I'm Peter Benedict, Senior Retail, Consumer Products, and Services Analyst at Baird. Want to be the first to welcome you all to the 2026 Consumer, Technology & Services conference. Really pleased to be kicking things off here with Tractor Supply, the leading rural lifestyle retailer in the U.S. A little more than 2,300 stores currently. They also have 200 or so Petsense locations. The stock carries a market cap of just under $17 billion. With us today, we have CEO, Hal Lawton, CFO, Kurt Barton, and of course, Mary Winn Pilkington, who heads up the IR effort. She's here as well. I think the guys are going to have some prepared remarks, and then we'll do some Q&A. If you have a question, we can try to weave it in, just email sessionone@rwbaird.com. I'll do my best. There will be a breakout session afterwards if you have questions that haven't been addressed. With that, I'll turn it over to Hal. Great. Thanks, Peter. Good to see everybody this morning. Thanks for joining us. Just a couple of opening remarks. As Peter mentioned, Tractor Supply, now over 2,400 stores in the U.S., Farm & Ranch, and then a couple of hundred Petsense stores. This is a business that's 88+ years old now, has a track record of navigating different cycles, and has a very resilient business model. One that has incredible strength and loyalty with our core customer and then continues to expand our total addressable market. Over the last several years, a handful of years, we've made some notable investments and some strategic initiatives. New stores have always been a hallmark of Tractor Supply. Over the last handful of years, we've remodeled nearly half of our stores and made incremental investments in areas like digital and in our Final Mile delivery program. Those have been very successful and created significant shareholder value creation. All that said, our performance in the last couple of quarters, in particular, has been less than what we would have aspired to deliver. That's primarily due to softer end markets that we participate in. Our total addressable market is 40% of our total addressable market, which is Farm & Ranch. Another 20% is pet. Another 20% is home improvement. All four of those sectors are soft and under some kind of pressure relative to their historic norms. That's created some weakness in our business. That said, we're not sitting still, and we're taking some significant action. We can provide some further updates on that today. We provided some of those updates on our most recent earnings call. Namely, those two major areas of immediate action we've been taking have been around re-accelerating our pet business and also further establishing our price -value competitive advantage in the market. We've been navigating in those two areas and putting significant energy and action against them over the last few months and look forward to sharing some of those updates on that. Again, just stepping back, Tractor Supply, an 88+-year-old business, is a hallmark of navigating a variety of different cycles, a very resilient business model, and pleased to be here today to talk with you. Peter, I'll just add onto some of Hal's comments. I thought I'd hit three things that I think all three of them are very focused on, not only for us but for the conference. I'll hit a little bit on our operating environment today. The consumer, particularly the rural consumer, is in our business, what's our focus in the near term? I'll start by saying, very consistent with our typical approach with your conference, we're not coming in providing an intra-quarter business update, but our comments are very purposeful to be more reflective of the broader consumer and customer, the broader retail market. I'll start with the operating environment. No doubt the operating environment today is very different and a bit more cautious than going into the year for most companies. Tractor Supply is inclusive of that. When you think about the operating environment today, with global conflict, higher fuel prices, higher interest rates, longer higher interest rates, and even choppy and much less ideal weather conditions in the environment, our operating environment is a bit more difficult and cautious than we saw going into this market. Take that onto the customer and the consumer. We're seeing very much the same thing that most retailers are saying. We're seeing a consumer that's very highly value-focused, being much more deliberate, discerning in their spend, particularly in the discretionary sides of the business, seasonal or big-ticket purchases. You see customers being much more discerning, planned, and deliberate in that, focused on value. Much more uncertainty on the consumer on the inflation at this point. When we see not only their spending and where they choose to spend in their wallet, but even the surveys that we pulse in with our own customers, our customers are telling us an even greater percentage of the decision-making on their purchasing is impacted by inflation. In the most recent survey that we've given, fuel has now become the highest level of inflationary pressure that they're telling us impacting their decision. When you think about fuel, while it impacts most businesses and all retailers, there's a bit of a uniqueness to the rural customer. The average rural consumer will drive, as an example, 400 miles on average a week. That's about 30% more than a suburban or urban customer. Even more specifically with Tractor Supply, 2/3 of our customers tell us they own one truck, or at least one truck. 