TSCO - Earnings call transcript Q1 2024 (2024)

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Good morning, ladies and gentlemen, and welcome to Tractor Supply Company's conference call to discuss first quarter 2024 results. [Operator Instructions]. 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.

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

Thank you, Elissa, taking the and good morning, to us everyone. join today. time Thanks for

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

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

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

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

the question. ask you people of limit who yourself in Q&A we session, respectfully X number that the to want to Given participate

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

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

to Hal. Now call I'll turn over the

the with solid off Winn, everyone, us Mary first Thank ongoing and and is a their for I XXXX you for our other each would line Supply in to you, to with quarter to our team today. start and expectations. joining Tractor thank morning, customers. commitment results good thank like

by the our for evidenced here. our supplier is of life high as for customers always team customer satisfaction there dependable As out scores, continuation record the

inflation, I review the want to at economy a remains quarter's continues business. Before in results, macroeconomic what a first and environment get the to a view, that level, our on In growing population and are mobility we're outsized impact into sticky of spending remains In Unemployment housing share its rural markets. a I of see market, of the consequence low take wages moment has our seeing our strong. U.S. strong, to we at continue slowed spite consumer in challenging said, as but steady growth clip. a

services spending, the the to to In nearly goods relates months As was of consumer to it spending X year, first than goods growth calendar be for services spending was less shift spending continues a consumer headwind on growth X%. consumer whereas X%, the from business. our of

PCE are of only progressive we above expectations result, enter This pre-COVID of their now line as average. our year. in share goods is as basis a mix XXX As with a the the points shift

home, has increases shelter, by remained inflation in food insurance. from expected, as sticky Also, outsized away and energy

the As consumer. lower-income to anxious inflation, a consumers continue particularly consequence, about be

to in In ticket income big on purchases the and lower their spend upper consumer, who first our over-indexed our is compared categories quarter, recreational needs. prioritizing income consumer

our income our stable in consumable, needs-based, performance categories, very and and edible proving again, difference Once very see our business is little durable, cohort. by to usable In we be consistent.

some low categories digits deflation. and are with disinflate to single running continue goods economy, our in moderate speaking, having Broadly generally

top inflationary in pressures disinflationary from to the our over to environment. current the the cycle we do X last most a we With not The months had an line. have transition challenging anticipated. XX Supply, deflationary lapped as successfully benefited benefits now Tractor cycle first due have that the we downward quarter compares our that additional is see substantially We playing out behind inflationary

In market, to we migration a continue housing trends of challenging to spite positive very markets. see our

at a perhaps X that's the migration our secure has migration the rural importantly, ensured moderated It piece that to of rural more and rural the of from markets, recent to in here population While stay the piece, rural time the trend reasonable have our XXXX. year growth found in the fourth in view community being. a is America This ability price marks property sensitive trends for population. gained consecutive is

with a that, and of with to up X.X% the grew business sales for quarter. review So comparable let's diluted X.X%, net store by share up per XX.X% now the earnings to sales $X.XX. first We turn

our as comparable you of in small in ticket decline the expectations quarter were shared we sales offset was Our and growth results store by average transaction X.X%. with we driven year. very much growth with a that by X.X% These started line of

Overall, our highly with program healthy Total reactivated Club and service. customer in new mid-single we count grew active, our growth remains customers digits engaged. Neighbor's customer and as base and customer invested in

continues Club represent our majority Neighbor's to sales. the of

quarter, the significantly our offering. Neighbor's enhanced During Club we

insights tier was with on our all offering we for changes our fourth to customer for have As based required rewards implemented and the customers The qualifications. enters us to appropriate program it goal points-based and spending to its lower receive were feedback. faster the made year, refresh

members these Our changes. Neighbor's responded to have Club positively

trips cohort. we're $X seeing on engagement the from spending increased collective our very from a has changes board. response for example, customers greater and rewards and the positive, and as initial down across at is For the $X level $XX been working redemption The customer designed we this driving new and is

affinity go through and for based loyalty tailored on continue million as addition, our should In to than we improve With to more Supply experiences and offers shopping Tractor XX we members, our interest Neighbor's members build continue relevancy incentives and their and more patterns. to Club customers' personalized forward.

area garnered the believe, all-time an strategically attention in at is customer continue scores. technology compensation, have invested our of has service This our to our to where tools elevate customer and Our helps customers, I training, help service. benefits, we and scores highs. strengthen This run

The was strength evident of robust growth in first our categories. and so had the missions our in much very portfolio seasonal of We shopping quarter. products

