Tractor Supply (TSCO) 27 Apr 232023 Q1 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to Tractor Supply Company’s Conference Call to discuss First Quarter 2023 results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. We ask that all participants limit themselves to one question and return to the queue for additional questions.

Please be advised that reproduction of this call, in whole or in part, is not permitted without written authorization of Tractor Supply Company. this being reminder, a as call recorded. is And

Supply introduce for Senior ahead. today’s would for President now Mrs. host to like Tractor Relations Public Pilkington, I call, please our Mary Investor and Mary Company. Winn, of go Vice Winn

you, Thanks taking to morning, the everyone. us today. Good operator. time Thank for join

for After CFO; Estep, EVP up and the are: Lawton, questions. Hal the Seth On your remarks, our CEO; open Merchandising our earnings that and made Officer. our to note call today Kurt prepared we’ll release. Barton, presentation accompany today’s we our supplemental a Please Chief website available call have on slide

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

company believes no assurance Although, may from give its its any actual expectations, or correct, to are such forward-looking and expectations. can the of statements materially be in the results will it that prove reasonable, expectations differ reflected statements, forward-looking

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

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

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

call for after available follow-ups. We will be the

my over Now, to call it pleasure is Hal. to the turn

us joining you morning, today. Winn, everyone, and for you, and good Mary Thank thank

and Kurt For today's outlook Seth highlights review and updates the then of call, go greater in merchandising quarter our share first through some our will I will quarter. initiatives detail. will some and

thank customers. or we team ongoing our and year to the started, Tractor the operating No and commitment for like a Before the their there dependable for supplier matter Out each unfold, customers to I'd seasons of communities other our team environment get Here is for is how this that lifestyle. our be the the always the to Supply

as provide our XX resilient, demand-driven product to business categories retailer. For and needs-based, proven nearly a be as stable consistent, has lifestyle we years, very

the two The and quarter. and stores integration stores the by in drivers the growth non-comp let's X.X%, to by of first at $X.XX. double grew a Now, X.X% up acquisition. had X digits sales were Petsense in with and the diluted stores earnings sales We We new quarter. of stores of turn per Orscheln review primary And quarter of Orscheln opened the share of comparable nearly XX points schedule. We business for net the the ahead running is XXXX. Supply new Supply Tractor Tractor

XXX to and the results expectations. a our points, our to Our over delayed milder majority comp January. sales attribute the lesser were to just miss a below extent, We spring sales of start a basis

for data changes customer behavior. review closely their to continue We trends and in

in destination as average, value judicious seek We being are select a remain resilient, in believe by us our products. this usable customers was the to chain their spending our While categories edible are were discretionary buying for closer demand out and and offset as need. consumable, below with stronger they but

business expectations, our remains strong. categories, in seasonal were our and very our sales core Excluding with line our

X.X%, ticket by of transactions X.X%. in driven was offset growth sales by decline store comparable growth Our of a

strong were year-round performance and Importantly, month March, with categories. of each positive February improved in comp transaction quarter our the trends and our in

and strength categories drive are needs-based demand this demand driven The products, quarter. exhibited had we trips driven impressive CUE by and and animal livestock, performance. Across ongoing and These products our what in to stores. strong are our companion year-round was which transactions

experienced our CUE last in the customer continue as three share. material robust, strength we've market trends gain The years over we remains to

In see each we us in quarter. category. week, customers to each seeing month, number continue each of And the this sequential throughout gains substantial companion category we're animal, share shopping the increases for

us, for ticket. category only are Chick strong poultry to new our the double in driving livestock, up digits. we're up seeing the to also largest event seeing we growth both Days is be In with growth existing robust shaping customers category, customers, ever Not and the from trips

to aspect exciting and categories of offering customers like to homesteading, they're Days gardening. a the their customers feed organic unique gravitating to gateway of chicks. category the to premium for Supply use our Chick that is poultry poultry things new for new Tractor all related to One and resource great beyond as products for our a explore breeds is this

declines and discretionary ticket. ticket Big to results in which to impacted and power lesser The start degree, outdoor pullback by ongoing weighed driven trends a spring equipment, our on average were slow ticket seasonal categories. big

pressure tractors, most significant in was generators zero-turn and The trailers.

we very Overall, Our customers closer were to moment has ticket been a or what our support to reported season in history recent data. sales items similar need. long big are in trends these on seeing based purchasing March retail need. buying Current the the have of that trends consistently

app our now customers seamless apps than currently digital shopping a sales. is progress of of more mobile a the Our shopping XXX major the strategy top on iOS more in our experience. represents store. ONETractor offer This is in our XX% to the ranked recognition app The

metrics at improvements run keep strong Overall, and continue to XXXX, all-time into to year-over-year. with continue scores momentum our the customer quarter customer highs. last Our over experience

a Our store teams servicing job are our doing customers. tremendous

XX celebrated a over week members. Our last Neighbor's milestone significant just Club with million

enters points-based its in our strength Club our year, to the exceed As program third Neighbor's expectations. continues

and overall we than continue our retention to Our strong members our high-value a performance, faster comping see and growth at are customers. rate in