25% of them are diesel trucks. In this environment where fuel prices are higher, as you watch, diesel prices have accelerated higher year-over-year than even gasoline prices. For our customer, that's about $50 a week more of inflation, almost $1,500 a year on average —that's pressuring them at this point. Our customer has definitely been resilient over the years in inflationary environments, but certainly recognizing the pressure that's on the business, and we see that. We still see a strong, actively engaged customer in buying needs-based items. Continue to see growth in the SKU and the consumables while the discretionary is underspent. With our customer and for even our business, we're going to continue to monitor the fuel costs, as that can impact not only their decision-making but even our input costs, with higher freight costs as well. With that said, the consumer, our customer, is the exciting thing and what we watch often for the health of the business, our customer continues to be engaged in the lifestyle and continues to be engaged with Tractor Supply. The customer shopping patterns, the engagement, and the loyalty to the lifestyle at Tractor Supply continue to be strong. Retention continues to be solid. We certainly see some of the impact on either what they're spending or the frequency of the spend, but it's great to see those Neighbor's Club members and those customers continue to shop with Tractor Supply. Maybe I'll just end by saying our focus right now is certainly in these environments; our focus is controlling what we can control. With the macro pressures, our team is very focused on executing strongly and driving value to the customers. In these environments, the team does an excellent job, and we're doing it right now to switch and pivot to value drivers for the consumer and driving the needs-based business. Inventory management and cost control are key. Investing in our capital allocation, I'll just end with saying we're going to continue to invest, and you'll see that not only in the near term but long term, investing for the things that give us a strong competitive position. Those items are areas that are really important to drive value and convenience. Investing in digital, investing in the final mile, and unlocking a number of revenue stream opportunities. Localization and Fusion and certainly new store economics, which are really strong, will continue to invest in new stores. These are the things that are helping us offset some of these macro pressures. We're going to continue to lean on those. As far as that capital allocation, we're going to continue to invest in one of the best economic parts of the business, which is new stores. Our balance sheet is strong. It gives us the opportunity to be nimble but yet disciplined on where we're going to invest but nimble to be able to make the investments in different areas of the business. That includes capital allocation on shareholder return. We can be nimble and lean heavier on or adjust share repurchases. We've got all those opportunities with a healthy balance sheet. For the long term, I'll just remind you that a differentiator for Tractor Supply is we have a very resilient, loyal customer base. We have a needs-based business that buoys us in environments like this where there's pressure on discretionary spending, and we have a still -growing opportunity to gain market share in rural America, and we're excited about the long term. Yeah. Those are some of the thoughts. No, that's great. You're addressing a lot of the current issues that are out there, which is great, and I want to take a step. We're going to dig into a lot of what you guys just touched on, but I just want to take a little bit of a step back because you do operate in a very unique market, relative to most retailers. You've got about a 7%-8% market share position, I think when you think across the entirety of the addressable market. Maybe talk about some of the key secular themes that are driving your end markets, where they sit right now, what's working, what's not working from a secular standpoint, and what you think an underlying growth rate should be for this TAM that you guys go after. Yeah. Great. Thanks for the question, Peter. I referenced our total addressable market earlier. Our TAM is over a couple of hundred billion dollars in size. We shared that at our most recent investor conference in the winter of 2024, for those who want to go back and look at that. In that investor presentation, we had a pie chart, and it showed the breakdown of our TAM by sector. I referenced it earlier. About 40% of our TAM is Farm & Ranch. That's kind of our historic core market base. Another 20% is pet. Another 20%, roughly, is home improvement. You've got the remaining 20% across a variety of smaller categories related to our business and markets, things like clothing, et cetera. If you think about those first three sectors that I mentioned, I'll first start with pet because that one's very well-known and documented. That sector has been soft for the better part of two years, and it's projected to continue to be soft this year as well, due to a reduction in particular in the dog population across the country and the impact that has on the business. That sector has been kind of flat to negative, really, for the last one to two years, particularly on the goods side of things. The second would then be home improvement. Again, that kind of sector is very well documented. There were some earnings reports last week, I