Good morning, ladies and gentlemen, welcome to Tractor Supply Company's conference call to discuss first quarter 2023 results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, 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 be advised that reproduction of this call in whole or in part is not permitted without written authorization of Tractor Supply Company. As a reminder, this call is being recorded. I would now like to introduce your host for today's call, Ms. Mary Winn Pilkington, Senior Vice President of Investor and Public Relations for Tractor Supply Company. Mary Winn, please go ahead. Thank you, operator. Good morning, everyone. Thanks for taking the time to join us today. On the call today are Hal Lawton, our CEO, Kurt Barton, our CFO, and Seth Estep, EVP and Chief Merchandising Officer. After our prepared remarks, we'll open the call up for your questions. Please note that we have made a supplemental slide presentation available on our website to accompany today's earnings release. Let me reference the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. This call may contain certain forward-looking statements that are subject to significant risk and uncertainty, 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. Given the number of people who want to participate, we respectfully ask that you limit yourself to one question. If you have additional questions, please feel free to get back in the queue. I appreciate your cooperation. We will be available after the call for follow-ups. It is my pleasure to turn the call over to Hal. Thank you, Mary Winn, good morning, everyone, thank you for joining us today. For today's call, I will go through some highlights of our first quarter. Seth will then share some merchandising initiatives and updates, Kurt will review the quarter and our outlook in greater detail. Before we get started, I'd like to thank the Tractor Supply team for their ongoing commitment to each other and our customers. No matter the operating environment or how the seasons of the year unfold, this is a team that is always there for our customers and our communities to be the dependable supplier for the out here lifestyle. For nearly 85 years, our business has proven to be resilient, stable and very consistent as we provide needs-based, demand-driven product categories as a lifestyle retailer. Now let's turn to a review of the business for the first quarter of 2023. We grew net sales by nearly double digits at 9.1%, with comparable stores up 2.1% and diluted earnings per share of $1.65. We had 7 points of non-comp sales growth in the quarter. The two primary drivers were new stores and the Orscheln acquisition. We opened 17 new Tractor Supply stores and three Petsense by Tractor Supply stores in the quarter. The Orscheln integration is running ahead of schedule. Our comp sales results were below our expectations. We attribute just over 200 basis points, the majority of our sales miss, to a delayed start to the spring and to a lesser extent, a milder January. We continue to closely review customer data for trends and changes in their behavior. While select discretionary categories were below the chain average, this was offset by stronger demand in our consumable, usable and edible products. We believe our customers remain resilient but are being judicious with their spending as they seek us out as a destination for value and are buying closer to need. Excluding our seasonal categories, our sales were in line with our expectations and our core business remains very strong. Our comparable store sales growth was driven by ticket growth of 2.8%, offset by a decline in transactions of 0.7%. Importantly, our comp transaction trends improved each month of the quarter and were positive in February and March, with strong performance in our year-round categories. The strength in our year-round categories was driven by CUE products, which exhibited ongoing impressive demand this quarter. These products are needs-based and demand-driven and are what drive trips and transactions to our stores. Across companion animal and livestock, we had strong performance. The strength we've experienced over the last three years in our CUE customer trends remains robust as we continue to gain material market share. In companion animal, we continue to see substantial share gains throughout the category, and we're seeing sequential increases in the number of customers shopping us for this category each week, each month, each quarter. In livestock, our Chick Days event is shaping up to be the largest ever for us, with the poultry category up strong double digits. Not only are we seeing growth from existing customers, we're also seeing robust growth in new customers to the category, driving both trips and ticket. One exciting aspect of the new customers to the poultry category is that they're gravitating to our unique offering of premium breeds and organic feed products for their chicks. Chick Days is a great gateway for our new customers to explore Tractor Supply and use this as a resource for all things related to homesteading beyond poultry to categories like gardening. Big Ticket declines were driven by seasonal trends and to a lesser degree, ongoing pullback in discretionary categories. The slow start to spring impacted outdoor power equipment, which weighed on our big ticket results and average ticket. The most significant pressure was in zero turn tractors, generators, and trailers. Our customers have a long history of buying these items based on need. Current trends support that we are seeing purchasing consistently closer to the season or moment of need. Overall, our big ticket trends were very similar to what has been reported in the recent March retail sales data. Our mobile app currently represents more than 20% of our digital sales. The app is now ranked in the top 100 shopping apps on the iOS store. This is a major recognition of the progress in our ONETractor strategy to offer our customers a more seamless shopping experience. Our customer scores continue to run at all-time highs. Overall, our customer experience metrics continue to keep momentum into 2023 with strong improvements over the last quarter and year-over-year. Our store teams are doing a tremendous job servicing our customers. Our Neighbor's Club just celebrated last week a significant milestone with over 30 million members. As our points-based program enters its third year, the strength in Neighbor's Club continues to exceed our expectations. Our members are comping at a faster rate than our overall performance, and we continue to see strong growth and retention in our high-value customers. As mentioned previously, the Orscheln Farm and Home integration is going very well. I had the opportunity recently to visit one of our first store conversions to the Tractor Supply brand. There was excitement across both our team members and importantly, our customers as they recognize that we're committed to providing the region with an elevated product assortment, a meaningful loyalty offering, an enhanced digital shopping experience, and so much more that Tractor Supply is able to offer. During the quarter, we opened our ninth and largest distribution center in