WEBVTT - Tractor Supply's CEO on How It Escaped the Post-Pandemic Curse 0:00:03.200 --> 0:00:16.360 Bloomberg Audio Studios, Podcasts, radio News. 0:00:20.320 --> 0:00:23.480 Hello and welcome to another episode of the Odd Lots podcast. 0:00:23.600 --> 0:00:25.799 I'm Tracy Alloway and I'm Joe Wisenthal. 0:00:26.079 --> 0:00:27.400 Joe, you know what I did this weekend? 0:00:27.680 --> 0:00:32.840 Something outdoors in your garden or maybe a home construction project, 0:00:32.880 --> 0:00:35.840 but something that was very dirty and costly and time 0:00:35.840 --> 0:00:37.600 consuming and an. 0:00:37.560 --> 0:00:39.120 Economical Thanks Joe. 0:00:39.560 --> 0:00:40.120 Yeah, but. 0:00:41.680 --> 0:00:43.600 I'm sure it's very satisfying on some level. 0:00:44.080 --> 0:00:46.800 Well, I did do a lot of that. I'm restoring 0:00:46.840 --> 0:00:49.360 an orchard at the moment, and it's a lot of 0:00:49.400 --> 0:00:52.000 hard work and a lot of supplies. As you pointed out, 0:00:52.040 --> 0:00:54.480 I'm currently building a gate, and I think the gate 0:00:54.680 --> 0:00:57.600 is going to be phenomenally expensive by the time I 0:00:57.640 --> 0:01:00.840 finally finish it. But what I actually did this weekend, 0:01:01.000 --> 0:01:02.680 or one of the things I did, was I went 0:01:02.720 --> 0:01:03.840 over to tractor supply. 0:01:04.400 --> 0:01:07.600 Oh I'm jealous, you know, amazingly I still haven't been 0:01:07.640 --> 0:01:11.960 to one. Wait, Tracy, are you a hobbyist farmer? It 0:01:11.959 --> 0:01:14.200 would you call yourself that if you have an orchard? 0:01:14.360 --> 0:01:14.520 Right? 0:01:14.880 --> 0:01:18.200 Yeah, I mean I guess we have blueberries and raspberries 0:01:18.280 --> 0:01:22.319 and strawberries and apples and apple pears and all of 0:01:22.319 --> 0:01:25.039 that stuff. So yeah, yeah, I guess it's my hobby. 0:01:25.120 --> 0:01:27.600 You know, we did that episode about Tractor Supply last 0:01:27.680 --> 0:01:30.320 year with the professor who had done that HBS study, 0:01:30.840 --> 0:01:34.880 and by it sounds like you are the modal Tractor 0:01:34.920 --> 0:01:35.840 Supply customer. 0:01:36.360 --> 0:01:39.560 Please, Joe, I prefer cottage core elder millennials. 0:01:39.640 --> 0:01:40.480 Okay, well that's no. 0:01:40.600 --> 0:01:42.480 It makes me sound like a character out of like 0:01:42.840 --> 0:01:44.240 Final Fantasy or something. 0:01:44.760 --> 0:01:44.840 No. 0:01:45.280 --> 0:01:47.360 So I went over to Tractor Supply. And the reason 0:01:47.360 --> 0:01:51.160 I went is because it's chicken season. So they have 0:01:51.320 --> 0:01:54.360 all the baby chicks over there and you can kind 0:01:54.360 --> 0:01:56.520 of see them in their little enclosure, and I can 0:01:56.600 --> 0:01:59.640 fantasize about the day when I will have my own 0:01:59.720 --> 0:02:01.360 chicken and what kind I will get. 0:02:01.880 --> 0:02:03.480 But in the meantime, you have to build like ten 0:02:03.520 --> 0:02:05.600 other things like and then you can get around to 0:02:05.640 --> 0:02:06.640 building the chicken coop. 0:02:06.720 --> 0:02:09.400 Yeah that's right. I've got big plans for the chicken coop, 0:02:09.680 --> 0:02:11.800 all right. But the reason I bring it up is 0:02:11.840 --> 0:02:15.040 because Tractor Supply is a company that is sort of 0:02:15.040 --> 0:02:19.200 of perennial interest to us. So last year we recorded 0:02:19.240 --> 0:02:23.320 an episode with Michael Roberto when he published a case 0:02:23.360 --> 0:02:27.840 study for Harvard Business School on Tractor Supply, and even 0:02:27.919 --> 0:02:32.720 before then, I remember Samuel Rnes, the CORBU analyst, he 0:02:32.960 --> 0:02:35.720 had always called this company one of the most interesting 0:02:35.800 --> 0:02:39.640 retailers on the planet. So it's sort of loomed large 0:02:39.720 --> 0:02:43.160 over our consciousness. And I think the interesting thing about 0:02:43.240 --> 0:02:47.839 the Tractor Supply Company is there's this question of cyclical 0:02:48.040 --> 0:02:51.720 versus structural. So this is one of the companies who 0:02:51.840 --> 0:02:56.040 share a price and revenue really boomed during the pandemic. 