There importantly, going our Farm opportunity Orscheln the across is Supply the was excitement the members our integration very they as previously, team committed meaningful first much shopping a that Home recognize offering so that assortment, to had I conversions providing to Supply well. an is both enhanced with experience mentioned brand. and, loyalty product and Tractor elevated store we're recently one to of more visit Tractor digital region customers and and to As the offer. able our

and of schedule. distribution the opened distribution ramp in quarter, Navarre, The on we Ohio. ninth During largest is the center right our center

areas the network costs to stores. stores, the store levels on our and to capacity, we in while the balance DC, With new the TSC improving integration addition opportunity opening across DC of DC of transportation Orscheln capitalized realign the the servicing and new stores XX service to

position to Here. hear from capacity stores, At It is DC Tractor great which more network service as Life to those is Supply, Kurt. our to our have a this better allow and inventory for our our company about costs, us purpose you'll to and new better Out freight reduce serve

steadfast we anniversary year, our our our and remain we As preserve protect commitment in XXth way celebrate to this life. of

ago, ambitious we we other proud more made that XXXX. is Tear there our we've weeks progress of towards goals heading community sustainability, as highlighting stewardship I actions and be our to the net-zero towards our and am and Sheet, Two Stewardship our on progress done towards annual but work commitments. DE&I goals, achieving issued know fourth our

wetter quarter have our continues we've lot us. remains expectations, American turned first while as wrap still the remains ahead sales of we and a consumer challenged, Spring were The that be our year cooler To below to broadly customer but QX. we our of into up, believe resilient.

positive. transactions our business That way believe at trends, on and said, the and is the on needs-based this with nature year. of experience we half, we're by encouraged mid-single as comp the the Based business, continue quarter-to-date to to of half digit timing the spring our first demand-driven impacts the best look comps that of

in sales While with are we acknowledge recouped, spring lineup be we not our pleased that January summer. will the and for softer

company, numerous to control market gain to expenses. a effectively to we and As levers have levers numerous share continue

see significant for We opportunities earnings well. as growth continue and to growth

XXXX. With we of for the the remaining, fiscal our are reiterating year majority guidance

to I'd roles finance, veteran Seth merchandising. passion a served and an for and has the like lifestyle XXXX. share the this Before since on Tractor marketing, Tractor call over is Supply, e-commerce Seth held background has turn I Supply. to He Merchant and of Seth, merchandising at across team as having Chief some XX-year our

needs over sales by market growth and of promoted of better the record we category to to recently business. a will realignment our plans to continue of to sales last provide support our three Presidents a our completed Seth share. growing product merchandising the Presidents Senior Vice Given gain review our and years, two categories our Vice

insights. Seth Now, discuss I'll to further call turn to the over some

market share excited I'm some with insights our into merchandising and Hal. you, you to Thank categories share position.

customers. to committed as sales with we productivity our are relationships We deepen driving our

Logan, and Seasonal Nicole Softline like They and of I'd Randall congratulating to divisions each complement recent the and Supply. Hardline SVP their that promotions. on industry Animal by tenure retail and bring Dodds, significant Tractor at experience of start SVP divisions;

new enhanced These us divisions of insights them. operate category to It Overall, merchandising now each to strategic reporting is merchandising have we're to have have partnerships. structure to divisions. scale, new into roles deeper organizational each three at exciting and this allow organized six greater

have XX% hard a represents sales. animal. of start division, lines includes of both that more This with XXXX largest than XX% our business let's pet, and than Tractor companion and approximately Supply have our one consumables the animal, So Around pet. customers companion more the XX% across

about customers more the than US our XX average. on Also, weight dog pounds average

animals, on ongoing the support key these positive our category. With this humanization of structural tailwinds outlook companion

differentiated a to we are and everyday We assortment gain low for a an destination and with comprehensive at customers, pet price, share. continue

litter points growth in the treats both share growth, and dollar another lead in our gaining pet XX pound in and example, basis to food, For QX. market of continues

gaining even pressured sizes if the strong see of partners, us up customer perhaps value. Our model club we pack national private service to for consumer legendary more brands, share, and differentiated continue and sets business more

which continue the category almost our note, and portion lifestyle on of to consistently just This to solely equine, is represents farm XX% largest Of our we outperform for category and second sells. key livestock the consumables of under categories. and seed ranch, a Moving division, this is market.

In Cargill, continue and considered national and equine Producer's exclusive animals. many cattle. key With Pride, does fencing, along and Purina, to brands which, DuMOR with not we ways, other our words, across this more, in like poultry, categories strong of from be include for Crown Triple innovate brands containment business can large

animal XX% share. consistently Broadly, clear out Tractor every percentage with We are this leader share, continue in market of at and take X the space, outperforming of we five market by the approximately to points. bought bags feed is one Supply,

seasonal weighting hardware our up and category divisions. our truck lineup an Next in equal are at tool and our

spring get area and think This business seasonal to have our share excited we off running. an where are opportunities. we We substantial is

for destination our categories the Turn as assortment power outdoor and this feed like Mowers grass categories is fertilizers. core and Zero live Also, in leader division. a goods in are We like included

As of in we for Garden very just offering Fusion vast majority of the customers' and year excited the ready Where Center spring we have layout spring, more to weather stores. product operations. garden today, has are response our XXX than cooperated, about entering with expanded two and centers our

season, goods, offering for More including are we chemicals Out weather plants, vegetables garden season. and excited like broadly, We tailored live are of and differentiated the assortment spring turned initial seasonal and products Here. the this reads a for where to mulch, our Life has soils,

as tool and power serviced welders a truck hardware. and in like power accessories. lifestyle is includes and Historically, tools, division that trailers, truck, tools items play convenience in we fourth tools, Our have hardware

exclusive share and allowed our the have Fusion one for our being in sales stores. Dremel, and have made The power coupled lift gains part progress categories in our Makita, tool Fusion has Bosch over last Porter-Cable to three elevating we the it corresponding on tools, selection, additions in retail consistent power of investments the of of with highest has destination resulted significant years. As us layout,