Our and edible with performed consumable, average. products usable in line our chain

market remain last performance of was to experienced robust the the Our quarter on as continue this our over [indiscernible] years top we customer strong growth gain as we've share. X trends

that were spring sales our discretionary were certainly preparedness comp below spring we our customers prepare gifts strength in growth to in in and ticket clothing mid-single and performed more Categories such hardware. strong as truck digits early big mindset as Our businesses the had growth other in and the and for categories. tool

we ownership grow our categories, seen food, In and moderates. continue growth In our food pet ] we've market moderate as the pet disinflates and pet to share. category livestock [

in now Our assortment pet-friendly we Pet in premium is differentiated, highly about includes and Wash a customers' so exclusive value this trip locations. from environment, brands super to shopping offer category a XXX which broad across private

format, Additionally, benefit cross pet with owners synergy of particular, shop livestock retail and convenience purchasing animal from our feed. in the the from one-stop lifestyle

from we producers Carina, pride, feed, livestock [indiscernible] offer brands with like brands national the along and and exclusive more. Cargill, animal Triple Crown In

events trends unique retail This cattle categories of results. our event like key bring and to innovate in categories Days. in track We is continue experience year, these spring across poultry and our with a Chick [indiscernible], on have organic like snack. to annual strong the we And

continue premium existing We and breads to customers out our continue building growth of feed from flock. Organic adding assortment category are growth. the and to see who and to their lead

in X/X our pets, customers poultry. chickens. Supply is Tractor X backyard customers and of poultry to the with nearly having consider ownership for destination them over-index nearly owners chicken Today, [indiscernible] the our X be

X our comps, tractors, share years we the feed, outdoor have categories. positive categories including and we market return vehicles in continue of to across big-ticket seasonal turn ticket big back, in on consistently categories, We broad-based we XX% X were equipment. recreational pleased take across livestock quarter. power pressure are strength share, experienced After a the and nearly see X market outperforming and about of Stepping to we bagged our

Our digital by up XX% estimated delivery of in mobile store. Nearly a update fulfilled conversion were increases they're orders app. growth sales feature improved with our as our excellent returned rate. the of team the increase through to in store have and or and picked and came an such double-digit our Almost in visits made these addition quarter The feature times, helped sales New rate. of Express conversion Checkout XX% our

realign this Arkansas. and as be better again, distribution network largest our the service improving while better for during opportunity tenth capacity Maumelle, center DC able stores. capacity in areas new distribution start-up the will cost. center on opening servicing and schedule costs the is is of DC we'll year, us to freight on across DC transportation our service Once all have It to June. our right allowing great balance our begin position to the network inventory The while to store This capitalize and shipping to reduce levels we're the our our to stores to

X the stem Our from miles. the in structural supply with last years reduction have chain investments us material gross over benefit provided margin

new Tractor Tractor Supply XX in Supply the and X by Petsense stores quarter. We opened stores

team more grower to ensure Based XXXX have center. year centers, our out leveraging positively that planning as growth across store be garden with to garden a centers the multiyear have we respond nearly a the seasons chain. customer of network broad see this As the across strong change will in to come I year quarter, We shifts and early support on the shared assortment the the time last the for front the driver. of season. of ever We're our should than the and expectation availability gate garden of XXX The spring, we has is differentiated read now our spring.

grounded commitment mission. meaningful our At our We Tear as issued life purpose values. and that Tractor Sheet believe finding deep fifth here in company here to annual of and serve support out Earlier rooted core and we're this our Life in our priorities Stewardship highlights mission out ways Supply, to a we our Stewards week, our to progress.

we at Supply, to generations. out Tractor highly are future life us committed of here all for preserving For

towards We share ambitious our progress goals. are our proud to

strategy. In line We're [indiscernible] The team summary, we're is expectations. on start in with trends our relatively making year. and our very to our with progress controllables are Customer the controlling our executing pleased well.

majority year that, guidance of our are call over with XXXX. to the Kurt. the I'll turn remaining, for the fiscal we reiterating With And

on to Thank you, Hal, the and call. everyone hello

quarter. Let me comments to Hal's building on the by about start

and first the Our line. performance line quarter on expectations when middle right the bottom top the our both was down compared to

the the cold. Regarding the a January started comp we as with month of strong features quarter, very brutal cadence spans for out of sales some

in January very across we best are to of deflation Average quarter. and geographic the of the in seeing in than February with overall, for warmer spring pleased at were unit We're of categories growth a in impact normal business cold unit retail pleased X% and was view share in soft, combined. product by we our how performed.All season a our outsized look underlying the And encouraged markets. February about an modest where performance in categories regions category relatively were by March While to deflation AUR. winter arrival turned positive band across tight expectations. line comped impacted had with has trends the with gains to performed limited had was our Where performance. the spring, the season and we way is weather weather this spite to We

price XX% of very execution continued Our were basis year. management and rate the transportation which ongoing cost pleased product We gross costs, XX to primarily lower margin strategy. these our were by of results, driven with disciplined increased low last everyday points

provide value our We were low-price strategically for committed the to maintaining We margin. in great leader customers our able gross being to while remain everyday our markets.