0:02:56.120 --> 0:02:58.760 Lots of people were staying at home, lots of people 0:02:58.800 --> 0:03:03.040 became hobby farmers, as you point out Joe, buying tomato 0:03:03.160 --> 0:03:07.600 cages and growing their own vegetables from seed whatever, and 0:03:07.680 --> 0:03:09.799 so there was an expectation that a lot of that 0:03:09.960 --> 0:03:13.000 business would start to subside or at least slow down 0:03:13.160 --> 0:03:15.520 as people started going back to work, or some of 0:03:15.560 --> 0:03:19.920 the moving from urban areas to the suburbs started to reverse. 0:03:20.200 --> 0:03:25.239 But instead seems like this particular market just continues to grow, 0:03:25.440 --> 0:03:28.960 and Tractor Supply share price is still very, very high. 0:03:29.000 --> 0:03:31.440 You're absolutely right, So the stock is really close to 0:03:31.520 --> 0:03:34.640 an all time high, continues to power higher. You know, 0:03:34.720 --> 0:03:37.520 like fifteen years ago this was like an eight dollars stock. 0:03:37.600 --> 0:03:39.800 Today it's a two hundred and forty nine dollars stock. 0:03:40.160 --> 0:03:42.000 You look like you could be looking at a chart 0:03:42.040 --> 0:03:44.680 of in video or something, and it is striking that 0:03:44.720 --> 0:03:46.800 you don't have to be an AI company. 0:03:46.640 --> 0:03:47.920 To see charts like this. 0:03:48.080 --> 0:03:50.200 If you like find the right product, the right lane, 0:03:50.240 --> 0:03:52.360 the right store mix, et cetera, and you are on 0:03:52.400 --> 0:03:55.120 the right secular trends such as the rise of the 0:03:55.120 --> 0:03:57.840 hobbyist farmer, people moving out to the exerbs, growing their 0:03:57.880 --> 0:04:01.480 own chickens, et cetera. It's an amazing case study on 0:04:01.520 --> 0:04:03.720 how to like, how to execute. 0:04:03.520 --> 0:04:06.120 Absolutely So today I'm glad to say we really do 0:04:06.240 --> 0:04:08.040 have the perfect guest because we are going to be 0:04:08.080 --> 0:04:12.080 speaking to the CEO of Tractor Supply, mister hal Lawton. 0:04:12.400 --> 0:04:14.920 He joins us. Now, thank you so much for coming 0:04:14.960 --> 0:04:15.520 on the show. 0:04:15.560 --> 0:04:17.960 How Hi Tracy, Hi Joe, Thanks so much for having 0:04:18.000 --> 0:04:19.960 me on. Look forward to talking with you all today. 0:04:20.200 --> 0:04:23.839 Likewise, we are very very excited about this conversation, not 0:04:24.000 --> 0:04:25.919 least because it's a way for me to sort of 0:04:25.960 --> 0:04:29.799 reflect on my own spending happens so for Tractor Supply, 0:04:30.480 --> 0:04:33.360 but maybe just to begin with, you know, Joe called 0:04:33.360 --> 0:04:37.160 it the hobbyist farmer. There's a bunch of different names, 0:04:37.480 --> 0:04:41.120 cottage core, millennial type lifestyle, but like, who do you 0:04:41.240 --> 0:04:46.000 think of as your primary customer? Rural enthusiast is the 0:04:46.040 --> 0:04:47.239 other one that I remember. 0:04:47.720 --> 0:04:50.520 Yeah, you know, I think all those names are used 0:04:50.560 --> 0:04:53.960 frequently to reference our customer and kind of our Our 0:04:54.040 --> 0:04:57.080 main kind of theme that we ladder up to is 0:04:57.320 --> 0:05:00.320 life out here. And the reason for that is is 0:05:00.520 --> 0:05:03.520 we went out maybe seven or eight years ago and 0:05:03.800 --> 0:05:07.680 talked with our customers, and you know, these customers range 0:05:07.720 --> 0:05:11.880 from living in West Texas and they've you've got cattle, 0:05:12.040 --> 0:05:15.599 maybe living in Wisconsin and have a dairy farm, or 0:05:16.279 --> 0:05:19.159 you know, could be living here in Tennessee and have 0:05:19.960 --> 0:05:22.560 five to ten acres and they do a little gardening. 