Tractor Supply Q4 2025 Tractor Supply Co Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Tractor Supply Co Earnings Call
2025 results.
At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. We ask that all participants limit themselves to 1 question and return to the queue for additional questions. Please note that the queue for our question and answer session did not open until the start of this call.
Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of tractor supply company. And as a reminder, this call is being recorded your host. For today's call is Mary Winn Pilkington, senior vice president of investor and public relations for Tractor Supply Company. Now first up is a year-end video
I would now like to pass the call to our host. Mary Winn, Pilkington, Mary win. Please go ahead.
To significant risk and uncertainties including the future operating and financial performance of the company. In many cases, these risk 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 an actual results May differ materially from expectations.
Important risk factors that could cause actual results to differ materially from those reflected in the forward-looking statement or included at the end of the press release issued today and in the company's filings with the Securities and Exchange Commission. The information contained in this call is accurate only as of the date discussed investors should not assume that statements will remain operative at a later 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 1, question to ensure everyone has 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 further discussions. Thank you for your time and attention this morning. Now it's my pleasure to turn the call over to Hal.
Thank you. Mary when and good morning everyone. Before we begin, I want to recognize our team members First Responders and local communities impacted by winter storm fern.
Our teams move quickly to support our neighbors during challenging times and continue to do so. And it reinforces our role as a Dependable supplier when our customers need us. Most
Turning to the business. The opening video highlights the progress, our team made in 2025 and does a nice job of setting. The context for the discussion that will follow in this earnings call.
As with any year 2025 was not without its challenges. And I want to thank her more than 52,000 Tractor Supply team members for staying focused on our purpose operating with discipline and making the adjustments necessary in a dynamic environment while continuing to evolve the business.
That work positions us to build on our strategic advantages and remain a consistent share gainer in an attractive Market.
Before getting into the details, I want to acknowledge that our fourth quarter results. Came in below our expectations.
Results. Reflected a shift in consumer spending with essential categories remaining resilient while discretionary demand moderated and emergency response was absent versus last year.
there were 3, primary drivers of our performance that I'd like to drill down on
First as we cycled the benefit from last year's hurricane, ha and Milton storm recovery. It became clear that it contributed more meaningfully to our results in 2024 than we had originally estimated.
In contrast, 2025 was a historically Quiet Storm season with no hurricanes, making landfall in the continental US for the first time in a decade.
We now estimate, this Dynamic represented, roughly 100 basis points headwind to comps most pronounced in the South Atlantic.
The second main driver was Big Ticket categories, excluding emergency response and they experienced a step down versus our trending Q3
Our inventory levels and pricing were competitive and we do not believe we lost share in these categories.
Instead, We Believe customers are more selective and that some discretionary spending shifted towards categories outside of our addressable Market in the fourth quarter.
And lastly performance across select holiday periods and seasonal categories, such as holiday Decor toys, things like dogs toys and snacks power tools. They were below our expectations. And this reflected a highly promotional holiday environment combined with softer demand again. We believe these Dynamics were categories, specific quarter specific and broadly consistent with what we saw across retail.
At the same time, customer engagement remained healthy, throughout the quarter, and our consumable. Usable and edible categories, continue to perform very well reinforcing. The resilience of our needs-based model.
We estimate, we had 1 of our strongest quarters of share gain in Farm and Ranch stay disciplined on cost, and continue to the ex execute, the fundamentals of the business while investing strategically in our growth priorities.
Now, let's transition to the fourth quarter and full year 2025 results.
For the fourth quarter, net sales increased 3.3% to 3.9 billion dollars with comparable store sales, increasing 0.3%, driven by Modest growth in average ticket.
Fourth quarter diluted EPS was 43 cents reflecting the combined impact of modest, sales growth elevated promotional activity and continued investment to support our strategic initiatives.
Our digital business, delivered high single-digit growth.
Strength was offset by the 2 regions in the South Atlantic, which declined mid single digits. And as I mentioned previously, we're lapping storm activity.
Customer fundamentals remain solid during the quarter identify, customer counts increase, approximately 2% while spend per customer moderated, just slightly.
From a category, standpoint consumable usable and edible were strong. As I mentioned previously and they delivered low mid, single digit comparable growth led by livestock, equan and poultry and Wildlife supplies.
Speaker #1: In contrast, 2025 was a historically quiet storm season, with no hurricanes making landfall in the continental U.S. for the first time in a decade.
Mary Winn Pilkington: In contrast, 2025 was a historically quiet storm season, with no hurricanes making landfall in the continental US for the first time in a decade. We now estimate this dynamic represented roughly 100 basis points headwind to comps, most pronounced in the South Atlantic. The second main driver was big-ticket categories excluding emergency response, and they experienced a step down versus our trend in Q3. Our inventory levels and pricing were competitive, and we do not believe we lost share in these categories. Instead, we believe customers were more selective and that some discretionary spending shifted towards categories outside of our addressable market in the fourth quarter. Lastly, performance across select holiday periods and seasonal categories such as holiday decor, toys, things like dog toys and snacks, power tools was below our expectations. This reflected a highly promotional holiday environment combined with softer demand.
Hal Lawton: In contrast, 2025 was a historically quiet storm season, with no hurricanes making landfall in the continental US for the first time in a decade. We now estimate this dynamic represented roughly 100 basis points headwind to comps, most pronounced in the South Atlantic. The second main driver was big-ticket categories excluding emergency response, and they experienced a step down versus our trend in Q3.
And our winter seasonal categories, posted modest comp growth with cold weather conditions. Largely neutral for the quarter.
Speaker #1: We now estimate this dynamic represented roughly 100 basis points headwind to comps, most pronounced in the South Atlantic. The second main driver was big ticket categories excluding emergency response, and they experienced a step-down versus our trend in Q3.
Again as I mentioned previously, this strength was offset by continued pressure in Big Ticket immersion response categories which together declined High single digits
Turning to the full year. 2025 was a year of steady progress as we navigated a challenging and uneven retail environment.
Our inventory levels and pricing were competitive, and we do not believe we lost share in these categories. Instead, we believe customers were more selective and that some discretionary spending shifted towards categories outside of our addressable market in the fourth quarter. Lastly, performance across select holiday periods and seasonal categories such as holiday decor, toys, things like dog toys and snacks, power tools was below our expectations. This reflected a highly promotional holiday environment combined with softer demand.
Speaker #1: Our inventory levels and pricing were competitive, and we do not believe we lost share in these categories. Instead, we believe customers were more selective and that some discretionary spending shifted towards categories outside of our addressable market in the fourth quarter.
Throughout the year, we stayed focused on executing the fundamentals of the business serving our customers. Well, and advancing our life out here, 2030 strategy,
Net sales increased 4.3% to 15.5 billion driven by new store growth.
Speaker #1: And lastly, performance across select holiday periods and seasonal categories such as holiday decor, toys, things like dogs, toys, and snacks, power tools, they were below our expectations.
The addition of eladott and comparable store sales gains of 1.2%.
Diluted earnings per share were $26 reflecting disciplined execution while continuing to fund strategic Investments across the business.
Speaker #1: And this reflected a highly promotional holiday environment, combined with softer demand. Again, we believe these dynamics were category-specific, quarter-specific, and broadly consistent with what we saw across retail.
Total active customers and high-value customer retention continue to be strong and customer service scores. Once again reached all-time highs
Mary Winn Pilkington: Again, we believe these dynamics were category-specific, quarter-specific, and broadly consistent with what we saw across retail. At the same time, customer engagement remained healthy throughout the quarter, and our consumable, usable, and edible categories continued to perform very well, reinforcing the resilience of our needs-based model. We estimate we had one of our strongest quarters of share gain in Farm and Ranch, stayed disciplined on cost, and continued to execute the fundamentals of the business while investing strategically in our growth priorities. Now let's transition to the fourth quarter and full year 2025 results. For the fourth quarter, net sales increased 3.3% to $3.9 billion, with comparable store sales increasing 0.3%, driven by modest growth in average ticket. Fourth quarter diluted EPS was $0.43, reflecting the combined impact of modest sales growth, elevated promotional activity, and continued investment to support our strategic initiatives.
Again, we believe these dynamics were category-specific, quarter-specific, and broadly consistent with what we saw across retail. At the same time, customer engagement remained healthy throughout the quarter, and our consumable, usable, and edible categories continued to perform very well, reinforcing the resilience of our needs-based model. We estimate we had one of our strongest quarters of share gain in Farm and Ranch, stayed disciplined on cost, and continued to execute the fundamentals of the business while investing strategically in our growth priorities.
Neighbors, Club, continued to grow with membership, representing more than 80% of sales.
Speaker #1: At the same time, customer engagement remained healthy throughout the quarter, and our consumable, usable, and edible categories continued to perform very well, reinforcing the resilience of our needs-based model.
Team member engagement remained high and turnover stayed near historic close particularly at the store manager level.
Speaker #1: We estimate we had one of our strongest quarters of share gain in farm and ranch, stayed disciplined on cost, and continued to execute the fundamentals of the business while investing strategically in our growth priorities.
On the technology front, our digital business continued to scale in 2025, delivering, high single-digit growth for the year and this performance reflects continued Improvement in personalization and conversion as well as our delivery capabilities.
More broadly on the technology front. We expanded our use of the AI across the Enterprise, including expanding our relationship with openai.
Speaker #1: Now let's transition to the fourth quarter and full year 2025 results. For the fourth quarter, net sales increased 3.3% to $3.9 billion. With comparable store sales increasing 0.3%, driven by modest growth in average ticket.
Now let's transition to the fourth quarter and full year 2025 results. For the fourth quarter, net sales increased 3.3% to $3.9 billion, with comparable store sales increasing 0.3%, driven by modest growth in average ticket. Fourth quarter diluted EPS was $0.43, reflecting the combined impact of modest sales growth, elevated promotional activity, and continued investment to support our strategic initiatives.
The capabilities are improving, forecasting, inventory flow and team member productivity. Helping us operate more efficiently and better serve our customers.
Speaker #1: Fourth quarter diluted EPS was $0.43, reflecting the combined impact of modest sales growth, elevated promotional activity, and continued investment to support our strategic initiatives.
A Hallmark of track Supply continues to be opening productive new stores. We open 99 track supply stores. And once again saw robust early news, store productivity performance,
Our distribution centers delivered, mid single-digit productivity improvements for the year while maintaining excellent safety and engagement results.
Speaker #1: Our digital business delivered high single-digit growth. We posted positive comps in 11 of our 15 regions, however this strength was offset by the two regions in the South Atlantic which declined mid-single digits as I mentioned previously were lapping storm activity.
Mary Winn Pilkington: Our digital business delivered high single-digit growth. We posted positive comps in 11 of our 15 regions. However, this strength was offset by the 2 regions in the South Atlantic, which declined mid-single digits, as I mentioned previously, were lapping storm activity. Customer fundamentals remained solid during the quarter. Identified customer counts increased approximately 2%, while spend per customer moderated just slightly. From a category standpoint, consumable, usable, and edible were strong, as I mentioned previously, and they delivered low mid-single-digit comparable growth, led by livestock, equine, and poultry, and wildlife supplies. Our winter seasonal categories posted modest comp growth, with cold weather conditions largely neutral for the quarter. Again, as I mentioned previously, this strength was offset by continued pressure in big-ticket emerging response categories, which together declined high single digits.
Our digital business delivered high single-digit growth. We posted positive comps in 11 of our 15 regions. However, this strength was offset by the 2 regions in the South Atlantic, which declined mid-single digits, as I mentioned previously, were lapping storm activity. Customer fundamentals remained solid during the quarter. Identified customer counts increased approximately 2%, while spend per customer moderated just slightly.
We also opened our first bulk Distribution Center 2025 and we broke ground in Idaho on our 11th DC.
Speaker #1: Customer fundamentals remained solid during the quarter. Identified customer counts increased approximately 2%, while spend per customer moderated just slightly. From a category standpoint, consumable, usable, and edible were strong, as I mentioned previously, and they delivered low to mid-single-digit comparable growth, led by livestock, equine and poultry, and wildlife supplies.
As part of our life out here. 2030 strategy, 2025 was a year of meaningful progress in building capabilities to support long-term growth. We focused on strengthening what we do best while continuing to scale a new initiatives. That expand how we serve our customers and Growers. Share a wallet.
From a category standpoint, consumable, usable, and edible were strong, as I mentioned previously, and they delivered low mid-single-digit comparable growth, led by livestock, equine, and poultry, and wildlife supplies. Our winter seasonal categories posted modest comp growth, with cold weather conditions largely neutral for the quarter. Again, as I mentioned previously, this strength was offset by continued pressure in big-ticket emerging response categories, which together declined high single digits.
On the store's front, we continue to embed localization into new stores and remodels with 160 stores localized as of year end.
Speaker #1: And our winter seasonal categories posted modest comp growth, with cold weather conditions largely neutral for the quarter. Again, as I mentioned previously, this strength was offset by continued pressure in big ticket and emergency response categories, which together declined high single digits.
With nearly 60% of our stores in the project. Fusion format, we continue to see attractive economics and improved customer relevance from our remodel program.
We also Advanced our final mile delivery initiative, which lowers the cost to serve online orders and expands our ability to fulfill larger more complex orders.
Speaker #1: Turning to the full year, 2025 was a year of steady progress as we navigated a challenging and uneven retail environment. Throughout the year, we stayed focused on executing the fundamentals of the business, serving our customers well, and advancing our life out here 2030 strategy.
Mary Winn Pilkington: Turning to the full year, 2025 was a year of steady progress as we navigated a challenging and uneven retail environment. Throughout the year, we stayed focused on executing the fundamentals of the business, serving our customers well, and advancing our Life Out Here 2030 strategy. Net sales increased 4.3% to $15.5 billion, driven by new store growth, the addition of Allivet, and comparable store sales gains of 1.2%. Diluted earnings per share were $2.06, reflecting disciplined execution while continuing to fund strategic investments across the business. Total active customers and high-value customer retention continued to be strong, and customer service scores once again reached all-time highs. Neighbors Club continued to grow, with membership representing more than 80% of sales. Team member engagement remained high, and turnover stayed near historic lows, particularly at the store manager level.
Turning to the full year, 2025 was a year of steady progress as we navigated a challenging and uneven retail environment. Throughout the year, we stayed focused on executing the fundamentals of the business, serving our customers well, and advancing our Life Out Here 2030 strategy. Net sales increased 4.3% to $15.5 billion, driven by new store growth, the addition of Allivet, and comparable store sales gains of 1.2%. Diluted earnings per share were $2.06, reflecting disciplined execution while continuing to fund strategic investments across the business.
during the year, we increase capacity and execution expanding to more than 210 delivery centers covering nearly 25% of our store base
In direct sales, we ended the year with approximately 50 sales Specialists covering 375 stores.
Speaker #1: Net sales increased 4.3% to $15.5 billion, driven by new store growth, the addition of Alibet, and comparable store sales gains of $1.2%. Diluted earnings per share were $2.06, reflecting disciplined execution while continuing to fund strategic investments across the business.
While both initiatives are still early, we encouraged by the traction. We're seeing in customer engagement basket, size and repeat Behavior.
And pet and animal prescriptions 2025 was focused on building the foundation and integrating capabilities into the Tractor Supply ecosystem.
Total active customers and high-value customer retention continued to be strong, and customer service scores once again reached all-time highs. Neighbors Club continued to grow, with membership representing more than 80% of sales. Team member engagement remained high, and turnover stayed near historic lows, particularly at the store manager level.
Speaker #1: Total active customers and high-value customer retention continued to be strong, and customer service scores once again reached all-time highs. Neighbors Club continued to grow, with membership representing more than 80% of sales.
While customer adoption, progressed more, gradually at the beginning and we have liked Alec accelerated throughout the year and delivered approximately 100 million in sales in the total year. Reinforcing the customer demand in this category and the opportunity ahead
Speaker #1: Team member engagement remained high, and turnover stayed near historic lows, particularly at the store manager level. On the technology front, our digital business continued to scale in 2025, delivering high single-digit growth for the year.
taken together, these initiatives, strengthen our foundation improved executions and position Tractor Supply for durable long-term growth
Mary Winn Pilkington: On the technology front, our digital business continued to scale in 2025, delivering high single-digit growth for the year. This performance reflects continued improvement in personalization and conversion, as well as our delivery capabilities. More broadly, on the technology front, we expanded our use of AI across the enterprise, including expanding our relationship with OpenAI. The capabilities are improving forecasting, inventory flow, and team member productivity, helping us operate more efficiently and better serve our customers. A hallmark of Tractor Supply continues to be opening productive new stores. We opened 99 Tractor Supply stores and once again saw robust early new store productivity performance. Our distribution centers delivered mid-single-digit productivity improvements for the year while maintaining excellent safety and engagement results. We also opened our first bulk distribution center in 2025, and we broke ground in Idaho on our 11th DC.
On the technology front, our digital business continued to scale in 2025, delivering high single-digit growth for the year. This performance reflects continued improvement in personalization and conversion, as well as our delivery capabilities. More broadly, on the technology front, we expanded our use of AI across the enterprise, including expanding our relationship with OpenAI. The capabilities are improving forecasting, inventory flow, and team member productivity, helping us operate more efficiently and better serve our customers.
as we plan for 2026, we are preparing for a wide range of demand outcomes.
Speaker #1: And this performance reflects continued improvement in personalization and conversion as well as our delivery capabilities. More broadly, on the technology front, we expanded our use of the AI across the enterprise, including expanding our relationship with OpenAI.
We're planning for continued, net sales, growth supported by a new store, openings and improved comp sales and better leverage as our investments mature.
Speaker #1: The capabilities are improving forecasting, inventory flow, and team member productivity, helping us operate more efficiently and better serve our customers. A hallmark of Tractor Supply continues to be opening productive new stores.
A hallmark of Tractor Supply continues to be opening productive new stores. We opened 99 Tractor Supply stores and once again saw robust early new store productivity performance. Our distribution centers delivered mid-single-digit productivity improvements for the year while maintaining excellent safety and engagement results. We also opened our first bulk distribution center in 2025, and we broke ground in Idaho on our 11th DC.
Fun season. However, that's alongside declining consumer sentiment and a robust National debate around affordability.
Speaker #1: We opened 99 Tractor Supply stores and once again saw robust early new store productivity performance. Our distribution centers delivered mid-single digit productivity improvements for the year, while maintaining excellent safety and engagement results.
These Dynamics are not unique to Tractor Supply. We believe our needs-based model, strong customer, relevance scale, and discipline execution, positions us favorably.
And with that, I'll now turn the call over to Kurt for further insights on our results and our outlook for 2026.
Speaker #1: We also opened our first bulk distribution center in 2025, and we broke ground in Idaho on our 11th DC. As part of our life out here 2030 strategy, 2025 was a year of meaningful progress in building capabilities to support long-term growth.
Thank you. How and hello to everyone on the call. I'd like to start by walking us through the Cadence of the quarter.
Mary Winn Pilkington: As part of our Life Out Here 2030 strategy, 2025 was a year of meaningful progress in building capabilities to support long-term growth. We focused on strengthening what we do best while continuing to scale new initiatives that expand how we serve our customers and grow our share of wallet. On the stores front, we continue to embed localization into new stores and remodels, with 160 stores localized as of year-end. With nearly 60% of our stores in the Project Fusion format, we continue to see attractive economics and improved customer relevance from our remodel program. We also advanced our Final Mile delivery initiative, which lowers the cost to serve online orders and expands our ability to fulfill larger, more complex orders. During the year, we increased capacity and execution, expanding to more than 210 delivery centers, covering nearly 25% of our store base.