did XX SG&A rate, planned to gains SG&A level loss This depreciation modest The our investments, the sales of our basis and store offset quarter depreciation cost our expense XX.X%. center of from deleverage amortization to of fixed well was and sales first given as as increase of growth. a as partially distribution comparable leverage. the including primarily which fixed attributable growth percent cost in increased net leverage amortization productivity Our higher points included the

the percent of $X were of to first that was Excluding anticipated occur depreciation quarter and better a there million in now planned This second amortization, flat anticipate performance the as than SG&A was that in as entering sales. we expenses we approximately quarter. year had the we incurring essentially

EPS perspective, job did increased my margin to with XX.X% the the controlling diluted From expansion XX Net income increased $X.XX. operating controllables. basis Altogether, team increased a operating and of income points. great X.X% X%,

X.X approximately shares to repurchased shareholders. and of totaling million quarter, million the million, returning dividends paid $XXX.X During we quarterly capital cash $XXX.X

XXth our marking dividend X%, dividend. by growing of our our increased also consecutive year We

inventories decrease our X% freight were sheet. the to Merchandise of was billion inventory dollars. at to first balance the now the of store. modest representing Lower Turning about a average contributor $X.X per a inventory decrease costs quarter, end in in

our and [indiscernible], dollar in value Excluding comp inventory up freight was and modestly units.

lifestyle, pleased of the In with cash the the capital, maintain the leverage sheet we first we we flows season Xx. With for at healthy our as quality ratio commitment the supplier dependable are continue inventory pre-COVID. how to the winter of customers' quarter. of highest are our We a around exited levels annualized be since to and working in-stock end of our with improved balance strong a and

continued for offset ongoing guidance headwinds. story a anticipate As Hal year macro be XXXX. by reiterating We mentioned, our to gains of this share we are

to and project positive down $XX.X X% billion store to X.X%. continue range full in of expect sales sales the billion year to to comparable be We $XX.X of a

we of the line second first As quarter the with in see through year, our manage full expect outlook. sales year half we comp to

sales, assumes strength will outlook ticket that our in Given and in our trends seasonal the big continue. comp

modest are pressure Q planning for AUR on trends. unit positive with a We

will Our expectation discretionary remain pressure. is categories that select under

average. chain by the For the with gross in of runs quarter, the partially ticket, effective we first line benefits expansion offset mix continued margin efficiencies quarter the growth supply from second in and big cost which from expect impact chain below management,

planned our the cost including incremental by We our be opening anticipate new offset from expansion to deleverage center. for distribution the investments the of SG&A gross margin

earlier, with training the mentioned first $X and DC. that the approximately of quarter As shifting the second costs I opening there's had anticipated initially including million to in the we staffing associated quarter,

year. a down profit prior quarter second to As slightly be margin result, we to compared operating expect

costs year-over-year guidance margin starting factors February, begin tailwinds lower As and I to impact of there will shared quarter quarters. provided that few the when initially in in certain transportation a flatten we the second QX. continue are benefit results our anticipate in in operating We to to

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

$X.XX income of $X.XX To the year, sum up, diluted billion $X.XX for billion per guide and net it of full earnings we to continue share to $XX.XX. toward to

the are still of of us, expectations majority the these still With we ahead appropriate. year believe

continue is the our We believe to to the but way quarters, best year. that by of at look business not by the the halves

this I back is ability investing line while to In Tractor apart call some what the environment, growth [indiscernible] sets for turn drivers. effectively with our in will remarks. strategic our manage the and bottom And that, final to line Hal Supply top

that Supply over business Tractor model been many cycles. a Kurt. Thanks, business has proven has resilient

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

on on Here are delivering Life track expectations. our Out strategic and Our priorities

for responding opportunities and ready to fantastic and assortments spring ahead. from positively Toro, summer more. are for the new online, season. see Weber, we're growth and product to Customers continue YETI We our In store

Stewart and like We learn test Bauer. product have Eddie initiatives several store and and online, in Martha