0:05:22.640 --> 0:05:25.120 Maybe they have some small animals, chickens, or they could 0:05:25.279 --> 0:05:29.120 half acre, you know, one acre unincorporated, you know, suburb 0:05:29.240 --> 0:05:31.920 exurb with you know, a raised bed garden in their backyard, 0:05:32.080 --> 0:05:34.440 or could be a dog breeder, and you know, just 0:05:34.520 --> 0:05:37.240 these whole range of customers that have different lives that 0:05:37.279 --> 0:05:39.920 they live. But what we found when we talked with 0:05:39.960 --> 0:05:43.040 them was they all used the words well out here 0:05:43.360 --> 0:05:47.240 in the description of their lifestyle, and it was just 0:05:47.279 --> 0:05:50.640 a very common phrase that all of our customers used, 0:05:50.680 --> 0:05:53.320 and so we ended up kind of laddering it up 0:05:53.360 --> 0:05:56.120 to that and saying, you know, we're built to serve 0:05:56.279 --> 0:05:59.760 life out here, and that plays itself out in so 0:05:59.800 --> 0:06:02.760 many different ways and so many, you know, variants of 0:06:02.800 --> 0:06:07.440 the lifestyle, whether it's hobby farmers, you know, horse owners, 0:06:07.600 --> 0:06:10.760 chicken owners, you know, whatever the passion they may be gardening, 0:06:10.800 --> 0:06:12.680 et cetera. But at the end of the day, they 0:06:12.720 --> 0:06:16.520 all have a lifestyle mentality philosophy that kind of ladders 0:06:16.600 --> 0:06:18.640 up to this notion of life out here, which is 0:06:18.680 --> 0:06:24.920 around freedom and self reliance, homesteading, the love of animals 0:06:24.920 --> 0:06:25.920 and pets and land. 0:06:26.320 --> 0:06:26.840 I love that. 0:06:26.920 --> 0:06:30.120 So since we are recording, since Tracy and I are 0:06:30.120 --> 0:06:34.040 in the Bloomberg HQ studios in Manhattan, I'm going to 0:06:34.160 --> 0:06:37.240 use the phrase out there, because we're certainly not out 0:06:37.240 --> 0:06:40.640 here right now, so we're talking about out there. You know, obviously, 0:06:40.680 --> 0:06:43.280 tractor supply has been growing a long time, and then 0:06:43.320 --> 0:06:46.440 it does seem to have at least helped been turbo 0:06:46.600 --> 0:06:49.880 charged by some of the changes that happened during COVID. 0:06:50.080 --> 0:06:53.080 I only realized this morning that you started in January 0:06:53.120 --> 0:06:56.560 twenty twenty, so you've probably never known like tractor supplying 0:06:56.560 --> 0:06:59.400 the normal times. But talk to us about, like how 0:06:59.440 --> 0:07:03.080 you distinguish sort of long term and short term trends 0:07:03.120 --> 0:07:05.360 in out heariness. Because I'm sure there was a bunch 0:07:05.360 --> 0:07:07.359 of people like, Oh, we're gonna move out to the country, 0:07:07.360 --> 0:07:09.520 We're gonna have chickens, we're gonna buy pets, et cetera. 0:07:09.680 --> 0:07:11.560 We know that some of that has slowed down or 0:07:11.600 --> 0:07:12.200 some of that was. 0:07:12.200 --> 0:07:12.720 A one off. 0:07:13.000 --> 0:07:15.280 So how do you think about the trajectory of the 0:07:15.320 --> 0:07:19.320 outhereeness and whether COVID was it an accelerant, was it 0:07:19.400 --> 0:07:21.440 something that went up and then we're back to trend, Like, 0:07:21.440 --> 0:07:25.200 how do you think about the growth of what's sustainable 0:07:25.600 --> 0:07:26.119 out there. 0:07:26.320 --> 0:07:29.640 It's a great question and it's one that's been asked 0:07:30.040 --> 0:07:34.160 repeatedly over the last few years about our business. To 0:07:34.200 --> 0:07:38.600 your point, we were eight point four billion dollars in 0:07:38.720 --> 0:07:43.480 revenue in twenty and nineteen. We did fourteen point six 0:07:43.600 --> 0:07:48.520 billion dollars of revenue in twenty twenty three. You know, 0:07:48.600 --> 0:07:52.480 that's roughly a twenty percent compound annual growth rad over 0:07:52.520 --> 0:07:57.240 those years, so significant growth for you know, particularly for 0:07:57.280 --> 0:08:02.840 our retailer with over two thousand store so reasonably mature. 