As part of our Life Out Here 2030 strategy, 2025 was a year of meaningful progress in building capabilities to support long-term growth. We focused on strengthening what we do best while continuing to scale new initiatives that expand how we serve our customers and grow our share of wallet. On the stores front, we continue to embed localization into new stores and remodels, with 160 stores localized as of year-end. With nearly 60% of our stores in the Project Fusion format, we continue to see attractive economics and improved customer relevance from our remodel program.
Speaker #1: We focused on strengthening what we do best while continuing to scale new initiatives that expand how we serve our customers and grow our share of wallet.
Looking at comp sales, October started soft as we lapped, the hurricane response, followed by a rebound in November as it got colder, and the hurricane lap dissipated. We entered the final 5 weeks of the year with relatively flat quarter to date comps.
December inclusive of Black Friday, produced modest gains.
Speaker #1: On the stores front, we continue to embed localization into new stores and remodels, with 160 stores localized as of year-end. With nearly 60% of our stores in the project fusion format, we continue to see attractive economics and improved customer relevance from our remodel program.
By all accounts broader, retail sales growth especially general merchandise, stepped down in December.
We also advanced our Final Mile delivery initiative, which lowers the cost to serve online orders and expands our ability to fulfill larger, more complex orders. During the year, we increased capacity and execution, expanding to more than 210 delivery centers, covering nearly 25% of our store base.
Speaker #1: We also advanced our final model delivery initiative, which lowers the cost to serve online orders and expands our ability to fulfill larger, more complex orders.
Average ticket increased 0.3% driven by approximately 2 points of retail inflation offset by softness and Big Ticket categories and a decline in units per transaction.
Speaker #1: During the year, we increased capacity and execution, expanding to more than 210 delivery centers, covering nearly 25% of our store base. In direct sales, we ended the year with approximately 50 sales specialists, covering 375 stores.
The retail inflation was primarily the result of a higher commodity cost environment and selective price adjustments as higher product costs flowed through the our supply chain.
The decline in up reflects the softness in certain discretionary, seasonal, and holiday categories.
Mary Winn Pilkington: In direct sales, we ended the year with approximately 50 sales specialists covering 375 stores. While both initiatives are still early, we're encouraged by the traction we're seeing in customer engagement, basket size, and repeat behavior. In pet and animal prescriptions, 2025 was focused on building the foundation and integrating capabilities into the Tractor Supply ecosystem. While customer adoption progressed more gradually at the beginning than we have liked, Allivet accelerated throughout the year and delivered approximately $100 million in sales in the total year, reinforcing the customer demand in this category and the opportunity ahead. Taken together, these initiatives strengthened our foundation, improved execution, and positioned Tractor Supply for durable long-term growth. As we plan for 2026, we are preparing for a wide range of demand outcomes.
In direct sales, we ended the year with approximately 50 sales specialists covering 375 stores. While both initiatives are still early, we're encouraged by the traction we're seeing in customer engagement, basket size, and repeat behavior. In pet and animal prescriptions, 2025 was focused on building the foundation and integrating capabilities into the Tractor Supply ecosystem.
Speaker #1: While both initiatives are still early, we're encouraged by the traction we're seeing in customer engagement, basket size, and repeat behavior. In pet and animal prescriptions, 2025 was focused on building the foundation and integrating capabilities into the tractor supply ecosystem.
Turning the margins fourth quarter gross margin declined, approximately 10 basis points year-over-year as ongoing cost management was offset by incremental tariffs, elevated promotional activity and higher delivery related Transportation costs.
The largest variance versus our expectation. Was the promotional environment, particularly around Black Friday and cyber week. As customers were more deliberate and how they allocated their spending.
While customer adoption progressed more gradually at the beginning than we have liked, Allivet accelerated throughout the year and delivered approximately $100 million in sales in the total year, reinforcing the customer demand in this category and the opportunity ahead. Taken together, these initiatives strengthened our foundation, improved execution, and positioned Tractor Supply for durable long-term growth. As we plan for 2026, we are preparing for a wide range of demand outcomes.
Speaker #1: While customer adoption progressed more gradually at the beginning than we have liked, Alibet accelerated throughout the year and delivered approximately $100 million in sales in the total year, reinforcing the customer demand in this category and the opportunity ahead.
Our view is that these promotions were transitory and specific to the operating environment in Q4.
Stepping back for the full year, gross margin expanded, 16 basis points. Underscoring the underlying strength of our margin structure despite the more challenging Dynamics
Speaker #1: Taken together, these initiatives strengthen our foundation, improve execution, and position Tractor Supply for durable, long-term growth. As we plan for 2026, we are preparing for a wide range of demand outcomes.
Sgna including depreciation and amortization increased approximately 70 basis points to 27.5% of sales driven primarily by planned Investments and fixed costy, leverage at the lower level of comp sales growth.
Speaker #1: We're planning for continued net sales growth supported by new store openings and improved comp sales, and better leverage as our investments mature. In our view, the broader environment remains uncertain, with a wide range of potential consumer spending outcomes.
Mary Winn Pilkington: We're planning for continued net sales growth supported by new store openings, improved comp sales, and better leverage as our investments mature. In our view, the broader environment remains uncertain with a wide range of potential consumer spending outcomes. We continue to see mixed signals, including an all-time high stock market and a strong projected tax refund season. However, that's alongside declining consumer sentiment and a robust national debate around affordability. These dynamics are not unique to Tractor Supply. We believe our needs-based model, strong customer relevance, scale, and disciplined execution positions us favorably. With that, I'll now turn the call over to Kurt for further insights on our results and our outlook for 2026.
We're planning for continued net sales growth supported by new store openings, improved comp sales, and better leverage as our investments mature. In our view, the broader environment remains uncertain with a wide range of potential consumer spending outcomes. We continue to see mixed signals, including an all-time high stock market and a strong projected tax refund season. However, that's alongside declining consumer sentiment and a robust national debate around affordability. These dynamics are not unique to Tractor Supply.
Speaker #1: We continue to see mixed signals, including an all-time high stock market and a strong projected tax refund season. However, that's alongside declining consumer sentiment and a robust national debate around affordability.
These pressures were partially offset by continued productivity and cost. Control our expense management, was a strong point for the quarter, sgna, inclusive of DNA, expense, increased 6% over the prior year with nearly 2/3 of the growth rate, attributed to new stores and the acquisition of allivet providing evidence of a more normalized cost structure.
Speaker #1: These dynamics are not unique to tractor supply. We believe our needs-based model, strong customer relevance, scale and discipline execution positions us favorably. And with that, I'll now turn the call over to Kurt for further insights on our results and our outlook for
We believe our needs-based model, strong customer relevance, scale, and disciplined execution positions us favorably. With that, I'll now turn the call over to Kurt for further insights on our results and our outlook for 2026.
Speaker #1: 2026. Thank you, Hal.
Kurt Barton: Thank you, Hal, and hello to everyone on the call. I'd like to start by walking us through the cadence of the quarter. Looking at comp sales, October started soft as we lapped the hurricane response, followed by a rebound in November as it got colder and the hurricane lap dissipated. We entered the final five weeks of the year with relatively flat quarter-to-date comps. December, inclusive of Black Friday, produced modest gains. By all accounts, broader retail sales growth, especially general merchandise, stepped down in December. Average ticket increased 0.3%, driven by approximately two points of retail inflation, offset by softness in big-ticket categories and a decline in units per transaction. The retail inflation was primarily the result of a higher commodity cost environment and selective price adjustments as higher product costs flowed through our supply chain.
Kurt Barton: Thank you, Hal, and hello to everyone on the call. I'd like to start by walking us through the cadence of the quarter. Looking at comp sales, October started soft as we lapped the hurricane response, followed by a rebound in November as it got colder and the hurricane lap dissipated. We entered the final five weeks of the year with relatively flat quarter-to-date comps. December, inclusive of Black Friday, produced modest gains. By all accounts, broader retail sales growth, especially general merchandise, stepped down in December.
Speaker #2: And hello to everyone on the call. I'd like to start by walking us through the cadence of the quarter. Looking at comp sales, October started soft as we lapped the hurricane response.
Operating income declined, 6.5% year-over-year reflecting the combined impact of the modest sales growth. Gross margin performance and the Investments to support our key strategic initiatives. Our effective tax rate for the fourth quarter, improved, approximately 250 basis points to 19% primarily reflecting the timing of certain tax planning initiatives, including a federal tax benefit discrete to the quarter representing half of the rate reduction.
Speaker #2: Followed by a rebound in November as it got colder and the hurricane lap dissipated. We entered the final five weeks of the year with relatively flat quarter-to-date comps.
Speaker #2: December, inclusive of Black Friday, produced modest gains. By all accounts, broader retail sales growth, especially general merchandise, stepped down in December. Average ticket increased 0.3%, driven by approximately $2.00 of retail inflation.
Average inventory per store with up approximately 5% about 1/3 of the growth reflects the impact of tariffs. The remaining portions of the growth reflects our deliberate actions to support customer demand and in-stock levels. Going into 2026, we remain comfortable with our inventory position.
Average ticket increased 0.3%, driven by approximately two points of retail inflation, offset by softness in big-ticket categories and a decline in units per transaction. The retail inflation was primarily the result of a higher commodity cost environment and selective price adjustments as higher product costs flowed through our supply chain.
Taken together. While 2025 was not the year we had planned some of the challenges. We faced were largely transitory rather than structural and we made meaningful progress strengthening the business as we head into 2026.
Speaker #2: Offset by softness in big ticket categories and a decline in units per transaction. The retail inflation was primarily the result of a higher commodity cost environment and selective price adjustments as higher product costs flowed through our supply chain.
Let me now turn to our Outlook, we view the upcoming year as a period of normalization for the business.
Speaker #2: The decline in UPT reflects the softness in certain discretionary seasonal and holiday categories. Turning the margins, fourth-quarter gross margin declined approximately 10 basis points year over year, as ongoing cost management was offset by incremental tariffs.
Kurt Barton: The decline in UPT reflects the softness in certain discretionary seasonal and holiday categories. Turning to margins, fourth quarter gross margin declined approximately 10 basis points year-over-year as ongoing cost management was offset by incremental tariffs, elevated promotional activity, and higher delivery-related transportation costs. The largest variance versus our expectation was the promotional environment, particularly around Black Friday and Cyber Week, as customers were more deliberate in how they allocated their spending. Our view is that these promotions were transitory and specific to the operating environment in Q4. Stepping back for the full year, gross margin expanded 16 basis points, underscoring the underlying strength of our margin structure despite the more challenging dynamics. SG&A, including depreciation and amortization, increased approximately 70 basis points to 27.5% of sales, driven primarily by planned investments and fixed cost leverage at the lower level of comp sales growth.
The decline in UPT reflects the softness in certain discretionary seasonal and holiday categories. Turning to margins, fourth quarter gross margin declined approximately 10 basis points year-over-year as ongoing cost management was offset by incremental tariffs, elevated promotional activity, and higher delivery-related transportation costs. The largest variance versus our expectation was the promotional environment, particularly around Black Friday and Cyber Week, as customers were more deliberate in how they allocated their spending.
For 2026, we expect total sales growth in the range of 4 to 6% driven. By continued new store, openings and improving comparable store sales. We expect comp sales, growth of 1 to 3%, supported by continued Improvement in average ticket. As Aur growth Trends are expected to continue along with modest transaction growth.
Speaker #2: Elevated promotional activity and higher delivery-related transportation costs. The largest variance versus our expectation was the promotional environment, particularly around Black Friday and Cyber Week, as customers were more deliberate in how they allocated their spending.
From a gross margin perspective. We expect continued expansion driven by ongoing costs management initiatives growth in our exclusive Brands retail media and continued supply chain. Efficiencies
these benefits are partially offset by delivery costs and tariffs.
Our view is that these promotions were transitory and specific to the operating environment in Q4. Stepping back for the full year, gross margin expanded 16 basis points, underscoring the underlying strength of our margin structure despite the more challenging dynamics. SG&A, including depreciation and amortization, increased approximately 70 basis points to 27.5% of sales, driven primarily by planned investments and fixed cost leverage at the lower level of comp sales growth.
Speaker #2: Our view is that these promotions were transitory and specific to the operating environment in Q4. Stepping back for the full year, gross margin expanded 16 basis points, underscoring the underlying strength of our margin structure despite the more challenging dynamics.
Overall these positive gross margin drivers remain firmly in place.
On the expense side. We expect measured sgna D Leverage.
Sgna will experience some pressure from the opening of a new DC in the second half of the year and a more normalized incentive compensation. Burden in most quarters
Speaker #2: SG&A, including depreciation and amortization, increased approximately 70 basis points to 27.5% of sales, driven primarily by planned investments and fixed-cost leverage at the lower level of comp sales growth.
Line with sales growth this year.
Speaker #2: These pressures were partially offset by continued productivity and cost control. Our expense management was a strong point for the quarter. SG&A, inclusive of D&A expense, increased 6% over the prior year, with nearly two-thirds of the growth rate attributed to new stores and the acquisition of Alibet.
Kurt Barton: These pressures were partially offset by continued productivity and cost control. Our expense management was a strong point for the quarter. SG&A, inclusive of DNA expense, increased 6% over the prior year, with nearly two-thirds of the growth rate attributed to new stores and the acquisition of Allivet, providing evidence of a more normalized cost structure. Operating income declined 6.5% year-over-year, reflecting the combined impact of the modest sales growth, gross margin performance, and the investments to support our key strategic initiatives. Our effective tax rate for Q4 improved approximately 250 basis points to 19%, primarily reflecting the timing of certain tax planning initiatives, including a federal tax benefit discrete to the quarter, representing half of the rate reduction. Average inventory per store was up approximately 5%. About one-third of the growth reflects the impact of tariffs.
These pressures were partially offset by continued productivity and cost control. Our expense management was a strong point for the quarter. SG&A, inclusive of DNA expense, increased 6% over the prior year, with nearly two-thirds of the growth rate attributed to new stores and the acquisition of Allivet, providing evidence of a more normalized cost structure. Operating income declined 6.5% year-over-year, reflecting the combined impact of the modest sales growth, gross margin performance, and the investments to support our key strategic initiatives.
Taken together. We expect operating margin in the range of 9.3 to 9.6% which implies we can maintain operating margin at the midpoint of the range.
For planning purposes. We are assuming effective tax rate of approximately 22% and interest expense. That is generally consistent with 2025, reflecting our ongoing approach to discipline, capital structure and Leverage.
Speaker #2: Providing evidence of a more normalized cost structure. Operating income declined 6.5% year over year, reflecting the combined impact of the modest sales growth, gross margin performance, and the investments to support our key strategic initiatives.
We are forecasting diluted EPS in the range of 2.13 to $2.23.
As we manage the business, we are anchored to the midpoint of our guidance. While maintaining flexibility to respond to changes in the operating environment.
Speaker #2: Our effective tax rate for the fourth quarter improved approximately 250 basis points to 19%, primarily reflecting the timing of certain tax planning initiatives, including a federal tax benefit discreet to the quarter, representing half of the rate reduction.
Our effective tax rate for Q4 improved approximately 250 basis points to 19%, primarily reflecting the timing of certain tax planning initiatives, including a federal tax benefit discrete to the quarter, representing half of the rate reduction. Average inventory per store was up approximately 5%. About one-third of the growth reflects the impact of tariffs.
Net, capital spending is expected to be in the range of 675 to 725 million with the majority focused on growth initiatives.
We plan to open 100, new stores that are low risk, High return, organic growth opportunities.
Speaker #2: Average inventory per store was up approximately 5%, about one-third of the growth reflects the impact of tariffs. The remaining portion of the growth reflects our deliberate actions to support customer demand and in-stock levels going into 2026.
Kurt Barton: The remaining portion of the growth reflects our deliberate actions to support customer demand and in-stock levels going into 2026. We remain comfortable with our inventory position. Taken together, while 2025 was not the year we had planned, some of the challenges we faced were largely transitory rather than structural, and we made meaningful progress strengthening the business as we head into 2026. Let me now turn to our outlook. We view the upcoming year as a period of normalization for the business. For 2026, we expect total sales growth in the range of 4% to 6%, driven by continued new store openings and improving comparable store sales. We expect comp sales growth of 1% to 3%, supported by continued improvement in average ticket as AUR growth trends are expected to continue, along with modest transaction growth.
The remaining portion of the growth reflects our deliberate actions to support customer demand and in-stock levels going into 2026. We remain comfortable with our inventory position. Taken together, while 2025 was not the year we had planned, some of the challenges we faced were largely transitory rather than structural, and we made meaningful progress strengthening the business as we head into 2026. Let me now turn to our outlook. We view the upcoming year as a period of normalization for the business.
Speaker #2: We remain comfortable with our inventory position. Taken together, while 2025 was not the year we had planned, some of the challenges we faced were largely transitory, rather than structural, and we made meaningful progress, strengthening the business as we head into 2026.
Our new store pipeline is robust, and we expect to see greater consistency of openings across the year in 2026 approximately. 50% of our new stores will be fee development, which continues to provide cost efficiencies improved site quality and more favorable long-term economics.
We also expect share repurchases between, 375 and 450 million representing approximately 1 to 1.5% of shares outstanding.
Speaker #2: Let me now turn to our outlook. We view the upcoming year as a period of normalization for the business. For 2026, we expect total sales growth in the range of 4 to 6%, driven by continued new store openings and improving comparable store sales.
While we remain focused on supporting our strategic priorities. We also expect those Investments to increase self-fund.
For 2026, we expect total sales growth in the range of 4% to 6%, driven by continued new store openings and improving comparable store sales. We expect comp sales growth of 1% to 3%, supported by continued improvement in average ticket as AUR growth trends are expected to continue, along with modest transaction growth.
Speaker #2: We expect comp sales growth of 1 to 3%, supported by continued improvement in average ticket as AUR growth trends are expected to continue. Along with modest transaction growth.
Our Capital allocation priorities remain unchanged. We will continue to invest in our flywheel new stores. Remodels supply chain capacity, digital and newer growth initiatives like direct sales and final mile delivery while maintaining a competitive and growing dividend consistent Cherry purchases and a strong balance sheet.
Speaker #2: From a gross margin perspective, we expect continued expansion. Driven by ongoing cost management initiatives, growth in our exclusive brands, retail media, and continued supply chain efficiencies.
Kurt Barton: From a gross margin perspective, we expect continued expansion, driven by ongoing cost management initiatives, growth in our exclusive brands, retail media, and continued supply chain efficiencies. These benefits are partially offset by delivery costs and tariffs. Overall, these positive gross margin drivers remain firmly in place. On the expense side, we expect measured SG&A deleverage. SG&A will experience some pressure from the opening of a new DC in the second half of the year and a more normalized incentive compensation burden in most quarters. After several years of elevated investment, we expect DNA growth to moderate and move more in line with sales growth this year. Taken together, we expect operating margin in the range of 9.3% to 9.6%, which implies we can maintain operating margin at the midpoint of the range.
From a gross margin perspective, we expect continued expansion, driven by ongoing cost management initiatives, growth in our exclusive brands, retail media, and continued supply chain efficiencies. These benefits are partially offset by delivery costs and tariffs. Overall, these positive gross margin drivers remain firmly in place. On the expense side, we expect measured SG&A deleverage. SG&A will experience some pressure from the opening of a new DC in the second half of the year and a more normalized incentive compensation burden in most quarters.