Up and well Recreation division, sprayers our categories and is as next which as categories. such Ag as Outdoor our fencing includes sport outdoor

animals. their people their are in of the helping and maintain contain land We business

very outdoor for in the by the country have segment in test we market are have several We expanded excited for as the prospects mid-single this digits. Orscheln about share and and Home the growth Farm recreation, an And largest we outgrown stores. assortment

volume business average. the sales decor. apparel, which decor, ranked rapid exhibited is This farmhouse above since and final the pandemic, well Our has growth clothing includes footwear company trending on and segment

finding the our of with other Colombia, their along largest workwear lifestyle. of are our and one Carhartt, Wrangler like meets As their and customers brands retailers assortment needs

is at the years, known shopper was leaned market For opportunity responding. there the women's and category, And team we've a into in this Tractor workwear has Supply.

business apparel grew base, While still in relatively our of XX% Blue off and QX, exclusive growth Mountain small by our Ridgecut. a in women's led brands

best-in-class to leading grow for We national to both categories by growing brands. look continue and these high-margin will ways exclusive

with and continue Tractor and closing, resources, speed, the to to our be additional operate positioned and In to drive with agility and is capture new growth Supply alignment well efficiency sales market leader productivity.

of are midst you get most as Supply we the experiences And one see of I and the to the chance We innovation. all spring stores our exciting to in at product a get and are merchandising times hope season. the in Tractor exciting out

I'll turn Kurt. it over Now, to

Thank you, to comments our will about I and Seth, quarter outlook the everyone Hal's the for and on year. on hello call. the to add

results. Let's start quarter with our first

quarter, out comp for Regarding we soft January. sales of the the a cadence started with

years. month XX-plus would but expect February results. we to more winter to the continued start so with we normalized our not soft, warmest in the and anticipate was second did but pressure it strong, in that line be mild expectations, the was January year's Last

it XX%, over put were were response categories down outerwear To also was perspective, insulated categories and XX% our heating emergency in down nearly significantly. down

As result, for digits quarter. were seasonal our a winter the down double products

would last in Midwest majority of cooler wet which as normalized Our we the unfold, that abnormally the expectation shortfall of was was spring Northeast. the a than the where see moved saw normal, March, season the selling we really well more continued quarter, and were as much and through we winter weather as three weeks in

snowiest prior nationally, in with was wettest Correspondingly, expectations. years To below in were our the eight to the March products well in flat our coldest below-average years. context, it and year, temperatures seasonal four put XX historical in the years spring the

of benefited inflation. price quarter of from we place that the retail in as retail not Most have digits changes were put Sales in the high-single reflects the second price in lapped this of that XXXX in inflation yet. half

goods. key by majority and The all around average three declines offset revolved to clearance. ticket a pressure big softness in price This benefit winter First, ticket higher factors: average runs our which inflation the the seasonal, of seasonal growth ticket ticket, the of in includes was average on at higher

Second, faster to per poultry, then ticket. a average units extent, and transactions, in in items animal reduction typically add-on lesser companion consumable which in And transaction like have a lower particular third, and candy a dog growth treats impulser snacks. in and

the increase basis year. margin results. was was income year an very XX.X%, of committed a points last being pleased clean. our from markets. activity winter season were with remain everyday our as clearance, down in exit XX.X% the Gross increase these XX We we low-price Moving looked statement. modest We last Promotional in leader with to in line with to

for gross and Moderating benefit. domestic a net costs provided freight shipments margin import

CUE robust from lower impact Our our more costs mix price freight initiatives of growth cost and and inflation offset management the from the than categories. product

As XX.X% A a increased SG& from depreciation including amortization, percent of XX.X% sales, to and basis a expenses, ago. points year XXX

initiatives. for For growth anticipated strategic perspective, was about of this half our

higher addition included capital percent our Orscheln step-up our support in growth. impact of and the growth to net and attributable the increase spending primarily remaining distribution agenda, SG&A investments sales our The amortization the as reminder, center the deleverage, store was from of planned comparable a sales and moderate to depreciation given acquisition. the new As in a from

opportunities the up structure. quarter to with of mentioned, limited March, cost last leading providing line the three our we've expectations, was weeks to in As the trending adjust

payroll sales the product quarter utilizing and we the get Specifically, to ahead continue to hours fund weeks assembly season, to of for chose driving fully support spring to tasks. the the other two last on

the income first $X.XX, We with quarter. Diluted with our operating a Petsense EPS first was net Supply openings. opened by Tractor This Supply significant the essentially Tractor of three in in also modest stores and year's year, was flat in flat store represents stores new quarter, the prior XX a For income. last with decline quarter. the cadence improvement

delay the increase in This quarter, our the inflation, in-stock inventories XX% attributable billion and to from now first balance is of year average at season. about inventory last spring store. to representing increase Turning $X the Merchandise an end in primarily per sheet. a selling better the were position of

our pleased ratio of are the as we maintain balance quarter. around a winter exited With with continue of strong the end with We to season inventory of times. the first of cash flows, sheet, X.X annualized a healthy quality and the we how leverage

Our guidance for XXXX is unchanged.

