Q4 2023 Tractor Supply Co Earnings Call

February 1, 2024

Incidents 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 return to the queue for additional questions.

Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of tractor supply company.

And as a reminder, this call is being recorded.

The hosts for today's call is Ms. Mary Winn Pilkington senior Vice President of Investor and public relations for tractor supply company.

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Speaker Change: Good morning, ladies and gentlemen, and welcome to tractor supply company's conference call to discuss fourth quarter and fiscal year 2020 results.

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Speaker Change: At this time all participants are in a listen only mode.

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Speaker Change: We will conduct a question and answer session and instructions will follow at that time.

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Speaker Change: We ask that all participants limit themselves to one question and return to the queue for additional questions. Please.

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Speaker Change: Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of tractor supply company and.

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Speaker Change: And as a reminder, this call is being recorded.

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Speaker Change: The hosts for todays call is Mrs. Mary Winn Pilkington senior Vice President of Investor and public relations for tractor supply company.

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Speaker Change: Now first step as of year end video.

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I would now like to pass the call to our host Ms. Mary Winn Pilkington.

Speaker Change: Yes.

Speaker Change: Okay.

Mary Winn. Please go ahead.

Speaker Change: Okay.

Speaker Change: Thank you.

Thank you Alyssa and good morning, everyone. Thanks for taking the time to join US today and I Hope you enjoyed watching the video a tractor supplies hearing review on the call today are Hal Lawton, our CEO and Kurt Barton our CFO. After our prepared remarks, we will open the call up for your questions Seth <unk>.

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F. R E V P and Chief merchandising officer will join US for the question and answer session. Please note that we've made a supplemental slide presentation available on our website to accompany today's earnings release.

Now, let me reference the Safe Harbor provisions under the private Securities Litigation Reform Act of 1995. This call may contain certain forward looking statements that are subject to significant risks and uncertainties, including the future operating and financial performance of the company in many cases these.

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Speaker Change: Thank you.

Risks and uncertainties are beyond our control, although the company believes the expectations reflected in its forward looking statements are reasonable it can give no assurance that such expectations or any of its forward looking statements will prove to be correct and actual results may differ materially from expectations important risk factors that could cause actual.

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Results could differ materially from those reflected in the forward looking statements are included at the end of the press release issued today and in the company's filings with the Securities and Exchange Commission. The information contained in this call is accurate only as of the date discussed investors should not assume that statements will remain operative at a later.

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Tractor supply undertakes no obligation to update any information discussed in this call.

Speaker Change: Hello.

Speaker Change: [music].

We have extended the call to allow for more time for Q&A given the number of people who want to participate we respectfully ask you to limit yourself to one question. If you have additional questions. Please feel free to get back in the queue. I. Appreciate your cooperation we will be available after the call for follow up. Thank you for your time.

Attention this morning.

Speaker Change: I would now like to pass the call to our host Mr. Mary Winn Pilkington.

Thank you Mary Winn and thank you to everyone for joining our call. This morning, the 2023 tractor supply celebrated our milestone 80 bps <unk> anniversary.

Speaker Change: Mary Winn. Please go ahead.

Thank you Alyssa and good morning, everyone. Thanks for taking the time to join US today and I Hope you enjoyed watching the video a tractor supply GRN review on the call today are Hal Lawton, our CEO and Kurt Barton our CFO. After our prepared remarks, we will open the call up for your questions.

Over 85 years track supply has been a growth company with a clear purpose to help our customers live life out here.

<unk> 1938, we've operated in all types of economic conditions embraced innovation and adapted to changing times.

Elevated the farm and ranch channel, bringing the sophistication of other retail categories to improve the shopping journey and ensure we have scalable platforms.

Speaker Change: Seth <unk>, our EVP and Chief merchandising officer will join US for the question and answer session. Please note that we've made a supplemental slide presentation available on our website to accompany today's earnings release.

<unk> supply needs based demand driven business model has stood the test of time.

No doubt this past year has proved challenging more topsy turvy than we expected at the beginning of the year with unfavorable weather rising interest rates and inflation impacting consumer spending habits.

Speaker Change: Now, let me reference the Safe Harbor provisions under the private Securities Litigation Reform Act of 1995. This call may contain certain forward looking statements that are subject to significant risks and uncertainties, including the future operating and financial performance of the company in many cases.

But we believe these headwinds are temporary we continued to invest for growth in 2023 and gain market share along the way, especially in companion animal and livestock feed.

Speaker Change: Risks and uncertainties are beyond our control, although the company believes the expectations reflected in its forward looking statements are reasonable it can give no assurance that such expectations or any of its forward looking statement will prove to be correct and actual results may differ materially from expectations important risk factors that could cause actual.

I think the opening video was a great recap of the highlights of the team's significant accomplishments across tractor supply in the year and over the last few years.

Does that reflect on 2023, our tractor supply team has navigated so much together working with commitment and resilience to serve our customers and our communities and our team has proven their ability to be unrelenting and executing against the macro and other headwinds while also building our future.

Speaker Change: Results could differ materially from those reflected in the forward looking statements are included at the end of the press release issued today and in the company's filings with the Securities and Exchange Commission. The information contained in this call is accurate only as of the date, we've got investors should not assume that statements will remain operative at a later.

Sincerely thank them for living our mission and values.

In 2023, we faced the well documented macro headwinds that weighed on consumer goods spending, particularly discretionary goods as well as unfavorable weather impacts every quarter on our business.

Speaker Change: Time.

Speaker Change: Your supply undertakes no obligation to update any information discussed in this call.

Speaker Change: We have extended the call to allow for more time for Q&A given the number of people who want to participate we respectfully ask you to limit yourself to one question. If you have additional questions. Please feel free to get back in the queue. I. Appreciate your cooperation we will be available after the call for follow up. Thank you for your time.

While we've made progress over the years to D seasonal as our business, we will always be the reliable supplier for our customers for their seasonal needs like heating fuel and fertilizer.

We estimate that adverse weather conditions negatively impacted our comp sales by approximately 200 basis points for the full year, including the lapping of the late December Winter storm in 2022.

Speaker Change: Pension this morning.

Speaker Change: Thank you Mary Winn and thank you to everyone for joining our call. This morning.

Personal consumption expenditures saw strong mid single digit growth in 2023.

Speaker Change: 2023 tractor supply celebrated our milestone 80 bps <unk> anniversary.

That said spending on goods as a percent of PCE declined nearly a point as consumers continue to shift spending on services back to pre COVID-19 levels. In particular this affected our big ticket business, which represents a little over 10% of our sales and had a negative 6% comp for the year.

Speaker Change: Over 85 years tracked slides than a growth company with a clear purpose to help our customers live life out here.

Speaker Change: This $19 38, we've operated in all types of economic condition embraced innovation and adapted to changing time, we've elevated the farm and ranch channel, bringing the sophistication of other retail category to improve the shopping journey and ensure we have scalable platforms <unk>.

Despite the headwinds we face we remain committed to our journey of transforming tractor supply.

Speaker Change: Tractor supply needs based demand driven business model has stood the test of time.

Since introducing our life out here strategy in October of 2020, we have dramatically transformed tractor supply.

Speaker Change: No doubt this past year has proved challenging more topsy turvy than we expected at the beginning of the year with unfavorable weather rising interest rate and inflation impacting consumer spending habit.

Over this time, we've invested nearly $2 5 billion in capital spending with about 80% of that's been targeted for growth initiatives as part of our life out in your strategy.

Speaker Change: But we believe these headwinds are temporary we continued to invest for growth in 2023 and gain market share along the way, especially in companion animal and livestock.

This includes new and remodeled stores, new distribution centers upgrading our technology infrastructure and several other strategic investments.

We've also significantly improved our operating capabilities, including Relaunching, our neighbor's club program, creating our field activities support team.

I think the opening video with a great recap of the highlights of the team's significant accomplishments across tractor supply in the year and over the last few years.

<unk>, our mobile footprint and delivering on the increased volume of consumable usable and edible products.

Speaker Change: Does that reflect on 2023, our tractor supply team has navigated so much together working with commitment and resilience to serve our customers and our communities and our team has proven their ability to be unrelenting and executing against the macro and other headwind while also building our future.

Additionally, our average store volume continues to far exceed pre pandemic levels going from $4 5 million to $6 $5 million annually per store.

Approximately 40% of our stores are in the project fusion layout, allowing us to drive improved space productivity. We continue to see a mid single digit comp lift benefit in the first year from our fusion remodel.

Speaker Change: Sincerely, thank Dan for living our mission and values.

Speaker Change: In 2023, we faced the well documented macro headwinds that weighed on consumer goods spending, particularly discretionary goods as well as the unfavorable weather impact every quarter on our business.

We will enter the spring of 2024 with more than 450 garden centers that are also driving space productivity, while allowing us to enter new categories that resonate with our customers hobbies for gardening and their needs for outdoor products doors with our garden centers are attracting new customers at a faster pace than the rest of the chain. Additionally, our garden center store to.

Speaker Change: While we've made progress over the years to D season, a lot of our business, we will always be the reliable supplier for our customers for their seasonal need like heating fuel and fertilizer.

Speaker Change: We estimate that adverse weather conditions negatively impacted our comp sales by approximately 200 basis points for the full year, including the lapping of the late December Winter storm in 2022.

Riding of multi year comp benefit.

Our distribution centers achieved a record year productivity the opening of our Navarre, Ohio DC in January 2023 allowed us to unlock savings across our network with the largest rebalancing of our stores ever.

Speaker Change: Personal consumption expenditures saw strong mid single digit growth in 2023.

Speaker Change: That said spending on goods as a percent of PCE declined nearly a point as consumers continue to shift spending on services back to pre COVID-19 levels. In particular this has affected our big ticket business, which represents a little over 10% of our sales and had a negative 6% comp for the year.

This provided us with substantial stem mile savings, while also allowing for significantly improved service to our stores.

Also importantly, our supply chain team member attrition reduced materially as we implemented a new progressive wage scale.

And no doubt these investments are resonating with our customers as we have achieved record high customer satisfaction scores throughout the year.

Speaker Change: Despite the headwinds we face we remain committed to our journey of transforming tractor supply.

Speaker Change: Since introducing our life out here strategy in October of 2020, we have dramatically transformed tractor supply.

As always our store managers were critical to the success and importantly, we achieved a near all time low of 12% attrition in this group.

Speaker Change: Over this time, we've invested nearly $2 5 billion in capital spending with about 80% of that's been targeted for growth initiatives as part of our life out in your strategy.

Overall, our customer base remains healthy and highly engaged.

Now, let's go through some of the specific highlights to the fourth quarter and the fiscal year.

Speaker Change: This includes new and remodeled stores, new distribution centers upgrading our technology infrastructure and several other strategic investments.

For the year, we achieved record sales of $14 6 billion.

Our comp store sales were even with the prior year and diluted earnings per share were $10 nine.

Speaker Change: We've also significantly improved our operating capability, including Relaunching, our neighbor's club program, creating our field activities support team.

This comes on top of record performance over the last three years.

We continue to have solid market share gains across our major product categories.

Speaker Change: <unk>, our mobile footprint and delivering on the increased volume of consumable usable and edible products.

And our digital business reached another year of record sales topping over $1 billion annually for the first time.

Speaker Change: Additionally, our average store volume continues to far exceed pre pandemic levels going from $4 5 million to $6 $5 million annually per store.

Since launch we've had over 7 million downloads of our mobile app and over $2 million in the year.

Speaker Change: Approximately 40% of our stores are in the project fusion lay out, allowing us to drive improved space productivity. We continue to see a mid single digit comp lift benefit in the first year from our fusion remodel.

For the fourth quarter, our comparable store sales declined four 2%.

Our fourth quarter diluted EPS was $2 28, with operating profit margin expansion of 16 basis points.

Speaker Change: We will enter the spring of 2024 with more than 450 garden centers that are also driving space productivity, while allowing us to enter into new categories that resonate with our customers hobbies for gardening and their needs for outdoor products doors with our garden centers are attracting new customers at a faster pace than the rest of the chain. Additionally, our garden center store to.

For the second consecutive year, we returned over $1 billion to our shareholders through the combination of a growing dividend and share repurchases.

Strategically the transformation of our real estate model enabled by a number of new capabilities that are designed to deliver material benefit to both revenue growth and operating margin reinforces our long term guidance.

Speaker Change: <unk>, a multiyear comp benefit.

Speaker Change: Our distribution centers achieved a record year productivity the opening of our Navarre, Ohio DC in January 2023 allowed us to unlock savings across our network with the largest rebalancing of our stores ever.

In 2023, we raised our new store growth target. We now believe there is a 3000 store opportunity domestically for tractor supply.

This is supported by our total addressable market of more than 180 billion, our robust growth and our ongoing market share gains.

Speaker Change: This provided us with substantial stem mile savings, while also allowing for significantly improved service to our stores.

Our new target represents an increase of 200 stores from our previous target of 2800.

Speaker Change: Also importantly, our supply chain team member attrition reduced materially as we implemented a new progressive wage scale.

We also implemented new capabilities to enable owned development of new store build.

This capability is expected to generate significant construction cost savings and allow for lower rents in these applicable stores once we sell them post construction.

Speaker Change: And no doubt these investments are resonating with our customers as we have achieved record high customer satisfaction scores throughout the year.

Speaker Change: As always our store managers were critical to the success and importantly, we achieved a near all time low of 12% attrition in this group.

Our real estate capabilities are a compelling addition to our lives out here strategy that will further solidify our growth for many years to come.

Speaker Change: Overall, our customer base remains healthy and highly engaged.

In 2023, the cadence of new store openings returned to a more normalized rate. We opened 70, new tractor supply stores and 13 pets in stores in 2023. The team has done a great job opening highly productive new stores as this remains a core strength and competency of tractor supply.

Speaker Change: Now, let's go through some of the specific highlight to the fourth quarter and the fiscal year.

Speaker Change: For the year, we achieved record sales of $14 6 billion, our comp store sales were even with the prior year and diluted earnings per share were $10 nine.

During the year, we successfully converted the 81 or shown stores acquired in 2022 to the tractor supply brand, representing essentially a year's worth of new store growth.

Speaker Change: This comes on top of record performance over the last three years.

Speaker Change: We continue to have solid market share gains across our major product categories.

We're very pleased with the opportunity to drive both topline and Bottomline performance of these locations closer to our standard run rates over time.

Speaker Change: In our digital business reached another year of record sales topping over $1 billion annually for the first time.

Speaker Change: Since launch we've had over 7 million downloads of our mobile app and over $2 million in the year.

Total customer counts increased 1% as we had positive growth in active customers and new reactivated customers.

Speaker Change: For the fourth quarter, our comparable store sales declined four 2%.

Neighbor's club added more than 4 million, new customers and represented 77% of our sales for the year, our highest mark to date.

Speaker Change: Our fourth quarter diluted EPS was $2 28, with operating profit margin expansion of 16 basis points.

Neighbor's club is successfully helping us migrate customers to a higher threshold of spending with us during the year, we reached a new record for the number of high value customers.

Speaker Change: For the second consecutive year, we returned over $1 billion to our shareholders through the combination of a growing dividend and share repurchases.

Overall, our best customers are shopping us more frequently and spending more money per transaction.

Speaker Change: Strategically the transformation of our real estate model enabled by a number of new capabilities that are designed to deliver material benefit to both revenue growth and operating margin reinforces our long term guidance.

Last year's rebranding of pets in the pet since by tractor supply along with our expansion of our Neighbor's Club program to Pet is also resonating with our customers.

Speaker Change: In 2023, we raised our new store growth target. We now believe there is a 3000 store opportunity domestically for tractor supply.

This expansion is allowing us to deepen relationships with existing customers and help attract new customers to both banners.

Speaker Change: This is supported by our total addressable market of more than 180 billion, our robust growth and our ongoing market share gains.

Our customers' response to these initiatives is very encouraging with neighbor's club membership already representing nearly 70% of sales of Hesitance with continued momentum.

Speaker Change: Our new target represents an increase of 200 stores from our previous target of 2800.

The person shopper is also cross shopping at tractor supply at an impressive rate of 47%.

Speaker Change: We also implemented new capabilities to enable owned development of new store build.

<unk> is also helping us gain share across pet specialty as we approached $225 million in sales and in our 200 store milestone in the <unk> brand.

Speaker Change: This capability is expected to generate significant construction cost savings and allow for lower rents and these applicable stores once we sell them post construction.

Speaker Change: Our real estate capabilities are a compelling addition to our lives out here strategy that will further solidify our growth for many years to come.

For the year, our financial services offering of our private label credit card together with our co branded credit card outpaced our overall sales with strong growth.

Speaker Change: In 2023, the cadence of new store openings returned to a more normalized rate. We opened 70, new tractor supply stores and 13, Pat <unk> stores in 2023. The team has done a great job opening highly productive new stores as this remains a core strength and competency of tractor supply.

Our penetration increase from last year's record level and is now in the high single digits in overall sales.

Our supply chain continues to be a competitive advantage for us during.

During the year, we opened up our ninth distribution center in Navarro, Ohio and broke ground on our 10th distribution Center in <unk>, Arkansas.

Speaker Change: During the year, we successfully converted <unk> stores acquired in 2022 to the tractor supply brand, representing essentially a year's worth of new store growth.

These investments were to enable the higher volumes of our existing stores and the continued build out of our new stores as well as the acquisition of <unk>. These investments in our DC network are complemented by our 15 mixing centers that are there for high velocity replenishment items.

Speaker Change: We're very pleased with the opportunity to drive both topline and Bottomline performance of these locations closer to our standard run rates over time.

In 2023, we moved nearly eight and a half a billion pounds of consumable usable and edible products through our supply chain. As we are the largest seller of bag beaten food for livestock and companion animals in the United States.

Speaker Change: Total customer counts increased 1% as we had positive growth in active customers and new reactivated customers Navy.

Speaker Change: Neighbor's club added more than 4 million, new customers and represented 77% of our sales for the year, our highest mark to date.

Our scale and reach provides us with the cost to serve that is lower than our farm and ranch competition and any other competitor in these markets.

Speaker Change: Neighbor's club is successfully helping us migrate customers to a higher threshold of spending with us during the year, we reached a new record for the number of high value customers.

As we executed the third year of our life out here at our long term strategy 2023 was a year that we made significant progress.

Speaker Change: Overall, our best customers are shopping us more frequently and spending more money per transaction.

We plan to continue building on that progress in 2024.

Speaker Change: Last year's rebranding of pets into the patents by tractor supply along with our expansion of our Neighbor's Club program to pet is also resonating with our customers.

Most of what Youll hear from US today will sell in all that different from the playbook. We've used the last two to three years, but thats intentional as we continue to be pleased with the benefits and financial returns of our strategic investments.

Speaker Change: This expansion is allowing us to deepen relationships with existing customers and help attract new.

Speaker Change: Customers to both banners.