believe it was, or two weeks ago that just came out talking about that sector. It's roughly flattish as well. Then you think about Farm & Ranch. That may be one that folks who are in this room are less exposed to. Again, you can get credit card data on the Farm & Ranch sector; you can pull Placer.ai data on the Farm & Ranch sector. We continue to outperform in that sector; that sector is flat to negative as well right now. When you take those three sectors and you put them together, that's 80% of our end markets that are kind of soft and kind of weak relative to historic times. Historically, our sector is an at or above GDP growth sector. We have been a share gainer in the context of that. We continue to be a share gainer right now in just more of a softer and weaker environment. Structurally, it's a very sound market. It's consumables-based, it's usable-based, and it's edible-based. It's needs, its essential products. It's an end market that's shown that it's had strength for the last 40+ years. We're confident it'll continue to be that way and that we'll continue to take a share in it. Yeah. You're a dominant player when you think about the Farm & Ranch— Exactly set. You talk about pets, you talk about home improvement; of course, there are all sorts of other companies out there that come to mind. Maybe talk about the competitive set that you guys think about, both the brick-and-mortar -based folks and the digital folks. How has that evolved over the last several years? How do you see yourself fitting in from a competitive standpoint? Yeah, I think, on a competitive front, the way I think about retail now is much like it was just pre-COVID. If you think about Farm & Ranch, that end market, we continue to take significant share. We've got a number of competitive advantages relative to our competition around scale with our manufacturers, supply chain, digital, our Neighbor's Club, et cetera. We're outgrowing the Farm & Ranch market kind of week to week, month to month, by usually two to three points of overall growth. Continuing to take share there and fully expect to do so as we move forward, and have historically always taken share in that market. If you think about home improvement, that market has been reasonably stable. There's not been significant share going back and forth in that market. I think we continue to do well there. We anchor hard on the garden side, in riding lawnmowers. We sell the largest number of riding lawnmowers in the U.S. each year. That's an anchor for us and will continue to be. Obviously, we have a strong tools and hardware business that's anchored in trucks, as Kurt talked about earlier. If you're in our business, you'd say, Oh, this feels like an Ace Hardware, but a little heavier, a little harder, a little more truck-oriented. That sector, I think, the competitive environment's very stable. In pet, it's a sector that's very competitive and one that's, as we all know, increasingly shifting to online. We've got to continue to be very competitive there. One that's increasingly shifting to services. We just made an acquisition that I think positions our ecosystem better in that area of the business. More broadly, if I were just to step back, I think retail is in similar to 2018 and 2019, where it's consolidating. You see, particularly with gas prices where they are, people are visiting less number of retailers, consolidating their trips across those. We are a consolidating retailer. We sell a lifestyle. We don't sell a specific category, so that fares well for us, but we've got to make sure we fight hard for that trip. Yeah. sticking with the companion animal kind of pet business— Yeah there's a macro issue there I think we appreciate, but what's like the self-diagnosis that you guys have done as you look at maybe how you've been merchandising and how you've been approaching that category? Are there changes that you're making to try to kind of maybe bend the curve before the sector turns? Yeah. If I were to step back and just talk about pets for a minute, kind of maybe break it into two buckets of things. One, dog, cat, goods versus services. On dogs and cats, the dog population peaked in 2023, it had a step down into 2024, had a step down into 2025, and is expected to step down again here in 2026. It's been primarily second dogs that haven't been replaced, or singular dogs, of course, when they pass away as well, but mostly second dogs and larger dogs. By contrast, though, the cat population has been going up during that time. You're seeing kind of a crossing of those two groups in terms of their overall growth rate. In our business at Tractor Supply, we are 80% dog, 20% cat. By contrast, the industry is 60% dog, 40% cat. We have a mixed headwind there, in addition to just, in general, a dog headwind in the market. The second thing I'll call out is goods versus services. If you look at pet and kind of across most sector experts right now, it is a flat to maybe modestly up business, call it like a flat to +1. The services side of it is what's leading it up. Call it +5% to +10%. The goods side is negative; call it like -1, -2. If you're in grooming or if you're in vet services or those sorts of things, those are the ones that are growing in the high single digits still. The good side of it, because, one, you don't have new dogs coming onto the market as much as they were three or four years ago, so all the hard -line side of it that goes along with a new dog is depressed. Obviously, if you have fewer dogs in the market, there's