tsco 2019 investment community day - website...the company claims the protection of the safe-harbor...
TRANSCRIPT
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May 15, 2019
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Mary Winn Pilkington
Vice President,Investor and Public Relations
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Agenda
Our Evolution and Results Greg Sandfort, Chief Executive Officer
Advancing Our ONETractor Strategy Steve Barbarick, President & Chief Operating Officer
Enabling Our Future Growth Rob Mills, EVP - Chief Technology, Digital Commerce & Strategy Officer
BreakCustomer First Panel: Seth Estep, SVP - General Merchandising Manager
Christi Korzekwa, SVP - MarketingJohn Ordus, SVP - Store OperationsColin Yankee, SVP - Supply Chain
Delivering Profit Improvement and OurLong-Term Financial Outlook Kurt Barton, EVP - CFO & Treasurer
Wrap-Up Greg Sandfort, Chief Executive Officer
Q & A / Box Lunch Depart for Store Tour
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The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.The information in this presentation contains certain forward-looking statements. These statements discuss, among other things, expectations with respect to sales, earnings, store growth, capital expenses, margins, debt, payment of dividends and stock repurchases. These forward-looking statements are based on estimates, projections, beliefs and assumptions, and may be affected by risks or uncertainties including, but not limited to, competition, product demand, economic conditions, the ability to open new stores, the effectiveness of merchandising and marketing initiatives, the ability to realize operational efficiencies, inflation, consumer debt levels, governmental approvals, ability to hire and retain qualified employees, weather, the imposition of tariffs on imported products, etc. The Company intends these forward-looking statements to speak only as of the time of the presentation and does not undertake any obligation to update or revise them after the date hereof or as more information becomes available.Actual results may differ materially from anticipated results described in these forward-looking statements. As a result, all of the forward-looking statements made are qualified by these cautionary statements and those contained in the Risk Factors section of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Safe Harbor Statement
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Greg SandfortChief Executive Officer
Our Evolution and Results
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The Largest Rural Lifestyle Retailer
Only National Farm and Ranch Chain Tailored to Local
Community
Tractor Supply is Unlike Any Other Retailer: We Serve a Lifestyle
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The Power of Our Mission and Values
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Serving the Out Here Lifestyle
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Serving the Out Here Lifestyle
Demographics Characteristics Hard Working
Family Focused
Genuine
Compassionate
Resourceful
Neighborly
Value a Sustainable Lifestyle
60/40 Male/Female
68%35 – 64
Years Old
Middle Income
Home Owners/
Land Owners
Average Household:
Married with Children
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Serving the Out Here Lifestyle
Stewardship: Process of Continuous Improvement to Be More Efficient, Eliminate Waste and Reduce Impact on the Environment
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Our Evolution
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Enhancing Our Core & Foundational
Capabilities
Building Customer-Centric
Engagement
Driving Profitable
Growth
Offering Relevant Products & Services
ANYTIME, ANYWHERE and in ANYWAY Our Customers Choose
Our ONETractor Strategy
Operational EfficiencyTeam Member Engagement
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Supply Chain Sophistication
Convenience Through Location and Services
Unique Product Assortment Across Channels
Knowledgeable Team Members
Our Competitive Strengths
Legendary Customer Service
Everyday Low Pricing
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10 Year CAGR = 8.4% 10 Year CAGR = 10.1%
903
1,940
2,030
2009 2018 2019F
PetsenseTSC
$3.2
$7.9
$8.31 to $8.46
2009 2018 2019F
($ in billions)
New Store Growth
Strong Track Record of Results
A Decade of Driving
Traffic 43 of 44 Quarters of Positive
Comparisons
Consistent Traffic GrowthProfitable Sales
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Strong Track Record of Results
10 Year CAGR = 19.5%
$0.79