Overall, we believe this positions Tractor Supply to continue executing effectively and deliver long-term value for shareholders.
As always, we view our results in halves, rather than the quarters, given the seasonality of the business.
Speaker #2: These benefits are partially offset by delivery costs and tariffs. Overall, these are positive gross margin drivers for remaining firmly in place. On the expense side, we expect measured SG&A leverage.
Turning to the calendar of key line items. We currently expect comp sales performance to be relatively balanced across the year, with each half, contributing relatively equal to the comp sales growth.
Speaker #2: SG&A will experience some pressure from the opening of a new DC in the second half of the year, and a more normalized incentive compensation burden in most quarters.
We expect every quarter to be within the range of 1 to 3% growth. We are planning for a more normalized spring season, which would result in a rebalancing of sales between Q2 and Q3.
Speaker #2: After several years of elevated investment, we expect D&A growth to moderate and move more in line with sales growth this year. Taken together, we expect operating margin in the range of 9.3 to 9.6%, which implies we can maintain operating margin at the midpoint of the range.
After several years of elevated investment, we expect DNA growth to moderate and move more in line with sales growth this year. Taken together, we expect operating margin in the range of 9.3% to 9.6%, which implies we can maintain operating margin at the midpoint of the range.
Speaker #2: For planning purposes, we are assuming effective tax rate of approximately 22% and interest expense that is generally consistent with 2025, reflecting our ongoing approach to disciplined capital structure and leverage.
Kurt Barton: For planning purposes, we are assuming an effective tax rate of approximately 22%, an interest expense that is generally consistent with 2025, reflecting our ongoing approach to disciplined capital structure and leverage. We are forecasting Diluted EPS in the range of $2.13 to $2.23. As we manage the business, we are anchored to the midpoint of our guidance while maintaining flexibility to respond to changes in the operating environment. Net capital spending is expected to be in the range of $675 million to $725 million, with the majority focused on growth initiatives. We plan to open 100 new stores that are low-risk, high-return organic growth opportunities. Our new store pipeline is robust, and we expect to see greater consistency of openings across the year. In 2026, approximately 50% of our new stores will be Fee Development, which continues to provide cost efficiencies, improved site quality, and more favorable long-term economics.
For planning purposes, we are assuming an effective tax rate of approximately 22%, an interest expense that is generally consistent with 2025, reflecting our ongoing approach to disciplined capital structure and leverage. We are forecasting Diluted EPS in the range of $2.13 to $2.23. As we manage the business, we are anchored to the midpoint of our guidance while maintaining flexibility to respond to changes in the operating environment. Net capital spending is expected to be in the range of $675 million to $725 million, with the majority focused on growth initiatives.
While the first quarter began against tougher comparisons, recent winter weather has supported demand across our core categories. That said importantly, a majority of the quarter remains ahead of us with March representing more than 40% of first quarter sales and each successive, week becoming more impactful as spring conditions emerge across the country.
Speaker #2: We are forecasting diluted EPS in the range of $2.13 to $2.23, as we manage the business we are anchored to the midpoint of our guidance.
From a margin standpoint. We expect gross margin performance to be stronger in the second half of the year as comparisons, ease and benefits from our new Distribution Center. Begin to flow through.
SG. Leverage is expected to be modestly higher in the first half driven by an earlier Cadence of new store openings.
Speaker #2: While maintaining flexibility to respond to changes in the operating environment. Net capital spending is expected to be in the range of $675 to $725 million, with the majority focused on growth initiatives.
A more normalized incentive compensation and the lapping of strategic Investments which ramped up near mid-year 2025.
Speaker #2: We plan to open 100 new stores that are low-risk, high-return organic growth opportunities. Our new store pipeline is robust, and we expect to see greater consistency of openings across the year.
We plan to open 100 new stores that are low-risk, high-return organic growth opportunities. Our new store pipeline is robust, and we expect to see greater consistency of openings across the year. In 2026, approximately 50% of our new stores will be Fee Development, which continues to provide cost efficiencies, improved site quality, and more favorable long-term economics.
We expect the cost of the new Idaho DC to add approximately 10 million dollars of incremental expense. On the year, most of this in the second half.
Speaker #2: In 2026, approximately 50% of our new stores will be fee development, which continues to provide cost efficiencies improved site quality, and more favorable long-term economics.
We anticipate q1 EPS to be comparable to the prior year as it Bears. A heavier burden of these 3 key sgna factors, I just mentioned
Given the prior Year's comparisons. We expect stronger, EPS growth in Q2 and Q4.
Speaker #2: We also expect shorter purchases between $175 and $450 million, representing approximately 1% to 1.5% of shares outstanding. While we remain focused on supporting our strategic priorities, we also expect those investments to increasingly self-fund.
so, stepping back for a moment before I wrap up, I want to address the underlying earnings power of Tractor Supply
Kurt Barton: We also expect share repurchases between $375 million and $450 million, representing approximately 1% to 1.5% of shares outstanding. While we remain focused on supporting our strategic priorities, we also expect those investments to increasingly self-fund. Our capital allocation priorities remain unchanged. We will continue to invest in our flywheel: new stores, remodels, supply chain capacity, digital, and newer growth initiatives like direct sales and final mile delivery, while maintaining a competitive and growing dividend, consistent share repurchases, and a strong balance sheet. Overall, we believe this positions Tractor Supply to continue executing effectively and deliver long-term value for shareholders. As always, we view our results in halves rather than the quarters, given the seasonality of the business. Turning to the calendarization of key line items, we currently expect comp sales performance to be relatively balanced across the year, with each half contributing relatively equal to the comp sales growth.
We also expect share repurchases between $375 million and $450 million, representing approximately 1% to 1.5% of shares outstanding. While we remain focused on supporting our strategic priorities, we also expect those investments to increasingly self-fund. Our capital allocation priorities remain unchanged. We will continue to invest in our flywheel: new stores, remodels, supply chain capacity, digital, and newer growth initiatives like direct sales and final mile delivery, while maintaining a competitive and growing dividend, consistent share repurchases, and a strong balance sheet.
While our recent earnings performance has been influenced by our comp sales trends.
We have been transparent that the backdrop has not been conducive to achieving our long-term Outlook.
Speaker #2: Our capital allocation remains unchanged. We will continue to invest in our flywheel, new stores, remodels, supply chain capacity, digital, and new growth initiatives like direct sales and final delivery, while maintaining a competitive and growing dividend, consistent share repurchases, and a strong balance sheet.
Speaker #2: Overall, we believe this position tracks our supply continued executing effectively, and deliver long-term value for shareholders. As always, we view our results in halves, rather than the quarters, given the seasonality of the business.
Overall, we believe this positions Tractor Supply to continue executing effectively and deliver long-term value for shareholders. As always, we view our results in halves rather than the quarters, given the seasonality of the business. Turning to the calendarization of key line items, we currently expect comp sales performance to be relatively balanced across the year, with each half contributing relatively equal to the comp sales growth.
We continue to believe that company is capable of delivering 3 to 5% comparable store, sales growth over time as that growth materializes. Operating leverage naturally, follows our model shows an inflection point in the low 2% conference as comps move above. That inflection point, we would expect operating margin to improve by roughly 5 to 20 basis points per year. This will allow us to progress back toward our Target operating margin over time consistent with our long-term framework.
Speaker #2: Turning to the calendarization of key line items, we currently expect comp sales performance to be relatively balanced across the year, with each half contributing relatively equal to the comp sales growth.
Term value.
Now, I'll turn it back over to Hal.
Speaker #2: We expect every quarter to be within the range of 1 to 3% growth. We are planning for a more normalized, spring season, which would result in a rebalancing of sales between Q2 and Q3.
Kurt Barton: We expect every quarter to be within the range of 1% to 3% growth. We are planning for a more normalized spring season, which would result in a rebalancing of sales between Q2 and Q3. While the first quarter began against tougher comparisons, recent winter weather has supported demand across our core categories. That said, importantly, a majority of the quarter remains ahead of us, with March representing more than 40% of first quarter sales, and each successive week becoming more impactful as spring conditions emerge across the country. From a margin standpoint, we expect gross margin performance to be stronger in the second half of the year as comparisons ease and benefits from our new distribution center begin to flow through.
We expect every quarter to be within the range of 1% to 3% growth. We are planning for a more normalized spring season, which would result in a rebalancing of sales between Q2 and Q3. While the first quarter began against tougher comparisons, recent winter weather has supported demand across our core categories. That said, importantly, a majority of the quarter remains ahead of us, with March representing more than 40% of first quarter sales, and each successive week becoming more impactful as spring conditions emerge across the country.
Thank you. Kurt. As we began 2026, we're staying focused on what is resonating most with customers across retail value and Essentials.
Speaker #2: the first quarter began against While tougher comparisons, recent winter weather has supported demand across our core categories. That said, importantly, a majority of the quarter remains ahead of us, with March representing more than 40% of first quarter sales, and each successive week becoming more impactful as spring conditions emerge across the country.
Needs-based products are a core strength for Tractor Supply. We are effectively the grocery store for our customers animals and pets with a scale frequency and relevance that come with that role.
That allows us to lead on value, invest with confidence and remain the Dependable supplier. Our customers rely on every day.
While much of the country is still in Winter mode.
Speaker #2: From a margin standpoint, we expect gross margin performance to be stronger in the second half of the year as comparisons ease, and benefits from our new distribution center begin to flow through.
From a margin standpoint, we expect gross margin performance to be stronger in the second half of the year as comparisons ease and benefits from our new distribution center begin to flow through.
Spring will be here before long particularly for southern markets. As that transition, unfolds we're committed to being a Dependable supplier for our customers spring needs while also bringing meaningful Innovation and newness across the store to keep track of Supply relative and differentiated
Speaker #2: SG&A leverage is expected to be modestly higher in the first half, driven by an earlier cadence of new store openings, a more normalized incentive compensation, and the lapping of strategic investments, which ramped up near mid-year 2025.
Kurt Barton: SG&A deleverage is expected to be modestly higher in the first half, driven by an earlier cadence of new store openings, a more normalized incentive compensation, and the lapping of strategic investments, which ramped up near mid-year 2025. We expect the cost of the new Idaho DC to add approximately $10 million of incremental expense on the year, most of this in the second half. We anticipate Q1 EPS to be comparable to the prior year as it bears a heavier burden of these three key SG&A factors I just mentioned. Given the prior year's comparisons, we expect stronger EPS growth in Q2 and Q4. So stepping back for a moment before I wrap up, I want to address the underlying earnings power of Tractor Supply.
SG&A deleverage is expected to be modestly higher in the first half, driven by an earlier cadence of new store openings, a more normalized incentive compensation, and the lapping of strategic investments, which ramped up near mid-year 2025. We expect the cost of the new Idaho DC to add approximately $10 million of incremental expense on the year, most of this in the second half. We anticipate Q1 EPS to be comparable to the prior year as it bears a heavier burden of these three key SG&A factors I just mentioned.
Speaker #2: We expect the cost of the new Idaho DC to add approximately $10 million of increased cost on the year, most of this in the second half.
This year chick days will be bigger than ever with more stores. Participating and more selling weeks chick days is retail theater, like no other and continues to be a powerful traffic driver with existing customers and a Gateway for new customers, particularly backyard homesteaders and hobby farmers.
This year we're leaning into chick health and wellness, expanding breed assortments and deepening education. Support for both new and experienced poultry customers.
Speaker #2: We anticipate Q1 EPS to be comparable to the prior year, as it bears a heavier burden of these key SG&A factors I just mentioned.
We're also extending chick days, online to 365 days a year and expanding our exclusive impeccable brand with more functional treats and toys.
Speaker #2: Given the prior year's comparisons, we expect stronger EPS growth in Q2 and Q4. So stepping back for a moment before I wrap up, I want to address the underlying earnings power of Tractor Supply.
Given the prior year's comparisons, we expect stronger EPS growth in Q2 and Q4. So stepping back for a moment before I wrap up, I want to address the underlying earnings power of Tractor Supply.
Taken together. These efforts reinforce Tractor Supply as the destination for poultry, while driving differentiation value and engagement across channels.
Speaker #2: While our recent earnings performance has been influenced by our comp sales trends, we have been transparent that the backdrop has not been conducive to achieving our long-term outlook.
As we prepare for the spring selling season, we're leaning into targeted newness in the categories, where customers are actively investing.
Kurt Barton: While our recent earnings performance has been influenced by our comp sales trends, we have been transparent that the backdrop has not been conducive to achieving our long-term outlook. We continue to believe the company is capable of delivering 3% to 5% comparable store sales growth over time. As that growth materializes, operating leverage naturally follows. Our model shows an inflection point in the low 2% comp range. As comps move above that inflection point, we would expect operating margin to improve by roughly 5 to 20 basis points per year. This will allow us to progress back toward our target operating margin over time, consistent with our long-term framework. To close, we remain focused on execution, productivity, and advancing our Life Out Here 2030 strategy, and we believe the actions we are taking position the business for durable long-term value. Now, I'll turn it back over to Hal.
While our recent earnings performance has been influenced by our comp sales trends, we have been transparent that the backdrop has not been conducive to achieving our long-term outlook. We continue to believe the company is capable of delivering 3% to 5% comparable store sales growth over time. As that growth materializes, operating leverage naturally follows. Our model shows an inflection point in the low 2% comp range. As comps move above that inflection point, we would expect operating margin to improve by roughly 5 to 20 basis points per year.
Speaker #2: We continue to believe the company is capable of delivering 3% to 5% comparable store sales growth over time. As that growth materializes, operating leverage naturally follows.
That includes refreshed assortments and Lawn and Garden on our exclusive groundwork brand. Including it expanded outdoor living and Grilling accessories and also a stronger more curated Rider's presentation and our Flagship stores. Featuring bad boy, CubCadet and Toro,
Speaker #2: Our model shows an inflection point in the low 2% comp range. As comps move above that inflection point, we would expect operating margin to improve by roughly 5 to 20 basis points per year.
We're also creating a dedicated in-store destination for outdoor power equipment and battery power tools. Bringing together leading Brands, like huskar and DeWalt Toro, and Greenworks, to make it easier for customers to shop and complete their projects.
Speaker #2: This will allow us to progress back toward our target operating margin over time, consistent with our long-term framework. To close, we remain focused on execution, productivity, and advancing our Life Out Here in 2030 strategy.
By mid year, we'll also be rolling out expanded outdoor and Wildlife Recreation aisles in approximately 500 stores.
This will allow us to progress back toward our target operating margin over time, consistent with our long-term framework. To close, we remain focused on execution, productivity, and advancing our Life Out Here 2030 strategy, and we believe the actions we are taking position the business for durable long-term value. Now, I'll turn it back over to Hal.
This includes a broader Field and Stream presence, extending Beyond hard Goods into apparel and Footwear along with a more complete assortment of food and supplements to support wildlife, feeding and Recreation.
Speaker #2: And we believe the actions we are taking position the business for durable long-term value. Now, I'll turn it back over to Hal. Thank you, Kurt.
These updates, strengthen our relevance with customers who live and work outdoors and reinforce tractor supplies at destination for both everyday needs and seasonal. Pursuits.
Speaker #2: As we began 2026, we're staying focused on what is resonating most with customers across retail: value and essentials. Needs-based products are a core strength for Tractor Supply.
Hal Lawton: Thank you, Kurt. As we begin 2026, we're staying focused on what is resonating most with customers across retail: value and essentials. Needs-based products are a core strength for Tractor Supply. We are effectively the grocery store for our customers' animals and pets, with the scale, frequency, and relevance that come with that role. That allows us to lead on value, invest with confidence, and remain the dependable supplier our customers rely on every day. While much of the country is still in winter mode, spring will be here before long, particularly for southern markets. As that transition unfolds, we're committed to being a dependable supplier for our customers' spring needs while also bringing meaningful innovation and newness across the store to keep Tractor Supply relevant and differentiated. This year, Chick Days will be bigger than ever, with more stores participating and more selling weeks.
Hal Lawton: Thank you, Kurt. As we begin 2026, we're staying focused on what is resonating most with customers across retail: value and essentials. Needs-based products are a core strength for Tractor Supply. We are effectively the grocery store for our customers' animals and pets, with the scale, frequency, and relevance that come with that role. That allows us to lead on value, invest with confidence, and remain the dependable supplier our customers rely on every day. While much of the country is still in winter mode, spring will be here before long, particularly for southern markets.
Beyond outdoor and Wildlife. We're also expanding our fresh pet food offering following a successful initial pilot with plans to add fresh pet to additional stores by mid year and continue building from there.
Speaker #2: We are effectively the grocery store for our customers' animals and pets—with the scale, frequency, and relevance that come with that role. That allows us to lead on value, invest with confidence, and remain the dependable supplier our customers rely on every day.
At the same time, we're investing in our 4 Health, private brand, including refresh packaging, new fresh food, products and updates the lines, such as shreds and Untamed.
Speaker #2: While much of the country is still in winter mode, spring will be here before long. Particularly for southern markets. As that transition unfolds, we're committed to being a dependable supplier for our customers' spring needs, while also bringing meaningful innovation and newness across the store to keep Tractor Supply relevant and differentiated.
And pet animals prescriptions without that. We're focused on deeper integration and betting prescription in our bet clinics and Pet Wash experience and strengthening our subscription offering on traxplus.
As that transition unfolds, we're committed to being a dependable supplier for our customers' spring needs while also bringing meaningful innovation and newness across the store to keep Tractor Supply relevant and differentiated. This year, Chick Days will be bigger than ever, with more stores participating and more selling weeks.
As we move from spring into summer, we'll then layer in seasonal moments like our Americana program combining patriotic assortments and in-store experiences with continued. Focus on value and care for animals.
Speaker #2: This year, chick days will be bigger than ever, with more stores participating and more selling weeks. Chick days is retail theater like no other, and continues to be a powerful traffic driver with existing customers and a gateway for new customers, particularly backyard homesteaders and hobby farmers.
Taking together, these efforts, reflect our ongoing investment in private Brands, and curated assortments that strengthen value support margins and reinforce our role as a Dependable supplier.
Hal Lawton: Chick Days is retail theater like no other. It continues to be a powerful traffic driver with existing customers and a gateway for new customers, particularly backyard homesteaders and hobby farmers. This year, we're leaning into Chick Health and Wellness, expanding breed assortments and deepening education support for both new and experienced poultry customers. We're also extending Chick Days online to 365 days a year and expanding our exclusive Imppeckables brand with more functional treats and toys. Taken together, these efforts reinforce Tractor Supply as the destination for poultry while driving differentiation, value, and engagement across channels. As we prepare for the spring selling season, we're leaning into targeted newness in the categories where customers are actively investing.
Chick Days is retail theater like no other. It continues to be a powerful traffic driver with existing customers and a gateway for new customers, particularly backyard homesteaders and hobby farmers. This year, we're leaning into Chick Health and Wellness, expanding breed assortments and deepening education support for both new and experienced poultry customers. We're also extending Chick Days online to 365 days a year and expanding our exclusive Imppeckables brand with more functional treats and toys.
Combined with continued investments in our core flywheel. We're advancing our life out here. 2030 strategy and strategic initiatives.
Speaker #2: This year, we're leaning into chick health and wellness, expanding breed assortments, and deepening education support for both new and experienced poultry customers. We're also extending Chick Days online to 365 days a year, and expanding our exclusive Impeckables brand with more functional treats and toys.
