Q4 2024 Tractor Supply Co Earnings Call

January 30, 2025

[music].

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.

Please note that the queue for our question and answer session did not open until the start of this call.

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

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

Speaker Change: Pilkington Mary Winn. Please go ahead.

Speaker Change: Thank you Melissa good morning, everyone. We appreciate your time and participation in today's call on the call today are how Walton, our CEO and Kurt Barton our CFO. Following our prepared remarks, we'll open the floor for questions southeast up our Chief merchandising officer will also be available during the Q&A session. Please note that a supplemental.

And as a reminder, this call is being recorded.

Speaker Change: The host for today's call is Mary Winn, Pilkington Senior Vice President of Investor and public relations for tractor supply company.

Now first up as of year end video.

Speaker Change: Slide presentation has been made available on our website to accompany today's earnings release now let me reference the Safe Harbor provisions under the 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.

Speaker Change:

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Speaker Change: And financial performance of the company in many cases these 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 X.

Speaker Change: Hum.

Speaker Change: Okay.

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Speaker Change: Morning, Ladies and gentlemen, and welcome to tractor supply company's conference call to discuss fourth quarter and fiscal year 'twenty 'twenty four results.

Speaker Change: Okay.

Speaker Change: No.

Speaker Change: Patient 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.

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Speaker Change: Yes.

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

Yes.

Speaker Change: Yeah.

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

Speaker Change: Yeah.

Speaker Change: Hum.

Speaker Change: Yeah.

Speaker Change: [music].

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

Speaker Change: [noise] formation contained in this call is accurate only as of the date discussed investors should not assume that statements will remain operative at a later time tractor supply undertakes no obligation to update any information discussed in this call as we move into the Q&A session. Please limit yourself to one question to ensure everyone has the.

Speaker Change: Please note that the queue for our question and answer session did not open until the start of this call.

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.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Opportunity to participate if you have additional questions. Please feel free to rejoin the queue. We appreciate your understanding and cooperation we will also be available after the call for any further discussions. Thank you for your time and attention. This morning, and now it's my pleasure to turn the call over to Hal.

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

Speaker Change: Uh huh.

Yeah.

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

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Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: No.

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

Speaker Change: Yeah.

Speaker Change: Okay.

Hal: And thank you to everyone for joining our call today before we begin I would like to acknowledge the recent wildfires and winter storms, our thoughts and prayers are with all those affected.

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Hal: I'd also like to express our deepest appreciation to the first responders, who work tirelessly to protect our communities during these challenging times our.

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Hal: Our tractor supply team has and will continue to stand with our communities as they recover from these events.

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Speaker Change: [music].

Speaker Change: You're opening video I think did an excellent job highlighting the key accomplishments of the tractor supply team in 2024.

Speaker Change: And my sincere appreciation and gratitude go out to the team for all they do.

Speaker Change: Over the year, our team consistently executed with distinction and delivered solid results in a tepid retail environment.

Speaker Change: Wow.

Speaker Change: Yeah.

Speaker Change: Additionally, the team made progress against our life out here strategy, enabling continued market share gains and future growth.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Now, let's go through some of our highlights specific to the fourth quarter and the fiscal year starting with financials.

Speaker Change: In the fourth quarter, our net sales grew three 1% and comparable store sales increased <unk>, 6% driven by strong comp transaction growth of two 3%.

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Speaker Change: And our fourth quarter diluted EPS was <unk> 44 cents.

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Speaker Change: For the fiscal year, we achieved record financial results on both the top and bottom line.

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Speaker Change: Net sales were nearly $14.9 billion growing two 2% versus 2023 with a comp store sales increase of <unk>, 2%.

Speaker Change: Diluted earnings per share were also a record $2.04 on a split adjusted basis.

Speaker Change: In our digital business reached another year of record sales topping over $1.1 billion and all no.

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Speaker Change: These results are on top of record performance over the last four years.

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Speaker Change: In 2024, we also generated a record $1 $4 billion in operating cash flow.

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Speaker Change: [music].

Speaker Change: And we use this cash flow to fund the business and attractive growth opportunities in 2024, we opened 80, new tractor supply stores and 11 pet sensors.

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

Speaker Change: The team has done a fantastic job opening highly productive new stores as this remains a core strength and competency of tractor supply.

Speaker Change: Thank you Alyssa and good morning, everyone. We appreciate your time and participation in today's call on the call today are how Walton, our CEO and Kurt Barton our CFO. Following our prepared remarks, we'll open the floor for questions southeast up our Chief merchandising officer will also be available during the Q&A session. Please note that a.

Speaker Change: Other business investments we made in 2024 include a new distribution center in Malm, El Arkansas, and more than 160 fusion remodels.

Speaker Change: After funding our business and these initiatives for the fourth consecutive year, we returned more than $1 billion to our shareholders through the combination of dividends and share repurchases.

Speaker Change: Minerals slides presentation has been made available on our website to accompany today's earnings release now let me reference the safe Harbor provisions under the 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 opera.

Speaker Change: In 2024 marked the 15th consecutive year of dividend growth for tractor supply.

Speaker Change: And finally at the conclusion of the year, we successfully acquired Olivette and we look forward to integrating olivette into our business and offering it to our millions of Neighbor's club members, who are pet owners.

Speaker Change: <unk> and financial performance of the company in many cases these 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.

Speaker Change: In addition to these financial results and even more importantly, perhaps our team member and customer engagement has never been stronger.

Speaker Change: Frontline team member attrition is at a record low total.

Speaker Change: Total active customer counts are at record highs high value customer retention is at record levels custom.

Speaker Change: Expectations and.

Speaker Change: 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.

Speaker Change: Customer service scores continue to hit all time highs and.

Speaker Change: And our neighbors club one of the largest loyalty programs in retail continues to attract record levels of new customers and we're exiting 'twenty 'twenty four with all time highs in both retention rates and retain customer counts.

Speaker Change: 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 time tractor supply undertakes no obligation to update any information discussed in this call as we move into the Q&A session. Please limit yourself to one question to ensure everyone has.

Speaker Change: Neighbor's club is truly a key differentiator for tractor supply and we're committed to continued enhancements.

Speaker Change: For example in 2020 for our members benefited for more Personalised offers new tiers and more meaningful rewards. Additionally, the expansion of neighbor's club the pet since by track supply continues to drive strong customer engagement. This expansion is allowing us to deepen relationships with existing customers and help attract new pet customers to both banners.

Hal: The opportunity to participate if you have additional questions. Please feel free to rejoin the queue. We appreciate your understanding and cooperation we will also be available after the call for any further discussions. Thank you for your time and attention. This morning, and now it's my pleasure to turn the call over to Hal.

Speaker Change: Neighbor's club membership currently represents over 85% of sales of headsets with continued momentum.

Hal: Morning, and thank you to everyone for joining our call today before we begin I would like to acknowledge the recent wildfires and winter storms, our thoughts and prayers are with all those affected.

Speaker Change: The person shoppers also cross shopping tractor supply in an impressive rate of 50%.

Speaker Change: Increase of nearly three points year over year.

Hal: I'd also like to express our deepest appreciation to the first responders, who work tirelessly to protect our communities during these challenging times.

Speaker Change: Overall neighbor's club membership now exceeds 38 million and as a percent of our sales reached a record 80%.

Hal: Archrock supply team has and will continue to stand with our communities as they recover from these events.

Speaker Change: With our life out here strategy, we have built on tractor supply is long standing commitment to invest in our powerful flywheel, we substantially transformed our business and are operating from a higher level of performance, we've not given back any of the gains that we've made over the last five years and we delivered against our strategy.

Hal: You're opening video I think did an excellent job highlighting the key accomplishments of the tractor supply team in 2024.

Hal: And my sincere appreciation and gratitude go out to the team for all they do.

Hal: Over the year, our team consistently executed with distinction and delivered solid results in a tepid retail environment.

Speaker Change: And we're very excited about the future.

Speaker Change: As we plan for 2025, we're forecasting strong net sales growth of 5% to 7%.

Hal: Additionally, the team made progress against our wipe out here strategy, enabling continued market share gains and future growth.

Speaker Change: And comp sales performance of 1% to 3%.

Hal: Now, let's go through some of our highlights specific to the fourth quarter and the fiscal year starting with financials.

Speaker Change: We anticipate that the headwinds we've been facing will moderate as we move through the year and that we continue our share gains.

Hal: In the fourth quarter, our net sales grew three 1% and comparable store sales increased <unk>, 6% driven by strong comp transaction growth of two 3%.

Speaker Change: We expect product deflation should be relatively neutral by mid 2025 and.

Speaker Change: And Additionally, we see signs of stabilization in both personal consumption expenditure and the balance of goods versus services as well as in the pet food category.

Hal: And our fourth quarter diluted EPS was <unk> 44 cents.

Hal: For the fiscal year, we achieved record financial results on both the top and bottom line.

As it relates to the new presidential administration, while there are many unknowns that we acknowledged for example, tariffs we are confident in our ability to navigate these circumstances as they evolve.

Hal: Net sales were nearly $14.9 billion growing 2.2% versus 2023 with a comp store sales increase of 0.2%.

And for your time and attention. This morning, and now it's my pleasure to turn the call over to Hal.

Good morning, and thank you to everyone for joining our call today before we begin I would like to acknowledge the recent wildfires and winter storms, our thoughts and prayers are with all those affected.

Speaker Change: Additionally, as I'll note that many of these unknown or not tractor supply specific and on most fronts. Our business profile is attractive on a relative basis to other retailers and companies.

Hal: Diluted earnings per share were also a record $2.04 on a split adjusted basis.

Hal: And our digital business reached another year of record sales topping over $1.1 billion and all no.

I'd also like to express our deepest appreciation to the first responders, who work tirelessly to protect our communities during these challenging times.

Speaker Change: As we shared at our recent investment community day in December we remain confident in our long term targets and expect to return to them when market conditions return to neutral.

Hal: These results are on top of record performance over the last four years.

Our tractor supply team has and will continue to stand with our communities as they recover from these events.

Hal: In 'twenty 'twenty four we also generated a record $1.4 billion in operating cash flow.

Speaker Change: Supply is a unique and highly differentiated retailer with a history of executing with discipline on our strategy delivering strong financial results and continued to expand our competitive moat.

You're opening video I think did an excellent job highlighting the key accomplishments of the tractor supply team in 2024.

Hal: And we use this cash flow to fund the business and attractive growth opportunities in 2024, we opened 80, new tractor supply stores and 11 pet sensors. The team has done a fantastic job opening highly productive new stores as this remains a core strength and competency of tractor supply.

And my sincere appreciation and gratitude go out to the team for all they do.

Speaker Change: We continue to gain market share across our major product categories, and our customer metrics remain incredibly healthy.

Over the year, our team consistently executed with distinction and delivered solid results in a tepid retail environment.

Speaker Change: We're excited about the continued evolution of our life out here strategy that builds on our strengths continues the momentum of our existing strategy and launched new initiatives that increase our total addressable market to $225 billion.

Additionally, the team made progress against our life out here strategy, enabling continued market share gains and future growth.

Other business investments we made in 2024 include a new distribution center in Malm, El Arkansas, and more than 160 fusion remodels.

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

Speaker Change: We're entering the new year with momentum and opportunity and with that I'll now turn the call over to Kurt Thanks, Hal and Hello to everyone on the call.

Hal: After funding our business and these initiatives for the fourth consecutive year, we returned more than $1 billion to our shareholders through the combination of dividends and share repurchases.

In the fourth quarter, our net sales grew three 1% and comparable store sales increased <unk>, 6% driven by strong comp transaction growth of two 3%.

Speaker Change: Let's start with some key insights for the fourth quarter and full year I'll spend the bulk of my time on our outlook for 2025.

In 2024 marked the 15th consecutive year of dividend growth for tractor supply.

Kurt Barton: We had a solid performance given the overall conditions for the fourth quarter comparable store sales increased <unk>, 6% driven by strong comparable average transaction increase of two 3%, partially offset by comparable average ticket decrease of one 7% of note unit volumes were solid.

And our fourth quarter diluted EPS was <unk> 44 cents.

Hal: And finally at the conclusion of the year, we successfully acquired all of that and we look forward to integrating all of that into our business and offering it to our millions of neighbor's club members, who are pet owners.

For the fiscal year, we achieved record financial results on both the top and bottom line.

Net sales were nearly $14.9 billion growing two 2% versus 2023 with a comp store sales increase of <unk>, 2%.

In addition to these financial results and even more importantly, perhaps our team member and customer engagement has never been stronger.

Kurt Barton: And the ticket pressure was principally from average unit retail.

Diluted earnings per share were also a record $2.04 on a split adjusted basis.

Hal: Frontline team member attrition is at a record low total.

Kurt Barton: For the fourth quarter, we always believed that weather trumps the holiday.

Hal: Total active customer counts are at record highs high value customer retention is at record levels of.

And our digital business reached another year of record sales topping over $1.1 billion and all no.

Kurt Barton: Typically the winter weather has a much greater impact to the fourth quarter and once again that is how this year played out. In addition, we continue to face the ongoing headwind of deflation in key product categories. We estimate that deflation had approximately 100 basis point drag on our comp sales performance in the quarter most of the deflation pressure.

Hal: Customer service scores continue to hit all time highs.

These results are on top of record performance over the last four years.

Hal: And our neighbors club one of the largest loyalty programs in retail continues to attract record levels of new customers and we're exiting 'twenty 'twenty four with all time highs in both retention rates and retain customer counts.

In 2024, we also generated a record $1.4 billion in operating cash flow.

And we use this cash flow to fund the business and attractive growth opportunities in 2024, we opened 80, new tractor supply stores and 11 pet sensors. The team has done a fantastic job opening highly productive new stores as this remains a core strength and competency of tractor supply.

Kurt Barton: Came from commodity based products consistent with the recent trends.

Hal: Neighbor's club is truly a key differentiator for tractor supply and we're committed to continued enhancements for example in 2020 for our members benefited for more Personalised offers new tiers and more meaningful rewards. Additionally, the expansion of Neighbor's club the purchase by track supply continues to drive strong customer engagement.

Kurt Barton: As we progressed through the quarter, we saw a positive impact from the early October Hurricanes.

Kurt Barton: While the warmer than usual temperatures in late October and November presented some challenges December had a modest improvement in the weather and solid holiday performance, demonstrating our resilience and ability to adapt to varying conditions.

Other business investments we made in 2024 include a new distribution center in Malm, El Arkansas, and more than 160 fusion remodels.