$4.31
$4.60 to $4.75
2009 2018 2019F
Strong EPS Growth Cash Returned to Shareholders
$15 $59
$211
$323
$198
$383 $396 $454
$503 $497 $550
Dividends Repurchases of Common Stock
~
Incremental $1.5B Share Repurchase and 12.9% Dividend Increase in May 2019
($ in millions)
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Healthy Customer BaseHighly Fragmented Sector, Categories and TripsAbility to Capitalize on Local Relevance Consumer-Centric and Agile MindsetAccelerating Capabilities through Technology and TrainingContinued New Store Openings
Market Share Opportunities
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1. New Store Growth
3. Services
Petsense Strategic Priorities
2. Products
4. CustomerEngagement
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Petsense Roadmap
2017 2018 2019 & Beyond
Understand Potential and Developed Long-Term Strategy
Began Integration
Move Headquarters to Brentwood
Leverage TSC Capabilities
Begin to Scale Growth
Complete Integration
Built New Real Estate Model
Developed New Store Layout
Established New Processes
Focused on Market Research
Enhanced Talent
In Progress:
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Petsense: New Store Layout
Previous Store Decor
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Petsense: New Store Layout
New Store Decor
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Petsense: New Store Opportunities
10 to 15
20 to 25
40 to 50per Year
2019F 2020T Long-Term Target
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Experienced Management Team WithA Strong Track Record
Name Years in Retail/TSC Tenure
Title Prior Experience
Greg Sandfort 41 / 11 CEO Michaels, Sears, Federated
Steve Barbarick 27 / 21 President & COO Builders Square, ALCO
Kurt Barton 19 / 19 EVP, CFO & Treasurer Ernst & Young
Rob Mills 19 / 5 EVP, Chief Technology, Digital Commerce & Strategy Officer
Ulta, Sears, Allstate, Rockwell Automation, HSBC
Ben Parrish 8 / 8 EVP, General Counsel & Corporate Secretary MV Transportation, Central Parking Corp.
Steve Neibergall 42 / 5 President, Petsense Safeway, AJ Bayless
Seth Estep 13 / 13 SVP, General Merchandising Mgr. BB&T
Chad Frazell 28 / 4 SVP, Human Resources Walmart, Target, Kohl’s, Shopko
Christi Korzekwa 15 / 7 SVP, Marketing Home Depot, American Airlines
John Ordus 25 / 21 SVP, Store Operations Quality Farm & Fleet
Colin Yankee 16 / 3 SVP, Supply Chain Target, Neiman Marcus, US Army
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Steve BarbarickPresident &
Chief Operating Officer
Our Evolution and Results
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Advancing Our ONETractor Strategy
Driving Profitable Growth
Offering Relevant Products & Services
Building Customer-Centric Engagement
Enhancing Our Core & Foundational Capabilities
Operational EfficiencyTeam Member Engagement
Comparable Store Sales Tractor Supply Store Growth Petsense Store Growth Online Growth
Personalization Relationship Marketing Supporting the Lifestyle
Product Assortment In-Store Experience Services
Supply Chain Efficiencies & Infrastructure Leverage Analytics Online Enhancements
ANYTIME, ANYWHERE and in ANYWAY Our Customers Choose
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Advancing Our ONETractor Strategy
Offering Relevant Products & Services
Enhancing Our Core & Foundational Capabilities
Driving Profitable Growth
Building Customer-Centric Engagement
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Offering Relevant Products & Services
Product Assortments
• Consumables• Innovation & Differentiation • Localization• Exclusive Brands• Online Endless Aisle
In-Store Experience
• Drive Aisle Merchandising• Extended Aisle through Stockyard• Team Member Tools
Services• PetVet Clinics• Pet Wash• Home Delivery• Trailer Rental• Test & Learn
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Offering Relevant Products & Services
Drive Traffic
ConsumablesDrive Ticket
Innovation & Differentiation
Drive Relevance
LocalizationDrive Loyalty
Exclusive Brands
Drive Offering
Online Endless Aisle
Driving sales through analytics and consistent resets to drive traffic, ticket and relevance
Grow sales and profit by offering a unique collection of quality, differentiated products that are relevant to the Out Here Lifestyle at everyday low pricing
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We are committed to being the most dependable supplier and grow market share through:
1. Broadening Assortment
2. Optimizing In-stock
3. Price Locally
Consumables: Drive Traffic
Consumable products drive footsteps and are central for being the dependable supplier for Life Out Here
