The paragraph describes the start of Tractor Supply Company's conference call about their Fourth Quarter and Fiscal Year 2024 results. The call is in a listen-only mode, with a question-and-answer session to follow. Mary Winn Pilkington, the Senior VP of Investor and Public Relations, is hosting the call, with CEO Hal Lawton and CFO Kurt Barton presenting remarks before the Q&A. A supplemental slide presentation is available online. The call may contain forward-looking statements subject to risks and uncertainties.

The paragraph is from a company call led by Hal Lawton of Tractor Supply. It states that while the company believes its forward-looking statements are reasonable, there is no guarantee they will prove accurate, as actual results may differ due to various risk factors. The company does not commit to updating the information after the call. The paragraph also mentions gratitude toward first responders for their efforts during recent disasters and acknowledges Tractor Supply's support for affected communities. Hal Lawton expresses appreciation for the team's accomplishments in 2024 as highlighted in an opening video. The Q&A session follows, with a request for participants to ask one question each.

Over the past year, while navigating a challenging retail environment, the company executed its strategy effectively, resulting in significant financial achievements. In the fourth quarter, net sales increased by 3.1% and comparable store sales grew by 0.6%, with a notable 2.3% rise in transaction growth. The diluted earnings per share for the quarter was $0.44. The fiscal year ended with record financial results, including net sales of nearly $14.9 billion, a 2.2% increase from the previous year, and a record diluted EPS of $2.04. The digital business also achieved record sales exceeding $1.1 billion. Additionally, the company generated $1.4 billion in operating cash flow in 2024 and invested in growth through new store openings and a new distribution center. It returned over $1 billion to shareholders in dividends and share repurchases, marking the 15th consecutive year of dividend growth.

At the end of the year, Tractor Supply successfully acquired Allivet and aims to integrate it into their business, benefiting their large base of pet-owning Neighbor's Club members. The company reports strong team member and customer engagement, with low frontline attrition, high customer account activity, and record customer service scores. The Neighbor's Club loyalty program continues to grow, with record retention rates and customer counts. Enhancements in 2024 included personalized offers, new tiers, and meaningful rewards, with its expansion to Petsense driving strong engagement. Over 85% of Petsense sales come from Neighbor's Club members, and cross-shopping with Tractor Supply has increased. Neighbor's Club membership exceeds 38 million, representing 80% of sales, demonstrating a commitment to high performance and customer investment through their Life Out Strategy.

The paragraph highlights Tractor Supply's positive financial performance and strategic outlook. The company has maintained gains from the past five years and forecasts strong growth in net and comp sales by 2025. They anticipate easing headwinds, neutral product deflation, and market stabilizations. While acknowledging uncertainties like tariffs under the new administration, they are confident in navigating these challenges. Tractor Supply's business profile is deemed attractive compared to other retailers, and they expect to meet long-term targets in neutral market conditions. They continue to gain market share and expand their competitive advantages. The "Life Out Here" strategy is set to increase their market potential, with optimism for the New Year. The paragraph concludes by transitioning the presentation to Kurt Barton.

The paragraph discusses the company's performance in the fourth quarter, highlighting a 0.6% increase in comparable store sales driven by a 2.3% rise in transaction average but offset by a 1.7% decrease in ticket average. Weather was a significant factor, with winter conditions impacting sales more than holidays, and deflation in commodities dragging down sales by 100 basis points. Despite challenges from warmer temperatures in late October and November, the company saw improvement in December and in response to early October hurricanes. Strong performances were noted in the seasonal, truck tool, and hardware departments, with consumable products performing as expected. The company experienced mid-single-digit unit growth, indicating a potential market share gain, although it was offset by deflationary pressures.

The paragraph discusses the company's sales performance, noting strong growth in spring and summer categories like mowers due to warm weather, while cold-weather items underperformed. Big-ticket items and hurricane response products, like generators, also did well. The company saw its highest sales day on the day after Thanksgiving, despite not being driven by holiday sales. Gross margin slightly decreased by nine basis points due to a tough comparison from the previous year. SG&A expenses rose by 60 basis points due to growth investments and new distribution center costs but were partially offset by cost-control efforts. Operating margin decreased by 69 basis points to 8.4%.