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

Kurt Barton: Turning to the category performance for the quarter, we had strong comps in our seasonal department as well as truck tool and hardware with both performing better than chain average our consumable usable edible products performed in line with chain average, notably we had mid single digit unit growth as we continue to believe we are gaining share.

After funding our business and these initiatives for the fourth consecutive year, we returned more than $1 billion to our shareholders through the combination of dividends and share repurchases.

Hal: Neighbor's club membership currently represents over 85% of sales up headsets with continued momentum.

Hal: Pets and shoppers also cross shopping tractor supply in an impressive rate of 50% an.

And 'twenty 'twenty four marked the 15th consecutive year of dividend growth for tractor supply.

Hal: Increase of nearly three points year over year.

And finally at the conclusion of the year, we successfully acquired alphabet and we look forward to integrating olivette into our business and offering it to our millions of Neighbor's club members, who are pet owners.

Hal: Overall neighbor's club membership now exceeds 38 million and as a percent of our sales reached a record 80%.

Kurt Barton: In these categories overall.

Kurt Barton: The strength of our unit growth in Q was offset by ongoing deflation.

Kurt Barton: No doubt the warm weather in November and to a lesser extent December weighed on our winter seasonal business overall, our spring and summer seasonal categories drove positive comp sales with zero turn and front engine mowers, both up double digits. This is indicative of the unseasonably warm weather, we had in the quarter.

Hal: With our life out here strategy, we have built on tractor supply's long standing commitment to invest in our powerful flywheel, we substantially transformed our business and are operating from a higher level of performance, we've not given back any of the gains that we've made over the last five years and we've delivered against our strategy.

In addition to these financial results and even more importantly, perhaps our team member and customer engagement has never been stronger Brent.

Frontline team member attrition is at a record low total.

Total active customer counts are at record highs.

High value customer retention is at record levels custom.

Cold weather related categories, such as insulated outerwear and heating modestly underperformed chain average due to the warm weather conditions.

Hal: And we're very excited about the future.

Customer service scores continue to hit all time highs and.

Hal: As we plan for 2025, we're forecasting strong net sales growth of 5% to 7%.

And our neighbors club one of the largest loyalty programs in retail continues to attract record levels of new customers and we're exiting 'twenty 'twenty four with all time highs in both retention rates and retain customer counts.

Kurt Barton: Big ticket performance continued to outperform in the low single digits, we experienced strength in hurricane response categories like generators. Additionally, grilling mowers trailers and truck toolbox is all performed well.

Hal: Comp sales performance of 1% to 3%.

Hal: We anticipate that the headwinds we've been facing will moderate as we move through the year and that we continue our share gains.

Neighbor's club is truly a key differentiator for tractor supply and we're committed to continued enhancements for example in 2020 for our members benefited for more Personalised offers new tiers and more meaningful rewards.

Hal: We expect product deflation should be relatively neutral by mid 2025 and.

Kurt 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 for the holiday season.

Hal: And Additionally, we see signs of stabilization in both personal consumption expenditure and the balance of goods versus services as well as in the pet food category.

Additionally, the expansion of Neighbor's club the pet since by track supply continues to drive strong customer engagement. This expansion is allowing us to deepen relationships with existing customers and help attract new pet customers to both banners.

Hal: As it relates to the new presidential administration, while there are many unknowns that we acknowledged for example, tariffs we are confident in our ability to navigate the circumstances as they evolve.

Kurt Barton: Moving on to gross margin gross margin decreased nine basis points to 35, 2% from the prior year's fourth quarter. It is worth calling out that we were lapping our most difficult gross margin comparison of the quarter with 129 basis points of expansion in the prior year.

Neighbor's club membership currently represents over 85% of sales up headsets with continued momentum the pea.

Hal: Additionally, as I'll note that many of these are nodes are not tractor supply specific and on most fronts. Our business profile is attractive on a relative basis to other retailers and companies.

Pets and shoppers also cross shopping tractor supply in an impressive rate of 50% an.

Kurt Barton: Our performance was relatively in line with our expectations.

Kurt Barton: As a percent of net sales SG&A expenses, including depreciation and amortization increased 60 basis points year over year to 26, 8%. This increase was primarily attributable to our planned growth investments, including higher depreciation and the onboarding of a new distribution center and modest deleverage of our fixed cost.

The increase of nearly three points year over year.

Hal: As we shared at our recent investment community day in December we remain confident in our long term targets and expect to return to them when market conditions return to neutral.

Overall neighbor's club membership now exceeds $38 million and as a percent of our sales reached a record 80%.

Hal: The actual supply is a unique and highly differentiated retailer with a history of executing with discipline on our strategy delivering strong financial results and continue to expand our competitive moat.

With our life out here strategy, we have built on tractor supply's long standing commitment to invest in our powerful flywheel, we substantially transformed our business and are operating from a higher level of performance, we've not given back any of the gains that we've made over the last five years and we delivered against our strategy.

Kurt Barton: Given the level of comparable store sales growth.

Kurt Barton: These factors were partially offset by the team's disciplined focus on productivity and our ongoing emphasis on cost control we.

Hal: We continue to gain market share across our major product categories, and our customer metrics remain incredibly healthy.

Kurt Barton: We did have a modest benefit from our ongoing sale leaseback strategy. This quarter, we had a similar number of existing store sales as the prior year with a slightly higher average gain per store.

And we're very excited about the future.

We're excited about the continued evolution of our life out here strategy that builds on our strengths continues the momentum of our existing strategy and launches new initiatives that increase our total addressable market to $225 billion.

As we plan for 2025, we're forecasting strong net sales growth of 5% to 7%.

Kurt Barton: Operating margin declined 69 basis points for the quarter to eight 4%.

Comp sales performance of 1% to 3%.

Speaker Change: We anticipate that the headwinds we've been facing will moderate as we move through the year and that we continue our share gains.

Kurt Barton: We're entering the new year with momentum and opportunity and with that I'll now turn the call over to Kurt.

Kurt Barton: Now, let's move to our outlook for 2025.

Kurt Barton: As I have previously shared navigating economic cycles is in our DNA.

Kurt Barton: And Hello to everyone on the call.

Speaker Change: We expect product deflation should be relatively neutral by mid 2025, and additionally, we see signs of stabilization in both personal consumption expenditure and the balance of goods versus services as well as in the pet food category.

Speaker Change: Let's start with some key insights for the fourth quarter and full year I'll spend the bulk of my time on our outlook for 2025.

Kurt Barton: We have a long track record of successfully managing through diverse market conditions the needs based nature of our business combined with our deep understanding of these dynamics allows us to proactively adapt to the market conditions.

Speaker Change: We had a solid performance given the overall conditions for the fourth quarter comparable store sales increased <unk>, 6% driven by strong comparable average transaction increase of two 3%, partially offset by comparable average ticket decrease of one 7% of note unit volumes were solid.

Speaker Change: The same can be said about tariffs as how commented in his opening remarks. There are certainly a number of unknowns at this time on this important topic.

Speaker Change: This is a team that has been cycle tested with lessons learned from the prior administration for instance, we have continued to diversify our country of origin for imports. We have been scenario planning and are prepared to address as any proposed actions take effect.

Speaker Change: Additionally, as I'll note that many of these unknowns or not tractor supply specific and on most fronts. Our business profile is attractive on a relative basis to other retailers and companies.

Speaker Change: And the ticket pressure was principally from average unit retail.

Speaker Change: For the fourth quarter, we always believe that weather trumps the holiday typically the winter weather has a much greater impact to the fourth quarter and once again that is how this year played out. In addition, we continue to face the ongoing headwind of deflation in key product categories. We estimate that deflation had approximately 100 basis points.

Speaker Change: It is important to remember that this is a topic that affects all of retail.

Speaker Change: As we shared at our recent investment community day in December we remain confident in our long term targets and expect to return to them when market conditions return to neutral tracks.

Speaker Change: We are differentiated is we only have about 12% or so of our sales that are direct imports and have a large <unk> business that is domestically sourced.

Speaker Change: Tractor supply is a unique and highly differentiated retailer with a history of executing with discipline on our strategy delivering strong financial results and continue to expand our competitive moat.

Speaker Change: Given the fluid nature of the discussion on tariffs and the number of unknowns our guidance does not assume any changes in tariffs at this time.

Speaker Change: <unk> on our comp sales performance in the quarter most of the deflation pressure came from commodity based products consistent with the recent trends.

Speaker Change: We successfully managed through tariffs in prior cycles, we will remain flexible and nimble to adapt to the changing environment.

Speaker Change: We continue to gain market share across our major product categories, and our customer metrics remain incredibly healthy.

Speaker Change: As we progressed through the quarter, we saw positive impact from the early October hurricanes, while the warmer than usual temperatures in late October and November presented some challenges December had a modest improvement in the weather and solid holiday performance, demonstrating our resilience and ability to adapt to varying conditions.

Speaker Change: For fiscal 2025, we are forecasting net sales growth of 5% to 7% to 15, 6% to $15 9 billion.

Speaker Change: We're excited about the continued evolution of our life out here strategy that builds on our strengths continues the momentum of our existing strategy and launches new initiatives that increase our total addressable market to $225 billion.

Speaker Change: Approximately four points of this growth is driven by new stores and ally bet with a purchase price of $135 million, we anticipate ally about adding more than $100 million to our net sales and accretive to earnings.

Speaker Change: Turning to the category performance for the quarter, we had strong comps in our seasonal department as well as truck tool and hardware with both performing better than chain average our consumable usable edible products performed in line with chain average, notably we had mid single digit unit growth as we continue to believe we are.

Speaker Change: We're entering the new year with momentum and opportunity and with that I'll now turn the call over to Kirk, Thanks, Hal and Hello to everyone on the call.

Speaker Change: Comparable store sales are anticipated to increase 1% to 3%.

Kirk: Let's start with some key insights for the fourth quarter and full year I'll spend the bulk of my time on our outlook for 2025.

Speaker Change: We expect modest gross margin expansion of about 20 to 40 basis points from continued supply chain efficiencies benefits from effective cost and price management, and our exclusive brands and retail media initiatives.

Speaker Change: We had a solid performance given the overall conditions for the fourth quarter comparable store sales increased <unk>, 6% driven by strong comparable average transaction increase of two 3%, partially offset by a comparable average ticket decrease of one 7% of note unit volumes were solid.

Speaker Change: Gaining share in these categories overall, the strength of our unit growth in Q was offset by ongoing deflation.

Speaker Change: We anticipate a relatively stable and consistent overall transportation market with.

Speaker Change: No doubt the warm weather in November and to a lesser extent December weighed on our winter seasonal business overall, our spring and summer seasonal categories drove positive comp sales with zero turn and front engine mowers bolt up double digits. This is indicative of the unseasonably warm weather, we had in the quarter.

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

Speaker Change: Depreciation and amortization is anticipated to increase about 10% with a higher growth rate in the first half as compared to the second half of the year.

Speaker Change: And the ticket pressure was principally from average unit retail.

Speaker Change: For the fourth quarter, we always believed that weather trumps the holiday typically the winter weather has a much greater impact to the fourth quarter and once again that is how this year played out. In addition, we continue to face the ongoing headwind of deflation in key product categories. We estimate that deflation had approximately 100 basis points.

Speaker Change: 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.

Speaker Change: Cold weather related categories, such as insulated outerwear and heating modestly underperformed chain average due to the warm weather conditions.

Speaker Change: Big ticket performance continued to outperform in the low single digits, we experienced strength in hurricane response categories like generators. Additionally, grilling mowers trailers and truck toolbox as all performed well.

Speaker Change: Second we are investing in our life out here 2030 strategic initiatives in order to launch our direct sales can final mile initiatives. We are planning a net investment of about 15 to 20 basis points of operating margin into these exciting opportunities for growth.

Speaker Change: Rag on our comp sales performance in the quarter most of the deflation pressure came from commodity based products consistent with the recent trends.

Speaker Change: 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 for the holiday season moving.

Speaker Change: As we progressed through the quarter, we saw positive impact from the early October Hurricanes.

Speaker Change: In 2025, we will continue our planned strategic sale leaseback program to sell some of our existing owned stores.

Speaker Change: While the warmer than usual temperatures in late October and November presented some challenges December had a modest improvement in the weather and solid holiday performance, demonstrating our resilience and ability to adapt to varying conditions.

Speaker Change: As we recently indicated at our investment community day, we expect to sell an incremental two to four existing stores to fund the step up in new stores from 80 to 90 in 2025.

Speaker Change: Moving on to gross margin gross margin decreased nine basis points to 35, 2% from the prior year's fourth quarter. It is worth calling out that we were lapping our most difficult gross margin comparison of the quarter with 129 basis points of expansion in the prior year. Our performance was relatively in line with our expectations.

Speaker Change: We anticipate these sales will occur across the year with a similar EPS contribution as in 2024 in total.

Speaker Change: For the year, we forecast an operating margin of nine 6% to 10% centering around our 2024 performance.

Speaker Change: As a percent of net sales SG&A expenses, including depreciation and amortization increased 60 basis points year over year to 26, 8%. This increase was primarily attributable to our planned growth investments, including higher depreciation and the onboarding of a new distribution center and modest deleverage of our.

Speaker Change: We are forecasting interest expense of approximately $65 million to $70 million, we plan to maintain a healthy leverage ratio of a little over two times.

Speaker Change: In these categories overall.

Speaker Change: The strength of our unit growth in Q was offset by ongoing deflation.

Speaker Change: We expect our effective tax rate to be in the range of 22.2% to 22, 5%.

Speaker Change: No doubt the warm weather in November and to a lesser extent December weighed on our winter seasonal business overall, our spring and summer seasonal categories drove positive comp sales with zero turn and front engine mowers, both up double digits. This is indicative of the unseasonably warm weather, we had in the quarter.

Speaker Change: Diluted EPS is forecast in a range of $2 10 to $2.

Speaker Change: Fixed cost given the level of comparable store sales growth.

Speaker Change: And 'twenty two.

Speaker Change: Net capital expenditures are forecast to be $650 to $725 million or about four to four 5% of sales.

Speaker Change: These factors were partially offset by the team's disciplined focus on productivity and our ongoing emphasis on cost control. We did have a modest benefit from our ongoing sale leaseback strategy. This quarter, we had a similar number of existing store sales as the prior year with a slightly higher average gain per store.

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

Speaker Change: Cold weather related categories, such as insulated outerwear and heating modestly underperformed chain average due to the warm weather conditions.

Speaker Change: Gross capital expenditures are forecast to be around $1 billion.

Speaker Change: Operating margin declined 69 basis points for the quarter to eight 4%.

Speaker Change: Our capital plans reflect a ramp in our new store openings to approximately 90 tractor supply stores.