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Innovation & Differentiation: Drive Ticket
We consistently drive new items through comprehensive category resets, drive aisle programs and a structured test program
Leading & Differentiated Brands
Category Expansions
Emerging Trends & Products
Online Demand & Search
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Localization: Drive Relevance
Our customers expect us to have the right products to support their way of life, which requires us to have a site-level merchandising philosophy
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Exclusive Brands: Drive Loyalty
Differentiated Products across all Categories
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Exclusive Brands: Drive Loyalty
Capture Share in Growing Workwear Apparel Segment
National Brand Quality with Attractive Price Points
Performance TechnologyOdor, stain & moisture resistant
Launch August 2019
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Online Endless Aisle: Drive Offering
A strategic focus on supporting customer needs with expanded online assortments drives conversion, loyalty and engagement
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Offering Relevant Products & Services
Product Assortments
• Consumables• Innovation & Differentiation • Localization• Exclusive Brands• Online Endless Aisle
In-Store Experience
• Drive Aisle Merchandising• Extended Aisle through Stockyard• Team Member Tools
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In-Store Experience: Drive Aisle
A focused effort on drive aisle merchandising to build the basket with seasonally relevant products while offering a treasure hunt experience
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In-Store Experience
Extended Aisle Team Member Tools
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Offering Relevant Products & Services
Product Assortments
• Consumables• Innovation & Differentiation • Localization• Exclusive Brands• Online Endless Aisle
In-Store Experience
• Drive Aisle Merchandising• Extended Aisle through Stockyard• Team Member Tools
Services• PetVet Clinics• Pet Wash• Home Delivery• Trailer Rental• Test & Learn
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Services: Grow and Expand
Growing existing services and exploring new services to drive traffic, sales and GURA
Providing Pet Services through Opportunistic Expansion:
PetVet Clinic in 80% of storesPet Wash Station
Driving Convenience through Delivery OfferingsTrailer RentalTest & Learn
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Advancing Our ONETractor Strategy
Offering Relevant Products & Services
Enhancing Our Core & Foundational Capabilities
Driving Profitable Growth
Building Customer-Centric Engagement
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Develop Deeper Personalization
• Know Our Core Customers Even Better• Continue to Grow Neighbor’s Club• Build Data-Driven Analytics
Relationship Marketing
• Foster Team Member Relationships with Customers• Connect through Social Media, Ambassadors & Influencers • Scale Local Community Marketing
Support the Customer and
Lifestyle
• Enhance 4-H and FFA Connection• Assist Community Events across the Nation• Support Our Military
Building Customer-Centric Engagement
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Building Customer-Centric Engagement
Develop Deeper Personalization
• Know Our Core Customers Even Better• Continue to Grow Neighbor’s Club• Build Data-Driven Analytics
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Know Our Core Customers Even Better
Jeanee
Julie & Pete Dave
Drew & Beth
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2016 2017 Today
Continue to Grow Neighbor’s Club
Members >12mm
>50% of SalesCompared to Non Members:
Spend 3-4x
Transactions ~3x
Basket +25%
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Welcome and Nurture New Customers Growth through Cross-Selling and Up-Selling
Build Data-Driven Analytics
Leverage AI-Driven Product RecommendationsOffer Exclusive Specials and DealsLocalize
Build and Grow Best CustomersCapitalize on Pet and Animal Own Key Markets
Manage CustomerLifecycle
Deliver Relevant, Timely Content
Drive Key Customer Segments
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Build Data-Driven Analytics
Increased Spend per Pet CustomerPet Messaging to Drive Specific Behaviors
Up-Sell
Grow spend per transaction by moving up brand tier
Cross-Sell
Expand share of wallet with purchases across the store
Stock-Up
Ensure repeat purchases with relevant, timely reminders
+4-6%
Control Test
