Tractor Supply Company

Good morning, ladies and gentlemen, and welcome to Tractor Supply Company's conference call to discuss fourth quarter and fiscal year 2024 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. We ask that all participants limit themselves to one question and return to the queue for additional questions. Please note that the queue for our question and answer session did not open until the start of this call. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Tractor Supply Company. And as a reminder, this call is being recorded. The host for today's call is Mary Wynn Pilkington, Senior Vice President of Investor and Public Relations for Tractor Supply Company. Now, first up is a year-end video. I would now like to pass the call to our host, Mary Wynn Pilkington. Mary Wynn, please go ahead.

Thank you, Alyssa. Good morning, everyone. We appreciate your time and participation in today's call. On the call today are Hal Walton, our CEO, and Kurt Barton, our CFO. Following our prepared remarks, we'll open the floor for questions. Seth Estep, our Chief Merchandising Officer, will also be available during the Q&A session. Please note that a supplemental slide presentation has been made available on our website to accompany today's earnings release. Now let me reference the safe harbor provisions under the Securities Litigation Reform Act of 1995. This call may contain certain forward-looking statements that are subject to significant risk and uncertainties, including the future operating and financial performance of the company. 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 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. The information contained in this call 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 call. As we move into the Q&A session, please limit yourself to one question to ensure everyone has the opportunity to participate. If you have additional questions, please feel free to rejoin the queue. We appreciate your understanding and cooperation. We will also be available after the call for any further discussions. Thank you for your time and attention this morning, and now it's my pleasure to turn the call over to Hal.

Good morning and thank you to everyone for joining our call today. Before we begin, I would like to acknowledge the recent wildfires and winter storms. Our thoughts and prayers are with all those affected. I'd also like to express our deepest appreciation to the first responders who work tirelessly to protect our communities during these challenging times. Our Tractor Supply Team has and will continue to stand with our communities as they recover from these events. The opening video I think did an excellent job highlighting the key accomplishments of the Tractor Supply Team in 2024. And my sincere appreciation and gratitude go out to the team for all they do. Over the year, our team consistently executed with distinction and delivered solid results in a tepid retail environment. Additionally, the team made progress against our life out here strategy, enabling continued market share gains and future growth. Now let's go through some of our highlights specific to the fourth quarter in the fiscal year, starting with financials. In the fourth quarter, our net sales grew 3.1% and comparable store sales increased 0.6%, driven by strong comp transaction growth of 2.3%. And our fourth quarter diluted EPS was 44 cents. For the fiscal year, we achieved record financial results on both the top and bottom line. Net sales were nearly $14.9 billion, growing 2.2% versus 2023, with a comp store sales increase of 0.2%. Diluted earnings per share were also a record $2.04 on a split adjusted basis. And our digital business reached another year of record sales, topping over $1.1 billion. And I'll note, these results are on top of record performance over the last four years. In 2024, we also generated a record $1.4 billion in operating cash flow. and we use this cash flow to fund the business and attractive growth opportunities. In 2024, we opened 80 new tractor supply stores and 11 PetSense stores. The team has done a fantastic job opening highly productive new stores, as this remains a core strength and competency of tractor supply. Other business investments we made in 2024 include a new distribution center in Maumelle, Arkansas, and more than 160 fusion remodels. After funding our business in these initiatives, for the fourth consecutive year, we returned more than $1 billion to our shareholders through the combination of dividends and share repurchases. And 2024 marked the 15th consecutive year of dividend growth for Tractor Supply. And finally, at the conclusion of the year, we successfully acquired Alivet, and we look forward to integrating Alivet into our business and offering it to our millions of Neighbors Club members who are pet owners. In addition to these financial results, and even more importantly perhaps, our team member and customer engagement has never been stronger. Frontline team member attrition is at a record low. Total active customer counts are at record highs. High value customer retention is at record levels. Customer service scores continue to hit all time highs. And our Neighbors Club, one of the largest loyalty programs in retail, continues to attract record levels of new customers, and we're exiting 2024 with all-time highs in both retention rates and retained customer counts. Neighbors Club is truly a key differentiator for tractor supply, and we're committed to continued enhancements. For example, in 2024, our members benefited from more personalized offers, new tiers, and more meaningful rewards. Additionally, the expansion of Neighbors Club to PetSense by TrackSupply continues to drive strong customer engagement. This expansion is allowing us to deepen relationships with existing customers and help attract new pet customers to both banners. Neighbors Club membership currently represents over 85% of sales at PetSense with continued momentum. The PetSense shoppers also cross-shopping tractors supply at an oppressive rate of 50%, an increase of nearly three points year over year. Overall, Neighbors Club membership now exceeds 38 million, and has a percent of our sales reached a record 80%. With our Life Out Here strategy, we have built on Tractor Supply's long-standing commitment to invest in our powerful flywheel. We've substantially transformed our business and are operating from a higher level of performance. We've not given back any of the gains that we've made over the last five years, and we've delivered against our strategy, and we're very excited about the future. As we plan for 2025, we're forecasting strong net sales growth of 5% to 7% and comp sales performance of 1% to 3%. We anticipate that the headwinds we've been facing will moderate as we move through the year and that we continue our share gains. we expect product deflation should be relatively neutral by mid 2025. And additionally, we see signs of stabilization in both personal consumption expenditure and the balance of goods versus services, as well as in the pet food category. As it relates to the new presidential administration, while there are many unknowns that we acknowledge, for example, tariffs, we are confident in our ability to navigate these circumstances as they evolve. Additionally, as I'll note that many of these unknowns are not tractor supply specific. And on most fronts, our business profile is attractive on a relative basis to other retailers and companies. As we shared at our recent investment community day in December, we remain confident in our long-term targets and expect to return to them when market conditions return to neutral. Tractor Supply is a unique and highly differentiated retailer. We have a history of executing with discipline on our strategy, delivering strong financial results, and continue to expand our competitive moat. We continue to gain market share across our major product categories, and our customer metrics remain incredibly healthy. We're excited about the continued evolution of our Life Out Here strategy that builds on our strengths, continues the momentum of our existing strategy, and launches new initiatives that increase our total addressable market to $225 billion. We're entering the new year with momentum and opportunity. And with that, I'll now turn the call over to Kurt.