Tractor Supply Company (TSCO)

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Tractor Supply Company (TSCO)

Q4 2008 Earnings Call

January 28, 2009 5:00 pm ET


Erica Pettit - Financial Dynamics

James F. Wright - Chairman, President, Chief Executive Officer

Anthony F. Crudele - Chief Financial Officer

Stanley L. Ruta - Executive Vice President, Store Operations

Gregory A. Sandfort – Executive Vice President, Merchandising


Mitch Kaiser - Piper Jaffray

Jack Murphy - William Blair & Company

Peter Benedict - Wachovia Capital Markets

Matt Nemer - Thomas Weisel Partners

Dan Wewer - Raymond James

John Lawrence - Morgan Keegan



Good afternoon, ladies and gentlemen and welcome to the Tractor Supply Company’s conference call to discuss fourth quarter and full year 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. (Operator Instructions)

Please be advised that reproduction of this call in whole or in part is not permitted without prior written authorization of the Tractor Supply Company. As a reminder, ladies and gentlemen, this conference is being recorded.

I would now like to introduce your host for today’s conference, Ms. Erica Pettit.

Erica Pettit

Thank you, Operator. Good afternoon everyone, and thank you for joining us. Before we begin we would like to take a moment to reference the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. This conference call may contain forward-looking statements that are subject to significant risks and uncertainties, including the future operating and financial performance of the company.

Although the company believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct. Important risk factors that could cause actual results to differ materially from those reflected in the forward-looking statements are included in the company’s filings with the Securities and Exchange Commission.

The information contained in this call is accurate only as of the date discussed. Investors should not assume that the statements will remain operative at a later time. Lastly, Tractor Supply Company undertakes no obligation to update any information discussed in this call.

Now I am pleased to introduce Jim Wright, Chairman, President, and Chief Executive Officer.

James F. Wright

Thank you, Erica, and good afternoon, everyone. I’m here today with Tony Crudele, our Chief Financial Officer, Stan Ruta, EVP of Stores, and Greg Sandfort, EVP of Merchandising.

Before our review of our performance during 2008, I’ll discuss the fourth quarter briefly. As we all know, the fourth quarter of 2008 was extremely challenging for the retail industry as the consume stayed home, traded down, and in some categories, simply stopped buying.

In the face of these headwinds, our team continued to take the necessary actions to change the merchandise offering, intensify customer engagement, and tightly control costs. As a result of these efforts, we’ve produced solid operating earnings.

For the holiday season 2008, we refined our strategy as we planned purchasing less giftable inventory and focused our gift assortments on items that supported our customers’ basic lifestyle needs at compelling value prices.

We’re pleased with our ability to navigate through the quarter by properly managing our up front buying and highlighting more every day basics, thus reducing exposure to markdowns and improving inventory productivity.

Throughout the year we saw consumers shifting purchases from wants to need and from style to value, and the fourth quarter was no different. While the holiday season was challenging, our team correctly anticipated consumer buying patterns and executed very well. As I mentioned last week, we believe our operating performance in 2008 represented one of our strongest periods every for the company.

I want to thank our team members for their hard work and consistent execution this year. We remain committed to offering great prices and merchandise assortments that are core to our customers’ rural lifestyle needs and we successfully executed the fundamentals of our business model.

Early in the year our team recognized the external challenges and we adjusted our strategies accordingly. Overall, I’m proud of our steadfast efforts to grow and to improve our business. To provide more detail behind our growth drivers for 2008 I’ll discuss some operational highlights.

First, we grew our business with sales increasing 11.3% and comps by 1.4. Further, we expanded the chain by 12%. We opened 91 new stores and ended the year with 855 stores. We’re very encouraged by performance of our new stores and we are pleased to reduce the cost of stores open in 2008 and also those that we approved during the year.

To further support our growth, we added 250,000 square feet of capacity to our distribution center in Waco, Texas. Second, we refined our merchandising selection and focused on core, non-discretionary basic products. Our core consumable business remains strong as our customers continue to purchase items that are relevant to our every day needs for their land, their animals, and their pets. This helped us drive traffic to our stores throughout the year.

We also made progress on our integrated multi-channel strategy by enhancing our e-commerce offering with a more robust website. We’ve seen a marked increase in the number of consumers who shop online prior to visiting one of our stores.

Throughout the year we challenged the paradigm and rigorously worked towards improving various areas of our business. First, we implanted an aggressive expense management program early in the year. Through this we tightly managed costs at the store support center and in our stores without compromising customer service. Our team responded well to this initiative and we believe we are better positioned to operate as a leaner organization going forward.

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