Navarre, Ohio. The ramp of the distribution center is right on schedule. With the opening in the new DC, the integration of 81 Orscheln stores, and addition of new TSC stores, we capitalize on the opportunity to realign the store servicing areas across the DC network to balance transportation costs and DC capacity while improving service levels to our stores. It is great for our DC network to have this new capacity to better position our inventory and better service those stores and allow us to reduce our freight costs, which you'll hear more about from Kurt. At Tractor Supply, our purpose as a company is to serve Life Out Here. As we celebrate our 85th anniversary this year, we remain steadfast in our commitment to preserve and protect our way of life. Two weeks ago, we issued our Fourth Annual Stewardship Tear Sheet, highlighting the actions and progress that we've made on our sustainability, DE&I, and community commitments. I am proud of our progress towards our ambitious stewardship goals, but know there is more to be done as we work towards achieving our net zero and other goals heading towards 2040. To wrap up, while our first quarter sales were below our expectations, we have a lot of the year still ahead of us. The American consumer broadly remains challenged, but we believe that our customer remains resilient. Spring continues to be cooler and wetter as we've turned into Q2. That said, we're encouraged by quarter-to-date trends with comps mid-single digit and comp transactions positive. Based on our experience and the nature of our needs-based, demand-driven business, we continue to believe that the best way to look at this business is on the halve as the timing of spring impacts the first half of the year. While we acknowledge that the softer sales in January will not be recouped, we are pleased with our lineup for spring and summer. As a company, we have numerous levers to continue to gain market share and numerous levers to effectively control expenses. We continue to see significant opportunities for growth and earnings growth as well. With the majority of the year remaining, we are reiterating our guidance for fiscal 2023. Before I turn the call over to Seth, I'd like to share some background on Seth and the merchandising team at Tractor Supply. Seth is an 18-year veteran of Tractor Supply, having held roles across marketing, finance, e-commerce, and merchandising. He has a passion for this lifestyle and has served as our chief merchant since 2020. Given our record sales growth over the last three years, we recently completed a realignment of our merchandising product categories and promoted two vice presidents to two senior vice presidents to better support the growing needs of our business. Seth will provide a review of our sales by category and our plans to continue to gain market share. Now I'll turn the call over to Seth to discuss some further insights. Thank you, Hal. I'm excited to share with you some insights into our merchandising categories and market share position. We are committed to driving sales productivity as we deepen our relationships with our customers. I'd like to start by congratulating Nicole Logan, SVP of Animal and Softline divisions, and Randall Dodds, SVP of Seasonal and Hardline divisions, on the recent promotions. They each bring significant retail and industry experience that complement their tenure at Tractor Supply. These new roles each have three merchandising divisions reporting to each of them. It is exciting to have this new organizational structure to allow us to operate at greater scale, have deeper category insights, and enhance strategic partnerships. Overall, we're now organized into six merchandising divisions. Let's start with our largest division, Companion Animal, that represents more than 20% of our 2022 sales. This business includes both the consumables and hard lines across companion animal. Around 75% of the Tractor Supply customers have a pet. Approximately 50% have more than one pet. Our customers' dogs weigh on average about 20 pounds more than the U.S. average. With the ongoing humanization of companion animals, these key structural tailwinds support our positive outlook on this category. We are a destination for pet customers with a comprehensive and differentiated assortment at an everyday low price. We continue to gain share. Our growth in pet food, treats, and litter continues to lead the market in both dollar and pound growth, gaining another 33 basis points of share in Q1. Our business model of private brands, strong national and differentiated partners, club pack sizes, and legendary customer service sets us up to continue gaining share, perhaps even more if we see the consumer more pressured for value. Moving on to our second-largest division, Livestock & Equine, which represents just under 20% of sales. This is a key category for Farm and Ranch, and we continue to consistently outperform the market. Of note, this category is almost solely the consumables portion of our livestock feed categories. In other words, this business does not include fencing, which in many ways can be considered containment for large animals. With strong exclusive brands like DuMOR and Producer's Pride, along with national brands from Purina, Cargill, Triple Crown, and more, we continue to innovate across our key categories of poultry, equine, and cattle. We are the clear leader in this space with approximately 20% market share. Broadly, one out of every five bags of animal feed is bought at Tractor Supply, and we continue to take share, consistently outperforming the market by 5 percentage points. Next up in our category lineup at an equal weighting are our Seasonal and our Truck, Tool & Hardware divisions. We are excited to get our spring seasonal business off and running. This is an area where we think we have substantial share opportunities. We are a leader in core categories like outdoor power as the destination for zero turn mowers and categories like grass seed and fertilizers. Our live goods assortment is included in this division. As of today, we have more than 350 garden centers ready for spring, with the vast majority just entering year two of operations. Where spring weather has cooperated, we are very excited about our customers' response to the expanded product offering and layout in our Fusion and Garden Center stores. More broadly, this season, we are offering a differentiated garden assortment of live goods, including vegetables and plants, soils, mulch, and chemicals tailored to Life Out Here. We like our initial reads for seasonal products where the weather has turned and are excited for the spring season. Our fourth division is Truck, Tool & Hardware. It includes lifestyle items like trailers, power tools, welders, and truck accessories. Historically, in tools, we have serviced as a convenience play in power tools and hardware. As part of our Fusion layout, we have made significant investments and corresponding progress on elevating our power tool selection, and it has resulted in one of the highest sales lift categories in our Fusion stores. The additions of Makita, Bosch, and Dremel, coupled with being the exclusive retail destination for PORTER-CABLE