Tractor Supply Company. Lehman Brothers Ninth Annual Retail Seminar May 2, 2006

Transcription

1 Tractor Supply Company Lehman Brothers Ninth Annual Retail Seminar May 2, 2006

2 Safe Harbor Statement This presentation contains certain historical and forward-looking information. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 ( the Act ). All statements, other than statements of historical facts, which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), business strategy, expansion and growth of the Company s business operations and other such matters are forward-looking statements. To take advantage of the safe harbor provided by the Act, the Company is identifying certain factors that could cause actual results to differ materially from those expressed in any forward-looking statements, whether oral or written, made by or on behalf of the Company. All phases of the Company s operations are subject to influences outside its control. Any one, or a combination, of these factors could materially affect the results of the Company s operations. These factors include general economic cycles affecting consumer spending, weather factors, operating factors affecting customer satisfaction, consumer debt levels, pricing and other competitive factors, the ability to attract, train and retain highly qualified employees, the ability to identify suitable locations and negotiate favorable lease agreements on new and relocated stores, the timing and acceptance of new products in the stores, the mix of goods sold, the continued availability of favorable credit sources, capital market conditions in general and the seasonality of the Company s business. Forward-looking statements made by or on behalf of the Company are based on a knowledge of its business and the environment in which it operates, but because of the factors listed above, actual results could differ materially from those reflected by any forward-looking statements. Consequently, all of the forward-looking statements made are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business and operations.

3 Agenda Company Overview The Out Here Lifestyle Our Customers Competitive Environment Competitive Advantages People / Customer Service Merchandising / Marketing Distribution Center Network Real Estate Site Selection Growth Channel - Del s Farm Supply Store Economics / Financial Data

4 Company Overview

5 General Information Founded in 1938 by Charles E. Schmidt Listed on NASDAQ: TSCO since 1994 Largest retail farm and ranch store chain in the United States Sales of $2.1 billion in stores in 37 states

6 Position Statement Tractor Supply Company s unique collection of rural lifestyle products and seasoned advice enables you to pursue life on your own terms. Unique products Seasoned advice Support for a lifestyle, the Out Here lifestyle

7 Store Averages 16,300 Sq. Ft. Inside Selling Space 6.5 years old $ 3.8 million in Sales Team Members 15,000-16,000 SKUs

8 Customer Profile Average age 45 Gender 50% female shoppers High indices - horses, pets, pickups Household income - 15% above national average Cost of living - below national average Lives the Out Here lifestyle

9 Tractor Supply Store Locations

10 Competitive Environment Fragmented competition Independent farm, feed and equine stores One privately held chain of 130 stores Small chains with 5 to 35 locations Tractor Supply complementary to Big Boxes & home centers Differentiated products and shopping experience Benefit from their traffic

11 Farm Retail Chain Store Counts Tractor Supply Orscheln Rural King Blain's Mills Atwoods

12 Competitive Advantages

13 Executive Leadership Joe Scarlett - Chairman - joined company in 1979 Jim Wright - President and CEO October 2000 Jerry Brase - SVP, Merchandising and Logistics Stan Ruta - SVP, Operations 1994 Tony Crudele - SVP and CFO September 2005 Over 120 Years Combined Retail Experience Insider Stock Ownership = 13.4%

14 Quarterly Executive Store Visits 2 days travel with 1 day Recap and Action Plan Up close look at Stores Communication with and feedback from Store Teams Leadership Development Opportunity New Site and Competitor Store Visits

15 Building Store Teams Hire Hard, Manage Easy Company Mission Hiring for attitude Hiring our customers Farmers & Ranchers Horse Owners Welders Employer of Choice To work hard, have fun and make money by providing legendary service and great products at everyday low prices.

16 Development Programs Training Programs for: Manager Trainees Assistant Managers Leadership Annual Review Process

17 Merchandising Strategy Products that fit our customer s lifestyle Product assortments differentiated from Big Boxes Constant testing of new items and new programs You can buy everything we carry someplace else, but you can t find someplace else that sells everything we carry.