2 of our highest priority initiatives are direct sales and final mile which are gaining traction and becoming increasingly important in how we serve customers with larger more complex, and needs-based purchases.
Speaker #2: Taken together, these efforts reinforce Tractor Supply as the destination for poultry, while driving differentiation, value, and engagement across channels. As we prepare for the spring selling season, we're leaning into targeted newness in the categories where customers are actively investing.
In direct sales, we're continuing the roll out of this initiative, including building the capabilities tools, and operating discipline needed to scale, along with plans, to approximately double our sales force over the course of the year.
Taken together, these efforts reinforce Tractor Supply as the destination for poultry while driving differentiation, value, and engagement across channels. As we prepare for the spring selling season, we're leaning into targeted newness in the categories where customers are actively investing.
Turning to final mile. Our focus in 2026 is on, lowering the cost, and improving the efficiency of our digital order delivery. While enabling large and bulky store, purchases and supporting direct sales.
Speaker #2: That includes refreshed assortments in lawn and garden on our exclusive GroundWork brand, including expanded outdoor living and grilling accessories, and also a stronger, more curated rider's presentation in our flagship stores featuring Bad Boy, Cub Cadet, and Toro.
Hal Lawton: That includes refreshed assortments in lawn and garden on our exclusive Groundwork brand, including expanded outdoor living and grilling accessories, and also a stronger, more curated riders presentation in our flagship stores featuring Bad Boy, Cub Cadet, and Toro. We're also creating a dedicated in-store destination for outdoor power equipment and battery-powered tools, bringing together leading brands like Husqvarna, DeWalt, Toro, and Greenworks to make it easier for customers to shop and complete their projects. By mid-year, we'll also be rolling out expanded outdoor and wildlife recreation aisles in approximately 500 stores. This includes a broader Field & Stream presence, extending beyond hard goods into apparel and footwear, along with a more complete assortment of food and supplements to support wildlife feeding and recreation. These updates strengthen our relevance with customers who live and work outdoors and reinforce Tractor Supply as a destination for both everyday needs and seasonal pursuits.
That includes refreshed assortments in lawn and garden on our exclusive Groundwork brand, including expanded outdoor living and grilling accessories, and also a stronger, more curated riders presentation in our flagship stores featuring Bad Boy, Cub Cadet, and Toro. We're also creating a dedicated in-store destination for outdoor power equipment and battery-powered tools, bringing together leading brands like Husqvarna, DeWalt, Toro, and Greenworks to make it easier for customers to shop and complete their projects.
To do that, we're planning to add more than 150 new hubs this year. Take us to approximately 375 hubs and covering more than 50% of our stores by year end.
Speaker #2: We're also creating a dedicated in-store destination for outdoor power equipment and battery-powered tools, bringing together leading brands like Husqvarna, DeWalt, Toro, and Greenworks to make it easier for customers to shop and complete their projects.
1 way to think about that level of coverage is that it gives us last mile delivery. Capabilities across more than 12200 stores and reaching over 15 million customers.
Speaker #2: By mid-year, we'll also be rolling out expanded outdoor and wildlife recreation aisles in approximately 500 stores. This includes a broader field and stream presence, extending beyond hard goods into apparel and footwear, along with a more complete assortment of food and supplements to support wildlife feeding and recreation.
Across all channels.
By mid-year, we'll also be rolling out expanded outdoor and wildlife recreation aisles in approximately 500 stores. This includes a broader Field & Stream presence, extending beyond hard goods into apparel and footwear, along with a more complete assortment of food and supplements to support wildlife feeding and recreation. These updates strengthen our relevance with customers who live and work outdoors and reinforce Tractor Supply as a destination for both everyday needs and seasonal pursuits.
Well both direct sales and final mile are still early. We're the progress we're seeing and the role. These capabilities can play in expanding how we serve our customers.
Speaker #2: These updates strengthen our relevance with customers who live and work outdoors, and reinforce Tractor Supply as a destination for both everyday needs and seasonal pursuits.
Speaker #2: Beyond outdoor and wildlife, we're also expanding our fresh pet food offering, following a successful initial pilot. With plans to add fresh pet to additional stores by mid-year and continue building from there.
Importantly, they sit behind continued investment in our core growth engine, including opening approximately 100 new stores advancing. Our store remodel program with roughly 160 to 175 Fusion projects with localization, expanding distribution capacity, with our new Idaho, DC, and continue to investment, in digital capabilities.
Hal Lawton: Beyond outdoor and wildlife, we're also expanding our Freshpet food offering following a successful initial pilot, with plans to add Freshpet to additional stores by mid-year and continue building from there. At the same time, we're investing in our 4health private brand, including refreshed packaging, new fresh food products, and updates to lines such as Shreds and Untamed. In pet and animal prescriptions with Allivet, we're focused on deeper integration, embedding prescription in our vet clinics and pet wash experience, and strengthening our subscription offering on tractorsupply.com. As we move from spring into summer, we'll then layer in seasonal moments like our Americana program, combining patriotic assortments and in-store experiences with continued focus on value and care for animals. Taken together, these efforts reflect our ongoing investment in private brands and curated assortments that strengthen value, support margins, and reinforce our role as a dependable supplier.
Beyond outdoor and wildlife, we're also expanding our Freshpet food offering following a successful initial pilot, with plans to add Freshpet to additional stores by mid-year and continue building from there. At the same time, we're investing in our 4health private brand, including refreshed packaging, new fresh food products, and updates to lines such as Shreds and Untamed. In pet and animal prescriptions with Allivet, we're focused on deeper integration, embedding prescription in our vet clinics and pet wash experience, and strengthening our subscription offering on tractorsupply.com.
Speaker #2: At the same time, we're investing in our four health private brand, including Refresh Packaging, New Fresh Food Products, and updates to lines such as Shreds and Untamed.
Taking together, these Investments supported disciplined, balanced approach to growth and represent. Meaningful long-term opportunities as we work to address a larger share of our approximately 225 billion total addressable Market.
Speaker #2: In pet and animal prescriptions, with Alibet, we're focused on deeper integration, embedding prescription in our vet clinics and pet watch experience, and strengthening our subscription offering on TractorSupply.com.
To close. We remain confident in the long-term opportunity for Tractor Supply. We operate a differentiated needs-based model that is proven resilient across cycles and we continue to gain share in a highly fragmented Market.
Speaker #2: As we move from spring into summer, we'll then layer in seasonal moments like our Americana program, combining patriotic assortments and in-store experiences with continued focus on value and care for animals.
As we move from spring into summer, we'll then layer in seasonal moments like our Americana program, combining patriotic assortments and in-store experiences with continued focus on value and care for animals. Taken together, these efforts reflect our ongoing investment in private brands and curated assortments that strengthen value, support margins, and reinforce our role as a dependable supplier.
Speaker #2: Taken together, these efforts reflect our ongoing investment in private brands and curated assortments that strengthen value, support margins, and reinforce our role as a dependable supplier.
The actions we're taking investing with discipline, strengthening our core and scaling our capabilities thoughtfully support, a year of Greater normalization to 2026 and position the business to deliver more consistent performance and create long-term value for our shareholders with that. Thank you for joining us this morning. We'll now open the call for questions.
Speaker #2: Combined with continued investments in our core flywheel, we're advancing our Life Out Here in 2030 strategy and strategic initiatives. Two of our highest priority initiatives are direct sales and final mile, which are gaining traction and becoming increasingly important in how we serve customers with larger, more complex, and needs-based purchases.
Hal Lawton: Combined with continued investments in our core flywheel, we're advancing our Life Out Here 2030 strategy and strategic initiatives. Two of our highest priority initiatives are direct sales and Final Mile, which are gaining traction and becoming increasingly important in how we serve customers with larger, more complex, and needs-based purchases. In direct sales, we're continuing the rollout of this initiative, including building the capabilities, tools, and operating discipline needed to scale, along with plans to approximately double our sales force over the course of the year. Turning to Final Mile, our focus in 2026 is on lowering the cost and improving the efficiency of our digital order delivery while enabling large and bulky store purchases and supporting direct sales. To do that, we're planning to add more than 150 new hubs this year, take us to approximately 375 hubs, and cover more than 50% of our stores by year-end.
Combined with continued investments in our core flywheel, we're advancing our Life Out Here 2030 strategy and strategic initiatives. Two of our highest priority initiatives are direct sales and Final Mile, which are gaining traction and becoming increasingly important in how we serve customers with larger, more complex, and needs-based purchases. In direct sales, we're continuing the rollout of this initiative, including building the capabilities, tools, and operating discipline needed to scale, along with plans to approximately double our sales force over the course of the year.
Speaker #2: In direct sales, we're continuing the rollout of this initiative, including building the capabilities tools and operating discipline needed to scale. Along with plans to approximately double our sales force over the course of the year.
Thank you. Hal. Before we move to Q&A, 1, Note for planning purposes due to a scheduling conflict. We will release our first quarter 2026, earnings on Tuesday, April. The 21st for the balance of the year. We anticipate returning to our normal reporting Cadence, but just wanted everybody to be able to get that on their calendars. Now, with that, I'll turn it over to Alissa to begin our Q&A session.
Speaker #2: Turning to final mile, our focus in 2026 is on lowering the cost and improving the efficiency of our digital order delivery while enabling large and bulky store purchases and supporting direct sales.
Thank you, Mary, when we will now begin the question and answer session. If you would like to ask a question, please press star. Followed by 1 on your telephone keypad,
Turning to Final Mile, our focus in 2026 is on lowering the cost and improving the efficiency of our digital order delivery while enabling large and bulky store purchases and supporting direct sales. To do that, we're planning to add more than 150 new hubs this year, take us to approximately 375 hubs, and cover more than 50% of our stores by year-end.
If for any reason you would like to remove your question or your question has been answered, you may press star 2.
Speaker #2: To do that, we're planning to add more than 150 new hubs this year, take us to approximately 375 hubs, and covering more than 50% of our stores by year-end.
As a reminder, if you are using a speaker-phone, please remember to pick up your handset before asking your question.
Speaker #2: One way to think about that level of coverage is that it gives us last-mile delivery capabilities across more than 1,200 stores and reaching over 15 million customers.
Our first question comes from the line of Steven zakone with Citigroup. Please go ahead.
Hal Lawton: One way to think about that level of coverage is that it gives us last-mile delivery capabilities across more than 1,200 stores and reaching over 15 million customers. We are also increasing utilization of our own delivery network while further integrating with gig providers, allowing us to optimize final mile execution and lower our cost per delivery across all channels. While both direct sales and final mile are still early, we're encouraged by the progress we're seeing and the role these capabilities can play in expanding how we serve our customers. Importantly, they sit behind continued investment in our core growth engine, including opening approximately 100 new stores, advancing our store remodel program with roughly 160 to 175 Fusion projects with localization, expanding distribution capacity with our new Idaho DC, and continued investment in digital capabilities.
One way to think about that level of coverage is that it gives us last-mile delivery capabilities across more than 1,200 stores and reaching over 15 million customers. We are also increasing utilization of our own delivery network while further integrating with gig providers, allowing us to optimize final mile execution and lower our cost per delivery across all channels. While both direct sales and final mile are still early, we're encouraged by the progress we're seeing and the role these capabilities can play in expanding how we serve our customers.
Speaker #2: We are also increasing utilization of our own delivery network while further integrating with gig providers, allowing us to optimize final mile execution and lower our cost per delivery across all channels.
Speaker #2: While both direct sales and final mile are still early, we're encouraged by the progress we're seeing and the role these capabilities can play in expanding how we serve our customers.
Hey, good morning. Thanks very much for taking my question. I wanted to start on gross margin so it sounds like for 26. You're still expecting expansion but it's going to be second half weighted, should we anticipate gross margin declines in the first half and then specifically on promotions. What gives you confidence that the promotions will be confined to the fourth quarter and that persists as a 26.
Speaker #2: Importantly, they sit behind continued investment in our core growth engine, including opening approximately 100 new stores, advancing our store remodel program with roughly 160 to 175 fusion projects with localization, expanding distribution capacity with our new Idaho DC, and continued investment in digital capabilities.
Importantly, they sit behind continued investment in our core growth engine, including opening approximately 100 new stores, advancing our store remodel program with roughly 160 to 175 Fusion projects with localization, expanding distribution capacity with our new Idaho DC, and continued investment in digital capabilities.
Speaker #2: Taken together, these investments support a disciplined, balanced approach to growth and represent meaningful long-term opportunities as we work to address a larger share of our approximately 225 billion total addressable market.
Hey Steve it's Kurt. Thank you for yeah, thank you for the question uh to your point on gross margin gave guidance on our expectation is that we can continue to expand gross margin. The fundamentals of our gross margin initiatives are still very solid. Uh, there is a stronger opportunity for expansion in the back half of the year, but we are not anticipating. Uh gross margin retraction in the first half of the year. Uh the
and the
Hal Lawton: Taken together, these investments support a disciplined, balanced approach to growth and represent meaningful long-term opportunities as we work to address a larger share of our approximately $225 billion total addressable market. To close, we remain confident in the long-term opportunity for Tractor Supply. We operate a differentiated needs-based model that is proven resilient across cycles, and we continue to gain share in a highly fragmented market. The actions we're taking, investing with discipline, strengthening our core, and scaling our capabilities thoughtfully support a year of greater normalization in 2026 and position the business to deliver more consistent performance and create long-term value for our shareholders. With that, thank you for joining us this morning. We'll now open the call for questions.
Taken together, these investments support a disciplined, balanced approach to growth and represent meaningful long-term opportunities as we work to address a larger share of our approximately $225 billion total addressable market. To close, we remain confident in the long-term opportunity for Tractor Supply. We operate a differentiated needs-based model that is proven resilient across cycles, and we continue to gain share in a highly fragmented market.
Speaker #2: To close, we remain confident in the long-term opportunity for Tractor Supply. We operate a differentiated, needs-based model that is proven resilient across cycles, and we continue to gain share in a highly fragmented market.
puts and takes that we described on fourth quarter. As I mentioned, very transitory, our gross margin initiatives. Our cost management, uh, is is still producing a strong opportunity for gross margin expansion, albeit modest. Uh, it particularly in the first half of the year.
Speaker #2: The actions we're taking—investing with discipline, strengthening our core, and scaling our capabilities thoughtfully—support a year of greater normalization in 2026 and position the business to deliver more consistent performance and create long-term value for our shareholders.
The actions we're taking, investing with discipline, strengthening our core, and scaling our capabilities thoughtfully support a year of greater normalization in 2026 and position the business to deliver more consistent performance and create long-term value for our shareholders. With that, thank you for joining us this morning. We'll now open the call for questions.
Thank you. The next question comes from the line of Jonathan mazuki with Jeffries.
Please go ahead.
Speaker #2: With that, thank you for joining us this morning. We'll now open the call for
Speaker #2: questions. Thank you,
Speaker #1: Hal. Before we move to Q&A, one note for planning purposes. Due to a scheduling conflict, we will release our first quarter 2026 earnings on Tuesday, April the 21st.
Mary Winn Pilkington: Thank you, Hal. Before we move to Q&A, one note for planning purposes. Due to a scheduling conflict, we will release our Q1 2026 earnings on Tuesday, 21 April. For the balance of the year, we anticipate returning to our normal reporting cadence, but just wanted everybody to be able to get that on their calendars now. With that, I'll turn it over to Alyssa to begin our Q&A session.
Mary Winn Pilkington: Thank you, Hal. Before we move to Q&A, one note for planning purposes. Due to a scheduling conflict, we will release our Q1 2026 earnings on Tuesday, 21 April. For the balance of the year, we anticipate returning to our normal reporting cadence, but just wanted everybody to be able to get that on their calendars now. With that, I'll turn it over to Alyssa to begin our Q&A session.
Speaker #1: For the balance of the year, we anticipate returning to our normal reporting cadence, but just wanted everybody to be able to get that on their calendars now.
All right. Good morning. Thanks for taking my question. Uh, it sounds like 1 Q, uh, started against tough Compares. But you saw some outside demand due to winter storm. Fern, uh, you know, recognizing that March is, uh, a large chunk of the quarter. Um, with each quarter, anticipated to be between 1 and 3% is that to suggest.
Speaker #1: With that, I'll turn it over to Alyssa to begin our Q&A
Speaker #1: With that, I'll turn it over to Alyssa to begin our Q&A session. Thank you, Mary Lynn.
Guess the quarter to date trend is in that range. Or could you just clarify? Maybe how the first, uh, couple of weeks in the quarter, in aggregate are trending. Thank you.
Speaker #3: We will now begin the question and answer session. If you would like to ask a question, please press star, followed by one on your telephone keypad, if for any reason you would like to remove your question or your question has been answered, you may press star two, as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question.
Operator: Thank you, Mary Wynne. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove your question or your question has been answered, you may press star two. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question comes from the line of Steven Zaccone with Citi. Please go ahead.
Operator: Thank you, Mary Wynne. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove your question or your question has been answered, you may press star two. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question comes from the line of Steven Zaccone with Citi. Please go ahead.
Speaker #3: Our first question comes from the line of Steven Zacone with Citigroup. Please go
Speaker #3: ahead. Hey, good
Speaker #4: morning. Thanks very much for taking my question. I wanted to start on gross margin. So it sounds like for '26, you're still expecting expansion, but it's going to be second half weighted.
[Analyst] (J.P. Morgan): Great. Good morning. Thanks very much for taking my question. I wanted to start on gross margin. So it sounds like for 2026, you're still expecting expansion, but it's going to be second half weighted. Should we anticipate gross margin declines in the first half? And then specifically on promotions, what gives you confidence that the promotions will be confined to the fourth quarter and not persist into 2026?
Steven Zaccone: Great. Good morning. Thanks very much for taking my question. I wanted to start on gross margin. So it sounds like for 2026, you're still expecting expansion, but it's going to be second half weighted. Should we anticipate gross margin declines in the first half? And then specifically on promotions, what gives you confidence that the promotions will be confined to the fourth quarter and not persist into 2026?
Speaker #4: Should we anticipate gross margin declines in the first half and then specifically on promotions? What gives you confidence that the promotions will be confined to the fourth quarter and not persist into '26?
Speaker #5: Hey, Steve, it's Kurt. Thank you for, yeah, thank you for the question. To your point on gross margin, gave guidance on our expectation is that we can continue to expand gross margin the fundamentals of our gross margin initiatives are still very solid.
Kurt Barton: Hey, Steve, it's Kurt. Thank you for, yeah, thanks for the question. To your point on gross margin, gave guidance on our expectation is that we can continue to expand gross margin. The fundamentals of our gross margin initiatives are still very solid. There is a stronger opportunity for expansion in the back half of the year, but we are not anticipating gross margin retraction in the first half of the year. The puts and takes that we described on fourth quarter, as I mentioned, very transitory. Our gross margin initiatives, our cost management is still producing a strong opportunity for gross margin expansion, albeit modest, particularly in the first half of the year.
Hal Lawton: Hey, Steve, it's Kurt. Thank you for, yeah, thanks for the question. To your point on gross margin, gave guidance on our expectation is that we can continue to expand gross margin. The fundamentals of our gross margin initiatives are still very solid. There is a stronger opportunity for expansion in the back half of the year, but we are not anticipating gross margin retraction in the first half of the year. The puts and takes that we described on fourth quarter, as I mentioned, very transitory.
Speaker #5: There is a stronger opportunity for expansion in the back half of the year, but we are not anticipating gross margin retraction in the first half of the year.