Across companion plants, and adding like our Pet like Diet. with assortment across Real Hill's animal, Carina our new brands and Mesa Mix [indiscernible], Pro and to we're Science expanding brands Sports offerings Native

and for prepare their hobbies property. help simply especially garden on customers centers trees with their our just set are enjoying fruit to gardening, a focus Our vegetables and of

the prepared new Mother's the for Across plant month. our Day. hanging seasons, with and center. currently garden the roses offerings specific have we product are We're showcasing to of baskets

the then this Christmas second to goods Overall, soften and of live harvest fall decor. we for front As a way and into shift and of and new will store. year, the we great to with Halloween to us the is half move track our customers

we store, newness of the customers' and tremendous Across amount lifestyles. passions for a have our

continue also our at We stores. in invest to customer service

effectively team customers Tractor members customers, building will members uses provide stores One our alert to at in alerts traffic Tractor vision, we garden and to that time. our help Vision are efficiently ERP really a for team This particularly a cameras vision members apron through customer In open provide investments through store the ranch leader team to that capabilities another for our better addition team our staff store is up their to and and retail. make up this is farm centers of [indiscernible] categories monitor separate to dwell incredibly law to scenario registers, our Tractor mowers. member member leveraging to serve AI store. the team outdoor computer and where deploy leveraging are service also data when and in technology competition in beneficial and needs our like which is that from Vision our riding We're our us come the types to another us front register. our allows of These our

exciting time we'd and delivering their and Tractor now It's day. thanks values for dedication team call to like at Supply. the questions. mission the for up go every out appreciation our to open My an to And

us I at If a point you what transactions a ticket ticket, looking talk Obviously, the the you're sales recall, big to products. from nice over Can wanted price certain from you talk to that's about we've improvement. try when difference size. seen. big I about separate between change for high

building, lawn part from seeing of as comps positive? Or you per basket specific So you're benefit mowers. transaction spring those in seen the go categories you actually it is writing mentioned the more Have activity? high-ticket units more

of provide then some Seth, thanks highlight big-ticket examples trends very in with in performance We of those. the were our pleased and context the question. each X I'll for QX.

those And log nice some had along weather we nice for I'll X that, a consequence as month lift then often a was in of the with the where in over spring in cold March, the we is throwers make we through the in .But outdoor lawn January, I'll weeks. prepared of is big ticket the to And strong ramp And had snow mowers, ticket the couple come that remarks we your start like positive saw price first of sales categories things other power, riding weeks. the we do, country. nice comps highlight we those big big highlight comment point. where whether saw ticket occur, see in that use particularly that's that weeks point, go as in The did cutoff that splitters. last categories like or to we those in $XXX

As we consumers over higher-income highlighted penetration remarks, those in we an versus consumers. of in the lower income prepared purchases saw

talked we towards buying As consumers. a kind need lower-income about, the just more of for bit

The last the big thing for March I'll sales add in QX. trend that on into is we saw ticket has spring that continued

big on also is ticket way. and can in maybe Hal put this question My I it

XXXX, relative at assess I whether and happening turn that's If a we're you versus look it to think seasonal. there's bottoming to like and a trying

about pretty the you like then these ticket that the of quarters, compare turn. we half continuing there's is plan a sound been maybe ticket I it about think versus always for? into strength the It the about and has and it to anything But may looking think informs hard the what baseline like that it it's static -- across to maybe you the sounds sounds normal and big it, trends but But if around year. if didn't you that perspective, XXXX there volume second anything be cadence big cadence doesn't understand your that not. comments March like at XXXX granted or

previous a reiterate have up I tee just the the comments couple that discussion. of I'll to question, Simeon. the on

ticket big-ticket dollars into continued QX sales. and nice it our to as relates comps exited we we're absolute we with trends as saw ticket big on very those and spring, So and ramp in big have QX, pleased spring

that recall, multiyear last look big if levels. that, at we year, on to ticket XXXX we As our commented a -- categories back you were history

of trend. the articulate kind be would we're consistent growth -- is would that I of on So go now top back a XXXX growth normal to that seeing and

just called in feel we levels. whether stable very drought .The heat is top numerous that talked all of and or that's add like that years, growth weather week, returned is the the the our times, out and growth, had executive much precipitation healthy and compounding about of our X last key we the across the the whole it's had, number a So I'll the and kind country right thing. occurred Midwest and we back a of markets XXXX came on conditions of we've given final green the country grass And the in now. the conditions cooler Texas, nice all thing across same walks kind last from we've we

green the growing are temperatures You've grass, cool. really staying and got and it's well

in for the big this ticket as continuing that as with So for But for and the activity, conditions healthy conditions well are well of right very year. and QX, XXXX it we're us. ticket are pleased the QX exit top big into sales on strong pace favorable