power tools, has allowed us to have consistent share gains over the last three years. Up next is our Ag and Outdoor Recreation division, which includes categories such as fencing and sprayers, as well as our outdoor sport categories. We are in the business of helping people maintain their land and contain their animals. We have the largest share in the country and have outgrown the market by mid-single digits. For outdoor recreation, we are very excited about the growth prospects for this segment as we test an expanded assortment in several Orscheln Farm and Home stores. Our final segment ranked on sales volume is Clothing and Decor, which has exhibited rapid growth since the pandemic, trending well above the company average. This business includes apparel, footwear, and farmhouse decor. As one of the largest retailers of Carhartt, along with other brands like Wrangler and Columbia, our customers are finding our assortment meets their workwear needs and their lifestyle. For years, we've known there was a market opportunity in women's workwear at Tractor Supply, and the team has leaned into this category, and the shopper is responding. While still off a relatively small base, our women's apparel business grew 24% in Q1, led by growth in our exclusive brands of Blue Mountain and Ridgecut. We will continue to look for ways to grow these high-margin categories by growing both leading national and best-in-class exclusive brands. In closing, with our new alignment and additional resources, Tractor Supply is well-positioned to continue to be the market leader and operate with speed, agility, and efficiency to capture growth and drive sales productivity. We are in the midst of one of the most exciting times at Tractor Supply as we are in the spring season. I hope you get a chance to get out to our stores and see all the exciting merchandising experiences and product innovation. I'll turn it over to Kurt. Thank you, Seth, and hello to everyone on the call. I will add on to Hal's comments about the quarter and our outlook for the year. Let's start with our first quarter results. Regarding the cadence of comp sales for the quarter, we started out with a soft January. Last year's January was strong, so we expected to start soft, but we did not anticipate that the month would be the second warmest in 30+ years. February was more normalized and in line with our expectations. The mild winter continued to pressure results. To put it in perspective, our heating categories were down nearly 50%. Insulated outerwear was down over 30%, and emergency response categories were also down significantly. As a result, our winter seasonal products were down double digits for the quarter. Our expectation was that as we moved through the quarter, we would see a more normalized spring selling season unfold. Where we saw the majority of the shortfall was really in the last three weeks of March, which were abnormally wet and much cooler than normal, as well as winter weather continued in the Midwest and Northeast. To put it in historical context, March was the coldest in four years with below average temperatures nationally, the wettest in eight years, and the snowiest in 30 years. Correspondingly, our spring seasonal products were flat to the prior year, well below our expectations. Sales in the quarter benefited in the high single digits from retail price inflation. Most of this inflation reflects retail price changes that were put in place in the second half of 2022 that we have not lapped as of yet. The benefit of price inflation to our average ticket growth was offset by three key factors. First, the majority of the pressure on average ticket all revolved around seasonal goods. This includes the softness in big ticket, declines in seasonal, which runs at a higher average ticket, and higher winter clearance. Second, faster growth in consumable transactions, in particular companion animal and poultry, which typically have a lower average ticket. Third, to a lesser extent, a reduction in units per transaction in impulse or add-on items like dog treats and candy and snacks. Moving down our income statement, gross margin was 35.5%, an increase of 52 basis points from 34.9% last year. We were very pleased with these results. We remain committed to being the everyday low price leader in our markets. Promotional activity was in line with last year with a modest increase in winter clearance as we looked to exit the season clean. Moderating freight costs for import and domestic shipments provided a net gross margin benefit. Our price management initiatives and lower freight costs more than offset the impact from cost inflation and product mix from the robust growth of our C.U.E. categories. As a percent of sales, SG&A expenses, including depreciation and amortization, increased 119 basis points to 28.1% from 26.9% a year ago. For perspective, about a half of this growth was anticipated for our strategic initiatives. As a reminder, our planned investments included higher depreciation and amortization from the step-up in capital spending to support our growth agenda and the addition of our new distribution center and the impact from the Orscheln acquisition. The remaining increase in SG&A as a percent of net sales was primarily attributable to deleverage given the moderate comparable store sales growth. As we've mentioned, the quarter was trending in line with our expectations leading up to the last three weeks of March, providing limited opportunities to adjust the cost structure. Specifically, we chose to continue to fully fund payroll for the last three weeks of the quarter to support the spring season, utilizing the hours to get ahead on product assembly and other sales-driving tasks. For the quarter, operating income was essentially flat with last year, with a modest decline in net income. Diluted EPS was $1.65, also flat with the prior year's first quarter. We opened 17 Tractor Supply stores and three Petsense by Tractor Supply stores in the first quarter. This represents a significant improvement in the cadence of our new store openings. Turning now to our balance sheet. Merchandise inventories were $3 billion at the end of the first quarter, representing an increase of about 12% in average inventory per store. This increase is primarily attributable to inflation, a better in-stock position from last year, and the delay in the spring selling season. We are pleased with how we exited the winter season and the quality of our inventory as of the end of the first quarter. With strong annualized cash flows, we continue to maintain a healthy balance sheet with a leverage ratio of around 2.0 x. Our guidance for 2023 is unchanged. We continue to expect full year sales of $15 billion-$15.3 billion and project comparable store sales to increase 3.5%-5.5%. As we manage to the first half of the year, we expect to see comp sales towards the top half of our guidance for the second quarter. Are pleased with the growth in C.U.E. products along with DIY categories like repairs and maintenance. Let me share further insights on the outlook for the remainder of the year. We anticipate Q2 and Q3 to have the strongest comp sales growth potential, while Q4 is expected to be closer to