Speaker #5: The puts and takes that we described on fourth quarter, as I mentioned, are very transitory. Our gross margin initiatives and cost management are still producing a strong opportunity for gross margin expansion, albeit modest.
Happens at the beginning of the last beginning of the year. You know, this week as an example, last year was the warmest in 35 years. And then this week, this year is uh, the coldest in 35 years. So, you know, you get these Extremes in the first part of the year but net net to your point. Uh, we are uh, uh, tracking uh, uh, you know, at above our, our plan, for the quarter to date. Uh, but as you said, there's still a lot of uh uh a lot of a lot of uh sales left to go. Uh, the month of January is like 30% of our sales, the month of March is 40-ish percent. Uh, we certainly need the weather to turn, uh, in the South uh, in late February to, uh, to deliver on our plan for for, uh, for March, but in addition to to spring coming up, which we know happens every year just a little bit different time. You know, we're optimistic about the potential for tax refunds this year and uh, you know, think that could be a very similar to say 2018 and that would be the the the majority of that benefit would also be in the first quarter. So there are a number of things as we look out at the balance.
Of the 7 weeks to go in the quarter that give us some give us optimism but feel feeling good about the quarter so far. Yes
Our gross margin initiatives, our cost management is still producing a strong opportunity for gross margin expansion, albeit modest, particularly in the first half of the year.
Speaker #5: Particularly in the first half of the year.
Thank you.
Thank you.
The next question is from the line of Bobby Griffin with Raymond James, please go ahead.
Speaker #3: Thank you. The next question comes from the line of Jonathan Mazucki with Jefferies. Please go
Speaker #3: ahead. Alright, good morning.
Operator: Thank you. The next question comes from the line of Jonathan Matuszewski with Jefferies. Please go ahead.
Operator: Thank you. The next question comes from the line of Jonathan Matuszewski with Jefferies. Please go ahead.
Speaker #6: Thanks for taking my question. It sounds like Q1 started against tough compares, but you saw some outsized demand due to winter storm Fern.
[Analyst] (Jefferies): All right. Good morning. Thanks for taking my question. It sounds like Q1 started against tough comparisons, but you saw some outside demand due to Winter Storm Fern. Recognizing that March is a large chunk of the quarter, with Q1 anticipated to be between 1% and 3%, is that to suggest the quarter-to-date trend is in that range? Or could you just clarify maybe how the first couple of weeks in the quarter in aggregate are trending? Thank you.
Jonathan Matuszewski: All right. Good morning. Thanks for taking my question. It sounds like Q1 started against tough comparisons, but you saw some outside demand due to Winter Storm Fern. Recognizing that March is a large chunk of the quarter, with Q1 anticipated to be between 1% and 3%, is that to suggest the quarter-to-date trend is in that range? Or could you just clarify maybe how the first couple of weeks in the quarter in aggregate are trending? Thank you.
Speaker #6: Recognizing that March is a large chunk of the quarter, with each quarter anticipated to be between one and three percent, is that to suggest the quarter-to-date trend is in that range, or could you just clarify maybe how the
Hey, good morning guys, thanks for taking the questions. Um, how I just want to maybe talk about the discretionary weakness, you referenced and just curious. Like, can you unpack that a little more? Do you think there's been a step function change where your customer, the more rule-based customers started to feel? Maybe some of the pressure, other areas of this country felt across retail or is it really just whether driven just anything there to help us understand that? And and what the uh maybe drivers will be for that to get better um in 26 and Beyond.
Yeah. Hey Bobby and good morning.
Um,
Speaker #1: The first couple of weeks in the quarter, in aggregate, are trending. Thank you.
when we reflect back on the discretionary for Q4 and, and a bit of the step down that we saw there, uh, we do think that was
Speaker #2: Hey , Jonathan , and good morning . Thanks for joining the call . I think you've encapsulated it pretty well . As you mentioned , the first few weeks were we Thanks for good morning .
Speaker #2: lapping and joining the call . I think you've encapsulated it pretty well . As you mentioned , the first few weeks we were lapping winter weather from last year and storms , and it was warm in the first three weeks of this year .
Hal Lawton: Hey, Jonathan, and good morning. Thanks for joining the call. I think you've encapsulated it pretty well. As you mentioned, the first few weeks, we were lapping winter weather from last year and storms, and it was warm in the first three weeks of this year. And then, of course, with Winter Storm Fern, we had the flip where we were having strength due to storm preparations and storm recovery on top of some warmer weather last year. Case in point on the volatility that often happens at the beginning of the year. This week, as an example, last year was the warmest in 35 years, and then this week this year is the coldest in 35 years. So you get these extremes in the first part of the year.
Hal Lawton: Hey, Jonathan, and good morning. Thanks for joining the call. I think you've encapsulated it pretty well. As you mentioned, the first few weeks, we were lapping winter weather from last year and storms, and it was warm in the first three weeks of this year. And then, of course, with Winter Storm Fern, we had the flip where we were having strength due to storm preparations and storm recovery on top of some warmer weather last year. Case in point on the volatility that often happens at the beginning of the year.
Speaker #2: And so we had offsetting comps there . And then of course , with Winter storm Fern , you know , we had the flip where we were having strength due to storm preparations and storm recovery on top of some warm , warmer weather year .
Speaker #2: last You know , case in point , on the volatility that often happens at the beginning of the beginning of the year . You know , this week , as an example , last year was the warmest in 35 years .
Um, specific to Q4 using the word transitory, I guess. And um, kind of hit on a few things there. Uh first. A lot of it was a merchant to response as we called out uh which is being specific to that quarter. The second 1 was really around kind of these like seasonal holiday categories that we really only participate in Q4 in and so things like toys, some of the holiday Decor, some of the uh, you know, even like in like dog snacks and dog treats. You see, like a, a lift in those last 2 weeks, kind of that are discretionary in their orientation. We just didn't didn't see that. Um, uh, but you know, as we head into 2026, we
This week, as an example, last year was the warmest in 35 years, and then this week this year is the coldest in 35 years. So you get these extremes in the first part of the year.
Speaker #2: And then this week this year is the coldest in 35 years . So you know you get these extremes in the first part of the year .
Speaker #2: But net net to your point , we are tracking , you know , at above our plan for the quarter to date . But as you said , there's still a lot of a lot of a lot of sales left to go the month of January is like 30% of our sales .
Hal Lawton: But net-net to your point, we are tracking at above our plan for the quarter to date. But as you said, there's still a lot of sales left to go. The month of January is like 30% of our sales. The month of March is 40%. We certainly need the weather to turn in the south in late February to deliver on our plan for March. But in addition to spring coming up, which we know happens every year, just at a little bit different time, we're optimistic about the potential for tax refunds this year and think that could be very similar to, say, 2018, and that would be the majority of that benefit would also be in the first quarter. So there are a number of things as we look out at the balance of the seven weeks to go in the quarter that give us optimism.
But net-net to your point, we are tracking at above our plan for the quarter to date. But as you said, there's still a lot of sales left to go. The month of January is like 30% of our sales. The month of March is 40%. We certainly need the weather to turn in the south in late February to deliver on our plan for March. But in addition to spring coming up, which we know happens every year, just at a little bit different time, we're optimistic about the potential for tax refunds this year and think that could be very similar to, say, 2018, and that would be the majority of that benefit would also be in the first quarter.
Speaker #2: The month of March is 40% . We certainly need the weather to turn in the south in late February to to deliver on for for plan March .
Speaker #2: for our But in to happens we know different to every year , time , you know , we're just a optimistic about the potential for tax refunds And this year .
Speaker #2: know , think that could be a very similar to , say , 2018 . And that would be the majority of that benefit would also be in the first quarter .
Very good about our our business. You know, we just as, uh, based on Jonathan's question, just gave a little bit of a summary of how things are playing to date in the quarter. Uh, we feel very good about our big ticket plan for the spring. You know, we've had 2 successful seasons in writers, uh, even with, uh, kind of broader Big Ticket pressure in the market. Uh, so I feel very good about our setup as we head into into the first half of this year. And do you think most of the step down we saw in, in Q4 was, uh, uh, kind of 1 time, kind of transitory type things that happened in the, in the month of December. And I think you'll hear that a bit more across retail as it as it comes out. I mean, by all accounts, December stepped down versus the year to date in quarter to date. If you look at almost any external data as it relates to retail sales and in particular, you see that in general merchants and in big ticket as well. Uh you see you saw kind of low price point, gifting things like Beauty uh, and others you know, have a have a good December, but I think most across most categories that were big ticket. You saw a pullback in December.
Speaker #2: So, there are a number of things, as we look out at the balance of the seven weeks to go in the quarter, that give us some—give us optimism.
So there are a number of things as we look out at the balance of the seven weeks to go in the quarter that give us optimism.
Thank you.
Speaker #2: But feeling good about the quarter so far? Yes.
Hal Lawton: But feeling good about the quarter so far, yes.
But feeling good about the quarter so far, yes.
The next question is from the line of Kate McShane, with Goldman Sachs. Please go ahead.
Speaker #1: Thank you .
[Analyst] (Jefferies): Thank you.
Jonathan Matuszewski: Thank you.
Speaker #3: Thank you . The next question is from the line of Bobby Griffin with Raymond James . Please go ahead .
Operator: Thank you. The next question is from the line of Bobby Griffin with Raymond James. Please go ahead.
Operator: Thank you. The next question is from the line of Bobby Griffin with Raymond James. Please go ahead.
Speaker #4: Hey . Good morning guys . Thanks for taking the questions . I just wanted to maybe talk about the discretionary weakness you referenced and just curious .
Seth Estep: Hey, good morning, guys. Thanks for taking the questions. Hal, I just wanted to maybe talk about the discretionary weakness you referenced. Just curious, can you unpack that a little more? Do you think there's been a step function change where your customer, the more rule-based customers, started to feel maybe some of the pressure other areas of this country felt across retail? Or is it really just weather-driven? Just anything there to help us understand that and what the maybe drivers will be for that to get better in 2026 and beyond.
Bobby Griffin: Hey, good morning, guys. Thanks for taking the questions. Hal, I just wanted to maybe talk about the discretionary weakness you referenced. Just curious, can you unpack that a little more? Do you think there's been a step function change where your customer, the more rule-based customers, started to feel maybe some of the pressure other areas of this country felt across retail? Or is it really just weather-driven? Just anything there to help us understand that and what the maybe drivers will be for that to get better in 2026 and beyond.
Hi, good morning, thanks for taking your question. Uh, Kurt we wondered if you could uh walk us through the Cadence of how you see tariff costs uh rolling in here, maybe in the first half and how you're managing pricing as a result.
Speaker #4: Can you unpack that a little more ? Do you think there's been a step function change where your customer , the more rule based customer has started to feel , maybe some of the pressure areas other of this country felt across retailers ?
Speaker #4: It really is just weather driven. Is there anything you can share to help us understand that? And what maybe the drivers will be for that to get better in '26 and beyond?
Speaker #2: Yeah . Hey Bobby and good morning . When we on reflect back the Q4 a bit of the step down that we saw there , we do think that was specific to Q4 using the word transitory .
Hal Lawton: Yeah. Hey, Bobby, and good morning. When we reflect back on the discretionary for Q4 and a bit of the step down that we saw there, we do think that was specific to Q4, using the word transitory, I guess, and kind of hit on a few things there. First, a lot of it was emergency response, as we called out, which was being specific to that quarter. The second one was really around kind of these seasonal holiday categories that we really only participate in Q4 in. And so things like toys, some of the holiday decor, some of the even in dog snacks and dog treats, you see a lift in those last two weeks kind of that are discretionary in their orientation. We just didn't see that. But as we head into 2026, we feel very good about our business.
Hal Lawton: Yeah. Hey, Bobby, and good morning. When we reflect back on the discretionary for Q4 and a bit of the step down that we saw there, we do think that was specific to Q4, using the word transitory, I guess, and kind of hit on a few things there. First, a lot of it was emergency response, as we called out, which was being specific to that quarter. The second one was really around kind of these seasonal holiday categories that we really only participate in Q4 in.
Speaker #2: I guess . And kind of hit on a few things . There . First , a lot of it was emergency response , as we called out , which was being specific to that quarter .
Speaker #2: The second one was really around kind of these seasonal holiday categories that we really only participate in Q4 in . And so things like toys , some of the holiday decor , some of the , you like in like dog know , even snacks and dog treats , you see , like a lift in those last two kind of that are weeks , discretionary in their orientation .
And so things like toys, some of the holiday decor, some of the even in dog snacks and dog treats, you see a lift in those last two weeks kind of that are discretionary in their orientation. We just didn't see that. But as we head into 2026, we feel very good about our business.
Speaker #2: just We didn't didn't see that . But you know , as we head into 2026 , we feel very good about our business .
1 of the key drivers of the average ticket increase as we, as we mentioned, there's some level of inflation in Aur. The biggest portion of that would be uh related to cycling the tariffs in the first half of the year. So not that much different. We step back we look at at the Tariff piece of the business, the team managed it really well been able to maintain our margins related to that and we anticipate similar in the first half.
Speaker #2: You know, just based on Jonathan's question, we just gave a little bit of a summary of how things are playing to date in the quarter.
Hal Lawton: Just based on Jonathan's question, just gave a little bit of a summary of how things are playing to date in the quarter. We feel very good about our big ticket plan for the spring. We've had two successful seasons in riders, even with kind of broader big ticket pressure in the market. So feel very good about our setup as we head into the first half of this year. And do think most of the step down we saw in Q4 was kind of one-time kind of transitory type things that happened in the month of December. And I think you'll hear that a bit more across retail as it comes out. I mean, by all accounts, December stepped down versus the year-to-date and quarter-to-date, if you look at almost any external data as it relates to retail sales.
Just based on Jonathan's question, just gave a little bit of a summary of how things are playing to date in the quarter. We feel very good about our big ticket plan for the spring. We've had two successful seasons in riders, even with kind of broader big ticket pressure in the market. So feel very good about our setup as we head into the first half of this year. And do think most of the step down we saw in Q4 was kind of one-time kind of transitory type things that happened in the month of December. And I think you'll hear that a bit more across retail as it comes out.
Thank you.
Speaker #2: We feel very good about our big ticket plan for the spring . We've had successful two seasons in even with kind of broader big ticket pressure in the market .
The next question is from the line of Michael Lasser with UBS. Please go ahead.
Good morning, thank you so much for taking my question.
Speaker #2: So feel very good about our setup as we head into into the first half of this year . And do you think most of the step down we saw in Q4 was kind of one time , kind of transitory type things that happened in the month of December ?
You have expressed a lot of optimism that the model can eventually returned to the algorithm. So under, what conditions,
Speaker #2: And I think you'll hear that a bit more across retail as it as it comes out . I mean , by all accounts , December stepped down versus the year to date and quarter to date .
I mean, by all accounts, December stepped down versus the year-to-date and quarter-to-date, if you look at almost any external data as it relates to retail sales.
Speaker #2: If you look at almost any external data as it relates to retail sales and in particular , you see that in general merchant and Big Ticket as well .
Hal Lawton: In particular, you see that in general merch and big ticket as well. You saw kind of low price point gifting, things like beauty, and others have a good December. I think across most categories that were big ticket, you saw a pullback in December.
In particular, you see that in general merch and big ticket as well. You saw kind of low price point gifting, things like beauty, and others have a good December. I think across most categories that were big ticket, you saw a pullback in December.
Economic or otherwise are necessary in order to restore the comp growth back to 3 to 5%, what's a reasonable time frame for that? It is the challenge today versus 10 years ago, that tractor has just achieved so much productivity gains
Speaker #2: You see , you saw kind of low price point gifting , things like beauty and others , you know , have a have a good December .
Speaker #2: But I think most across most categories that were big ticket , you saw a pullback in December .
During the last decade through all the initiatives, it's deployed, such that it's just going to be more difficult to generate the type of growth that the market had been accustomed to in the past.
Because of the base being so much bigger, and the market share being so much larger today. Thank you very much.
Speaker #3: Thank you. The next question is from the line of Kate McShane with Goldman Sachs. Please go ahead.
Operator: Thank you. The next question is from the line of Kate McShane with Goldman Sachs. Please go ahead.
Operator: Thank you. The next question is from the line of Kate McShane with Goldman Sachs. Please go ahead.
Speaker #5: Good morning . Thanks for taking Hi . our question Kurt . We wondered if you could walk us through the cadence of how you see tariff costs rolling in here , maybe in the first half and how you're managing pricing as a result ?
[Analyst] (Goldman Sachs): Hi, good morning. Thanks for taking our question. Kurt, we wondered if you could walk us through the cadence of how you see tariff costs rolling in here, maybe in the first half, and how you're managing pricing as a result.
Kate McShane: Hi, good morning. Thanks for taking our question. Kurt, we wondered if you could walk us through the cadence of how you see tariff costs rolling in here, maybe in the first half, and how you're managing pricing as a result.
Speaker #6: Yeah . Kate , I'll share a little bit of what our assumptions are in 2026 . And in summary , I'd say there's not that much variation to what we saw in the second half of 2025 .
Hal Lawton: Yeah, Kate, I'll share a little bit of what our assumptions are in 2026. In summary, I'd say there's not that much variation to what we saw in the second half of 2025. As we've said before, we feel like we're basically halfway through the process of cycling through tariffs. Tariffs have had, at its base rate, anywhere from 20 or 30 basis points of pressure. We've been able to offset that through great cost management initiatives. In some cases, there's price increases selectively, like I mentioned in there. We would anticipate that the impact in the first half to be very similar. It's one of the key drivers of the average ticket increase. As we mentioned, there's some level of inflation in AUR. The biggest portion of that would be related to cycling the tariffs in the first half of the year. So not that much different.
Hal Lawton: Yeah, Kate, I'll share a little bit of what our assumptions are in 2026. In summary, I'd say there's not that much variation to what we saw in the second half of 2025. As we've said before, we feel like we're basically halfway through the process of cycling through tariffs. Tariffs have had, at its base rate, anywhere from 20 or 30 basis points of pressure. We've been able to offset that through great cost management initiatives. In some cases, there's price increases selectively, like I mentioned in there.
Speaker #6: As we've said before , we feel like we're basically halfway through the the process of cycling through tariffs . Tariffs have had at its base , you know , at its base rate , anywhere from 20 or 30 basis of points pressure .
Hey Michael. Thanks for your question. Good to speak with you this morning. We remain very committed to our long-term algorithm on our comp sales. Uh, we feel like we're on a track and a path to return to Those comp sales. And, uh, you know, we think we've got the full Suite of activities necessary to deliver that, including, you know, big Investments we made in our core flywheel, uh, you know, everything ranging from our DC product capacity to all the Investments we made in our stores and our remodel programs. Uh, our new stores continue to provide, excellent maturity curves, uh, and we've got a number of our strategic initiatives as well. So we feel like uh the the tool kit, the track supplies had for the last 20, 30 years is a tried and true toolkit. We continue to add to it like we always have and feel very confident in our long-term algorithm. We think we're on the path to back to that. Thank you so much.
Thank you.
Speaker #6: We've been able to offset that through great cost management initiatives . In some cases , there's some there's price increases selectively . Like I mentioned in there .
The next question is from the line of Robert owns with Bank of America. Please go ahead.
Speaker #6: And we would anticipate that the the impact in second and the first half to be very similar . It's one of the key drivers of the average ticket increase , as we as we mentioned , there's some level of inflation in our the biggest portion of that would be related to cycling the tariffs in the first half of the year .