We continue to $XX.X increase X.X%. year billion full project expect sales comparable billion store to to to of $XX X.X% and sales

sales growth pleased anticipate are half first categories, to manage second along quarter. pressure increased the the expect we we with on towards see the top products categories like of of maintenance. half through in repairs with DIY but and We As discretionary comp our for the some guidance year, CUE the

share the range strongest comp Let low further closer sales remainder the insights and prior year. have potential, while on the the year. for to expected guidance to end growth me be due QX We compares anticipate strong the outlook is to the QX the the of of QX to to

we is improve lap acquisition-related having potential, with move onetime Orscheln. Operating expected margin the as the highest year through of performance costs to from of the the principally QX

As up a half the begin freight of gross Ohio, year with center the in expected ramp benefit Novar, capture savings. second margin we our as reminder, is the distribution second to in quarter the to

SG&A gross points as will approximately offset in of negative be SG&A. by XX cost reflected in margin center the the distribution benefits drag The basis of on are

earnings have of We in a sales in scenarios. our variety confidence

business type confident are are business. in to before upside selling to of can and quarter. XXXX, the We've For consumer, a extended the we of third resiliency Regardless season. seen to bring the the ability the it as times, example, our of wetter our we the model can of manage and state at spring the this optimistic cadence of provide cautiously such cooler start an and seasonal

up see do make where scenario a operating leverage. further not January sales, we miss opportunities In for we

in Specifically, anticipate second we back easing accretion we chain are now should capacity drive half. which half. constraints, seeing an in efficiencies greater porcelains supply additional And the our of the for

We prior per are share our raising our $X.XX to expectation accretion of $X.XX to compared per share. assumption

full Over weather by continue to To to years Supply, time after earnings of year, of XX And to the sets not but the our we billion is net at Life sum been environment, best effectively line line it transitory. business billion, is per for Here strategic it diluted In Supply apart with has Tractor the investing up, the Out quarter, Tractor $XX.XX. toward $X.XX what $XX.XX time share ability and the way be to our to this income look guide in year. proven the can halves my $X.XX our bottom of and top by drivers. manage growth while

turn I back Hal. And call to with that, will the

have Thanks, Kurt. business has types Tractor business Throughout cycles. Supply XX-year has emerged and business successfully environments model resilient that have a navigated stronger over many been each history, all our proven we time. of

rural that's in secure to one more Here. live to population a suburban, third the property seek here space to see of living is and affordability markets. perhaps has an is ability a continue We increased desire ensured exurban the that at of out year to of stay community This found and of migration migration take view the that It rural our for of being. and country our a the the sense markets and ability time to price, This the with to growth trend cost reflects our marks more reasonable the positive advantage offer consecutive importantly, trends in lower positive America. rural piece Life markets, Out

has Out embraced The millennial Here. generation Life

their in resilient prioritize macroeconomic the and inflation been elevated have higher face rates, customers far thus and of growth, Our lifestyle passions. interest they and slower

balance opportunities, business. our living and growth in for go we remain year values team day. dedication significant to thanks our With confident out share market excited the the the My appreciation about are and every their of and mission to

for much. And you the now, so we'd like call to open up questions. Thank

begin question with Zaccone session. of Instructions] comes the from We line will Steven question-and-answer first now [Operator Citigroup. Our the

You may proceed.

to I my wanted Great. the about just Good the everyone. Thanks morning, question. of for year. context taking start thinking

to first quarter, of recover same-store So balance in about just these sales given can weaker-than-expected the the talk sales spring over the you the year? the slightly confidence

January bit consumers. like can't cautious And is sounded material up, on a sounds your you've then made It you but be how more seen just from full what for year? discretionary that from the

very So how impact elaborate an just on be could to much. that full much the Thanks year.

year. Thanks Good question. and Yes. our Hal, your joining or remain call. our confident morning, our Stephen. very in sales in guidance earnings for thanks We it's the guidance for for

stated weather. of last on about sales about off -- we've were XX% due XXX basis basis with by about of About that three the being January. As XX% spring/fall call, due in XXX we of points our to comp was below the our that weeks quarter to expectations the points of in the

when component, look smaller So at fullness is January the year. particularly it the of a much you over

As Spring Kurt we of the year the potentially path said, recovering to are a ways but sales that the number progress. not there as see only sales winter

XXXX, that As a there of growing, past particular, remain, into in similar in strong and season year, are summer remain continue spring, as in green midst those In growing the our weather of, XX-year years drought. you business year yards years into summer, one those farms cooler to months. other mentioned into we several that remains the and last you've remain profiles in pushed recall where we had has the the and years time kind have got if happen, cultivation

looks the promising. that So of lapping very

continues and on On would perform that last year last more that to we same year. QX consumer reiterate average. broadly, are QX the the this themes represents themes consumer we from sharing XX% here in we've this of our Discretionary, QX change year a of under which behavior seen same call. only business, sequential into not The were

the the QX about in it is that and same of That was as -- pace QX.

last low we've their as couple to transaction Our be But modest judicious of consumers units quarters. to in that's -- pressure, continue face single-digits continued for calling out the basket. been per that

in categories change are the where our up seeing their be some organic consumer spend in of, in we're shift we've strongest really poultry, continues not sequential to seen spend, otherwise, in feed. spending. consumer our kind segment There fee But any

seeing In be increased due to to dog out. food, economy called the that's continue we that actually customers Seth are strong, but

If food at haven't they buying customer from and all core you behavior. years base changed ago, at ago one two look our year their

behavior not ticket to last really, about was came really consumer January of quarter, of the Big wetter X lot an and down year. weeks year. the last continues from same. run than underperforming measurable So a And top were to the change snowier of which it small. in The cooler, last falloff but the we anticipated on spring

Great. I’ll for detail. the all leave the Thanks floor.