the low end of the guidance range due to the strong compares of the prior year. Operating margin performance is expected to improve as we move through the year, with Q4 having the highest potential, principally from the lap of the one-time acquisition-related costs of Orscheln. As a reminder, our Navarre, Ohio distribution center is expected to begin to benefit gross margin in the second quarter with a ramp-up in the second half of the year as we capture freight savings. The benefits in gross margin will be offset by approximately 15 basis points of negative drag on SG&A as the cost of the distribution center are reflected in SG&A. We have confidence in our earnings in a variety of sales scenarios. For example, at times, a cooler and wetter start to the spring can provide an extended selling season. We've seen this type of seasonal cadence before, such as 2013. We are cautiously optimistic of the upside it can bring to the third quarter. Regardless of the state of the consumer, we are confident in the resiliency of our business model and our ability to manage the business. In a scenario where we do not make up missed January sales, we see opportunities for further operating leverage. Specifically, we are seeing an easing of our supply chain capacity constraints, which should drive additional efficiencies in the second half. We now anticipate greater accretion from Orscheln in the back half. We are raising our accretion assumption to $0.15 per share compared to our prior expectation of $0.10 per share. To sum it up, for the full year, we continue to guide toward net income of $1.13 billion-$1.17 billion and diluted earnings per share of $10.30-$10.60. Over my 23 years with Tractor Supply, it has been proven time after time, weather can be transitory, and the best way to look at our business is not by the quarter but by the halves of the year. In this environment, what sets Tractor Supply apart is our ability to effectively manage the top line and bottom line while investing in our Life Out Here strategic growth drivers. With that, I will turn the call back to Hal. Thanks, Kurt. Tractor Supply has a proven business model that has been resilient over many business cycles. Throughout our 85-year history, we have successfully navigated all types of business environments and have emerged stronger each time. We continue to see positive migration trends to our markets. This marks the third consecutive year of positive population growth in rural America. This reflects an increased desire to seek out more space and take advantage of the affordability that country suburban, ex-urban, and rural markets offer, with a lower cost of living and the ability to live Life Out Here. It is our view that the sense of community found in our markets, and perhaps more importantly, the ability to secure a piece of property at a reasonable price, has ensured the rural migration trend is one that's here to stay for the time being. The millennial generation has embraced Life Out Here. Our customers have been resilient thus far in the face of slower macroeconomic growth, elevated inflation and higher interest rates. They prioritize their lifestyle and passions. With significant growth in market share opportunities, we are excited about the balance of the year and remain confident in our business. My thanks and appreciation go out to the team for their dedication to living our mission values every day. Now we'd like to open up the call for questions. Thank you so much. We will now begin the question-and-answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. Our first question comes from the line of Steven Zaccone with Citigroup. You may proceed. Great. Good morning, everyone. Thanks for taking my question. I wanted to start just thinking about the context of the year. Given the, you know, the slightly weaker than expected same-store sales in the first quarter, can you just talk about the confidence to recover these spring sales over the balance of the year? It sounds like January can't be made up, but how material is that for the full year? Then just you sounded a bit more cautious on discretionary from what you've seen from your consumer. Just elaborate on how much that could be an impact to the full year. Thanks very much. Yeah. Hey, Steven. Good morning. It's Hal. Thanks for your question. Thanks for joining our call. We remain very confident in our, in our sales guidance or in our earnings guidance for the year. As we stated on the call, about 200 basis points we were below our sales comp expectations by about 200 basis points due to weather. About 80% of that was due to the spring fall off in the last 3 weeks of the quarter, with about 20% of that being in January. January is a much smaller component, particularly when you look at it over the fullness of a, of a year. As Kurt said, there are a number of ways that we see path to recovering not only the spring sales, but potentially the winter sales as the year progresses. As he mentioned in the year 2013, and there are several other years that have similar profiles, where you've had a cooler, wetter spring that has pushed the season into the summertime as yards remain green and growing, pastures remain growing, cultivation in farms continue to happen, and our business remains strong into those years, into those months. In particular, if you recall, last year, in the midst of summer, we had a 1 in 10-year drought. The lapping of that looks very promising. On the consumer more broadly, we've not seen a sequential change in consumer behavior from Q3 and Q4 last year into Q1 of this year. The same themes that we were sharing last year are the same themes that we would reiterate here on this call. Discretionary, which only represents 15% of our business, continues to perform under average. The pace of that is about the same as it was in Q3 and Q4. Our units per transaction continue to face modest pressure, low single digits, as consumers continue to be judicious in their basket. We've been calling that out for the last couple of quarters. Otherwise, we've really not seen any sequential change in consumer spending. There's some categories where we're seeing consumer shift up in their spend. In poultry, our organic feed continues to be the strongest segment in our feed. In dog food, we are seeing economy continue to be strong, but that's actually due to the increased customers that Seth called out. If you look at our core customer base from one year ago and two years ago, they haven't changed at all their food buying behavior. Really not a lot of change in the consumer behavior from last year. Big ticket continues to run about the same. The January falloff was measurable but small. Really, it came down to the last three weeks of the quarter, which were cooler, wetter, and snowier, you know, than we anticipated on top of a, you know, underperforming spring last year. Great. Thanks for all the detail. I'll cede the floor. Yeah, thanks, Steven. Thank you for your question. The next question comes from the line of Scot Ciccarelli with Truist. You may proceed. Good morning, guys. Scot Ciccarelli. Hal, this may be a function of my fading memory, but I don't recall you guys talking about customers buying closer