We would anticipate that the impact in the first half to be very similar. It's one of the key drivers of the average ticket increase. As we mentioned, there's some level of inflation in AUR. The biggest portion of that would be related to cycling the tariffs in the first half of the year. So not that much different.
Oh, hey, thanks for taking my question. I was hoping you guys could. Um, actually talk to talk a little more about the direct sales model and the profitability now, and it, it looks like you're going to keep ramping it up. Is there a, um, how do we think about how many stores, how many sales Specialists, you know what the uh, how big it needs to be to, to really become, uh, you know, profitable
Speaker #6: So not that much different . We step back . We look at at the tariff piece of the business . The managed . It really team well .
Hal Lawton: We step back. We look at the tariff piece of the business. The team managed it really well, been able to maintain our margins related to that, and we anticipate similar in the first half.
We step back. We look at the tariff piece of the business. The team managed it really well, been able to maintain our margins related to that, and we anticipate similar in the first half.
Speaker #6: Been able to maintain our margins related to that . And we anticipate similar in the first half .
Speaker #5: Thank you . Thank
Speaker #7: you .
[Analyst] (Goldman Sachs): Thank you.
Kate McShane: Thank you.
Operator: Thank you. The next question is from the line of Michael Lasser with UBS. Please go ahead.
Operator: Thank you. The next question is from the line of Michael Lasser with UBS. Please go ahead.
Speaker #3: The next question is from the line of Michael Lasser with UBS. Please go ahead.
Yeah, thanks for the question. Uh, first, I'll just tell you, I'm very pleased with our performance so far. We saw volume average sales per rep, transaction value, average transaction, volume all increase in the month, and in the quarter in the December. We finished with sales of over 2 million dollars. We're seeing a month-to-month to-month ramp and similar to new store maturation curve. Our growth is structural, our direct sales app is core growth engine for us, our people and our process of Investments are delivering returns and we're seeing strong momentum exiting Q4 into 2026.
Speaker #8: Good morning . Thank you so much for taking my question . You have expressed a lot of optimism that the model can eventually return to the algorithm .
[Analyst] (Jefferies): Good morning. Thank you so much for taking my question. You have expressed a lot of optimism that the model can eventually return to the algorithm. So under what conditions, economic or otherwise, are necessary in order to restore the comp growth back to 3% to 5%? What's a reasonable timeframe for that? And is the challenge today versus 10 years ago that Tractor has just achieved so much productivity gain during the last decade through all the initiatives it's deployed, such that it's just going to be more difficult to generate the type of growth that the market had been accustomed to in the past because of the base being so much bigger and the market share being so much larger today? Thank you very much.
Jonathan Matuszewski: Good morning. Thank you so much for taking my question. You have expressed a lot of optimism that the model can eventually return to the algorithm. So under what conditions, economic or otherwise, are necessary in order to restore the comp growth back to 3% to 5%?
Speaker #8: So, under what conditions, economic or otherwise, are necessary in order to restore the comp growth back to 3 to 5%? What's a reasonable time frame for that?
75% of our Specialists are external and they're bringing this book of business with them and they are strong at. Selling they all live the lifestyle and they all have an average of 11 years of experience in in the farm and ranch industry.
What's a reasonable timeframe for that? And is the challenge today versus 10 years ago that Tractor has just achieved so much productivity gain during the last decade through all the initiatives it's deployed, such that it's just going to be more difficult to generate the type of growth that the market had been accustomed to in the past because of the base being so much bigger and the market share being so much larger today? Thank you very much.
Speaker #8: And is the challenge today versus ten years ago ? That tractor has just achieved so much productivity gains during the last decade . Through all the initiatives deployed , such that it's just going to be more difficult to generate the type of growth that the market had been accustomed to in the past because of the base being so much bigger in the market , share being so much larger today .
And then the month of December. We had our first 1 million dollar specialist, so I, I was able to go travel with that person. I could tell you, just, like, phone calls throughout the day. Um, the relationship he had with his clients. Everybody calling them, all the stuff they need. You can just see that relationship building and building and building their as we look into 2026. We'll continue invest in technology and training. We'll double our specialist count as hell mentioned. We found that smaller training classes have been
Better than the bigger classes. And we're able to do more 1-on-1 training and we're targeting around 50 million in sales in 2026.
Speaker #8: Thank you very much .
Speaker #2: Michael , thanks Hey , for your question . Good to speak with you this morning . We remain very committed to our long term algorithm comp on our sales .
Hal Lawton: Hey, Michael, thanks for your question. Good to speak with you this morning. We remain very committed to our long-term algorithm on our comp sales. We feel like we're on a track and a path to return to those comp sales. We think we've got the full suite of activities necessary to deliver that, including big investments we made in our core flywheel, everything ranging from our DC product capacity to all the investments we made in our stores and our remodel programs. Our new stores continue to provide excellent maturity curves, and we've got a number of our strategic initiatives as well. We feel like the toolkit that Tractor Supply has had for the last 20, 30 years is a tried-and-true toolkit. We continue to add to it like we always have and feel very confident in our long-term algorithm.
Hal Lawton: Hey, Michael, thanks for your question. Good to speak with you this morning. We remain very committed to our long-term algorithm on our comp sales. We feel like we're on a track and a path to return to those comp sales. We think we've got the full suite of activities necessary to deliver that, including big investments we made in our core flywheel, everything ranging from our DC product capacity to all the investments we made in our stores and our remodel programs. Our new stores continue to provide excellent maturity curves, and we've got a number of our strategic initiatives as well.
How also mentioned that uh, we ended the year with just under 50, uh, sales Specialists. We've hired 9, UM, at the end of December going into January and we'll continue to build as this year, goes on throughout the year.
Thank you.
Speaker #2: We feel like we're on a track and a return path to to those comp sales . And , you know , we think we've got the full suite of activities necessary to deliver that , including big in our core investments we made flywheel .
Thank you. Next question, is from the line of Peter benedict with beard. Please go ahead.
Speaker #2: You know , everything ranging from our DC product investments the we made in our our remodel stores and programs stores continue to , our new provide maturity excellent curves , and we've got a number of our strategic initiatives as well .
All right, you guys, thanks for thanks for taking the question. I wanted to follow up on an earlier question. Just on the, on the, the inflation with uh, I guess 200 basis points. A lot of that you're saying was terrorists. I'm just curious. You know, if you could talk about the commodity side of that and and what you're seeing and what you're what your outlook 2020,
Speaker #2: So we feel like the toolkit that track supplies had for the last 20 or 30 years is a tried and true toolkit . We continue to add to it like we always have and feel very confident in our long term algorithm .
We feel like the toolkit that Tractor Supply has had for the last 20, 30 years is a tried-and-true toolkit. We continue to add to it like we always have and feel very confident in our long-term algorithm.
Speaker #2: We think we're on the path to achieve back to that , thank you so much .
Hal Lawton: We think we're on the path to back to that. Thank you so much.
Hal Lawton: We think we're on the path to back to that. Thank you so much.
Um, you're about 32% penetrated, uh, what's the Outlook there? Uh, any plans to go faster slower, just kind of an update on, uh, on that initiative. Thank you.
Speaker #3: Thank you . The next question is from the line of Robert Ohmes with Bank of America . Please go ahead .
Operator: Thank you. The next question is from the line of Robby Ohmes with Bank of America. Please go ahead.
Operator: Thank you. The next question is from the line of Robby Ohmes with Bank of America. Please go ahead.
Hey Peter um definitely take the first question on uh inflation. And then I'll take the cam. The question on garden centers.
Speaker #9: Oh , hey , thanks for taking my question . I was hoping you guys could actually talk to talk a little more about the direct sales model and the profitability now .
[Analyst] (Bank of America): Oh, hey, thanks for taking my question. I was hoping you guys could actually talk a little more about the direct sales model and the profitability now, and it looks like you're going to keep ramping it up. How do we think about how many stores, how many sales specialists, how big it needs to be to really become profitable?
Robby Ohmes: Oh, hey, thanks for taking my question. I was hoping you guys could actually talk a little more about the direct sales model and the profitability now, and it looks like you're going to keep ramping it up. How do we think about how many stores, how many sales specialists, how big it needs to be to really become profitable?
Speaker #9: And it looks like you're going to keep ramping it up . Is there a how do we think about how many stores , how many sales specialists ?
Speaker #9: You know , what the how big to be to to it needs really become , you profitable .
Speaker #10: Yeah . Thanks for the question . with our First I just tell you I'm very pleased performance so far . We saw volume average sales per rep , transaction value , average transaction volume , all increased in the month .
Seth Estep: Yeah, thanks for the question. First, I'll just tell you, I'm very pleased with our performance so far. We saw volume, average sales per rep, transaction value, average transaction volume, all increased in the month and in the quarter. And in December, we finished with sales of over $2 million. We're seeing a month-to-month-to-month ramp. It's similar to new store maturation curve. Our growth is structural. Our direct sales app is core growth engine for us. Our people and our process investments are delivering returns, and we're seeing strong momentum exiting Q4 into 2026. 75% of our specialists are external, and they're bringing this book of business with them, and they are strong at selling. They all live the lifestyle, and they all have an average of 11 years of experience in the farm and ranch industry. And in the month of December, we had our first $1 million specialist.
Hal Lawton: Yeah, thanks for the question. First, I'll just tell you, I'm very pleased with our performance so far. We saw volume, average sales per rep, transaction value, average transaction volume, all increased in the month and in the quarter. And in December, we finished with sales of over $2 million. We're seeing a month-to-month-to-month ramp. It's similar to new store maturation curve. Our growth is structural. Our direct sales app is core growth engine for us. Our people and our process investments are delivering returns, and we're seeing strong momentum exiting Q4 into 2026. 75% of our specialists are external,
Speaker #10: And in the quarter in December , we finished with sales of over $2 million . We're seeing a month to month to month ramp .
Speaker #10: And similar to new store maturation our growth curve , is Our direct is sales app core growth structural . engine for us , our people and our investments .
Speaker #10: Returns are delivering strong, and we're seeing momentum exiting Q4 into 2026. Seventy-five percent of our specialists are external, and they're bringing this book of business with them.
Yeah. Uh hey Peter Seth thanks Al Hey as we look ahead to this year you know as we looking at comp sales, some of what we we put in the guide as we do anticipate a little bit of inflation you know that kind of potentially 1 to 2% range. From an Aur perspective to really help drive that from a comp perspective with some modest obviously transaction gains with that. And that's kind of a blend right with commodities trading kind of within a range in which we manage kind of every day. It's, you know, corns within that, you know, low to mid fours, which we feel very comfortable with, with that Outlook right now, and as we look ahead, you know, as we managed strategically manage our kind of pricing. Uh you know we'll we'll continue to to monitor, you know, how much is being driven by traffic. How much is being driven by Aur and we'll continue to flex up and down accordingly but uh yeah some modest continued inflation as we look ahead in the guide to deliver on that comp sales goal of this year.
and they're bringing this book of business with them, and they are strong at selling. They all live the lifestyle, and they all have an average of 11 years of experience in the farm and ranch industry. And in the month of December, we had our first $1 million specialist.
Speaker #10: And they are strong at selling . They all live the lifestyle , and they all have an average of 11 years of experience in , in the farm and ranch industry and in the month of December , we had our first $1 million specialist .
Speaker #10: So I was able to go travel with that person . I could tell you , just like phone calls throughout the day , the relationship he had with his clients , everybody calling him all the stuff they need , you can just see that relationship building and building and building there .
Seth Estep: So I was able to go travel with that person. I could tell you just phone calls throughout the day, the relationship he had with his clients, everybody calling him all the stuff they need. You can just see that relationship building and building and building there. As we look into 2026, we'll continue to invest in technology and training. We'll double our specialist count, as Hal mentioned. We found that smaller training classes have been better than the bigger classes, and we're able to do more one-on-one training. And we're targeting around $50 million in sales in 2026. Hal also mentioned that we ended the year with just under 50 sales specialists. We've hired 9 at the end of December going into January, and we'll continue to build as this year goes on throughout the year.
So I was able to go travel with that person. I could tell you just phone calls throughout the day, the relationship he had with his clients, everybody calling him all the stuff they need. You can just see that relationship building and building and building there. As we look into 2026, we'll continue to invest in technology and training. We'll double our specialist count, as Hal mentioned. We found that smaller training classes have been better than the bigger classes, and we're able to do more one-on-one training. And we're targeting around $50 million in sales in 2026.
Speaker #10: As we look into 2026 , we'll to invest in technology and training . We'll double our mentioned , found that we hell count as specialist training classes have been better than the bigger classes , and we're able to do more one on one training , and we're targeting around 50 million in sales in 2026 .
Speaker #10: How also mentioned that we ended the year with just under 50 sales specialists . We've hired nine at the end of December going into January , and we'll continue to build as this year goes on throughout the year .
Hal also mentioned that we ended the year with just under 50 sales specialists. We've hired 9 at the end of December going into January, and we'll continue to build as this year goes on throughout the year.
Speaker #3: Thank you. Next question is from the line of Peter Benedict with Baird. Please go ahead.
Operator: Thank you. The next question is from the line of Peter Benedict with Baird. Please go ahead.
Operator: Thank you. The next question is from the line of Peter Benedict with Baird. Please go ahead.
And then, uh, circling back on garden centers, I'll start out by just saying we remain very pleased and and, uh, committed to our, uh, being in the business of live goods and kind of the outdoor Garden business. Uh, as expected Over The Last 5 Years, the way we go after that uh has a continues to evolve so we have we talked about this a little bit before but we have kind of our now really large uh live Goods garden centers. We've got kind of a medium and size. We have a smaller size and then we also have another solution set where we do pop-up tents, uh, out in our stores. And so we've gotten really good in our real estate model over the last few years of deciding, which 1 of those Solutions sets is best for each store. Uh, and then we deploy it as such. And as I mentioned, uh, in my, uh, opening remarks, you know, we'll have well over a thousand stores. This year that between, uh, new between garden center stores and pop-up, uh, garden centers, and we feel really good about it. And live Goods is 1 of our best performing categories last year as a business
Speaker #11: guys . Thanks for thanks Hi , for taking the question . I wanted to follow up on an earlier question , just on the on the inflation lift .
Thank you.
[Analyst] (Baird): Hi, guys. Thanks for taking the question. I wanted to follow up on an earlier question. Just on the inflation lift, I guess, to a basis point, a lot of what you're saying was tariffs. I'm just curious if you could talk about the commodity side of that and what you're seeing and what your outlook for 2026 includes from a commodity standpoint. And then my other question is just around the garden centers, you're about 32% penetrated. What's the outlook there? Any plans to go faster, slower? Just kind of an update on that initiative. Thank you.
Peter Benedict: Hi, guys. Thanks for taking the question. I wanted to follow up on an earlier question. Just on the inflation lift, I guess, to a basis point, a lot of what you're saying was tariffs. I'm just curious if you could talk about the commodity side of that and what you're seeing and what your outlook for 2026 includes from a commodity standpoint. And then my other question is just around the garden centers, you're about 32% penetrated. What's the outlook there? Any plans to go faster, slower? Just kind of an update on that initiative. Thank you.
Speaker #11: I guess hundred basis points . A lot of what you're seeing with tariffs . I'm just curious if you could talk about the commodity side of that and what you're seeing and what you're what your outlook for 2026 includes from a commodity standpoint .
Our next question is from the line of Oliver. Winter mantel with evercore isi. Please go ahead.
Speaker #11: And then my other question is just around the garden centers , you're about 32% penetrated . What's the there ? outlook Any plans to go faster or slower .
Uh, thanks guys. Good morning. Um, how should we think about the the lap of sales lease back benefits. And uh as we move through 2026, uh should we expect any incremental contributions next year? Or does the comparison become neutral? Thank you.
Speaker #11: Just kind of an update on that initiative. Thank you.
Speaker #2: Hey , Peter . Seth will take the first question on inflation and then I'll take the the question on garden centers .
[Analyst] (Jefferies): Hey, Peter. Seth will take the first question on inflation, and then I'll take the question on garden centers.
Jonathan Matuszewski: Hey, Peter. Seth will take the first question on inflation, and then I'll take the question on garden centers.
Speaker #10: Yeah . Hey , Peter .
Speaker #12: Seth . Thanks , al . Hey , as we look ahead to this year , you know , as we look at comp sales , some of what put in the we we guide is we do anticipate a little bit of inflation , you know , that kind of potentially at 1 to 2% range from an order perspective really help drive to that from a comp perspective with some modest , obviously transaction gains with that .
Seth Estep: Yeah. Hey, Peter. Seth. Thanks, Al. Hey, as we look ahead to this year, as we're looking at comp sales, some of what we put in the guide, as we do anticipate a little bit of inflation, that kind of potentially 1% to 2% range from an AUR perspective to really help drive that from a comp perspective with some modest, obviously, transaction gains with that. And that's kind of a blend, right, with commodities trading kind of within a range in which we manage kind of every day. It's corns within that low to mid-4s, which we feel very comfortable with, with that outlook right now. And as we look ahead, as we strategically manage our kind of pricing, we'll continue to monitor how much is being driven by traffic, how much is being driven by AUR, and we'll continue to flex up and down accordingly.
Seth Estep: Yeah. Hey, Peter. Seth. Thanks, Al. Hey, as we look ahead to this year, as we're looking at comp sales, some of what we put in the guide, as we do anticipate a little bit of inflation, that kind of potentially 1% to 2% range from an AUR perspective to really help drive that from a comp perspective with some modest, obviously, transaction gains with that. And that's kind of a blend, right, with commodities trading kind of within a range in which we manage kind of every day. It's corns within that low to mid-4s, which we feel very comfortable with, with that outlook right now.
Speaker #12: And that's kind of a blend, right, with commodities trading kind of within a range in which we manage kind of day.
Speaker #12: every It's , you know , corn's within that , you know , low to mid fours , which we feel very comfortable with with that outlook right now .
Speaker #12: And as we look ahead , you know , as we manage strategically manage our kind of pricing , you know , we'll continue to to monitor , you driven know , how much by is being traffic , how much by driven is being ore .
And as we look ahead, as we strategically manage our kind of pricing, we'll continue to monitor how much is being driven by traffic, how much is being driven by AUR, and we'll continue to flex up and down accordingly.
Hey Ollie, um, and Kirk can jump in here if we need to get any of that. Uh some of the core details of it, I would just say in general, the sale lease back is going to be flat year over year from an operating income benefit. Uh, what I'd love to do is just step back though and just talk about how successful uh are a real estate model that we introduced to summers ago is going. Uh we are now doing own development on 50% of our of our new stores that is providing 2 sets of benefits 1. The um, the benefit the, the the dollars that we would normally pay our developer, we're now able to reinvest that back in the store that's saving us somewhere in the high single digit call it 10% uh in total cost to build and then we're also essentially procuring a lot of the um uh uh materials that go into building our stores and we're getting high single-digit call it ten percent for savings there as well. So we are getting significant savings from the cost of building a new store that continues to allow us to deliver High RR.
Speaker #12: continue to And we'll flex up and down accordingly . But yeah , some modest continued inflation as we look ahead in the guide to deliver on that comp sales goal this year .
Seth Estep: But yeah, some modest continued inflation as we look ahead in the guide to deliver on that comp sales goal this year.
But yeah, some modest continued inflation as we look ahead in the guide to deliver on that comp sales goal this year.