Speaker Change: Now, let's move to our outlook for 2025.

Speaker Change: We anticipate opening about 10 <unk> stores this year.

Speaker Change: As I've previously shared navigating economic cycles is in our DNA.

Speaker Change: Our new store pipeline remains exceptionally strong continuing to exceed historical averages in both sales and profitability.

Speaker Change: We have a long track record of successfully managing through diverse market conditions the needs based nature of our business combined with our deep understanding of these dynamics allows us to proactively adapt to the market conditions.

Speaker Change: We expect our store opening cadence to be in line with 2024.

Speaker Change: As we announced this week, we anticipate starting construction of our 11th distribution Center in Idaho later this year with operations commencing in late 2026 or early 2027.

Speaker Change: The same can be said about tariffs as how commented in his opening remarks. There are certainly a number of unknowns at this time on this important topic.

Speaker Change: This is an exciting expansion of our DC network that will allow us to more effectively service, our existing stores and new store growth opportunities in the Pacific Northwest.

Speaker Change: This is a team that has been cycled tested with lessons learned from the prior administration for instance, we have continued to diversify our country of origin for imports. We have been scenario planning and are prepared to address as any proposed actions take effect.

Speaker Change: We remain committed to returning cash to shareholders through the combination of a growing dividend and share repurchases for 2025, we anticipate share repurchases in a range of $525 million to $600 million, which is estimated to have a benefit of a net reduction in weighted average shares outstanding of approximately 1% to 2%.

Speaker Change: Our performance was relatively in line with our expectations.

It is important to remember that this is a topic that affects all of retail.

Speaker Change: We are differentiated is we only have about 12% or so of our sales that are direct imports and have a large <unk> business that is domestically sourced.

Speaker Change: Given the fluid nature of the discussion on tariffs and the number of unknowns our guidance does not assume any changes in tariffs at this time.

Speaker Change: Now I'd like to walk through a few items to consider for the calendar innovation of our expectations as always we believe the best way to look at our results 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 2025 guidance we anticipate.

Speaker Change: Given the level of comparable store sales growth.

Speaker Change: These factors were partially offset by the team's disciplined focus on productivity and our ongoing emphasis on cost control we.

Speaker Change: We successfully managed through tariffs in prior cycles, we will remain flexible and nimble to adapt to the changing environment.

Speaker Change: We did have a modest benefit from our ongoing sale leaseback strategy. This quarter, we had a similar number of existing store sales as the prior year with a slightly higher average gain per store.

Speaker Change: For fiscal 2025, we are forecasting net sales growth of 5% to 7% to $15 six to $15 $9 billion approximately four points of this growth is driven by new stores and ally bet with a purchase price of $135 million, we anticipate allied that adding more than $100 million to our net sales.

Speaker Change: <unk> that comp sales will be modestly stronger in the second half of the year as our compares ease and the headwind from deflation continues to moderate.

Speaker Change: Operating margin declined 69 basis points for the quarter to eight 4%.

Speaker Change: We are planning for positive comp transactions for the year, along with flat to slightly positive average ticket, we anticipate that deflation will be a modest headwind in the first half of the year.

Speaker Change: Now, let's move to our outlook for 2025.

Speaker Change: As I have previously shared navigating economic cycles is in our DNA.

Speaker Change: And accretive to earnings.

Speaker Change: <unk> store sales are anticipated to increase 1% to 3%. We expect modest gross margin expansion of about 20 to 40 basis points from continued supply chain efficiencies benefits from effective cost and price management, and our exclusive brands and retail media initiatives.

Speaker Change: We believe we are nearing the trough now having successfully managed through the deflation of 2023 and 2024.

Speaker Change: As to earnings we expect our EPS growth to be relatively consistent between the first half and second half of the year as.

Speaker Change: The same can be said about tariffs as how commented in his opening remarks. There are certainly a number of unknowns at this time on this important topic.

Speaker Change: As we see it today, our forecast calls for the first half of the year to have marginally better operating margin performance than the second half as we begin to cycle recent transportation efficiencies.

Speaker Change: We anticipate a relatively stable and consistent overall transportation market.

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

Speaker Change: Specific to the first quarter, we've had a solid start to the year given the recent cold weather trends as a reminder January last year was also very cold with strong comps, we're seeing good momentum as we start the first quarter recognizing we have a lot of the quarter ahead of US overall, we are anticipating positive comp sales for.

Speaker Change: Depreciation and amortization is anticipated to increase about 10% with a higher growth rate in the first half as compared to the second half of the year.

Speaker Change: 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.

It is important to remember that this is a topic that affects all of retail.

Speaker Change: We are differentiated is we only have about 12% or so of our sales that are direct imports and have a large <unk> business that is domestically sourced.

Speaker Change: The first quarter.

Speaker Change: Our first quarter diluted EPS is anticipated to be relatively consistent with the prior year as our positive sales growth is somewhat offset by our investments in the business.

Speaker Change: Given the fluid nature of the discussion on tariffs and the number of unknowns our guidance does not assume any changes in tariffs at this time.

Speaker Change: We are planning for continued gross margin expansion to be offset by incremental investments to launch our strategic initiatives and the operational cost for our new Arkansas distribution Center, which opened in mid 2024 as a consequence operating margin is anticipated to be flat to slightly below prior year.

Speaker Change: We successfully managed through tariffs in prior cycles, we will remain flexible and nimble to adapt to the changing environment.

Speaker Change: In 2025, we will continue our planned strategic sale leaseback program to sell some of our existing owned stores as.

Speaker Change: For fiscal 2025, we are forecasting net sales growth of 5% to 7% to $15 six to $15 9 billion approximately four points of this growth is driven by new stores and ally bet with a purchase price of $135 million, we anticipate allied that adding more than $100 million to our net sales.

Speaker Change: As we recently indicated at our investment community day, we expect to sell an incremental two to four existing stores to fund the step up in new stores from an 80 to 90 in 2025, we anticipate these sales will occur across the year with a similar EPS contribution as in 2024 in total.

Speaker Change: 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 tradeoffs to fuel our investments while we protect our operating profit margins and earnings we intend to maintain this focused approach through <unk>.

Speaker Change: And accretive to earnings.

Speaker Change: For the year, we forecast an operating margin of 9.6% to 10% centering around our 2020 for performance.

Hal: 2025, as we self fund our life out here 2030 initiatives, we are committed to continuously striving for stronger results with that I will turn the call back over to Hal.

Speaker Change: We are forecasting interest expense of approximately $65 million to $70 million, we plan to maintain a healthy leverage ratio of a little over two times, we expect our effective tax rate to be in the range of 22.2% to 22, 5%.

Speaker Change: We anticipate a relatively stable and consistent overall transportation market.

Thanks, Kurt as we shared in December at our investment community day, we're embarking on the next leg of growth for tractor supply with our life out here 2030 strategy.

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

Speaker Change: Diluted EPS is forecast in a range of $2 <unk> to.

Speaker Change: To $2.22.

Speaker Change: Depreciation and amortization is anticipated to increase about 10% with a higher growth rate in the first half as compared to the second half of the year.

Speaker Change: Net capital expenditures are forecast to be $650 to $725 million or about four to four 5% of sales.

Hal: This strategy is designed to continue to invest in what's working as well as begin investments in several new opportunities.

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

Hal: Creating horizons of growth that we expect to last through the end of the decade.

Speaker Change: 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.

Hal: Key initiatives in our life out here strategy will continue to be our project fusion and Garden Center Rollouts. Both of these projects are working well and delivering compelling returns through improved space productivity.

Speaker Change: Gross capital expenditures are forecast to be around $1 billion.

Speaker Change: Our capital plans reflect a ramp in our new store openings to approximately 90 tractor supply stores, we anticipate opening about 10 <unk> stores this year.

Speaker Change: Second we are investing in our life out here 2030 strategic initiatives in order to launch our direct sales and final mile initiatives. We are planning a net investment of about 15 to 20 basis points of operating margin into these exciting opportunities for growth.

Hal: In 2025, these initiatives will be complemented with enhanced localization capabilities.

Speaker Change: Our new store pipeline remains exceptionally strong continuing to exceed historical averages in both sales and profitability. We expect our store opening cadence to be in line with 2024.

Hal: Specifically the team has developed data driven archetypes that Taylor approximately 25% of store space to better reflect customer needs and further optimize the incremental sales opportunity of each unique site.

Speaker Change: In 2025, we will continue our planned strategic sale leaseback program to sell some of our existing owned stores as.

Speaker Change: As we announced this week, we anticipate starting construction of our 11th distribution Center in Idaho later this year with operations commencing in late 2026 or early 2027.

Hal: Going forward, all new stores, and our fusion Remodels will have localized space allocation and assortment based on their respective archetypes.

Speaker Change: This is an exciting expansion of our DC network that will allow us to more effectively service, our existing stores and new store growth opportunities in the Pacific Northwest.

Turning to our Neighbor's club.

Hal: We have significant plans in place to continue to capitalize on this unique strategic asset.

Speaker Change: For the year, we forecast an operating margin of nine 6% to 10% centering around our 2020 for performance.

Hal: A significant focus for us this year will be to bring our members pet Rx through our recent olivette acquisition the.

Hal: The acquisition of Ala that expands our total addressable market by $15 billion to 225 billion.

Hal: All of that has a proven platform to make pet ownership easier by providing convenient access to brand name medications expert pharmacy advice and convenient reordering with its auto ship program.

Now I'd like to walk through a few items to consider for the calendar as nation of our expectations as always we believe the best way to look at our results 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 2025 guidance we.

Speaker Change: Diluted EPS is forecast in a range of $2 10 to.

Speaker Change: To $2.22.

Speaker Change: Net capital expenditures are forecast to be $650 to $725 million or about four to four 5% of sales.

Hal: Our efforts in Q1 are focused on integrating all of that is catalog onto track supply dot com and updating our members neighbor's club profile to include their prescription and veterinarian information.

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

Speaker Change: Anticipating that comp sales will be modestly stronger in the second half of the year as our compares ease and the headwind from deflation continued to moderate we.

Hal: We look forward to providing our 38 million neighbor's club members with a value added pet and animal prescription service and introducing tracks fly to Alabama customers.

Speaker Change: Gross capital expenditures are forecast to be around $1 billion.

Speaker Change: Our capital plans reflect a ramp in our new store openings to approximately 90 tractor supply stores.

Speaker Change: As Kurt mentioned, we're investing in this year and several new key strategic initiatives, especially direct sales and final mile. It is critical to get them off to a strong start and the team is keenly focused on our multi year journey to capture the significant opportunity with these initiatives.

Speaker Change: We anticipate opening about 10 <unk> stores this year.

Speaker Change: Our new store pipeline remains exceptionally strong continuing to exceed historical averages in both sales and profitability.

Speaker Change: We believe we are nearing the trough now having successfully manage through the deflation of 2023 and 2024.

Speaker Change: We expect our store opening cadence to be in line with 2024.

Speaker Change: As to earnings we expect our EPS growth to be relatively consistent between the first half and second half of the year as we see it today our forecast calls for the first half of the year to have marginally better operating margin performance than the second half as we begin to cycle recent transportation efficiencies.

Speaker Change: As we announced this week, we anticipate starting construction of our 11th distribution Center in Idaho later this year with operations commencing in late 2026 or early 2027.

Speaker Change: And direct sales our efforts in the first half are focused on building a scalable field sales model and launching version one of our business to business selling platform.

Speaker Change: This is an exciting expansion of our DC network that will allow us to more effectively service, our existing stores and new store growth opportunities in the Pacific Northwest.

Speaker Change: And final mile. Our efforts in the first half are focused on hardening, our existing delivery hubs activating inventory across more locations and bringing bulk online orders in house for delivery.

Speaker Change: Specific to the first quarter, we've had a solid start to the year given the recent cold weather trends as a reminder January last year was also very cold with strong comps. We are seeing good momentum as we start the first quarter recognizing we have a lot of the quarter ahead of US overall, we are anticipating positive comp sales.

Speaker Change: While our long term strategy sets the foundation for sustained growth. Our 2025 operating plans are designed to deliver measurable results today, ensuring we continue to meet our evolving customers' needs and build momentum towards achieving our long term goals.

Speaker Change: For the first quarter.

Speaker Change: Our first quarter diluted EPS is anticipated to be relatively consistent with the prior year as our positive sales growth is somewhat offset by our investments in the business.

Speaker Change: As mentioned the Euro started solid and our teams have been busy supporting our customers for all their winter needs as a dependable supplier of the out here lifestyle.

Speaker Change: Now I'd like to walk through a few items to consider for the calendar <unk> of our expectations as always we believe the best way to look at our results 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 2025 guidance we anticipate.

Speaker Change: Or am heating fuel and heating pellets to insight into the winter clothing to livestock feed we are highly engaged ensuring our customers have what they need to deal with the recent winter storms and recovery.

Speaker Change: <unk> that comp sales will be modestly stronger in the second half of the year as our compares ease and the headwind from deflation continues to moderate.

Speaker Change: As the calendar will soon turn to spring, we've already transitioned over 600 of our stores to our spring sets and the remainder will do serve in the next couple of months.

Speaker Change: Our merchant teams have done an excellent job, bringing value and innovation to our lineups for spring <unk>.

Speaker Change: Examples include expanding Weber grilling to all stores and launching exclusive zero turn mowers from Cub cadet and the second year of the Toro habit as well as introducing new national live goods programs and we have so much more and I look forward to sharing more details on spring and our Q1 earnings call as all.

Speaker Change: We believe we are nearing the trough now having successfully managed through the deflation of 2023 and 2024.

Speaker Change: 2025, as we self fund our life out here 2030 initiatives, we are committed to continuously striving for stronger results with that I will turn the call back over to Hal.

Speaker Change: Thanks, Kurt as we shared in December at our investment community day, we're embarking on the next leg of growth for tractor supply with our life out here 2030 strategy.

Speaker Change: Ways, we are laser focused on our Q categories.

Speaker Change: In our companion animal segment, we're pleased to launch new products, both in store and online.

Speaker Change: We recently launched for health Shreds, we expanded our temptation assortment in cap and we introduced new freeze dried and shelf stable treats.

Speaker Change: This strategy is designed to continue to invest in what's working as well as begin investments in several new opportunities.

Speaker Change: Creating horizons of growth that we expect to last through the end of the decade.

Speaker Change: In the market now we have our annual pet appreciation days with a month of targeted savings offers and in store events to drive excitement.

Speaker Change: Key initiatives in our life out here strategy will continue to be our project fusion and Garden Center Rollouts. Both of these projects are working well and delivering compelling returns through improved space productivity.