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Develop Deeper Personalization
• Know Our Core Customers Even Better• Continue to Grow Neighbor’s Club• Build Data-Driven Analytics
Building Customer-Centric Engagement
Relationship Marketing
• Foster Team Member Relationships with Customers• Connect through Social Media, Ambassadors & Influencers • Scale Local Community Marketing
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Foster Team Member Relationships with Customers
Tractor Supply Team Members have a strong relationship with their customers and their communities
Increase in Spending when Customers
Experience All Aspects of GURA
GreetUncoverRecommendAsk
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Relationship Marketing
Over 3,100 fairs & local events supported last year
Community Marketing Events based on what our customers are most passionate about
Our Customers are digitally savvy and want to have conversations with us online
28
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Develop Deeper Personalization
• Know Our Core Customers Even Better• Continue to Grow Neighbor’s Club• Build Data-Driven Analytics
Relationship Marketing
• Foster Team Member Relationships with Customers• Connect through Social Media, Ambassadors & Influencers • Scale Local Community Marketing
Support the Customer and
Lifestyle
• Enhance 4-H and FFA Connection• Assist Community Events across the Nation• Support Our Military
Building Customer-Centric Engagement
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Support the Customer and Lifestyle
Our stores serve as a connection with the community
Our customers value support of the Military, and it drives their loyalty to Tractor Supply
4-H and FFA Sponsorships allow us to locally supportour customers’ way of life
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Advancing Our ONETractor Strategy
Offering Relevant Products & Services
Enhancing Our Core & Foundational Capabilities
Driving Profitable Growth
Building Customer-Centric Engagement
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Enhancing Our Supply Chain Capabilities
Right Product Right Place Right CostAssortment Optimization
Responsive Product Flow
Upstream Collaboration &
Downstream Automation
Our supply chain is uniquely designed to optimize sales, minimize risk and support a diverse assortment across stores and direct to customer
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Right Product: Assortment Optimization
Demographics Loyalty
Historic & Forecasted
SalesProduct
Attributes
We are deploying advanced analytics to drive inventory productivity and deliver maximum profitability
Customer Relevant
Seasonally Relevant
Locally Relevant
![Page 54: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/54.jpg)
Right Place: Responsive Product Flow
We fulfill our brand promise of being the most dependable supplierwith an infrastructure that supports our customers’ unique needs
Mixing CenterImport Center
Distribution Center
Distribution CentersEnable regionalized store replenishment and resetsDeliver digital fulfillment
Import CentersRespond to seasonal sales
Mixing CentersProvide just-in-time consumables
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Right Cost: Upstream Collaboration & Downstream Automation
Reduce Lead Times
Vendor Collaboration
DC Automation/System
Increase Speed & Scale
Strategic Sourcing
Drive profit improvement by integrating End-to-End Supply Chain
Reduce Stem Miles
![Page 56: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/56.jpg)
Advancing Our ONETractor Strategy
Offering Relevant Products & Services
Enhancing Our Core & Foundational Capabilities
Driving Profitable Growth
Building Customer-Centric Engagement
![Page 57: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/57.jpg)
Comparable Store Sales
New Stores
Online
Driving Profitable Growth
• Increase Ticket• Drive Transactions• Continue Building Capabilities• Team Members as a Differentiator
• 80 New Tractor Supply Stores in 2019• 10 to 15 New Petsense Stores in 2019
• Enhance Capabilities for Seamless Shopping• Expand Relevant Assortments• Content & Knowledge Expert for Life Out Here
![Page 58: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/58.jpg)
Driving Profitable Growth
Nearly 1,800 Tractor Supply Stores
with a 2,500 Store Opportunity
![Page 59: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/59.jpg)
Driving Profitable Growth
New Store Growth
BOPISeCommerce
MPOS
Products and
Services Petsense
Team Member
EngagementProfit
Improvement
![Page 60: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/60.jpg)
