Earnings Call Transcript - TSCO Q4 2021

Operator, Operator

Good morning and welcome everyone to Tractor Supply’s Fourth Quarter 2021 Enhanced Earnings Event. The video we just shared, I hope, has you in a Tractor Supply state of mind. Thank you for taking the time to join us today. We look forward to the time we can host this event in person. We have a packed agenda today. Our executive team is excited to bring you many updates of where we’ve been since our last event in October 2020 and where we are headed in 2022 and beyond...

Hal Lawton, CEO

Good morning, everyone. Thank you for joining us today. We are here in cold Nashville. We are excited to update you in greater detail on our Life Out Here strategy that we first shared with you back in October 2020. As our Year Review video highlighted, we are just getting started... This team has worked diligently with grit and determination to overcome the challenging operating environment...

Kurt Barton, CFO

Thanks, Hal and hello everyone. Thank you for joining us. We really appreciate your time and attention today to hear more about our substantial progress and our very bright future. As Hal covered a good bit about our top line results and impressive customer trends, I will pick up with our gross margin performance. Our fourth quarter gross margin rate was 33.8%, a decrease of 83 basis points versus last year...

Hal Lawton, CEO

Thanks, Kurt. Wow, what again outstanding 2021 on top of a record 2020. Yes, the team did a great job, they did, just fantastic. Alright. Let’s transition out of a typical earnings dialogue and look to the future. We have a very bright past with more than 83 years of serving Life Out Here...

Christi Korzekwa, SVP of Marketing

Thank you, Mary Winn, and good morning. As you’ve already heard from Hal and Kurt, our future at Tractor Supply is extremely bright and promising, that’s why I’m excited to take a few minutes and give you an update on our customers, provide some insights into what we know about our ever-expanding marketplace and how we are using our industry-leading Neighbor’s Club program to drive our growth...

John Ordus, Chief Stores Officer

I love hearing stories like that from our customers. I get a bunch of notes every week from our customers and our team members. I will share another one with you in just a few minutes. But I am excited to talk to you today about something I am very passionate about, taking care of our customers...

Rob Mills, Chief Technology, Digital Commerce and Strategy Officer

Thank you, Mary Winn. I am very excited about being here today to talk about the activities that we will continue to grow our legendary customer experience. It’s great to be here. We have made significant opportunities to continue to grow and capture and build momentum on our digital business we have seen over the past few years...

Seth Estep, Chief Merchandising Officer

Thanks, Rob. Good morning, everyone. Tractor Supply has been busy making headway with our Life Out Here strategy. In 2020, we outlined initiatives to grow space productivity as a major opportunity to deliver consistent comp store sales...

Colin Yankee, Chief Supply Chain Officer

I really appreciate that, Seth. Thank you so much. It’s great to be here with you to share the transformation that we are on across our supply chain. Tractor Supply is differentiated as the largest retailer for bagged animal feed in the country and the leader in meeting our customers’ needs for poultry, equine, dog and cat food...

Kurt Barton, CFO

Thank you, Mary Winn. It’s been 15 months since our October 2020 enhanced earnings event, and I am excited to talk to you again about Tractor Supply’s strategy, our new supporting strategic initiatives and our plan to continue to deliver strong and sustainable total shareholder return...

Hal Lawton, CEO

Thanks, Kurt. We appreciate everyone in the audience spending the last couple of hours with us. As we transition to Q&A, I hope you found compelling the updates we shared with you today. Kind of a quick summary of the incremental news we discussed...

Operator, Operator

Welcome back to the Q&A session of Tractor Supply’s enhanced earnings event. We have assembled all of today’s presenters and they are ready to take your questions...

Kate McShane, Analyst

Hi, good morning. Nice to see everyone. Our question is centered around the operating margin opportunity. So I guess this question is for Kurt. We wondered about the cadence of the operating margin expansion over the next 5 years. Is it fairly even each year? And what is the biggest difference in this outlook versus what you gave us in October when it was a 9% to 9.5% range...

Kurt Barton, CFO

Yes, hey, good morning Kate and thank you for the questions. On operating margin, as you think about the long-term targets, one, we are extremely pleased with the performance of the business. And the last 15 months have really shown in regards to is it structural, is it transitory in regards to the performance of the company...

Hal Lawton, CEO

Yes, hey, Scott. Thanks so much for the question. And I’ll toss it over to Christi to talk about our new customers and the customer insights for seeing. Yes. Hi. Thanks for the questions. First off, I would start off by saying our pet business is incredibly strong. We talked about our C.U.E. and its performance over the last handful of quarters, out-comping our overall store...

John Ordus, Chief Stores Officer

Yes. Thanks, John for the question. So our pet washes – so as soon as a customer uses the pet wash, they continue to come back and back and back. They love using the pet wash. They like to come back...