to need before. If I'm wrong about that, I apologize. If that's the case, can you give us an idea of how much that has changed over the last, say, six months in terms of buying closer to need? Did you guys expect that behavioral shift when you provided your initial outlook? Hey, Scott. I'll reference that really just in the context of dominantly of big ticket and the fact that, you know, historically, if you were to take out 2021 when you had the stimulus and you were to take out 2020 when there was a modest stimulus combined with obviously COVID, I think, you know, if you were to go back over, like, my 20+ years history in retail and home improvement and farm and ranch, Seth and Kurt, I think we'd all say that, like, things like riding lawnmowers, you know, bigger ticket items like that, customers typically buy them when they need. The vast majority of those categories or purchases are needs-based. That's really what we were trying to signal is we're seeing more of that than we did kind of in 2020 and 2021. Really more of a reversion to kind of historic purchasing patterns of those sorts of categories. Nothing otherwise intended to be implied. Got it. Okay. Just a normalization of what you have historically seen prior to pandemic-related changes? Exactly. Nothing otherwise intended to be implied. Thanks for the clarification. Got it. Got it. Thank you. Thank you for your question. The next question comes from the line of Chris Horvers with JP Morgan. You may proceed. Thanks. Good morning. My follow-up question on the, on the weather and the April trend is, you know, April was pretty historically bad last year as well. You know, spring really broke in May and June. I'm assuming May and June got a lot better for you. How are you thinking about, you know, you talked about 2Q being at the high end of the range for the year. How are you thinking about the current trend versus the harder compares? Is it just April's still cold and wet, the mid-single digit's not necessarily reflective of the potential despite the harder compares? Yeah. Hey, Chris. As we called out, quarter to date, we're, you know, nearly done with April, is mid-single-digit comps and low positive single-digit comp transactions. Given the cool wet weather that's continued into April, we're relatively pleased with that performance. As a recollection from last year, June was not a strong spring selling season. Last year's spring only had a handful of really good weeks, and then it went very hot. That's what I was referencing earlier about the drought. If you recall on our Q2 call, we started to talk about the drought in the back half of June and into July. We reiterated that we saw that impact us for the first six, eight weeks of Q3 as well. You know, we are optimistic that we can have a solid May comp on top of a weaker June and have an extended selling season into July and August this year, particularly in core areas for us like Florida, Texas and California. You know, California and Texas in particular, you know, were under extreme drought conditions by the time we got to mid-June last year and really extended into September. You know, as we know, those areas have had extreme weather the first quarter of this year. We're all reading about the flooding in California and such, and we think that'll bode well for us as we get into the summertime in those areas of the country. Got it. As a follow-up on the margin line, you know, the historically your first quarter gross margin is a decent indication of what the year looks like. It also sounds like, some things are breaking your way on the freight side and inventory is very clean. Is there just a general bias upward, over the year on the gross margin line? You know, could that lead to some potential operating margin upside as, if sales come in line with plan? Yes. Thanks for calling that out, Chris. As Kurt mentioned in his prepared remarks, we see a variety of ways for us to achieve our guidance this year, both on the sales side and on the earnings side. As it relates to earnings, there's a number of expense opportunities that are starting to show up, if you will, particularly in our supply chain and in the Orscheln integration costs. You know, on the gross margin side, look, this is the benefit of being a scaled player in our market. When you start to see kind of just a little bit of moderation in pricing, you know, we're able to take advantage of that and drive some upside in our gross margin rate and still remain incredibly price competitive and lead the market there. Additionally, we've seen container costs come down significantly, and that's starting to flow through. It had some impact in Q1, but it will have more impact in Q2 and Q3. Also, domestic freight is starting to trend down as well. There was a couple of, I think recently one of the big freight companies mentioned that we were in a freight recession or depression. you know, that bodes well for us in terms of being able to leverage our scale to drive down freight costs, in particular because we've got new routes to market coming online with our new DC and obviously with the 150 stores we have that we're building plus with Orscheln. We feel really good about our gross margin rate performance. Do feel like there's continued upside as we look towards the year. That's one of the reasons it gives us strong confidence to be able to reinforce our guidance. Thank you. Have a great finish to spring. Thank you for your question. The next question comes from the line of Simeon Gutman with Morgan Stanley. You may proceed. Hey, good morning, everyone. Quick follow-up to the last question. Your Q1 gross margin, it looks like it's the highest ever. Can we just talk about the conceptual drivers, not some of the seasonal movement, but why is it the best ever? The 200 basis points of weather, I think Hal called out in the prepared remarks, is that a spread between certain markets? Was there anything in that regarding the judicious comment you made on the consumer, or is that pure weather? Hey, Simeon, this is Kurt. I'll hit both of those. Why don't I start with the second one first? It's a quick one. The, the variation between geographies, between weeks all reinforce what Hal was just saying. To your question, if you take, like, the Midwest, Northeast, Commonwealth states, you compare that to the rest of the geographies, you did see a disparity because those states had a very mild winter where it's really strong for them, and then they saw no spring. They basically saw more snowfall in March than they did in January. We did see a very clear disparity between those from low or mid-single-digit negative to mid-single-digit positive in the other geographies, which, you know, again, just gives us the confidence in the trends of the business. On the gross margin question, I'll give the primary drivers, and I'll just give you the order of magnitude on what we're seeing in gross margin. These are all areas of structural improvements. These are things that we plan for, but are, as Hal said, we see continued upside in gross margin. First is our price management was the biggest driver of that. That was offset by the second, which would have been mixed impact from Q. The third was