TRACTOR SUPPLY CO /DE/ Q4 FY2024 earnings call

• The team executed well in a tepid retail environment, making progress on the Life Out Here strategy and gaining market share.
• Achieved record financial results in fiscal 2024 with net sales growth, record EPS, and strong digital sales.
• Opened new stores, a distribution center in Arkansas, and completed Fusion remodels.
• Returned over $1 billion to shareholders for the fourth consecutive year, with 15 years of dividend growth.
• Successfully acquired Allivet and look to integrate it into the business.
• Strong team member attrition at record low, high customer account and retention levels, and high customer service scores.

In the fourth quarter, net sales grew 3.1%, with comparable store sales increasing 0.6% driven by strong comp transaction growth of 2.3%, and diluted EPS was $0.44. For the fiscal year, net sales reached nearly $14.9 billion, up 2.2% compared to 2023, with comp store sales up 0.2%. Diluted earnings per share were a record $2.04 on a split-adjusted basis. Digital business sales topped over $1.1 billion. The company opened 80 new Tractor Supply stores and 11 Petsense stores in 2024. Operating cash flow for the fiscal year was a record $1.4 billion.

• Forecasts net sales growth of 5% to 7% for fiscal 2025, with comp sales performance of 1% to 3%.
• Anticipates deflation to be relatively neutral by mid-2025 and stabilization in personal consumption and pet food categories.
• Sees operating margin in the range of 9.6% to 10%, diluted EPS $2.10 to $2.22, and share repurchases of $525 million to $600 million.
• Plans capital expenditures of $650 million to $725 million, with gross capital expenditures around $1 billion.
• Aims to open about 90 Tractor Supply stores and 10 Petsense stores in 2025.

• Uncertainties from the new presidential administration, particularly tariffs, which are beyond control and affect retail generally.

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

A: Good morning Simeon, and thanks for the question. We were pleased with our comp transaction growth in Q4. And the breadth was widespread across both categories and geographies. What I would say is where we had weather activity, we saw stronger comp transactions as one would imagine. But our comp transaction growth was strong, particularly as it relates to average ticket growth across all regions of the country and across our categories as well. I'll note the numerous call outs I made on customers, customer counts and customer activity and customer retention as well. But we were very pleased with the comp transaction growth and expect comp transactions to continue to be strong force in 2025. And really, as you know, comp transactions have been one, a key component of our growth over the last five years, around half of our total growth over the last five years has been driven by comp transactions. And I think it's a hallmark and a differentiator for us as it relates to the rest of retail. On the new store front, new stores continue to perform right in line with our expectations. New store openings are in that 4.2, 4.3 range on a first-year basis, very much in line with our expectations. The IRRs are performing in line, the operating profit margin rates are performing in line and that's if you look at our 2021, 2022, 2023 and 2024 classes across the Board, the 2021 far outperformed given the moment of time we were in, but 2022, 2023 and 2024 have all been very consistent. And, of course, that is the vast majority of the customers that shop our new stores are new and drive a number of incremental transactions. Of course, that wouldn't be in our comp transaction number that would be a non-comp. But very pleased with the transactions and new customer counts coming along with our new stores and their kind of their opening profile.

Q: Good morning, Hal, Kurt, Seth. Kurt, you mentioned localization initiatives and the Field & Stream partnership as well. So I was hoping maybe if you can walk us back to the Analyst Day where you explored the customer segmentation work that you guys executed upon. Any way to sort of reframe up the opportunity as you think about localization and sort of what drove the strategic partnership with Field & Stream. How do we sort of contextualize the product category opportunities, the potential lift in sales per square foot that you see in the back of localization? Just any sort of color for us that helps us think about what it means for comp transactions and new store productivity as well as the maturation curve of the stores themselves.

A: Hey, Steven, this is Seth. Thanks for the question. I would separate both of those kind of individually, and I'll spend a little bit on both. First and foremost, just kind of going back to the localization commentary. I would say it remains really consistent with what we said at ICD and what we said in prepared remarks. Relative to just knowing the amount of opportunity we have to adjust particularly our macro space floor planning when we go out to our Fusion and our new stores to just maximize that space productivity. And like we shared at ICD, anticipate that we'll continue to deliver likely an incremental low single digits lift as we go to implement those as we adjust, call it, 25% of the floor plans as we start to roll those out. We're always looking at ways that we can localize our assortments. And if we were to go back to 2019 and to where we are today, one of the things that we continue to see is that the wildlife and hunting categories for us in recreation have been among the fastest growing, and it's where a lot of our consumers are continuing to respond with us. So, we were looking for ways in which we could continue to drive some meaningful assortments, meaningful partnerships, specifically in that space because it's been very strong growth, but we know that we have a tremendous amount of growth opportunity in front of us. So, we're very excited about the Field & Stream partnership that we announced yesterday and Hal mentioned prepared remarks. It really will be a multiyear journey for us starting midyear this year, specifically tailored more towards that wildlife category. And then as we roll into late this year and then into next year, it will start to be expanded into like an exclusive line of apparel and other things that the brand really resonates with our shoppers. And then also, there's some very unique marketing opportunities where our collective brands can come together across all the channels. So, I do think the partnership is reflective of how we're looking at both localization and our category assortments in general, but very excited about both those opportunities. Thanks for the question.

Q: Hey. Thanks, guys. You mentioned the poultry category, and I'm wondering, one of my favorite topics with backyard chickens, if the rising egg prices here is starting to drive some acceleration in that category. And as we think about egg prices potentially continuing to go up this year, maybe reflect back on what you saw in 2023 when there also seem to be meaningful chicken demand. And what did you see in your results in terms of like customer acquisition and traffic.

A: Yes. This is Seth, Peter. Thanks for the question. Backyard poultry, Backyard Flock, like as you mentioned, it's one of your favorite topics you said, it's also one of ours, its core to our customers, as we mentioned. About one in five of our current shoppers participate in the hobby. It's well above the national average. We are very excited about this year's Chick Days. It's a chance for not only for our current shoppers as we continue to dive in with personalization to grow their flocks with all the unique guidance and expanded items that Hal talked about here at the end of the prepared remarks. But one thing that we also saw like back in 2023 was also a great entry point into the hobby when we saw egg prices continue to elevate at the same time. So, as we look at this year's event, we're very excited about our current customers continue to expand, the flock continue to engage with us, to be their primary destination, but also are excited about the potential opportunity to continue to engage new shoppers in the category which then that we see over time, it just continues to deepen that relationship with them, so more to come. Look forward to discussing the results of Chick Days as it continues to roll out over the next few weeks, and it will be in stores here shortly.