TSCO - Earnings call transcript Q3 2021

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Mary Winn Pilkington

Thank you, Operator. Good morning, everyone. Thanks for taking the time to join us today and we do hope everyone is staying safe and well.

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

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

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

to ask respectfully one who yourself number limit of people that we the participate, Given to question. you want

queue. appreciate this. cooperation on feel in If you free get your to back have I the please questions, additional

follow-up. the time be call for morning. this Thank will your We after you available attention and for

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

Hal Lawton

sales Comparable Winn. net Tractor an very to the of outstanding share job challenging Team XX.X%. per and doing XX.X%. quarter a us you, diluted and environment. The with third Thank of And sales morning. XX.X% navigating results increase Supply everyone earnings operating strong thank store you of joining this is for delivered for dynamic Team Mary

trends continue as sound. benefit we that many We structurally for to very market see

our have We're We share across base. customer gaining categories. market strengthened our

our We Life advance Here to Out Strategy. continue

has we for ahead of And see never been business Our stronger. opportunities growth tremendous us.

disruptions, As in consistently and persevere XX,XXX+ all-time including based other months, and of our strong team tight wave, the goods chain you shared strong safe navigated they've are for with like all, them navigated customer satisfaction the manage deliver we've went and to increases, broad Through a I'd kept They to over through and our quarter. each through cost supply to their as last high efforts labor resilient thank members all and another results been a testament COVID-XX XX we market. it scores. scores, [Indiscernible] through

Our are with competitive key and team members our differentiator a our greatest asset, strategic customers..

per hour. as June, highly loyal and wage members our to Back we have most team stores our raised minimum Our $XX.XX [Indiscernible]. and us better as far than staffing fare in helped across opening engaged

Across our store been together focused stores rate. the higher mentioned. $XX as in chain just we've the partners, actions supply by these you thank hourly to and The customers, controlling to what we've the and like rates, done and overcome I and environment average nearly a by and as higher DC recent we've overall job in I'd nimble addressing our the vendors inflationary scores navigate shortages, been delays, to macro network been freight global unprecedented we very worked challenges chain to to pressures, together chain that shortages with driver deliver import on supply our made per wage labor a from port and container issues ranging has supply can good in say also Our control of the results. [Indiscernible], container pop-up network, rate team at Despite and investments and multitude bring issues, customer great the able our at inventory exit have year our we wage a of we shipment. centers including recognized hour in-stock supply are has quarter. our direct-to-store year, chain expansion of being to constraints. challenges, our team mitigate To these the shape finished last challenges, mixing leveraged is ship, these rates above the dedicated in our end satisfaction at other

during strong Our diversified chain us times. differentiation a point base vendor import for is direct with supply of XX% these only about

in trends the to competitive our going our and include above like like gardening, anticipate our ownership. we serve and self-reliant Here and continue Here sales the continue consumer spending poultry, of that that more are growth Out dependable have fully environment Key being levels investments much in investments is movement, a to ingrained structural consolidation, Categories -COVID pre to we work the we're the in that in continue omni Out We pet elevated we've the Lifestyle. lifestyle that is that Given well for favor adoption, this foreseeable which we Lifestyle including future. structurally advantage consequently, things given levels. now think in the the sophistication, behavior And in -channel consumer we sound, scale a for trip lifestyle believe network supplier participate, that trends backyard and in revitalization, to seen psyche. the is rural and course, DIY changes hobbies consumer

this then, been great as [Indiscernible] environment likely next most year. customers results. For many on some even employers. a at our years And that office have much more anticipate behaviors and will has point, return color structural. over for their workers, to hybrid out at our the very two be in sustainable Provide we are pushed been we'll until And

across second like our highlights Also, share me quarter, other had quarter. of was the categories. the the Let quarter, broad-based second few a positive third product and week every growth comps. Like regions

increases now represents strong and over experience just sales to X app a XX%, our in and double-digit downloads already than continues of our more business XX% with year, of has million under e-commerce sales. over mobile momentum e-commerce Our

supporting think in structural Ranch, the the a that is customer the changes growth certainly to to the behaviors which improved customer all which We and relevancy across has been improvement our same share customer we're from contributor trends unaided This power in gains seeing share largest and customer the and in our quarter-after-quarter trend most a Core demographic. We by digital important of significant Also down. of share with strong, consistent November has The with share significant trend age has Tractor And a our aided important multiple our of the Farm by satisfaction, target brand campaign both consistently consistent in our previous awareness, our XX% of time, positive as seeing has the given gain notable now. to ad strength stores. customer XXXX. since been quarters, points base. this to average we're were At market experiencing. quarters overall segments combined and data gain increase and in Supply our gain online all This customers been have categories. continue in in the millennial for are staying we're our millennials

more than and retention strong. money are our per are For more trips very at spending and the remains trip Tractor customers have Supply. new customer shopped year, ever more making These customers

of Club continue the grew with to times re-launch customers over These to the rate growth about the in of to members. X loyalty We members almost the Our the members to excess more retention prior with than sales and Club traction now quarter Club are sales. from of exited year-over-year exceed running of Neighbors our our high-value members customers. be Neighbors with continues high-value second gain program this Club continue Neighbors rate north the improvement to step-up nearly -- XX% quarter program quarter of of than year. our million XX% we for been for more for in XX% our results demonstrate These a spending these XX% the expectations to Neighbors per where and strong The customers. non-members, continues with changes XX This experience of the we've of number sequential program accounting

third performance our we quarter, fourth our earnings along and share are sales guidance our our the the later more details with on quarter, outlook again for outlook through improved will Kurt for the in raising Given robust And XXXX. call.