Speaker Change: We will continue to leverage our over 1000 pet wash locations and last year, we conducted over 1.8 million pet washes, including a record breaking 500000 plus in Q4.

Speaker Change: The first quarter.

Speaker Change: Our first quarter diluted EPS is anticipated to be relatively consistent with the prior year as our positive sales growth is somewhat offset by our investments in the business.

Speaker Change: In 2025, these initiatives will be complemented with enhanced localization capabilities.

Speaker Change: Our pet Isle is more robust than ever featuring familiar favorites as well as new unique offerings that deliver the quality our customers expect at incredible value.

Speaker Change: Specifically the team has developed data driven archetypes that Taylor approximately 25% of store space to better reflect customer needs and further optimize the incremental sales opportunity of each unique site.

Speaker Change: In our animal segment spring it tracks fly maintenance time for our annual spring Chick days.

Speaker Change: Going forward, all new stores, and our fusion Remodels will have localized space allocation and assortment based on their respective archetypes.

Speaker Change: The arrival of checks at our stores is a sure sign of spring and creates strong retail theater in our stores backyard poultry continues to see significant engagement with our customers highlighting a shift towards sustainable and self reliance living.

Speaker Change: Turning to our Neighbor's club.

Speaker Change: We have significant plans in place to continue to capitalize on this unique strategic asset.

Speaker Change: Whether it's pets or as a source of eggs chicks are about the practical and enjoyable hobby for many and are often referred to as the third pet.

Speaker Change: A significant focus for us this year will be to bring our members pet Rx through our recent olivette acquisition.

Hal: 2025, as we self fund our life out here 2030 initiatives, we are committed to continuously striving for stronger results with that I will turn the call back over to Hal.

Speaker Change: We have more shopping trends and insights than ever on our poultry customers and are able to build out more targeted campaigns based on where they are in their journey as our customers build and maintain their blocks, we have everything they need for feed treats toys and an exciting lineup of new chicken coops.

The acquisition of Ala that expands our total addressable market by $15 billion to 225 billion.

Speaker Change: All of that has a proven platform to make pet ownership easier by providing convenient access to brand name medications expert pharmacy advice and convenient reordering with its auto ship program.

Hal: Kurt as we shared in December at our investment community day, we're embarking on the next leg of growth for tractor supply with our life out here 2030 strategy.

Speaker Change: Okay.

Speaker Change: Our retail philosophy as it chick dates as a great gateway for our customers to deepen their relationship with tractor supply and that enables track supply then be viewed as a resource for all things related to homesteading beyond the poultry category.

Speaker Change: This strategy is designed to continue to invest in what's working as well as begin investments in several new opportunities.

Speaker Change: Our efforts in Q1 are focused on integrating Ala that's catalog onto track supply dot com and updating our members neighbor's club profile to include their prescription and veterinarian information.

Speaker Change: Creating horizons of growth that we expect to last through the end of the decade.

Speaker Change: Earlier this week, we announced a multiyear strategic licensing partnership with field <unk> stream.

Speaker Change: We look forward to providing our 38 million neighbor's club members with a value added pet and animal prescription service and introducing tracks fly to Alabama customers.

Speaker Change: Beginning in June tracks flight customers can shop, a variety of hunting and outdoor field <unk> stream branded products. We're excited about the opportunity. This partnership presents and look forward to providing more details in future earnings calls.

Speaker Change: As Kurt mentioned, we're investing in this year and several new key strategic initiatives, especially direct sales and final mile. It is critical to get them off to a strong start and the team is keenly focused on our multiyear journey to capture the significant opportunity with these initiatives.

Speaker Change: In 2025, these initiatives will be complemented with enhanced localization capabilities.

Speaker Change: As the season turns to spring I hope you get a chance to visit our stores and see the actions and initiatives coming to life.

Speaker Change: Our future remains exceptionally bright and exciting.

Speaker Change: Our upcoming initiatives scale and capabilities demonstrate our ability to meet the evolving needs of our customers. We're excited about the future and look forward to continuing our journey of growth and innovation in the channel.

Speaker Change: And direct sales our efforts in the first half are focused on building a scalable field sales model and launching version one of our business to business selling platform.

Speaker Change: Going forward, all new stores, and our fusion Remodels will have localized space allocation and assortment based on their respective archetypes.

Speaker Change: I'd like to close where I started by extending my gratitude to our team members for their unwavering dedication to each other and serving our customers.

Speaker Change: Turning to our Neighbor's club.

Speaker Change: We have significant plans in place to continue to capitalize on this unique strategic asset.

Speaker Change: I'd also like to thank our customers for choosing us as their trusted supplier for life out here.

Speaker Change: A significant focus for us this year will be to bring our members pet Rx through our recent olivette acquisition.

Speaker Change: Our long term strategy sets the foundation for sustained growth. Our 2025 operating plans are designed to deliver measurable results today, ensuring we continue to meet our evolving customers' needs and build momentum towards achieving our long term goals.

Speaker Change: And also call out our 'twenty 300, plus communities for embracing us as an integral part of our hometowns.

The acquisition of Alabama expands our total addressable market by $15 billion to 225 billion.

Speaker Change: Operator, we'd now like to open the line for questions.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: As mentioned the Euro started solid and our teams have been busy supporting our customers for all their winter needs as a dependable supplier of the out here lifestyle.

Speaker Change: Yeah.

Speaker Change: Our efforts in Q1 are focused on integrating all of that is catalog onto track supply dot com.

Speaker Change: From heating fuel and heating pellets to insight as the winter clothing to livestock feed we are highly engaged ensuring our customers have what they need to deal with the recent winter storms and recovery.

Speaker Change: In updating our members neighbor's club profile to include their prescription and veterinarian information.

Speaker Change: We look forward to providing our 38 million neighbor's club members with a value added pet and animal prescription service and introducing tracks fly to all of that as customers.

Speaker Change: As the calendar will soon turn to string we've already transitioned over 600 of our stores to our spring sets and the remainder will do serve in the next couple of months.

Speaker Change: Thank you.

Speaker Change: We will now begin the question and answer portion of today's call.

Speaker Change: As Kurt mentioned, we're investing in this year and several new key strategic initiatives, especially direct sales and final mile. It is critical to get them off to a strong start and the team is keenly focused on our multiyear journey to capture the significant opportunity with these initiatives.

Speaker Change: Our merchant teams have done an excellent job, bringing value and innovation to our lineups for spring.

Speaker Change: As a reminder to queue for questions. Please press star one on your telephone keypad.

Speaker Change: Additionally, please limit yourself to one question and return to the queue.

Speaker Change: Well pause here briefly ask questions are registered.

Speaker Change: And direct sales our efforts in the first half are focused on building a scalable field sales model and launching version one of our business to business selling platform.

Speaker Change: The first question comes from the line of Simeon Gutman with Morgan Stanley.

Speaker Change: All ways, we are laser focused on our key categories.

Speaker Change: Your line is now open.

Simeon Gutman: Good morning, everyone.

Speaker Change: And our companion animal segment, we're pleased to launch new products, both in store and online.

Simeon Gutman: I wanted to focus my one question on comp transactions, which were positive and a good sign of health can you talk about transaction breath in two ways geographically and then if you can look at it across immature in mature stores, how balanced is it.

Speaker Change: We recently launched for health Shreds, we expanded our temptation assortment in cap and we introduced new freeze dried and shelf stable treats.

Speaker Change: In the market now we have our annual pet appreciation days with a month of targeted savings offers and in store events to drive excitement.

Simeon Gutman: Okay.

Kurt Barton: Yeah, Good morning, Simeon and thanks for the thanks for the question we were pleased with our comp transaction growth in Q4, and the breath was widespread.

Speaker Change: Additionally, we will continue to leverage our over 1000 pet wash locations and last year, we conducted over 1.8 million pet washes, including a record breaking 500000 plus in Q4.

Speaker Change: As mentioned the Euro started solid and our teams have been busy supporting our customers for all their winter needs as a dependable supplier of the out here lifestyle.

Simeon Gutman: Widespread across both categories and geographies.

Speaker Change: Our pet Isle is more robust than ever featuring familiar favorites as well as new unique offerings that deliver the quality our customers expect at incredible value.

Simeon Gutman: What I would say is where we had us.

Speaker Change: From heating fuel and heating pellets to insight into the winter clothing to livestock feed we are highly engaged ensuring our customers have what they need to deal with the recent winter storms and recovery.

Simeon Gutman: Weather activity.

Simeon Gutman: We saw stronger comp transactions as one would imagine, but our comp transaction growth with strong, particularly as it relates to average ticket growth across all regions of the country and across our categories as well of note. The numerous callouts I made on cut.

Speaker Change: In our animal segment spring it tracks fly maintenance time for our annual spring Chick days.

Speaker Change: As the calendar will soon turn to spring, we've already transitioned over 600 of our stores to our spring sets and the remainder will do so over the next couple of months.

Speaker Change: Our merchant teams have done an excellent job, bringing value and innovation to our lineups for spring.

Simeon Gutman: <unk>, our customer count in customer activity and customer retention as well.

Speaker Change: Whether it's pets or as a source of eggs chicks are about the practical and enjoyable hobby for many and are often referred to as the third pet.

Simeon Gutman: But we were very pleased with the comp transaction growth and expect comp transactions to continue to be strong fourth in 2025.

Simeon Gutman: And really as you know comp transactions have been one a key component of our growth over the last five years there.

Simeon Gutman: Over half around half of our total growth over the last five years has been driven by a comp transactions and they get a hallmark and a differentiator for us as it relates to the rest of of retail on the new storefront at new stores continue to.

Speaker Change: Always we are laser focused on our Q categories.

Speaker Change: And our companion animal segment, we're pleased to launch new products, both in store and online.

Speaker Change: Okay.

Speaker Change: Our retail philosophy as it Chick days is a great gateway for our customers to deepen their relationship with tractor supply and that enables track supply then to be viewed as a resource for all things related to homesteading beyond the poultry category.

Speaker Change: We recently launched for health Shreds, we expanded our temptation assortment in cat and we introduced new freeze dried and shelf stable treats.

Simeon Gutman: Performed right in line with our expectation.

In the market now we have our annual pet appreciation days with a month of targeted savings offers and in store events to drive excitement.

Simeon Gutman: New store openings are right in that $4 to $4 three range on a first year basis are very much in line with our expectations. The irr's are performing in line. The operating profit margin rates reporting in line and that's if you look at our 'twenty, one 'twenty two 'twenty three and 'twenty four classes.

Speaker Change: Earlier this week, we announced a multiyear strategic licensing partnership with field <unk> stream beginning in June tracks fly customers can shop, a variety of hunting and outdoor field <unk> stream branded products. We're excited about the opportunity. This partnership presents and look forward to providing more details in future earnings calls.

Speaker Change: Additionally, we will continue to leverage our over 1000 pet wash locations and last year, we conducted over 1.8 million pet washes, including a record breaking 500000 plus in Q4.

Simeon Gutman: Across the board the 'twenty once bar outperformed given the moment in time, we were in that 'twenty. Two 'twenty three 'twenty four have all been very consistent and of course that is the vast majority of the customers that shop, our new stores are new customers.

Speaker Change: Our pet Isle is more robust than ever featuring familiar favorites as well as new unique offerings that deliver the quality our customers expect at incredible value.

Speaker Change: As the season turns to spring I hope you get a chance to visit our stores and see the actions and initiatives coming to life.

Speaker Change: Our future remains exceptionally bright and exciting.

Speaker Change: In our animal segment spring it tracks fly maintenance time for our annual spring Chick days.

Simeon Gutman: And <unk>.

Simeon Gutman: Drive the number of incremental transactions of course that would be in our comp transaction number that would be a non comp that very pleased with the transactions and new customer counts coming along with our new stores in there there are Canada, they're opening profile.

The arrival of checks at our stores is a sure sign of spring and create strong retail theater in our stores backyard poultry continues to see significant engagement with our customers highlighting a shift towards sustainable and self reliance living.

Speaker Change: I'd like to close where I started by extending my gratitude to our team members for their unwavering dedication to each other and to serving our customers.

Simeon Gutman: Thanks, Damien thanks for the questions. Good luck.

Simeon Gutman: Yes.

Speaker Change: Thank you. The next question is from the line of Steven Forbes with Guggenheim. Your line is now open.

Speaker Change: Whether it's pets or as a source of eggs chicks are about the practical and enjoyable hobby for many and are often referred to as the third pet.

Speaker Change: I'd also like to thank our customers for choosing us as their trusted supplier for life out here.

Steven Forbes: Good morning, how occur theft.

Speaker Change: And also call out our 'twenty 300, plus communities for embracing us as an integral part of our hometowns.

Steven Forbes: You mentioned localization initiatives and the field <unk> stream partnership as well. So I was hoping maybe if you can walk us back to the analyst day, where you.

Speaker Change: With that operator, we'd now like to open the line for questions.

Speaker Change: Thank you.

Steven Forbes: Can you explore the customer segmentation work that you guys.

Speaker Change: I'll now begin the question and answer portion of today's call.

Steven Forbes: Yeah.

Speaker Change: As a reminder to queue for questions. Please press star one on your telephone keypad.

Steven Forbes: Executed upon any way to sort of reframe up the opportunity as you think about localization and sort of what drove the strategic partnership with field <unk> stream, how do we sort of contextualize the product category opportunities the potential lift in sales per square foot that you see on the back of localization just any sort of color.

Speaker Change: Additionally.

Speaker Change: Please limit yourself to one question and return to the queue.

Speaker Change: We will pause here briefly ask questions are registered.

Speaker Change: Yeah.

Speaker Change: The first question comes from the line of Simeon Gutman with Morgan Stanley. Your line is now open.

Speaker Change: Earlier this week, we announced a multiyear strategic licensing partnership with field <unk> stream.

Steven Forbes: For us that helps us think about what it means for comp transaction then.

Speaker Change: Beginning in June tracks flight customers can shop, a variety of hunting and outdoor field and stream branded products. We're excited about the opportunity. This partnership presents and look forward to providing more details in future earnings calls.

Simeon Gutman: Good morning, everyone I wanted to focus my one question on comp transactions, which were positive and a good sign of health can you talk about transaction breath in two ways geographically.

Steven Forbes: And new store productivity as well as the maturation curve of the stores themselves.

Steven Forbes: Yeah, Hey, Steven this is Seth thanks for the question.

Steven Forbes: Separate both of those kind of individually in all its been a little bit on both.

Simeon Gutman: And then if you can look at it across immature in mature stores, how balanced visit.

Speaker Change: As the season turns to spring I hope you get a chance to visit our stores and see the actions and initiatives coming to life.