Uniquely Positioned to Support the Out Here Lifestyle
Drive Market Share Using Differentiated Products and Innovation
Scale Personalization to Drive Customer Loyalty
Strengthen Customer Relationships through Our Team Members
Leverage Nimble Supply Chain to Capture Growth
Key Takeaways
![Page 61: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/61.jpg)
Rob MillsEVP, Chief Technology, Digital
and Strategy Officer
Enabling Our Future Growth
![Page 62: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/62.jpg)
Retail Capabilities are Evolving
Retailer
YESTERDAY TODAY
Customer
Pricing Product Information
Product Location Expert KnowledgeDrives Drives
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Our Capability Journey
Today
Competitive Price Intelligence
Neighbor’s Club Loyalty Program
Omni Channel Capabilities – Seamless Experience
Endless Aisle Product Assortment
Foundation for Analytical Expansion
Growing our Fulfillment Capabilities
Yesterday
Manual Processes
Limited Ability to Capture Data
Basic Online Selling Capabilities
Online Products Mirrored Store Selection
Basic Reporting and Analytics
Supply Chain Constraints
![Page 64: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/64.jpg)
How Our Omni Channel Experience Has Evolved
Capabilities
Omni Channel Growth
Mobile Traffic
70%Unique Visitors Year Over Year
+20%Overall Web Visits
+60%
2016
2017
2018
ContentSocial Media
Endless Aisle
BOPIS Loyalty
Tax Exemption
Unified Customer Profile
Shift Print to Digital Store Task Management#1 Online Experience
Payment Options
Store Locator Visits Year Over Year
+41%
![Page 65: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/65.jpg)
2018 Omni Channel Performance
Improving Profitability
3–4X In-Store
Average Order
+80%BOPISGrowth Year Over Year
Proven Scalability
2012 2014 2016 2018
27Quarters of Double-Digit
Growth
2016 2017 2018
+34%ConversionGrowth Year Over Year
![Page 66: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/66.jpg)
From Test & Learn to Rollout
2017 2018 2019
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Team Member Engagement
Operational Efficiency
Capabilities Supporting ONETractor
Driving Profitable Growth Building Customer-Centric Engagement
Offering Relevant Products & Services Enhancing Our Core & Foundational Capabilities
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Team Member Engagement
Operational Efficiency
Capabilities Supporting ONETractor
Driving Profitable Growth Building Customer-Centric Engagement
Offering Relevant Products & Services Enhancing Our Core & Foundational Capabilities
Competitive Pricing Intelligence
Neighbors Club
TransportationManagement
Allocations
Unified Customer Profile
![Page 69: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/69.jpg)
Team Member Engagement
Operational Efficiency
Capabilities Supporting ONETractor
Driving Profitable Growth Building Customer-Centric Engagement
Offering Relevant Products & Services Enhancing Our Core & Foundational Capabilities
Training – Productivity Tools – Recognition - Recruiting
Store Productivity – Transportation – DC Productivity – Indirect Procurement
Customer Acquisition
Financial Services ExpansionExpanding Online Products
Stockyard KiosksONETractor Stores
Team Member Mobility
Assortment PlanningDeliver from Store
Strategic Sourcing
Distribution Network
Product Information Management (PIM)Petsense Integration
Store Labor Scheduling
Personalization
Social Media
Grow Exclusive Brands
Streamlined Online Checkout
Enterprise Analytics Platform
Floor Planning
Payment OptionsBrand Awareness
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Team Member Engagement
Operational Efficiency
Capabilities Supporting ONETractor
Driving Profitable Growth Building Customer-Centric Engagement
Offering Relevant Products & Services Enhancing Our Core & Foundational Capabilities
Consumer Mobile App
Expand Service Offerings
Voice ShoppingBOPIS 3.0
Augmented Reality
Enhanced Inventory Visibility
Automation
PIPELINE
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Spending plateauing
~30% of total capital
IT Investment to Support Capabilities
2014 2015 2016 2017 2018 2019F 2020T
$23M
$80-90M
$36M $40M
$82M $87M
IT Capital Investments
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Framework for Enabling Future Growth
Anticipate Needs Artificial Intelligence & Automation Customer Experience Evolve Fulfillment
![Page 73: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/73.jpg)
Anticipating Needs
Analytics Personalization Across Channels Labor Management
Neighbor’s Club Member Bob Smith has entered the store.