morning. Seth, good

the important X most from it top most is us difficult that As away relates to comping relates probably the on quarters to inflation. to take point lapped inflation, of our as it we've

our lapping As last substantial XXXX. QX we XXXX. end inflation of we're we QX in call, then lapping from at were QX year And the remarked of inflation XX% from of

issues. have as lapping ahead, we So look we significantly less

the by And as the basically it more mid-QX, by we feed, to to all. we to in things like time we relates towards QX, get And of end get we really to -- normalized start in a way, we're the get animal environment. it back particular, lapped as

we we we're get we disinflation good really the in the outlook. on getting expectations bottom of So our at back normal to year. I as to of expectations, the close expectations, hitting different margin good end look as cost anything towards towards saw of not kind that the that We're pricing forward seeing year a and starting feel beginning the more be to

year we mentioned, middle vendor been That's to we've lot increases we've cost partners back a last pull on As worked successful. of of closely the our with seen.

rate our You in margin gross see results. that

time, moderated on At same the we've prices. we're appropriate

monitor the that Our we've multi, very kind and did kind trends of kind than into retail of year. never sharper been in we and goods see cost pricing shipping QX. closely, anything has We complete got that that, multiyear we price, We industry. last flat QX of And on been coming of just in horizon our the outlook. never in on don't sharper would negotiations. change basically all container coming of our are to Those had

future not -- the we -- cost think at to type that increases fuel this a had in of there's start oil there. all. I market So fuel in -- significant certainly see there amount given don't don't freight impact kind come first at And been as and cost there's point And area prices reflect type of we see overcapacity up the the to the well. market, that to of freight that the headwind to status

stable, outlook change call last call. our real on to So versus or pretty this our no either

Yes. And Kurt. this Seth, is

tie our to guidance. Just back that to

current play QX, year, environment an the QX we'll today, may it point. have playing or looks saw half in similar neutral, planning with XXXX, as if inflation, see line XXXX would I after for as us on As have still were plus in standpoint. really quarters we're a we last relatively some how pretty we those more said of inflation guidance. X that minus to lap the to in for But and impact you back QX. we expect our know from the starting right could much we entered sort an year And are but And of out that neutral put expectation then deflation,

been where Yes. the we've been we have with spring. been think conditions Chris, and right, sun very out pleased has

big Our Goods strong, well. Live are sales are ticket selling our

like and the performing, Our sun across conditions other categories in like first strength Northeast the there quarter, [indiscernible], are were half more Southeast of seeing decent right back first into the Garden -- out a the where Texas in the that's Centers the throughout cloudiness to over the the is fertilizer as weeks in the board couple categories quarter. grilling, -- real and stronger, of of last [indiscernible] are sun is conditions when we're second kind was continue bit precipitation the and quarter. bid of and the through the and into Midwest And [indiscernible] of really

pleased we've way. in And very really QX of with fair QX similar spring But we optimistic middle just we see Nashville as performance our headed the here. in QX, feel But a very turn spring and beautiful down always today. right very about the They southern to markets. into

quarter And in streak But it's it's call very as the for We a queue. with to we us that expect with start. QX the similar very as to quarter be very similar pleased to optimistic bottom otherwise, of relates QX. the disinflation Kurt think and we're it spring said, had on QX. around, X our to middle, kind I And notable

as I least which program, expectations. here per a million upside little in bit, think to our members you is sort noted the the at surprised of XX

that those to maybe retention changes the And sort members that maybe you expand of of about program how size nonmembers sort what if made could true is wondering thinking acquisition, today? Is opportunity of coming you're or sales from for Club changed that you into in trends non-Neighbor's there any was I members on to the anything of or program. evolving time? So notable the XX% converting terms way up the membership are repeat over in

key We're part in finding clearly, very area it's our how using a of making an in to retention for us. in driver for customers Club pleased with the we a it business. our engaging become platform. behavior advantage integral continued our progress it certainly it's value and are of it, And driver and and Neighbor's competitive key go we're And and market

we the in with to the I number And the that new was Club Neighbor's customer that key in customers a were very growth. that quarter. to called customer quarter, are had This out positive counts pleased platform. we We're new quarter. of Neighbor's growth customers program driver pleased Club new a have the we to added

our to dollar call program adjustments out $X. I'll increments terms $X be as points, your The redeemed allow second to thing for to in membership to both and we a point, made of lower

structure We a opening also and or people get to on tier calls goal them that modified about the engaged our to allow best of dollars last bit tier was been X years, we And plus performance more that earn as seen drive has sooner. we've the in behavior more to talked entire over that to X these our the preferred tier.