As I've shared many times our biggest challenge is prioritizing the plethora of growth opportunities. We have ahead of us and.

Speaker Change: Our customers' response to these initiatives is very encouraging with neighbor's club membership already representing nearly 70% of sales of Hesitance with continued momentum.

We anticipate 2024 to be a continued story of ongoing share gains offset by macro headwinds with.

Speaker Change: The patent shopper is also cross shopping at tractor supply at an impressive rate of 47%.

With this in mind, we have taken a cautious approach to our 2024 financial outlook with it being below our long term target.

Speaker Change: <unk> is also helping us gain share.

Speaker Change: Judy as we approach $225 million in sales and in our 200 store milestone in the <unk> brand.

We remain confident in our long term targets and expect to return to them when macro conditions returned to neutral.

Our underlying assumption start with consumers continuing to be judicious in their spending on goods and.

Speaker Change: For the year, our financial services offering of our private label credit card together with our co branded credit card outpaced our overall sales with strong growth.

Additionally, we anticipate average ticket to be pressured as we lap inflation we're.

Speaker Change: Our penetration increase from last year's record level and is now in the high single digits in overall sales.

We're assuming market share gains that are supported by our strategic initiatives will continue.

Our supply chain continues to be a competitive advantage for us here.

Housing oil agriculture, and weather are anticipated to be neutral factors in our guidance.

Speaker Change: During the year, we opened up our ninth distribution center in Navarro, Ohio and broke ground on our 10th distribution Center in <unk>, Arkansas.

Collectively all of these factors are considered to help us provide the guidance range that Curt will share with you more later on.

Speaker Change: These investments were to enable the higher volumes of our existing stores and the continued build out of our new stores as well as the acquisition of <unk>. These investments in our DC network are complemented by our 15 mixing centers that are there for high velocity replenishment items.

Tractor supply is a unique highly differentiated retailer we are the leader in a large fragmented market.

We're a needs based business that is tailored to our out here lifestyle.

Our customers have a passion for the out here lifestyle and over index as homeowners landowners pet owners and animal owners.

Speaker Change: In 2023, we moved nearly eight and a half a billion pounds of consumable usable and edible products through our supply chain. As we are the largest seller of bag being food for livestock and companion animals in the United States.

We live our mission and values and our culture defines our relationship with our customers as we begin the year, we take great pride in our path and are equally excited about our future.

Speaker Change: Our scale and reach provides us with the cost to serve that is lower than our farm and ranch competition and any other competitor in these markets.

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

Thank you Hal and Hello to everyone on the call I want to start by reiterating <unk> comments on 2023, and our confidence in the long term opportunities for tractor supply.

Speaker Change: As we executed the third year of our life out here at our long term strategy 2023 was a year that we made significant progress.

Over my two and a half decades in this business I've never seen a year, where we've had as many transitory headwinds as we did in 2023 that did not break positively at some point during the year.

Speaker Change: We plan to continue building on that progress in 2020 for most of what Youll hear from US today would sell and all that different from the playbook. We've used the last two to three years, but thats intentional as we continue to be pleased with the benefits and financial returns of our strategic investments.

Before I get into my review of the quarter.

Wanted to address two items first for comparability purposes. Please keep in mind 2022 had a 50 <unk> fiscal week that provided a net sales benefit of $225 million to the prior year fourth quarter, representing about five six percentage points of our net sales decline this quarter.

Speaker Change: As I've shared many time, our biggest challenge is prioritizing the plethora of growth opportunities. We have ahead of us and.

We anticipate 2024 to be a continued story of ongoing share gains offset by macro headwinds with.

On a full year basis, it negatively impacted net sales by one six percentage points. In addition, diluted EPS in 2022 benefited by <unk> 16 for the quarter and the year from the 50 <unk> week.

Speaker Change: With this in mind, we have taken a cautious approach to our 2024 financial outlook with it being below our long term target.

Speaker Change: We remain confident in our long term targets and expect to return to them when macro conditions returned to neutral.

Second overall, the unseasonably warm winter weighed on our results in the fourth quarter, we estimate the impact to be approximately 400 basis points of pressure on our comp sales performance we.

Speaker Change: Our underlying assumptions start with consumers continuing to be judicious in their spending on good <unk>.

Speaker Change: Additionally, we anticipate average ticket to be pressured as we lap inflation.

We knew this was going to be the most challenging quarter of the year, given our strong comp performance of eight 6% in the prior year as we were cycling. The late December 2022 Winter storm that provided a 200 basis point comp benefit to the fourth quarter of last year.

We're assuming market share gains that are supported by our strategic initiatives will continue.

Speaker Change: Housing oil agriculture, and weather are anticipated to be neutral factors in our guidance.

Speaker Change: Collectively all of these factors are considered to help us provide the guidance range that Curt will share with you more later on.

The majority of the pressure was in transactions given the needs based nature of our business and it impacted our seasonal categories across Q and other winter goods.

Speaker Change: Tractor supply is a unique highly differentiated retailer we are the leader in a large fragmented market.

Our <unk> business in the fourth quarter has a higher mix of cold weather seasonal products, such as wood pellets, both propane bird seed and pine shavings for bedding.

Speaker Change: We're a needs based business that is tailored to our out here lifestyle.

Speaker Change: Our customers have a passion for the out here lifestyle and over index as homeowners landowners pet owners and animal owners.

From the cadence of the quarter to our product categories seasonal impacts always play into our performance coming.

Speaker Change: We live our mission and values and our culture defines our relationship with our customers as we begin the year, we take great pride in our path and are equally excited about our future.

Coming into the fourth quarter, we anticipated it would work against us in the quarter played out much like we expected.

Factoring in the seasonal impact from the weather our fourth quarter performance was very much in line with our run rate from last quarter.

Speaker Change: And with that I'll now turn the call over to Kirk.

Kirk: Thank you Hal and Hello to everyone on the call.

Most of my remaining commentary of our comp sales performance is on a normalized basis adjusting for the impact of weather.

Kirk: Want to start by reiterating <unk> comments on 2023, and our confidence in the long term opportunities for tractor supply.

October and November were very similar comp sales performance with December being the biggest comp sales decline as we were lapping the winter storm from last year on a normalized basis all months performed relatively consistent with a slight decline in comp sales.

Kirk: Over my two and a half decades in this business I've never seen a year, where we've had as many transitory headwinds as we did in 2023 that did not break positively at some point during the year.

Turning to our product categories, we continue to see solid performance in Q with above chain average comps essentially flat for the quarter on a normalized basis Q had a positive comparable sales as we continued to gain share.

Kirk: Before I get into my review of the quarter I wanted to address two items first for comparability purposes. Please keep in mind 2022 had a 50 <unk> fiscal week that provided a net sales benefit of $225 million to the prior year fourth quarter, representing about five six percentage points of our net sales decline.

Discretionary categories performed in line with our expectations with a mid single digit comp sales decline Big ticket performance showed a continued improvement over the trends of the previous five quarters comparable big ticket sales ramp slightly negative for the quarter and were positive in the low single digits on a normalized basis.

Kirk: This quarter.

Kirk: On a full year basis that negatively impacted net sales by one six percentage points. In addition, diluted EPS in 2022 benefited by <unk> 16 for the quarter and the year from the 50 <unk> week.

Although our business is not primarily driven by holiday sales in Q4, we were encouraged by our performance during the holiday season, including recording our highest sales day of all time on the day after Thanksgiving and strong performance in the week, leading up to Christmas.

Kirk: Second overall, the unseasonably warm winter weighed on our results in the fourth quarter, we estimate the impact to be approximately 400 basis points of pressure on our comp sales performance.

Kirk: We knew this was going to be the most challenging quarter of the year, given our strong comp performance of eight 6% in the prior year as we were cycling. The late December 2022 Winter storm that provided a 200 basis point comp benefit to the fourth quarter of last year.

As we have experienced all year, we saw continued slowdown in retail price inflation throughout the year with Q4 experiencing a slight net deflation.

We have successfully managed through deflation in various commodities throughout 2023 and believe we are nearing the trough now.

Kirk: The majority of the pressure was in transactions given the needs based nature of our business and it impacted our seasonal categories across Q and other winter goods or.

In 2023 raw material inputs rolled over as evidenced by the 35% decline in corn from its most recent high in 2022 and currently running about 15% above the historical average.

Kirk: <unk> business in the fourth quarter has a higher mix of cold weather seasonal products, such as wood pellets bulk propane bird seed and pine shavings for bedding.

As we exit 2023. These types of feedstock declines are already reflected in our retail prices star.

Kirk: From the cadence of the quarter to our product categories seasonal impacts always play into our performance coming into the fourth quarter, we anticipated it would work against us in the quarter played out much like we expected.

Structural inflationary factors, such as higher wage rates transportation costs and other overhead items are all still supporting higher product costs.

Moving on to gross margin for the fourth quarter, our trend of strong gross margin performance continued with a year over year improvement of 129 basis points to 35, 3% of sales are.

Kirk: Factoring in the seasonal impact from the weather our fourth quarter performance was very much in line with our run rate from last quarter.

Kirk: Most of my remaining commentary of our comp sales performance is on a normalized basis adjusting for the impact of weather.

Our gross margin expansion was led by improvements in the supply chain from lower transportation rates and efficiencies in our network, including opening a new DC.

Kirk: October and November were very similar comp sales performance with December seeing the biggest comp sales decline as we were lapping the winter storm from last year on a normalized basis all months performed relatively consistent with a slight decline in comp sales.

We continued to benefit from our commitment to everyday low prices and disciplined product cost management.

While our promotional activity was modestly greater than the prior year, we were able to strategically provide great value for our customers, while maintaining our gross margin.

Kirk: Turning to our product categories, we continue to see solid performance in Q with above chain average comps essentially flat for the quarter on a normalized basis Q had a positive comparable sales as we continued to gain share.

These favorable drivers were partially offset by an unfavorable product mix shift due to a higher mix of Q and a lower mix of high margin seasonal categories.

Kirk: Discretionary categories performed in line with our expectations with a mid single digit comp sales decline Big ticket performance showed a continued improvement over the trends of the previous five quarters.

As a percent of net sales SG&A expenses, including depreciation and amortization increased 113 basis points year over year to 26, 2%.

Kirk: <unk> Big ticket sales ramp slightly negative for the quarter and were positive in the low single digits on a normalized basis.

This increase was primarily attributable to our planned growth investments.

Each included higher depreciation and amortization and the Onboarding of our new DC.

Kirk: Although our business is not primarily driven by holiday sales in Q4, we were encouraged by our performance during the holiday season, including recording our highest sales day of all time on the day after Thanksgiving and strong performance in the week, leading up to Christmas.

Along with some lost fixed cost leverage due to the decline in comparable store sales. Additionally.

Additionally, higher medical claims also contributed to the increase in SG&A, although to a lesser extent than last quarter.

Kirk: As we have experienced all year, we saw a continued slowdown in retail price inflation throughout the year with Q4 experiencing a slight net deflation.

SG&A deleverage was partially offset by a decrease in incentive compensation and the benefits of the sale leaseback program initiated last quarter. In Q4, we sold five tractor supply stores, which contributed a 40 basis point benefit to SG&A.

Kirk: We have successfully managed through deflation in various commodities throughout 2023 and believe we are nearing the trough now in 2023 raw material inputs rolled over as evidenced by the 35% decline in corn from its most recent high in 2022 and currently running about 15% above the historical average.

Operating margin improved 16 basis points for the quarter to nine 1%.

Excluding the cycling of the 50 <unk> week diluted EPS of $2 28 was essentially flat with the prior year.

Kirk: As we exit 2023. These types of feedstock declines are already reflected in our retail prices.

Our new store pipeline continues to be strong our new store sales and profitability numbers continue to outperform historical averages.

Structural inflationary factors, such as higher wage rates transportation costs and other overhead items are all still supporting higher product costs.

Given the addition of the <unk> stores to our non comp sales numbers, the new store productivity metric for the organic new tractor supply stores is cloudy and our external reporting.

Kirk: Moving on to gross margin for the fourth quarter, our trend of strong gross margin performance continued with a year over year improvement of 129 basis points to 35, 3% of sales. Our gross margin expansion was led by improvements in the supply chain from lower transportation rates and efficiencies in our network Inc.

By our calculations TSV new store productivity in 2023 was about 67% of our mature store average average sales in year, one of our new store have increased more than 40% compared to 2019 in line with the performance of the chain our stores continue to be profitable in year, one cash flow positive at <unk>.

Kirk: <unk> opening a new DC.

Kirk: We continued to benefit from our commitment to everyday low prices and disciplined product cost management.

About the same point and have a payback in two to three years.

Our new store economics, unlock sustainable growth and solidify our lead in the channel strong new store economics are a hallmark of tractor supply.

Kirk: While our promotional activity was modestly greater than the prior year, we were able to strategically provide great value for our customers, while maintaining our gross margin.

As I reflect back on 2023, I continue to be encouraged by the resiliency of our business and the structural nature of it.

Kirk: These favorable drivers were partially offset by an unfavorable product mix shift due to a higher mix of Q and a lower mix of high margin seasonal categories.

Now, let's move to our outlook for 2024.

<unk> shared how we are thinking about the macro backdrop for the coming year.

Kirk: As a percent of net sales SG&A expenses, including depreciation and amortization increased 113 basis points year over year to 26, 2%.

We are anticipating a gradual slowdown with the lingering question of do we have a soft landing or if the risk of a harder recession remain.

Kirk: This increase was primarily attributable to our planned growth investments, which included higher depreciation amortization and the on boarding of our new DC.

With this in mind, we have taken a cautious approach to our 2024 financial outlook and our forecast at our comparable sales performance below our long term algorithm.

Kirk: Along with some lost fixed cost leverage due to the decline in comparable store sales. Additionally.

Navigating economic cycles is in our DNA, we have successfully managed through diverse market conditions, including periods of inflation to disinflation and even deflation our deep understanding of these dynamics allows us to proactively adapt to market conditions.

Kirk: Additionally, higher medical claims also contributed to the increase in SG&A, although to a lesser extent than last quarter.

Kirk: SG&A deleverage was partially offset by a decrease in incentive compensation and the benefits of the sale leaseback program initiated last quarter. In Q4, we sold five tractor supply stores, which contributed a 40 basis point benefit to SG&A.

We expect average unit retails to be neutral to a modest headwind for the near term as we anticipate stickiness to input costs, such as labor wage rates and other items to mitigate any further reversion and commodity pricing.

Kirk: Operating margin improved 16 basis points for the quarter to nine 1%.

Excluding the cycling of the 50 <unk> week diluted EPS of $2 28 was essentially flat with the prior year.

For fiscal 2024, we are forecasting net sales of $14 7 million to $15 1 billion.

Comparable store sales are anticipated to be in the range of down a modest 1% to an increase of one 5%.

Kirk: Our new store pipeline continues to be strong our new store sales and profitability numbers continue to outperform historical averages.

We are cautiously optimistic that big ticket trends will revert to positive for the full year as we are cycling 18 months of declines.

Kirk: Given the addition of the <unk> stores to our non comp sales numbers, the new store productivity metric for the organic new tractor supply stores is cloudy and our external reporting.

We expect gross margin expansion of about 40 to 60 basis points from continued supply chain efficiencies benefits from effective cost management and a moderation of the mix impact of Q.

Kirk: By our calculations PSC new store productivity in 2023 was about 67% of our mature store average average sales in year, one of our new store has increased more than 40% compared to 2019 in line with the performance of the chain our stores continue to be profitable in year, one cash flow positive at <unk>.

We anticipate the gross margin expansion to be offset by SG&A deleverage due to a couple of primary factors.

First depreciation and amortization is anticipated to increase in the mid teens.

Kirk: About the same point and have a payback in two to three years.

While this is an improvement from recent underlying growth rates as our investments in our strategic growth initiatives moderate we will deleverage as DNA grows faster than sales.

Kirk: Our new store economics, unlock sustainable growth and solidify our lead in the channel strong new store economics are a hallmark of tractor supply.

Kirk: As I reflect back on 2023, I continue to be encouraged by the resiliency of our business and the structural nature of it.

Second we plan to open our 10th distribution center in the second quarter as a reminder, the operating costs for the new DC are reflected in SG&A, while the supply chain benefits are reflected in gross margin or.

Now, let's move to our outlook for 2024.

Kirk: <unk> shared how we are thinking about the macro backdrop for the coming year.

Our DC network is expected to pressure SG&A by approximately 10 to 15 basis points the.

Kirk: We are anticipating a gradual slowdown with the lingering question of do we have a soft landing or if the risk of a harder recession remain.

The benefit in gross margin will not completely offset this pressure since it takes time for the new facility to fully ramp to maturity and realize the supply chain benefits.

Kirk: With this in mind, we have taken a cautious approach to our 2024 financial outlook and our forecast that our comparable sales performance below our long term algorithm.

As a result, we expect modest pressure on our operating margin from the opening of this new DC.

These two primary factors are partially offset by the lapping of some higher than normal medical benefits in 2023, we do not expect those to reoccur due to our proactive changes to our benefit programs.

Kirk: Navigating economic cycles is in our DNA, we have successfully managed through diverse market conditions, including periods of inflation to disinflation and even deflation our deep understanding of these dynamics allows us to proactively adapt to the market conditions.

In 2024, we will continue our planned strategic sale leaseback program to sell some of our existing owned stores. We anticipate these sales will occur in the second half of the year on a similar cadence to 2023 and with a similar EPS contribution.

Kirk: We expect average unit retails to be neutral to a modest headwind for the near term as we anticipate stickiness to input costs, such as labor wage rates and other items to mitigate any further reversion and commodity pricing.

We continue to forecast these strategic sale lease backs to be ongoing for the next seven to 10 years.

Kirk: For fiscal 2024, we are forecasting net sales of 14, 7% to $15 1 billion.

For the year, we forecast an operating margin of $9 seven to 10, 1%.

We are forecasting interest expense of approximately $50 million to $55 million, we plan to maintain a healthy leverage ratio of approximately two times and.

Kirk: Comparable store sales are anticipated to be in the range of down a modest 1% to an increase of one 5%.

Kirk: We are cautiously optimistic that big ticket trends will revert to positive for the full year as we are cycling 18 months of declines.

And we expect our effective tax rate to be in the range of $22 7, million% to 23.0%.

Diluted EPS is forecast in a range of $9 85.

Kirk: We expect gross margin expansion of about 40 to 60 basis points from continued supply chain efficiencies benefits from effective cost management and a moderation of the mix impact of Q.

To $10 50.

Net capital expenditures are forecast to be $625 million to $700 million.

Or about 4% to four 5% of sales.

Kirk: We anticipate the gross margin expansion to be offset by SG&A deleverage due to a couple of primary factors.

This net amount reflects the anticipated proceeds from the sale of existing and newly developed tractor supply stores.

Gross capital expenditures are forecast to be in the range of $850 to $925 million, our capital plans reflect a ramp in our new store openings to approximately 80 tractor supply stores, we anticipate opening 10 to 15 person by trucks less stores in 2024.