Yes. Thanks, Steven

question question. line the for with you your Truist. of Thank The from next comes Scot Ciccarelli

You proceed. may

I Good recall And before. of a need morning, may talking be how buying about guys. stating It’s But Scot function customers guys this memory. closer my you Ciccarelli. don't to

I you when give to And wrong buying the terms us But an closer about that, of your say, in expect if apologize. over months can that's how shift much six you need? last, So that behavioral outlook? you did idea if guys I'm of changed provided case, has that the initial

ticket COVID, ticket and when with, to you Seth ranch, obviously, if XXXX I'll bigger a there the buy like that, stimulus riding take mowers, you like you Hey, just out like the big if were that to improvement so Scott, when and we'd out and stimulus a say in lawn retail Kurt, history fact back over that go my – I XX-plus really items of things think like when combined to and in dominantly farm think had all context the historically, the XXXX, years them need. take they and you and I reference that, typically customers modest were the home was were

based. sorts were reversion trying than those kind to of of patterns more what we categories, of And kind is majority and XXXX otherwise be really intended are those really categories in of to The to or did more XXXX, historic needs nothing implied. vast signal that of purchases purchasing seeing we're that's we of of

Got it.

Okay.

to the historically pandemic-related prior what seen just have So changes? you of normalization

And be to implied. intended for otherwise Nothing the clarification. exactly. thanks Exactly,

Thank Got it. you.

JPMorgan. Thank you the Horvers comes for line of The next question. with your question Chris from

You may proceed.

Thanks and good morning.

as broke question bad the follow-up really and in year the May was last April spring is, historically pretty trend on April my and So And weather well. June.

So I'm for June assuming lot got and better a you. May

So Is and about high thinking the it current are mid-single compares? the is not think about just reflective compares? so the April wet, versus the How year. XQ you at digit the you despite cold potential -- for you of trend being talked end of the still harder the how necessarily range harder about the

Hey, out done is we low called comps nearly Chris, as with comp transactions. positive mid-single-digit April quarter-to-date, and single-digit we're

that's so into that pleased the continued April, cool relatively wet And weather with given we're performance.

it recollection a As spring from then very drought. year's weeks, spring hot. only about last good June that's went season. handful the I selling really strong The last year, earlier and was a a And not had of what was referencing

the about the back reiterated the and impact weeks our for If kind of half we that into And July. drought in first started eight saw of call, that back us well. talk as -- that you we half QX of recall, we to QX June six, of on then

on of an top Florida, in core a selling Texas, extended have that are July comp year, May a into we season optimistic weaker and June for and have and So, this solid areas can particularly us, we California. like August

and California really September. drought the and in Texas, extended under last got into to particular, mid-June we conditions extreme time by year were

extreme that those half for bode And us know, think quarter we will the of country. had about reading California the -- first as well and summertime such. we get the areas weather flooding have in As of in into We're the we this year. all first the areas those

looks of the a on side like follow-up freight decent is is clean. the as also sounds indication things line, margin your historically, inventory very way then a Got it. first gross on breaking their but And the and are like, margin it quarter some what year

the just line a potential on as the general if with could that is over plan? to upside gross lead come margin year line? And So, in there upward sales bias some operating margin

out, thanks that And for calling Yes. Chris.

our achieve number show see this are of particularly prepared his on if in side. you in guidance remarks, earnings as earnings, the both opportunities relates mentioned in we to to and Kurt integration there's cost. the And starting the Orscheln ways up, a a will, expense side sales it that to variety us and chain As supply for on year, our of

margin this start of remain the in player pricing, to price side, just incredibly moderation you and and upside being to in market scaled still On that take the bit in of a advantage look, rate when of see benefit our drive lead little there. is And the market. we're some a competitive margin and kind able of our gross gross

seen we've Additionally, is to and it it domestic freight QX. costs starting impact well. impact Also as in have down that's And come and trend had will to more down but significantly, starting through. some QX, in flow QX container

DC. to with online Orscheln. with scale new the freight new was terms couple or we freight with -- we're have XXX recently, I coming our think There that being leverage building obviously, bodes we particular to of, because drive in us that that mentioned depression, of recession big the and freight our we've one companies And of got routes costs, a to in down stores in plus were well for a able market

look rate our guidance. we really towards margin able of gives to feel So, one confidence And gross reinforce strong that performance. the you there's us Do we feel our year? as continued be like upside good to reasons the about that's

great finish spring. you. Thank this Have a

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

proceed. may You

the everyone. question. Hey quick last to good follow-up A morning

highest ever. gross margin, looks like it Your it's QX the

ever. is the just So, the then basis Hal can consumer, made about conceptual it XXX the best on And we talk remarks. is think in drivers, weather, of some Was of but in the points I spread seasonal not why movement, you Is the regarding that there that prepared certain judicious called markets? between out that pure a comment weather? anything the or the

to weeks Commonwealth is hit variation the your don't of was the Why quick The Kurt. the of with To reinforce rest I'll Hal the what question, one. a start you that just this you first. It's those. between Midwest, saying. Simeon, geographies. between like states, the take then second the -- Northeast if all both I compare geographies

states saw You where in did them. they more March very winter, did basically see And mild a in for disparity saw then than it's strong really they spring, had snowfall because no a January. they those

did geographies, mid-single-digit in gives confidence we to a again, or the the the in between trends which, low mid-single-digit negative those other business. just clear see very us positive the So disparity of

as gross areas you These Hal the the things give order planned in improvements. I'll upside the are gross And said, On these gross margin just question, we on primary for, of we're see and margin. are seeing drivers, what of all magnitude I'll in continued but that we margin. structural give

and was that the a CUE is the of is biggest by from driver Freight second, one the First was third benefit to management continues our would we impact potential mix which then have believe been benefit price that. going freight. That offset the from have was forward.