0:08:03.200 --> 0:08:07.440 We would articulate that the majority of that sales lift 0:08:07.600 --> 0:08:11.440 we've seen and the increased customer transactions and new customers 0:08:11.440 --> 0:08:15.440 that are shopping us is structural in nature, and I 0:08:15.480 --> 0:08:17.520 can get into the reasons for that, but I would 0:08:17.560 --> 0:08:19.520 just say at the highest level, I think, you know, 0:08:19.600 --> 0:08:22.760 what we've seen in our business is very different than 0:08:22.840 --> 0:08:26.240 many of the other kind of COVID winners that you 0:08:26.240 --> 0:08:28.960 know went kind of boom to bus to some degree, right, 0:08:29.000 --> 0:08:32.920 whether it was everybody you know jumped on a peloton 0:08:33.000 --> 0:08:34.880 because they couldn't go to a gym, and then you know, 0:08:34.880 --> 0:08:39.920 we saw that reversion. Everyone started you know, using videos, meetings, 0:08:40.120 --> 0:08:42.120 things like zooms and stuff. And now you've got to 0:08:42.160 --> 0:08:44.280 shift back right where people are still doing that but 0:08:44.320 --> 0:08:46.720 obviously in person now. And you know, you look at 0:08:46.760 --> 0:08:50.920 even like other retailers who sell say electronics, who had 0:08:50.960 --> 0:08:53.760 a huge search because everybody needed a computer or a 0:08:53.760 --> 0:08:57.280 new router or you know need some other needed wanted 0:08:57.320 --> 0:09:00.760 a new TV, and then that all back. I mean, 0:09:00.760 --> 0:09:03.080 there's a lot of circumstances. We can think about different 0:09:03.080 --> 0:09:05.760 companies and different sectors that had a boom and then 0:09:05.800 --> 0:09:09.319 a reversion you know, with us, it's been different because 0:09:09.520 --> 0:09:12.439 for the most part it's been macro structural. But I 0:09:12.480 --> 0:09:15.320 would also assert that we've done some things hopefully that 0:09:15.360 --> 0:09:18.079 have helped make that, you know, structural. The big thing 0:09:18.120 --> 0:09:21.520 I would push on is really just the millennial generation. 0:09:22.200 --> 0:09:25.520 And at the timing that COVID was occurring, the millennial 0:09:25.600 --> 0:09:29.800 generation was kind of late twenties, early thirties, and you know, 0:09:29.840 --> 0:09:32.920 it'd been a question for a decade whether or not 0:09:33.040 --> 0:09:36.280 that generation was going to revert to to kind of 0:09:36.280 --> 0:09:40.680 the normal behavioral trends that other generations had followed, or 0:09:40.760 --> 0:09:42.599 were they going to be different. Right, we'd read the 0:09:42.679 --> 0:09:45.240 numerous stories on this is going to be a rental generation, 0:09:45.440 --> 0:09:47.920 and it's going to be an urban generation, et cetera, 0:09:48.000 --> 0:09:52.120 et cetera, right, and sharing generation, and you know, lesser kids, 0:09:52.640 --> 0:09:55.439 they're you know, lesser you know, buying homes and those 0:09:55.480 --> 0:09:59.680 sorts of things. And what we're seeing is that that 0:09:59.720 --> 0:10:04.480 gener generation is reverting to previous generational norms, they're just 0:10:04.520 --> 0:10:07.679 doing it a little later. And what we would articulate 0:10:07.840 --> 0:10:09.400 is that COVID was actually a. 0:10:09.480 --> 0:10:11.600 Catch up versus a pull forward. 