Steven Forbes: First and foremost just kind of going back to the localization commentary I would say it remains really consistent with what we said at IPD and what we said in prepared remarks.

Simeon Gutman: Yes, good morning, and thanks for the thanks for the question, we were pleased with our comp transaction growth in Q4.

Speaker Change: Our future remains exceptionally bright and exciting.

Speaker Change: Our upcoming initiatives scaling capabilities demonstrate our ability to meet the evolving needs of our customers. We're excited about the future and look forward to continuing our journey of growth and innovation in the channel.

Steven Forbes: Relative just under just knowing the amount of opportunity we have to adjust particularly our macro space or planning when we go out to a fusion or a new stores. So.

Simeon Gutman: The breath was.

Simeon Gutman: Widespread across both categories and geographies.

Steven Forbes: So just maximize our space productivity and like we shared at ICD, we anticipate that will continue to deliver likely an incremental a low single digit lift as we go to implement those as we adjust you know call it 25% of the floor plans as we start to roll those out.

Speaker Change: I'd like to close where I started by extending my gratitude to our team members for their unwavering dedication to each other and serving our customers.

Simeon Gutman: What I would say is where we had.

Simeon Gutman: Weather activity.

Speaker Change: I'd also like to thank our customers for choosing us as their trusted supplier for life out here.

Steven Forbes: We're always looking at ways that we can localize our assortments.

Speaker Change: So call out our 'twenty 300, plus communities for embracing us as an integral part of our hometowns.

Steven Forbes: And if we were to go back to 2019 into where we are today one of the things that we've continued to see is that the wildlife and hunting categories for us in recreation have been among the fastest growing and it's it's where a lot of our consumers are continuing to respond with us.

Speaker Change: With that operator, we'd now like to open the line for questions.

Simeon Gutman: And across our categories as well of note. The numerous callouts I made on customers customer counts and customer activity and customer retention as well.

Simeon Gutman: But we were very pleased with the comp transaction growth and expect comp transactions to continue to be strong for us in 2025.

Steven Forbes: So we were looking for ways in which we can continue to drive some meaningful assortments meaningful partnerships, specifically in that space because.

Speaker Change: Yeah.

Simeon Gutman: And really as you know comp transactions have been.

Simeon Gutman: A key component of our growth over the last five years.

Steven Forbes: It's been very strong growth, but we know that we have a tremendous amount of growth opportunity in front of us. So we're very excited about the field <unk> stream partnership that we announced yesterday and what Hal mentioned his prepared remarks.

Simeon Gutman: Over half around half of our total growth over the last five years has been driven by comp transactions.

Simeon Gutman: It's a hallmark and a differentiator for us as it relates to the rest of retail on the new storefront new stores continue to.

Steven Forbes: It really will be a multiyear journey for us starting midyear this year, specifically tailored more towards that towards that wildlife category and then as we roll into late this year and then into next year it'll start to be expanded into like an exclusive line of apparel and other things that the brand really resonates with our shoppers.

Speaker Change: Thank you.

Speaker Change: We will now begin the question and answer portion of today's call.

Speaker Change: As a reminder to queue for questions. Please press star one on your telephone keypad.

Simeon Gutman: Performed right in line with our expectations.

Simeon Gutman: New store openings are right in that 4243 range on a first year basis are very much in line with our expectations. The Irr's are performing in line. The operating profit margin rates are performing in line and that's if you look at our 'twenty one 'twenty two 'twenty three and 'twenty four classes.

Speaker Change: Additionally.

Speaker Change: Please limit yourself to one question and return to the queue.

Steven Forbes: And then also there is some very unique marketing opportunities, where our collective brands can come together across all the channels. So I do think the partnership is reflective of how we're looking at both localization in our category Assortments in general.

Speaker Change: Well pause here briefly ask questions are registered.

Speaker Change: The first question comes from the line of Simeon Gutman with Morgan Stanley. Your line is now open.

Simeon Gutman: Across the board the 'twenty one's far outperformed given the moment of time, we were in that 'twenty. Two 'twenty $3 24 have all been very consistent and of course that is the vast majority of the customers that shop, our new stores are new customers.

Steven Forbes: Very excited about both those opportunities thanks for the question.

Steven Forbes: Thank you.

Speaker Change: Good morning, everyone I wanted to focus my one question on comp transactions, which were positive and a good sign of health can you talk about transaction breath in two ways geographically and then if you can look at it across immature in mature stores, how balanced visit.

Steven Forbes: Thank you. The next question is from the line of Peter Keith with Piper Sandler. Your line is now open.

Simeon Gutman: <unk>.

Simeon Gutman: Drive the number of incremental transactions of course that would be in our comp transaction number that would be a non comp.

Speaker Change: Alright, thanks, guys.

Speaker Change: You had mentioned in the poultry category and I'm wondering on my favorite topic showed backyard chickens, if the ryzen egg prices here is starting to drive some acceleration in that category.

Simeon Gutman: Very pleased with the transactions and new customer counts coming along with our new stores in there there are tenants.

Simeon Gutman: They are opening profile.

Speaker Change: Yes, good morning, Simeon Thanks for the thanks for the question we were pleased with our comp transaction growth in Q4, and the breath was widespread.

Speaker Change: Thanks, Tim for the question Okay. Thanks for the question good luck.

Speaker Change: And as we think about egg prices potentially continuing to go up this year, maybe reflect back on what you saw in 2023, when they're also community and meaningful chicken demand and and what did you see in your results in terms of like customer acquisition and traffic.

Simeon Gutman: Thank you.

Speaker Change: Our next question is from the line of Steven Forbes with Guggenheim. Your line is now open.

Speaker Change: Widespread across both categories and geographies.

Steven Forbes: Good morning, how occur theft.

Speaker Change: Pat you mentioned localization initiatives and the field <unk> stream partnership as well. So I was hoping maybe if you can walk us back to the analyst day, where you explore the customer segmentation work that you guys.

Speaker Change: What I would say is where we had us.

Speaker Change: Yeah.

Peter Keith: Yes. This is Peter thanks for thanks for the question.

Speaker Change: Weather activity.

Speaker Change: We saw stronger comp transactions as one would imagine, but our comp transaction growth with strong, particularly as it relates to average ticket growth across all regions of the country.

Speaker Change: A backyard poultry backyard clockwork as you mentioned.

Speaker Change: One of your favorite topics you said, it's also one of ours, it's quarter our customers as we mentioned you know about.

Steven Forbes: Yes.

Steven Forbes: Executed upon any way to sort of re frame up the opportunity as you think about localization and sort of what drove the strategic partnership with field <unk> stream, how do we sort of contextualize the product category opportunities the potential lift in sales per square foot that you see on the back of localization just any sort of color.

Speaker Change: About one in five of our current shoppers participated in the hobby, it's well above the national average.

Speaker Change: And across our categories as well of note.

Speaker Change: We are very excited about this year's Chick days.

Speaker Change: Numerous callouts I made on customers customer counts and customer activity and customer retention as well.

Speaker Change: It's a chance for not only for our current shoppers as we can see the dynamic personalization to grow their flocks are with all of the unique items and expanded items that Hal talked about here at the end of the prepared remarks.

Speaker Change: But we were very pleased with the comp transaction growth and it's that comp transactions to continue to be strong force in 2025.

Steven Forbes: For us that helps us think about what it means for comp transaction.

Speaker Change: But one thing that we also saw back in 2023 was also a great entry point into the hobby. When we saw egg prices continued to elevate at the same time. So as we look at this year's event you know we're very excited about our current customers continue to expand the block continue to engage with us to be their primary destination, but also.

Steven Forbes: New store productivity as well as the maturation curve of the stores themselves.

Speaker Change: And really as you know comp transactions have been.

Steven Forbes: Yeah.

Speaker Change: One key component of our growth over the last five years.

Steven Forbes: Yeah, Hey, Steven this is Seth thanks for the question.

Speaker Change: Over half around half of our total growth over the last five years has been driven by a comp transactions then they get a hallmark and a differentiator for us as it relates to the to the rest of retail on the new storefront at new stores continue to.

Steven Forbes: Separate both of those kind of individually and I'll spend a little bit on both first.

Steven Forbes: First and foremost just kind of going back to the localization commentary I would say it remains really consistent with what we said at ICD and what we said in prepared remarks.

Speaker Change: <unk> are excited about potential opportunity to continue to engage new shoppers in the category. We're seeing that we see over time. It just continues to deepen that relationship with them. So more to come look forward to discussing the results of Chick days as it continues to roll out over the next few weeks.

Steven Forbes: Our relative just under just knowing the amount of opportunity we have to adjust particularly our macro space for planning when we go out through a fusion of our new stores.

Speaker Change: To performed right in line with our expectation.

Speaker Change: New store openings are right in that $4 to $4 three range on a first year basis are very much in line with our expectations. The irr's are performing in line. The operating profit margin rates are performing in line and that's if you look at our 'twenty one 'twenty two 'twenty three and 'twenty four classes across the board the 'twenty once far outperformed.

Speaker Change: It'll be in stores here shortly.

Steven Forbes: Maximize that space productivity and like we shared at ICD, we anticipate that will continue to deliver likely an incremental a low single digit lift as we go to implement those as we adjust call. It 25% of the floor plans as we start to roll those out.

Speaker Change: That's great. Thank you very much.

Speaker Change: Thank you.

Speaker Change: The next question is from the line of Seth Sigman with Barclays. Your line is now open.

Steven Forbes: We're always looking at ways that we can localize our assortments.

Speaker Change: Hey, guys. Good morning, So you discussed macro headwinds potentially moderating through 'twenty five and it seems like that's what's reflected in the comp guidance for the year can you just elaborate on what that means specifically for tractor supply because in a lot of ways. Your business has been much more stable this year than a lot of other cyclical businesses, so what categories.

Speaker Change: Given the moment in time, we were in that 'twenty two 'twenty three 'twenty four have all been very consistent and of course that is the vast majority of the customers that shop, our new stores are new customers and <unk>.

Steven Forbes: If we were to go back to 2019 into where we are today one of the things that we've continued to see is that the wildlife and hunting categories for us in recreation have been among the fastest growing and it's where a lot of our consumers are continuing to respond with us.

Speaker Change: Drive the number of incremental transactions of course that would be in our comp transaction number that would be a non comp that very pleased with the transactions and new customer counts coming along with our new stores in there there are Canada, they're opening profile.

Separately under punched any signs that maybe that's starting to improve and then if you could also speak to big ticket, perhaps in that context.

So we were looking for ways in which we can continue to drive some meaningful assortments meaningful partnerships, specifically in that space because.

Jamie: Thanks, Jamie Thanks for the questions. Good luck.

Speaker Change: Tickets been a nice outline for you this year of low double digit growth, although it did moderate in the fourth quarter to be to speak to that and remind us on how youre thinking about some of those categories. Thanks. So much.

Speaker Change: Yes.

Speaker Change: It's been very strong growth, but we know that we have a tremendous amount of growth opportunity in front of us. So we're very excited about the field <unk> stream partnership that we announced yesterday and what Hal mentioned his prepared remarks.

Speaker Change: Thank you. The next question is from the line of Steven Forbes with Guggenheim. Your line is now open.

Speaker Change: Yeah, Good morning, Seth and thanks for the question.

Steven Forbes: Good morning, how car theft.

Speaker Change: It really will be a multiyear journey for us starting midyear this year, specifically tailored more towards the towards that wildlife category.

Steven Forbes: You mentioned localization initiatives and in the field <unk> stream partnership as well. So I was hoping maybe if you can walk us back to the analyst day, where you.

Speaker Change: Hi.

Speaker Change: Reference back to my prepared remarks, and kind of highlight three factors that really have weighed on our business over the last 18 to 24 mine.

Speaker Change: And then as we roll into late this year and then into next year. It will start to be an expanded into like an exclusive line of apparel and other things that the brand really resonates with our shoppers.

Steven Forbes: For the customer segmentation work that you guys.

Steven Forbes: Yeah.

Speaker Change: And then comment on our outlook for those in 2025.

Steven Forbes: Executed upon any way to sort of re frame up the opportunity as you think about localization and sort of what drove the strategic partnership with field <unk> stream, how do we sort of contextualize the product category opportunities the potential lift in sales per square foot that you see on the back of localization.

Speaker Change: And then also there is some very unique marketing opportunities, where our collective brands can come together across all the channels. So I do think the partnership is reflective of how we're looking at both localization in our category Assortments in general.

Speaker Change: Those three factors that I'd highlight would be the you know in PCE, the reversion from goods to services spin.

Speaker Change: The second would be underlying deflation in our commodity related items.

Speaker Change: Very excited about both those opportunities thanks for the question.

Speaker Change: And then the third would be a stabilization of the pet category. All three of those as you know our our head headwinds that we've been facing.

Steven Forbes: And any sort of color for us that helps us think about what it means for comp transactions in.

Speaker Change: Thank you.

Speaker Change: Thank you. The next question is from the line of Peter Keith with Piper Sandler. Your line is now open.

Steven Forbes: New store productivity as well as the maturation curve of the stores themselves.

Speaker Change: And.

Speaker Change: We've been very transparent on the impact those have had on our business on things like average ticket et cetera.

Steven Forbes: Yeah, Hey, Steven this is Seth thanks for the question.

Speaker Change: Alright, thanks, guys.

Speaker Change: You had mentioned the poultry category and I'm wondering when my favorite topics of backyard chickens, if the ryzen egg prices here is starting to drive some acceleration in that category.

Steven Forbes:

Steven Forbes: Separate both of those kind of individually in all its been a little bit on both.

Speaker Change: As we look into 2025, we do see modernization neutralization stabilization kind of pick your word.

Steven Forbes: First and foremost just kind of going back to the localization commentary I would say it remains really consistent with what we said at IPD and what we said in prepared remarks.

Speaker Change: As more so as it goes through the year. So if you look at goods and services are at basically reached its pre COVID-19 levels now mid 68 versus mid 31.

Speaker Change: And as we think about egg prices potentially continuing to go up this year, maybe reflect back on what you saw in 2023, when they're also see meaningful chicken demand and what did you see in your results in terms of like customer acquisition and traffic.

Relative just under just knowing the amount of opportunity we have to adjust particularly our macro space or planning when we go out for a fusion or a new stores. So.

Steven Forbes: So just maximize our space productivity and like we shared at the ICD. We anticipate that we will continue to deliver likely incremental a low single digit lift as we go to implement those as we adjust you know call it 25% of the floor plans as we start to roll those out.

Speaker Change: It's very much back in line, maybe a half a point to go there on.

Speaker Change: Pat.