benefit from freight. Freight's the one that we believe continues to have potential benefit going forward. On price management, just a couple of points on there. When we talk price management, it really includes more than just managing the retail price. It's the retail pricing, it's the management of everyday low pricing, our promos, and then even the cost negotiation and concessions. Seth and the team did an excellent job leveraging our scale, our size in this environment to produce a strong enough price management direct margin to offset more than offset the CUE. Between retail price management and pressure from CUE, that was about half the benefit. Transportation was about the other half. Thank you. Good luck. Thank you for your question. The next question comes from the line of Seth Sigman with Barclays. You may proceed. Good morning. Thanks for taking the question. I want to follow up on a couple of the last points. I think you raised the accretion by $0.05 for Orscheln, which is obviously encouraging. You did keep the full year guidance and probably appropriate just given the Q1 challenges. Can you just help frame what some of the underlying changes may be in that guidance? Because it sounds like the message is that, you know, you should be able to recoup a lot of the sales from Q1, maybe not January, but the bulk of the rest. Gross margin seems to be tracking ahead. SG&A, while it was elevated, it does seem to be as planned and maybe just we were all mismodeling it. Is there anything else that you could sort of point to within that? Yeah. Hey, good morning, and thanks, Seth, for the question. I'll speak just about Orscheln integration for a moment. First off, the integration's going very well. Most importantly, it's being well received by the Orscheln team members as they're converting to Tractor Supply team members. It's also being really well received by customers. Even more so than I anticipated. Secondly, the team is doing a fantastic job cadencing the stores and transitioning them over to Tractor Supply banners. We have several done already. We've got almost 20 that are converted from a point-of-sale transaction. We're implementing the Fusion remodel on all of them. We are ahead of schedule on those transitions. What that allows us to do is to take our back half plan and optimize a bit how the expense structure that we had planned. Specifically, there's two elements that are driving that. The first is our IT integration cost. Our team's doing an excellent job integrating from an IT perspective, and we're finding some leverage there and some need to not have to spend what we previously anticipated. The second is around the sale of the SSC and the DC. We previously planned that to the end of the year. We're now optimistic that we can pull that forward by maybe a month or two or three, and we'll save some dollars there as well from an operating cost perspective. In general, the Orscheln acquisition is going very, very well. We're very pleased with how it's progressing and wanted to share that outlook today. You know, more broadly, what I'd say is, I think like most companies that are reporting this weekly cycle, You seem to see a lot of people holding guidance in spite of like what you just articulated, some upside for us on gross margin rate, on expense and others, just in the spirit of because there's a lot of the year left to go. Okay, understood. Thanks very much. Thank you for your question. The next question comes from the line of Brian Nagel with Oppenheimer. You may proceed. Hi, good morning. Thanks for taking my question. I sorry for, you know, beating a dead horse here, but with regard to weather, I just wanna make sure I'm hearing this correctly. I mean, you know, clearly there was a weather disruption here in Q1. You know, it sounds like in early Q2, you've seen sales pick up or sales grow, comp sales pick up meaningfully. In markets across the country where there was no weather disruption, are sales there tracking consistent with how you would expect them to track? Hey, Brian. Brian, this is Kurt. Yes. On that, I'll just continue to give a few points. In areas where they're not as impacted by weather, you heard me mention to the previous question, the South, the Texas area, far West, all those areas, we saw a performance in line with our expectations versus the areas of the North and Midwest where it was below our expectations. I'll also add, what also is so evident to us is that internally, when we look at the variation by categories in merchandising, the categories that are not impacted by, you know, weather variations, right in line with expectations. When we look at the weeks within it, you can look at the first few weeks and the last three weeks, you see which weeks are not like the others. When we look at our external measurements where we've utilized market industry information on that, it also confirms that Tractor Supply outperformed the market. In farm and ranch, we've seen in market industries, it's running negative in those, especially in those areas where there is a lot of farm and ranch co-competition. From all the data points that we see for Q1, the softness was seasonal. As we look throughout the rest of this quarter, it's really a matter of, you know, when does spring start? It's not if, but when. It's a matter of whether it's ideal, typical, poor, but Tractor Supply has been able to pivot and be able to manage each of those quarters. To Hal's point, it's very much shaping up like one of those years where it gives us the opportunity for a good extended selling season. Brian, this is Hal. Just to add on to that, I mean, if you, if you go back and look at weeks eight, nine, and 10, where we were starting to comp on some tougher weather from last year and kinda late spring, early March was actually good weather, kind of reasonably across the country, we had high single-digit comps those three weeks. As you get into the last three weeks, we had negative comps those three weeks, and it was driven by the geographies that Kurt mentioned, you know, kinda from the state of Virginia all the way up through the Northeast through the Midwest. You know, they were comping on top of tough weather from last year, and it was worse weather than that we had this year. You know, if you look at areas like Kurt said in Florida and Texas and elsewhere, you know, we had, we had good seasonal, spring seasonal businesses in those areas. Really, we just point to those three weeks. Then as we said, as we bounced back here in April at the mid-single digit comp rate. No, that's very, very helpful. Just one quick follow-up. Again, I'm not asking you necessarily to be meteorologists, but, you know, as you look at the dynamic here, as we've had this, you know, what seems to be a very wet, you know, late winter, early spring Historically, has that ever not led to an extended spring or in a spring that was actually better for Tractor Supply? We'd love to be a weather predictor and be good at it. As you know, most of the weather forecasts you get are 12 months out and then like three weeks out. The reason we brought up 2013. 