Tractor Supply Company

Good morning, and in honor of the 40,000 team members of Tractor Supply, welcome to our third quarter 2020 enhanced earnings event. Thanks for taking the time today to join us, and I do hope you're all staying safe and well. And on behalf of all of us at Tractor Supply, I also want to thank frontline workers around the country, including our own team members, who work so hard to ensure that our stores can continue to provide our products and services to the communities we call home. Today, we have a packed agenda. First, we're here to discuss our third quarter results with Hal Lawton, our CEO, and Kurt Barton, our CFO. After that, we'll be joined by members of TSC's executive team, who will go into greater detail on some of Tractor Supply's key initiatives to support our company's long-term plans. Following their presentations, there will be an extensive Q&A period when they will take your questions. Our goal is to allow about an hour for the Q&A session, and we plan to conclude our event by noon Central Time. A replay of the webcast, as well as the Q&A session, will be available on our website at irtractorsupply.com under Events and Presentations. But before we get too far down the road, I'd like to ask you to take note of our Safe Harbor Statement. Please note some of the discussions, presentations and statements that we make today regarding our business, operation and financial performance may be considered forward-looking. Such statements involve a number of risks and uncertainties that could cause actual results to differ materially. In many cases, these risks and uncertainties are beyond our control. Although the company believes the expectations reflected in its forward-looking statements are reasonable, It can give no assurance that such expectations or any of its expectations or any of its forward-looking statements will prove to be correct, and actual results may differ materially from expectations. Important risk factors that could cause actual results to differ materially from those reflected in the forward-looking statements are included at the end of the press release issued today and in the company's filings with the Securities and Exchange Commission. Because we use select non-GAAP measures to describe our business performance, we've provided a reconciliation of these measures to the most directly comparable GAAP measures, which is included in the appendix of this presentation and will be posted on the IR section of our website as part of today's call. The information contained in this webcast is accurate only as of the date discussed. Investors should not assume that statements will remain operative at a later time. Tractor Supply undertakes no obligation to update any information discussed in this webcast. Thank you for your time and attention. Now, we'd like to share a video featuring one of our many team members who lives our lifestyle and brings the Tractor Supply story to life.

They make us who we are. They are farmers. They are husbands and wives. They are family and they are friends. They get up early and they come home late. They do whatever it takes to get the work done and get it done right. They are horse people and goat people. They know tractors and they know feed. They are hardworking and hard playing. We depend on them to keep the doors open. They are Tractor Supply. We depend on them to keep the doors open. They are hardworking and hard playing. They know tractors and they know feed. They are horse people and goat people. They do whatever it takes to get the work done and get it done right. They get up early and come home late. They are family and they are friends. They are farmers. They are husbands and wives. They make us who we are. Tractor Supply.

Hello, everyone, and thank you for joining us today. When I first saw the video that we just shared with you, I thought it really captured the essence of Tractor Supply as a purpose-driven company. It is who we are. It is what we do. In retail today, having meaning and purpose with customers makes all the difference. It is a pleasure to speak with everyone today, not only about our third quarter results, but also about our life out here strategies. we see opportunities to capture tremendous growth ahead of us. As we're in the midst of a global health crisis and all that comes along with that, we didn't feel that it was appropriate to do a full investor community day. Rather, it's our goal today to share our life out here strategic framework and provide greater insights on our initiatives as we plan for 2021 and beyond. Over time, as the world normalizes, Our goal would be to host another event in the future as appropriate. Tractor Supply is well positioned to leverage our stores and capitalize on our omni-channel capabilities. We have a large total addressable market with an attractive position and are gaining market share. We're focused on operational excellence, execution discipline, and making investments from a position of strength for long-term value creation. We're on a multi-year journey to evolve the future of our company. We are thriving as our second and third quarter results indicate. And with the actions we're taking, we're committed to emerging from the pandemic stronger than before. My sincere thanks and appreciation go out to our more than 40,000 team members of Tractor Supply that delivered these strong results. This is a team that's been operating during a global pandemic supporting recovery from multiple natural disasters and executing at elevated sales levels, while at the same time laying the foundation for our future growth. Coming into the quarter, we recognized it would continue to be a challenging time, and our team certainly stepped up to the challenge. Through it all, the organization has lived up to our mission and values. And I also want to thank our vendor and supply chain partners who've done a tremendous job supporting us in this challenging operating environment. I'm incredibly proud to be a part of this team. The results that we reported for the third quarter would not be possible without the team's inspiring efforts over the last several months. The tractor supply team has been fully committed to adapting to the uncertainty brought on by the pandemic. Our utmost priority has been the health and safety of our team members and customers. We're committed to being a safe place to work and a safe place to shop, and we continue to implement industry-leading best practices across all parameters of safety. Our team member engagement scores continue to rank among the best in class. We have taken steps to reinforce our appreciation of the hard work of our teams that enhance and build on our culture. We're also committed to supporting and strengthening the local communities that we call home. Before we get into our life out here strategy that I'm very excited to share with you, let's cover off on some of our third quarter performance. The third quarter was another exceptional quarter for Tractor Supply. Our results were very much a continuation of the trends we experienced in the second quarter. For Q3, we had robust and consistent growth across all periods, all product categories, and all geographic regions. Our brand awareness to campaign, along with our new customer growth, continues to be a significant driver of our performance. Our e-commerce business continued to drive triple-digit comps, with nearly 80% of our Omni sales picked up in our stores. And e-commerce continues to increase significantly as a percentage of our overall sales, doubling its penetration year over year. The work we have done to improve our e-commerce capabilities has certainly resonated with our customers. For example, our recently launched customer app has had almost 500,000 downloads since our launch in July. For the third quarter, our business continued to perform at record levels. As an essential needs-based retailer, we are supporting our customers with products they need to take care of their families their animals, their land, and pets. Net sales for us in the third quarter were up 31% over last year, with comparable store sales up 26.8%. Much like second quarter, we had good balance across both our transactions and our ticket growth. The top performing categories were in our core competencies of pet food, feed and forage, agricultural fencing, poultry and bird feeding, along with seasonal categories like zero turn tractors, outdoor power equipment, and lawn and garden as we had an excellent extended selling season for these categories. And we had robust performance in our big ticket sales driven by strength in zero turns, safes, generators, trailers, and front engine riders. Our Q products, consumable, usable, and edible categories, which represent the strength of our core, reoccurring business, had comp sales growth in the high 20% range, an acceleration from our mid-teens performance in the second quarter. We're gaining share in these businesses and across the board, including pet food. We continue to engage with new and re-engaged customers at amongst the fastest rate in the company's history. On a combined basis, more than 10 million identified new and re-engaged customers have shopped with Tractor Supply since the start of the pandemic. These new customers skew younger, higher income, and slightly more female, and they represent significant incremental growth opportunities for us to unlock. More customers shopping with us than ever, and they have larger baskets. The feedback from our customers on their shopping patterns at Tractor Supply include positive comments such as convenient locations, selection of products, and most importantly, previous positive shopping experiences at our stores. Our opportunity is to capitalize on these trends as we look to nurture these customers and gain market share. We're working hard to retain these customers with marketing, products, and service offerings, and we'll continue to make investments to do so. Before we turn to our strategic framework for life out here, Kurt will now take you through some greater detail on our performance and share our outlook for the fourth quarter.