Speaker #2: And then circling back on garden centers , I'll start out by just saying we remain very pleased and , and committed to our being in the business of live goods and kind of the outdoor garden business as expected , over the last five years , the way we go after that has continues to evolve .
Hal Lawton: And then circling back on garden centers, I'll start out by just saying we remain very pleased and committed to our being in the business of live goods and kind of the outdoor garden business. As expected over the last 5 years, the way we go after that has continued to evolve. So we have, and we talked about this a little bit before, but we have kind of our now really large live goods garden centers. We've got kind of a medium size. We have a smaller size. And then we also have another solution set where we do pop-up tents out in our stores. And so we've gotten really good in our real estate model over the last few years of deciding which one of those solution sets is best for each store, and then we deploy it as such.
Hal Lawton: And then circling back on garden centers, I'll start out by just saying we remain very pleased and committed to our being in the business of live goods and kind of the outdoor garden business. As expected over the last 5 years, the way we go after that has continued to evolve. So we have, and we talked about this a little bit before, but we have kind of our now really large live goods garden centers. We've got kind of a medium size. We have a smaller size. And then we also have another solution set where we do pop-up tents out in our stores.
Um, and now, when we're in the market, starting to sell some of those owned stores, we're seeing, uh, really strong cap rates on those as well. So, uh, the, the the strategy has paid off in, uh, in Spades and more were very pleased with the results in the returns it's getting and uh, you know, the capital impact, the operating income impact Etc. And just can't can't say enough about the work that teams doing in the in the impact. It's having on the company.
Thank you very much.
Speaker #2: So we have we talked about this a little bit before , but we have kind of our now really large garden live goods , garden centers .
The next question is from the line of Michael Baker with d a Davidson and Company. Please go ahead.
Speaker #2: We've got kind of a medium end size. We have a smaller size. And then we also have another solution set where we do pop-up tents out in our stores.
Speaker #2: And so we've really good gotten in our real estate model over the last few years of deciding which one of those solution sets is best for each store .
And so we've gotten really good in our real estate model over the last few years of deciding which one of those solution sets is best for each store, and then we deploy it as such.
Speaker #2: And then we deploy it as such . And as I mentioned in opening remarks , you know , we'll have my well over this 1000 stores that year between between Garden Center stores and pop up garden centers .
Hal Lawton: And as I mentioned in my opening remarks, we'll have well over 1,000 stores this year between garden center stores and pop-up garden centers, and we feel really good about it. And live goods was one of our best-performing categories last year as a business.
And as I mentioned in my opening remarks, we'll have well over 1,000 stores this year between garden center stores and pop-up garden centers, and we feel really good about it. And live goods was one of our best-performing categories last year as a business.
Hi thanks. Uh, can you talk about the timing of when you start to leverage some of the Investments that you've made over the last few years? For instance, you're you're saying that delivery will still be a drag this year at some point. I think the final mile Investments you're making start to leverage themselves. Similarly, uh, with the the uh Big Barn initiative just wondering when we when we see a, I guess would be a lower comp Break, Even point from leveraging the, the past Investments. Thanks.
Speaker #2: And we feel really good about it. And Live Goods is one of our best-performing categories. Last year as a business.
Speaker #3: Thank you. Our next question is from the line of Oliver Wintermantel with Evercore ISI. Please go ahead.
Operator: Thank you. Our next question is from the line of Oliver Wintermantel with Evercore ISI. Please go ahead.
Operator: Thank you. Our next question is from the line of Oliver Wintermantel with Evercore ISI. Please go ahead.
Speaker #13: guys . Good Thanks , morning . How should we think about the the lack of sales leaseback benefits and as you move through 2026 , should we expect any incremental contributions next year or does the comparison become neutral ?
[Analyst] (D.A. Davidson & Co.): Thanks, guys. Good morning. How should we think about the impact of sale-leaseback benefits? As we move through 2026, should we expect any incremental contributions next year, or does the comparison become neutral? Thank you.
Oliver Wintermantel: Thanks, guys. Good morning. How should we think about the impact of sale-leaseback benefits? As we move through 2026, should we expect any incremental contributions next year, or does the comparison become neutral? Thank you.
At a low 2% comp. I think that's a really good inflection point for retail. Um, and so that's why we're emphasizing it and and putting it out there. So folks kind of have that in their model. So I feel really good about that and I think that stands tall in retail in terms of the right the right comp percent to be inflecting on your operating margin.
Specific to the initiatives, um, on, uh, final mile.
Speaker #13: Thank you .
Speaker #2: Ollie Hey , and Curt can jump in here if we need to get into that . Some of the core details of it , I would just say in general , the sale leaseback is going to be flat year from over year an operating income benefit .
Hal Lawton: Hey, Alyssa. Kurt can jump in here if we need to get into some of the core details of it. I would just say, in general, the sale lease-back is going to be flat year-over-year from an operating income benefit. What I'd love to do is just step back and just talk about how successful our real estate model that we introduced 2 summers ago is going. We are now doing own development on 50% of our new stores. That is providing two sets of benefits. One, the dollars that we would normally pay our developer, we're now able to reinvest that back in the store. That's saving us somewhere in the high single digit, call it 10-ish% in total cost to build.
Hal Lawton: Hey, Alyssa. Kurt can jump in here if we need to get into some of the core details of it. I would just say, in general, the sale lease-back is going to be flat year-over-year from an operating income benefit. What I'd love to do is just step back and just talk about how successful our real estate model that we introduced 2 summers ago is going. We are now doing own development on 50% of our new stores. That is providing two sets of benefits. One, the dollars that we would normally pay our developer, we're now able to reinvest that back in the store.
There are there is no kind of incremental operating expense being contributed into that this year that that um, while we're expanding it, to twice the number of stores this year and getting to 50% store coverage.
Speaker #2: What I'd love to do is just step back and just talk about how successful our real estate model introduced two summers ago is going.
Speaker #2: We are now development on 50% of our of our new stores . That is providing two sets of benefits . One , the the benefit , the the the dollars that we would normally pay our developer .
Speaker #2: We're now able to reinvest that back in the store . That's saving us somewhere in the high single digit . Call it ten ish percent in total cost to build .
That's saving us somewhere in the high single digit, call it 10-ish% in total cost to build.
Speaker #2: And then we're also essentially procuring a lot of the materials that go into building our stores. And we're getting high single-digit, call it 10%, savings there as well.
Hal Lawton: And then we're also essentially procuring a lot of the materials that go into building our stores, and we're getting high single digit, call it 10-ish% savings there as well. So we are getting significant savings from the cost of building a new store. That continues to allow us to deliver high RRRs. And now when we're in the market starting to sell some of those own stores, we're seeing really strong cap rates on those as well. So the strategy has paid off in spades and more. We're very pleased with the results and the returns it's getting and the capital impact, the operating income impact, etc. And just can't say enough about the work that team's doing and the impact it's having on the company.
And then we're also essentially procuring a lot of the materials that go into building our stores, and we're getting high single digit, call it 10-ish% savings there as well. So we are getting significant savings from the cost of building a new store. That continues to allow us to deliver high RRRs. And now when we're in the market starting to sell some of those own stores, we're seeing really strong cap rates on those as well. So the strategy has paid off in spades and more. We're very pleased with the results and the returns it's getting and the capital impact, the operating income impact, etc.
Speaker #2: So we are getting significant savings from the cost of building a new store, that continues to allow us to deliver high returns. And we're in the market now, when starting to sell some of those owned stores, we're seeing really strong cap rates on those as well.
It's basically last year's benefits are paying for the roll out for this year. In incremental, to that, there is significant cost savings. So that initiative will will capture this year related to Freight, uh, specific on freight that we use for Roadie. And also, which is our gig provider as well as Freight that we use to ship goods from our DCS that will now ship through our stores and then out to the customer for the final mile. And those are 10ish million dollars a year in savings that help the improve our gross margin, but then also fund that that initiative. So that initiative in many ways is kind of self-funding itself as it goes on. The same front, direct sales is doing the same thing. As we talked about last year, we invested around 10 basis, points of margin rate. Between those 2 initiatives,
Speaker #2: So the the strategy has paid off in in spades . And more . We're very pleased with the results and the returns . It's getting .
Speaker #2: And you know , the capital impact , the operating income impact , etc. and just can't enough about can't say that team is doing and the the impact it's having on the company .
And just can't say enough about the work that team's doing and the impact it's having on the company.
They are not further deluded this year uh on Final on direct sales, it's the same way. As John mentioned, we're going to double the class from this year last year, 50 to next year. 100. The class of last year of 50 is basically paying for the investment of the next 50, this coming year. And so there's not incremental dilution on either 1 of those from a rate perspective and that's what allows us to achieve that break, even just above the 2% comp run rate.
Thanks so much Michael.
Speaker #13: Thank you very much .
Thank you.
Operator: Thank you.
Hal Lawton: Thank you.
Seth Estep: Thank you very much.
Seth Estep: Thank you very much.
Speaker #3: The next question is from the line of Michael Baker with D.A. Davidson and Company. Please go ahead.
Operator: The next question is from the line of Michael Baker with D.A. Davidson & Co. Please go ahead.
Operator: The next question is from the line of Michael Baker with D.A. Davidson & Co. Please go ahead.
The next question is from the line of Chris with JP Morgan. Please go ahead.
Speaker #14: Hi . Thanks . Can you talk about the timing of when you start to the investments leverage some of that you've made over the last few years , for instance , you're saying that delivery will still be a drag this year at some point .
[Analyst] (D.A. Davidson & Co.): Hi, thanks. Can you talk about the timing of when you start to leverage some of the investments that you've made over the last few years? For instance, you're saying that delivery will still be a drag this year. At some point, I think the final mile investments you're making start to leverage themselves. Similarly, with the big barn initiative, just wondering when we see a, I guess, would be a lower comp break-even point from leveraging the past investments. Thanks.
Michael Baker: Hi, thanks. Can you talk about the timing of when you start to leverage some of the investments that you've made over the last few years? For instance, you're saying that delivery will still be a drag this year. At some point, I think the final mile investments you're making start to leverage themselves. Similarly, with the big barn initiative, just wondering when we see a, I guess, would be a lower comp break-even point from leveraging the past investments. Thanks.
Thank you, and thanks for taking my question. So I wanted to take the the other half of that question. So as you've scaled out, the self-help benefits from
Speaker #14: I think the final mile investments you're making start to leverage themselves . Similarly with the the Big Barn initiative , just wondering when we when we see a I guess would be a lower comp break even point from leveraging the past investments .
Uh, you know, prescriptions and final mile and direct sales.
Speaker #14: Thanks .
Speaker #2: Yeah . Hey , Michael , and thanks for the question . This morning . I'll just start out by saying at a low 2% comp , I think really good that's a inflection point for retail and so and that's why putting it we're emphasizing it out there .
Hal Lawton: Yeah. Hey, Michael, and thanks for the question this morning. I'll just start out by saying at a low 2% comp, I think that's a really good inflection point for retail. And so that's why we're emphasizing it and putting it out there so folks kind of have that in their model. So I feel really good about that. And I think that stands tall in retail in terms of the right comp percent to be inflecting on your operating margin. Specific to the initiatives, on Final Mile, there is no kind of incremental operating expense being attributed into that this year. While we're expanding it to twice the number of stores this year and getting to 50% store coverage, it's basically last year's benefits are paying for the rollout for this year.
Hal Lawton: Yeah. Hey, Michael, and thanks for the question this morning. I'll just start out by saying at a low 2% comp, I think that's a really good inflection point for retail. And so that's why we're emphasizing it and putting it out there so folks kind of have that in their model. So I feel really good about that. And I think that stands tall in retail in terms of the right comp percent to be inflecting on your operating margin. Specific to the initiatives, on Final Mile, there is no kind of incremental operating expense being attributed into that this year.
Out of those bills like when when do you think they'll become sort of a a a greater portion of the comp such that you know you the overall Trends become a lot less macro sensitive. Is there an inflection as this year progresses? And you know, how does that look then in 27 and you know, any quantification around, that would be really helpful. Thanks so much.
Yeah. Um,
thanks for the the question, Chris and and
Speaker #2: kind of So folks have that in their model . So I feel really good about that . And I think that stands tall in retail in terms of the right the right comp percent to be inflecting on your operating margin specific to the initiatives on final mile .
Speaker #2: There are there is no kind of incremental operating expense being attributed into that . This year that that while we're expanding it to the twice number of stores this year and getting to 50% store coverage , it's basically last year's benefits paying for the are rollout for this year , incremental to that .
While we're expanding it to twice the number of stores this year and getting to 50% store coverage, it's basically last year's benefits are paying for the rollout for this year.
Speaker #2: There is significant cost savings that that initiative will will capture year related this to freight, specific on freight that we use for roading and also which is our gig provider, as well as freight used to ship that we goods from our DCs that will now ship through our stores and then out to the customer for the final mile.
Hal Lawton: Incremental to that, there are significant cost savings that that initiative will capture this year related to freight, specifically on freight that we use for Roadie and also, which is our gig provider, as well as freight that we use to ship goods from our DCs that will now ship through our stores and then out to the customer for the final mile. Those are $10-ish million a year in savings that help both improve our gross margin, but then also fund that initiative. That initiative, in many ways, is kind of self-funding itself as it goes. On the same front, direct sales is doing the same thing. As we talked about last year, we invested around 10 basis points of margin rate between those two initiatives. They are not further dilutive this year. On direct sales, it's the same way.
Incremental to that, there are significant cost savings that that initiative will capture this year related to freight, specifically on freight that we use for Roadie and also, which is our gig provider, as well as freight that we use to ship goods from our DCs that will now ship through our stores and then out to the customer for the final mile. Those are $10-ish million a year in savings that help both improve our gross margin, but then also fund that initiative. That initiative, in many ways, is kind of self-funding itself as it goes. On the same front, direct sales is doing the same thing.
What I'd say is, if you take well, first off, I'd start by saying we expect the the those initiatives to provide material benefit this year in our comp. Um, and they did have some nominal benefit in our comp last year last year, at the beginning of the year, we kind of said, hey, look don't don't, we're going to get these things ramped up. We're making some investments in them. You'll be able to, we'll be able to see some of the sales, but we're not going to be sharing those a lot just because we wanted to get ramped up and get in a good spot this year. We feel like those are off and running. As John said, we have 50 sales reps. Last year, we had the first 1 to hit a million dollars. We did 2 million dollars uh in the month of December. We eclipsed that rate in the month of January, so we're seeing the right pace and Cadence there, uh, you guys can do the math on that. If you think about the number of reps and the pace we're running at, and you can see the dollars that we would roughly be targeting this year and that starts to have a material, you know?
Speaker #2: And those are ten-ish million dollars a year in savings that help both improve our gross margin, but then also fund that initiative.
Speaker #2: So that initiative , in many ways is kind of self-funding itself as it goes on the same front , Direct sales is doing the same thing as we talked about last year .
Speaker #2: We invested around ten basis points of margin rate between those two initiatives. They are not further dilutive this year. On final, on direct sales.
As we talked about last year, we invested around 10 basis points of margin rate between those two initiatives. They are not further dilutive this year. On direct sales, it's the same way.
Speaker #2: It's the same way as John mentioned . We're going to double the class from this year . Last year , 50 to next year , 100 .
40ish basis point impact on on comp, uh, and the same thing starts to happen, you know, in the in pet and RX as we start to scale that up as well. And we start to see uh, the strong growth rates we see in there and then that starts to add to it as well. And so feeling really good about these initiatives. And final miles as we talked about is really, it has 3 purposes, it's driving costs down on our delivery. It's enabling uh, uh, the direct sales, uh, as well. But really, it's also, you know, providing a means for us to be able to fulfill future demand as delivery becomes.
Hal Lawton: As John mentioned, we're going to double the class from last year 50 to next year 100. The class of last year 50 is basically paying for the investment of the next 50 this coming year. So there's not incremental dilution on either one of those from a rate perspective. That's what allows us to achieve that break-even just above the 2% comp run rate. Thanks so much, Michael.
As John mentioned, we're going to double the class from last year 50 to next year 100. The class of last year 50 is basically paying for the investment of the next 50 this coming year. So there's not incremental dilution on either one of those from a rate perspective. That's what allows us to achieve that break-even just above the 2% comp run rate. Thanks so much, Michael.
Speaker #2: The class of last year, 50, is basically paying for the investment of the next 50 this coming year. And so there's not incremental dilution on either one of those.
You know, more and more away a way of life for everyone. So feeling great about all 3 initiatives, they're all uh, on track and doing really well.
Thank you.
Speaker #2: From a rate perspective . And that's what allows us to achieve that break even just above the 2% comp run rate . Thanks so much , Michael .
The next question is from the line of Peter Keith with Piper Sandler. Please go ahead.
Speaker #3: Thank you . The next question is from the line of Chris Horvers with J.P. Morgan . Please go ahead .
Operator: Thank you. The next question is from the line of Christopher Horvers with J.P. Morgan. Please go ahead.
Operator: Thank you. The next question is from the line of Christopher Horvers with J.P. Morgan. Please go ahead.
Speaker #15: Thank you . And thanks for taking my question . So I wanted to take the other half of that question . So as you've scaled out the self-help benefits from , you know , prescriptions and final mile and direct sales , how do those build ?
[Analyst] (J.P. Morgan): Thank you. And thanks for taking my question. So I wanted to take the other half of that question. So as you've scaled out the self-help benefits from prescriptions and Final Mile and direct sales, how do those build? When do you think they'll become sort of a greater portion of the comp such that the overall trends become a lot less macro-sensitive? Is there inflection as this year progresses, and how does that look then in 2027? And any quantification around that would be really helpful. Thanks so much.
Christopher Horvers: Thank you. And thanks for taking my question. So I wanted to take the other half of that question. So as you've scaled out the self-help benefits from prescriptions and Final Mile and direct sales, how do those build? When do you think they'll become sort of a greater portion of the comp such that the overall trends become a lot less macro-sensitive? Is there inflection as this year progresses, and how does that look then in 2027? And any quantification around that would be really helpful. Thanks so much.
Inflation. Uh, what specifically did you guys see in, uh, in Q4, and what are you expecting for, for pet food in 26?
Hey Peter, uh this is Seth, thanks for the question. Hey, um, relative to pet, you know?
Speaker #15: Like when , when do you think they'll become sort of a greater portion of the comp such that , you know , the overall trends become a lot less macro sensitive ?
Speaker #15: Is there inflection as this year progresses ? And how does that look then in 27 and any quantification around that would be really helpful .
Speaker #15: Thanks so much .
Speaker #2: Yeah , thanks for the question , Chris . And what I'd say is if you take well , first off , I'd start by saying we expect those initiatives to provide material benefit this year in our comp .
Hal Lawton: Yeah. Thanks for the question, Chris. What I'd say is if you take, well, first off, I'd start by saying we expect those initiatives to provide material benefit this year in our comp. They did have some nominal benefit in our comp last year. Last year, at the beginning of the year, we kind of said, "Hey, look, we're going to get these things ramped up. We're making some investments in them. You'll be able to, we'll be able to see some of the sales, but we're not going to be sharing those a lot just because we want it to get ramped up and get in a good spot." This year, we feel like those are off and running. As John said, we had 50 sales reps last year. We had the first one to hit $1 million. We did $2 million in the month of December.