2014, by the way, was a kind of reasonably similar year pattern where you had a similar. In In fact, we went back and pulled our earnings transcripts from those dates and looked at them, and we almost had a very similar earnings call where we talked about weather in Q1, cold weather could potentially lead to an extended selling season into the summer. That, sure enough, is exactly what happened in both of those years. That's why we brought it up to say there is very much a precedent for it. In particular, this year we'll be comping on top of a one-in-10-year drought last year. We're cautiously optimistic, that, you know, we can have an extended selling season this year, which would be on top of tougher comps, I mean, easier comps from last year. Got it. I appreciate it. Thank you. Yeah. Thanks, Brian. Thank you for your question. The next question comes from the line of Kate McShane with Goldman Sachs. You may proceed. Hi. Good morning. Thanks for taking our question. We wanted to ask about market share. There seemed to be a lot of commentary on this, and I wondered if you could remind us, you know, what assumption you are making for market share in your guide for this year. Was it something you saw an acceleration of in the first quarter? With some of the changes you're highlighting with the new leadership and merchandising in those categories, are you expecting more of a lift in market share than maybe originally planned, or is that more for 2024? Kate, hey, this is Kurt. Our original expectation and guidance, just to reiterate that, we see as we enter this year, GDP growing 1%-2% was our assumption, then Tractor Supply has historically been growing outside of that as we're grabbing market share. Another 1% or 2% of growth beyond that. Where Seth talked about, you know, where we're gaining market share, we are certainly gaining market share in categories like companion animal, in poultry, in other areas. That gain is part of what we expect to be able to do. I'd also say as we look at this year, where there may be any challenges in regards to consumer, this is a great opportunity. Just like we saw where some discretionary saw some softness offset by a robust gain in market share. I think that's the resiliency of the business, and that's one of the exciting things, is that if there's some softness in some categories, we've got opportunity in live goods, companion animal, and others to gain market share. We see upside to our market share gains compared to our standard model for this year and the next couple years. Hey, Kate, just to add a couple of points on that. Thanks for your question. This is Seth. In general right now, if we look at our business and we think about where we're gonna continue to grow market share, again, to Kurt's point, we are very excited to see market share gains, particularly like in our companion animal or our pet and our dog businesses, as well as on the cat side. you know, our entire portfolio, if you call it like in pet food, is growing extremely strong. As Hal mentioned earlier, we're seeing our current customer base or previous customer base really maintaining those categories in which they were purchasing. They're coming more often, and we're gaining a lot of new shoppers across the portfolio. We think our merchandising strategy and our portfolio strategy, particularly in things like pet and pet food, is very much a strategic advantage for us to continue to gain market share. Newness and innovation is critical. Our merchants are continuing to drive comprehensive resets across the box and where they're planned. If you also look at other items that are relevant to the lifestyle, whether that be like poultry, feed, forage, sporting goods, as we mentioned earlier, we are continuing to lead in those categories. For us, we are by far leading share, in the industry and in farm and ranch, far away leading pet share gains. We don't anticipate that slowing down based off the activity that we're seeing and the customer response we're seeing in our database today. Thank you. Thank you for your question. The next question comes from the line of Scott Mushkin with R5 Capital. You may proceed. Hey, guys. Thanks for taking my question. A little bit focus on the merchandising management team. You're obviously beefing it up, so I was wondering, you know, what drove that decision? Do you see significant opportunities to expand the total addressable market? If yes, where do you think those opportunities are? Hey, Scott. Yeah, Seth. Thanks for the question. Absolutely on those questions today. You know, for us, you know, kind of what we said earlier, for us, you know, as we continued to grow rapidly over the course of the last few years, we saw an opportunity to continue to double down and drive at a greater scale our merchandising activities. Really driving towards innovation, really driving towards strategic partnerships, driving into categories, driving into regionalization, localization, so that we can really maximize all the work we're doing with like our Fusion, our garden centers, all those type things. If we look at our portfolio strategy, we see share opportunities across many of the areas of our addressable market. We just mentioned pet. We see that we continue to have opportunities there. We reorganized our feed and our core livestock and equine division to species, where we're really driving a category management approach. We're basically taking the way in which we've managed our pet business over the course of the last few years and applying those same category management principles on new items, shopper insights, adjusting the flow, localization, regionalization, to continue to make sure that we are offering the best-in-class shopper experiences. We have new shoppers entering today. I mentioned we're gonna be piloting some things like an Orscheln Farm and Home. Sporting Goods did very well for us in Q1, we're gonna continue to lean in where we have our strengths. A lot of those categories today are just in our center core for six months. We think we have an opportunity to drive those businesses year-round. I can go on and on. We think that the new structure that we're putting in place today is allowing us to have more agility, continue to move fast, operate at scale, and continue to drive deeper, partnerships and innovation. Very excited about this, and, we're starting to really see, some programs come to life, under this new structure. Do you see the data from the frequent shopper card helping you with the vendors and the relationships getting stronger and more beneficial? Absolutely. You know, leveraging our 30 million members in our database is such a strategic advantage for us, not only in farm and ranch, but just in broader retail and the categories in which we serve. We are continuing to deep dive into those categories, and we are partnering in a significant way with our vendor base to say, "Hey, where do we continue to end up, you know, where we have opportunities? What are those cohorts that we need to continue to go after? And how do we continue to drive regionalization, localization, and use that into our assortment planning process?" Absolutely. Neighbor's Club is fundamental to everything we're doing, not only from a marketing perspective, but it is a core driver of everything we're doing in