross certainly second said quarter of rides we've earlier we've I with of fourth the so margin well. is sound. reflected the really in and on really very And some very performance and this been structurally manage And margin. the the in back half the year The shows, uncertainties

shift the adjust we We to given. the continue business miles a always is In able process profit strong to reduce ability as sort on well cost. to the able right we're that flexibility, stem to are going few profit margins upside regards that potentially We've business, in investments have driving help important The are these be of uncertainties is some got back improvement to active be solid of and the focused maintain the our be going efficiencies of to while have well in that and we confidence above this of a organization initiative on doing of operating XXXX ranges some to we that. where in offsets we've improvement business. don't we and to to guidance the play both making we're factors that the the we've the in have be nimble some and the out, some adjust stores a momentum well If our there, variable able is as that to our very on and efficiency be half there able we're chain. shift lot on on to costs variable distribution lever ability to there in of acknowledge supply in now to would in in got regards of to any the us size just work if drive

Peter Benedict

much. so Right. Thanks

Mary Winn Pilkington

Operator, more one call. maybe time for

Operator

with question your Wells Zach and comes last All the from right of line Fargo. Fadem

Zach Fadem

Hey, good in today. for morning. Thanks fitting me

current largely environment less So, the you've more related XXXX gross long-term points Kurt, talk And and extent promo, reasons the this that what seen that clearance muted gross think to past believe margin inevitably the margin XXX through range expansion we're of halfway to the there as environment. low the state are or or through in and now us is that clearance way appropriate right more plus to of was return? in promos you the line historical continue, the suggested year can is basis business about and you XX% XX% this to margin just the

Kurt Barton

pandemic, time, the from this XXX throughout your over cycle said over as point, we of some those margin factors, to on seen points you expected clearance. the our coming somewhat over We've we margin anticipate, pandemic, as that of mentioned. gross promo, we the improvement normalization pre-pandemic said we've we've basis operating really As

anticipate pricing our do everyday and in it very giving normalization. are we holding our we can, and best guidance While long-term low assume the disciplined some customers to price

target that if range. that maintain year a shows with we'll -- second acknowledge guidance operating we Now, in long-term margins our above that XXXX, of

offer as business we'll gross going And we focus as driving growth. further long-term We're this go to see always continue on market expectations going we focus address things gaining and -- start on so low certainly get but as to to strong XXXX, pricing. we the we through as on manage to we're margin, unit share normalize, everyday

is the price be going to leveraging of of to nimble efficient very an to have in business So size supply our important us the strength chain. and

we get to gross target. visibility, as acknowledge the more long-term our certainly will So compared trends margin margin, we operating

couple For the in visibility beyond quarters. certainly right reaching the now, we're not next

Zach Fadem

in about to and guys talk at quick $XX had billion Last you you $XX $XX.X the day. up more and year operating year stepped expense it's XXXX, how and gross on follow-up Could sales mean, to lines? generated billion a step up advantages that this scale to that And margin that. I should the translate billion. you going

Hal Lawton

things. joining the I'd Hal. call for it's And Hey, a thanks and few today again say Zack,

First with to the us With investments we the of have that that, our able the off, on dominantly market. gives towards moving the meaningfulness distribution our technology with an scale X relationships and we're advantage, in XX, the opportunity make. it'd say vendors it centers,

operating they enabled really single focused as rolling scale and stores headset by an sales. than out for profit every been And handheld times, market customer top and that's the many they now. wears quarters SG&A of long-term to member and performing rate, rate our Theater example and is implied that is in to we've business main outlook our grow last operating the done as a Those the really been our and to experience process a on gain the helping in create, how enabled And an inside creates so. service every stores. capture our on market. over said, you That's one talked well. are the optimal we've anticipate line our devices share continuing do sorts -- As or - six that hold us and and at is flat we've what's investments faster trends the team drive are able goal then - new to as of team are in we've members We're down our of

the base, whether but we've doing view member grown it's where it's point business, our our we're in there line, as asset. So in strategic reinvesting not been deleveraging grown at in team our a we sales the members sales capital and we've as and and line our a - team or

customer retailer. service driven We are a

to item to are yourself retailer self-checkout We someone, your not drive pick a going away. you never loading the where talk and in, car want, a and walk to go you're

the the gain help that's pick us. And to that item, we're share to going where be pleased we're activity out to to as I no We that sustainable our none rate little well. very are the going inventory review, to margin going promotional think side, and And on going then drive to are going help you is, car. to for little you check we're we position clearance just gross in we to continue you requiring it remains loaded very your environment and

Our the pleased now, And with freight that be thought are it prudent guidance Right sales we're kind guidance to us It's our import hope the reflected fully high-cost we are there the those there. promotional very point us we've environment. that to given is of that guidance said the of in give this itself, given allowing at they was level that longer in sustains to to at becomes. low that remain but acknowledge, offset the out just we've Kurt provide we nature. just to if the import that allow guidance. QX rates structural given, upside and That's right uncertainty as we that that And the in would more now. the had and that a freight continued

Zach Fadem

the Appreciate Makes context. sense.

Mary Winn Pilkington

wrap Great. Thank everyone. Dan, up will our today. you that call

joining will any to you for to questions call I speaking at October. be and for will look you forward Marianne and thank around So us. our in

Operator

gentlemen, conclude this for and all. your does Ladies conference you Thank today's participation.

You lines. may your now disconnect

Tractor Supply (TSCO) 19 Jul 212021 Q2 Earnings call transcript