Customer Weather
Product Browse Behavior
Social
![Page 74: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/74.jpg)
Artificial Intelligence & Automation
FinanceMerchandising
IT Automation
Chatbots
Customer Interactions
Cognitive AI
Labor Optimization
Inventory Placement
Supply Chain Efficiency
Machine Learning
Delivery Routes
![Page 75: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/75.jpg)
Customer Experience
Innovating To Drive Convenience Anytime, Anywhere, Anyway
![Page 76: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/76.jpg)
Evolve Fulfillment
Efficient
Cost Effective
Customer Expectations
Improve In-Stock
Convenient
Predictable
New Ideas
Home
TSC Store
Neighbors
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Leveraging Our Physical Assets…
Supporting the Out Here Lifestyle Anytime, Anywhere, Anyway
…Growing Our Omni Channel Capabilities
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Key Takeaways
Continuing to Evolve Capabilities to Meet Customer Expectations
Strong Progress Growing Omni Channel Business
Investments Are Driving Improvements
Future Capabilities Will Drive Growth and Efficiencies
Leveraging Digital and Stores to Deliver the ONETractor Experience
![Page 79: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/79.jpg)
Panel
SVP, Marketing
Christi KorzekwaSVP, General
Merchandising Manager
Seth EstepSVP, Store Operations
John OrdusSVP, Supply Chain
Colin Yankee
![Page 80: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/80.jpg)
Kurt BartonEVP, Chief Financial Officer
and Treasurer
Delivering Profit Improvement and Our Long-Term Financial Outlook
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Strong Track Record of Performance
$278.5 million invested in
capital spend in 2018
Positive traffic consecutive quarters of comp store sales greater than 3%
7quartersof43 44
9thconsecutive
year of increased quarterly
cash dividends for shareholders
$3 billion returned to shareholders
through share repurchases and quarterly cash
dividends in the last 10 years
Broad-based topline growth
in 2018
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Additional Contributors of Financial Performance
• Strength of Our Real Estate Portfolio
• Tractor Supply Card Penetration Growth
• Operating Margin Opportunities
Shareholder Return Principles
Long-Term Financial Targets
Agenda
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Age of Stores Square Footage of Stores
Prototype vs. Retrofit
Strength of Our Real Estate Portfolio
28%
25%25%
15%
6%
<5 Years 5-9 Years 10-14 Years
15-20 Years >20 Years
Average Age = 10 Years
14%
78%
8%
<15k 15-18k >18k
Average Square Footage =
15.5k
57%43%
Prototype Retrofit
Note: TSC only
![Page 84: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/84.jpg)
Prototype (Build-to-Suit)
Retrofit (2nd Use Retail)
Petsense
Strength of Our Real Estate Portfolio
~$900k Investment ~$1.5M Investment ~$300k Investment
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1.201.10
0.851.05
1.20
2013 2014 2015 2016 2017
Current Forecast
Solid New Store Economics
New Store First Year SalesBy Year of Opening
New Store ReturnsBy Year of Opening
(20 Year IRR)
$3.2 $3.2 $3.1 $3.1 $3.1
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
2013 2014 2015 2016 2017
Actual Pro-forma
Note: 2018 new store results have not yet cycled. As such, 2017 is the most recent data. Pro-forma has been adjusted for tax reform.