the it's pricing, and produce even to price. there. the It's to this more did the price managing our leveraging concessions. direct we Seth in of management, management points offset strong price CUE. On talk couple our the and our retail size the low a management, excellent it everyday negotiation promos, environment an pricing, than on job scale, than margin -- enough includes retail team And offset of the then just a cost really price more management just When

from retail the about was about between that Transportation half CUE, the price was So other management benefit. and half. pressure

luck. Good you. Thank

Thank the with you question. question comes for from Sigman The your line of next Barclays. Seth

may proceed. You

a question. for of wanted point. couple Good last on the the morning. up Thanks I follow taking to

I you which is by for think Orscheln, encouraging. $X.XX accretion So raised obviously the

were year guidance challenges. lot all given that changes was it. may underlying bulk message guidance? it does and of the You mis-modeling be sales Because did probably is full that to of ahead. QX, the what be seems you SG&A, the frame planned to then can QX while it we it you a be some appropriate the as the maybe sounds just maybe seem the like just But not in rest and be and tracking gross just January, of help margin from should the but able elevated, keep to recoup

anything within there could else sort that? point is you So of that to

speak moment. Hey, integration And about for Seth, morning. a just the Yeah. for good I'll Orscheln question. thanks,

they converting very team being so are received being importantly, Supply even by -- anticipated. well as it's First by customers received going well. is to integration team than it's really the and more it's the well also Most And members Orscheln I Tractor off, members.

over stores transitioning is doing team them the Secondly, cadencing job the a and fantastic Supply banners. to Tractor

ahead We and -- transitions. schedule done on we implementing point-of-sale transaction. Fusion We've got those on are from already. have several the we on remodel are almost them, a of that XX of We're are all converted

half that is structure how planned. that do expense to us optimize our And take had then a what allows we back the and plan bit to

specifically, there's elements so, that driving are And that. two

IT our is first The integration cost.

to we're is doing some what finding there integrating and and some previously team to job excellent have leverage need Our anticipated. spend IT we perspective, from not an an

the an or we of or save We're the end SSC can pull as the some three, is optimistic previously to planned the maybe a DC. We year. by cost And month dollars of from well second that the operating sale the forward perspective. now around we'll that two that and there and

just to the for in So on guidance in what going this is, is a of like I'd companies gross lot very it's how and in that are there's We're what pleased More -- broadly, to rate, go. and very, lot expense of today. well. on everyone say share progressing wanted of acquisition a seem just outlook is to very us reporting of others think I upside you you because with holding most of year left people spite weekly -- the Orscheln general, like articulated, some spirit cycle, see kind that the margin

very Thanks Understood. Okay. much.

The line question. your question from Brian for you Oppenheimer. next Nagel the of comes with Thank

proceed may You

taking for Thanks morning. my Good question. Hi.

with make dead sales tracking hearing would weather, early weather expect just QX. pick was no country Sorry are in correctly. for so, sales in like disruption, across QX, beating sounds to pick where -- there markets here. this But a a in seen regard here meaningfully. was to sure, want It sales I'm comp horse the there to I up up disruption weather track? you you've there But I clearly, consistent them with how mean

I'll the of when Kurt. evident Midwest me by we us our categories a where impacted just the give South, we not right the it variation look as is performance by area, is areas expectations variations -- they're that weather, in points. so continue that Yes. I'll areas that Far to line impacted merchandising, our few the that, below to was in also add this expectations. versus categories Brian, West, mention those the was saw the all expectations. also I'll and in Hey, we areas internally, at you weather to give In what North -- not are the with question, heard previous where Texas with by On in line

When market in those a negative industry it, you we've three industries, and farm the where there can outperformed are market of also weeks, at that we've external especially and is farm Supply competition. look at Tractor we we running the weeks ranch, information areas the seen then within look that, confirms in it's weeks in which And it like others. and the first where on lot ranch our last the market. and you those, not In at when weeks utilized few look measurements, see

points not a was QX, typical, pivot when. it's those of throughout and see if, -- whether a the able this any has and to to the matter poor, all the the seasonal each we manage of matter softness quarter, been rest of of be I Tractor it's as when does quarters. So data for that then mean, ideal, able spring really but but And from start. Supply it's It's -- look for we of

us a opportunity selling shaping those it's years extended like for of one point, season. house gives good to And very up much the where it

is this Brian, And Hal.

add mean, and nine actually we high the where and early weather, single-digit back to comps if were across weeks year, look to on of, was country, that. of, weather I on XX, kind March some weeks. at those you spring, comp starting kind tougher to eight, reasonably good go three had we last Just and from late

mentioned, the into three had weeks, those geographies from the the And up the it three kind through weeks, to Midwest. negative the that we and you Kurt as of, then Virginia Northeast last State way get was driven the all of by comps

of they And on year. and comping than was had worse top weather tough from than -- we had year, this they last weather it were

those and spring in good You said, know, and elsewhere, areas. you Texas areas look if we at Florida had in like Kurt businesses seasonal seasonal

to here then bounce we at said, we weeks. point in those single-digit three comp back the April as mid rate. just really, we So And as

helpful. And quick very follow-up. No, very, one that's just

the meteorologist, actually you led a seems had what asking going but spring for be a I'm an ever Supply? very again, as historically, to dynamic late at we've look the So you to winter, extended this, or be wet was necessarily better spring, as has not to early in that spring here, that Tractor

be to a it. be love predictor We'd good at weather and

XXXX. a XXXX, similar get -- XX out them. most had brought by at from weeks back pattern, in reason went we our similar three and up either the fact, year weather know, But are those transcripts reasonably you we pulled where kind like forecast the the and months of was you looked of and dates out. As then a you way, earnings

there for of one that's last much particular, up and a where sure and could almost talked of similar it say year. in extended both wetter, those And year we we years. brought call drought on had why cold, an enough we'll lead exactly we in this it. to top potentially earnings that's is And precedent happened season weather very And very selling what be XX-year into summer, a to QX, a about is the comping in

extended which we optimistic we're tougher I comps So easier of selling have from year. year, season would mean, an that can comps be top on this cautiously last --

it. Got you. it. I Thank appreciate

Yes. Thanks, Brian.

