Tractor Supply Company (TSCO)

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Tractor Supply Company (TSCO)

F4Q09 Earnings Call

January 27, 2009 5:00 p.m. ET


Erica Pettit - FD

Jim Wright - Chairman and CEO

Tony Crudele - CFO

Greg Sandfort - President and Chief Merchandising Officer

Stan Ruta - Chief Operating Officer


Vincent Cinice - Banc of America/Merrill Lynch

David Magee - SunTrust Robinson Humphery

John Lawrence - Morgan Keegan

Jack Murphy - William Blair

Matt Nemer - Wells Fargo

Peter Benedict - Robert Baird

Christian Buss - Thomas Weisel

Robert Higginbotham - Goldman Sachs

Brent Rystrom - Feltl & Company

Mitch Kaiser - Piper Jaffray


Good afternoon, ladies and gentlemen. And welcome to Tractor Supply Company’s Conference Call to discuss Fourth Quarter and Full Year 2009 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 Tractor Supply Company. And as a reminder, ladies and gentlemen, this conference is being recorded.

I will now like to introduce your host for today’s conference, Ms. Erica Pettit of FD. Please go ahead, Erica.

Erica Pettit

Thank you, Maria. Good afternoon, everyone. And thank you for joining us. Before we begin, let me 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’m pleased to turn it over to Jim Wright, Chairman and Chief Executive Officer. Jim, please go ahead.

Jim Wright

Thank you, Erica. Good afternoon, everyone. I’m here today with Tony Crudele, our CFO; Greg Sandfort, our President and Chief Merchandising Officer; and Stan Ruta, our Chief Operating Officer.

At the on set of 2009 we knew that it would be a dynamic and challenging year to stay ahead of the game we assessed and responded to a much more cautious and needs-driven consumer, through our teams of steadfast execution we deliver strong results quarter-after-quarter while continuing to make strategic investments in our business.

We’re delighted that we achieved record financial results for the year based on fourth quarter performance. We continue to experience solid sales performance in consumable, usable, and edible are cue categories, including animal and pet-related products, as well as, key winter products.

Throughout 2009, we focused on two priorities, which were to continue differentiate our company in market and execute our retail strategy to ensure that we win the current environment and beyond. I’ll briefly review key accomplishments that drove top and bottom-line growth for this year.

First differentiating our company in the marketplace. We’ve always served an attractive niche and continue to see relative strength in both the consumers and the markets we serve. While our consumers were not immune to the challenges of the economic environment, they are generally more fiscally conservative and they are less impacted by weak housing and credit markets.

Our compelling merchandise assortment is wide yet targeted positions us as a one-stop destination for those who live the rural lifestyle. Throughout the year, the team continued to work closely to support our customer’s everyday basic needs at compelling prices. In doing so we expanded our cue item offering, which helped drive traffic into our stores.

Animal and pet-related products grew and we built upon this strength with successful and seamless introduction of select equine and livestock feeds from Purina and Nutrina to our stores nationwide.

In the second half of 2009, wood pellets use for fueling alternative heating stoves also performed well as we had significant better in stocks to support our ever growing consumer base that heats with pellet stoves and furnaces.

We also experienced increased demand for replacement parts in lawn and garden items given the self-reliant nature of our customers and continuing relevance of the do-it-yourself and grow-it-yourself trend. Further, as we shifted toward nondiscretionary purchase, as a shift persisted we responded strategically by narrowing our assortment of certain big-ticket items such as outdoor power equipment.

In light of the consumer behavior in this environment, we refined our marketing program. As part of this we intensified our focus on managing gross margin in that of advertising, one of our key internal metrics we used to drive merchandise and marketing decisions.

It’s always been difficult to identify direct correlation between TV spend and store traffic, we view 2009 as an opportunity to test the elimination of our television ad spending. We were pleased to see our assumptions validated, as store traffic continued turn positive in the absence of TV.

Internally we reinvested a portion of our TV ad budget into our direct marketing program, which includes targeted offers to various customer segments and the direct distribution of circulars to known TSC households.

We are also continue to test and refine our CRM capacities and anticipate even higher return on advertisers spending through direct marketing. As a result of our effective marketing results of 2009 we do not plan to resume TV spend this year but will add one additional circular in 2010.

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