($ in millions)
Indexed to Pro-forma
![Page 86: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/86.jpg)
0%
2%
4%
6%
8%
10%
$1,000
$2,000
$3,000
$4,000
$5,000
Year ofOpening
2 3 4 5 6 7 8 9 10
Annual Sales Comp Growth Rate
2018 Comp Store Sales Average
Solid New Store Economics
New Store Maturation Curve
Strong Maturation Curve
Track Record of Mature Stores Comping Positive
Creating Solid Economic Returns
($ in 000s)
![Page 87: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/87.jpg)
Solid New Store Economics
Capturing Growth Opportunities
2015 Opportunity
Store Count 13 +9
TSC StoreOpportunity
$78
2015
Market Sales ($ in millions)
![Page 88: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/88.jpg)
Solid New Store Economics
$78
$98
2015 2018 Future
$115
2015 2018 Remaining Opportunity
Store Count 13 18 +4
Capturing Growth Opportunities
Market Sales Growth($ in millions)
TSC StoreOpportunity
![Page 89: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/89.jpg)
Significant Opportunities for New Store Growth
CurrentStore Count
1,775
Site SelectionModelProfile
Opportunity2,500
• Robust site selection process• Recent 2,500 store opportunity revalidation
As of March 30, 2019
![Page 90: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/90.jpg)
Tractor Supply Card Penetration Growth
Benefits of Our TSC Card
Drive Sales Build Loyalty Reduce Tender Expense
![Page 91: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/91.jpg)
Drive Sales
Tractor Supply Card Penetration Growth
Pre-credit Post-credit
~30%+ Increase
Spend per Customer
Note: Based on 12 months pre-TSC credit card and 12 months post-TSC credit card, excluding the initial transaction.
![Page 92: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/92.jpg)
2017 2018
TSC CardOther Tender
27%
73% 65%
35%
Tractor Supply Card Penetration Growth
Riding Lawn Mower SalesDrive Sales
![Page 93: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/93.jpg)
Tractor Supply Card Penetration Growth
Build Loyalty
Announcing in Neighbor’s Club Rewards
$5 for every $100 spent on the TSC Card
5% BACK
![Page 94: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/94.jpg)
Tractor Supply Card Penetration Growth
~3% ~4%
10%
~20%
2017 2018 3 - 5 YearTarget
Best-in-ClassRetailersTractor Supply
TSC Card Tender Sales Mix Potential
Reduce Tender Expense
Growing TSC Card Mix reduces tender expense
and improves the efficiency & economics of
the program
![Page 95: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/95.jpg)
• Operating Margin Opportunitieso Gross margin expansion initiativeso Capture profit improvement plan savings
Agenda
![Page 96: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/96.jpg)
Gross Margin Expansion Initiatives
Exclusive Brands
Strategic Sourcing
• Focused on assortment planning and supply chain efficiencies• Productive inventory turns and working capital initiatives
Inventory Management
Price Optimization
• Capture topline growth and gross margin expansion across categories
• Optimize direct import capabilities complemented by domestic sourcing
• Leverage expanded price zones to be more nimble with greater flexibility across chain
![Page 97: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/97.jpg)
Capture Profit Improvement Plan Savings
Store Productivity
Transportation Efficiency
Distribution Center Productivity
Indirect Procurement
$$$$
$$$$
$$$
$$
Customer First Approach
Strategic Sourcing
LeverageAutomation
Performance Management
Process Re-engineering
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Rollout 6-9 MonthsQ2-Q3 Testing2018 Pilot
Goal• Increase Sales / Labor Hour• Align Hours to Traffic Volume &
Task Work• Drive Greater Customer Engagement
Capture Profit Improvement Plan Savings
Strategy• Re-engineer Receiving & Recovery Process• Leverage Scheduling & Task Management
System• Increase Customer Engagement / GURA
Store Productivity
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Ongoing2019 Rollout2018 Foundation
Goal• Reduce Stem Miles & Lead Time• Reduce Freight Rate• Maximize Truck Utilization
Capture Profit Improvement Plan Savings
Strategy• Domestic Strategic Sourcing• Freight Lane Optimization• Transportation Procurement• Truck Load / Flat Bed Utilization
Transportation Efficiency
![Page 100: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/100.jpg)
Multi-Year Rollout2020 Phase II2019 Pilot
Goal• Optimize DC Space & Slotting
• Increase Labor Utilization
Capture Profit Improvement Plan Savings
Strategy• Product Flow Engineering
• Performance Culture
Distribution Center Productivity
![Page 101: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/101.jpg)
Capture Profit Improvement Plan Savings
Store Rent
Outside Services
Technology
MarketingFacility
Maintenance
Utilities
Indirect Procurement
Savings Opportunities
Other
Supplies & Fixtures
![Page 102: TSCO 2019 Investment Community Day - Website...The Company claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform](https://reader033.vdocument.in/reader033/viewer/2022053010/5f0e060b7e708231d43d3d5f/html5/thumbnails/102.jpg)
Capture Profit Improvement Plan Savings
2018 2019 2020 2021
Implementation
Foundation
Value Capture
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ROIC Improvement
Shareholder Return Principles
Business Drivers• New Store Sq. Ft. Growth• Comparable Store Sales• Gross Margin • SG&A Leverage• Profit Improvement Plan
Return of Cash• Dividends
• Share Repurchases
LowDouble-Digit EPS Growth
Total ShareholderReturn Target (EPS Growth
+ Dividend Yield)+11% - +13%
Strong Free Cash Flow Generation• Invest for Growth
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Disciplined and Growth-Oriented Capital Allocation Targets
Reinvest in the Business
Share Repurchases
~ 30% Payout Ratio$0.35 Quarterly Cash Dividend (increased 12.9% in May)
Dividends
Leverage
~ $250 to $300M Annually
~ 2.5% to 3.5% Net Share Reduction AnnuallyNew Authorization of $1.5 Billion
Lease Adjusted Leverage Ratio of 2.0x to 2.4x
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30%
20%
30%
20%
New & Relocated Stores
Logistics
Information Technology
Existing Stores
Future Capital Expenditure Targets
Reinvest in the Business for Growth
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Long-Term Financial Targets
Targeting Low Double-Digit EPS Growth2018 to 2021
Sales Growth of 7-9% Comp Sales of 3%+
• New Store Growth:
• ~80 to 100 TSC
• ~20 to 50 Petsense
• Comparable Store Sales Growth
• Double-Digit Online Sales Contribution
Operating Margin Improvement
• Balanced Investments
• Gross Margin Opportunities
• Operational Efficiencies
• Outlook for Stable External Environment
Earnings Per Share Growth
• Deliver Consistent Low Double-Digit Earnings Growth
• Strong Operating Free Cash Flow to Enhance Returns
• Leverage Strong Balance Sheet to Expand Share Repurchases
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Long-Term Financial Targets
New Store Growth
MACRO TRENDSInflation/
Deflation
MPOSTRAFFIC
PriceMgmt. TICKET
BOPIS
Products and
Services
Petsense
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Long-Term Financial Targets
8.87%
9.0 - 9.4%
Levers of Operating Profit Margin2018 to 2021
8.9 - 9.0%
2018 2021T2019F
• Sales Growth• Productivity Culture• Profit Improvement Plan• Cost Management• Investments Plateauing
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Delivering on Our Near-Term and Long-Term Financial Targets
Clear Priorities for Comp Store Sales Growth
Runway for New Store Growth with Solid Returns
Building a Productivity Culture to Capture Operational Efficiencies
Disciplined Capital Allocation to Drive Returns
History of Strong and Growing Cash Returned to Shareholders
Key Takeaways
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Greg SandfortChief Executive Officer
Our Evolution and Results
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Our Culture is a Competitive Advantage
Value-Creating Business Model with a Healthy Customer Base
Well-Positioned with ONETractor Strategy for Long-Term Growth
Strong Track Record of Results
History of Growing Cash Flows and Cash Returned to Shareholders
Delivering on Near-Term and Long-Term Goals
Seasoned Management Team with Strong Retail Background
Key Takeaways
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Thank You