0:10:11.720 --> 0:10:16.840 And historically that generation, say twenty six twenty five twenty 0:10:16.880 --> 0:10:21.920 seven would have started to you know, create household, buy homes, 0:10:22.160 --> 0:10:25.719 I begin to have children, those sorts of things, and 0:10:26.000 --> 0:10:29.080 they just pushed that out till twenty eight, thirty, thirty, two, 0:10:29.200 --> 0:10:31.640 thirty three, depending on where their age fell in that 0:10:31.760 --> 0:10:35.400 generational span. But you know, they're following the same steps, 0:10:35.400 --> 0:10:36.920 which is like, all right, like I've been in the 0:10:36.960 --> 0:10:37.520 city for. 0:10:37.440 --> 0:10:40.240 Five or ten years, I've kind of done that. 0:10:40.640 --> 0:10:42.480 It's time for me to you know, kind of get 0:10:42.520 --> 0:10:46.040 on with the next phase of my life. And many 0:10:46.080 --> 0:10:48.240 of them did that in twenty twenty and twenty twenty 0:10:48.240 --> 0:10:49.679 one and are continuing to do that. 0:10:49.720 --> 0:10:50.720 I mean, we still see. 0:10:50.520 --> 0:10:54.239 A net exodus out of urban even in twenty three. 0:10:54.920 --> 0:10:58.199 And when they're buying homes, both because of the current 0:10:58.320 --> 0:11:01.319 home environment they have to buy a bit more ex 0:11:01.480 --> 0:11:04.480 urban or country suburban as we would call it, but 0:11:04.559 --> 0:11:08.160 I think also their preference is to buy in those areas, 0:11:08.400 --> 0:11:11.040 and so they're buying homes and have been since twenty 0:11:11.080 --> 0:11:14.880 twenty in the areas where our stores are, and they're 0:11:15.000 --> 0:11:19.600 naturally wired for our type of business. You know, they 0:11:19.679 --> 0:11:25.760 come predisposed to gardening, they come predisposed to things like recycling, 0:11:25.880 --> 0:11:29.720 and and whether it's vegetarian or fresh foods. But you know, 0:11:29.720 --> 0:11:31.880 if you think about the mental lifestyle that they were living, 0:11:31.880 --> 0:11:34.640 even in a city, when they go out into kind 0:11:34.640 --> 0:11:37.520 of country suburbia, ex urban rural, you know, they want 0:11:37.559 --> 0:11:40.520 to have a similar mentality. So they get animals. They 0:11:40.559 --> 0:11:43.680 do raised bed gardens, they do chickens. In fact, now 0:11:43.720 --> 0:11:47.160 we're seeing that generation start to move into goats as 0:11:47.240 --> 0:11:52.640 they think about, you know, the vegetables and get the 0:11:52.720 --> 0:11:53.120 right milk. 0:11:53.280 --> 0:11:55.400 My husband and I have been talking about goats. We've 0:11:55.400 --> 0:11:58.880 been having a debate on goats versus sheep. Specifically, there's 0:11:58.880 --> 0:12:01.160 a type of sheet called a be doll sheep and 0:12:01.280 --> 0:12:05.199 it looks absolutely adorable. Sorry I interrupted you. How go ahead, 0:12:05.200 --> 0:12:06.920 I I could talk about it. 0:12:07.960 --> 0:12:11.600 Basically, you've catalyzed yet another whole in Tracy's pocket book 0:12:11.720 --> 0:12:12.320 with the sheep. 0:12:12.440 --> 0:12:13.040 The sheep, And. 0:12:30.360 --> 0:12:33.240 That's really interesting. And you sort of jogged my memory 0:12:33.480 --> 0:12:36.839 about some of the early commentary on millennials, and it 0:12:37.280 --> 0:12:39.640 was very much like, oh, this is a generation that 0:12:39.800 --> 0:12:42.600 just isn't going to own houses, when in fact, it 0:12:42.640 --> 0:12:45.600 seems like it just took everyone a little bit longer 0:12:45.720 --> 0:12:50.280 to actually buy a house for various reasons. But going 0:12:50.320 --> 0:12:53.160 back to something you you alluded to just then, you've 0:12:53.200 --> 0:12:56.080 sort of been riding a wave of, you know, a 0:12:56.120 --> 0:12:59.960 cultural trend and also demographic trend as millennials get older, 0:13:00.240 --> 0:13:04.160 and in some respects that could be considered a cyclical development. 0:13:04.520 --> 0:13:08.480 But you mentioned doing stuff to actually make it more 0:13:08.840 --> 0:13:12.240 permanent or more structural. What is it that you're doing 0:13:12.400 --> 0:13:16.160 to ensure that, you know, something that is would seem 0:13:16.160 --> 0:13:18.959 to be out of your control sticks around for longer. 