Kirk: First depreciation and amortization is anticipated to increase in the mid teens.

Kirk: While this is an improvement from recent underlying growth rates as our investments in our strategic growth initiatives moderate we will deleverage as DNA grows faster than sales.

Kirk: Second we plan to open our 10th distribution center in the second quarter as a reminder, the operating cost for the new DC are reflected in SG&A, while the supply chain benefits are reflected in gross margin.

Our new store pipeline continues to be solid and we expect store opening cadence to be in line with 2023.

We remain committed to returning cash to shareholders through the combination of a growing dividend and share repurchases for 2024, we anticipate share repurchases in a range of $575 million to $625 million, which is estimated to have a benefit of a net reduction in weighted average shares outstanding of approximately 2%.

Our DC network is expected to pressure SG&A by approximately 10% to 15 basis points the.

Kirk: The benefit in gross margin will not completely offset this pressure since it takes time for the new facility are fully ramp to maturity and realize the supply chain benefits.

Now I'd like to walk through a few items to consider for the calendar realization of our expectations.

Kirk: As a result, we expect modest pressure on our operating margin from the opening of this new DC.

As always we believe the best way to look at our business is in the halves and not quarters due to the nature of our business.

Kirk: These two primary factors are partially offset by the lapping of some higher than normal medical benefits in 2023, we do not expect those to reoccur due to our proactive changes to our benefit programs.

We expect comp sales for each of the quarters to be in a relatively tight range consistent with our overall 2024 guidance. We are planning for positive comp transactions for the year.

Kirk: In 2024, we will continue our planned strategic sale leaseback program to sell some of our existing owned stores. We anticipate these sales will occur in the second half of the year on a similar cadence to 2023 and with a similar EPS contribution.

As to earnings we expect our EPS growth to be slightly more favorable in the first half as opposed to the second half.

There are a few factors that will impact operating margins in certain quarters, we anticipate the tailwind of lower transportation cost to benefit our results through the second quarter and begin to flatten year over year starting in Q3.

Kirk: We continue to forecast the strategic sale lease backs to be ongoing for the next seven to 10 years.

Kirk: For the year, we forecast an operating margin of nine 7% to 10, 1%.

As a result gross margin expansion for the first half of the year is anticipated to be near the high end of our annual guidance range. While the second half may be near the low end of the range in.

Kirk: We are forecasting interest expense of approximately $50 million to $55 million, we plan to maintain a healthy leverage ratio of approximately two times and.

In regards to SG&A, the second and third quarters will be pressured from the startup costs for the new distribution center, while the supply chain benefits will not begin to be realized in gross margin until late in the third quarter.

Kirk: And we expect our effective tax rate to be in the range of 22, 7% to 23.0%.

Kirk: Diluted EPS is forecast in a range of $9 85.

Please keep in mind, we will be lapping an eight <unk> per share benefit from the depreciation change in the third quarter of last year.

Kirk: To $10 50.

Net capital expenditures are forecast to be $625 million to $700 million.

Considering each of these factors the third quarter will be our toughest earnings comparison, as we anticipate a decline in operating margin and EPS due to the combination of these factors.

Kirk: Or about four to four 5% of sales.

This net amount reflects the anticipated proceeds for the sale of existing and newly developed tractor supply stores.

Gross capital expenditures are forecast to be in the range of $850 million to $925 million.

As a reminder, the <unk> stores will be added to the comp store calculation beginning in the second quarter with a tiered approach as we cycle the timing of moving these stores to our point of sale systems and rebranding of stores to tractor supply.

Kirk: Our capital plans reflect a ramp in our new store openings to approximately 80 tractor supply stores, we anticipate opening 10 to 15 person by trucks less stores in 2024.

Specific to the first quarter, we had a challenging first quarter last year as it was abnormally warm in January and February and relatively cold March we were also benefiting from retail price inflation in the high single digits.

Kirk: Our new store pipeline continues to be solid and we expect store opening cadence to be in line with 2023.

Kirk: We remain committed to returning cash to shareholders through the combination of a growing dividend and share repurchases for 2024, we anticipate share repurchases in a range of $575 million to $625 million, which is estimated to have a benefit of a net reduction in weighted average shares outstanding of approximately 2%.

Given the recent Arctic cold temperatures across most of the regions. We are seeing good momentum as we start the first quarter. Overall, we are anticipating positive comp sales for the first quarter to.

To wrap up we have clearly defined strategic priorities and are investing to capture the long term opportunities in our market.

Kirk: Now I'd like to walk through a few items to consider for the calendar realization of our expectations.

We are committed to driving productivity and making appropriate tradeoffs to fuel our investments, while we protect our operating profit margins and earnings.

Kirk: As always we believe the best way to look at our business is in the halves and not quarters due to the nature of our business.

Kirk: We expect comp sales for each of the quarters to be in a relatively tight range consistent with our overall 2024 guidance. We are planning for positive comp transactions for the year.

We intend to maintain this focused approach through 2024, we are committed to continuously striving for stronger results.

With that I will turn the call back over to Hal.

Kirk: As to earnings we expect our EPS growth to be slightly more favorable in the first half as opposed to the second half.

Thank you Kirk now I'd like to update you on our progress on our life out here strategy and share more about the exciting plans we have in place for the spring season.

Kirk: There are a few factors that will impact operating margins in certain quarters, we anticipate the tailwind of lower transportation cost to benefit our results through the second quarter and begin to flatten year over year, starting in Q3 as a result gross margin expansion for the first half of the year is anticipated to be near the high end of our annual guidance.

Tractor supply continues to build on our competitive advantages and arguably the company is as strong as it's ever been this is backed up by several proof points, we continued to gain market share across our major product categories, and our customer metrics remain incredibly healthy with strong spending and retention with our best customers.

Kirk: Range, while the second half may be near the low end of the range in.

Our strategic priorities are clearly resonating with our customers, we continue to see strengthen our brand equity metrics.

Kirk: In regards to SG&A, the second and third quarters will be pressured from the startup costs for the new distribution center, while the supply chain benefits will not begin to be realized in gross margin until late in the third quarter.

To grow our brand consideration and our unaided awareness.

These strong customer trends are a tribute to the team. The team is executing at a high level and is extremely engaged in 2023, our turnover improved at every level across the company as we're committed to being an employer of choice in Rural America.

Kirk: Please keep in mind, we will be lapping an eight <unk> per share benefit from the depreciation change in the third quarter of last year.

Kirk: Considering each of these factors the third quarter will be our toughest earnings comparison, as we anticipate a decline in operating margin and EPS due to the combination of these factors.

With customer satisfaction scores at an all time high the team is passionate about their work and we're energized to capitalize on our growth investments to provide our customers with legendary service.

Kirk: As a reminder, the <unk> stores will be added to the comp store calculation beginning in the second quarter with a tiered approach as we cycle the timing of moving these stores to our point of sale systems and rebranding of stores to tractor supply.

Our strong culture has always been a part of our secret sauce. The team is dialed in and determined to build on our long track record of success.

Kirk: Specific to the first quarter, we had a challenging first quarter last year as it was abnormally warm in January and February and relatively cold March we were also benefiting from retail price inflation in the high single digits.

Our life out in your strategy is on point, our strategic initiatives and project Fusion Garden centers Neighbor's club and digital are working and they are driving results in.

Kirk: Given the recent Arctic cold temperatures across most of the regions. We are seeing good momentum as we start the first quarter. Overall, we are anticipating positive comp sales for the first quarter.

In 2024, we anticipate that our project fusion lay out we'll be in at about 50% of our store base by year end.

This layout is clearly driving improved comp sales for us as we're leveraging category insight was determined space allocation and drive productivity.

Kirk: To wrap up we have clearly defined strategic priorities and are investing to capture the long term opportunities in our market.

For instance, in the companion animal categories, we're seeing that the fusion layouts are contributing to strong growth.

Kirk: We are committed to driving productivity and making appropriate tradeoffs to fuel our investments while we protect our operating profit margins and earnings we intend to maintain this focused approach through 2024, we are committed to continuously striving for stronger results.

We're able to have an expanded SKU offering and larger stack out. This layout is also seeing the highest quartile of customer satisfaction scores and attracting new customers at a faster rate.

Kirk: With that I will turn the call back over to Hal.

2024 will be the year of the Garden Center for US, we will leverage the change of seasons across the store front as the year shifts. This spring we will continue to build out about 150 garden centers across the new stores and sidelight transformation this year.

Hal: Thank you Kirk now I'd like to update you on our progress on our life out here strategy and share more about the exciting plans we have in place for the spring season.

Hal: Tractor supply continues to build on our competitive advantages and arguably the company is as strong as it's ever been this is backed up by several proof points, we continue to gain market share across our major product categories and our customer metrics remained incredibly healthy with strong spending and retention with our best customers.

As we look to leverage our learnings from our garden centers, we will implement a new life.

Prototypes in many of these locations. This new prototype requires about half of the capital investment of a traditional garden center. There we've been building over the last few years and allows us to maximize the value creation of a sideline in lower volume stores on in markets, where the season is less extensive and thus, allowing us to achieve the <unk>.

Hal: Our strategic priorities are clearly resonating with our customers, we continue to see strengthen our brand equity metrics.

ROI that we target <unk>.

Hal: We need to grow our brand consideration and our unaided awareness.

Additionally, the new prototype of many way makes it easier for our stores to operate from a staffing standpoint, and the maintenance costs are lower.

Hal: These strong customer trends are a tribute to the team. The team is executing at a high level and is extremely engaged in 2023, our turnover improved at every level across the company as we're committed to being an employer of choice in Rural America.

With more variety than ever and a grower network to support our garden centers. We're excited about the benefit of these initiatives in 2024, and the continued opportunity to serve our customers.

Now turning to our Neighbor's club, we have significant plans in place to capitalize on this strategic asset.

Hal: With customer satisfaction scores at an all time high the team is passionate about their work and we're energized to capitalize on our growth investments to provide our customers with legendary service.

Our loyalty program has the scale and scope to continue to drive meaningful results.

Hal: Our strong culture has always been a part of our secret sauce. The team is dialed in and determined to build on our long track record of success.

As we entered the third year since the move to a points based rewards program. Our members can expect more personalised offers new tiers and more meaningful rewards. These compelling enhancements are designed to drive transactions and engagement all while migrating customers upward.

Hal: Our life Abner strategy is on point, our strategic initiatives and project fusion Garden centers Neighbor's club and digital are working and they are driving results.

Moving on to our digital business, we continued to capitalize on opportunities to accelerate our growth between our website and our mobile app, we have more visitors online now than we do on our stores. These.

Hal: In 2024, we anticipate that our project fusion lay out we'll be in at about 50% of our store base by year end.

Hal: This layout is clearly driving improved comp sales for as we're leveraging category insight was determined space allocation and drive productivity for.

These digital assets are essentially the front door to tractor supply.

We will be focused this year on improving our digital customer experience and capability as we look to accelerate conversion rate.

Hal: For instance, in the companion animal categories, we're seeing that the fusion layouts are contributing to strong growth. We are able to have an expanded SKU offering and larger stock out. This layout is also seeing the highest quartile of customer satisfaction scores and attracting new customers at a faster rate.

Just as the trip to attract supply store is highly differentiated we'll be doubling down to ensure the shopping experience on our website and our mobile app has that same level of differentiation as we shop across our destination categories.

Hal: 2024 will be the year that garden center for US, we will leverage the change of seasons across the store front as the year shifts. This spring we will continue to build out about 150 garden centers across both new stores and sidelight transformation this year.

We are looking to mirror, our in store legendary service and the digital experience through personalized and conversational commerce.

We'll leverage AI technologies to improve search redesign our checkout introduced a new refreshed homepage focusing on personalization that leverages, our robust neighbor's club data.

Hal: As we look to leverage our learnings from our garden centers, we will implement a new live goods center prototypes for many of these locations. This new prototype requires about half of the capital investment of a traditional garden center. There we've been building over the last few years and allows us to maximize the value creation of a sideline in lower volume stores on end markets.

As our customer base continues to skew younger these improvements will be key to unlocking future growth.

Our strategic priorities are resonating with our customers and driving strong return.

As the calendar shifts now and we start to turn to spring, it's an exciting time to be in our stores and online.

Hal: Where the season is less extensive and.

Hal: Allowing us to achieve the rois that we target.

In 2024, our merchant teams will be as diligent as ever to be our customers' purchasing agent with a sharp focus on value and innovation, we're committed to everyday low price and we simply will not be on value.

Hal: Additionally, the new prototype of many way it makes it easier for our stores to operate from a staffing standpoint, and the maintenance costs are lower.

Hal: With more variety than ever and our grow our network to support our garden centers. We're excited about our benefit of these initiatives in 2024, and the continued opportunity to serve our customers.

Our customers can trust and tractor supply to build a dependable supplier for their lifestyle, our merchandising strategies, our focus to drive profitable sales and market share.

Hal: Now turning to our Neighbor's club, we have significant plans in place to capitalize on this strategic asset.

Across product categories, we will have more innovation. This year that I believe we will see collectively over the last three years.

Hal: Our loyalty program has the scale and scope to continue to drive meaningful results.

Hal: As we entered the third year since the move to a points based rewards program. Our members can expect more personalized offers new tiers and more meaningful reward. These compelling enhancements are designed to drive transactions and engagement all while migrating customers upward.

We have a number of new and exclusive product launches, including the introduction of the Toro, having zero turn mower the expansion of Yeti and solus does to more stores.

And attack of Martha Stewart and Eddie Bauer.

Our limited rollout of preferred cattle fencing.

Hal: Moving on to our digital business, we continued to capitalize on opportunities to accelerate our growth.

And a limited rollout of Weber Grill.

Relaunch, a mutt nation for Miranda Lambert and the addition of Tri Amped equine feed and that's just to name a few of the new innovations that we're bringing to our customers and there'll be able to find in store and online.

Hal: Queen our website and our mobile App, we have more visitors online now than we do on our stores.

Hal: These digital assets are essentially the front door to tractor supply we will be focused this year on improving our digital customer experience and capability as we look to accelerate conversion rate.

Here are a few more highlights that you can see in our stores as you get out there.

<unk> long been a destination for zero turn mowers with the Cub Cadet and Bad Boy brand.

Hal: Just as the trip to attract supply store is highly differentiated we'll be doubling down to ensure the shopping experience on our website and our mobile app has that same level of differentiation as we shop across our destination categories.

<unk> had the condition will continue to reinforce that positioning outside of Torres dealer network tourer Haddock is exclusive to tractor supply with a sharp price point. This is unique and differentiated platform in just in time for the spring season.

Hal: We are looking to mirror, our in store legendary service and the digital experience through personalized and conversational commerce we.

Big ticket, our entire trail assortment over $1000 price point is unique and exclusive to tractor supply.

Hal: We'll leverage AI technologies to improve search redesign our checkout introduced a new refreshed homepage focusing on personalization that leverages, our robust neighbor's club data.

Cross specifications and features our trailer offerings are designed to support our customers' lifestyle.

Across our categories, we have a long history of test and learn and we're excited about the expansion of several recent program. After a very successful rollout to our project fusion stores Yeti will be expanded to nearly half of the chain by Q2 and rollout rolled out to the balance of the chain by year end.

Hal: As our customer base continues to skew younger these improvements will be key to unlocking future growth.

Hal: Our strategic priorities are resonating with our customers and driving strong return.

Hal: As the calendar shifts now and we start to turn to spring, it's an exciting time to be in our stores and online.

Another Great example, as solar stove are high quality outdoor wood burning fire pit that is a perfect fit for the outdoor enthusiasts and our customers.

Hal: In 2024, our merchant teams will be as diligent as ever to be our customers' purchasing agent with a sharp focus on value and innovation, we're committed to everyday low price and we simply will not be beyond value.

Given our customers' response to this product will be expanding the top selling skus of bolus to more than 500 stores with the complete offering available online.

Hal: Our customers can trust and tractor supply, we build a dependable supplier for their lifestyle, our merchandising strategies, our focus to drive profitable sales and market share.

Weber grills is another leading brand that we're excited to pilot in 2024 after growing significantly our grilles business over the last three years.

The introduction of Webber positions us to expand our grille lineup and continue to grow our market share in this rapidly growing category wherever it has long been one of America's leading barbecue grill brand and their products are highly complementary to our existing offering a pit boss, even ambers and Blackstone griddle.

Hal: Across product categories, we will have more innovation. This year that I believe we will see collectively over the last three years.

Hal: We have a number of new and exclusive product launches, including the introduction of the Toro, having zero turn mower, the expansion of yeti and solar stoves to more stores.

We're also excited about the newness is being introduced in companion animal in the first quarter first up is the relaunch of our Mutt nation partnership with Miranda Lambert <unk>.

Hal: And attack of Martha Stewart and Eddie Bauer.

Hal: The limited rollout of preferred cattle fencing.

Hal: And our limited rollout of Weber Grill.

<unk> is the pet wellness destination out here and were introducing market, leading new brands like native Pat and expanding our core health exclusive brand supplement assortment and our continued pursuit of taking market share, we're introducing new national brands also across cat food.

Hal: Relaunch, a mutt nation for Miranda Lambert and the addition of Tri Amped equine feed and that's just to name a few of the new innovations that we're bringing to our customers and there'll be able to find in store and online.

<unk> more highlight that you can see in our stores as you get out there.

We have new brands like clients <unk> D and a continued focus on organic feeds across our large animal and poultry categories.

Hal: <unk> long been a destination for zero turn mowers with the Cub Cadet and Bad Boy brand.

And we're also expanding our dear wildlife steps to support our customers' hobby of cultivating feeding and watching their dear.

Hal: <unk> addition, we will continue to reinforce that positioning outside of Toros dealer network tourer Haddock is exclusive to tractor supply with a sharp price point. This is unique and differentiated platform in just in time for the spring season.

We will continue to leverage our strong portfolio of exclusive brands to grow market share and offer great value.

For instance, we are launching groundwork back garden in potting soil at compelling price points to the leading national brands and.

Hal: Big ticket our entire trail assortment over the $1000 price point is unique and exclusive to tractor supply across specifications and features our trailer offerings are designed to support our customers' lifestyle.

And we will be introducing Blue mountain Tech with performance fabrications to appeal to our millennial customer. These are just two examples of the strong pipeline, we have for newness in our exclusive brands, which represent nearly 30% of our sales.

Hal: Across our categories, we have a long history of test and learn and we're excited about the expansion of several recent program. After a very successful rollout to our project fusion stores Yeti will be expanded to nearly half of the chain by Q2 and rollout rolled out to the balance of the chain by year end.

And finally, it wouldn't be spring at tractor supply without the launch of our annual Chick days. The arrival of chicks at our stores is a sure sign of spring and create strong retail theater in our stores.

Our Chick days event is shaping up to be the largest ever for poultry.