We and as improved the product Regarding the pricing. we and our pending continue to offer proposed to forward of the with review Home, look to Orscheln customers acquisition transaction benefits will with Farm transaction. it cooperatively competitive work continues this offering FTC

of Supply to each way team months, the As the incredibly stay XX on taking and focused has care entire case I'm customers. over our our been managed has Tractor proud other of the last

Our very exciting. long-term remain opportunities

stronger. emerge has pandemic goal from Our to been the

course over gotten stronger of rolling pandemic, now from going And last I'll have with out year Kurt. the through our and the emerge we're execute we Life better to that, stronger believe it this since positioned to and that Here we even we as our the strategy. Over Strategy, Out turn call

Kurt Barton

Thank everyone our resilience business the third strength quarter our demonstrate the of to you, and results Once on Hal. strategic and And initiatives. hello call. our again,

underlying strong. As very to our Hal shared, health we the of believe continue is business

advantage count products. X.X% Third X.X% quarter is have we by and edible An in of of driven the of strength of usable, X-year the a increase were comparable example representing XX.X% stack our structural sales XX.X% ticket comp store transaction average ongoing and increase consumable,

food average of XX%. and feed, in the what categories, C.U.E. Once above dry again, at dog a subcategories broad-based strength. chain with among the to represent for as consecutive the sales or were C.U.E. comp had C.U.E. fifth comp core quarter livestock our strength the the such strongest outperformed sales and Our growth poultry, store. business and trips products Key drives row,

was basis about we're performance line Our by in comp utility trailers, growth and continue store going solid average. significant recreational vehicles, points store the have year, big to zero-turn the chain sales sales. contributed categories, strength to with ticket which prior safes, mowers. and driven XXX comparable This in Inflation against in

imports, remains commodities, retail freight, heard from wages. you've cost elevated others, the domestic labor As and the sector and environment across

cannot and extremely been price currently supply of for are Our chain to merchant and teams challenging that pass increases merchant are customers. we aggressively we has Where our well. our some offset. this taking team cost environment disruptive advocating navigating the pressures necessary, through

behaviors, trends right our unit priced on monitor are customers product purchasing closely every As and being day. we're committed we to focused

of basis points quarter last third a gross margin XX%, rate XX Our year. was decrease versus

was our margin quarter this drivers about QX Year-over-year, margin XXXX gross rate were XX%. comparison, the For points items. a gross principally XXX three basis rate still our of above

of in shift C.U.E. normalized mix higher costs and third, freight inflation, product cost domestic more and import inclusive elevated second, First costs product a

significant portion through costs. retail our program. The freight of Supply All effectively price working a management and through is inflation of the offset Tractor team drivers

the guidance. Additionally, The for continued we of benefit of for initiative, due in continue promotions. This and launched categories. to activity our to frequency strong which the from vendor with favorability our last our is funding pricing demand consistent year, to our everyday and for low field our in depth a was see support fast commitment product the half second was teams strategy

to Our This the COVID-XX improved Strategy sales. XX.X%. hours this costs to third ensure initiative. increase were a occupancy basis by leverage and quarter net Life from year of great XX incentive Partially customer amortization, depreciation points with higher fixed SG&A Here are and lower ratio other to and in was pandemic wage good providing comparable offsetting and store percent investments expense improvement compensation. primarily including Along leverage attributable response we as rates, sales store Out in our incremental versus and costs last decreased labor service, our

was costs benefit approximately then. first as our $X.XX, environment, to our the SG&A since DCs, now discrete ratio about Given incremental profit select the of in we to timing operating launch SG&A elevated are cycling the nearly from increase also annual our was current last basis XX% operating sales margin like points gross XX% compares third profit in which team of the team normally Much benefits, volumes of such favorably margin of our incremental XX quarter QX member labor The meeting, quarter. to of XX favorable and the last year. about Operating encourage performance points pop-up basis as offset XX.X% occurs initiative investment the for we costs Diluted fast expense for XXXX. EPS and margin in increased an rate, the with quarter. program We've had the the year. expense initial gross

The store. increase the trends strong. inventory an impact Our XX.X% robust of with of sheet the the year-over-year balance principally were per inflation. billion, representing merchandise $X.X incredibly remains to quarter, At support increase end the average along in sales growth our inventories reflects

now XXXX. our Moving updated guidance for Fiscal to

of supply to we heightened a operate time this regarding our the including in pandemic. continue uncertainty, chain outlook. and cost We constraints, raising uncertainty full-year inflation, product Despite are

for Our know sales continuing year strong into the reflects we today, with momentum of of XXXX the net about structural of growth quarter. the in the updated guidance sales first quarters billion we're and see results and our store we fourth positive comparable centered the X Fiscal what Against business around $XX.X forecasting the XX%. backdrop

comparable this mind, For range This points of year we Christmas week you sales from forecast quarter to This to your $X.XX of sales, guidance EPS XXXX, the it fourth next to guidance, diluted to XX.X% our $X.XX of Farm Home of us. typically in our we'll store of week please the modeling volume the in is of Diluted previous margin XXrd forward to guidance. low XX.X%, forecast step-up not Orscheln XX%. is roll a forecasting we range prospective given the is an $X have included to share. start X% for operating week year, mind acquisition are for and prior Within in $X.XX. keep that that Two now our per a models keep in updated and earnings growth holidays. to as compares for a follows

store and sheet experience with our strength and shareholders and balance the combination positive we labor to a channels. committed the and free of of dividend of a provide as to of flow for customer Supply. committed We legendary strength the in the to all returning our position continue unique a The trends repurchases. business. cash chain with consistency have investing remain across And look momentum We supply opportunity growing are customer in be cash Tractor through to we a share to that,

billion share remain range of dividends. This Tractor repurchases our repurchases million. track on $X to a year again, anticipated to through with of shareholders unique returned for we milestone results Supply competitive share combination XXXX, summary, $XXX proved For In yet in will advantages. the 's mark $XXX and approximately a

Hal. for call Our relentless turn our lifestyle With focus back over here on out supplier being the in is Company. that, dependable as purpose the the a embedded will I to

Hal Lawton

Kurt. Thanks,

as recent share update Life Lot you are I'd Side Now, announcement, in initiatives goals our change all across By climate justice, provide Fusion like and our ESG Strategy. net we on stewardship, with achieve on committing to in updates the an our which strategic of and to announced XXXX, key the we're our on of urgency action At as zero well parts Out Here just our long-standing sustainability, commitment to and are social that time operations. new step opportunity. emissions carbon next

an focused learn value. website. and where in our you our for diversity is I of social our on dedicated of all more Supply, initiatives At are part Tractor cultivating we actions accelerating kinds prioritizing invite equity, As appreciated commitments, of to environment on and ESG diversity, and inclusion. are inclusion we

Turning Here next Out to Life Strategy. our

in five our a attractive we've total are against strategy. our As nearly capitalize Those year Digital, and overall billion market. Lot. strategy initiatives opportunities addressable see FAST, strategic this reminder, are Fusion, been Neighbors to we and the initiatives part its as key The Side on Club, designed executing $XXX initiatives of

existing model Life stores. of investments stores as in and Here Strategy. designed grow investments part productivity share Side market and of Our drive significant our project the our Out Lot to and new Fusion store-level transformations are These our represent both

our program. Fusion, Project So store let's with remodel start

the having the may our designed and customers' customers turn to minimize us the more mature operations past enhance the beginning total our to disruption the base is in Fusion a the by since complete shopping reminder, anticipate the and Fusion layout and give shopped our experience. year-end. new store XX% with state-of-the-art As to XX% experience in reduced of have to shop. by reasons in to base store of that in space not We've productivity Project store remodels Fusion customer program quick time year, us allowing about the We

taking Our layout, offerings. ease new of of note the our customers improved product the are and shopping,

customer seeing call and selection, brighter layout. strongest aisles, cleaner our lift in survey, and navigate better in intercept's Specifically merchandise like animal the easier to improved tools. out organization, areas include in they Categories campaign sales and power apparel,

sales Given our store the through size comp and of is this our further store refresh productivity. a drive opportunity to multi-year continually base, base

Another a space wider a for capabilities offer and Enter the product and through in expansion component our store. to locations the of has as pickup inside garden feed of the drive-through lot side as our we And is categories. typically offer with midst offering reminder, investment, our in of the on transform our experience. thresholds, select side outside a this pickup. convenience largest Again, side space there's meet average. a below in And the the of store are the leveraged the to transformation of expanded greater categories significant adding product with of space as side We're an a efforts room our lot, the stores have an volume center substantially offering buy a garden seller to in shopping online the productivity much deliver the chain reminder, our is new as lot. lot project and in In also this space we sales demand. bag-feed we're help of productivity country. multiyear bag the that feed of lawn enhanced With

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

higher our Side the of these to embarked deal about pilots square significant about year. the a In early remains sales ability than appetite space when test exit a Our And learning XXXX. and we great an even we as Lot a per lawn opportunity. drive through excited XXX late transformation we're We across lots the customers' of remodels, complete last on we're chain assortment. having side foot our we were more for garden initial expanded anticipate

also to teams timeline we store and continue learn our Fusion our here test disruption about the findings and the project as process. our As XX% minimizing we customers from to remodels, with reduce and implement by our

early still While on, refinement learning. are we the continued positive about very and

implementing making project the we're challenging construction and reduce While construction to the the at scale store to scope corresponding very progress has ability site. in the this and in construction our disruption macro-environment, current time, been significantly costs,

While disruption been completed the on have we Side are with for recently, of remodels. majority Lot pleased the and the period, lifts. Fusion and combo remodels seeing read of the more stores, Fusion sales both remodels we're had Post single-digits which mid single-digits low lifts early very for

We single-digits one had the these mid year improvements projects. expect stores Fusion for for lift stores, are combo which expectations as as and single-digits we these forecasting as is the began results we on continued track in normalize and for high

as mission members go enter our the at up done and more and the appreciation in our about elevated open busiest before. the the a Tractor for the team the And thanks Team with to strategies transformational working. values. we lines levels, Out effectively. extremely last that than the sincere we of team to That commitment like My that stronger underscore each results pandemic is year, our out of optimistic periods to dedication initiatives to And to the and retail. that than their questions. Life Over Here operator, wrap from also support one emerging of the we're XX,XXX has Strategy, our our would Supply our challenges for are future We're and challenges executing course and business job navigating unprecedented navigating clearly great the operating

Operator

ISI. the begin question Wintermantel Oliver [Operator from question-and-answer first now of will is with We The Evercore Thank line you. session. Instructions] the

may proceed. You

Oliver Wintermantel

the Hal, changes question regarding my structural Good morning, margins. is business. the lot you guys. within mentioned about And gross a

points it's I said think you the XXX pandemic than basis XXXX. before higher in

So think your early indications you. I you from when come promotions strong gross what you XX% maybe gains have in very structural COO back and was the is Thank wondering margin back to on versus decelerates to maybe you of give COO. what have the if

Hal Lawton

term on margins. joining Oliver, quarter gross our this both good On -- margin, of results, of very long-term Hey short thanks and for gross we're we're call. morning, also nature pleased about margins, with the our optimistic very gross kind our past

vendors We've short-term, cost through it we've as coming significant labor as also of the as had goods, freight really materials relates to The imports. the being costs costs, an excellent as goods related raw our business, cost to advocate On finding that's commodity-based related also and navigating increase in well cost and amount team's those it. as whether possible. along measures to seen job That's of freight. costs customer passing done to keep offsets, well prices as productivity low for the

foreseeable X from around inflation as to two promotional to As very gross focused have last those we on day future. a that delivering every our intensity We we our the really intensity everyday in price. focused and call question and over we year business. X% very GAAP low. remain QX. they of very that sequentially helped We single offset in the quarters: the way of delivered talked which we which for levels the about at customers, the playing is And have it X% s, the remain see clearance low the remain did that us out value on last same the improved the from those term, to Long Kurt quarter did alot mentioned, several quarter, and in on results margin costs of

sort move in And will And We promotional this next with will continue couple promotional intensity intensity minimal have for of structure into that environment of promotional forward. bodes of the in no first going promotional supply to very significant as QX. half any well we being that years a remain year. think intensity, think now for in plans I And a market. able maintain limit low too we to a constrained to

And structural so very and nature our results also about we're our of I said, very with short-term long-term optimistic margin. gross again, as pleased margin the gross

Oliver Wintermantel

Good luck. much. very Thanks

Operator

Wintermantel. Short line question Mr. Barclays. of from you, is next Karen with the The Thank

You may proceed.

Karen Short

Hi. Thanks much. very

So based on comments be little you on all the the we obviously haven't we're an algorithm on that would that question that. had for bit of clearly Hal, those longer-term update and but a provided just trending above well

wondering in versus lines. So prior you you give could operating just long-term realistic, obviously if more those maybe algorithm about how little really think X because a isn't color that X.X, margin the broadly to just

Hal Lawton

targets reviewing months. in the we for few guidance the joining over Hey It's -- we're for about on We in and for point excited we a morning to the our here Out addressable sustainable both [Indiscernible] And it's annual ahead long-term of ahead don't total absent $XXX thanks a and very that just in which billion toXXX get our next strategy time, share. significant us the several Petsense acknowledge Absolute did runway of our commented growth talked Here that XXXX. ahead we're Super exceed the we t We ensure for midst that, times, the XX.X% in to we opportunities long-term good your certainly that market. profit market same is write-down capture, about our those call. want to always that our targets. What -- be at that at at business natural Life we're quarter. here third see and planning ourselves in and XXXX there. our to in investing on off XXXX of Strategy looking also XXX

And a on amount news I long-term excited all the with opportunity it executing we this there results still just now. and so, the we're more balance we'll out cylinders have in a opportunity that, quarter, the ahead, we're have folks right the know. of that team and there's we for significant period when and very share significant pleased But put $XXX where we our also outlook up in are see think the on is we the certainly we again, as billion year, of market let in gaining about

Karen Short

very much. Thank Great. you

Operator

of from next line The question Brian is with Nagel the Oppenheimer.

You may proceed.

Brian Nagel

Good great quarter. morning. Congrats on another

and in prior from think question side. of Clearly, a lot the over bit demand been quarters tractor you your repetitive several has mentioned of is I maybe the the my Hal demand prepared structural comments to, the but last question have I here sort now outstanding.

shift is behind dynamic the question is, You're still us? to are how the seeing odd, performing want gives was within greater crisis -- COVID guess I are confidence I that completely very there presenting the persist structural that What consumer overall your environment. consumers what I -- have just demand you unique in in a trends business, you will once the

Kurt Barton

our in I'd point X Brian. things business. to Hey,

talk again, more retailers any other whether their as no all what thing pet rural on saw and is and whether really is it's the trends. nature you relates of it of purchases, year and more last things revitalization, last are and adoption, talk it's it's reinforce in businesses mobility, of the people business, benefit and behavior there's certain not macro And trends, our second COVID that look people year like and third home those matter move where of have and Whether trends, I waned. the dataset structural gains. homesteading things I'll really consistency to behaviors macro a we're the I'll permanence off, broad share trends whether data and as the In like ownership the that we it's about just broad I they think about money, more this First of I'll case whether early that's permanent about saw it's kind all pet that sort all qualitative in QX at, talk if sustained the a of mid for permanent think seeing themselves, it's us, been ownership, so nature. to whether which is spending in mentality, bit self-reliance the

The as to point second the mentioned. I'd is consistency, I thing

business not consistent. they're been region. lock been regardless that week whether time. across us service -- and gaining category, to or with down us to our think also to lock board customers in been we've And certain we're every stock seeking our confidence all to they a the the categories the in be structural new share shopped in has at really finding and and give then confidence the now who we share in and level in And those of customer come of we're context. in things right by by seeing point we're that customers just have serve price, those what real on that the lifestyle that right as significant to in in month, Our of who lastly, I three with that are again more we're this long remarkably the I'd states us to business. orientation in core not of And Month that's that And orientation. or to in or or whether surges been week, COVID And gaining down. have gain category really our our speaks business. structural share less almost

And camp. of that -- the it's were then winners much and seeing put structural think are And set second another more it sustained. top COVID it that there's on of and seen I wane. at that have some very a of early I much there's set that

Brian Nagel

I Thank congrats helpful. it you. and appreciate very That's again.

Operator

of and Sandler is Piper Sandler Piper Co. and the Keith with -- Peter question line next The from

may You proceed.

Peter Keith

everyone. results, Hi. Thanks. Good Great morning.

prices, be there benefit Looking of looks be heating I'm XX guys forward exposure next a winter ago heating seeing And energy home with some the with years XX, the have, back the thinking sometimes to of Tractor. here, going costs. just can to like months to we're for couple you record nice

So your I do net costs this we're positive maybe question conversely feel going guess on core the or a a is for Is this basis, heating costs about that elevated net see to how it elevating you winter? consumer?

Seth Estep

of opportunity as of drive to just joining Seth. and just record ahead activity little we number shopper's with brands call. continues energy of the coming where think Ridgecut, where Columbia Harriet, rural is doing we of as we for Thanks apparel when in in Peter, continue broadly, and call they as discussed business opportunity. [Indiscernible] we're about into core months, weren't our customer the past. strategy, than other Hey even about where than the we're this on brand customers capitalize the where bit just couple the we're based the like with in to look over benefits to that to revitalization, that, of that some that season and trends, specifically, costs Things categories but consumers own holidays a for market We're look they drive we're next Hal that like resonating outside seeing team couple Carhartt, to fall. us expansions to ahead these coming excited the us seeing lineup consumers are that now key continuing like for us the are When I'd the how more our months, over with, can to more Hey, and that outdoor a team in the highlight of past, then in about categories. maximize about couple this And share it well go excited brands lot execute and really a We're those lies footwear. on and the we through merchandising leveraging really even we resets here not Fast really maybe and see that coming to our off activities, the over just we're to the macro things year, women's really that seeing the love in just excited that next we're quarter. reset throughout as And team. the the our momentum new preholiday, of holiday expanding have and broadly new for also portfolio well, like

seeing like where the to s strength then to coming and us things So board there customers and patio across we're continue Wildlife C.U.E. our still footsteps. on UTV grills, demand, focus activity are driving to we're for going heaters, even a

to as It's where the market going pet with continuing that little drive So, also few as at categories, pet years, resonating items, coming last activity season. about establish. new holistically the And through, seeing last extremely be we're a business, record seen we're as the be we've have are broader but base we're we're business as our new C.U.E. whole consumer they with the than a we that momentum we as over partnerships quarters. new energy well throughout to adoptions well, really to the we holiday over the as to question continue be it the with and just to the excited number few here see looking of well across our very the consistent what that

Peter Keith

Seth. very you Thank much,

Operator

is with -- question Goldman Golden Kate next from The McShane Sachs.

may proceed. You

Kate Mc Shane

the of for how you I to I wanted Thanks are morning. it to when expecting And much when elasticity store back actions pricing just reaction talk the across that the if for comes Good has you inflation go the question. certain what it categories? fourth you quarter. wondered or inflation you to our an could from about expect was one most in And for us minute. do taking standpoint? Hi. to been took, or

Kurt Barton

hey. and morning Good morning Kurt. good is everybody. [Indiscernible], to This

that's product portfolio regards really we compared there and areas, was continues as in basis key sure slightly low side On manages QX the the We pressures top as it, there QX, patterns Seth, on costs XXX traffic customers, moderating look in making on got of benefit levels what the pricing. team guidance. as we inflation at transportation at of inflation from to to costs coming of and are the driving levels a saw that, at like QX factored in some how both or Hal out QX of our it more inflation be we take into we everyday approach. the In continued our into QX. into as We portfolio. saw of higher to at merchant ahead look we with where contributing, of business. mentioned that is inflation exited a But great look that levels well we've points to and the cost those the side, QX, shopping handle

chain what the through our just similar to that we side, leverage as we portfolio that cost our s pattern. they're team the a and standpoint in low strength tools guidance QX sure we are able managed from that keep mature a manage make we as that retail really as pricing great from So our this possible. our well of and supply can forecasting to And expecting to can leverage do for as has again, balance well

Kate Mc Shane

Thank you.

Operator

is Lasser UBS, the The next with proceed. question may from Michael line you of

Michael Lasser

the opportunity intended that moderated the volume Thank you question just a can to Good be manage right-size or might increase given contribution there to remarks, points I question. my morning, leverage XXX more still what your XQ COO to thanks that of that to need do your of points, had, moderate stores basis in XXXX. on able and have points, cost a that question basis lever was is, with that just clarify magnitude all moving sheer for you to so the wasn't basis expenses? you to or -- really last response you. answered. a some would contribution XX XXX noted relative be it your or My but how confusing prepared the the to relative you little to has you structures inflation XXX you're hopefully the inflation expecting In taking SG&A your leveraged And moderated the that forward. forward, question was to comp say my Kurt, X% relative moving terms

Kurt Barton

at is where business, the we're our X% this cost. seeing right well to what strong two on potentially be traffic the the and inflation so outlook focus saw Great on. slightly described Kate's to QX: revenue hit on regards just just to does the to up business to over as we're Hal But to be the a different I momentum the opportunity for position definitely business, with that comp our questions. business. in And point, whole the and in now QX. levels QX will this our and a outlook that really to elevated the on to see our question, as the we're I'll regards that we growth, clarification market in that of your in than leverage our we managing point, we stores. of our makes response on right you Michael, are saying from to point leverage made a drive the gain algorithm In flattish that elevate to investments pressures In strength, fairly prepared similar of now, as continued really investing SG&A way tremendous still to our the leverage that we're using will and share made continue flattish on remarks into time also ability it opportunity, managing

Michael Lasser

much. very you Thank

Operator

Chris JP from next Horvers the is line with Morgan. The question of

You proceed. may

Mary Winn Pilkington

to just can we out. Chris question the Operator, on next if is move

Chris Horvers

Hello.

Mary Winn Pilkington

Hey, are. there you

Chris Horvers

Winn. Thank Mary you,

Mary Winn Pilkington

Thanks.

Chris Horvers

XQ, there, how in-stock And you're spring? sounds At softline this feeling probably from soit you business OPE, level obviously, around Asian like with orders your commentary then an next is Seth, you're that. thinking slot are for that making guessing heating accurate? and sourcing, I'm the good point about

for ordering enough next you be So will spring?

Seth Estep

Chris. Hey, Yes.

now. always always we satisfied So not more, we we're -- we want where say with we are right but are

supply our As through we've we the good as where and are the our with merchants really we we both chain get to chain the partners feel team into are, supplier products heading in. flowing and holiday products managed supply season where

product to source the can we'll sure plan be past product or can able to within, the when through for shelf be ways and have in look it it, hit partners, through our earlier for key we can every give our have of commitments whole working we're you're at forecast it we to managed with need than that we've the taking to process, plan piece In year, historically we looked spot our of we properly overseas lead the so alternative we're get time, course take even factories As giving earlier make supply We've supplier we're have on. we this our chain, well. as throughout that earlier than

team, the across supply to continue ready Really -- that So our on and challenge can across there. feel loaded that about supply has that's locked going base global navigate and be can supplier we business. spring make and been this chain the out for planning to the we good with sure that

Chris Horvers

Thank you. it. Got

Operator

Peter is line from Benedict proceed. Baird. with of you, question the may Thank next you The

Peter Benedict

that, this up, Hi, I question. I'm year and thinking on how so we should that you rate we D&A. the we've think guys. for probably you. about million pencil for of seen a under question. making, Should growth this XXXX? stuff, my Thank of about has obviously do -- the That's taking the investments are been through Capex you expense Kurt, up XX% then or we guys see Thanks $XXX And curious as we're year-over-year, about kind is How next similar guess it's year maybe just how think back year. D&A that?

Kurt Barton

Yeah, sure, Peter.

year, when expected for we framed point out Life Strategy. And plan, investments much much the at year-over-year, this So ones incremental line that's mid-to-high similar we've on Here very expectations. Out Side much the low remodel rate, for the center depreciation in what Fusion and Lot where in with XX% has XXXX build, this we the throughout to year, very well our this launched growth would quarters, growth distribution the The growth likely we with be depreciation. principally we is expect as rate as the XX% new the made our us with very right

Peter Benedict

Okay, got you. Thanks so much, Kurt.

Operator

Stanley, The may line with next Gutman Morgan the from is proceed. question Simon of you

Simeon Gutman

-- Hey the another longer-term everyone. question. I morning. margin Maybe I Can take Good and will Kurt. stab Hal at

would second math say, above you so your that be other is, about can growth business on layer higher that there that of investments layers keep we third And that plan question would in accelerate, the are the do let margin above can we Strategy or running the any that. there -- re-investments you the The Out in Here the are just level. a [Indiscernible] run the that Hal, think things business run about? that you Are price you think regard, want I think and that it there that along philosophically, level? to at hey, could lean building where don't could suggest

Hal Lawton

talk this joining and morning Hey, to for to Gutman. Good thanks you us.

said You had opportunity our first we ahead off, see market. -- in sizable

followed very who that and are we're market. out. very that historically. long of it's well-positioned One, significant made further and fragmented. relationships we a for those period where We a us For size scale investments there very think look One, attractive our with it's as have and time, we've opportunity we

process, our above long-term go our we'll forward. the planning to annual us committed will an We above our straight grow really look we guidance of years we're X acknowledge of and take we after as would long-term through in XXXX guidance. going as way out-sized share. grow. continue think to -- help through that performance XX% off be continuing And that That And that share, margin. to said, and It's relevance

would say now, very excellent I bullish our in guidance. our on of capital investments seeing focused What we're our investments, investments, right very on as we're it the long-term it relates we're is, For the is results allocation, to business.