0:13:19.400 --> 0:13:23.840 As we saw the surge in our business, we doubled 0:13:23.880 --> 0:13:28.400 down on the investment in our business across a variety 0:13:28.400 --> 0:13:33.960 of factors, with the primary goal of really staying ahead 0:13:33.960 --> 0:13:37.800 of our customer as it evolves and to illuminate that 0:13:37.880 --> 0:13:41.319 a little bit. In twenty nineteen, we spent two hundred 0:13:41.320 --> 0:13:45.840 and seventy five million dollars in capital expenditures. We're now 0:13:45.920 --> 0:13:49.880 spending between seven and eight hundred million dollars on an 0:13:49.920 --> 0:13:54.160 annual basis, So we've you know, nearly tripled the amount 0:13:54.200 --> 0:13:56.640 of capital that we're spending on the business on an 0:13:57.120 --> 0:14:01.320 annual basis, and we're doing it across avariety of areas, 0:14:01.360 --> 0:14:02.199 but really. 0:14:01.960 --> 0:14:03.960 All with the goal of, of. 0:14:03.880 --> 0:14:06.280 You know, better serving our customers and just making sure 0:14:06.280 --> 0:14:09.160 we're staying ahead of them as they're rapidly, you know, 0:14:09.240 --> 0:14:13.120 evolving in terms of both number needs and you know, 0:14:13.160 --> 0:14:14.920 kind of the ways that they're used to shopping. So 0:14:15.240 --> 0:14:17.679 a few examples of that one would be in our 0:14:18.120 --> 0:14:21.280 membership program or our loyalty program. We've always had a 0:14:21.280 --> 0:14:23.480 little well we've had a littalto program for the well 0:14:23.480 --> 0:14:27.600 over ten years, but it really was a modest program, 0:14:27.720 --> 0:14:31.560 kind of pre COVID, And in March of twenty one, 0:14:31.880 --> 0:14:35.800 we relaunched the program to be a tiered based rewards 0:14:35.800 --> 0:14:38.120 based system where kind of the more you spend, the 0:14:38.160 --> 0:14:41.680 more you earn, all with the goal of driving behavior, 0:14:41.800 --> 0:14:44.720 locking these new customers in getting them, you know, kind 0:14:44.720 --> 0:14:48.440 of as used as possible to routinely shopping tractors supply 0:14:48.720 --> 0:14:51.040 and you know, I can talk more about our Neighbor's 0:14:51.040 --> 0:14:53.760 Club program, but we now have thirty four million members. 0:14:53.800 --> 0:14:57.920 It represents nearly eighty percent of our sales. We've seen 0:14:58.000 --> 0:15:02.960 substantial benefits from that that investment. Second investment's been in digital. 0:15:03.440 --> 0:15:06.200 We launched a consumer mobile app in the summer of 0:15:06.240 --> 0:15:09.840 twenty twenty one. It now represents nearly forty percent of 0:15:09.880 --> 0:15:14.360 our sales online. We rolled out deliver from Store in 0:15:14.400 --> 0:15:16.680 a matter of weeks in the midst of twenty twenty 0:15:17.040 --> 0:15:19.720 and in addition to kind of the e commerce side 0:15:19.720 --> 0:15:21.920 of things, we've also rolled out in a bunch of 0:15:21.960 --> 0:15:25.000 technology for our team members to utilize in our stores, 0:15:25.160 --> 0:15:27.960 which has made them more efficient and sophisticated in serving 0:15:28.000 --> 0:15:31.200 our customers. And then the third thing I would highlight 0:15:31.520 --> 0:15:35.560 was we rolled out a store remodel program and we're 0:15:35.600 --> 0:15:39.720 now remodeling roughly fifteen percent of our stores on an 0:15:39.760 --> 0:15:43.400 annual basis. At the conclusion of twenty twenty three, remodeled 0:15:43.600 --> 0:15:46.240 forty percent of our stores. There's a number of things 0:15:46.240 --> 0:15:48.600 that we get out of that from a sales lift perspective, 0:15:48.840 --> 0:15:52.640 but one of the other important benefits is it contemporizes 0:15:52.720 --> 0:15:56.560 the store and really shifts it from what was historically 0:15:57.080 --> 0:15:59.560 perceived to be a kind of farm and ranch store, 0:15:59.640 --> 0:16:02.160 which you know, kind of the as you might imagine 0:16:02.160 --> 0:16:03.880 that when you're saying it, that was kind of the 0:16:03.880 --> 0:16:05.840 perception and a bit the style that we had in 0:16:05.920 --> 0:16:07.880 the store, and we, you know, we were able to 0:16:08.000 --> 0:16:11.200 contemporize it and make it feel a bit more like 0:16:11.320 --> 0:16:13.800 what it Millennial would think of when they walk into 0:16:13.840 --> 0:16:16.200 any sort of store, maybe they've been in an urban environment. 