Speaker Change: Yes. This is Peter thanks for the thanks for the question.

Speaker Change: You know the kind of a stabilization or neutral nature of that industry over the last 12 months has been well documented and we do see that business recovering to low single digit growth. This year and our business. Accordingly are growing alongside of that is we are a share gainer in that category.

Speaker Change: Hey, backyard poultry backyard flock like as you mentioned.

Speaker Change: One of your favorite topics you said, it's also one of ours at the quarter our customers as we mentioned about one in five of our current shoppers participate in the hobbies well above the national average.

Steven Forbes: We're always looking at ways that we can localize our assortments.

Speaker Change: We are very excited about this year's Chick days.

Speaker Change: And then as it relates to deflation.

Speaker Change: It's a chance for not only for our current shoppers as we continue to dive in with personalization to grow their flocks with all of the unique items and expanded items that <unk> talked about here at the end of the prepared remarks, but.

Speaker Change: We are we see light at the end of the tunnel on that if we just take our average unit cost than our average unit retail across our commodity related items.

Steven Forbes: So we were looking for ways in which we can continue to drive some meaningful assortments meaningful partnership specifically in that space because it's.

Speaker Change: But one thing that we also saw like back in 2023 was also a great entry point into the hobby.

Speaker Change: We hit that.

Speaker Change: We start comping over top of all that between April and May of this coming year and then I'd also just point out on that at steady state point in time, and if you look at the commodity markets right now if anything theyre kind of.

Speaker Change: When we saw egg prices continued to elevate at the same time.

Speaker Change: As we look at this year's event.

Speaker Change: We're very excited about our current customers continue to expand the block continue to engage with us to be their primary destination, but also are excited about the potential opportunity to continue to engage new shoppers in the category within that we see over time. It just continues to deepen that relationship with them. So more to come look forward to discussing the <unk>.

Speaker Change: Surging up I mean, if you look at say like corn prices, which we've talked about is a commodity that we're most odd.

Speaker Change: Correlated with <unk>.

Speaker Change: Corn is trading now in kind of that high four hundreds 490 range.

Speaker Change: At like a 15 month high now we arent seeing that make its way into pricing yet, but you know if anything I'd say that is there a potential tailwind there.

Speaker Change: <unk>, a chick days as it continues to roll out over the next few weeks.

Speaker Change: It will be in stores here shortly.

Speaker Change: As we look out we do see a kind of a light at the end of the tunnel on these these are macro factors that had been a headwind for us and we think as we get into the year.

Speaker Change: Okay. That's great. Thank you very much.

Steven Forbes: And then also there's some very unique marketing opportunities, where our collective brands can come together across all the channels. So I do think the partnership is reflective of how we're looking at both localization in our category Assortments in general.

Speaker Change: Thank you.

Speaker Change: The next question is from the line of Seth Sigman with Barclays. Your line is now open.

Speaker Change: Those forces will become less and less of a headwind that's reflected in our guidance for the year, which is that comp of 1% to 3% and.

Seth Sigman: Hey, guys. Good morning, So you discussed macro headwinds potentially moderating through 'twenty five and it seems like that's what's reflected in the comp guidance for the year can you just elaborate on what that means specifically for tractor supply because in a lot of ways. Your business has been much more stable this year than a lot of other cyclical businesses. So what.

Steven Forbes: Very excited about both those opportunities thanks for the question.

Speaker Change: And we said that we expect kind of sequential improvement from our comps in the first half to the second half as well and the final thing I'll call out is we have had a solid start to the year, which gives us more confidence in our AR in our our guidance of course, we've got 11 months still to go but it's been nice to have the cold winter weather in the first month of the year to in particular help us.

Steven Forbes: Thank you.

Speaker Change: Thank you. The next question is from the line of Peter Keith with Piper Sandler. Your line is now open.

Seth Sigman: Categories have really under punched any signs that maybe thats starting to improve and then if you could also speak to big ticket, perhaps in that context big ticket has been a nice outline for you this year of low double digit growth. Although it did moderate in the fourth quarter. So if you just speak to that and remind us how youre thinking about some of those categories. Thanks. So much.

Speaker Change: Alright, thanks, guys.

Speaker Change: You had mentioned in the poultry category I'm wondering on my favorite topics of backyard chickens, if the ryzen egg prices here is starting to drive some acceleration in that category.

Speaker Change: Last year's cold weather and start out with a relatively solid solid start to the year.

Speaker Change: The think that appreciate the question.

Speaker Change: And it's just when we think about egg prices potentially continuing to go up this year, maybe reflect back on what you saw in 2023, when they're also community and meaningful chicken demand and and what did you see in your results in terms of like customer acquisition and traffic.

Speaker Change: Hello, just mentioned is Seth last question on Big ticket, which I think is a great topic as well so Seth this is Kurt.

Seth Sigman: Yeah, Good morning, Seth and thanks for the question.

Seth Sigman: Hi.

Speaker Change: As we've talked about through all of 2020 for me the merchants did an excellent job coming off of two years of declining big ticket sales with newness innovation competitive pricing great financing and so we recognize in our guidance that we're cycling strong big ticket comps in 2025.

Seth Sigman: Back to my prepared remarks, and kind of highlight three factors that really have weighed on our business over the last 18 to 24 months.

Speaker Change: Yeah.

Speaker Change: Yes. This is Peter thanks for thanks for the question.

Speaker Change: A backyard poultry back our clock like as you mentioned you know.

Seth Sigman: And then comment on our outlook for those in 2025.

Speaker Change: One of your favorite topics you said, it's also one of ours, it's quarter our customers as we mentioned.

Seth Sigman: Three factors that I'd highlight would be the TCE the reversion from goods to services spend.

Speaker Change: One in five of our current shoppers participated in the hobby, it's well above the national average.

Speaker Change: But a lot of 24 was a comeback of some of the lack of newness and.

Seth Sigman: The second would be underlying deflation in our commodity related items.

Speaker Change: We are very excited about this year's Chick days it's.

Speaker Change: And the customers responded and we still we see that big ticket is more at its new stabilized.

Seth Sigman: And then the third would be stabilization of the pet category all three of those as you know our our head.

Speaker Change: Platform and we look at 2025, as we're bringing together of all the reasons the newness.

Seth Sigman: <unk> headwinds that we've been facing.

Speaker Change: But one thing that we also saw back in 2023 was also a great entry point into the hobby.

Seth Sigman: And as we.

Seth Sigman: We've been very transparent on the impact those have had on our business on things like average ticket et cetera.

Speaker Change: The competitive pricing love our opportunities in 2025 Big ticket is expected to run.

Speaker Change: When we saw you know egg prices continue to elevate at the same time. So as we look at this year's event you know we're very excited about our current customers continue to expand the block continue to engage with us to be their primary destination, but also are excited about potential opportunity to continue to engage new shoppers in the category, we're seeing that.

Seth Sigman: As we look into 2025, we do see modernization neutralization stabilization kind of pick your word.

Speaker Change: Positively more inline with chain average in 2025, but what we're bringing in zero turns trailers a number of areas that you'll start to see this year is we've got a good reason to be optimistic on our ability to continue to comp the comp on big ticket in 'twenty five.

Seth Sigman: Uh huh.

Seth Sigman: More so as it goes through the year. So if you look at goods and services.

Seth Sigman: Basically reached its pre COVID-19 levels now mid 68 versus mid 30 ones.

Speaker Change: We see over time it just continues to deepen that relationship with them. So more to come look forward to discussing the results of Chick days as it continues to roll out over the next few weeks and it will be in stores here shortly.

Seth Sigman: It's very much back in line, maybe a half a point to go there on pad.

Speaker Change: Very helpful. Thank you both.

Speaker Change: Thank you.

Seth Sigman: The kind of stabilization or neutral nature of that industry over the last 12 months has been well documented and we do see that business recovering to low single digit growth this year and our business accordingly growing alongside of that is we are a share gainer in that category.

Speaker Change: That's great. Thank you very much.

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

Speaker Change: Thank you.

Speaker Change: The next question is from the line of Seth Sigman with Barclays. Your line is now open.

Hi, good morning, Thanks for taking a question we wonder if we could focus our question on the operating margin guide I think it's the lower end of it maybe seems a little bit lower than what you were talking to you in December which we thought was around flat first is that right and if so what's driving the change and then can you talk.

Seth Sigman: And then as it relates to deflation.

Seth Sigman: We are we see light at the end of the tunnel on that if we just take our average unit costs and average unit retails across our commodity related items.

Speaker Change: To the range of that range concurrent with what you expect to do on the top line and 25 are there other things that we should consider driving that range of outcomes.

Seth Sigman: We hit that.

Speaker Change: These have really under punched any signs that maybe that's starting to improve and then if you could also speak to big ticket, perhaps in that context, how big ticket has been a nice outline for you. This year of low double digit growth. Although it did moderate in the fourth quarter to be to speak to that and remind us on how youre thinking about some of those categories. Thanks. So much.

Seth Sigman: <unk>.

Seth Sigman: We start comping over top of all that between April and May of this coming year and then I would also just point out on that steady state point in time, and if you look at the commodity markets right now if anything theyre kind of.

Kurt Barton: Yeah, Hey, Kate this is Kurt Thanks for the question on an operating margin as I mentioned in my remarks.

Speaker Change: We.

Speaker Change: We estimate and forecast that our 2025 operating margin would be more in line and centerpoint at around the 2020 for operating margin.

Seth Sigman: Surging.

Seth Sigman: <unk>.

Seth Sigman: If you look at say like corn prices, which we've talked about is the commodity that we're most.

Speaker Change: Yeah, Good morning, Seth and thanks for the question.

Seth Sigman: Correlated with.

Speaker Change: To your second part of your question.

Seth Sigman: Corn is trading now in kind of that high $404 90 range really at like a 15 month high now we arent seeing that make its way into pricing yet, but if anything I would say that is a potential tailwind. So as we look out we do see kind of light at the end of the tunnel on these these macro factors that had been a.

Speaker Change: I'd reference back to my prepared remarks, and kind of highlight three factors that really have weighed on our business over the last 18 to 24 mine.

Speaker Change: The operating margin range that we gave is is more concurrent and proportional with the.

Speaker Change: Comp sales range of 1% to 3% so are allowing.

Speaker Change: And then comment on our outlook for those in 2025.

Speaker Change: Allowing for the appropriate flow through under the low end and high end scenarios on the comp sales range. The nine 6% to 10% operating margin reflects that we've got a significant opportunity.

Seth Sigman: Headwinds for us and we think as we get into the year.

Speaker Change: Three factors that I'd highlight would be the you know in TCE, the reversion from goods to services spin.

Seth Sigman: Those forces will become less and less of a headwind that is reflected in our guidance for the year, which is a comp of 1% to 3%.

Speaker Change: The second would be underlying deflation in our commodity related items.

Opportunity for growth in this business as we've talked about the 2030 initiatives. So we are purposefully investing to be able to launch those programs and we're self funding those with gross margin expansion and efficiencies that we have.

Seth Sigman: And we said that we expect kind of sequential improvement from our comps in the first half to the second half as well and the final thing I'll call out is we have had a solid start to the year, which gives us more confidence in our in.

Speaker Change: And then the third would be a stabilization of the pet category. All three of those as you know our our head headwinds that we've been facing.

Seth Sigman: In our guidance of course, we've got 11 months still to go but it's been nice to have the cold winter weather in the first month of the year in particular help us lap.

Speaker Change: And.

Speaker Change: We've been very transparent on the impact those have had on our business on things like average ticket et cetera.

Speaker Change: <unk> and continue to target on the SG&A side. So we're excited about 2025, we're going to continue to strive to hit the high end of our targets. We believe we've got gross margin expansion that allows us in this year to be able to do both things grow the business and be able to maintain the operating margin.

Speaker Change: As we look into 2025, we do see modernization neutralization stabilization kind of pick your word.

Seth Sigman: Last year's cold weather and start out with a relatively solid solid start to the year.

Seth Sigman: So thanks appreciate the question.

Speaker Change: As more so as it goes through the year. So if you look at goods and services.

Kurt Barton: I'll just mention this last question on Big ticket, which I think is a great topic as well so set this kurt.

Speaker Change: Basically reached its pre COVID-19 levels now mid 68 versus mid 31.

Speaker Change: That's the key message on both the top and bottom line.

Kurt Barton: As we've talked about through all of 2020 for me the merchants did an excellent job coming off of two years of declining big ticket sales with newness innovation competitive pricing great financing and so we recognize that our guidance that we are cycling strong big ticket comps in 2025.

Speaker Change: Okay.

Speaker Change: It is very much back in line, maybe a half a point to go there on pad.

Speaker Change: Thank you.

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

Speaker Change: The kind of stabilization or neutral nature of that industry over the last 12 months has been well documented and we do see that business recovering to low single digit growth. This year and our business. Accordingly are growing alongside of that is we are a share gainer in that category.

Michael Lasser: Good morning. Thank you so much for taking my question.

Michael Lasser: My question is on the outlook for this year, which you noted that the business is already started off with a solid beginning given some of the weather and you're guiding to an acceleration over the course of the year and then on top of that you outlined.

Kurt Barton: But a lot of 24 was a comeback of some of the lack of newness and.

Kurt Barton: And the customers responded and we still we see that big ticket is more at its new stabilized.

Speaker Change: And then as it relates to deflation.

Speaker Change: We are we see light at the end of the tunnel on that if we just take our average unit cost than our average unit retail across our commodity related item I E.

Kurt Barton: Platform and we look at 2025, as we're bringing together all the reasons the newness.

Michael Lasser: Positive drivers for that could impact that.

Speaker Change: The business. So a should we interpret the 1% to 3% comp outlook is conservative or what would stand in the way of.

Speaker Change: We hit that.

Kurt Barton: The competitive pricing love our opportunities in 2025 Big ticket is expected to run.

Speaker Change: Potential upside from that and B. If there is comp upside how should that flow to the bottom line, meaning would you choose to potentially proactive we reinvest.

Kurt Barton: Positively more in line with chain average in 2025, but what we're bringing in zero turns trailers a number of areas that youll start to see this year as we've got good reason to be optimistic on our ability to continue to comp the comp on big ticket in 'twenty five.

Speaker Change: I mean, if you look at say like corn prices, which we've talked about it a commodity that we're most correlated.

Speaker Change: Some of the upside back in further investment initiatives.

Speaker Change: Correlated with.

Speaker Change: Corn is trading now in kind of that high four hundreds 490 range really at like a 15 month high now we arent seeing that make its way into pricing yet, but you know if anything I'd say that is there a potential tailwind there.

Speaker Change: There may not be as much upside even if the comp outperformed thank you.