Goldman comes your the question from for question. The Sachs. next of McShane Kate with Thank you line

may proceed. You

Thanks year? than commentary with you're something remind that the acceleration if taking be to the We guide And in some of leadership Hi. what There with is are lift or XXXX? first share. maybe And expecting those highlighting changes you your I more and in market wanted planned, about for you our Was Good of more quarter? could originally it the new market seems lot question. wondered on a you market for categories, of a saw of this. morning. share making merchandising, share us assumption an you're for in in ask for to this

Kate, Kurt. hey, is this

talked gaining -- so share, in that, that as to market areas. and poultry, growth to share, in guidance, another Supply market X% about categories grabbing we're where we're been we GDP as And we X% X% of Seth see where reiterate other entered like share expectation certainly just has of historically And then year, market growing beyond animal, we companion assumption. in that. Tractor are our original X% or outside growing this Our was gaining

expect gain in this so as is at part look may that And consumer, be any be the is I'd of what to also challenges do. where year, we regards we to say, this a able to But great there opportunity.

in gain discretionary, like some market some where by a Just share. saw saw robust offset we softness,

market and upside of standard in our And see share gains some for to animal, business, others to companion compared exciting our that, we share. and year that's the think of if got of opportunity goods, is there that's I live things to this the model And years. the market some one resiliency softness in categories, next we've the is gain -- couple

going to right to animal well look cat market our Kurt's points very particularly again, are of business This add excited on side. Hey, Hey, our if businesses at companion to where Seth. grow in that. as or for think like our market on dog share pet couple and our now, share, the as and Kate, about we gains, point, we're see in we question. Thanks is a general, your to just to we continue

food, portfolio, is extremely entire pet like growing it call you if in strong. Our

often. our to gain us in to across much really current market we're is particularly shoppers lot purchasing, gaining And customer of a the seeing strategic they food, our As like categories strategy, earlier, customer our merchandising And portfolio. we which advantage strategy new more maintaining we're base, share. think those for continue previous base pet our things and Hal mentioned and they're were a coming portfolio in pet very

innovation and is Newness critical.

whether items are Our box to and sporting we And merchants planned. look mentioned earlier, are forage, categories. you in they're if continuing where be those to lead drive at comprehensive goods, other we that as that feed, relative continuing to poultry, like the across resets lifestyle, are also

based far, us, in ranch, by share away activity seeing leading database the we're that and gains. on are, we're down the today. seeing for the our industry leading and So, far that farm we pet We share response slowing in in anticipate customer and don't

you. Thank

The question. your you next question with of RX Thank for from Mushkin comes the Capital. line Scott

proceed. may You

question. little on merchandising the Hey, for A my management focused guys. bit taking team. Thanks

You're obviously beefing it up.

to you And think so that expand are? opportunities I if market? significant see those yes, you Do was decision? wondering, where what total And do the drove addressable opportunities

Hey, Scott, yes, on Seth, Absolutely today. thanks for questions those the question.

to we're like driving strategic can driving so to those towards with partnerships, driving Centers, categories, course we greater saw earlier, really that all few into Garden activities, to what the innovation, the towards really opportunity an things. maximize we we the and localization, into a our doing drive of really driving grow work our down type regionalization, Fusion, all over as for us, kind merchandising we rapidly scale, years, last continue our at us, said continue of double For

opportunities we're have reorganized addressable species, we if see a feed we areas So that look strategy, to of equine market. share core our category our we approach. and of really where We across our driving at division We livestock the management opportunities just portfolio We our see to many and mentioned pet. continue there.

shoppers management business over years we those of and the adjusting taking course items, have on last continue shopper to entering the make few regionalization We're the best-in-class are which applying managed insights, to shopper in localization, experience pet same category flow, the our we as way new sure the principles basically that new offering we've today.

to Sporting Home, some mentioned months. A strengths. our year-round. lot where like businesses going opportunity center did going we're well us we're QX. have are in very six those today be continue We in drive our we to in lean And categories piloting an and we for Orscheln in just think have I to of for things to those goods Farm core

on, agility, that today deeper is to scale putting operate place structure drive new to but have and to think continue I in us go and on continue allowing at we innovation. the and more partnerships can fast, we're that move

we're excited about this to life this, see programs under to some very So come new starting structure. and really

card the do more the relationship And and and is you from you the stronger see with frequent the data vendors getting helping shopper beneficial?

in our in only in broader in in a and serve. just which XX members advantage the for not our million Absolutely. but is we database retail farm strategic such categories ranch, Leveraging us,

go where in where deep We categories, significant to our and way we up with have after? how we localization, process. continue are say, we a use that we opportunities, into those we do are continuing hey, to end drive to partnering into that continue vendor are to regionalization, assortment to and planning dive continue what And our do need cohorts those base to

only know continue we're in we're their are So absolutely. marketing but where doing needs to a to a the merchandising It is we because from sure but we're drive is -- customer where they're Neighbor's going Club make to future. looking today, fundamental is the it in to driver everything everything perspective, is doing core not of what

guys. Thanks

next The question question. comes your with of Partners. for Steven from line you the Thank Guggenheim Forbes