Hal Lawton: Yeah. Thanks for the question, Chris. What I'd say is if you take, well, first off, I'd start by saying we expect those initiatives to provide material benefit this year in our comp. They did have some nominal benefit in our comp last year. Last year, at the beginning of the year, we kind of said, "Hey, look, we're going to get these things ramped up. We're making some investments in them. You'll be able to, we'll be able to see some of the sales, but we're not going to be sharing those a lot just because we want it to get ramped up and get in a good spot." This year, we feel like those are off and running.
I would approach pet and how we're thinking about it and kind of 3 different kind of Frameworks, uh, particularly as we look ahead for kind of 2026 and Beyond. The first thing I would just say is, you know, pet does not have to overdo and outside growth for us to achieve our overall comp targets. Uh, you know, we're a needs-based multi-category retailer. We have a history of balancing, our full portfolio to to deliver our comp growth rates. Uh and there's not we're really not relying on any single category, kind of going forward.
Speaker #2: And they did have some nominal benefit in our comp last year . Last year , at the the year , we beginning of kind of said , hey , look , don't , don't .
Speaker #2: going to get these things up . We're making some ramped investments in them . You'll be able to we'll be able to see some of the sales , but we're not going to be sharing those a lot just because we want it to get ramped up and get in a good spot .
Speaker #2: year , This we feel like those are off and running . As John said , we have 50 sales reps . Last year we had the first one to hit $1 million .
As John said, we had 50 sales reps last year. We had the first one to hit $1 million. We did $2 million in the month of December.
Speaker #2: We did $2 million in the month of December . We eclipsed that rate in the month of January . So we're seeing the right pace and cadence there .
Hal Lawton: We eclipsed that rate in the month of January. So we're seeing the right pace and cadence there. You guys can do the math on that. If you think about the number of reps and the pace we're running at, you can see the dollars that we would roughly be targeting this year. And that starts to have a material 40-ish basis point impact on comp. And the same thing starts to happen in Pet and RX as we start to scale that up as well. And we start to see the strong growth rates we see in there. And then that starts to add to it as well. And so feeling really good about these initiatives. And Final Mile, as we talked about, is really it has three purposes. It's driving costs down on our delivery. It's enabling the direct sales as well.
We eclipsed that rate in the month of January. So we're seeing the right pace and cadence there. You guys can do the math on that. If you think about the number of reps and the pace we're running at, you can see the dollars that we would roughly be targeting this year. And that starts to have a material 40-ish basis point impact on comp. And the same thing starts to happen in Pet and RX as we start to scale that up as well. And we start to see the strong growth rates we see in there. And then that starts to add to it as well. And so feeling really good about these initiatives.
Speaker #2: You guys can do the math on that . If you think about the number of reps and the pace we're running at , and you can see the dollars that we would roughly be targeting this year , and that starts to have a material , you know , 40 ish basis point impact on comp .
The second way I'd look at pad is also from a share perspective, we're not seeing any indication that we're losing share in pets. You know, we're holding our own, we might not be at the outside Pace that we were over the course of the last couple of years but the data that we get is a very data-rich industry that we're holding our own. We're holding trips, our customer remains very engaged in the category for an example. Last year uh we saw over 2 million pets. Come through our pet, washes, our pet vet clinics grew in sales over 20% in those stores. So we're seeing really good engagement from our Shoppers in the category itself.
Speaker #2: And the same thing starts to happen . You know , in the in pet . And as we start to scale that up as well , and we start to see the strong growth rates we see in there , and then that starts to add to it as well .
Speaker #2: And so, feeling really good about these initiatives and final mile, as we talked about, it really has three driving purposes.
And Final Mile, as we talked about, is really it has three purposes. It's driving costs down on our delivery. It's enabling the direct sales as well.
Speaker #2: It's costs down on our delivery . It's enabling the direct as sales But really well . it's also providing a means fulfill to for us to future demand as delivery becomes more and more a way , a way of life for everyone .
Hal Lawton: But really, it's also providing a means for us to be able to fulfill future demand as delivery becomes more and more a way of life for everyone. So feeling great about all three initiatives. They're all on track and doing really well.
But really, it's also providing a means for us to be able to fulfill future demand as delivery becomes more and more a way of life for everyone. So feeling great about all three initiatives. They're all on track and doing really well.
Speaker #2: So feeling great about all three initiatives , they're all on track and doing really well .
Speaker #3: Thank you . The next question is from the line of Peter Keith with Piper Sandler . Please go ahead .
And then third I would just say hey we're we're excited about what's ahead. I mean from the assortments from the layouts, we're focusing on more localized assortments. Making sure that we're allocating brand and space in our stores. So the brands that fit kind of regional preferences in a given Market, you know, is how mentioned as well earlier? We're continuing to expand kind of fresh and frozen into that category. That is the fastest growing category in the space. And we'll have a few hundred stores, uh, this year uh, in that particular area as well. And we're constantly looking to revitalize Our Brands as well like for health continuing to see that kind of customer engagement and interaction. And as the category returns to kind of historical growth, we feel like we're really well positioned to can continue to maintain our share and be in a position. Can you grow share long term here as well? So thanks for the question.
Operator: Thank you. The next question is from the line of Peter Keith with Piper Sandler. Please go ahead.
Operator: Thank you. The next question is from the line of Peter Keith with Piper Sandler. Please go ahead.
Thank you.
Speaker #11: Hi . Good morning . Thanks for taking the question . So you could talk about the pet food category that was not called out as an area of performance within Q I think there's been some concern out there with of the investors market share loss or maybe the C category inflation .
The next question is from the line of David Bellinger with mizuho.
Please go ahead.
[Analyst] (Piper Sandler): Hey, good morning, John. Thanks for taking the question. Hal, it's something you could talk about the pet food category that was not called out as an area of outperformance within Q. I think there's been some concern out there with investors of maybe market share loss or maybe the category seeing deflation. What specifically did you guys see in Q4, and what are you expecting for pet food in 2026?
Peter Keith: Hey, good morning, John. Thanks for taking the question. Hal, it's something you could talk about the pet food category that was not called out as an area of outperformance within Q. I think there's been some concern out there with investors of maybe market share loss or maybe the category seeing deflation. What specifically did you guys see in Q4, and what are you expecting for pet food in 2026?
Speaker #11: What specifically did you guys see in Q4? What are you expecting for food in '26?
Speaker #12: Hey , Peter , this is Seth . Thanks for the Hey question . , relative to pet , you , I would approach pet and how we're thinking about it kind of different kind and of three frameworks , particularly as we look for ahead kind of 2026 and beyond .
Seth Estep: Hey, Peter. This is Seth. Thanks for the question. Hey, relative to pet, I would approach pet and how we're thinking about it in kind of three different kind of frameworks, particularly as we look ahead for kind of 2026 and beyond. The first thing I would just say is pet does not have to over-deliver an outsized growth for us to achieve our overall comp targets. We're a needs-based, multi-category retailer. We have a history of balancing our full portfolio to deliver our comp growth rates. And we're really not relying on any single category kind of going forward. The second way I'd look at pet is also from a share perspective. We're not seeing any indication that we're losing share in pet. We're holding our own.
Seth Estep: Hey, Peter. This is Seth. Thanks for the question. Hey, relative to pet, I would approach pet and how we're thinking about it in kind of three different kind of frameworks, particularly as we look ahead for kind of 2026 and beyond. The first thing I would just say is pet does not have to over-deliver an outsized growth for us to achieve our overall comp targets. We're a needs-based, multi-category retailer. We have a history of balancing our full portfolio to deliver our comp growth rates. And we're really not relying on any single category kind of going forward.
Hey, good morning. Thanks for the question. Maybe a bit bigger picture, but you, you you mentioned some of these initiatives laying in for 2026. Even maybe 40 basis points of comps from direct sales seems very incremental but if if we back some of these things out, why is the core business of tractor sort of underperforming? Now we we're talking about a a wider range of outcomes these these outcomes basically widening out.
Speaker #12: The first thing I would just say is , you know , pet does not have to overdeliver an outsized growth for us to achieve our overall comp targets .
And plus can, can you score that away with some of this increased promo activity? We heard about in Q4 is is that something contained to the period or something that we could see bleed into 2026 as well. Thank you.
Yeah. Hey David. Uh, thanks so much for the question.
Speaker #12: You know , we're a needs based multi-category retailer . We have a history of balancing our full portfolio to to deliver our comp growth rates .
Speaker #12: And there's not really not relying on any single category kind of going forward . The second way I'd look at pet is also from a share perspective .
The second way I'd look at pet is also from a share perspective. We're not seeing any indication that we're losing share in pet. We're holding our own.
Speaker #12: We're not seeing any indication that we're losing share in pet . You know , we're holding our own . We might not be at the outsized pace that we were over the course of the last couple years , but the data that we get is a very data rich industry that we're holding our own , we're holding trips .
Seth Estep: We might not be at the outsized pace that we were over the course of the last couple of years, but the data that we get, it's a very data-rich industry, that we're holding our own. We're holding trips. Our customer remains very engaged in the category. For an example, last year, we saw over 2 million pets come through our pet washes. Our pet vet clinics grew in sales over 20% in those stores. So we're seeing really good engagement from our shoppers in the category itself. And then third, I would just say, hey, we're excited about what's ahead. I mean, from the assortments, from the layouts, we're focusing on more localized assortments, making sure that we're allocating brand and space in our stores to the brands that fit kind of regional preferences in a given market.
We might not be at the outsized pace that we were over the course of the last couple of years, but the data that we get, it's a very data-rich industry, that we're holding our own. We're holding trips. Our customer remains very engaged in the category. For an example, last year, we saw over 2 million pets come through our pet washes. Our pet vet clinics grew in sales over 20% in those stores. So we're seeing really good engagement from our shoppers in the category itself. And then third, I would just say, hey, we're excited about what's ahead.
Speaker #12: Our customer remains very engaged in the category. For example, last year we saw over 2 million pets go through our pet washes.
Speaker #12: Our pet vet clinics grew in sales , over 20% in those stores . So we're seeing really good engagement from our shoppers in the category itself .
Speaker #12: And then third , I would just say , hey , we're we're excited about what's ahead . I mean , from the assortments , from the layouts , we're focusing on more localized assortments , making sure that we're allocating brand and space in our stores to the brands that fit regional kind of preferences in a given market , you know , as Hal mentioned as well earlier , we're continuing to expand kind of fresh and frozen into that category .
We, we are, uh, in a very excited as we enter the year of 2026, I think, uh, as always as we commented, there's a wide range of outcomes. We think that are, uh, allowable for the year. Um, and I think we're starting in a in the right prudent mentality. Uh, as it relates to promos, uh, we really haven't seen that carry over into 2026. I admit there's been a lot of volatility, uh, you know, in retail for these first 5 or 6 weeks. And so, uh, you know, I think time will tell on that. But, uh, you know, today, we've not seen that that carryover we all I would say all 30 already, have most part our, our spring plans already laid out and and, you know, we're planning for a more normalized, you know, environment on that as well. But certainly will be prepared to respond if if necessary but I just start out by just close by just saying we feel very optimistic about 2026, we'd like to set up, we have coming into 2026, uh the first 5 or 6 weeks have been a nice start to the year. We're optimistic about potential for tax refunds. We're optimistic about the potential for a strong spring after
I mean, from the assortments, from the layouts, we're focusing on more localized assortments, making sure that we're allocating brand and space in our stores to the brands that fit kind of regional preferences in a given market.
Seth Estep: As Hal mentioned as well earlier, we're continuing to expand kind of fresh and frozen into that category that is the fastest-growing category in the space. We'll have a few hundred stores this year in that particular area as well. We're constantly looking to revitalize our brands as well, like 4health, continuing to see that kind of customer engagement and interaction. As the category returns to kind of historical growth, we feel like we're really well-positioned to continue to maintain our share and be in a position to continue to grow share long-term here as well. So thanks for the question.
As Hal mentioned as well earlier, we're continuing to expand kind of fresh and frozen into that category that is the fastest-growing category in the space. We'll have a few hundred stores this year in that particular area as well. We're constantly looking to revitalize our brands as well, like 4health, continuing to see that kind of customer engagement and interaction. As the category returns to kind of historical growth, we feel like we're really well-positioned to continue to maintain our share and be in a position to continue to grow share long-term here as well. So thanks for the question.
Speaker #12: That is the fastest growing category in the space , and we'll have a few hundred stores this year in that particular area as well .
2 top Springs. Uh, we we've got a lot of strategic initiatives underway. Uh, our team is engaged, uh, Supply chains. Never been better. Stores. Have never been operating better. We think we've got a great setup as we head into 2026 here and we're, you know, looking forward to to getting to the year and then and coming back and Reporting on some some strong axles for you.
Speaker #12: And we're constantly looking to revitalize our brands as well . Like for health , continuing to see that kind of customer engagement and interaction .
Speaker #12: And as the category returns to kind of historical growth , we feel like we're well really positioned to continue to maintain our share and be in a position to continue to grow , share long term here as well .
Today.
Speaker #12: So thanks for the question .
Speaker #3: Thank you . Thank you . The next question is from the line of David Bellinger with Mizuho . Please go ahead .
This will conclude today's conference call. Thank you all for your participation. You may now disconnect your lines.
[Analyst] (Piper Sandler): Thank you.
Peter Keith: Thank you.
Operator: Thank you. The next question is from the line of David Bellinger with Mizuho. Please go ahead.
Operator: Thank you. The next question is from the line of David Bellinger with Mizuho. Please go ahead.
Speaker #16: Hey, good morning. Thanks for the question. Maybe a bit bigger picture, but you mentioned some of these initiatives layering in for 2026.
[Analyst] (J.P. Morgan): Hey, good morning. Thanks for the question. Maybe a bit bigger picture, but you mentioned some of these initiatives layering in for 2026, even maybe 40 basis points of comps from direct sales. It seems very incremental. But if we back some of these things out, why is the core business of Tractor sort of underperforming now? We're talking about a wider range of outcomes, these outcomes basically widening out. And plus, can you square that away with some of this increased promo activity we heard about in Q4? Is that something contained to the period or something that we could see bleed into 2026 as well? Thank you.
David Bellinger: Hey, good morning. Thanks for the question. Maybe a bit bigger picture, but you mentioned some of these initiatives layering in for 2026, even maybe 40 basis points of comps from direct sales. It seems very incremental. But if we back some of these things out, why is the core business of Tractor sort of underperforming now? We're talking about a wider range of outcomes, these outcomes basically widening out. And plus, can you square that away with some of this increased promo activity we heard about in Q4?
Speaker #16: Even maybe 40 basis points of comps from direct sales seems incremental. But if we back some of these things out, why is the core business of Tractor sort of underperforming?
Speaker #16: Now we're talking about a wider range of outcomes. These outcomes are basically widening out. And can you square that away with this increased promo activity?
Speaker #16: We heard about in Q4 . Is that something contained to the period or something that we could see bleed into 2026 as well ?
Is that something contained to the period or something that we could see bleed into 2026 as well? Thank you.
Speaker #16: Thank you .
Speaker #2: Yeah . Hey , David , thanks so much for the question are , . you know , We very excited as 2026 , of the year we enter I think as always , as we commented , there's a wide range of outcomes .
Hal Lawton: Yeah. Hey, David. Thanks so much for the question. We are very excited as we enter the year of 2026. I think, as always, as we commented, there's a wide range of outcomes we think that are allowable for the year. I think we're starting in the right prudent mentality. As it relates to promos, we really haven't seen that carry over into 2026. Admittedly, there's been a lot of volatility in retail for these first five or six weeks. I think time will tell on that. But to date, we've not seen that carry over. We all, I would say, also already have, for the most part, our spring plans already laid out. We're planning for a more normalized environment on that as well, but certainly will be prepared to respond if necessary.
Hal Lawton: Yeah. Hey, David. Thanks so much for the question. We are very excited as we enter the year of 2026. I think, as always, as we commented, there's a wide range of outcomes we think that are allowable for the year. I think we're starting in the right prudent mentality. As it relates to promos, we really haven't seen that carry over into 2026. Admittedly, there's been a lot of volatility in retail for these first five or six weeks. I think time will tell on that. But to date, we've not seen that carry over. We all, I would say, also already have, for the most part, our spring plans already laid out.
Speaker #2: We think that are allowable for the year . And we're starting in the right prudent mentality as it relates to promos . We really haven't seen that carry over into 2026 .
Speaker #2: there's Admit been a lot of volatility . You know , in retail for these first 5 or 6 weeks . And so you know I think time will tell on that .
Speaker #2: But you know to date we've not seen that carry over . We all would say also already have most of our spring plans already laid out .
Speaker #2: And you know , we're planning for a more normalized , environment on that as well . But certainly will be prepared to respond if necessary .
We're planning for a more normalized environment on that as well, but certainly will be prepared to respond if necessary.
Speaker #2: But I just start out by just close by saying just we feel very optimistic about 2026 . We like the setup we have coming into 2026 .
Hal Lawton: But I'd just start out by just close by just saying we feel very optimistic about 2026. We like the setup we have coming into 2026. The first five or six weeks have been a nice start to the year. We're optimistic about the potential for tax refunds. We're optimistic about the potential for a strong spring after two tough springs. We've got a lot of strategic initiatives underway. Our team is engaged. Supply chain's never been better. Stores have never been operating better. We think we've got a great setup as we head into 2026 here. And we're looking forward to getting into the year and coming back and reporting on some strong actuals for you.
But I'd just start out by just close by just saying we feel very optimistic about 2026. We like the setup we have coming into 2026. The first five or six weeks have been a nice start to the year. We're optimistic about the potential for tax refunds. We're optimistic about the potential for a strong spring after two tough springs. We've got a lot of strategic initiatives underway. Our team is engaged. Supply chain's never been better. Stores have never been operating better. We think we've got a great setup as we head into 2026 here.
Speaker #2: The first 5 or 6 weeks have been a nice start to the year . We're optimistic about the potential for tax refunds . We're optimistic a strong spring after two tough springs .
Speaker #2: we've got a I think lot of initiatives strategic underway . Our team is engaged supply chain has never been better . Stores have operating never been better .
Speaker #2: We think we've got a great set up as we head into 2026 here and we're , looking forward to to get into the year and and coming back and reporting on some , some strong actuals for you .
And we're looking forward to getting into the year and coming back and reporting on some strong actuals for you.
Speaker #17: Alissa , we've hit the top of the maybe even gone a hour , minute past . So we'll go ahead and call it now and wrap the call up .
Speaker #17: I do want to thank everybody for joining us . And as a reminder , we'll look forward to speaking with you again during our Q1 earnings on Tuesday , April the 21st .
Operator: Alyssa, we've hit the top of the hour, maybe even gone a minute past. So we'll go ahead and call it now and wrap the call up. I do want to thank everybody for joining us. And as a reminder, we'll look forward to speaking with you again during our Q1 earnings on Tuesday, 21 April. As always, please don't hesitate to reach out with any questions. Thank you for your time and attention today.
Operator: Alyssa, we've hit the top of the hour, maybe even gone a minute past. So we'll go ahead and call it now and wrap the call up. I do want to thank everybody for joining us. And as a reminder, we'll look forward to speaking with you again during our Q1 earnings on Tuesday, 21 April. As always, please don't hesitate to reach out with any questions. Thank you for your time and attention today.
Speaker #17: As always , please don't hesitate out with any to reach questions . Thank you for your time and attention today .
Mary Winn Pilkington: This will conclude today's conference call. Thank you all for your participation. You may now disconnect your lines.
Mary Winn Pilkington: This will conclude today's conference call. Thank you all for your participation. You may now disconnect your lines.
