Tractor Supply Company's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Tractor Supply Company (TSCO)

Q1 2012 Earnings Call

April 25, 2012 5:00 p.m. ET


Jennifer Milan – FTI Consulting, IR

Greg Sandfort – President and Chief Merchandising Officer

Jim Wright – Chairman and CEO

Tony Crudele – Chief Financial Officer


David McGee - SunTrust Robinson Humphrey

Vincent Sinisi – Bank of America

John [Lawrence] - Stephens

Dan Wewer - Raymond James

John - Piper Jaffray

Mark Miller – William Blair

Alan Rifkin – Barclays

Aram Rubinson – Nomura

Adam Sindler – Deutsche Bank

Joan Storms -Wedbush Securities

Thomas Mahoney - Cleveland Research Company



Good afternoon, ladies and gentlemen, and welcome to Tractor Supply Company’s conference call to discuss first quarter 2012 results. [Operator instructions.] 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, and good afternoon, everyone. I’m here today with Jim Wright, our chairman and CEO, and Tony Crudele, our CFO. We’re very pleased with our first quarter results, and are very excited that we achieved another significant milestone for Tractor Supply Company, generating first quarter sales of over $1 billion for the first time in the company’s history.

Our results continue to reflect broad-based strength with solid performance in all areas of the store and in all regions. Our team again executed exceptionally well in what continues to be a very challenging retail environment.

The strides we are making in the areas of inventory management, merchandise allocation, and expanded regionalization of our assortments continued to contribute to our performance. We are delighted to have generated another quarter of double digit increases in both sales and profitability on top of record results a year ago.

Now let me provide a little more detail on our first quarter performance. We did anticipate stronger first quarter results than our business has historically exhibited due to the calendar shift created by the 53rd week last year. We also benefited from our improved ability to both plan for, and react to, seasonal weather patterns and changes in our customers’ wants and needs.

As stated on our prior call, we accelerated product flow of spring sets in our southern markets this year while planning concurrent marketing expenditures in those same regions to drive sales. These planned shifts, based on our analysis of historical sales patterns, allowed us to more fully capture peak demand in these markets, especially given the early break we experienced in spring weather this year.

At the same time, we are recognizing and reacting more quickly to the sales trends and customer demand that develop in our business daily. With the warmest winter on record, we acted quickly in January and February to clear through winter seasonal merchandise to minimize seasonal carryover. With our improved ability to react, we were able to take advantage of the early spring weather in March, increasing inventory flow of top seasonal SKUs and adjusting store replenishment patterns.

Our proactive planning approach and improved systems capability enabled us to allocate merchandise more productively than ever before. In terms of specific sales drivers, our CUE categories remained key to increasing both traffic and sales, contributing to our 16th consecutive quarter of comp transaction count increases.

We saw particularly strong performance from seasonal merchandise categories, especially big ticket items in the outdoor power equipment category. Along with sales of big ticket items, it was also gratifying to see our parts and repair business remain strong, where more typically we would experience customers either replacing or repairing these items, certainly not doing both.

As we think about our first quarter performance, we were particularly pleased to see such broad-based strength across nearly all categories within the store and all regions of the country. To mention a few, customers were very receptive to our expanded assortments in live goods, which we introduced early in the south this year.

Forage is still gaining momentum, and we have plans to expand the program to approximately 600 stores by the end of this year, a significant increase from 300 stores at the end of 2011. Additionally, our hardware and tools division continues to perform well, and our private brand groundwork for lawn and garden products added to our momentum across our seasonal categories.

We continue to test and refine our assortments while successfully pursuing our strategy to balance both product selection of national brands while increasing private brand mix across multiple categories.

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