merchandising because the customer is what we're looking to continue to drive to make sure we know where their needs are today, but where they're going in the future. Thanks, guys. Yeah. Thank you for your question. The next question comes from the line of Steven Forbes with Guggenheim Partners. You may proceed. Good morning, Hal, Seth, Kurt. I wanted to revisit the Side Lot plus Fusion remodels, in terms of cost versus sales lift as we sort of approach the core of the spring selling season here. Two-part question. One, can you remind us of the net cost of such projects and whether you've been able to sort of improve, the net spend, behind these projects as you scale the initiative? Then two, has the spring selling season, albeit early, changed your expectation, right, for the overall sales lift or the ROIC, that you expect to generate, behind the spend as well? Yeah. Hey, Steven, thanks so much for the question. I'll hit three things quickly, and just in the sake of time. First off, the capital spend for both the garden center projects, kind of Side Lot transformations and the inside the store Fusion transformations continues to reduce. It's a key area of focus and one of our primary metrics that we're evaluating our performance on our strategic initiatives this year. The second thing is the performance of our Fusion and Side Lot remodels are continuing to perform at the same rate as they have been the last couple of years, which we're incredibly pleased with because we're now reaching significant scale on both inside of our company. The third thing is we are very pleased with the live goods performance. I think it's strategically, gonna be big for us this year. It's a low-cost way for people to beautify their yards. There's gonna be a lot of refreshing coming out of the December and November storms that happened. We are well positioned for that. Kind of one of the things we always talk about is you can now see live goods sales, quote-unquote, from space in our daily and weekly sales reporting, which is exactly what, you know, the plan was at the beginning of the year now with 350 garden centers. All right. Operator. Thank you. We'll try to get one more question in. Absolutely. The final question comes from the line of Peter Benedict with Baird. You may proceed. Hello, guys. Thanks. Thanks for sticking this in. I guess I'll ask one about inflation. Kurt, just curious, I know high single-digit retail price inflation in the first quarter. Your thoughts on 2Q and then in the back half of the year, is that changing at all? You know, as you hear, you've talked about a lot about some costs coming down, supply chain costs coming down. I'm curious if you're at a point where you're actually seeing some kind of all-in product costs coming lower year-over-year in certain areas and how you're dealing with that from a pricing standpoint. Are there areas of the business where you're actually seeing, let's call it the price deflation at a retail level, year-over-year? Is that not something that's gotten to that point yet? That's my question. Thank you. Yeah, Peter, I'll hit those. On the inflation, our outlook on the retail price inflation for the year hasn't changed much at all. A vast majority of retail price inflation, as I mentioned in Q1, was what was put in place in the second half of last year. We're seeing a bit of a steady plateau. Maybe some categories like pet will continue to see some. Our expectation is high single digit Q1 moving into the mid single digit. Q2 to maybe slightly lower in Q3, then getting into low single-digit Q4. We're not seeing significant cost deflation. At this point, there may be some deflation in certain areas of the business, but overall, there's some disinflation that we have expected in there. The great thing is, this year we expect to see comp transactions really being a key driver to it. That's what we're seeing right now, as Hal mentioned. Our expectation as the year unfolds, it really is a good balance between ticket and transactions. Lastly, I'd say what is exciting, you heard this from both Hal and I, is in other parts of the business, in costs, in SG&A, we are taking advantage of our ability to use the scale where there's either excess capacity or there's costs coming down. The operating expenses have efficiencies there. You heard that in some of our messaging. Hopefully that helps answer the question. A lot of great expectation, our ability in any sales scenario to really have increased operating margin in 2023. That's helpful. Just to follow up on something you mentioned, that you brought up transactions, it's encouraging to see them up despite the soft seasonal stuff. I know that would not have been the case several years ago with this business. I'm just curious maybe if you guys can talk a little bit about the role that Neighbor's Club might be playing in this. I mean, just how those members are shopping more frequently, if they are, how you're expanding your wallet with those members. I know there's a lot of marketing initiatives underway on that front. Just maybe a little bit more on the behavior of your Neighbor's Club members and how that might be something that's helping maintain the traffic during periods of seasonal weakness. Thank you. Yeah, absolutely, Peter. Neighbor's Club has been a integral part of driving our business and enabling customer behavior, particularly on our consumables. You know, more and more of our customers are signing up for our private label credit card. We announced last quarter that we'd reached for the first time $1 billion in sales on that credit card. You get a 5% discount when you use the credit card in your purchases, which drives, you know, kind of repeat behavior on food and feed in particular. As Seth talked about, we are outgrowing the feed market by 5 points repeatedly every single quarter. You know, we have a 20% share, far and away the largest share in the market in that category. Same thing on dog food. I mean, we are far and away the share leader in dog food. Doesn't matter what metric you look at, pounds, units, dollar growth, and even new customer counts. Every single week, our new customer counts for dog food are going up. Those are what we can count on to drive our transactions. I think one of the things you mentioned is, you know, the business is kind of changing it to some degree, you know, from kind of three, four, five years ago in terms of having the scale we have in pet food now to complement the scale we've always had in animal feed. That's driving positive comp transactions for us. As we said, even in March, where we had dip, soft weather on the seasonal side, it still allowed us to have positive comp transactions. All right, operator, this will wrap our call up. All right. Thank you, Peter. Operator, that'll conclude our remarks today. Thank you to everyone for joining us. We look forward to speaking to you on our second quarter call in July. I'm around all day, so please reach out if there's anything that I can do, and I look forward to speaking to you. Thank you. That concludes today's Tractor Supply Company's conference call to discuss first quarter 2023 results. Thank you for your participation. You may now disconnect your line.