The paragraph outlines the company's outlook for 2025, emphasizing their ability to adapt to economic cycles and tariff uncertainties, drawing from past experiences. They have diversified import origins and plan well, with only 12% of sales being direct imports and a focus on domestic sourcing. The company's guidance does not currently account for tariff changes, but they are prepared to adjust if needed. For fiscal 2025, they forecast a net sales growth of 5% to 7%, reaching $15.6 to $15.9 billion, partly driven by new stores and the acquisition of Allivet, which is expected to contribute over $100 million in net sales. Comparable store sales are projected to rise by 1% to 3%, with a modest gross margin expansion from supply chain efficiencies and effective cost management. The transportation market is expected to remain stable and consistent.

The paragraph outlines the company's financial forecast and strategic initiatives. It expects gross margin expansion to be offset by SG&A deleverage due to increased depreciation and amortization and investments in the "Life Out Here 2030" initiatives. The company plans to sell 2-4 existing stores in 2025 to fund new store openings, aiming to open 80-90 new stores. The forecasted operating margin is between 9.6% and 10%, with interest expenses between $65 million and $70 million and an effective tax rate of 22.2% to 22.5%. Diluted EPS is projected to range from $2.10 to $2.22. Net capital expenditures are expected to be $650 million to $725 million, or 4% to 4.5% of sales, with gross capital expenditures around $1 billion. The plan includes opening approximately 90 Tractor Supply stores and 10 Petsense stores within the year.

The paragraph outlines the company's strong store growth and financial outlook. It highlights plans to open a new distribution center in Idaho by late 2026 or early 2027 to support expansion in the Pacific Northwest. The company is committed to returning cash to shareholders through dividends and share repurchases, with planned repurchases of $525-600 million in 2025, reducing shares outstanding by 1-2%. Financial performance is expected to be evaluated in halves rather than quarters, with consistent comp sales and modestly stronger performance in the second half of the year due to easing comparisons and moderating deflation. The company aims for positive transaction growth and stable average ticket prices, with EPS growth expected to be consistent throughout 2025.

The paragraph outlines the company's financial forecasts and strategic plans. It predicts slightly better operating margins in the first half of the year compared to the second half, with positive comp sales expected for the first quarter. Despite growth, first-quarter earnings per share (EPS) will be consistent with the previous year due to business investments. Gross margin expansion will be offset by strategic investments and operational costs for the new Arkansas distribution center opening in 2024. Operating margin is expected to remain flat or slightly decline. The company emphasizes prioritizing strategic investments and protecting profit margins through 2025, aiming to self-fund its "Life Out Here 2030" initiatives. The strategy focuses on sustaining current success while exploring new growth opportunities.

The paragraph outlines key initiatives in Tractor Supply's "Life Out Here" strategy, focusing on Project Fusion and Garden Center rollouts to enhance store productivity and localization by 2025. These efforts involve creating data-driven archetypes to tailor store space for customer needs, optimizing sales. It also highlights plans to leverage the Neighbor's Club through the Allivet acquisition, expanding the market by $15 billion. This includes integrating Allivet's pet medication services into tractorsupply.com and enhancing member profiles. The company is investing in new strategic initiatives, like direct sales and Final Mile, to capitalize on future opportunities.

The paragraph outlines the company's efforts in direct sales and final mile delivery, focusing on building a scalable sales model, hardening delivery networks, and handling online orders in-house. It highlights the strong start to the year by supporting customers' winter needs and transitioning stores to spring merchandise. Key initiatives include expanding product lines, such as Weber grills and zero-turn mowers, and launching new companion animal products. The company aims for immediate measurable results while also building towards long-term growth, with more details to be shared in the upcoming Q1 earnings call.