Hal: Another Great example of solar stove are high quality outdoor with burning fire pit that is a perfect fit for the outdoor enthusiast and our customers.

Poultry now rivals livestock in equine in size of our business.

Recent trends have supported growth from existing customers, coupled with robust growth from new customers in the category and this is driving both trips and ticket to our stores.

Hal: Given our customers' response to this product will be expanding the top selling skus of bolus.

Hal: For more than 500 stores with a complete offering available online.

One exciting aspect of the new customers of the upholstery category is that they are gravitating to our new unique offering of premium breed and organic feed products for their chip wait.

Hal: Weber grills is another leading brand that we're excited to pilot in 2024 after growing significantly our grilles business over the last three years.

We're introducing impeccable new exclusive branded ship date with a poultry starter kit poultry retreats and even ship toy.

Hal: Introduction of Webber positions us to expand our grille lineup and continue to grow our market share in this rapidly growing category wherever has long been one of America's leading barbecue grill brand and their products are highly complementary to our existing offering a pit boss, even ambers and Blackstone griddle.

<unk> is a great gateway for our new customers to explore tractor supply and we use this as a resource for all things related to homesteading beyond poultry to expand lending categories like gardening I hope you get a chance to experience the event in our stores.

Hal: We're also excited about the newness is being introduced in companion animal in the first quarter first up is the relaunch of our Mutt nation partnership with Miranda Lambert.

To wrap up our customers continue to trust us for everything they need to care for their pets and animals tend to their homes farm and land enjoy the great outdoors and generally just the live life out here that purpose.

Hal: <unk> is the pet wellness destination out here and were introducing market, leading new brands like native Pat and expanding our core health exclusive brands supplement assortment and our continued pursuit of taking market share, we're introducing new national brands also across cat food.

Even those who live life out here drives, meaning what we do each day.

Our future remains bright as it ever has been.

Hal: We have new brands like <unk>, B and a continued focus on organic needs across our large animal and poultry category.

Thank you to our team members for your dedication to tractor supply and passion for serving our customers.

And to our customers for trusting us as you go to supplier for life out here.

Hal: And we're also expanding our dealer wildlife steps to support our customers' hobby of cultivating feeding and watching their gear.

And to our 2400 communities across tractor supply person for embracing this as part of the fabric of the communities we call home.

Hal: We will continue to leverage our strong portfolio of exclusive brands to grow market share and offer great value for instance, we're launching groundwork bag garden in potting soil at compelling price points with a leading national brands and.

Overtime and over various cycles, a standby the best three words to describe tractor supply our consistent reliable and sustainable these attributes allow us to be an earnings growth compound or on both topline and bottomline.

Hal: And we will be introducing blue mountain tack with performance fabrications to appeal to our millennial customer. These are just two examples of the strong pipeline, we have for newness in our exclusive brands, which represent nearly 30% of our sales.

Here's to the next 85 years of serving life out here.

And with that operator, we would now like to open the line for questions.

Hal: And finally, it wouldn't be spring at tractor supply without the launch of our annual Chick days. The arrival of chicks at our stores is a sure sign of spring and create strong retail theater in our stores.

We will now begin the Q&A session.

I would like to ask a question. Please press star one on your telephone keypad.

And for any reason you would like to remove that question or your question has been answered press star two.

Hal: Our Chick days event is shaping up to be the largest ever for poultry.

Hal: Poultry now rivals livestock in equine in size of our business.

If you are using a speakerphone please pick up your handset before asking your questions.

Hal: Recent trends have supported growth from existing customers, coupled with robust growth from new customers in the category and this is driving both trips and ticket to our stores.

And as an additional reminder, we do ask that all participants limit themselves to one question and return to the queue for additional questions.

Hal: One exciting aspect of the new customers of the upholstery category is that they are gravitating to our new unique offering of premium breed on organic feed products for their chip wafer.

Our first question comes from the line of Zack <unk> with Wells Fargo. Your line is now open.

Hal: Greater leasing impossible, a new exclusive branded ship date with a poultry starter kit poultry treats uneven ship toy.

Hey, good morning, starting with Q4 it sounds like October November trends were a touch better than that down 4% comp, but December stepped down in January step back up so just considering all the variability over the past couple of months can you help us understand just the.

Hal: <unk> is a great gateway for our new customers to explore tractor supply and we use this as a resource for all things related to homesteading beyond poultry to expand lending categories like gardening I hope you get a chance to experience the event in our stores.

Underlying run rate for the business, where you think it is today and what you think the path is back to the long term growth Algo and then specifically how are you thinking about the contribution of the internal drivers like lawn and garden and Neighbor's club in 'twenty four.

Hal: To wrap up our customers continue to trust us for everything they need to care for their pets and animals tend to their homes farm and land enjoy the great outdoors and generally just the live life out here that purpose.

Hey, Zach this is Kurt good morning.

Hal: Having those who live life out here drives meaning in what we do each day.

In regards to the comp sales performance I'll point back to some of the things I mentioned on our prepared remarks for the fourth quarter.

Hal: Our future remains bright as it ever has been.

Hal: Thank you to our team members for your dedication attract supply and passion for serving our customers.

The best way to look at it is start with the backdrop that when we look at the seasonal performance the challenges of an extremely mild fourth quarter going up against.

Hal: And to our customers for trusting us as you go to supplier for life out here.

Hal: And to our 2400 communities across tractor supply pet them for embracing this as part of the fabric of the communities we call home.

Arctic storm of last year, Theres 400 basis points of pressure.

October and November were unseasonably warm as well. So you have got negative low single digits generally consistent when you normalize for the December storm across all of the months.

Hal: Overtime and over various cycles, a standby the best three words to describe tractor supply our consistent reliable and sustainable these attributes allow us to be an earnings growth compound or on both topline and bottomline.

And all of that principally in the weather related categories that I pointed out on the call. So.

Hal: Here's to the next 85 years of serving life out here.

Speaker Change: And with that operator, we would now like to open the line for questions.

As I mentioned, the fourth quarter ran consistently with the trend rates of the third quarter, our consumable or need space business continues to be running solid, especially the year round.

Speaker Change: We will now begin the Q&A session.

Speaker Change: I would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: And for any reason you would like to remove that question or your question has been answered press star two.

Non seasonal related categories, the strength in all of our feed and food.

The confidence we have comes from examples such as livestock feed equine feed poultry feed wild.

Speaker Change: If you are using a speakerphone please pick up your handset before asking your questions.

Speaker Change: And as an additional reminder, we do ask that all participants limit themselves to one question and return to the queue for additional questions.

Wildlife supplies cat and dog running unit positive comps in the fourth quarter some of that up against the last year pantry filling that happens in the last week of the year.

Speaker Change: Our first question comes from the line of Zach <unk> with Wells Fargo. Your line is now open.

Against that storm so.

You can see the traffic that we get from the consumables.

Zach: Hey, good morning, starting with Q4 it sounds like October November trends were a touch better than that down 4% comp, but December stepped down in January step back up so just considering all the variability over the past couple of months can you help us understand just the.

The.

The stability of the core of our business are running really strong. So we still have that and carry that confidence that our customers are shopping us.

Just as consistent as they were before we have growth in active customers Neighbor's club contributing more.

Zach: Underlying run rate for the business, where you think it is today and what you think the path is back to the long term growth Algo and then specifically how are you thinking about the contribution of the internal drivers like lawn and garden and Neighbor's Club 24.

All of those are the drivers of the consistency of the business.

Thanks for the time.

Thank you.

The next question comes from the line of Chris <unk> with Jpmorgan. Your line is now open.

Zach: Hey, Zach this is Kurt good morning.

Kurt: In regards to the comp sales performance I'll point back to some of the things I mentioned on our prepared remarks for the fourth quarter.

Thanks, Good morning.

And thank you for taking my question, So I guess a.

Kurt: The best way to look at it start with a backdrop that when we look at the seasonal performance the challenges of an extremely mild fourth quarter going up against.

Two parter. So first as you think about not putting weather into 24 as a potential benefit.

Can you talk through that is that because you look at it the headwind in 'twenty three is more of a lap or is it just you.

Kurt: Arctic storm of last year, Theres 400 basis points of pressure.

Kurt: October November were unseasonably warm as well so you've got negative low single digits generally consistent when you normalize for the December storm across all of the months.

Just trying to be prudent in your in your outlook.

A second follow a follow up as we get a lot of questions about the competitive encroachment from the big box guys. So could you talk about what youre seeing in terms of where those competitors have rolled out an expanded farm and ranch assortment. Thank you.

Kurt: And all of that principally in the weather related categories that I pointed out on the call. So.

Okay.

Kurt: As I mentioned, the fourth quarter ran consistently with the trend rates of the third quarter. Our consumable are needs based business continues to be running solid, especially the year round non.

Hey, Chris.

Thanks for joining the call this morning.

On weather I think as we reflect on last year.

Yes, we had a lot of discussion on whether constant like we're playing meteorologists and.

Kurt: Non seasonal related categories, the strength in all of our feed and food.

<unk>.

Just decided to be prudent as we look at this year not look at whether it's potential upside or down.

Kurt: The confidence we have comes from examples such as livestock feed equine feed poultry feed wild.

<unk> side as we called out there's a number of other factors that could also influence.

Influencer sales as the year progresses, whether that be the agriculture market oil housing, etc, and instead, we just chose to focus on for the purposes of our guidance and range of outcomes. This year really the factors that we think youre going to have the most influence on our R&R sales as we can see it right now which are our continued <unk>.

Kurt: Wildlife a supplies cat and dog running unit positive comps in the fourth quarter some of that up against the last year pantry filling that happens in the last week of the year against that storm. So.

Kurt: You can see the traffic that we get from the consumables.

Kurt: The <unk>.

Kurt: The ability of the core of our business are running really strong. So we still have that and carry that confidence that our customers are shopping us.

<unk> share gains.

Offsetting.

The shift still a consumer spending from goods to services as well as disinflation, which is dominantly of first half.

Kurt: As consistent as they were before we have growth in active customers Neighbor's club contributing more or all of those are the drivers of the consistency of the business.

Issue.

And then as it relates to competitive encouragement.

We really haven't seen anything different in competitive activity.

Speaker Change: Thanks for the time.

For the foreseeable past so it's been really.

Speaker Change: Thank you.

For the last since Covid.

Speaker Change: Next question comes from the line of Chris <unk> with Jpmorgan. Your line is now open.

The competitive activity has been pretty pretty stable pretty rational or share gains continue to.

Two we continue to take share in the market.

Chris: Thanks, Good morning.

Chris: And thank you for taking my question, So I guess the.

And I really haven't seen anything out of the ordinary and competitive from a competitive perspective, whether that be in our farm and ranch core farm <unk> ranch competitors or the multitude of other national retailers that we compete against as well.

Chris: A two parter. So first as you think about not putting weather into 24 as a potential benefit.

Chris: Can you talk through that is that because you look at it the headwind in 'twenty three is more of a lap or is it just you're just trying to be prudent in your in your outlook.

Thank you.

The next question comes from the line of Kate Mcshane with Goldman Sachs. Your line is now open.

Chris: A second follow a follow up as we get a lot of questions about the competitive encroachment from the big box guys. So could you talk about what youre seeing in terms of where those competitors have rolled out an expanded farm and ranch assortment. Thank you.

Hi, good morning, Thanks for taking a question.

<unk> centered around SG&A, we just wondered if you could talk a little bit about how you're thinking about wage growth in 2024, and how does incentive comp.

Chris: Yeah.

Speaker Change: Hey, Chris.

Chris: Thanks for joining the call this morning.

I'm into play in 'twenty four.

Speaker Change: Yes on whether I think as we reflect on last year.

Regarding incentive comp 23, given the flat comp for the care and how should we think about that.

Speaker Change: Yes, we had a lot of discussion on whether it's <unk> felt like we were playing meteorologists and.

Hey, Kate this is Curt I'll take those on wage rate growth, we are anticipating wage rate growth slightly above the historical averages pre pandemic it varies across different areas of the business, but I would center around a 3% to 4% wage.

Speaker Change: We just decided to be prudent as we look at this year not look at whether it's potential upside or down.

Speaker Change: Downside as we called out there's a number of other factors that can also <unk>.

Speaker Change: Influence our sales as the year progresses, whether that be in the agriculture market oil housing et cetera, and instead, we just chose to focus on for the purposes of our guidance in a range of outcomes. This year really the factors that we think are going to have the most influence on our R&R sales as we can see it right now which are our continued <unk>.

Great wage rate growth.

We continue to see strong <unk>.

Solid workforce unemployment continues to be low.

Our culture. Our teams continue to have all the success with hiring but it's appropriate to anticipate that you'd be at that level of wage great wage rate growth in regards to incentive compensation. We're incentivised at all levels of the organization in 2023, our performance from top and.

Speaker Change: <unk> share gains.

Speaker Change: Offsetting.

Speaker Change: The shift still a consumer spending from goods to services as well as disinflation, which is dominantly of first half.

Speaker Change: Issue.

Speaker Change: And then as it relates to competitive encouragement, yet I'd say, we really haven't seen anything different in competitive activity.

<unk> did underperform, our original expectations and so there was some modest <unk>.

Leverage in 2023, so if you look at 2020 for what's factored into our guidance into our SG&A is some normalization of incentive comp gives a modest 10 or 15 basis point deleverage, but thats all considered in the guidance that I gave.

Speaker Change: For the foreseeable past so it's been really.

Speaker Change: For the last since Covid.

Speaker Change: The competitive activity has been pretty pretty stable pretty rational our share gains continued to.

Speaker Change: Two we continue to take share in the market.

Okay.

Speaker Change: And I really haven't seen anything out of the ordinary and competitive from a competitive perspective, whether that be in our farm and ranch core farm <unk> ranch competitors or the multitude of other national retailers that we compete against as well.

Thanks.

Thank you. Our next question comes from the line of Jason Haas with Bank of America. Your line is now open.

Hey, good morning, and thanks for taking my question I'm curious if you could comment on your expectation for new store productivity in 2024 based on the math that we can do it looks like it's maybe going to be like around 60% or so I know, sometimes the math can be can be funded from our perspective. So can you just talk about what's expected there.

Speaker Change: Thank you.

Speaker Change: The next question comes from the line of Kate Mcshane with Goldman Sachs. Your line is now open.

Speaker Change: Yes.

Theres any any reason why the initial parts of it would be lower in 2024.

Hi, good morning, Thanks for taking our question or question centered around SG&A.

Yes, Jason this is Kurt.

Wondered if you could talk a little bit about how you're thinking about wage growth in 2024, and how does incentive comp.

I'll answer that question on my prepared remarks, I was very specific on that on what is really driving our new store productivity. So I want to point, everyone back to that we continue to see.

Kate Mcshane: I'm into play in 'twenty four.

Kate Mcshane: Regarding incentive comp at 23, given the flat comp for the year and how should we think about that.

Tractor supply consistent strong new store productivity 2023 ran at 67% New store productivity. The 80 stores that we plan for 2024 are expected to be coming out the gates very consistent in the same way and our new store maturation process of a four to five year <unk>.

Kate Mcshane: Hey, Kate this is Curt I'll take those on wage rate growth, we are anticipating wage rate growth slightly above the historical averages pre pandemic it varies across different areas of the business, but I would center around a 3% to 4% wage.

65% to 70% new store productivity is where we target and we expect 2024 with the strong pipeline that we've got we believe an excited just as we have in 2023 about what these new stores will produce.

Great Rage weight growth.

Speaker Change: We continue to see strong <unk>.

Speaker Change: Solid workforce unemployment continues to be low.

Curt: Our culture. Our teams continue to have all the success with hiring but it's appropriate to anticipate that you'd be at that level of wage great wage rate growth in regards to incentive compensation. We're incentivised at all levels of the organization in 2023, our performance from top and.

Thank you.

The next question comes from the line of Peter Benedict with Baird. Your line is now open.

Alright, guys good morning.

I guess.

For you.

Curt: <unk> did underperform, our original expectations and so there was some modest leverage in 2023. So if you look at 2024 was factored into our guidance into our SG&A is some normalization of incentive comp gives a modest 10 or 15 basis point deleverage.

As we think about the EBIT margin.

And how it toggles within your within your guidance range.

Roughly speaking about 15 basis points up or down per point of comp move it if we.

We see a scenario where your comps are either below the low end of your guide range or they come in above the range any sense for how the incrementals or Decrementals would look.

But thats all considered in the guidance that I gave.

Anything we should think about there is 15 basis points, a good benchmark or I'm.

Curt: Okay.

Curt: Thanks.

I'm, just curious kind of your thoughts on that thank you.

Curt: Thank you. Our next question comes from the line of Jason Haas with Bank of America. Your line is now open.

Yes, I will give you a couple of points Peter on that.

First we've considered the micro strategic drivers the macro favorable or unfavorable pressures for this year.

Jason Haas: Hey, good morning, and thanks for taking my question I'm curious if you could comment on your expectation for new store productivity in 2024 based on the math that we could do it looks like it's maybe going to be like around 60% or so I know, sometimes the math can be can be funded from our perspective. So can you just talk about what's expected there.

Given a guidance range, albeit slightly larger on the top and bottom line than we historically have that recognizes we're in a time of uncertainty and so we believe all of those scenarios any plausible reasonable scenarios have been factored into our guidance. So.

Jason Haas: There is any any reason why the initial product to be lower in 2024.

We don't see a likelihood outside of the downside of the guidance that we've given that said inside the guidance range, even outside of the guidance range I'd point that the EBIT margin movement within sales range is not linear.

Jason Haas: Yes, Jason this is Kurt.

Kurt: I'll answer that question on my prepared remarks, I was very specific on that on what is really driving our new store productivity. So I want to point, everyone back to that we continue to see.

Kurt: Tractor supply consistent strong new store productivity 2023 ran at 67% New store productivity. The 80 stores that we plan for 2024 are expected to be coming out the gates very consistent in the same way and our new store maturation process of a four to five year six.

And Theres a number of factors is certainly with the level of gross margin or what might be a factor that's driving the low end of the range. A deflationary environment. For example gives us upside on margin rates, so that would not point to any linear and even outside of the range. When you start considering incentive comp and other things, it's not linear as well.

Kurt: 65% to 70% new store productivity is where we target and we expect 2024 with the strong pipeline that we've got we believe an excited just as we have in 2023 about what these new stores will produce.

Thank you.

Our next question comes from the line of Scot Ciccarelli with Truest. Your line is now open.

Hi, guys Scot Ciccarelli.

Can you help quantify the comp lift that you are baking into your model from your garden centers this year.

Speaker Change: Thank you.

Speaker Change: The next question comes from the line of Peter Benedict with Baird. Your line is now open.

I think you mentioned you have about 40% penetration now and we know that the spring selling season was largely wiped out in 'twenty, three and probably even in 'twenty, two and maybe any other color on the performance of the garden centers as that program matures.