0:16:16.520 --> 0:16:19.080 But we didn't fancy it up quote unquote enough that 0:16:19.320 --> 0:16:23.520 our existing customer base they still felt really comfortable shopping it, right. 0:16:23.520 --> 0:16:26.400 We didn't kind of fire or alienate our existing customer 0:16:26.480 --> 0:16:29.440 But those would be three, you know, big investments that 0:16:29.440 --> 0:16:32.680 i'd highlight that we've made over the last few years, 0:16:33.240 --> 0:16:35.800 really all to serve our existing customer base is even better, 0:16:35.840 --> 0:16:39.920 but really to set ourselves up to be a retailer 0:16:39.960 --> 0:16:41.960 of choice for the new millennial customer. 0:16:42.080 --> 0:16:44.520 Joe, you know how you note that you're old. Tell 0:16:44.600 --> 0:16:48.240 me it's when businesses start catering to your taste and 0:16:48.320 --> 0:16:48.960 when you're. 0:16:49.000 --> 0:16:50.720 It's like, oh you're talking about me here. 0:16:50.800 --> 0:16:54.840 Yeah, pretty much. When CEOs come and say like, oh, 0:16:54.880 --> 0:16:58.520 we're redesigning our stores to appeal to millennials who might 0:16:58.560 --> 0:17:01.080 be more used to urban environments but are now in 0:17:01.160 --> 0:17:03.080 rural areas, that's how you know, and that's. 0:17:02.960 --> 0:17:05.240 How you feel like you're looking in a mirror. 0:17:05.520 --> 0:17:08.280 Actually, I want to ask, so, uh you recently I 0:17:08.280 --> 0:17:11.720 think in twenty twenty two, but a pet retailer pet 0:17:11.760 --> 0:17:15.520 sense and I'm curious in terms of like becoming less cyclical. 0:17:15.520 --> 0:17:17.639 I mean, you know, if people have animals or if 0:17:17.640 --> 0:17:20.600 people have pets, whether it's recession or a boom or whatever, 0:17:20.640 --> 0:17:22.719 they're probably going to feed them the same amount. 0:17:23.000 --> 0:17:23.960 How much does. 0:17:23.880 --> 0:17:27.760 That business allow you or was it sort of designed 0:17:27.920 --> 0:17:31.160 in order to sort of build some more acyclicality into 0:17:31.160 --> 0:17:31.639 the business. 0:17:32.040 --> 0:17:37.680 Nearly ninety percent of our customers have an animal or pet. Wow, 0:17:37.720 --> 0:17:40.879 seventy five percent of them have a dog. And then 0:17:40.960 --> 0:17:43.200 you know there's an array of cats and everything. 0:17:43.240 --> 0:17:46.280 It's just Tracy in this episode. Literally everything you say 0:17:46.400 --> 0:17:48.200 just comes back to Tracy. But yeah, keep going. 0:17:48.240 --> 0:17:50.160 Sorry, I'm the art more than our customer. 0:17:50.320 --> 0:17:53.719 Yeah, exactly, over half of our customers have more than 0:17:53.760 --> 0:17:57.960 two dogs. On average, our customer's dog weighs twenty pounds 0:17:58.040 --> 0:18:00.359 more than the average dog across the country. So you know, 0:18:00.400 --> 0:18:03.960 our customers have animals and past they almost all have dogs. 0:18:03.960 --> 0:18:06.359 Most have two dogs and their big dogs and a 0:18:06.440 --> 0:18:09.360 compelling kind of an element of our businesses for we've 0:18:09.359 --> 0:18:12.760 been around for eighty five years. We've really been were 0:18:12.800 --> 0:18:15.760 built even eighty five years ago to serve life out here. 0:18:16.280 --> 0:18:18.919 But our business model and our culture and our mission 0:18:18.960 --> 0:18:21.880 values have really been consistent throughout that entire eighty five years. 0:18:21.880 --> 0:18:24.720 But our business model has evolved over time to better 0:18:24.760 --> 0:18:27.120 server customers. So forty years ago, we didn't even sell 0:18:27.160 --> 0:18:30.800 animal feed for the most part, horse feed, coffee, chicken. 0:18:30.600 --> 0:18:31.280 Feed, et cetera. 