Side and today, we stores Lot well. are stores the the As performing shared Fusion very

from see that very we you business, last with excited very again, can on of it. on we bullish continues hear remain that. think pleased short-term on opportunity, both and expect the more early stronger, time. and potential our we're how I But as about us evolve year our it's this to in And what expected and anticipate leverage an and to model That's rate with for our were. scale -- plan As line way normalize, to fully the didn't it. a continues seeing business our right business our opportunity we're and they them that outsized in that to gives much mature begin we at grow an inside next long-term to into at never results Also and is been business business us year,

Simeon Gutman

you. Thank

Operator

Fadem The Wells next Zach from is Fargo. question with

You may proceed.

Zach Fadem

question. Hey, good expense morning. Kurt, another

of the growth, Is is without then of you of uptick XX, or spend any that provide through And lingering on there? Orscheln? costs, to D& COVID strategic and year of -- a mentioned can an XX% then there look all, lapping incentive And A you're we in spend. can COO, separately the impact with some you these first items? detail so as talk As strategic elevating you

Kurt Barton

is Kurt in a and there. this things number of Zach,

Let try not is this. first. to the just regards in Orscheln I'll depreciation the me given of we've of last the in the hit one numbers structure. any that to in package that considered guidance One, expense

others environment continue continued variant year, in expenses outperformance at to They're and last from we have pandemic COVID team the and level members. lower having than for comp the year have we we levels last lingered. with the at quarters target. levels lower emphasize safe customers a the be elevated incentive with year, because saw and while into, our The that the So to year above this just been clean comparable than entered our but Delta

this should we leverage there's comp. think items so forward and performance years, that are going leveraged points. those incentive are those in And future And paying above like in beyond level the for target, year, us about incentive as while we're the gives above if, an comp

again. X when is overall with year launched in leverage Strategy this plan. and to I we plan to Out in to The year growth year, an mentioned Here Life that the will long-range much X about very and as year rate our quoted the talked we referring next net and compare what expected line a it's earlier, So those items depreciation favorable I expense, be

at, with our term elevated those comfortable the growth what depreciation sales, fourth the a we the rate we're we've near with got expenses very not mean, I quarter that's so include investments the for with even XX% Orscheln, And that. does and comfortable visibility again, have where very management feel we are in beyond and and on because

Zach Fadem

side? Kurt, it.Thanks, the about strategic what Got

Kurt Barton

initiative really spend on Strategy The to we'll digital Out we that -- of specifically that year outside this continue had the on we've in and increased initiatives we we Life execute the strategic had what planned strategic Here mentioned had any haven't plan. technology,

there. what clarify you're just referring maybe So

Zach Fadem

should were was strategic to there XXXX You so to uptick going spend that if mentioned in I we curious you continue an in invest anticipate. just was

Kurt Barton

said capital still we to investment the over expect. what that expenditures we of XXX next in be But to it's is years, centers. that in with what the those with the our few much Got could We XXX line in years. distribution some higher No, businesses be of you, anticipate Zach. because level very consistent launching

Zach Fadem

time it. Got the today. Appreciate

Operator

line from The the you Basham next of question is Wedbush with may proceed. Seth

Seth Basham

a comp morning. and in seeing around Thanks following of and a lift the terms question My out. you're the roll good clarification trends lot, Fusion is Lot the Side just

list single-digit said have you're combo for a for for think mid Is that plan mid stores you and stores seeing low of I Fusion, first full completed. single-digit correct? high for combos? year and single-digits been single-digits Fusion But for is that your

Kurt Barton

morning. remodel, remarks good yes, store is is make just our The add typical it Hey, as is we that to that is prepared in what a said and with accurate. And I'd that

Hal Lawton

some remodel new remodel fixtures and types There's a which Particularly the of of seeing would disruption. a the we're month used getting by occurring performance other the store week, of both improve. customers see happen happens things lift as during months remodel. the new we categories of and environment, the and that post of remodel. continues and to little start the That combo the a every even new stores brands with and the -- after there's come chain that's the layout to that Fusion and And disruption that then of goes the what What little the current the in remodel. kind little find is opening bit shopping, There's the expect, to disruption re-grand the supply as case still some new we every that's is late.

would relates is the the Garden with The it Lot make that Center. other I that as Side to to

months immediate Center in in of than expect a the have what of saw more again curve Garden impact of we X the Center, curve, store X curve. whereas X, of seeing maturity expectation the results through X, impact, We year nice, then remodel, X, a with of that of but strong But being also couple Garden line that very are went we're a continuation seeing would XX would remodel. spring. stores Fusion with Fusion we're the and we seeing Fusion few even yeah, maturity for which XX, the a each We months it's more the and of with immediate lift our combo. the we maturity outsized inside maturity an of positive gains we nice complete We it's lift line, even of remodels. And we think curve as whether already, continued months year more remodels, see with or those that we're the is in that see in X the then into those much

Seth Basham

That's helpful.