the of Club pleased. horizon the regalvanized that a Second will we wanted significant help tier. grow and had our we're in we to where reenergize that a to we've group. basic very response Neighbor's made, And And group, really changes us was best things to our on performance that number program. And that been got continue saw preferred tier we

of we keeps tested end share customers incremental also allow but already us excited the that quarter, details we've another improvement right in from on personalization quarter that to we out more feedback that's the we're the the of us year, for the to those back next of gotten data or going And we're but beginning we'll about going -- an called with. We'll to customer capabilities process market-leading customers be we to We've implementing personalization time value, the say that's end And rolling just our frame. of third the allow provide and -- embrace the in As targeting great a program that's this and July to call, I'd significantly that's of back that year. us capabilities in set got have, level, lot improve there. the to take of job around out allow that half that, which time our second do a Heroes X our beginning to that's next on excellent towards that. job. our about implementation platform a them just and going the at the we've

So got a in [indiscernible] that a in Club great being of horizon. Neighbor's then this I going competitive And said, new features And quarter, are number we've advantage new the performance to keep launched that. us. on the for distinct is driving things as already part of

on ask margin. to wanted I gross

to given of talk because second some So you it terms the start of expansion. similar guidance the the that be tougher should Can half quarter year comparisons. face the for in back through you just

Just talk through half? in back some of the expectations the

year, are margin a similar I it The is Yes, has very by in mentioned my Kurt. Steven, bit some this a but drivers difference throughout gross as in of the yet, quarter. remarks, of impact

And reduce centers lanes higher to by and the in we Novara, the and the optimize up center, in able miles. are improvements throughout in stem the sustainable our chain, happened driving margin with transitory finding structural driver the those biggest tenth year, costs, miles, the be And freight. will distribution ocean we'll DC also gross stem better our our our coming freight, of we that related, rate supply last Ohio both reoptimize be are as even in lowest open distribution rates, down opportunity freight, new particularly year. and where biggest the transportation, it's more or the the So where transportation off our is and growth but

that rate-related the those biggest heavily to lap benefits. We'll of QX driver. be So the and some will in start in QX, --

actually so aspect that that even began to begin that towards And the But but then to key on our the merchants on management of of and modestly will that, able categories, on moderate started on cost share. feel competition, we're aspect. strategic our we that we're we to down that is our helping our even regardless And AUR best confident partner bringing that deflation what to rate. that very that of some that's of I QX. that the value been our that's cost. drivers, our really, pressure some is prices mentioned categories some best in in the other it benefit there's better disciplined of a gross to and really creating And key the approach very see last market So offer And products. gain AUR year, what's really our margin and we're in together vendors drive the really

And management center. transportation, the So half, begin then that the will item the the drivers supply distribution will second from be in year, the will contribute. cost for benefits lower new and half chain of third cost back the

the half As highest it's first year, said But main less to benefit will but second side half one, that's the may lower start the the margin in that the the on things. been we've a cycle the second we transportation X as growth benefit in beginning half. transportation a gross the be really to it. slightly of just are throughout costs why

been late? for share quarter price steps seems Can of surprised market the general taking you this give been has how as us been the more program. to food the quarters, has And Tractor a [indiscernible] trends? has like performing softness how it's Have couple especially these there's you whether last it loyalty pet as in sense that category Supply's the aggressive of company investments, compared been to

indication an the trends. that lot quarter? words about us see fairway acceleration understand to happening then to of quarter-to-date, an quarter-to-date what's down explicit of been order the can you commentary so your And give been get there's you finally, have a second if Can to here parsing from we in on of

Pet. on first comment I'll Michael,

And I has market. broader us. X market First well on It's macro slowdown this off, been just say X with for growth source of really incredibly think I'll It's retail by the the year slowdown been that documented, driven being kind that it's drivers. that -- that in for the in industry and step long-term outperformed pet back a attractive of decades. an

the increases moderation right? been the is the That's historically over X every year, is in last And years, year. pet first . it's -- basically, pricing, that able the that ownership. X an given flat industry X in in have that The increase of to second pricing or is occurred price points price substantial for category kind claw that's of category stagnant

just the this So you've in got some year. for category moderation

that We have an in distinct value category. incredibly proposition

includes, Our pets. think, value our of have feed. with and majority both. customers XX% proposition The I importantly, vast the purchases co-mingling of has animals animal

pet pet both we et nearly with which same We environment our washes, our complement of pet time. that's advantage with pet with that And the having over obviously, see So store. a and XXX animal pets able kind clinics, shop washes, in way, just animals service pet-friendly portfolio at for true in to they by customer appreciate stores XX,XXX the being now food key their week a cetera.