Speaker Change: Very helpful. Thank you both.

Kurt Barton: Thank you.

Speaker Change: Hey, Michael and thanks for the question.

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

Speaker Change: As we look out we do see a kind of light at the end of the tunnel on these these are macro factors that had been a headwind for us and we think as we get into the year.

Michael Lasser: To your ally entered into two parts the way you ask it on our on our comp first.

Kate Mcshane: Hi, good morning, Thanks for taking our question.

Michael Lasser: Obviously, when we set our guidance, we try not to be impacted too much by the first three or four weeks of the year in terms of sales and try to look over a full 50 to 52 week period, and I with that with that as context, we certainly see the broader macro conditions like we talked about with <unk> question.

Speaker Change: Wondered if we could focus our question on the <unk>.

Speaker Change: Our operating margin guide I think it's the lower end of it maybe seems a little bit lower than what you were talking to you in December which we thought was around flat first is that right and if so what's driving the change.

Speaker Change: Those forces will become less and less of a headwind that's reflected in our guidance for the year, which is that comp of 1% to 3% and.

Speaker Change: And we said that we expect kind of sequential improvement from our comps in the first half to the second half as well and the final thing I'll call out is we have had a solid start to the year, which gives us more confidence in our AR and our our guidance of course, we've got 11 months still to go but it's been nice to have the cold winter weather in the first month of the year that in particular help us.

Speaker Change: Then can you talk to the range of that range concurrent with what you expect to do on the top line and 25 are there other things that we should consider driving that range of outcomes.

Michael Lasser: Beginning.

Michael Lasser: You know kind of more neutralizing and some of them, perhaps even becoming positive in nature for us as we get through the year.

Kurt Barton: Hey, Kate this is Kurt Thanks for the question on operating margin as I mentioned in my remarks.

Michael Lasser: So I think that's what leads us to the kind of sequential improvement as the year goes on and that you know without any sort of consideration for the aberrations of weather and how they might impact one month here and there through through the year.

Speaker Change: We.

Speaker Change: Last year's cold weather and start out with a relatively solid solid start to the year.

Speaker Change: Estimate and forecast that our 2025 operating margin would be more in line and centerpoint at around the 2024 operating margin too.

Speaker Change: The think that appreciate the question.

Speaker Change: How I'll just mention is Seth last question on Big ticket, which I think is a great topic as well so Seth this is Kurt.

Michael Lasser: But we feel very good about our 1% to 3%. We think that you know we're highly confident in it and we think it's the right place to start here at the beginning of the year, what I as it relates to if we had caught upside I think obviously there is a variety of scenarios.

Speaker Change: To your second part of your question.

Speaker Change: <unk> operating margin range that we gave.

Speaker Change: Is more concurrent and proportional with the.

Speaker Change: Comp sales range of 1% to 3% so <unk>.

Speaker Change: Allowing for the appropriate flow through under the low end and high end scenarios on the comp sales range. The nine 6% to 10% operating margin reflects that we have.

Michael Lasser: That we'll evaluate as we go through the year and that would be a great scenario breadth to be considering.

Michael Lasser: What I would say is a reference kind of back the way we thought about it in the past and we've had comp outperformance, we will evaluate our current initiatives how theyre running how the investments in those initiatives are going if we were to lean more into the initiatives what would be the result of that incremental investment.

Speaker Change: Got a significant.

Speaker Change: But a lot of 24 was a comeback of some of the lack of newness and.

Speaker Change: Opportunity for growth in this business as we've talked about the 2030 initiatives. So we are purposely investing to be able to launch those programs and we are self funding those with gross margin expansion and efficiencies that we have.

Speaker Change: And the customers responded and we still we see that big ticket is more at its new stabilized.

Michael Lasser: <unk>.

Michael Lasser: What other needs that we have in the business.

Speaker Change: Platform and we look at 2025 as we're bringing together.

Michael Lasser: And then obviously, we would evaluate the flow through as well, but as we've indicated long term when we see our comp growth rate in our long term guidance range in that 345% range. We do expect to leverage on operating margin rate and had that improve and thorough.

Speaker Change: Achieved and continue to target on the SG&A side. So we're excited about 2025, we're going to continue to strive to hit the high end of our targets. We believe we have got gross margin expansion that allows us in this year to be able to do both things grow the business and be able to maintain the operating margin.

All the reasons the newness.

Speaker Change: The competitive pricing love, our our opportunities in 2025 Big ticket is expected to run.

Speaker Change: Positively more in line with the chain average in 2025, but what we're bringing in zero turns trailers a number of areas that you'll start to see this year is we've got a good reason to be optimistic on our ability to continue to comp the comp on big ticket in 'twenty five.

Michael Lasser: I would also say that if you saw comp outperformance in the year, you would see operating margin flow towards the higher end of our guidance and.

Speaker Change: And that's the key message on both the top and bottom line.

Speaker Change: Thank you.

Michael Lasser: And we would update you accordingly through the year on that but again just stepping back we're very very excited about the beginning of the year we.

Speaker Change: Thank you.

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

Speaker Change: Very helpful. Thank you both.

Michael Lasser: We feel good about our plans for the year end and have good momentum as we head into 2025 here and we've got a lot of new initiatives.

Speaker Change: Yeah.

Speaker Change: Thank you.

Michael Lasser: Good morning. Thank you so much for taking my question. My question is on the outlook for this year with you noted that the business has already started off with a solid beginning given some of the weather and youre guiding to an acceleration over the course of the year and then on top of that you outlined.

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

Michael Lasser: <unk> embark on top really solid existing initiatives are creating real value for our shareholders and excited about the horizons for growth that we have over the next few years.

Kate Mcshane: Hi, good morning, Thanks for taking a question we wonder if we could focus our question on the operating margin guide I think it's the lower end of it maybe seems a little bit lower than what you were talking to you in December which we thought was around flat first is that right and if so what's driving the change and then can you talk to the right.

Michael Lasser: Thanks, Michael for the question. Thank you very much good luck.

Michael Lasser: Okay.

Michael Lasser: Thank you.

Speaker Change: Positive driver for that could impact that.

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

Speaker Change: The business so a.

Speaker Change: We incorporate the 1% to 3% comp outlook is conservative or what would stand in the way.

Kate Mcshane: And does that range concurrent with what you expect to do on the topline and 25 are there other things that we should consider driving that range of outcomes.

Peter Benedict: Hi, guys. Good morning, Thanks, Thanks for taking the question.

Speaker Change: Currently.

Speaker Change: Around all of that is there any seasonality of that business that we should that we should think about and I know you said, it's going to be accretive.

Speaker Change: Of potential upside from that and B. If there is comp upside how should that flow to the bottom line, meaning would you choose to potentially proactively reinvest.

Kate Mcshane: Yeah, Hey, Kate this is Kurt Thanks for the question on an operating margin as I mentioned in my remarks.

Speaker Change: Slightly accretive to earnings this year, just kind of how it may be impacting the P&L, there's I would assume it's higher gross margin but.

Kate Mcshane: We.

Kate Mcshane: We estimate and forecast that our 2025 operating margin would be more in line and centerpoint at around the 2020 for operating margin.

Speaker Change: Some of the upside back in further investment initiatives.

Speaker Change: Kind of curious your view there and then if you could even frame maybe the magnitude of the earnings lift that you get here in year, one from from Ireland that thank you.

Speaker Change: There may not be as much upside even if the comps outperformed thank you.

Kate Mcshane: To your second part of your question.

Kate Mcshane: The operating margin range that we gave is is more concurrent and proportional with the.

Michael Lasser: Hey, Michael Thanks for the question.

Peter: Yeah, Hey, Peter.

Speaker Change: Okay.

Peter: For the most part allo Allied that is pretty consistent and stable. There's there's some seasonality you might not be able to see it significantly with the size of tractor supply, but you think about the spring summer there was a bit of a peak on flea tick and some of those type categories, but I we.

Speaker Change: Ill answer in two parts the way you ask it on our on our current first.

Kate Mcshane: Comp sales range of 1% to 3% so.

Speaker Change: Obviously, when we set our guidance, we try not to be impacted too much by the first three or four weeks of the year in terms of sales and try to look over a full 50 to 52 week period and I.

Kate Mcshane: Allowing for the appropriate flow through under the low end and high end scenarios on the comp sales range. The nine 6% to 10% operating margin reflects that we've got a significant opportunity.

Speaker Change: With that with that as context, we certainly see the broader macro conditions like we talked about with Siemens question at the beginning.

Peter: Look at it is it's a pretty stable consistent business. It's got a solid operating margin over the long term, we expect that while it's accretive to earnings that we have the ability.

Kate Mcshane: Opportunity for growth in this business as we've talked about the 2030 initiatives. So we are purposefully investing to be able to launch those programs and we're self funding those with gross margin expansion and efficiencies that we have.

Speaker Change: <unk> had more neutralizing and some of them, perhaps even becoming positive in nature for us as we get through the year.

Peter: To grow their operating margins and the long term outlook is that allied that when you look at that level of business on the Rx side of it over this five year period of time, we can see ally vet equaling, an even surpassing tractor supply level operating margins because it's that strong of a business right now when you.

Speaker Change: I think that's what leads us to the kind of sequential improvement as the year goes on and Thats without any sort of consideration for the aberrations of weather and how they might impact one month here and there through the year.

Kate Mcshane: <unk> and continue to target on the SG&A side. So we're excited about 2025, we're going to continue to strive to hit the high end of our targets. We believe we've got gross margin expansion that allows us in this year to be able to do both things grow the business and be able to maintain the operating margin and.

Speaker Change: But we feel very good about our 1% to 3% we think that we're highly confident in it and we think it's the right place to start here at the beginning of the year.

Peter: Think of 2025, our focus is on the topline and getting neighbor's club members on boarded onto ally vet their platform their subscription model and so there'll be while accretive there'll be some investments in the the onboarding and the transition year, and we'll be able to share more.

Speaker Change: As it relates to if we had call it upside I think obviously, there's a variety of scenarios.

Kate Mcshane: That's the key message on both the top and bottom line.

Speaker Change: That we'll evaluate as we go through the year and that would be a great scenario for us to be considering.

Kate Mcshane: Yes.

Kate Mcshane: Okay.

Peter: More beyond 2025 is how we see that growing in the future but.

Kate Mcshane: Thank you.

Speaker Change: What I would say is that.

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

Speaker Change: I reference handed back the way, we thought about it in the past and we've had comp outperformance, we will evaluate our current initiatives how theyre running how the investments in those initiatives are going if we were to lean more into the initiatives what would be the result of that incremental investment and or.

Peter: Great platform, a great team we purchased.

Kate Mcshane: Good morning. Thank you so much for taking my question.

Peter: Hal mentioned the technology the resources licensed in all the states enable for us to be able to ramp quickly with them. So very excited about this opportunity, which is certainly we believe a one plus one is certainly more than two.

Kate Mcshane: My question is on the outlook for this year, which you noted that the business is already started off with a solid beginning given some of the weather and you're guiding to an acceleration over the course of the year and then on top of that you outlined.

Speaker Change: What other needs that we have in the business.

Speaker Change: And then obviously, we would evaluate the flow through as well, but as we've indicated long term when we see our comp growth rate in our long term guidance range in that 345% range. We do expect to leverage on operating margin rate and have that improve and so.

Peter: Sounds good thank you.

Kate Mcshane: Positive drivers for that could impact.

Peter: Thank you.

Kate Mcshane: The business. So a should we interpret the 1% to 3% comp outlook is conservative or what would stand in the way.

Speaker Change: The next question is from the line of Karen short with Melius Research. Your line is now open.

Speaker Change: Hey, Thanks, very much I wanted to just focus on comp in general. So can you give a sense of what the comp mater contribution is or the new store waterfall contribution is to the comp and how you think about that going forward and then tie that in with high.

Kate Mcshane: Potential upside from that and B. If there is comp upside how should that flow to the bottom line, meaning would you choose to potentially proactively reinvest.

Speaker Change: I would also say that if you saw hop outperformance in the year, you would see operating margin flow towards the higher end of our guidance and.

And we would update you accordingly through the year on that but again just stepping back we're very very excited about the beginning of the year.

Kate Mcshane: Some of the upside back in further investment in your initiatives.

Speaker Change: To think about new store productivity.

Speaker Change: We feel good about our plans for the year and have some good momentum as we head into 2025 here and we've got a lot of new initiatives.

Kate Mcshane: That there may not be as much upside even if the comps outperformed thank you.

Speaker Change: Yeah, sure Hey, Karen on new stores, hitting both comp and new store productivity first when we all hit new store productivity first when we when we talk about new store productivity profitability, we look at it on a net of cannibalization.

Speaker Change: Embark on top of really solid existing initiatives are creating real value for our shareholders.

Michael Lasser: Hey, Michael and thanks for the question.

Michael Lasser: To your ally entered into two parts the way you ask it on our on our comp first.

Speaker Change: About the horizons for growth that we have over the next few years.

Michael Lasser: Thanks, Michael for the question.

Speaker Change: Thank you very much.

Speaker Change: That's how we view its impact that's how we view its its IRR and we've continued to be consistent that our new stores, while theres a mix some we drop into existing markets. Some into brand new markets. There is some cannibalization and we continue to have net contribution to comp.

Speaker Change: Good luck.

Speaker Change: Thank you.

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

Speaker Change: Hi, guys. Good morning, Thanks for taking the question.

Speaker Change: Currently it is something around all of that is there any seasonality to that business that we should that we should think about and I know you said it could be accretive slightly.

Michael Lasser: <unk>.

Speaker Change: After cannibalization from new stores, it's a modest contributor if I would say of all the contributors we talk about the buildup to our comp sales from the strategic initiatives.

Michael Lasser: You know kind of more neutralizing and some of them, perhaps even becoming positive in nature for it as we get through the year and so I think that's what leads us to the kind of sequential improvement as the year goes on and that you know without any sort of consideration for the aberrations of weather and how they might impact one month.

Speaker Change: Slightly accretive to earnings this year, just kind of how it may be impacting the P&L, there's I would assume it's higher gross margin but.

Speaker Change: It is a modest <unk>.

Speaker Change: Level, but we are net.

Speaker Change: Kind of curious of you there and then if you could even frame maybe the magnitude of the earnings lift that you get here in year, one from from out of that thank you.

Speaker Change: Contribution to our comp sales and so as we ramp up as we planned in 2025 from 80 to 90, and we ramped up from 70 to 80 Youre seeing the non comp.