less food being bought. The third thing I'll bring up is in the context of food; we've seen a big shift over the last seven or eight years, out of dry food, kibble, into fresh food, which is now nearly 10% of the business. Those are kind of the three main factors, I would say, that everyone in the pet industry is navigating. As it relates to us, what are some of the actions we're taking? First off on the dog/cat piece, we are shifting our space in our stores more to cat so that we've got a square footage that's reflective of the market more so. We're pivoting there, and you'll hear more about our cat expansions. On the dog side, we've got several things that are going on. Over the next six weeks, we'll reset 70-ish% of our dog area in the store. We'll be redoing the entire dog feed area; we'll be redoing the entire snack and treats area, as well as the wellness area. In the snack and treats area, you'll see much more health and wellness, protein, and those sorts of things built in. Similarly, people are feeding their animals healthier foods and diets just like we are ourselves. We also are rolling out Freshpet. We now have Freshpet in over 250 stores. That's been complete. We talked about that on our earnings call, that that would be done by the end of this quarter. That is complete already. We'll be rolling it out to the better part of another 500 stores by year-end. Working to embrace those trends, whether it's on fresh, whether it's on cat, or whether it's on the wellness side inside of dog. Lastly, we just acquired VIP Petcare. This is a business we have worked closely with for the last 15-20 years. They do mobile pet clinics. We see over 1 million customers a year with VIP Petcare. We have 700, 800 stores remaining that we can expand it into, so there's upside on the growth there. The services sector is an area, as I mentioned earlier, that's high single -digit growth in dogs, so it gives us an avenue to play in that more. There's a variety of synergies on the back end I can talk about later in terms of connecting to the Allivet business that we acquired a year and a half ago or connecting into our Neighbor's Club business and driving some loyalty over time there, improved engagement. We're very excited about that acquisition as well. To your point, Peter, we're not standing still. We're very conscious of what the trends are, investing in those trends to re-accelerate our pet business. Another initiative that you guys have been front-footed on is direct sales. Yeah which is kind of maybe an incremental TAM that you kind of outlined a year or two ago. Talk about what that means, why Tractor Supply is a right to win with direct sales, and just a timeframe to kind of start to see that really impact the P&L. We talked about this also at our investor conference a year and a half ago. I'll reference it, and folks can pull some of those slides if they want. There are five core customer segments that Tractor Supply serves. On the kind of more fringe side, we have this customer segment called Country Dabbler. You've got our pet enthusiast. In our core, you've got a backyard homesteader and a hobby farmer. Those are our core customers. Kind of our B2B that's on the left-hand side of that is Big Barn. That is over a $10 billion TAM. It is an area that we've underserved historically because they're more business-oriented. When they're more business-oriented, time is money. They require some different go-to-market approaches than what we've historically done. Namely, those two kind of go-to-market approaches. The first is delivery. You've got to be able to get the product out to their barns, their ranches, and their farms, and you've got to be able to not only get it to the driveway, but you've got to be able to get it into the barn, or you've got to be able to get it into the stable. That's what we're building out in Final Mile. We are seeing a significant amount of success with that. Our Big Barn customer growth has been significant over the last 12 - 18 months. Direct sales, which I'll get to in a minute, has been a big piece of that, but what's been an even bigger piece as we're getting into it is the unlocking of delivery and being able to get the products that our customers want in the quantities they want at the time and in the location they want on the Big Barn customer. Think of this as a bit like our pro strategy for those who hear about it a lot in home improvement. This would be a bit more of our pro strategy. Direct sales for those customers that don't have the time to go into a store to pick their product, or even don't have time to go online to select their items and go through the purchase process there. We have a direct sales team that we've been building out this year that'll do over $50 million in sales that are going out and calling on these Big Barns and these big customers and then taking their orders, building that relationship, and grabbing that volume over time, and it's been very successful. We're a little over a year and a half into the rollout of that program now. Every other month, we're hiring a new cohort, bringing them up, putting them out in the market, and then building that customer base. The strategies we're executing at Big Barn have been very successful, both on the direct sales side as well as on the delivery and the Final Mile side. When you say pro, I think a lot of times investors will start to get back on their heels. Oh, that's a lot of investment. There's a lot of CapEx. Right. Margin dilute. How is the return on