distinct we value have all international had range So of -- We We have brands, a cover of publicly proposition. the we very private brands. but brands, leading assortments. X very also the available label kind

further incredible this on said, competitive So well given want absolutely particular as in growth market I taking that's and are albeit share. growth we the a to the share fully to rate in that a of I capture that really think And because of in at we're we expect PET category, are I look various up X moderation -- continue in still for overall and lower category, there, distinct dynamics the doing we driver going category, a taking value only still to be holds and proposition but long-term reinforce, and in X growth. that continue that will as us category that things share and reinvest our absolutely but to that to are we forward, lean in

the us. words quarter need QX, be quarter. expect acceleration another don't As to for to it the performance it meaningful your relates that down We to we said, deliver to use as for I fairway just straight

One animal of last highlighted in particularly the the is quarter already that of material things disinflation, real I feeds.

in month be flat So be look have in into comp ahead, behind anything, look some takes and us consideration. it if there think our April to And then great and if that comp quarterly dropped mid-single-digit we that you the month would last as I year, modest of May upside we outlook could of comps the basically had June. a to at off and our

recall last immediately can you year, the forest had and We all fires. Canadian it June hot went

right outlook get improvement, not count opportunity but for it's month. the on Our conditions an that does should performance we that

that. on [indiscernible]

right our call, the had So drive so we've centers encourage play sorting centers chance garden would garden a much our at in and garden gotten centers, We've garden better the the all customer into got month, optimize centers, are of [indiscernible] visit to putting our of hadn't center service. Tractor X improve which at everyone staffing our call, go if you knockout technology year on to software garden as the this roads I on stores now. things spring mentioned Vision do the to our We're like to so. deploying our

these produce for there. we're -- more doing a gives for with in things down. just bought to where across night X are execute up -- over us, and our been now Our country sorts really we're network product of live those XXX,XXX can results those our this the It we're packaging of .The real we things around like good And results blew stores have that many broadly brought us. in grower ideal, is even areas We kind seeing lined in conditions in the for bulbs for Easter year year, seeing in goods of in now tailored sales ways. that team us Easter first those any confidence even we and for time, out.

And our center so performance. live with garden very pleased our and goods

the goods to addition we're which the was for. piece, of live half about lift looking In that

assortment this at year, what also, versus in gotten goes what much have outside of this like all there inside, see goes better out year. garden centers our We you'll our past

our this and vegetables cross-merchandise You'll fruit soils year. besides see organic closely,

side our in drive-through to lots be up load lined able and there. [indiscernible] up soil see facilitate to You'll

back really blowing year got -- things much destination out real see a really we us half Halloween this look then that this our garden as year. harvest prime harvest kind harvest and building year, with we centers. product, product you'll have expansive So this programs those And like the of in and more a things [indiscernible], towards

similarly, then we've And you'll see wonderland like really not yet life year to Christmas. brought this for done winter

that the lining our Easter center plants our shipped that job excellent through also performance is plans garden in about forward to functions, on the have, first doing we all we look period, the as spring time really across It we team we So current an that excited but us -- example, ran our DC. DCs. like to was up program, an really as the

of So execution there. a a continued lot and of lot learnings

Yes.

at expectations, suboptimal centers have a the because better operated those is X were again, the strong high in So of to as you year, as performing said much garden we'll we're we our will expectations. not QX, last year, the that year X, X, X, noted weeks all into our exit certainly that spring we center, expectations garden for the weeks of conditions sense with another we X -- But last this at year, it over go. had recall, spring but of that performing our we

would come to kind at But say is the short they're that. more to expectations on of season date. I our answer, performing think I So

believe curious, Just [indiscernible] the second the in base the earning I comp stores quarter. are

balance standpoint we in look Seth that's of think little talk think merchandising of a would most kind stores or related the ago unrelated. little year? need Just the about excited curious about? the -- what of some should he's as and newness cycling that anything from and if more curious And store about how the maybe out to a that innovation a those we over that? I maybe was year to that we Any about are

line Orscheln Yes, I'll it hand part with Peter, Seth to of question your back is with to start the our first part end right then in it. expectation. and of this over is running Kurt. address your

outside we you The lot to of Orscheln. first in second quarter, of then And liquidation the for instance, quarter, is as of liquidation. a a begin transition, lapping that still get lot in

converted the having sale, in of the point somewhat Supply Tractor of Tractor we line all time with inventory frame of System. as it's Supply in into our So the