Michael Lasser: Here and there through the year, but we feel very good about our 1% to 3%. We think that you know we're highly confident in it and we think it's the right place to start here at the beginning of the year, what I as it relates to if we had caught upside I think obviously there is a variety of scenarios.

Peter: Yeah, Hey, Peter.

Peter: For the most part Alex that is pretty consistent and stable. There is there is some seasonality you might not be able to see it significantly with the size of tractor supply, but if you think about the spring summer there was a bit of a peak.

Speaker Change: Growth from new stores, continuing to increase and that has over time in that five year maturation. We view it a while we're talking you know 510 15 type level of basis points, but over the next five years, that's a comp contributor as our new stores ramp from 70 up to 100 over that next <unk>.

Michael Lasser: That we'll evaluate as we go through the year and that would be a great scenario for us to be considering.

Peter: <unk> flea tick and some of those types of categories, but we look at it is it's a pretty stable consistent business. It's got a solid operating margin over the long term, we expect that while it's accretive to earnings that we have the ability.

Michael Lasser: What I would say is a reference kind of back the way we thought about it in the past and we've had comp outperformance will evaluate our current initiatives how theyre running how the investments in those initiatives are going if we were to lean more into the initiatives what would be the result of that incremental investment.

Speaker Change: A few years and then Hal mentioned earlier, new store productivity I can't reiterate more while I acknowledge in the last 18 months with or Slim and refining some of the square footage new store productivity has been extremely consistent in right in line from all of our targets over the last three or four years and we are.

Michael Lasser: <unk>.

Michael Lasser: What other needs that we have in the business.

And then obviously, we would evaluate the flow through as well, but as we've indicated long term when we see our comp growth rate in our our long term guidance range in that 345% range. We do expect to leverage on operating margin rate and have that improve and so on.

Speaker Change: Consistent Lee are performing at or above our markets and excited about.

Peter: Surpassing tractor supply level operating margins, because it's that strong of a business right now when you think of 2025, our focus is on the topline and getting neighbor's club members on boarded onto allied that their platform their subscription model and so there'll be.

Speaker Change: The production and the performance of our new stores.

Speaker Change: Great. Thank you.

Speaker Change: I think Gary obviously, I think we've got time for one more question. Please.

Speaker Change: Certainly the next question is from the line of David Bellinger with Mizuho. Your line is now open.

Michael Lasser: I'd also say that if you saw hop outperformance in the year, you would see operating margin flow towards the higher end of our guidance and.

Peter: Accretive there'll be some investments in the the onboarding and the transition year, and we will be able to share more beyond 2025 is how we see that growing in the future but.

David Bellinger: Hey, good morning, Thanks for the question.

Michael Lasser: And we would update you accordingly through the year on that but again just stepping back we're very very excited about the beginning of the year. We feel good about our plans for the year end and have some good momentum as we head into 2025 here and we've got a lot of new initiatives.

Speaker Change: It's on the gross margins are down very slightly year over year. This quarter I think it was the first time since late 2022, and we were just a little unclear on the drivers other than the difficult difficult comparison in the prior year. So just any more detail you can help us with anything on the promo activity alright, and the shorter holiday how that played into it.

Peter: Great platform, a great team we purchased.

Peter: Al mentioned.

Peter: The technology the resources licensed in all the states enable for us to be able to ramp quickly with them. So very excited about this opportunity, which is certainly we believe a one plus one is certainly more than two.

Michael Lasser: Embark on top really solid existing initiatives are creating real value for our shareholders and excited about the horizons for growth that we have over the next few years.

Speaker Change: And then just secondly, how should we think about the year on year gross margin progression throughout 2025, no any specific drivers you've got baked in like retail media or some other factors.

Thanks, Michael for the question. Thank you very much.

Sounds good thank you.

Good luck.

Speaker Change: Thank you. The next question is from the line of Karen short with Melius Research. Your line is now open.

Michael Lasser: Thank you.

Speaker Change: Yes.

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

Thanks, David on gross margin for the fourth quarter as I mentioned it came in very much in line with our expectations. The Q3 Q3 call.

Speaker Change: Hey, Thanks, very much I wanted to just focus on comp in general. So can you give a sense of what the water fall contribution is or the new store waterfall contribution is to the comp and how you think about that going forward and then tie that in with her.

Peter Benedict: Hi, guys. Good morning, Thanks, Thanks for taking the question.

Peter Benedict: Currently around the Alan that is there any seasonality of that business that we should that we should think about and I know you said, it's going to be accretive.

Speaker Change: Forecasted that we were anticipating flat year over year gross margin knowing that we were up against the 129 basis point growth. There was probably 20 to 30 basis points back in the prior year that that was very unique to that quarter in fourth quarter 2023. So we continue to have solid performance in.

Peter Benedict: Is it accretive to the earnings this year just on how it may be impacts the P&L, there's I would assume it's higher gross margin but.

Speaker Change: How to think about new store productivity.

Peter Benedict: Kind of curious your view there and then if you could even frame maybe the magnitude of the earnings lift that you get here in year, one from from Ireland that thank you.

Speaker Change: Yes, sure Hey, Karen on new stores, hitting both comp and new store productivity first when we all have new store productivity first when we when we talk about new store productivity profitability. We look at it on a net of cannibalization. That's how we view its impact that's how we view it.

Speaker Change: Gross margin, we were cycling that there really wasn't much that was unique and it wasn't promotional while there was a step up in promotional in fourth quarter year over year for US. We we had targeted promotions we had vendors partnership that helped maintain the gross margin. So.

Peter: Yeah, Hey, Peter.

Peter: For the most part Arab allies that is pretty consistent and stable. There is there some seasonality you might not be able to see it significantly with the size of tractor supply, but you think about the spring summer there was a bit of a peak on flea tick and some of those type categories, but I we.

Speaker Change: <unk> IRR and we've continued to be consistent that our new stores. While there is a mix some we drop into existing markets. Some into brand new markets. There is some cannibalization and we continue to have net contribution to comp.

Speaker Change: There is a little bits and pieces here and there that shifted from flat to nine basis points.

Part of that is mix in the quarter and that's probably the only meaningful items I can mentioned it gives us all the confidence on on our gross margin plan. As you think about 2025 as I mentioned gross margin in the first half slightly more favorable than the back half.

Peter: Look at it is it's a pretty stable consistent business. It's got a solid operating margin over the long term, we expect that while it's accretive to earnings that we have the ability.

Speaker Change: After cannibalization from new stores.

A modest contributor if I would say of all the contributors we talk about the buildup to our comp sales from the strategic initiatives.

To grow their operating margins and the long term outlook is that allied that when you look at that level of business on the Rx side of it over this five year period of time, we can see ally that equaling and even <unk>.

Speaker Change: And what you'd see is we're going to start lapping some of the the last or most recent transportation efficiencies by about mid year.

Speaker Change: It is a modest level, but we are net contribution to our comp sales and so as we ramp up as planned in 2025 from 80 to 90, and we've ramped up from 70 to 80 million Youre seeing the non comp growth from new stores.

Speaker Change: And we'll begin to see a little bit more benefit though in the back half from exclusive brands, which Seth has talked about launching that.

Peter: Surpassing tractor supply level operating margins, because it's that strong of a business right now when you think of 2025, our focus is on the top line and getting neighbor's club members on boarded onto ally vet their platform their subscription model and so there'll be one.

Speaker Change: Retail media is the more beneficial but the net net is.

Speaker Change: <unk> to increase and that has over time in that five year maturation, we view it while we're talking $5 $10 15 type level basis points, but over the next five years, that's a contributor.

Speaker Change: In our expectations for gross margin, you'll see a modestly we forecast today, but more modestly higher gross margin performance in the first half in the second half.

Peter: Accretive there'll be some investments in the the onboarding and the transition year, and we'll be able to share more beyond 2025 is how we see that growing in the future but.

Speaker Change: Our new stores ramp from 70 up to 100 over the next next few years and then Hal mentioned earlier new store productivity.

Speaker Change: Great. Thank you I think that Dan.

Speaker Change: Thanks, David Disco and wrap our collateral I'm around all day and coming up next week, if I look anybody Nathan he thinks that place I'll hesitate to reach out and look forward to talking to you on our Q1 call in April Thank you.

Speaker Change: Great platform, a great team, we purchased as Hal mentioned.

Speaker Change: Reiterate more while I acknowledge in the last 18 months with or Slim and refining some of the square footage new store productivity has been extremely consistent in right in line from all of our targets over the last three or four years and we are.

Speaker Change: The technology the resources licensed in all the states enable for us to be able to ramp quickly with them. So very excited about this opportunity, which is certainly we believe a one plus one is certainly more than two.

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

Distantly performing at or above our markets and excited about the production and the performance of our new stores.

Speaker Change: Sounds good thank you.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Speaker Change: Next question is from the line of Karen short with Melius Research. Your line is now open.

Speaker Change: Sure. Thank Harry obviously, I think we've got time for one more question. Please.

Speaker Change: Certainly the next question is from the line of David Bellinger with Mizuho. Your line is now open.

Speaker Change: Hey, Thanks, very much I wanted to just focus on ex comp in general. So can you give a sense of what the comp water all contribution is or the new store waterfall contribution is to the comp and how you think about that going forward and then tie that end with how.

David Bellinger: Hey, good morning, Thanks for the question.

David Bellinger: On the gross margins are down very slightly year over year. This quarter I think it was the first time since late 2022, and we're just a little unclear on the drivers other than the difficult difficult comparison in the prior year. So just any more detail you can help.

Speaker Change: Think about new store productivity.

David Bellinger: As with anything on the promo activity alright, and the shorter holiday how that played into it and then just secondly, how should we think about the year on year gross margin progression throughout 2025 any specific drivers you've got baked in like retail media or some other factors.

Karen short: Yeah, sure Hey, Karen.

Speaker Change: New stores, hitting both comp and new store productivity first when we all hit new store productivity first when we when we talk about new store productivity profitability. We look at it on a net of cannibalization. That's how we view its impact that's how we view it it's IRR and we continue.

David Bellinger: Yes.

David Bellinger: Thanks, David on gross margin for the fourth quarter as I mentioned it came in very much in line with our expectations. The Q third Q3 call.

Speaker Change: To be consistent that our new stores, while there is a mix some we drop into existing markets. Some into brand new markets. There is some cannibalization and we continue to have net contribution to comp.

David Bellinger: <unk> forecasted that we were anticipating flat year over year gross margin knowing that we were up against the 129 basis point growth. There was probably 20 to 30 basis points back in the prior year that was very unique to that quarter in fourth quarter 2023. So we continue to have solid performance in.

Speaker Change: After cannibalization from new stores, it's a modest contributor if I would say of all the contributors we talk about the buildup to our comp sales from the strategic initiatives.

Speaker Change: It is a modest <unk>.

David Bellinger: Gross margin, we were cycling that there really wasn't much that was unique and it wasn't promotional while there was a step up in promotional.

Speaker Change: Level, but we are net.

Speaker Change: Contribution to our comp sales and so as we ramp up as we planned in 2025 from like 80 to 90, and we ramped up from 70 to 80 Youre seeing the non comp.

David Bellinger: In fourth quarter year over year for US we had targeted promotions, we had vendors partnership that helped to maintain the gross margin. So.

David Bellinger: There is a little bits and pieces here and there that shifted from flat to nine basis points.

David Bellinger: Part of that is mix in the quarter and that's probably the only meaningful items I can mentioned it gives us all the confidence on on our gross margin plan. As you think about 2025 as I mentioned gross margin in the first half slightly more favorable than the back half.

Speaker Change: Next few years, and then Hal mentioned earlier, new store productivity I can't reiterate more while I acknowledge in the last 18 months with or Slim and refining some of the square footage new store productivity has been extremely consistent in right in line from all of our targets over the last three or four years and we are.

David Bellinger: And what you'd see is we're going to start lapping some of the last or most recent transportation efficiencies by about mid year.

David Bellinger: And we'll begin to see a little bit more benefit though in the back half from exclusive brands, which assess has talked about launching.

Speaker Change: Consistently performing at or above our markets and excited about the production and the performance of our new stores.

David Bellinger: Retail media is a more beneficial but the net net is.

David Bellinger: Our expectations for gross margin you will see a modestly we forecast today, but more modestly higher gross margin performance in the first half in the second half.

Speaker Change: Great. Thank you.

Speaker Change: I think Gary obviously, I think we've got time for one more question. Please.

Speaker Change: Certainly the next question is from the line of David Bellinger with Mizuho. Your line is now open.

David Bellinger: Alright, thank you.

Speaker Change: Thanks, David wrap our collateral on the round all day and.

David Bellinger: Hey, good morning, Thanks for the question.

David Bellinger: Coming up.

David Bellinger: Next week as well if anybody needs anything so please don't hesitate to reach out and look forward to talking to you on our Q1 call in April Thank you.

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

Speaker Change: And then just secondly, how should we think about the year on year gross margin progression throughout 2025 any specific drivers you've got baked in like retail media or some other factors.

Speaker Change: Yes.

Speaker Change: Thanks, David on gross margin for the fourth quarter as I mentioned it came in.

Speaker Change: Much in line with our expectations the Q3 Q3 call.

Speaker Change: Forecasted that we were anticipating flat year over year gross margin knowing that we were up against the 129 basis point growth. There was probably 20 to 30 basis points back in the prior year that was very unique to that quarter in fourth quarter 2023. So we continue to have solid performance.

Speaker Change: <unk> gross margin, we were cycling that there really wasn't much that was unique and it wasn't promotional while there was a step up in promotional in fourth quarter year over year for US. We we had targeted promotions we had vendors partnership that helped maintain the gross margin. So there's a little bit.

Speaker Change: Pieces here and there that shifted from flat to nine basis points.

Speaker Change: Part of that is mix in the quarter and that's probably the only meaningful items I can mentioned it gives us all the confidence on on our gross margin plan. As you think about 2025 as I mentioned gross margin in the first half slightly more favorable than the back half.

Speaker Change: And what you'd see is we're going to start lapping some of the the last or most recent transportation efficiencies by about mid year.

Speaker Change: And we'll begin to see a little bit more benefit though in the back half from exclusive brands, which Seth has talked about launching.

Speaker Change: The retail media is the more beneficial but the net net is in.

Speaker Change: In our expectations for gross margin Youll see a modestly we forecast today, but more modestly higher gross margin performance in the first half in the second half.

Speaker Change: Great. Thank you I think that Dan.

Speaker Change: Thanks, David Disco and wrap our collateral I'm around all day and the Amp out coming up next week, if I look anybody needs anything. So please don't hesitate to reach out and look forward to talking to you on our Q1 call in April Thank you.

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

Q4 2024 Tractor Supply Co Earnings Call

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