Tractor Supply is currently running its annual Pet Appreciation days, offering savings and events to engage customers. The company reports strong activity in their pet wash services and a growing pet aisle. Their Chick Days event is a notable spring fixture, promoting backyard poultry as a hobby, and they use customer insights to tailor more targeted marketing. Additionally, the company has announced a multi-year partnership with Field & Stream to offer hunting and outdoor products starting in June, aiming to expand its reach beyond poultry to broader homesteading and outdoor living.

The paragraph is part of a Q&A session during a company's call, where Simeon Gutman from Morgan Stanley asks about the health of comp transactions. Hal Lawton responds positively, indicating that comp transaction growth in Q4 was strong and widespread, both geographically and across categories. He notes that regions with weather activity experienced stronger growth. Lawton emphasizes the growth in average ticket size across all regions and categories, and highlights positive customer-related metrics such as customer counts, activity, and retention.

The paragraph discusses the strong performance and future expectations of comp transactions, which have been a key growth driver for the company in the past five years, accounting for about half of its total growth. The new stores are performing as expected, with consistent operating profit margins and IRRs since 2021, despite some variability in performance across years. The company is pleased with the incremental transactions and new customer counts driven by new store openings. Additionally, during a Q&A session, Steven Forbes from Guggenheim asks about the company’s localization initiatives and partnership with Field & Stream, seeking insights related to the customer segmentation and strategic decisions discussed during a past Analyst Day.

In this paragraph, Seth Estep discusses the company's strategy for enhancing store productivity and sales through localization and optimized floor planning. He highlights the consistent opportunities identified in previous reports, particularly in adjusting macro space floor plans in new and existing stores, which is expected to boost productivity by low single digits. The focus is on localizing assortments, especially in the growing wildlife and hunting categories, as these areas have shown strong consumer response. Estep also underscores the potential for significant growth in these sectors and expresses excitement about the new multiyear Field & Stream partnership, which aims to further strengthen the company's presence in the wildlife category.

The paragraph discusses the expansion of a brand's exclusive line of apparel and unique marketing opportunities as it emphasizes localization and category assortments. It then shifts to a discussion about the poultry category, particularly backyard chicken farming, in light of rising egg prices, which has increased interest in this hobby among customers. Seth Estep notes that about one in five customers engage in this activity, exceeding the national average. He highlights the importance of "Chick Days" for existing customers to expand their flocks and reflects on 2023 when rising egg prices also led to increased engagement in backyard poultry farming.

The paragraph discusses Tractor Supply's business performance and future outlook. The company is excited about expanding its customer base and engaging new shoppers, particularly through their upcoming "Chick Days" event. In response to a question from Seth Sigman of Barclays, Hal Lawton identifies three macroeconomic factors that have impacted the business over the last 18 to 24 months: shifts in consumer spending from goods to services, deflation in commodities, and stabilization in the pet category. Despite these challenges, Tractor Supply's business has remained stable compared to other cyclical businesses, particularly in big-ticket items. The response also hints that these macro headwinds may moderate by 2025, as reflected in their guidance for the year.

The paragraph discusses the challenges the business has been facing, including the impact on average ticket sales, but expresses optimism for 2025. The company anticipates stabilization and growth, noting that goods and services have largely returned to pre-COVID levels. The pet industry is expected to recover with low single-digit growth, helping the company as it gains market share. The company also sees potential relief from deflation, with commodity prices, especially corn, showing upward trends, which may become a tailwind. Overall, the business forecasts positive momentum, with expectations for year-over-year improvement and guidance of 1% to 3% growth, particularly improving from the first to the second half of the year.

The paragraph discusses a company's solid start to the year and confidence in their guidance, despite having 11 months left in the year. It mentions the positive impact of cold winter weather on sales. Kurt Barton responds to Seth's question about big-ticket sales, noting that in 2024, merchants excelled in revitalizing sales through innovation and competitive pricing. They expect stable big-ticket sales in 2025, with new offerings like zero-turns and trailers. Seth Sigman finds the insights helpful, and the operator introduces Kate McShane from Goldman Sachs, who asks about the company's operating margin guidance, noting that the lower end seems lower than previously discussed and asks for explanations and more details about the range.