Peter S. Benedict: Alright, guys good morning.

Peter S. Benedict: I guess Kurt.

Peter S. Benedict: Sure.

Peter S. Benedict: As we think about the EBIT margin.

Peter S. Benedict: And how it toggles within your within your guidance range.

Yes, so why don't I start with that Scott on the comp and then I'll toss it to set a little bit on the performance of garden centers.

Kurt: Roughly speaking about 15 basis points up or down per point of comp move it if we.

Kurt: We see a scenario where your comps are either below the low end of your guide range or they come in above the range any sense for how the incrementals or Decrementals would look.

Some of the 2024 drivers et cetera.

Our expectation and how we've modeled in our long term targets is still the same as our expectations for 2024 as we continue to add garden centers, roughly 150 to 200 of those a year and you get from fusion and Garden Center mid single digit to high single digits.

Kurt: Anything we should think about there is 15 basis points, a good benchmark or just.

Speaker Change: Just curious kind of your thoughts on that thank you.

Speaker Change: Yes, I'll give you a couple of points Peter on that.

Speaker Change: First we've considered the micro strategic drivers the macro favorable or unfavorable pressures for this year, we've given a guidance range, albeit with a slightly larger on the top and bottom line than we historically have that recognizes we're in a time of uncertainty and so we believe all of those.

Combo lift as those mature in year, one and then a lower benefit in like year, two but still a benefit over the chain that roughly plays into our algorithm and we would anticipate for this year to play similar that the fusion Garden center initiatives is driving.

Speaker Change: <unk> any plausible reasonable scenarios have been factored into our guidance. So.

Give or take some roughly one point of comp in our in our guidance range.

And Neighbor's club is another initiative that driving consumers to spend up the tiers more transactions getting more of their share of wallet is another driver. So just kind of pointing out the two biggest strategic initiative drivers and then I'll toss it over to Seth maybe just talk a little bit about what's driving the garden centers getting started thanks. Thanks Scott.

Speaker Change: We don't see a likelihood outside of the downside of the guidance that we've given that said inside the guidance range and even outside of the guidance range I would point that the EBIT margin movement within sales range is not linear.

Speaker Change: And there is a number of factors is certainly with the level of gross margin or what might be a factor that's driving the low end of the range.

The question.

Scott first I'll just start with as we think about our Garden Center initiative, just the size of the addressable market there is over $20 billion.

Speaker Change: A deflationary environment for example gives us upside on margin rates, so that would not point to any linear and even outside of the range. When you start considering incentive comp and other things, it's not linear as well.

And as we know it's a place where our customers participated where they didn't necessarily look at us as their first and primary destination for those categories and we believe we have significant share opportunities as we look at the lawn and garden segment over the course last three years as Curtis mentioned.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Scot Ciccarelli with Truest. Your line is now open.

We have really been focused on driving scale to build out our grower base and then billed to the 450 plus garden centers, where we will be entering spring, which we really believe this is the year that the team is really going to be able to drive some sales as we go into spring with those 450, I mean, obviously, we're focused on winning those spring categories as well as building out.

Scot Ciccarelli: Hi, guys Scot Ciccarelli.

Scot Ciccarelli: Can you help quantify the comp lift that you are baking into your model from your garden centers this year.

Scot Ciccarelli: I think you mentioned you have about 40% penetration now and we know that the spring selling season was largely wiped out in 'twenty, three and probably even in 'twenty, two and maybe any other color on the performance of the garden centers as that program matures.

<unk>, both fall and winter seasonal related areas to make sure that we can leverage and maximize that footprint not just in the spring season, but also in the 12 months of the year. So.

Speaker Change: Sure why don't I start with that Scott on the comp and then I'll toss it to set a little bit on the performance of garden centers.

Very excited about the work that the team has been doing very excited about the size of the prize there and I think this is the year, which really all going to come together, we built scale and how those programs are going to be hitting stores.

Some of the 2024 drivers et cetera, our expectation and how we've modeled in our long term targets is still the same as our expectations for 2024 as we continue to add garden centers, roughly 150 to 200 of those a year and you get from fusion and garden.

Thank you.

Next question comes from the line of Chuck Grom with Gordon Haskett Research Advisors. Your line is now open.

Speaker Change: Center mid single digit to high single digit in a combo lift as those mature in year, one and then a lower benefit in like year, two but still a benefit over the chain that roughly plays into our algorithm and we would anticipate for this year to play similar that the fusion Garden center initiatives is driving.

Great. Thanks, very much guys.

You've completed the origin of the conversions. So I guess I'm curious your outlook on sales productivity and margins at these locations.

Yes.

During the how does that compare to the legacy tractor supply stores and when we look to 2024 and 25, how do we think about the sales maturation curve and the benefit to comps.

Speaker Change: Give or take some roughly one point of comp in our in our guidance range.

Those stores thanks.

Yes, Chuck this is Kurt the <unk> conversion went very well all stores converted as we mentioned to the tractor supply brand they the.

Speaker Change: And Neighbor's club is another initiative that driving consumers to spend up the tiers more transactions.

Speaker Change: Getting more of their share of wallet is another driver. So just kind of pointing out the two biggest strategic initiative drivers and then I'll toss it over to Seth maybe to talk a little bit about what's driving the garden centers that things Kurt. Thanks, Thanks, Scott for the question.

The first six to nine months since the acquisition was a.

Transition a lot of noise through that we now have them all branded tractor supply.

The team is engaged.

Seth: Scott first I'll just start with as we think about our Garden Center initiative, just the size of the addressable market there is over $20 billion.

Got the tractor supply products and services, our tractor supply feed and food brands and when we begin to cycle that in second quarter, where we converted all over we do anticipate to see much like a new store maturation, perhaps we'll learn if it's a similar type maturation curve, but we.

Seth: And as we know it is a place where our customers participated where they didn't necessarily look at us as their first and primary destination for those categories and we believe we have significant share opportunities as we look at the lawn and garden segment over the course last three years as Kurt mentioned.

Anticipated have baked into our guidance some new store maturation type comp benefit from those 81 stores as well and how it compares we anticipate these markets from a real estate study that there is upside to the historical performance in those stores to be able to run in line with.

Seth: We've really been focused on driving scale to build out our grower base and then billed to the 450 plus garden centers, where we will be entering spring, which we really believe this is the year that the team is really going to be able to drive some sales.

Seth: As we go into spring with those 450, I mean, obviously, we're focused on winning those spring categories as well as building out both fall and our winter seasonal related areas to make sure that we can leverage and maximize that footprint not just in the spring season, but also in the 12 months of the year. So.

Tractor supply averages, albeit we've said it's very much in line with like a Midwest tractor supply average, which is a bit below the overall tractor supply.

Average store level. So there's room to have these grow over time and we're excited about our ability to capture new customers bring them into tractor supply in the stores and so overall for 2024, even into 2025, we believe much like a new store there is a benefit from the maturation.

Seth: Very excited about the work that the team has been doing very excited about the size of the prize there and I think this is a year, which really all going to come together, we build scale and how those programs are going to be hitting stores.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of Chad.

Chad: Grom with Gordon Haskett Research Advisors. Your line is now open.

Thank you.

The next question comes from the line of Michael Lasser with UBS. Your line is now open.

Chuck Grom: Hey, Thanks, very much guys.

Good morning. Thank you so much for taking my question what is assumed for input cost relief in 2024, especially key.

Chuck Grom: Now that you've completed the origin of the conversions I guess I'm curious your outlook on sales productivity and margins at these locations.

Yes.

Chuck Grom: During the third how does it compare to the legacy tractor supply stores and when we look to 2024 and 25, how do we think about the sales maturation curve and the benefit to comps.

Key variables like transportation costs and commodity costs.

And then how does that inform your view of.

Chuck Grom: Those stores thanks.

The gross margin outlook for this year because it seems like the gross margin has been expanding significantly in part because of this relief and is there a risk that at some point tractor supply could invite more competition as its group's margin is about 150 basis points higher than it was in 2019.

Chuck Grom: Yeah. Chuck this is Kurt the <unk> conversion went very well all stores converted as we mentioned to the tractor supply brand. They the first six to nine months since the acquisition was a.

Kurt: <unk> transitioned a lot of noise through that we now have them all branded tractor supply.

Thank you so much.

Kurt: The team is engaged.

Hey, Michael Good morning.

Kurt: Got the tractor supply products and services, our tractor supply feed and food brands and when we begin to cycle that in second quarter, where we converted all over we do anticipate to see much like a new store maturation, perhaps we'll learn if it's a similar type maturation curve, but we <unk>.

<unk>.

Two things I'll hit on this first is.

The long term structural nature of our gross margin and then I'll speak to the assumptions implied in <unk> and <unk>.

2024 on the long term structural nature. There is two big shifts that I want to remind folks about.

That really have transferred.

Kurt: Anticipating have baked into our guidance some new store maturation type comp benefit from those 81 stores.

Right.

Out of gross margin into our expense out of gross margin and into SG&A. The first one of those is our field activity support team as we've mentioned, it's nearly a 500 person team.

Kurt: Well and how it compares we anticipate these markets from a real estate study that there is upside to the historical performance in those stores to be able to run in line with tractor supply averages, albeit we've said it's very much in line with like a Midwest tractor supply average, which is a bit.

That.

Where the expense falls in our SG&A, but the offsetting support provided by our vendors falls in gross margin.

Kurt: Below the overall tractor supply.

As we've talked about that several times in the past that's roughly in the neighborhood of 40 to 50 basis points of shift.

Kurt: Average store level. So there's room to have these grow over time and we're excited about our ability to capture new customers bring them into tractor supply in the stores and so overall for 2024, even into 2025, we believe much like a new store there is a benefit from the maturation.

Secondly, I would call out the continued transformation of our supply chain.

From 2018 to 2023, our stem miles have reduced by 20%.

Speaker Change: Thank you.

And that basically means a truck going from a DC to a store.

Speaker Change: The next question comes from the line of Michael Lasser with UBS. Your line is now open.

So the impact of that is a reduced freight cost on a like for like volume and rate basis versus say 2018, but theres, obviously operating cost embedded in our G&A.

Michael Lasser: Good morning. Thank you so much for taking my question, what if you assumed for input cost relief in 2024, especially key.

Michael Lasser: Key variables.

To run the two Dcs, we've opened since then and the 11 mixing centers that we've opened since then that is a benefit of roughly 60 to 70 basis points. The delta there. So when you add the.

The SaaS difference and you add the supply chain different.

Call it 75% of the gross margin difference that you quoted that 150 basis points is structural in nature and really a shift from.

SG&A to gross margin rate.

Now looking forward I would say the balance that you see there in gross margin rate I would attribute to our scale as we talked about were double almost double the size of the business that we were in 2018, when I quoted those stem miles and Thats, a courted us the ability to obviously manage and run the business more productive.

Whether that's in our freight and our negotiations with our with our freight providers or whether thats getting credit for our scale with our with our primary Cogs vendors.

As it relates to this year.

We do see continued benefit in the freight market, particularly in the first half of the year.

And we've talked about that.

In the back half of last year and also in the first and second quarter, some but we do see continued freight benefit.

Also as we've talked about in Q3 and Q4 and we also mentioned in our prepared remarks, we have been working very closely with our vendors on cost and have been rolling back cost, where we've seen commodity prices come down and other cost impacts moderate or redo.

We started that work as we mentioned in past earnings calls really in the summer time.

And the impact of those cost reductions are forecasted in our.

In our margin rate assumptions that Curt laid out in his prepared remarks.

One thing I'll mention is just on competition.

We are as price strongly in the market right now as we've been ever and we have a number of initiatives that we have in place to really make sure we stand for value in the marketplace on our key.

Kind of value, indicating skus out there and feel really good about our price position and don't see any sort of.

Approach meant from competition.

And just the same competitive intensity that we've seen over the last the last few years.

Thank you.

The next question comes from the line of Seth Basham with Wedbush. Your line is now open.

Good morning, My question's on the companion animal category and if you could comment on the performance of that category in the fourth quarter with comps up or down and then specific to cat and dog food you mentioned positive unit comps what about sales comps and how are you.

Seeing that consumer.

Upon to inflation broadly in that category.

Hey, Seth.

Relative to our companion animal business.

We remain very excited about the opportunity that we have in companion animal and.

And we've continued over the years to manage through multiple cycles.

And have a track record of this.

What I would tell you that relative to comp companion animal continues to be a comp driver for us.

And both units as well as top line.

When you look at trends in the industry.

Approximately year and for our customers approximately 75% of our customers.

Pat and about half of those that only owned more than one pad and so just structural to our customer base in general it's an area that that we are highly committed to.

We believe when you think about like our convenient locations. Our team members, our omnichannel capabilities are robust and differentiated assortments, we see those as all competitive advantages in the pet space.

And we continue to take market share there and we believe we have substantial market share opportunities ahead, both in 2024 and beyond with our existing customer base as well as the new customers that are out there. So companion animal in general for US It remains a healthy business and its something that.

That we were confident in taking share in the years to come.

Thank you.

The next question comes from the line of Peter Keith with Piper Sandler. Your line is now open.

Hey, Thanks, good morning, everyone.

Just to touch base on a deflation curtains that modest deflation and wondering if you could actually quantify that it would make it it's like down 1% as a comp headwind and then bigger picture. There are some concerns that deflation will take you guys back to the backup of like 2015 to 2017, where comps were sluggish for a longer period of time.

Any key differences from the economic backdrop today versus several years ago, when we last saw deflation.

Yes.

Peter I'll start with your first part of your question in regards to what our assumption is on a neutral deflation.

Roughly neutral deflation for the year overall is what we see give or take I mean give or take in a range is plus or minus 1% impact on retail aur's.

As Hal mentioned I think in one of the other questions earlier we've.

We've rolled back off the peaks of 2022 throughout 2023 on a lot of the commodity Deflations a vast majority of that occurred throughout 2023. During these cycles and these are fast turning skus in feed and food. So these these prices are already in our retail prices first half of the year may.

You have some exposure as a year over year lap on that.

As we had slight net deflation in Q4, there could be an assumed in our guidance.

Slight in the first half of the year, the second half of the year could be neutral or actually slightly positive. So we've considered each of those scenarios, but we really don't see a wide range in there and I demonstrated that in regards to like corn, where it's 35% below the highs of 2022.

It happened throughout 2023, there is 10 or 15 points of difference between the pre pandemic levels.

And so there's really not much movement left in a commodity and that commodity is a small percent ingredient in a small or a portion of our products.

Products that we offer.

In comparison to 2015, it's all about what's structural in 2015, we were coming off of years, where oil prices steel prices grains were coming off of highs and they completely flipped in this case the commodities hit the early peaks in 2021 and 2002.

Two and all the structural nature, which is a bigger portion such as wage rates operating costs et cetera are really began to get embedded in 2022 and 2023 and this structural so I think it's very different scenario theirs and.

Operator: 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 return to the queue for additional questions. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Tractor Supply Company. And as a reminder, this call is being recorded.

Start with your first part of your question in regards to what our assumption is on a neutral deflation.

There's limited risk that we see if anything I'd say.

A small level.

We believe adequately considered in our guidance.

Roughly neutral deflation for the year overall is that we see give or take I mean give or taken a range is plus or minus one <unk>.

Thank you.

The next question comes from the line of Joe Feldman with Telsey Advisory Group. Your line is now open.

Packed on retail <unk>.

As Hal mentioned I think in one of the other questions earlier.

Hey, guys. Thanks for taking the question I wanted to.

Operator: The host for today's call is Mary Wynn Pilkington, Senior Vice President of Investor and Public Relations for Tractor Supply Company. Now, first up is a year-end video. I would now like to pass the call to our host, Mrs. Mary Wynn Pilkington. Mary Wynn, please go ahead.

Follow up on something you said about big ticket.

And.

You talked about you think big ticket should be positive in 'twenty four.

Mary Winn Pilkington: Thank you, Alyssa. Good morning, everyone. Thanks for taking the time to join us today, and I hope you enjoyed watching the video of Tractor Supply's Year in Review. On the call today are Hal Lawton, our CEO, and Kurt Barton, our CFO. After our prepared remarks, we'll open the call up for your questions.

These prices are already in our retail prices first half of the year may have some exposure as a year over year lap on that as we had slight net deflation in Q4, there could be an assumed in our guidance.

Curious is that lapping the easier comparisons or is it more to do with your view that discretionary spending will pick up consumer behavior will kind of shift towards that discretion.

Mary Winn Pilkington: Seth Estep, our EVP and Chief Merchandising Officer, will join us for the question and answer session. Please note that we've made a supplemental slide presentation available on our website to accompany today's earnings release. Now, let me reference the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. This call may contain certain forward-looking statements that are subject to significant risk and uncertainties, including the future operating and financial performance of the company. In many cases, these risks and uncertainties are beyond our control.

Bigger ticket categories like whats driving I guess confidence in having said that thanks.

Joe This is Kurt I'll quickly just affirm what was assumed in our guidance and then let Seth give.

You the answer about why we're assuming that for 2024, but we do believe that big ticket should be in line with our overall guidance range for the year as you see that that's relatively flattish.

Mary Winn Pilkington: Although the company believes the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct, and actual results may differ materially from expectations. Important risk factors that could cause actual results to differ materially from those reflected in the forward-looking statements are included at the end of the press release issued today and in the company's filings with the Securities and Exchange Commission. The information contained in this call is accurate only as of the date discussed. Investors should not assume that the statements will remain operative at a later time. Tractor Supply undertakes no obligation to update any information discussed in this call. We have extended the call to allow for more time for Q&A. Given the number of people who want to participate, we respectfully ask you to limit yourself to one question.

That happened throughout 2023, there is 10 or 15 points of difference between the pre pandemic levels.

At the midpoint to slightly favorable and we're going up against two consecutive years of negative big ticket comps. So there. It has a lot to do about the compares in 2022, we were coming off of all of the stimulus spending in 2023.

And so there's really not much movement left in a commodity and that commodity is a small percent ingredient in a small or a portion of our products that we offer.

In comparison to 2015, it's all about what structural in 2015, we were coming off of years, where oil prices steel prices grains were coming off of highs.

There is a bit of a swing off of durable goods into services and some of the weather related pressures and in 2024, we're cycling that and we've got some we've got some great offer some new innovations that I know Seth can speak to.

And they completely flipped in this case the commodities hit the early peaks in 2021, and 2022 and all the structural nature, which is a bigger portion such as wage rates operating costs et cetera are really began to get embedded in 2022 and 2023 and this structural.

Thanks Kurt.

Yes, so as Hal mentioned in his prepared remarks, we've got a lot of newness and innovation coming particularly in our big ticket categories also as we lap some of the easier compares that kirt.

Kirt, just mentioned whether it be the Toro havoc thats going to be exclusive to us that Hal mentioned, a whole new grille lineup that we continue to expand basically an exclusive lineup of trailers to tractor supply we are definitely a destination.