So we normal in the of begin frame, year. the half particularly to time lap a more back

opportunity our with a Again, Midwest made proposition The said for Orscheln such that. stores pleased are of us, great value we running lot with well line Orscheln. out acquisition, a We're performance. in and we the as it's in when playing

stores the over put we've some to allow learning the in of we've the [indiscernible] able process. Some the fusion best do put done, streamlined, there that Tractor the many months, in that experience stores lot last ones for that the were there. square larger things is line and of Tractor Supply, the [indiscernible] make in efficient shopping engaging Supply with fits The optimized and of team rebrand, to the us got differently. that been it rightsize the bulk we've and sized Tractor, But those. XX a XX of sure period very We've test been foot. got the Tractor right We've some

merchandising So with of able across bit pleased that. can side with Seth And the aspects Orscheln. little the board, very some on about be a the to other talk

Thanks, Peter, for the question.

speak start the I'd call even their that activity, quarter's more So about with back kind are the a of look how to all even last I half, since kind normal of to chains outside our broadly go and with really levels. we seen we've bit would base, of the supplier out talked if of reset and back partnership the back pandemic supply of back Orscheln this to being just say, the newness, stores our innovation most -- kind in little

we're that highlight would I really that things of couple A about. excited

life now and I about responding, the in We [ that right riders. our see would talked strength Tractor big in talked built performing well. I really Havok is we you again, lineup out like product a ago exclusive about ] minute for and we tell will just very a have, say, Hal Toro innovation the that here. First, ticket that

don't brands about think with of have just assortment going. a strong. that how pleased garden things itself. speak our start Very that's comprehensive that just Like we we groundwork, and Weber. when soils We we and about launched that exclusive very launched Some much been

the strong the and that And [indiscernible] have those that we'll getting new Home, that business. just really hunting first course going we food, of will the some we that activities then see in lean and some throughout the our here things be localization of brick-and-mortar then and of centers back like really getting the about we from kind perspective midyear, Tractor some regional the just believe some go launching across but [indiscernible]. drive be Rio where if just kind And launch [indiscernible] EconoClassics, a the stores and of think out customer, has in launch that categories which into we consumer outdoor Supply to you'll brand, pet brick-and-mortar of approach. towards will coming to in U.S. the been Mesa, rec, be really can half, Farm the new the perspective that even I and programs you the would activity year there & us We we're learnings themselves of mentioned new take some in first those like [indiscernible] the then targeted all remarks, in in to newness say, it's garden prepared a but digital pet,

years. just reiterate lot the had we've over of again, kind some and past new newness newness this most from innovation, XXXX of So lot of a few

by the results, Nice way.

kind Housing quite So I broader wanted of ask remains sluggish. to economy. around the just

for see with be where broader rural think economy. I in versus do the more So you would broader operate discussion backdrop economies you general into guess economic U.S. that the rural helpful do the We've outperforming? housing is well. the been guys how in U.S.? you maybe performing Or as line

think I highest very in is I store question. is base well level across performance Peter, right highest thanks our by rural right doing rural -- We now. rural the our now. for America America very see the start

going of If national you kind to And rural out look at migration you that America. the -- coming in. than migration you more of migration see out statistics, cities net urban see

for a there's but variety think us. that, drivers trend I of that benefits

context we acknowledged quarter, and us to of X PCE of economic back beginning look economic conditions to in spend became a acknowledge earnings to trends goods that last as us. as neutral kind that long-term at [indiscernible] Those most disinflation. transition for were back, kind we X our notion of playing are on would algorithm more the getting us we -- Stepping out importantly, forward of as our conditions services be we the the call for the the from expected and impacting year. XXXX with and Most the

away As basis points already goods to levels. that XXX at that XXX journey. from pre-Covid comment, basis almost we're points We've services being traveled its on

the vast would you way but obviously the will disinflation, QX journey, that will So out our be say of were that. on unclear stop, along where majority that it we've bottom on called

that And near that about so good and behind we us. feel that's really as well

the light our business, so And tunnel. you at are X of affecting that end the conditions the can major see

been talking market out any anywhere know the degree it XXXX and for of some to for the we -- we are us. [ a As on notion ] don't conversation housing primary our Peter, as rates, business. that more that housing the see for results kind relates housing there's to But very longer around right now how obviously, sensitive. we impacting of the delay then impact the might Thanks, about broadly, quarter, XXXX may those And results in on occur. see longer And have for housing is don't impacts business near question. I very higher it as that our premature called last driver and really hire

look right, of please And that talking you the you forward calls. I'm we're and don't All to to at anything, up call available our will hesitate our quarter. around if second and today. to we reach end for out, need wrap everyone,

So you. thank

concludes conference Thank call. for participation. today's your This you

now may You your disconnect lines.