The paragraph discusses the company's expectations for its operating margin and comp sales in 2025, aligning the operating margin range of 9.6% to 10% with a comp sales growth of 1% to 3%. Kurt Barton responds to Kate's question by stating that the 2025 operating margin will likely align with the 2024 margin, and there is potential for growth under their 2030 initiatives, which are being funded through gross margin expansion and efficiencies. He emphasizes the company's excitement and commitment to achieving high targets while maintaining the operating margin. In response to Michael Lasser's question from UBS regarding the current year's outlook, the company had a strong start due to favorable weather and projects acceleration throughout the year. Michael asks if the 1% to 3% comp outlook is conservative or if there is room for upside growth.

In the paragraph, Hal Lawton discusses how the company approaches potential upside in their comparable sales ("comp") and their plans if such upside materializes. He states that their sales guidance is made with a long-term perspective, considering macroeconomic conditions expected to improve throughout the year. If comp sales outperform, the company will evaluate whether to reinvest that upside into existing initiatives or address other business needs. Lawton emphasizes confidence in their 1% to 3% guidance and notes that incremental investments will be assessed based on their potential benefits to the business.

The speaker discusses the company's long-term expectations for comp growth rates in the 3% to 5% range, which would improve operating margin rates. If comp performance exceeds expectations, operating margins may reach the higher end of the guidance. The speaker expresses excitement about the year and the company's future plans, highlighting new and existing initiatives that create value for shareholders as they approach 2025. The conversation then shifts to a question from Peter Benedict regarding the business Allivet. Kurt Barton responds that Allivet is generally stable with a slight seasonal peak in flea and tick products during spring and summer. He views it as a consistent business with a solid operating margin.

The paragraph discusses the long-term expectations for Allivet, focusing on its potential to enhance earnings and grow operating margins. It suggests that Allivet, particularly on the prescription side, could match or surpass Tractor Supply's operating margins within five years. The current priority is to expand the top line and onboard Neighbor's Club members to Allivet's subscription model. While there will be initial investments in this transition, the platform's potential is promising. The speaker is optimistic about the opportunity, supported by technology and resources acquired to facilitate quick expansion. Peter Benedict acknowledges this, leading to a new question from Karen Short about comp and new store productivity. Kurt Barton addresses new store productivity, emphasizing its evaluation net of cannibalization and impact on IRR.

The paragraph discusses the overall performance and contribution of new stores to a company's comparable sales. Despite some cannibalization, the new stores have a net positive impact on sales. The contribution is described as modest compared to other strategic initiatives, but it is still positive. The company projects increasing non-comparable growth from new stores, expecting them to ramp from 70 to 100 over the next few years, which will further contribute to sales. New store productivity has been consistent and in line with targets despite some adjustments. The latter part of the paragraph addresses a question from David Bellinger about a slight decline in gross margins year-over-year due to challenging comparisons and other factors such as promotional activities and a shorter holiday period.

In the paragraph, Kurt Barton discusses the company's expectations for gross margin performance throughout 2025. He notes that the gross margin for the fourth quarter was in line with expectations, despite some unique factors in the prior year's comparison. Promotional activities and vendor partnerships helped maintain the margin. Looking ahead, Barton anticipates slightly more favorable gross margins in the first half of 2025 compared to the second half. He mentions that the company will benefit from transportation efficiencies, exclusive brand launches, and retail media. Overall, the expectation is for a modestly higher gross margin in the first half of the year. David Bellinger and Mary Winn Pilkington also briefly speak, with Pilkington offering to provide further assistance if needed.

The paragraph is a conclusion to a conference call, encouraging participants to reach out and noting there will be another discussion in April during the Q1 call. The operator then thanks everyone for participating and signals the end of the call, instructing them to disconnect.

This summary was generated with AI and may contain some inaccuracies.