Just for clarification. do lift after the When How a months end? you many post does disruption? point completion period start disruption measuring

Hal Lawton

Yeah, we the lift day re-grand measuring the start opening. of

weeks opening that X from of complete. that do date. lift re-grand that the So is get The and after tactical, that's thing, measuring not project on reasonably quickly week, project X we sign the day to opening too happens the there's the when and start re-grand kind that that, then off off, manager and but manager store construction the manager sign a the

Seth Basham

you. Thank

Operator

question next Grom is Chuck The from Haskett. Gordon line the of with

proceed. may You

Chuck Grom

learned productivity in-store to curious the Side could to would or efforts Okay. guys upside have store morning. you the What in relative areas let sense Side class Great differently. I'm and Thank think you of been what's apply at [Indiscernible] So, initiative. Good me you longer-term future, to the Lot? biggest quarter for the look look Lot productivity? be you to said you. of any your for where then surprise XX

Hal Lawton

kind Chuck briefly Lot and touch Hey, three just on things then on base call joining I'll today. I'll the productivity. of Side for and thanks hit Fusion

I'll is then the talk Center, about and feed things X about about talk talk Side BOPIS, rooms. Lot, the the I'll our Garden On I'll

So first on Center. Garden the

address that Our is they that and garden. from customers key data a in least destination is that engage live the categories goods we perspective, set most

for our more category improvement and planning the really gardening of fleet All customers it's you much a convenience and it's strategy to vegetables advantages -- shrubs little whether do And seeing Out is in fruits of I'd product, benefit the of -- in prospects whether exactly or see Garden tree what the time last expect. customers of And we're the beautification, what excited the from shrubs in more we in things what store, sooner -- backyard the Here, results. for creating along that year. fence our you adding behavior less we're terms along about than around you're about, Center like tax to is really that the a your we It's about more a we're in our business. another and so in and you the were just sorts Life significant home C.U.E. all this And now say in that's might seeing even Garden and our destination but our core and the -- speak those land. your line perspective. a kind location your -- have And trees. and

of and live the the performing just well and store. with obviously, by relationships are So on both those, our our very but the vendors it started tailoring s with goods also Center getting Garden build-out assortments, we're

months factor X convenience now, seeing behavior. And with we're seeing X, driving -- on The drive-through we're you're customers. levels and line seeing that that's drive-thru X, open being second of seeing have our high And XX%. XX%, from for in store X, We're stores repeat some is thing BOPIS bio XX%, in the extra of pickup drive-thru. our incredibly customers. been just then that behavior

out. feature pleased feed lastly customers so consistent rolled when what the from then the the and we're it And how really evolving room. with with is seeing our behavior And that's we was is

towards our we've put you Q, a of it the s, feed in if relates of provided their being capacity -- effectively, cost X, those store and feed trucks with think And the and bad -- We're not out leverage way bags designed out bag customer. stress We stores a a X then combined the perspective, serve We're seen customers' the way. X, and the the in it the the get they're centers as outsized now. touching for growth volumes from are that's average our and our in get our in times. to volumes largest country. stock customers, on store to also the And that rooms the allowed about good onto staying lot to able them valuable on performance receipt of getting store, have onto to in able seller us mixing that

them And so continuing it performance use exactly them things those are all X we're tweak coming learn built designed across and along and we're together, all test we as really and excellent our to X way. of the to seeing

outpacing our we about think you a move the to that as retail Here that billion we're market overall Life and our $XXX market. still outpacing As productivity, comps forward, Out we committed as define

we continued We same-store look to speak. was long-term are margin sales bit improvements as as the guidance on step in thing, in if say to long-term questions What still so Kurt that consecutive about reference at quarters mike just there's expectations our several have way talking double-digit I'd can op spite I'd our X And our here an topic. there comps, now of and with back forward. like you forward. leverage this you got a about. is I've on through productivity so outsized even while other we move moving expect One

from in or leverage but cost I And the share, we're as business we state growth freight costs continued goods and right last business, of our guidance XX% obviously and forward. of implies long-term earnings in cost seeing which X% you for we're the being quarters outsize sixth X% would year say, to move we had And per in that leverage, and the growth, are a diluted a normalcy whether of now, to environment. that's whether of announced with not Our we sales seeing consecutive comps outsize what that expectation on is spirit of X% continued more results. have labor the our the double-digit normal our

And way, And regardless just executing we're that in of to that so the accountable in. clarify ourselves we're environment to holding that. wanted

is environment" leverage Kurt but of think a in that point "non accept even a still comp environment, X% point of whether and around we that's challenge. normal same kind still, I accurate in still -normal 's a

Mary Winn Pilkington

Hal call All get you us conclude really lot appreciate that questions, allowed thank right. to Operator, and a will I cooperation today. Thanks, so our that through more everybody's all.

so January Looking any for Maryanne to a this Have for forward on thank questions, you speaking be and our great in quarter call earnings and I will you fourth your day. cooperation. around to all afternoon

Operator

for call. concludes the today's That of and your day. rest you your participation conference Thank enjoy

Tractor Supply (TSCO) 21 Oct 212021 Q3 Earnings call transcript