0:18:31.359 --> 0:18:33.439 And now we're far and away the largest player of 0:18:33.480 --> 0:18:35.840 bagged animal feed in the United States between a twenty 0:18:35.880 --> 0:18:37.439 and twenty five percent market share. 0:18:38.000 --> 0:18:38.960 Twenty five years. 0:18:38.760 --> 0:18:42.440 Ago, we didn't even sell pet food and similar you know, realization, 0:18:42.520 --> 0:18:44.960 it's a better way for server our customers. It has 0:18:45.040 --> 0:18:47.960 less ups and downs both annually and also throughout the year, 0:18:48.080 --> 0:18:50.920 you know, seasonally. So let's start getting into pet food. 0:18:51.000 --> 0:18:53.040 And you know, now we're right at that number four, 0:18:53.160 --> 0:18:55.760 number five largest player and pet food in the country. 0:18:56.160 --> 0:18:59.080 And you know, one of the initiatives that we have 0:18:59.320 --> 0:19:03.040 in place to keep driving that expanded pet business is 0:19:03.440 --> 0:19:06.199 pet Sentence. And to your point, we did acquire that 0:19:06.280 --> 0:19:10.280 company seven to eight years ago, and in twenty twenty 0:19:10.280 --> 0:19:13.640 two we rebranded it to be pet Scents by Tractors Supply. 0:19:14.320 --> 0:19:16.960 We rolled out our neighbors Club membership program that was 0:19:17.000 --> 0:19:19.439 work that worked in Tractors Supply. We rolled that out 0:19:19.520 --> 0:19:22.120 to petscent So it works in both name plates now 0:19:22.600 --> 0:19:25.119 pet Sence. The ownership of pet Sentence really over the 0:19:25.200 --> 0:19:28.480 last decade almost has given us a lot of insights 0:19:28.520 --> 0:19:31.879 into the pet industry, given us access to brands that 0:19:31.920 --> 0:19:34.679 we would not have otherwise gotten access to, and allowed 0:19:34.760 --> 0:19:38.240 us to bring that knowledge and that those contacts into 0:19:38.280 --> 0:19:41.040 the core track supply and make the business better. We 0:19:41.119 --> 0:19:44.120 also are rapidly growing the pet Sence brand and we've 0:19:44.119 --> 0:19:46.919 got over two hundred stores now. They are in the 0:19:46.960 --> 0:19:50.000 same towns as a tractor supply. Ideally they're in a 0:19:50.000 --> 0:19:51.840 town that doesn't have a pet co. It doesn't have 0:19:51.880 --> 0:19:55.560 a Pet Smart. Typically our towns don't. We typically serve 0:19:55.640 --> 0:19:58.879 call it a twenty thousand person town. The tractor supply 0:19:58.960 --> 0:20:01.600 would be on the outs to the town typically wherever 0:20:01.640 --> 0:20:04.919 the more agg related you know, area is. But the 0:20:04.960 --> 0:20:07.520 Pet Sense we want that in the center of the town, 0:20:07.960 --> 0:20:11.280 kind of where the few restaurants are, the grocery store, 0:20:11.680 --> 0:20:14.000 some of the clothing stores that are in the town. 0:20:14.480 --> 0:20:16.359 You know, there might be a two three strip malls 0:20:16.480 --> 0:20:19.240 or malls in the town that are where the commercial 0:20:19.240 --> 0:20:21.960 activity is located. That's where we want a pet Sense 0:20:22.000 --> 0:20:25.240 and it does really two things. It serves that inner 0:20:25.359 --> 0:20:29.119 city quote unquote population that doesn't have big yards and 0:20:29.240 --> 0:20:32.199 doesn't have horses and cows and they've got you know, 0:20:32.280 --> 0:20:36.120 smaller animals and pets. But then also secondarily, in addition 0:20:36.160 --> 0:20:39.639 to serving that community in a specialty like way, it 0:20:39.680 --> 0:20:43.199 also serves convenience for the core tractor supply customers. So 0:20:43.240 --> 0:20:45.640 to say, on a Friday night, you're in town having 0:20:45.720 --> 0:20:48.600 dinner at the you know, olive garden, and you need 0:20:48.640 --> 0:20:51.720 to get some dog food or chicken feed on the 0:20:51.800 --> 0:20:54.639 way home just to get you through the weekend before you, 0:20:54.640 --> 0:20:57.240 you know, you do your annual your weekly shop at 0:20:57.280 --> 0:20:59.919 at track supply. Pet Sense also serves that in the 0:21:00.160 --> 0:21:04.000