So I think it's very different scenario there is.

And there's limited risk that we see if anything it's a a small level.

We believe adequately considered in our guidance.

As we look ahead, we believe can can can be a driver for us.

Okay.

Thank you.

The next question comes from the line of Joe Feldman with Telsey Advisory Group. Your line is now open.

And then finally I would just say is the team and as we mentioned in his prepared remarks, our private label credit card that we've been able to lean into to drive some some volume as it comes to Big ticket has also been strong broad based I would you say.

Okay.

Hey, guys. Thanks for taking the question wanted to.

To follow up on something you said about big ticket.

Retail in general is rebounding some big ticket we could.

And.

You talked about you think big ticket should be positive in 'twenty. Four I was just curious is that lapping.

We could definitely see that as we approach kind of November and December.

Hal Lawton: If you have additional questions, please feel free to get back in the queue. I appreciate your cooperation. We will be available after the call for follow-up. Thank you for your time and attention this morning. Thank you, Mary Wynn, and thank you to everyone for joining our call this morning. In 2023, Tractor Supply celebrated its milestone 85th anniversary. For over 85 years, Tractor Supply has been a growing company with a clear purpose: to help our customers live life out here. Since 1938, we've operated in all types of economic conditions, embraced innovation, and adapted to changing times. We've elevated the farm and ranch channel, bringing the sophistication of other retail categories to improve the shopping journey and ensure we have a scalable platform. Tractor Supply's needs-based, demand-driven business model has stood the test of time. No doubt this past year has proved challenging.

And we can we'll take one more question.

The easier comparisons or is it more to do with your view that discretionary spending will pick up consumer behavior will kind of shift towards that discretion.

Linda.

Certainly our final question comes from the line of Michael Baker with D. A Davidson your line is now open.

Bigger ticket categories like whats driving I guess that confidence.

Okay. Thanks can you guys hear me.

Having said that thanks.

Yes.

Joe This is Kurt I'll quickly just affirm what was assumed in our guidance and then let Seth give you the answer about why we're assuming that for 2024, but we do believe that big ticket should be in line with our overall guidance range for the year as you see that that's relatively flattish.

Hello.

Yeah. Good Okay, that's Michael half of hate to ask the last question on AR I hate to ask a question on a real short term thing, but I am curious about the first quarter. You said you expect all cores to be within your range are consistent with the range or something along those lines. So that would mean at the high end and you said positive for <unk>, but that would mean about 1%.

<unk>.

At the midpoint to slightly favorable and we're going up against two consecutive years of negative big ticket comps. So it has a lot to do about the compares in 2022, we were coming off of all of the stimulus spending in 2023.

Is that reflective of what youre seeing in January or how much does that consider I think the comparison gets a little bit harder of February although I don't think March was very good last year either so.

All of the weather, we're all seeing in the country I think a lot of people were assuming that January is a pretty strong month, I guess I'm just trying to gauge how strong relative to the implied guidance of maybe up 1%.

Hey, Michael <unk>. Thanks for the question I would just say it's.

Certainly we saw sudden.

Benefit from the weather in the first three weeks of January.

Seth: Thanks Kurt.

Seth: So as Hal mentioned in his prepared remarks, we've got a lot of newness and innovation coming particularly in our big ticket categories.

Really the second and third week, but January is our smallest month of the year smallest month of the quarter.

Seth: So as we lap some of the easier compares that Curtis mentioned, whether it be the <unk>.

And the thing Thats the month, it's really going to determine our comps for Q1 is going to be March we are as I mentioned in my prepared remarks, very excited about our spring setup. This year.

Seth: Havoc thats going to be exclusive to us that Hal mentioned, a whole new grille lineup that we continue to expand basically an exclusive lineup of trailers to tractor supply, where we are definitely a destination.

Seth: Safe as we look ahead, we believe can can can be a driver for us and then finally I would just say is the team and as we mentioned in his prepared remarks, our private label credit card that we've been able to lean into to drive.

We've got our most innovation in the last three or four years now that kind of the supply chain disruptions and all those things have been worked through our vendors have been able to really spend the last year getting their innovation pipeline restarted.

Our in stock rates in our spring sets are back to the expected, 95% plus that we.

Speaker Change: Some some volume as it comes to Big ticket has also been strong.

Speaker Change: <unk> would you say.

Speaker Change: Retail in general is rebounding some big ticket we could.

Historically, you have said at and we feel great about spring, we're optimistic about Q1 as Curt said, we're certainly expecting a positive comp.

Speaker Change: We can definitely see that as we approach kind of November and December.

Speaker Change: We'll take one more question.

We're off to a good start with the month of January behind Us, but really the most important thing that we're focused on is setting here is having a win in March.

Speaker Change: Okay.

Speaker Change: Certainly our final question comes from the line of Michael Baker with D. A Davidson your line is now open.

Hal Lawton: More topsy-turvy than we expected at the beginning of the year, with unfavorable weather, rising interest rates, and inflation impacting consumer spending habits. But we believe these headwinds are temporary. We will continue to invest for growth in 2023 and gain market share along the way, especially in companion animal and livestock feed. I think the opening video was a great recap of the highlights of the team's significant accomplishments across Tractor Supply this year and over the last few years. As I reflect on 2023, our Tractor Supply team has gone through so much together, working with commitment and resilience to serve our customers and our community, and our team has proven their ability to be unrelenting in executing against the macro and other headwinds while also building our future. I sincerely thank them for living our mission and values.

Alright, well I like to thank you that will conclude.

Michael Baker: Okay. Thanks can you guys hear me.

Our Q&A session and I'm around all day for anybody please reach out to follow up a little bit point in talking to you on our Q1 earnings call.

Michael Baker: Yes.

Michael Baker: Hello.

Speaker Change: Yeah. Good Okay, that's Michael half of hate to ask the last question on it.

Speaker Change: I hate to ask philosophy question auto real short term thing, but I am curious about the first quarter. You said you expect all quarters to be within your range are consistent with the range or something along those lines. So that would mean at the high end you said positive from <unk>, but that would mean about 1% is that reflective of what youre seeing in January or how much does that consider.

At the end of April Thank you.

This concludes today's conference call. Thank you for your participation you may now disconnect your lines.

Speaker Change: I think the comparison gets a little bit harder February although I don't think Mark was very good last year either so.

Speaker Change: With all the weather, we're all seeing in the country I think a lot of people were assuming that January is a pretty strong month, I guess I'm just trying to gauge how strong relative to the implied guidance of maybe up 1%.

Hal Lawton: In 2023, we face the well-documented macro headwinds that weigh on consumer goods spending, particularly discretionary goods, as well as unfavorable weather impacts every quarter on our business. While we've made progress over the years to deseasonalize our business, we will always be a reliable supplier for our customers for their seasonal needs, like heating fuel and fertilizer. We estimate that adverse weather conditions negatively impacted our comp sales by approximately 200 basis points for the full year, including a lapping of the late December winter storm in 2022. However, personal consumption expenditures saw strong mid-single-digit growth in 2023. That said, spending on goods as a percent of PCE declined nearly a point as consumers continue to shift spending on services back to pre-COVID levels.

Speaker Change: Thanks.

Speaker Change: Hey, Michael <unk>. Thanks for the question I would just say it.

Speaker Change: Certainly we saw sudden.

Speaker Change: <unk> benefit from the weather in the first three weeks of January.

Speaker Change: Really the second and third week, but January is our smallest month of the year smallest month of the quarter.

Speaker Change: And the thing Thats the month, it's really going to determine our comps for Q1 is going to be March.

Speaker Change: As I mentioned in my prepared remarks, very excited about our spring set up this year.

Speaker Change: Got our most innovation in the last three or four years now that kind of the supply chain disruptions and all those things have been worked through our vendors have been able to really spend the last year getting their innovation pipeline restarted.

Hal Lawton: In particular, this affected our big ticket business, which represents a little over 10 percent of our sales and had a negative 6 percent comp for the year. Despite the headwinds we face, we remain committed to our journey of transforming tractor supply. Since introducing our Life Out Here strategy in October of 2020, we have dramatically transformed tractor supply. Over this time, we've invested nearly $2.5 billion in capital spending, with about 80% of that spend targeted for growth initiatives as part of our Life Out Here strategy.

Speaker Change: Our in stock rates in our spring sets are back to the expected, 95% plus that we historically have said that and we feel great about spring. We're optimistic about Q1 as Curt said, we're certainly expecting a positive comp.

Speaker Change: We're off to a good start with the month of January behind Us, but really the most important thing that we're focused on is setting here is having a win in March.

Hal Lawton: This includes new and remodeled stores, new distribution centers, upgrading our technology infrastructure, and several other strategic investments. We've also significantly improved our operating capabilities, including relaunching our Neighbor Club program and creating our Field Activity Support Team. Spanning our mobile footprint and delivering on the increased volume of consumable, usable, and edible products. Additionally, our average store volume continues to far exceed pre-pandemic levels, going from four and a half million dollars to six and a half million dollars annually per store.

Speaker Change: Alright, Thank you that will.

Speaker Change: Our Q&A session and I'm around all day entering Penny please reach out for follow up until that point.

Speaker Change: Our Q1 earnings call.

Speaker Change: At the end of April Thank you.

Speaker Change: Yes.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect your lines.

Hal Lawton: Approximately 40% of our stores are in the Project Fusion layout, allowing us to drive improved space productivity. We continue to see a mid-single-digit comp lift benefit in the first year from our Fusion remodel. We will enter the spring of 2024 with more than 450 garden centers that are also driving space productivity while allowing us to enter new categories that resonate with our customers' hobbies for gardening and their needs for outdoor products. Stores with our garden centers are attracting new customers at a faster pace than the rest of the chain. Additionally, our garden center stores are providing a multi-year commuting benefit.

Hal Lawton: Our distribution centers achieved a record year of productivity. The opening of our Navarre, Ohio, D.C., in January 2023 allowed us to unlock savings across our network with the largest rebalancing of our stores ever. This provided us with substantial stem mile savings while also allowing for significantly improved service to our stores. Also importantly, our supply chain team member attrition reduced materially as we implemented a new progressive wage scale, and no doubt these investments are resonating with our customers as we have achieved record high customer satisfaction scores throughout the year. As always, our store managers were critical to the success. And importantly, we achieved a near all-time low of 12% attrition in this group.

Speaker Change: Yes.

Speaker Change: With regard.

Hal Lawton: Overall, our customer base remains healthy and highly engaged. Now, let's go through some of the specific highlights for the fourth quarter and the fiscal year. For the year, we achieved record sales of $14.6 billion. Our comp store sales were even with the prior year, and diluted earnings per share were $10.09.

Hal Lawton: This comes on top of record performance over the last three years. We continue to have solid market share gains across our major product categories, and our digital business reached another year of record sales topping over $1 billion annually for the first time. Since launch, we have had over 7 million downloads of our mobile app and over 2 million in the year. For the fourth quarter, our comparable source sales declined 4.2%.

Hal Lawton: Our fourth-quarter diluted EPS was $2.28, with an operating profit margin expansion of 16 basis points. For the second consecutive year, we returned over $1 billion to our shareholders through the combination of a growing dividend and share repurchase. Strategically, the transformation of our real estate model, enabled by a number of new capabilities that are designed to deliver material benefits to both revenue growth and operating margin, reinforces our long-term guidance. For example, in 2023, we raised our new store growth target. We now believe there is a 3,000 store opportunity domestically for tractor supply. This is supported by our total addressable market of more than $180 billion, our robust growth, and our ongoing market share gain. Our new target represents an increase of 200 stores from our previous target of 2,800. We also implemented new capabilities to enable owned development of new store builds. This capability is expected to generate significant construction cost savings and allow for lower rents in these applicable stores once we sell them post-construction.

Hal Lawton: Our real estate capabilities are a compelling addition to our Life Out Here strategy that will further solidify our growth for many years to come. In 2023, the cadence of new store openings returned to a more normalized rate. We opened 70 new tractor supply stores and 13 petcent stores in 2023. The team has done a great job opening highly productive new stores, as this remains a core strength and competency of tractor supply. During the year, we successfully converted the 81 Orson stores acquired in 2022 to the Tractor Supply brand, representing essentially a year's worth of new store growth. We're very pleased with the opportunity to drive both top-line and bottom-line performance of these locations closer to our standard run rates over time. Total customer counts increased 1% as we had positive growth among active customers and new reactivated customers. Neighbors Club added more than 4 million new customers and represented 77% of our sales for the year, our highest mark to date.

Hal Lawton: Neighbors Club is successfully helping us migrate customers to a higher threshold of spending with us. During the year, we reached a new record for the number of high-value customers. Overall, our best customers are shopping with us more frequently and spending more money per transaction. Last year's rebranding of PetSense to PetSense by Tractor Supply, along with our expansion of our Neighbors Club program to include PetSense, is also resonating with our customers.

Hal Lawton: This expansion is allowing us to deepen relationships with existing customers and help attract new out-here pet customers to both banners. Our customers' response to these initiatives is very encouraging, with Neighbors Club membership already representing nearly 70% of sales at PetSense with continued momentum. The PetSense Shopper is also cross-shopping at Tractor Supply at an impressive rate of 47%.

Hal Lawton: Petsense is also helping us gain share across Pet Specialty as we approach $225 million in sales and our 200 store milestone for the Petsense brand. For the year, our financial services offering of our private label credit card, together with our co-branded credit card, outpaced our overall sales with strong growth. Our penetration increased from last year's record level and is now in the high single digits in overall sales. Our supply chain continues to be a competitive advantage for us. During the year, we opened our ninth distribution center in Navarro, Ohio, and broke ground on our 10th distribution center in Maumelle, Arkansas.

Hal Lawton: These investments are to enable higher volumes in our existing stores, the continued build out of our new stores, as well as the acquisition of Orchland. These investments in our D.C. network are complemented by our 15 mixing centers that are there for high-velocity replenishment items. In 2023, we will move nearly eight and a half billion pounds of consumable, usable, and edible products through our supply chain, as we are the largest seller of bag feeding food for livestock and companion animals in the United States. Our scale and reach provide us with a cost to serve that is lower than our farm and ranch competition and any other competitor in these markets. As we executed the third year of our life-out-here long-term strategy, 2023 was a year that we made significant progress. We plan to continue building on that progress in 2024. Most of what you'll hear from us today won't sound all that different from the playbook we've used for the last two to three years.

Hal Lawton: But that's intentional, as we continue to be pleased with the benefits and financial returns of our strategic investments. As I've shared many times, our biggest challenge is prioritizing the plethora of growth opportunities we have ahead of us. We anticipate 2024 to be a continued story of ongoing share gains offset by macro headwinds. With this in mind, we've taken a cautious approach to our 2024 financial outlook, with it being below our long-term target.

Hal Lawton: We remain confident in our long-term targets and expect to return to them when macro conditions return to neutral. Our underlying assumptions start with consumers continuing to be judicious in their spending on goods. Additionally, we anticipate average ticket prices to be pressured as we lap inflation. We're assuming market share gains that are supported by our strategic initiatives will continue. Housing, oil, agriculture, and weather are anticipated to be neutral factors in our guidance. Collectively, all these factors are considered to help us provide the guidance range that Kurt will share with you more later on. Tractor Supply is a unique, highly differentiated retailer.

Hal Lawton: We are the leader in a large, fragmented market. We're a needs-based business that is tailored to our out-here lifestyle. Our customers have a passion for the out-here lifestyle and are over-indexed as homeowners, landowners, pet owners, and animal owners. We live our mission and values, and our culture defines our relationship with our customers. As we begin the year, we take great pride in our past and are equally excited about our future. And with that, I'll now turn the call over to Kurt.

Kurt D. Barton: Thank you, Hal, and hello to everyone on the call. I want to start by reiterating Hal's comments on 2023 and our confidence in the long-term opportunities for tractor supply. Over my two and a half decades in this business, I've never seen a year where we had as many transitory Headwinds as we did in 2023 that did not break positively at some point during the year. Before I get into my review of the quarter, I wanted to address two items. First, for comparability purposes, please keep in mind 2022 had a 53rd fiscal week that provided a net sales benefit of $225 million to the prior year fourth quarter, representing about 5.6 percentage points of our net sales decline this quarter. On a full-year basis, it negatively impacted net sales by 1.6 percentage points.

Kurt D. Barton: In addition, diluted EPS in 2022 benefited by 16 cents for the quarter and the year from the 53rd week. Second, overall, the unseasonably warm winter weighed on our results in the fourth quarter. We estimate the impact to be approximately 400 basis points of pressure on our comp sales performance. We knew this was going to be the most challenging quarter of the year, given our strong comp performance of 8.6% in the prior year, as we were cycling the late December 2022 winter storm that provided a 200 basis point comp benefit to the fourth quarter of last year. The majority of the pressure was in transactions, given the needs-based nature of our business, and it impacted our seasonal categories across Q and other winter goods.

Kurt D. Barton: Our Q business in the fourth quarter had a higher mix of cold weather seasonal products, such as wood pellets, bulk propane, birdseed, and pine shavings for bedding. From the cadence of the quarter to our product categories, seasonal impacts always play into our performance. Coming into the fourth quarter, we anticipated they would work against us, and the quarter played out much like we expected.

Kurt D. Barton: Factoring in the seasonal impact from the weather, our fourth-quarter performance was very much in line with our run rate from last quarter. Most of my remaining commentary on our comp sales performance is on a normalized basis, adjusting for the impact of weather. October and November were very similar in comp sales performance, with December seeing the biggest comp sales decline as we were lapping the winter storm from last year.

Kurt D. Barton: On a normalized basis, all months performed relatively consistently with a slight decline in comp sales. Turning to our product categories, we continue to see solid performance in Q with above chain average comps, essentially flat for the quarter. On a normalized basis, Q had positive comparable sales as we continued to gain shares. Discretionary categories performed in line with our expectations, with a mid-single-digit comp sales decline. Big-ticket performance showed continued improvement over the trends of the previous five quarters. Comparable big ticket sales ran slightly negative for the quarter and were positive in the low single digits on a normalized basis.

Kurt D. Barton: Although our business is not primarily driven by holiday sales in Q4, we were encouraged by our performance during the holiday season, including recording our highest sales day of all time on the day after Thanksgiving and strong performance in the week leading up to Christmas. As we have experienced all year, we saw a continued slowdown in retail price inflation throughout the year, with Q4 experiencing a slight net deflation. We have successfully managed through deflation and various commodities throughout 2023 and believe we are nearing the trough now. In 2023, raw material inputs rolled over, as evidenced by the 35% decline in corn from its most recent high in 2022 and currently running about 15% above the historical average. As we exit 2023, these types of feedstock declines are already reflected in our retail prices. However, structural inflationary factors such as higher wage rates, transportation costs, and other overhead items are all still supporting higher product costs.

Kurt D. Barton: Moving on to gross margin, for the fourth quarter, our trend of strong gross margin performance continued with a year-over-year improvement of 129 basis points to 35.3% of sales. Our gross margin expansion was led by improvements in the supply chain from lower transportation rates and efficiencies in our network, including opening a new DC. We continue to benefit from our commitment to everyday low prices and disciplined product cost management. While our promotional activity was modestly greater than the prior year, we were able to strategically provide great value for our customers while maintaining our gross margin. These favorable drivers were partially offset by an unfavorable product mix shift due to a higher mix of Q and a lower mix of high-margin seasonal categories.

Kurt D. Barton: As a percent of that sales, SG&A expenses, including depreciation and amortization, increased 113 basis points year-over-year to 26.2%. This increase was primarily attributable to our planned growth investment, which included higher depreciation and amortization and the onboarding of our new DC, along with some lost fixed cost leverage due to the decline in comparable store sales. Additionally, higher medical claims also contributed to the increase in SG&A, although to a lesser extent than last quarter. However, the SG&AD leverage was partially offset by a decrease in incentive compensation and the benefits of the sale-leaseback program initiated last quarter.

Kurt D. Barton: In Q4, we sold five tractor supply stores, which contributed a 40 basis point benefit to SG&AD; property margin improved 16 basis points for the quarter to 9.1%, excluding the cycling of the 53rd week; diluted EPS of $2.28 was essentially flat with the prior year. Our new store pipeline continues to be strong, and our new store sales and profitability numbers continue to outperform historical averages. Given the addition of the Orson stores to our non-comp sales numbers, the new store productivity metric for the organic new tractor supply stores is cloudy in our external reporting.

Kurt D. Barton: By our calculations, TSC's new store productivity in 2023 was about 67% of our mature store average. Average sales in year one of a new store have increased more than 40% compared to 2019, in line with the performance of the chain. Our stores continue to be profitable in year one, cash flow positive at about the same point, and have a payback in two to three years. Our new store economics unlocks sustainable growth and solidifies our lead in the channel. Strong new store economics are a hallmark of tractor supply. As I reflect back on 2023, I continue to be encouraged by the resiliency of our business and its structural nature. Now let's move to our outlook for 2024, and I will share how we are thinking about the macro backdrop for the coming year. We're anticipating a gradual slowdown with the lingering question of, do we have a soft landing or if the risks of a harder recession remain? With this in mind, we have taken a cautious approach to our 2024 financial outlook and have forecasted our comparable sales performance below our long-term algorithm. Navigating economic cycles is in our DNA.

Kurt D. Barton: We have successfully managed diverse market conditions, including periods of inflation to disinflation and even deflation. Our deep understanding of these dynamics allows us to proactively adapt to market conditions. We expect average unit retail to be neutral to a modest headwind for the near term as we anticipate stickiness to input costs such as labor wage rates and other items to mitigate any further reversion in commodity prices. For fiscal 2024, we are forecasting net sales of $14.7 to $15.1 billion.

Kurt D. Barton: Comparable store sales are anticipated to be in the range of down a modest 1% to an increase of 1.5%. We are cautiously optimistic that big ticket trends will revert to positive for the full year as we are cycling 18 months of decline. We expect gross margin expansion of about 40 to 60 basis points from continued supply chain efficiencies, benefits from effective cost management, and a moderation of the mixed impact of Q. We anticipate the Gross Margin Expansion to be offset by SG&AD leverage due to a couple of primary factors. First, depreciation and amortization is anticipated to increase in the mid-teens.

Kurt D. Barton: While this is an improvement from recent underlying growth rates, as our investments and our strategic growth initiatives moderate, we will de-leverage as DNA grows faster than sales. Second, we plan to open our 10th distribution center in the second quarter. As a reminder, the operating costs for the new DC are reflected in SG&A, while the supply chain benefits are reflected in gross margin. Our DC network is expected to pressure SG&A by approximately 10 to 15 bases.

Kurt D. Barton: The benefits and gross margin will not completely offset this pressure since it takes time for the new facility to fully ramp to maturity and realize the supply chain benefits. As a result, we expect modest pressure on our operating margin from the opening of this new DC. These two primary factors are partially offset by the lapping of some higher-than-normal medical benefits in 2023, but we do not expect those to reoccur due to proactive changes to our benefit program.

Kurt D. Barton: In 2024, we will continue our planned strategic sale leaseback program to sell some of our existing owned stores. We anticipate these sales will occur in the second half of the year on a similar cadence to 2023 and with a similar EPS contribution. We continue to forecast these strategic sale leasebacks to be ongoing for the next 7 to 10 years. For the year, we forecast an operating margin of 9.7 to 10.1 percent. We're forecasting interest expense of approximately 50 to 55 million dollars.

Kurt D. Barton: We plan to maintain a healthy leverage ratio of approximately two times, and we expect our effective tax rate to be in the range of 22.7 to 23.0 percent. The Luda DPS is forecast in a range of $9.85 to $10.50. Net capital expenditures are forecast to be $625 to $700 million, or about 4% to 4.5% of sales.

Kurt D. Barton: This net amount reflects the anticipated proceeds for the sale of existing and newly developed tractor supply stores. Gross capital expenditures are forecast to be in the range of $850 to $925 million. Our capital plans reflect a ramp-up in our new store openings to approximately 80 tractor supply stores. We anticipate opening 10 to 15 PetSense by Tractor Supply stores in 2024. Our new store pipeline continues to be solid, and we expect the store opening pace to be in line with 2020. We remain committed to returning cash to shareholders through the combination of a growing dividend and share repurchase. For 2024, we anticipate share repurchases in a range of $575 to $625 million, which is estimated to have a benefit of a net reduction in weighted average shares outstanding of approximately. Now I'd like to walk through a few items to consider for the calendarization of our expectations.

Kurt D. Barton: As always, we believe the best way to look at our business is in halves and not quarters due to the nature of our business. We expect comp sales for each of the quarters to be in a relatively tight range, consistent with our overall 2024 guidance. We are planning for positive comp transactions for the year. As to earnings, we expect our EPS growth to be slightly more favorable in the first half as opposed to the second half. There are a few factors that will impact operating margins in certain quarters.

Kurt D. Barton: We anticipate the tailwinds of lower transportation costs to benefit our results through the second quarter and begin to flatten year over year, starting in Q3. As a result, gross margin expansion for the first half of the year is anticipated to be near the high end of our annual guidance range, while the second half may be near the low end of the range. In regards to SG&A, the second and third quarters will be pressured from the startup costs for the new distribution center, while the supply chain benefits will not begin to be realized in gross margin until late in the third quarter. Please keep in mind we will be lapping an $0.08 per share benefit from the depreciation change in the third quarter of last year. Considering each of these factors, the third quarter will be our toughest earnings comparison as we anticipate a decline in operating margin and EPS due to the combination of these factors.

Kurt D. Barton: As a reminder, the Orson stores will be added to the comp store calculation beginning in the second quarter with a tiered approach as we cycle the timing of moving these stores to our point of sale systems and rebranding these stores to tractor supply. Specific to the first quarter, we had a challenging first quarter last year as it was abnormally warm in January and February and relatively cold in March. We were also benefiting from retail price inflation in the high single digits. Given the recent Arctic cold temperatures across most of the regions, we are seeing good momentum as we start the first quarter. Overall, we are anticipating positive comp sales for the first quarter. To wrap up, we have clearly defined strategic priorities and are investing to capture the long-term opportunities in our market. We are committed to driving productivity and making appropriate trade-offs to fuel our investments while we protect our operating profit margins and earnings. We intend to maintain this focused approach through 2024. We are committed to continuously striving for stronger results. With that, I will turn the call back over to Hal.

Hal Lawton: Thank you, Kurt. Now I'd like to update you on our progress on our Life Out Here strategy and share more about the exciting plans we have in place for the spring season. Tractor Supply continues to build on our competitive advantage, and arguably, the company is as strong as it's ever been. This is backed up by several examples.

Hal Lawton: We continue to gain market share across our major product categories, and our customer metrics remain incredibly healthy with strong spending and retention with our best customers. Our strategic priorities are clearly resonating with our customers. We continue to see strength in our brand equity metrics, and we continue to grow our brand consideration and our unaided awareness. These strong customer trends are a tribute to the team. The team is executing at a high level and is extremely engaged.

Hal Lawton: In 2023, our turnover improved at every level across the company as we're committed to being an employer of choice in rural America. With customer satisfaction scores at an all-time high, the team is passionate about their work, and we're energized to capitalize on our growth investments to provide our customers with legendary service. Our strong culture has always been a part of our secret sauce.

Hal Lawton: The team is dialed in and determined to build on our long track record of success. Our life out here strategy is on point. Our strategic initiatives and Project Fusion, garden centers, Neighbors Club, and Digital are working, and they are driving results. By the end of 2024, we anticipate that our Project Fusion layout will be in about 50% of our store base by year-end. This layout is clearly driving improved comp sales for us as we're leveraging category insights to determine space allocation and drive productivity. For instance, in the companion animal categories, we're seeing that the fusion layouts are contributing to strong growth.

Hal Lawton: We're able to have an expanded SKU offering and a larger stack out. This layout is also seeing the highest quartile of customer satisfaction scores and attracting new customers at a faster rate. 2024 will be the year of the Garden Center for us.

Hal Lawton: We will leverage the change of seasons across the storefront as the year shifts to spring. We will continue to build out about 150 garden centers across both new stores and sidelight transformations this year. As we look to leverage our learnings from our garden centers, we will implement a new Live Goods Center prototype in many of these locations. This new prototype requires about half of the capital investment of a traditional garden center that we've been building over the last few years and allows us to maximize the value creation of a side lot in lower volume stores and in markets where the season is less extensive, thus allowing us to achieve the ROIs that we target. Additionally, the new prototype, in many ways, makes it easier for our stores to operate from a staffing standpoint, and the maintenance costs are lower.

Hal Lawton: With more variety than ever and a grower network to support our garden centers, we're excited about the benefit of these initiatives in 2024 and the continued opportunity to serve our customers. Now turning to our Neighbors Club, we have significant plans in place to capitalize on this strategic asset. Our loyalty program has the scale and scope to continue to drive meaningful results. As we enter the third year since the move to a points-based rewards program, our members can expect more personalized offers, new tiers, and more meaningful rewards.

Hal Lawton: These compelling enhancements are designed to drive transactions and engagement, all while migrating customers upwards. Moving on to our digital business, we continue to capitalize on opportunities to accelerate our growth. Between our website and our mobile app, we have more visitors online now than we do in our stores. These digital assets are essentially the front door to tractor supply.

Hal Lawton: We'll be focused this year on improving our digital customer experience and capability as we look to accelerate conversion rates. Just as the trip to a tractor supply store is highly differentiated, we'll be doubling down to ensure the shopping experience on our website and in our mobile app has that same level of differentiation as we shop across our destination categories. We are looking to mirror our in-store legendary service and the digital experience through personalized and conversational commerce. We will leverage AI technologies to improve search, redesign our checkout, and introduce a new refreshed homepage focusing on personalization that leverages our robust Neighbors Club data. As our customer base continues to skew younger, these improvements will be key to unlocking future growth. Our strategic priorities are responding to our customers and driving strong returns. As the calendar shifts now and we start to turn to spring, it's an exciting time to be in our stores and online.

Hal Lawton: In 2024, our merchant teams will be as diligent as ever to be our customers' purchasing agents with a sharp focus on value and innovation. We're committed to everyday low prices, and we simply will not be beyond value. Our customers can trust in Tractor Supply to be the dependable supplier for their lifestyle.

Hal Lawton: Our merchandising strategies are focused on driving profitable sales and market share. Across product categories, we will have more innovation this year than I believe we will have seen collectively over the last three years. We have a number of new and exclusive product launches, including the introduction of the Toro Havok zero-turn mower, the expansion of Yeti and Solo stoves to more stores, and a test of Martha Stewart and Eddie Bauer. A limited rollout of Prefort Cattle Fencing, and a limited rollout of Weber Grills, a relaunch of Mutt Nation from Miranda Lambert, and the addition of Triumph Equine Feed.

Hal Lawton: And that's just to name a few of the new innovations that we're bringing to our customers, and they'll be able to find in-store and online. So, let me share a few more highlights that you can see in our stores when you go out there. Tractor Supply has long been a destination for zero-turn mowers with a cub cadet and bad boy brand. The Toro Habit Condition will continue to reinforce that position. Outside of Toro's dealer network, the Toro Havoc is exclusive to Tractor Supply with a sharp price point.

Hal Lawton: This is a unique and differentiated platform and just in time for the spring season. And big ticket, our entire trailer assortment over the $1,000 price point is unique and exclusive to Tractor Supply. Across specifications and features, our trailer offerings are designed to support our customers' lifestyles. Across our categories, we have a long history of test and learn, and we're excited about the expansion of several recent programs. After a very successful rollout to our Project Fusion stores, Yeti will be expanded to nearly half of the chain by Q2 and rolled out to the balance of the chain by year end. Another great example is the Solo Stove, a high-quality outdoor wood-burning fire pit that is a perfect fit for outdoor enthusiasts and our customers.

Hal Lawton: Given our customers' response to this product, we'll be expanding the top-selling SKUs of SoloStove to more than 1,500 stores with the complete offering available online. Weber Grills is another leading brand that we're excited to pilot in 2024 after growing significantly our grills business over the last three years. The introduction of Weber positions us to expand our grill lineup and continue to grow our market share in this rapidly growing category. Weber has long been one of America's leading barbecue grill brands, and their products are highly complementary to our existing offering of Pit Boss, Even Embers, and Blackstone Griddle.

Hal Lawton: We're also excited about the newness being introduced in Companion Animal in the first quarter. First up is the relaunch of our Mutt Nation partnership with Miranda Lambert. Tractor Supply is the pet wellness destination out here, and we're introducing market-leading new brands like Native Pet and expanding our 4Health exclusive brand supplement assortment. In our continued pursuit of taking market share, we're also introducing new national brands across cat food.

Hal Lawton: We have new brands like Triumph Equine Feed and a continued focus on organic feeds across our large animal and poultry categories. And we're also expanding our deer wildlife sets to support our customers' hobby of cultivating, feeding, and watching their deer. We will continue to leverage our strong portfolio of exclusive brands to grow market share and offer great value. For instance, we're launching groundwork, bag, garden, and potting soil at compelling price points comparable to the leading national brands, and we'll be introducing Blue Mountain Tech with performance fabrication to appeal to our millennial customers. These are just two examples of the strong pipeline we have for newness in our exclusive brands, which represent nearly 30% of our sales. And finally, it wouldn't be spring at Tractor Supply without the launch of our annual Chick Day.

Hal Lawton: The arrival of chicks at our stores is a sure sign of spring and creates strong retail theater in our stores. Our Chick Days event is shaping up to be the largest ever for it. Poultry now rivals livestock and equine in the size of our business; recent trends have supported growth from existing customers coupled with robust growth from new customers in the category, and this is driving both trips and tickets to our stores. One exciting aspect of the new customers in the Poultry category is that they're gravitating to our new unique offering of premium breeds and organic feed products for their chicks. We're introducing Impeccables SickDays is a great gateway for our new customers to explore Tractor Supply, and we use it as a resource for all things related to homesteading beyond poultry to expand it to categories like gardening.

Hal Lawton: I hope you get a chance to experience the event in our stores. To wrap up, our customers continue to trust us for everything they need to care for their pets and animals, tend to their homes, farms, and land, enjoy the great outdoors, and generally just live life out here. That purpose, serving those who live life out here, drives meaning in what we do each day.

Hal Lawton: Our future remains as bright as it ever has been. Thank you to our team members for your dedication to Tractor Supply and passion for serving our customers, and to our customers for trusting us as your go-to supplier for life out here, and to our 2,400 communities across Tractor Supply and Pep Sense for embracing us as part of the fabric of the communities we call home. Over time and across various cycles, I stand by the best three words to describe Tractor Supply: consistent, reliable, and sustainable. These attributes allow us to be an earnings growth compounder on both the top line and bottom line. Here's to the next 85 years of serving life out here.

Operator: And with that, operator, we would now like to open the line for questions. We will now begin the Q&A session. If you would like to ask a question, please press star 1 on your telephone keypad. If, for any reason, you would like to remove that question or your question has been answered, press star 2.

Operator: If you are using a speakerphone, please pick up your handset before asking your question. And, as an additional reminder, we do ask that all participants limit themselves to one question and return to the queue for additional questions. Our first question comes from the line of Zach Fadem with Wells Fargo. Your line is now open. Hey, good morning.

Kurt D. Barton: Starting with Q4, it sounds like October-November trends were a touch better than that down 4% comp, but December stepped down, and January stepped back up. So just considering all the variability over the past couple months, can you help us understand just the underlying run rate for the business, where you think it is today, and what you think the path is back to the long-term growth algorithm? And specifically, how are you thinking about the contribution of internal drivers like Lawn and Garden and Neighbors Club in 2020? Hey, Zach.

Kurt D. Barton: This is Kurt. Good morning. In regards to the comp sales performance, I'll point back to some of the things I mentioned in our prepared remarks. For the fourth quarter, the best way to look at it is to start with the backdrop that when we look at the seasonal performance, the challenges of an extremely mild fourth quarter going up against, you know, an Arctic storm last year, there were 400 basis points of pressure. October and November were unseasonably warm.

Kurt D. Barton: As well, you've got negative low single digits generally consistent when you normalize for the December storm across all of the months and all of that principally in the weather-related categories that I pointed out on the call. As I mentioned, the fourth quarter ran consistently with the trend rates of the third quarter. Our consumable or needs-based business continues to be running solid, especially the year-round non-seasonal related categories, as well as the strength in all of our feed and food. The confidence that we have comes from examples such as livestock feed, equine feed, poultry feed, wildlife supplies, cat and dog running unit positive comps in the fourth quarter. Some of that is up against last year's pantry filling that happens in the last week of the year against that storm.

Kurt D. Barton: So you can see the traffic that we get from the consumables, the stability of the core of our business running really strong. So we still have that and carry that confidence that our customers are shopping with us just as consistently as they were before. We have growth in active customers, and Neighbors Club contributing more. All of those are the drivers of the consistency of the business. Thanks for your time.

Kurt D. Barton: Thank you. The next question comes from the line of Chris Horvers with J.P. Morgan. Your line is now open. Thanks. Good morning. And thank you for taking my question. So, first, as you think about not putting weather into 24 as a potential benefit, can you talk through that? Is that because, as you look at it, the headwind in 23 is more of a lap?

Hal Lawton: Or is it just, you know, you're just trying to be prudent in your outlook? And a second follow-up is that we get a lot of questions about the competitive encroachment from the big box guys. So could you talk about what you're seeing in terms of where those competitors have rolled out an expanded farm and ranch assortment? Thank you. Hey Chris, thanks for joining the call this morning. Yeah, on weather, I think, as we reflect on last year, you know, we had a lot of discussion about whether it kind of felt like we were playing meteorologist.

Hal Lawton: And, you know, I think we just decided to be prudent as we look at this year, not look at whether there's potential upside or, you know, downside. As we called out, there's a number of other factors that can also, you know, influence our sales as the year progresses, whether that be, you know, the agriculture market, oil, housing, etc. And instead, we just chose to focus on, for the purposes of our guidance and range of outcomes this year, really the factors that we think are going to have the most influence on our sales, as we can see right now, which are our continued market share gains, offsetting the shift still in consumer spending from goods to services, as well as disinflation, which is mainly a first half issue. And then, you know, as it relates to competitive encouragement, you know, I think we really haven't seen anything different in competitive activity for the foreseeable past.

Hal Lawton: So it's, you know, been really, for the last, since COVID, competitive activity has been pretty, pretty stable, pretty rational. Our share gains continue to, you know, we continue to take share in the market. And really haven't seen anything out of the ordinary and competitive from a competitive perspective, whether that be in our farm and ranch, core farm and ranch competitors, or the, you know, multitude of other national retailers that we compete against as well. The next question comes from the line of Kate McShane with Goldman Sachs. Your line is now open, https://www.youtube.com. Yeah, hey, Kate, this is Kurt. I'll take those.

Kurt D. Barton: On wage rate growth, we are anticipating wage rate growth slightly above the historical averages pre-pandemic. It varies across different areas of the business, but I'd center around a three to 4% wage weighted growth. We continue to see, you know, a strong, solid workforce; unemployment continues to be low. Our culture, our teams continue to have all the success with hiring, but it's appropriate to anticipate that you'd be at that level of wage rate growth. In regards to incentive compensation, we're incentivized at all levels of the organization. However, in 2023, our performance from the top and bottom lines did underperform our original expectations.

Kurt D. Barton: And so there was some modest leverage in 2023. So if you look at 2024, we're factored into our guidance into our SG&A some normalization of incentive comp gives you, you know, a modest 10 or 15 basis point of D leverage, but that's all considered in the guidance that I gave. Thank you. Thank you. Our next question comes from the line of Jason Hoss with Bank of America. Your line is now open.

Kurt D. Barton: Hey, good morning, and thanks for taking my question. I'm curious if you could comment on your expectation for new store productivity in 2024. Based on the math that we can do, it looks like it's maybe going to be around 60% or so. I know sometimes the math can be fuzzy from our perspective.

Kurt D. Barton: So can you just talk about what's expected there? And is there any reason why the new store productivity would be lower in 2024? Thanks. Yeah, Jason, this is Kurt.

Kurt D. Barton: I'll answer that question. In my prepared remarks, I was very specific about that and about what is really driving our new store productivity, so I want to point everyone back to that.

Kurt D. Barton: We continue to see The tractor supply consistent strong new store productivity. Twenty twenty three ran at 67 percent new store productivity. The 80 stores that we plan for twenty twenty four are expected to be coming out the gates very consistently in the same way, and our new store maturation process of a four to five year sixty five to 70 percent new store productivity is where we target. And we expect twenty twenty four with the strong pipeline that we've got. We believe in being excited just as we were in twenty twenty three about what these new stores will produce. Thank you. The next question comes from the line of Peter Benedict with Baird. Your line is now open. All right, guys, good morning. I guess, Kurt, maybe I have a question for you.

Kurt D. Barton: As we think about the even margin and how it toggles within your guidance range, roughly speaking about 15 basis points up or down per point of comp move. If you think we see a scenario where your comps are either below the low end of your guide range or they come in above the high end of the range, any sense for how the incrementals or decrements would look? Anything we should think about there? Is 15 basis points a good benchmark? Curious, what kind of your thoughts on that.

Kurt D. Barton: Yeah, I'll give you a couple of points, Peter, on that. First, we considered the micro strategic drivers, the macro favorable or unfavorable pressures for this year. We've given a guidance range, albeit slightly larger on the top and bottom lines than we historically have, that recognizes we're in a time of uncertainty. And so we believe all of those scenarios, any plausible, reasonable scenarios have been factored into our guidance. So we don't see, you know, a likelihood outside of the downside of the guidance that we've given. That said, inside the guidance range, even outside of the guidance range, I'd point out that the EBIT margin movement within the sales range is not linear. And there's a number of factors, certainly with the level of gross margin, or what might be a factor that's driving the low end of the range, a deflationary environment, for example, gives us upside on margin rate. So that would not point to any linear relationship, and even outside of the range, when you start considering incentive comp and other things, it's not linear as well.

Kurt D. Barton: Thank you. Our next question comes from the line of Scott Ciccarelli with Truist. Your line is now open. Hi guys, Scott Ciccarelli.

Hal Lawton: Can you help quantify the comp list that you're baking into your model from your garden centers this year? I think you mentioned you have about 40% penetration now, and we know that, you know, the spring selling season was largely wiped out in 23 and probably even 22. And maybe any other color on the performance of the garden centers as that program matures? Thanks.

Seth Estep: Yeah, sure. Why don't I start with that, Scott, on the comp, and then I'll toss it to Seth a little bit on the performance of garden centers, some of the 2024 drivers, etc. Our expectation and how we've modeled our long-term targets is still the same as our expectations for 2024. As we continue to add garden centers, roughly 150 to 200 of those a year, and you get from fusion and garden center, mid single-digit, high single-digit, and a combo lift as those mature in year one, and then a lower benefit in like year two, but still a benefit over the chain, that roughly plays into our algorithm.

Kurt D. Barton: And we would anticipate for this year to play similarly that the fusion garden center initiative is driving, you know, give or take roughly one point of comp in our guidance range. And Neighbors Club is another initiative that drives consumers to spend up the tiers, more transactions, getting more of their share of wallet is another driver. So just kind of pointing out the two biggest strategic initiative drivers. And then I'll toss it over to Seth, you know, maybe to talk a little bit about what's driving the garden centers. Yeah, thanks, Kurt. Thanks.

Seth Estep: Thanks, Scott, for the question. Scott, first, let's just start with, as we think about our garden center initiative, the size of the addressable market there is over $20 billion. And, as we know, it's a place where our customers participated, where they didn't necessarily look at us as their first and primary destination for those categories.

Seth Estep: And we believe we have significant share opportunities as we look at the lawn and garden segment. Over the course of the last three years, as Kurt mentioned, we have really been focused on driving scale to build out our grower base and then build to the 450-plus garden centers where we'll be entering spring, which we really believe this is the year that the team's really going to be able to drive some sales. As we go into spring with those 450, I mean, obviously, we're focused on winning those spring categories as well as building out both fall and our winter seasonal-related areas to make sure that we can leverage and maximize that footprint, not just in the spring season but also throughout the 12 months of the year.

Seth Estep: So, very excited about the work that the team's been doing, very excited about the size of the prize there. And I think this is the year we're truly all going to come together. We've built scale, and now those programs are going to be hitting stores. Thank you. The next question comes from the line of Chuck Grom with Gordon-Haskett Research Advisors. Your line is now open.

Kurt D. Barton: Hey, thanks very much. Happy to hear from you guys. Um, you know, now you've completed the Orslin conversions.

Kurt D. Barton: I guess I'm curious about your outlook on sales productivity and margins for these locations. And I guess now that they're in the set, how does that compare to the legacy tractor supply stores? And when we look to 2024 and 2025, how do we think about the sales maturation curve and the benefit to comps from those stores? Thanks. Yeah, Chuck, this is Kurt.

Kurt D. Barton: The Orslan conversion went very well. All stores converted, as we mentioned, to the Tractor Supply brand. The first six to nine months since the acquisition were a transition, a lot of noise through that. We now have them all branded Tractor Supply. The team is engaged.

Kurt D. Barton: We've got the Tractor Supply product and services, our Tractor Supply feed and food brands, and when we begin to cycle that in the second quarter, where we convert it all over, we do anticipate seeing much like a new store maturation. Perhaps we'll learn if it's a similar type maturation curve, but we anticipate and have baked into our guidance some new store maturation type comp benefit from those 81 stores as well. And how it compares, we anticipate these markets from our real estate study that there is upside to the historical performance in those stores to be able to run in line with Tractor Supply averages, albeit we've said it's very much in line with like a Midwest Tractor Supply average, which is a bit below the overall Tractor Supply average store level. So there's room to have these grow over time.

Kurt D. Barton: And we're excited about our ability to capture new customers, bring them into Tractor Supply in these stores. And so overall, for 2024, even into 2025, we believe, much like a new store, there's a benefit from maturation. Thank you. The next question comes from the line of Michael Lasser with UBS. Your line is now open. Good morning.

Hal Lawton: Thank you so much for taking my question. What if you assume input cost relief in 2024, especially key variables like transportation costs and commodity costs? And then how does that inform your view of the gross margin outlook for this year? Because it seems like the gross margin has been expanding significantly, in part because of this relief. And is there a risk that at some point, Tractor Supply could invite more competition as its gross margin is about 150 basis points higher than it was in 2019? Thank you so much.

Hal Lawton: Hey Michael, good morning. Two things I'll hit on this. First is the kind of long-term structural nature of our gross margin. And then I'll speak to the assumptions implied in 2024. On the long-term structural nature, there are two big shifts that I want to remind folks about that really have transferred the rate out of gross margin or expense out of gross margin and into FG&A. The first one of those is our field activity support team. As we've mentioned, it's nearly an 1,800-person team where the expense falls in FG&A, but the offsetting support provided by our vendors falls in gross margin. As we've talked about several times in the past, that's roughly in the neighborhood of 40 to 50 basis points of shift.

Hal Lawton: Secondly, I would call out the continued transformation of our supply chain. From 2018 to 2023, our stem miles will have reduced by 20%, and that basically means a truck going from a distribution center to a store.

Hal Lawton: And so the impact of that is reduced freight costs on a like-for-like volume and rate basis versus, say, 2018. But there are obviously operating costs embedded in our G&A to run the two DCs we've opened since then and the 11 mixing centers that we've opened since then. That is a benefit of roughly 60 to 70 basis points, the delta there. So when you add the FAS difference and you add the supply chain difference, call it 75% of the gross margin difference that you quoted, that 150 basis points is structural in nature and really a shift from FG&A to gross margin.

Hal Lawton: Now, looking forward, I would say the balance that you see there in the gross margin rate, I would attribute to our scale. As we talked about, we're double, almost double the size of the business that we were in 2018 when I quoted those STEM miles. And that's accorded us the ability to obviously manage and run the business more productively, whether that's in our freight and our negotiations with our freight providers, or whether that's, you know, getting credit for our scale with our primary COGS vendors. As it relates to this year, we do see continued benefits in the freight market, particularly in the first half of the year. And we've talked about that, particularly in the back half of last year and also in the first and second quarter, but we do see continued freight benefits.

Hal Lawton: Also, as we talked about in Q3 and Q4, and we also mentioned in our prepared remarks, we have been working very closely with our vendors on cost and have been rolling back costs where we've seen commodity prices come down and other cost impacts moderate or reduce. We started that work, as we mentioned in past earnings calls, really in the summertime. And the impact of those cost reductions is forecasted in our margin rate assumptions that Kurt laid out in his prepared remarks.

Hal Lawton: The last thing I'll mention is just competition. We are as priced strongly in the market right now as we've ever been. And we have a number of initiatives that we have in place to really make sure we stand for value in the marketplace on our key value-indicating SKUs out there and feel really good about our price position and don't see any sort of encroachment from competition, just the same competitive intensity that we've seen over the last few years. Thank you. The next question comes from a line from Seth Basham with Wedbush. Your line is now open. Good morning. My question is about the companion animal category.

Seth Estep: And if you could comment on the performance of that category in the fourth quarter, were comps up or down? And then, specific to cat and dog, what about positive unit comps? What about sales comps? And how are you seeing the consumer respond to inflation broadly in that category? Hey Seth, this is Seth.

Seth Estep: Hey, relative to our companion animal business, we remain very excited about the opportunity that we have in companion animals. And we've continued over the years to manage through multiple cycles, you know, and have a track record of this. What I'd say, relative to comp, companion animals continue to be a comp driver for us, you know, in both units as well as top line. You know, when you look at trends in the industry, you know, approximately 75% of our customers own a pet, and about half of those that own a pet own more than one pet.

Seth Estep: And so, just structural to our customer base in general, it's an area that we are highly committed to. We believe, you know, things like our convenient locations, our team members, our omni-channel capabilities, our robust and differentiated assortments. We see those as all competitive advantages in the pet space, and we continue to take market share there.

Seth Estep: And we believe we have substantial market share opportunities ahead both in 2024 and beyond with our existing customer base as well as new customers that are out there. So, companion animals, in general, for us, it remains a healthy business, and it's something that we are confident in taking share in the years to come. Thank you. The next question comes from the line of Peter Keith with Piper Sandler. Your line is now open. Hey, thanks. Good morning, everyone.

Kurt D. Barton: Just a touch base on deflation. Kurt, you said modest deflation. I wonder if you could actually just quantify that. I was thinking it's like down one percent of the comp headwind.

Kurt D. Barton: And then bigger picture, there are some concerns that deflation will take you guys back to the backdrop of like 2015 to 2017, where comps were sluggish for a longer period of time. Do you see any key differences from the economic backdrop today versus several years ago when we last saw deflation? Yeah. Peter, I'll start with the first part of your question in regards to what our assumption is on a neutral deflation.

Kurt D. Barton: Roughly neutral deflation for the year overall is what we see, give or take, I mean, give or take in our ranges, plus or minus one, you know, impact on retail AURs. As Hal mentioned, in one of the other questions earlier, as we've rolled back off the peaks of 2022, throughout 2023, on a lot of the commodity deflations, a vast majority of that occurred throughout 2023 And these are fast turning skews in feed and food.

Kurt D. Barton: So these prices are already in our retail prices. The first half of the year may have some exposure as a year over year lap on that, as we had slight net deflation in Q4, there could be, and is assumed in our guidance, some slight slight inflation in the first half of the year. The second half of the year could be neutral or actually, you know, slightly positive. So we've considered each of those scenarios, but we really don't see a wide range in there. And I demonstrated that in regards to corn, where it's 35% below the highs of 2022. And it happened throughout 2023; there were 10 or 15 points of difference between the pre-pandemic levels and so there's really not much movement left in a commodity. And that commodity is a small percent ingredient in a small or portion of our products that we offer.

Kurt D. Barton: In comparison to 2015, it's all about what's structural. In 2015, we were coming off years where oil prices, steel prices, and grains were coming off of highs, and they completely flipped. In this case, the commodities hit their early peaks in 2021 and 2022, and all the structural nature, which is a bigger portion, such as wage rates, operating costs, et cetera, really began to get embedded in 2022 and 2023. This is the structural nature. So I think it's a very different scenario.

Kurt D. Barton: There's limited risk that we see. If anything, it's a small level, and we believe it has been adequately considered in our guidance. Thank you. The next question comes from the line of Joe Feldman with Telsey Advisor Group. Your line is now open.

Kurt D. Barton: Hey guys, thanks for taking the question. I wanted to follow up on something you said about big ticket. And, you know, you talked about how big ticket should be positive in 24. I was just curious, is that lapping at just the easier comparisons?

Kurt D. Barton: Or is it more to do with your view that, you know, discretionary spending will pick up, and consumer behavior will kind of shift towards that discretionary? Bigger ticket category, like what's driving, I guess, that confidence? Having said that, Joe, this is Kurt.

Kurt D. Barton: I'll quickly just affirm what was assumed under guidance and then let Seth give you the answer about, you know, why we're assuming that for 2024. But we do believe that the big ticket item should be in line with our overall guidance range for the year. That's, you know, as you see that that's relatively flattest, you know, at the midpoint to slightly favorable. And we're going up against two consecutive years of negative big ticket comps. So it has a lot to do with the comparisons.

Kurt D. Barton: And in 2022, we were coming off of all of the stimulus spending. In 2023, there was a bit of a swing off of durable goods into services and some of the weather-related pressures. And in 2024, we're cycling that.

Seth Estep: And we've got some great offers, some new innovations that I know Seth can speak to. Yeah, thanks, Kurt. Yeah, so you know, as Hal mentioned in his prepared remarks, we've got a lot of newness and innovation coming, particularly in our big ticket categories. Also, as we look at some of the easier comparisons that Kurt just mentioned, whether it be the Toro Havoc, that's going to be exclusive to us, that Hal mentioned, a whole new grill lineup that we continue to expand, basically an exclusive lineup of trailers to Tractor Supply, where we are definitely a destination. SAFE, as we look ahead, we believe it can can be a driver for us. And then finally, I just say, you know, as the team and as we mentioned in his prepared remarks, our private label credit card that we've been able to lean into to drive some volume as it comes to big ticket items has also been strong. Broadbase, I'd just say, retail in general is rebounding some in big ticket items, and we could definitely see that as we approach kind of November and December. Lisa, we'll take one more question. Certainly. Our final question comes from the line of Michael Baker with D.A. Davidson

Hal Lawton: Your line is now open. Okay, thanks. Can you guys hear me?

Operator: Yeah. Hello? Yeah, good. Okay. Yes, Michael.

Hal Lawton: I hate to ask the last question on a real short-term thing, but I am curious about the first quarter. You said you expected all quarters to be within your range or consistent with the range or something along those lines. So that would mean at the high end, and you said positive for 1Q, but that would mean about 1%.

Hal Lawton: Is that reflective of what you're seeing in January, or how much does that factor in? I think the comparison gets a little bit harder in February, although I don't think March was very good last year either. So, you know, with all the weather we're all seeing in the country, I think a lot of people are assuming that January is a pretty strong month. I guess I'm just trying to gauge how strong it is relative to

Hal Lawton: Supply Guidance. You know, maybe up one. Hey, Michael, it's Hal.

Hal Lawton: And thanks for the question. I just say, it's, certainly, we saw some benefit from the weather in the first three weeks of January, you know, really the second and third week. But January is our smallest month of the year, and the smallest month of the quarter.

Hal Lawton: And, you know, the thing that's the month that's really going to determine our comps for Q1 is going to be March. We are, as I mentioned in the prepared remarks, very excited about our spring setup this year. We've had the most innovation in the last three or four years now that, you know, kind of the supply chain disruptions and all those things have been worked through. Our vendors have been able to really spend the last year getting their innovation pipeline restarted. Our in-stock rates and our spring sets are, you know, back to the expected 95% plus that we, you know, we historically have set at. And we feel great about spring. We're optimistic about Q1, as Kurt said. We're certainly expecting a positive comp. You know, we're off to a good start with the month of January behind us. But really, you know, the most important thing that we're focused on is having a win in March.

Hal Lawton: Great. Well, Alisa, thank you. That will conclude our Q&A session. And I'll be around all day.

Operator: For anybody, please reach out for follow-up. And we'll look forward to talking to you on our Q1 earnings call at the end of April. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.

Q4 2023 Tractor Supply Co Earnings Call

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