You may proceed.

core season approach sales plus to and of the versus terms side revisit as remodels we in the Good Kurt. Seth Fusion wanted morning, I of the here. selling spring Hal, lot cost lift

One, whether question. as two-part can initiative? the improve able you've spend behind cost you us been net So these of and net scale of you the projects such remind to the projects,

has your that this for spend spring lift ROIC well? expect right, the two, overall sales to as And albeit expectation, season, selling you behind the the how generate changed then, early, or

so Yeah, and thanks I'll the of hey sake question. just Steven, quickly the three much time. in for things hit

the the year. focus and center on continues our initiatives our transformations strategic side projects, capital of lot area off, spend performance kind a primary of Fusion key garden that and First inside-the-store It's we're metrics of reduce. to transformation for both the our evaluating one this

now same rate in as Side incredibly the couple last Lot performance is years, second the the The on at both because of of of have continuing pleased scale perform we're with our our and which remodels we're they to are reaching thing significant inside Fusion company.

The very goods the with thing is, live pleased we third performance. are

for their strategically is was it's is at way and to now to happened And of daily we to big year. talk people that. for storms of about yards, the live beautify with a see kind refreshing centers. well-positioned are things weekly sales, this lot going always of can going December now “from think exactly one for -- a the garden and what be year November us we and coming out I the that low-cost in the there's XXX beginning you be the of plan of and reporting, sales goods space” our which It's

you. Thank

time we Operator, for have question. more

line Baird. comes question final Benedict The with Absolutely. of the from Peter

proceed. You may

Thanks guys. in. Hello, squeezing for

in price I just So I one quarter. first single-digit guess I'll inflation. curious, about Kurt, ask know high retail inflation the

as Are call changing gotten retail you're lower at chain all? areas And deflation to if that year, certain or at of, talked you're question. a I'm XQ a -- you're you've and is with level my that actually some hear, seeing, that business down. where it, curious from coming that's Thank coming then price you. all-in you and kind on half thoughts the back Your you're is some, the where there seeing not of pricing dealing yet. year-over-year, how something costs a about year-over-year coming costs that supply in at of areas That's costs a point actually in product the down, you're standpoint? the lot point let's

hit Yes. Peter, those. I'll

what our price all. inflation, put in for much QX, as I price plateau. steady retail in of like some. On the the Maybe on a outlook second see majority vast mentioned was And changed of seeing the year categories in will year. at pet inflation, of A we're place the hasn't retail half inflation some continue to bit was last a

we're into to moving our So low deflation. And cost single-digit QX QX. in then QX expectation QX the single-digit high maybe single-digit and lower significant seeing not getting slightly mid into is

business. is in The it be at disinflation see point, between right some in a that's this areas balance there. this But comp as And transactions ticket expectation, a And to some there great we're key being to deflation have what it. really we mentioned. Hal certain driver there's that thing overall, the year, really expected and good the transactions. of as unfolds, may our seeing So we expect is, now, year

the the taking Lastly, in I advantage there's heard business, Hal in I'd scale other in you our capacity down. what of either exciting, messaging. to efficiencies say is both our we parts and of or in SG&A, are expenses cost there's have of there heard use excess from and where is that coming ability this some you The cost, operating

So answer hopefully, question, lot that expectation. helps of the great a

ability to in margin operating XXXX. increased in really sales Our any scenario have

No. That's helpful.

this. transactions, on maybe business. just something role ago that encouraging years curious to I'm several in with talk mentioned if to know might Just up the that can a little seasonal Neighbor's guys see the would stuff. you I you follow it's not case them up be up brought despite bit Club have this playing soft that about the you've been and

of shopping your are those you're they members those more that expanding I lot underway members frequently, if are? How a mean, marketing there's initiatives and just front. how with on wallet

that's the a your periods how weakness? the of Neighbor's of and bit seasonal Club something you. maybe helping be on just behavior that members maintain might traffic during more Thank So little

been we our our an for credit in customers signing billion particularly and label quarter driving first $X credit that behavior, of Yes, Neighbor's last Club for customer reached enabling on our absolutely, our and business More integral We up has part private more are card. card. on time consumables. sales Peter. the of announced that

which You on drives credit particular. feed get kind of behavior a food purchases, repeat when in discount in X% the card use and you your

we units, the points food. to leader single XX% new share market As are share new we single that away going mean share I on quarter. are drive our in customer repeatedly market in counts. dog dog are largest even are food, week, we have matter for in what every on far a the thing Same you far customer metric counts And Seth Every food our we what talked pounds, dollar up. by count outgrowing and transactions. growth X dog category. the at, doesn't and those And feed about, away the It can look and

five of the Feed driving having kind ago now degree three, have complement pet And I years Animal four, positive the to of is of and mentioned scale in terms transactions the kind think some had has business the one for of in you -- we things scale from we've us. that's changing is food always to comp in

we it to even had the soft weather March, As we said, still have us side, allowed in where positive transactions. on comp seasonal

look anything you Thank you. Thank speaking to on Thank please remarks for and you us. to joining everyone to today. you, our around that you. We all our look I'm that Operator, quarter day, I I second speaking there's conclude forward Peter. will can call do, to in to forward so July. out reach if

conference XXXX quarter participation. your Company's That you discuss call concludes first to for today's Supply Tractor Thank results.

may You now lines. your disconnect