Tractor Supply Company (TSCO)

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Tractor Supply Company (TSCO)

Q4 2011 Earnings Call

February 1, 2012 5:00 PM ET


Jennifer Milan – FTI Consulting, IR

Greg Sandfort – President and Chief Merchandising Officer

Jim Wright – Chairman and CEO

Tony Crudele – Chief Financial Officer


Vincent Sinisi – Bank of America

Alan Rifkin – Barclays

Peter Benedict – Robert W. Baird

Aram Rubinson – Nomura

Matthew Fassler – Goldman Sachs

Brad Thomas – KeyBanc Capital Markets

Mark Miller – William Blair

Adam Sindler – Deutsche Bank

Matt Nemer – Wells Fargo Securities

Simeon Gutman – Credit Suisse

Eric Bosshard – Cleveland Research

Wayne Hood – BMO Capital



Please standby. Good afternoon, ladies and gentlemen. And welcome to Tractor Supply Company’s Conference Call to discuss Fourth Quarter 2011 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 would now like to introduce your host for today’s conference, Ms. Jennifer Milan of FTI Consulting. Please go ahead, Jennifer.

Jennifer Milan

Thank you, Operator. 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 introduced Greg Sandfort, President and Chief Merchandising Officer. Greg, please go ahead.

Greg Sandfort

Thank you, Jennifer. Good afternoon, everyone. I’m here today with Jim Wright, our Chairman and CEO; and Tony Crudele, our CFO.

We are pleased with our fourth quarter performance, which caps off another strong year for Tractor Supply Company. Our team continued to execute well in what remains a challenging environment for customers and retailers.

In the fourth quarter, we experienced another period of strong broad-based performance across the store and achieved double-digit increases in both sales and profitability on top of record results a year ago. This mix of broad-based sales growth across the store continues to mitigate our dependence on weather related merchandise.

The momentum in our business is a reflection of the structural improvements we have made in recent years. Not only have we increased our focus on consumable, usable, edible key merchandise, which has proven to be a successful strategy in meeting the needs and creating loyalty with our customers, but we have also made great strides in our inventory management to better merchandise allocation and expanded regionalization.

These sustainable improvements have enabled us to ensure we have the right products in the right places at the right time. As we continue to learn more about our customers each day, we are working diligently to further refine our product offerings, our marketing initiatives and the in-store shopping experience.

Now, let me provide a little more detail on our performance during the fourth quarter. Our strong topline sales results were reflective of consumers continued support of our unique merchandise mix, which enables us to meet their needs across multiple categories at a compelling everyday value.

As we had anticipated, weather was warmer than last year in the quarter and we planned accordingly. We were nimble and adjusted our merchandise mix to take advantage of the weather trends. Our proactive planning approach to merchandise allocation and regionalization enabled us to deliver higher year-over-year results for the quarter.

During the fourth quarter, our CUE categories remained key sales and traffic drivers. Our feed and food customers shop our stores more frequently and contributed to our 15th consecutive quarter of comp transaction count increases.

And despite the inflationary environment, we continue to provide compelling values to our customers while effectively managing merchandise margin. We were once again capable of improving gross margin dollars per unit in most CUE categories while increasing market share.

We also achieved strong sales performance in a hard lines areas, which include tools, hardware, truck and automotive. Our strategy of balancing our product selection between national brands and increased private brand mix across multiple categories contributed to improved performance for the entire category.

From an inventory perspective, our rigor has enabled us to manage flow more productively. As a result, we continue to execute better than ever. While we did decide to move forward spring deliveries for several of our southern regions to accelerate sales, we were pleased with their year end inventory position and we continued our successful management, the seasonal carryover and minimized forward business risk into the next season.

Operationally, we continue to make great strides in the areas of inventory management, price optimization and merchandise allocation, and regionalization. These collectively have driven meaningful sustainable improvements in our business.

Our fourth quarter and 2011 results further validate that we continue to gain traction from our strategic initiatives and as we look to 2012, we have never been more excited about the opportunities that lie ahead.

I’d now like to turn the call over to Tony to review our financial results for the quarter and discuss our outlook after which Jim will share some closing comments.

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