capital? Well, what's the investment required to make it happen? When you think about the return on capital of this business, how does it compare to the core Tractor? Yeah, I'll take that. The differentiator with that versus how you, to your point, you normally start to think if you talk pro, it means you've got all this capital and spend. This is very much a hub -and-spoke type environment. It's asset-light. For us, we're utilizing our stores as the source of the product and the base as to where it's being delivered from. You've got a sales force, a sales rep that may cover five, six, or seven stores, and an environment. You've really got a low level of capital, leased trucks, leased vehicles, et cetera, for the field force. It's really not a capital-intensive environment. We can leverage our cross-dock and mixing centers, our distribution centers, and our stores as the source for it. We're implementing principally a field-based team, and so it's not as capital intensive as you often think about a large, big home improvement -type pro approach. Got it. Okay. Stores are critical to the business. As you mentioned, 2,400, target of 3,200, I think, at last check. Talk about the performance of the new stores, what the economics are. You made some decisions on own versus leasing. Then, given the operating environment we're in, what would it take for you to have to reassess that and say, Hey, you know what? 90-100, maybe that's too much," or are we not even at that point yet? I'll talk first about our new store economic model, then I'll talk about some of the quantitative results of that kind of, then talk about how we think about what we do every year in terms of evaluating shareholder capital. On our new store. Our new stores are one of the best investments Tractor Supply can make. Particularly this environment, given where our business results are, very much understand the question around new stores and whether you are kind of driving over the cliff, building too many new stores. What I'd say is a few things on that. Our new store maturity curve benefit still significantly exceeds the impact of cannibalization as well as competitive impact. It's still very much accretive, that kind of math right there. The second thing is, when you look at the return on invested capital of our new stores, they are in the 23%, 24%, 25% range. Right there in that low to mid-20s. Still very much in line with where they were 10, 15 years ago, and in fact, a point or two higher. Our ROICs continue to be very strong on our new stores. If you look at the new store productivity, I think last quarter we were in the high 60s in terms of our new stores opening at our average store sales volume. We're opening up in the high 60s. Our new stores are profitable in the first year, cash flow positive in kind of somewhere between year two and year three. Outstanding investments. We've incrementally improved that investment over the last handful of years, as Peter mentioned, by embracing a sale-leaseback model. Historically, with Tractor Supply, if you think about the ROIC, the return on invested capital, you've got obviously your operating income on the top that the store's spinning off, but then you've got your invested capital on the denominator side. Historically, the way that invested capital would work is we would go to a developer, and we'd say, We want this location. You go build it for us and finance that build, and then when it's done, we'll have an agreed-upon lease, and you can go flip that store in the market. They would typically spend $6 million-$6.5 million to build the store, typically flip it for $7.5 million-$8 million, and pocket somewhere between $1.25 million-$1.75 million in net for that effort. What we're doing with half of our stores is we're using our balance sheet to fund that 18-month development cycle, and we're paying the developer a $500,000 flat fee. Instead of them making, say, one or two, as I mentioned earlier, they're now making $500,000. That $700,000 is coming back to us. As I mentioned, it takes $6.5 million or so to build a store, so we're saving 10% right there in the cost of building our stores. We're able to then sell it immediately on the open market because we very much have a lease operating strategy and bolster our invested capital there. New stores continue to be an outstanding investment for our shareholders. They continue to return well. We are not kind of driving off that proverbial cliff. All that said, all the time, throughout the year, but certainly about this time of year as we start to think about annual planning for the next year, we're always looking at what the right way to allocate our capital is. We've increased store counts from 70 - 80 - 100 over time. We've gone up and down depending on the operating environment that we're in. Certainly always reserve the right to do that as we move forward. If we were to do something like that, it would not be drastic, like a 50% or 60% store reduction. It would be some toggling up and down, as we've had historically 10 or 20 stores up or down as we see the environment and our need to evolve to reflect the environment. This is a business that's always evolved to reflect the environment, and we certainly would do that again if we think it's prudent. Right. All right, well, the doors are opening in the back of the room. I think that means our time is up. Time went fast. There will be a breakout session in the Astor Room. Join me in thanking the folks from Tractor Supply. Thanks, Peter. Thank you