18 Animal & Pet Products 31%, includes: Pet Food and Animal Feed Pet and Equine Supplies Fencing Bird Feeding Animal Health Pet Supplies

19 Seasonal Products 24%, includes: Riding Mowers Lawn & Garden Power Equipment Heating & Cooling Recreational Vehicles Toys & Seasonal Gifts

20 Hardware & Tools 18%, includes: Generators Compressors Welding Supplies Power and Hand Tools Material Handling Paint Plumbing Supplies

21 Truck, Trailer, Towing, and Lube 12%, includes: Truck Tool Boxes Trailers Lubricants Fuel Handling Tires & Accessories Batteries & Accessories

22 Clothing & Footwear 9%, includes: Men & Boys Pants Men & Boys Shirts Ladies Pants & Shirts Insulated Outerwear Footwear Clothing Accessories

23 Farm & Ranch Maintenance 6%, includes: Tractor Maintenance Equipment Repair Agricultural Sprayers and Chemicals

24 Private Label Private Label Brands represent 17% of our business

25 Addition of E3 Technology JDA E3 Solution Implementation Lower Carrying Costs Reduce Inventory Levels Increase Service Levels and Sales Improve Buyer Productivity

26 Delivering Customer Value Superior customer service with seasoned advice Customer driven merchandising assortments Convenient location & hours Easy in and easy out Guaranteed Satisfaction

27 Marketing Reaching our customers through: Circulars in more than 1100 small town papers Cable television Equine magazines Direct mail / Web site

28 Distribution Center Network Pendleton, IN Opened 2000, Expanded 2004 Waco, TX Opened 2003 Braselton, GA Leased; Opened 2004 Hagerstown, MD Opened January 2005 Waverly, NE Opened December 2005 Hagerstown, MD Distribution Center

29 Site Selection Process Refined Strategic Process to Identify Future Store Sites Census Data Department of Agriculture Statistics Specific Customer Profiles Recommendations to Real Estate Committee

30 Opportunity for Locations

31 Del s Farm Supply Small Box, Land, Animal, Rural Lifestyle Store Average Sales - $2.1 million Equine, Animal & Pet 70% Prototype 1.25 Acres Store 8400 Sq Ft 4800 Selling, 3600 Warehouse Added 5000 Sq Ft Shed

32 Capital Expenditures Investments 2003 to 2005 $ (in millions) New store growth & relocations Improvements to Existing stores Distribution Centers Information Technology Corporate & Other Total $50 $93 $79

33 Store Economics / Financial Data

34 New Store Investment $ (in thousands) Inventory $ 750 Leasehold Improvements, Fixtures and Signage 450 Total $1,200 Increase in Vendor Payables <300> Investment Required $ 900

35 New Store Proforma $ (in thousands) First Year Third Year Sales $3,000 $3,600 Pre-Allocation Profit 165 (5.5%) 380 (10.6%) Pre-Opening Costs (100) - Incremental Overhead (60) (65) Incremental Advertising (30) (15) Incremental EBIT ($ 25) $ 300 Pretax return on investment year three, 33.3%

36 Q Performance $ (in millions) % Change Sales % Gross Margin % Earnings Per Share $0.01* $0.02 * includes $0.03 per share for treatment of stock options Quarter End Store Count % Same Store Sales 3.7% 4.2%

37 2006 Financial Guidance 2006 ($ in millions) Sales $2,350 to $2,400 Same Store Sales 3.0% to 4.0% Net Income $95 to $99 Earnings per Share $2.32 to $2.39 New Stores 78 to 80 Capital Expenditures $75 to $80

38 Company Performance Net Sales and Earnings per Share Net Sales (in $ billions) $2.5 $2.0 $1.5 $1.0 $0.5 $ Year CAGR Sales = 19.2% EPS = 29.2% $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 Earnings Per Share Net Sales Earnings Per Share (diluted)

39 Sales Growth Same Store Sales and Sales per Store Same Store Sales % 12% 10% 8% 6% 4% 2% 0% $3.8 $3.6 $3.3 $3.0 $2.6 $ % 3.8% 9.6% 7.0% 9.9% 5.7% $4.0 $3.0 $2.0 $1.0 $0.0 Net Sales in $ Millions Same Store Sales Average Sales Per Store

40 Transaction Trends Transaction Count and Average Ticket Avg Transaction Count $43 $42 $41 $40 $39 $38 $37 Average Ticket $36 Transaction Count Average Ticket

41 Investing in Tractor Supply Dominant player in proven niche; limited competition Significant room for store expansion Infrastructure in place to support future growth Strong culture Aligned and experienced leadership team

42 Tractor Supply Company Check out our website: