Tractor Supply Company (TSCO) Earnings Call Transcript & Summary

Great. Well, thank you so much for joining us at the BofA Consumer Retail and Technology Conference and for tuning into our fireside chat with Tractor Supply. I'm Liz Suzuki, BofA's retail hardline senior analyst, and I'm joined today by Hal Lawton, President and CEO; and Kurt Barton, CFO and Treasurer of Tractor Supply. And I also have to give a big thanks to Mary Winn Pilkington of Investor Relations for all her help as well. So thank you for joining us this morning. I have a few questions for you both. And then I'd love to leave some time for questions from the audience, which can either be e-mailed to me, [email protected], or using the add question box in the webcast here. So first, I guess, for Hal, it's been a little over a year, I think, since you joined Tractor Supply, and you were immediately thrown into the fire. I guess, in what ways do you think you were able to achieve what hope you would in your first year? Were there performance metrics that exceeded your expectations? And any areas of improvement that came to light as a result of the unique circumstances of the past year?

Yes. Good morning, Liz, and thanks for having us here today, and it's a pleasure to have a chance to speak with everyone. Yes, what a year 2020 was. It's a year, I think we'll all look back and just think about all the challenges that we went through, whether it was global pandemic and economic crisis, the outcry for racial justice, whether it was forest fires in California and Oregon and Washington with over, I think, it was over 10 million acres of land on fire at one time, the most active hurricane season in Atlantic on record. I mean, it was a year of many, many challenges. And I don't think it's one that any of us will look back on with fondness, but certainly, at Tractor Supply, there's a small measure of pride that we have when we look back on the year. There were 3 main objectives that we were focused on throughout the year. First and foremost was the safety and well-being of our team members, and creating a safe shopping environment for our customers. And we're really pleased with and proud of the efforts that we took there. We literally spared no expense over the last 12 months in that area. The second has really been operating the business at the elevated volume levels that we've seen. Almost instantaneously, our same-store sales jumped 25%, and they've pretty much held that since then. And as we've talked about on our earnings calls, the -- our comps by week, by day, by category have been very consistent for the last past 3 quarters. And that's required us to lean in and make a ton of operational changes, including the hiring of 10,000 net new incremental team members. obviously, the acquisition of a lot more inventory and a variety of other types of operational changes that we were forced to make and needed to make just to be able to manage with -- in those elevated volume levels. And then the third thing has really been around the future of the company. And we really do believe that we have an opportunity to make a stronger company. When I was joining, we all -- we talked a lot about the trucks plan, an incredibly bright past but an equally bright future, and we wanted to start to lay the track for that future this past year as well. And so in October, we had our enhanced earnings call and introduced our Life Out Here Strategy, and began making investments against that strategy last year and putting resources against it. And we are fully underway in our execution on that strategy as we enter 2021 here. So certainly an unprecedented year, certainly one of many challenges. But I think, as a company, there's some small element of pride in how we responded across those 3 areas.

Great. And if you think ahead to, hopefully, a more normal environment at some point in the future, and what are the top priorities or top goals for Tractor Supply?

Yes. I mean, so for Tractor Supply, we introduced our Life Out Here Strategy in October. And that's very much what we're focused on. There's 5 strategic pillars. The first pillar is around delivering legendary customer service. And that starts with our team members in the stores and engaging with our customers and greeting them and uncovering their needs, recommending solutions. But it also goes upstream to our brand marketing efforts that we began last year, which had a significant impact on our business, improving our unaided brand awareness from 34 points to 43 points. And also contributing to the 11 million new customers that we saw last year and 6 million reacquired customers. And it also includes things like our CRM capabilities in our Neighbor's Club program. The second thing is once that -- once you're delivering those legendary customer service and you're focused on that, you want to allow the customer to shop anywhere anytime, anywhere they want. And that's really a nod to continuing to accelerate our ONETractor capabilities, and that's really our second pillar. And we're really proud of our efforts there over the last year. And previous to that, we increased, last year, our online penetration from about 3%, 3.5% to 6% for the year. The third big area is really around what we call operating the tractor way. And Tractor Supply is -- a hallmark of our company has always been our execution and our operational capabilities. And the 3 big areas underneath operate the Tractor way are around driving that space productivity and that kind of art and science and merchandising and constant looking at every square foot in the store and making sure that it's delivering the most optimal sales and margin performance it can. But also labor productivity in the store shifting away from tasking and more towards customer service, and how do you make sure you're most optimal in a task that you're asking your team members to do with systems and processes. And then supply chain productivity as well. The fourth big area for us is really around generating healthy shareholder returns. And then the fifth one is around going the country mile for our team members and we really do believe that if we take care of our team members, they'll take care of the customer and everything else will take care of itself, including generating those healthy shareholder returns. And so those are the big 5 things. What I would say on the generating healthy shareholder returns is that's not just a goal, but it is -- there are a set of actions underlying that pillar. Kurt and the team have been really driving that. That includes our dividend, it includes our recently issuing $650 million of public debt back in November at an outstanding rate of 1.75%. So there are real things we're doing to create shareholder value through financial actions as well. But those are the big things that as we enter the year that we're focused on. It's all around continuing to maintain the momentum of the business. And we also provided some long-term targets in our enhanced earnings call that those strategies all ladder up here.

Great. Now I'll switch on over to Kurt. So how is the demand environment for charges [ supply ] currently? I think everyone is sort of waiting for things to slow down at some point, and we just -- we haven't seen it in our Bank of America credit card data yet in most of the categories that Tractor is exposed to. But I'm just thinking about how it's evolved over the course of the last year? And what some of your planning assumptions are? Or expectations are for the next year?

Yes. Thanks, Liz, and good morning, everybody. The 2020, certainly, as Hal mentioned, had an outsized demand. The demand for our essential products. I mean, we've said for years, we're a needs-based business. And the pandemic just drove a greater demand for our products. And examples of that from 2020 was in the year overall, 23% comp sales for the year, fueled by 3 -- the last 3 quarters, over 25% comps in those quarters. Our C.U.E. merchandise, where our consumable, usable, edible merchandise, the demand grew throughout the year. And that's -- as we've always said, a strong indicator of the strength of our business from high teens in the second quarter into above 20% comps in our C.U.E. merchandise in the back half of the year. Some of the key drivers that we saw in 2020 that we see continuing into 2021, pet adoption and pet ownership at an all-time high. Interest and investment in the consumers' homes, their land, their homes are all a primary priority for them. Even new millennials that are now owning homes and making that investments. There's growth in suburbia and rural areas that were there right in the heart of that. And so for the most part, both brick-and-mortar, omnichannel, and as we say, our 4 corners of our store have been fueled by a growth in the markets and interest in a growth in their homes as consumers shifted their spend away from travel entertainment and dining into creating their own experiences at home and Tractor Supply has been there to be able to help them. That momentum was strong throughout the year. We've said that momentum has continued into 2021. And we believe that areas like pet ownership and adoption is something that has a very long tail in its benefit as our customers will continue to own them and grow into that maturity in life cycle of pets. The -- also the -- all the outlook that is -- that we expect, I think, it's well written about is consumers continue to invest in their home. Recent stimulus checks and expected stimulus checks have consumers focused on their homes still at this point. So we do see a lot of opportunity to continue to take advantage of and fulfill the needs of our consumer as we anticipate in 2021 still a very steady demand, and that's in our guidance. Our guidance said knowing the comps that we're going up against, we anticipate negative 2% to positive 1% comp sales going up against even those strong comps of 2020. So yes, we do see a lot of momentum in the macro environment and the tailwinds to the micro side of our business.

Great. That's a great lead into my next question for Hal, actually. So what are the demographic of the new customers that you're seeing in your stores? Are you starting to get younger first time homeowners that are new to the area? Or is it people who have always lived near a Tractor store but haven't shopped there before and are now starting to consolidate trips more?

Yes. It's a little bit of all that, but I'll try to -- I'll break it down into 4 or 5 segments that are the main drivers. So to your point, Liz, last year, we saw 11 million new customers shop with us, and we had 6 million reacquired customers shop with us. And those are higher numbers than we've seen in any previous year. And then also the good news about those new customers and those reacquired customers is their retention rates are much higher than what we've seen in the past. As an example, approximately 20% of our new customers reshop with us again within 28 days, so a second time. And this reshop rate has been at the 28th day mark has been consistent, kind of right around 20% since the start of the pandemic. So we haven't seen kind of a half-life, a diminishing return on that retention rate as the year progressed, which is, for us, gives us some optimism around the retention of these new customers. Yes, I would point to a handful of things that are driving those new customers, and I think they speak much to what Kurt also highlighted. The first is really pet adoption. As we all know, pet ownership is at all-time highs. The great thing about that is that, that is not a COVID-related kind of category in terms of meeting kind of as COVID abates, knock on wood, that I don't think there's not going to be a change in consumer spend. Those pets are still going to be there. They're still going to have their needs. And different than a grocery store, they're not going to go to restaurants as the economy opens back up, right? We're going to still be their primary means for food. So we're certainly seeing a lot of traffic and new customers from pet. The second one would be around animal feed. In particular, poultry, but also equine and cattle and other animals as well. And I attribute that to both new ownership of things of a poultry hobby, but also us taking share in the kind of farm and ranch channel as we've really leaned in to keep our stores in stock. Also, we've added the omnichannel capabilities around curbside pickup, and same-day, next-day delivery, which I think us being able to leverage the scale that we have in our supply chain and technology has really enabled us to pick up share in those categories. And then the third thing I would mention is around kind of the consolidation of trips, to your point, Liz, our ticket is a ramp-up, but just think about our comp being up 23% for last year in 2020, and about half of that being ticket-related and half of that being transaction-related. Of the half that's ticket-related, the vast majority of it is basket size, meaning units per basket, not averaging at retail. And so that really does speak to the kind of one-stop-shop mentality of customers. And the days of them wanting to go -- customers going to a retailer to buy 1 item is -- those are gone. And customers, when they make their list, they want to go to a retailer where they can purchase 4, 5, 6, 7 items in 1 trip. And the last thing I'll mention is home. As Kurt mentioned, I think we're seeing a pretty sizable shift in millennial behavior as we're exiting COVID, where they're buying homes and they're building homes, and they're moving to the suburbs and they're moving out into rural areas. And this is a generation that I think all retailers have been watching closely and wondering if there was going to be a continued residence of city life and kind of the rental trends that we've all been talking about for the last decade. And I think what we've seen in COVID is while that generation was delayed moving to suburbs and housing and family formations and home purchases, we're certainly seeing that in a really increasing trends and gives us confidence that, that is going to be kind of a -- there's going to be momentum kind of in that home investment for the foreseeable future.

Great. And I'll turn one over to Kurt. This kind of comes up in the question about average ticket as well. So investors are becoming increasingly focused on inflation. We've seen a number of commodity prices rising, in particular. So historically, how has Tractor Supply been able to either hedge those cost increases, pass them through to customers or otherwise react to inflationary environment?

Yes. Liz, thanks. It's a timely question. It's a great question. And we indicated when we gave our outlook for 2021, as we indicated, we saw an inflationary environment. I think, even today, it's even more clear. We're in an inflationary environment. We speak often to the #1 driver for us, much like grocery stores because there's such a commodity base in ours is that and we speak to our commodity-based inflation, and we're certainly seeing increased cost in grains, steel and petroleum are the primary. And as we indicated, we expected going into this year that, from a commodity base, we could see 1% to 2% of top line benefit coming from passing through commodity-based inflation. And we're also seeing, as everybody has seen, it's well written about is the pressures on the supply chain. Transportation costs are at some of the all-time high. And then there's certainly more demand than there are trucks out there. And so transportation is certainly a pressure as well. So we saw that going into the year. These costs may be at the higher end of our ranges for the year, but in our business, being an essential, needs-based retailer. And our consumers are actually in communities. And then their lifestyle, they're very much aware of and their life is impacted with inflation and deflation in that rural economy. So they understand inflation. So we've generally seen that passing through some of the inflationary costs has not has been as difficult in a needs-based environment where our customers are in the rural communities. We anticipate, as we had in the past, we utilized our pricing tools and structures and are able to generally pass on most of those costs. So we anticipate seeing some benefit in the average ticket. This year, we, again, guided to 1% to 2% benefit on the ticket side. Generally, maybe the last thing I'd say with inflation versus deflation, while it has a benefit on the top line, certainly in areas like transportation costs, not something you can always pass along. So we've seen generally a bit of a modest pressure on the gross margin, and we plan for that in our guidance for the year. And at this point, certainly, everything we saw is playing out, maybe even perhaps at a higher end of the range of expectation on inflation for the year.

And presumably, your competitors are really all seeing the same cost increases and are also theoretically trying to raise price at the same time. And what are some of the competitive advantages that you think that Tractor Supply has in terms of logistics and supply chain efficiency?

Yes. Certainly be glad to talk about that. That's a strength, and in a very fragmented market, and where there's independents, regional players, Tractor Supply stands strong. With our number of distribution centers across the U.S., with our import transload centers with the cross-dock mixing centers for high-volume palletized bolt goods that we've strategically put in place, we've then mirrored that with our vendor production locations. And even over time, as we've talked about, our vendors putting some of their mills and plants closer to our distribution centers. Those are all areas where our supply chain that we've invested in the last few years, I believe in 2020, that really showed to be a benefit. Those investments we made through '16, '17 and '18, and purposely said we're making those investments in supply chain. 2020 was really the first year to reap to see that benefit. And while transportation supply chain will be an industry pressure, being able to keep our prices low and give that value to our customers and still maintain our margins, we have -- we view that as one of our competitive advantage in our niche industry.

Great. And so I'll shift one over to Hal, though. One of the interesting outcomes of the pandemic has just been the acceleration in consumer preference for buying online. And you cited Tractor Supply stat, which the online penetration has increased, so as a retailer with a distinct customer-focused and service-oriented culture, how do you bring that same level of service to the online channel?

Yes. It's -- we're very pleased with our ONETractor capabilities and the improvements we've made over the last year. And as mentioned earlier, those include things like rolling out our first ever mobile app, the relaunch of our website onto a platform that's cloud-based and services built and leverages a lot of best-in-class kind of open source technology. It also includes the launch of same-day, next-day delivery nationwide, and then the rollout of curbside pickup. And I'll use curbside pickup as an example of kind of how to bring customer service to life in a digital world. This is an area that we rolled it out nationwide in a handful of days, almost exactly a year ago. And it now represents over 75 -- approximately 75%, 80% of our pickup at store. So it's an incredibly well utilized feature by our customers. Just to even provide a few more stats. So for about 6% of our business is online, about 75% of that business gets picked up in store, and then about 75% of that business is curbside pickup. So curbside pickup is 3%, 4% of our total company sales now. I mean, it's a big feature for us. And so to bring to life that customer journey, to give you a sense of how we think about customer experience there. If someone were to purchase inside of our mobile app, and do a curbside pick up, at the conclusion of their purchase, they can put in their vehicle. So say, a white F-150. They can put in any specific instructions, put it in the back of the truck. And they also, obviously, as I said earlier, can get the color. Then when they're on their way, they can click a feature we have called on your way, which only allows us to have access to your location for a specific period of time. So it's -- it has kind of safeguards around privacy. As you're approaching the store, we send a signal to the customer in the ear piece that says Kurt Barton is on his way to pick up. If I back up when the order's placed, the first thing is we have these Theatro headsets. It will say, "Buy online, pick up in-store orders been occurred." It'll say, "Hal Lawton, go pick the order." It literally gives a person instructions. We're picking 90% of those orders in less than an hour. Now the customer is on the way, we're getting the vast majority of our orders out to the customer's truck in under a minute. Because we rolled out these curbside lockers upfront. So we have a Theatro headsets, we have our mobile app technology, we have the lockers upfront. And then, of course, our team member is the key to all that in terms of executing the task or executing the customer service. And then we also rolled out mobile handheld devices last year in the midst of the pandemic, we doubled the capacity that we have with those in the stores. So now a team member can take them out to a customer's car, vehicle. And then as soon as the order is over, they can just clear them out right there on their handheld. Last year, we also increased our WiFi capacity in our stores by 2x. We went from anywhere from 3 to 4 access points to 5 to 7 access points per store. And so one of the big access points we added was on the front of the store, projecting well into the parking lot to give our WiFi access there. So it's -- you've got to -- just kudos to the team to really thinking through the end-to-end customer journey. The journey of that not only for the customer but also the team member. And then we [ mainly ] gather all of our technologies that we have to create a kind of a best-in-class solution there.

Yes, it sounds like very value-add to the customer. I'll follow-up on one with Kurt, just about how a potentially higher online penetration over time if this continues to accelerate, what does that ultimately mean for Tractor Supply's margin profile?

Yes. Liz, the important thing, as Hal mentioned, the volume of online business being so predominantly picked up in stores. The 75% of our online business picked up in stores, and a vast majority of that is actual product fulfilled out of our stores, items supplied through our distribution centers. And so as we continue to grow our online business and we continue to add the last mile opportunities, the shift from stores where we now can utilize the 1,900 plus stores and in select markets, be able to keep the shipping cost right there within some of the small parcel shipping zones. The key for us is going to be continue to meet the customer where they want. And in our case, there is a heavy interest, a great opportunity for local convenience of curbside and BOPIS. And then shipping some of those items from store, giving great local opportunities as we partner with Roadie for same-day delivery. These are all ways that we can grow our online business and still maintain a high percentage of buy online, pickup in stores. Those items share in their equal gross margin and operating margin as the items that customers come in and pick up in store. So we anticipate, as we grow our omnichannel, that we can still grow that in this strategic environment and keep an excellent operating margin.

Great. So I've got another one for you, Kurt. So Tractor Supply has made a lot of investments in supporting its associates, picking up wages and benefits as well as supply chain and technology improvements, so is this potentially the start of what you would consider a new investment cycle? Or should we think about a lot of the costs that were borne in 2020 and in those years past that you mentioned, 2016 to 2018 plus, as being somewhat temporary in nature? And starting to bear some further fruit in the outyears?

Yes, sure. I'd go back to the house statement about the Life Out Here Strategy. To answer that question, I have to start with the ultimate foundation and the important part of that answer to that question is our Life Out Here Strategy. We launched that in 2020. The part that I'd emphasize on and Hal hit that in his is that, it was very purposeful as this executive team, structured our strategy to make sure that it was not only a part of the strategy, but our Life Out Here Strategy is centered around a total shareholder return focus. And so in the past, I've seen, and we've had a finance strategy and a business operation strategy. Life Out Here Strategy really combines the two. And the reason I say that is, we ensure that our Life Out Here Strategy has all the aspects of the right investments, short-term, long-term investments, to be able to drive top line revenue, but ensure that we've got a good, growing operating margin. Examples of that are like quick investments like the next level Neighbor's Club, where we really can grow even greater engagement, loyalty and new customers and benefit from that. Our field activity support team, where we partnered with our vendors to cover a significant portion of that cost, they're already out in the field beginning to make a significant difference on excellence and consistent, quick to market on new sales driving initiatives. So those are examples of our strategy being focused on making sure that for the long term as well as the short term, it has a total shareholder return focus. But we are making investments over the next 3 to 5 years, that's definitely part of the strategy. We've said over the next 3 to 5 years, $450 million to $550 million in capital. That is focused on new store growth, from 150 to 200 this year, fusion concept rollouts of -- in existing stores, 150 side lot greenhouses. Growth in our digital area as well. We have a strategy, we believe, can grow for the long term. We're investing from a position of strength. And as those investments impact our operating costs, we also see, as we transition out of COVID, where we spent over $100 million and invested in the right areas on COVID expenses, those are bit transitional. We had outsized incentive comps. So we feel very good and have great visibility to our cost structure, we're making the right investments so that we can invest for the future, invest from a position of strength, but still maintain a real solid operating margin. And we are very excited about our opportunity for growth, our return on invested capital and total shareholder return that this strategy offers.

Great. I'll keep the topic on investor priorities, but I'm going to turn this one over to Hal. So investors are increasingly focused on companies' environmental, social and governance metrics, and the ways in which they're improving on those metrics. And Tractor Supply has a pretty comprehensive website on the corporate site, listing all of its dedications to ESG. Can you just walk us through some of those key highlights?

Yes, absolutely, Liz. And thanks for the opportunity to talk about ESG. As you said, it's an incredibly important topic. It's one that has the utmost priority of our Board, the utmost priority of myself and our leadership team, and certainly something that's expected from our shareholders. We've taken -- it's been an area of focus for us for a number of years. On sustainability, to your point, last year, we launched our ESG report last year and provided an update on a number of metrics and goals. And then just recently announced that we had achieved our 25% carbon footprint reduction goal, which we had announced previously, 5 years ahead of schedule. So we're in the process of reassessing what the right set of goals are. And what sort of additional reporting we want to make on environmental and sustainability. And you can expect to hear more from us later on in the year on that. But it's an area that we're very -- we're significantly focused on. As an example, we just -- we announced that we're building our ninth DC in the state of Ohio recently, and we'll be outfitting that DC with a solar roof, but that's several million dollars more in additional cost. But it basically negates the carbon footprint of that DC. And so with the right investment, it does have a return, but it also has a long-term environmental return. So it's a financial return and an environmental return. And those are the sorts of investments we're committed to making. On the social side, Tractor Supply has a long-standing set of actions we've been taking to advance diversity, equity -- equality and inclusion in our organization and certainly to be a part of the solution inside the -- our country and globe. And we've absolutely amplified those efforts over the last year whether it's funding and donations to HBCUs and other underserved communities or whether it's additional hiring practices that we had internal to drive improved representation inside of our stores. Or whether it's just the reflection of the fullness of our customers and our marketing and, of course, a whole suite of other actions we've been taking. But it's been an area of very significant focus for us, particularly in this last year, as we've all been responding to the outcries around racial justice and we're very clear inside our company that there's 0 tolerance for discrimination inside the company. And then as it relates to governance, yes, this has really been a hallmark of our Board. We have an ISS score of 1 on governance. It's an area that we take very seriously. And I'd just say hats off to our Board overall on ESG. And if you look at our Board, I think it's a -- our Board itself is a great example of our commitment across ESG. We now have 4 female members of our Board out of 9 members. We have 3 diverse members, a person of Hispanic background, Indian background and African-American background on the Board. And then our Board has individuals from all types of industries and functional backgrounds. And it's a big area of commitment for us. We're pleased with our progress, but we know we've got -- there's much more progress to be made.

Great. And I have a question e-mailed to me that I want to make sure I get to. It was about the side lot initiative. So I'll start this one with Hal, and then maybe ask Kurt for some of the financials. So Hal, can you just take us through where you are in the side lot project? And how many stores are going to have those improvements made this year? And then what percentage of the store base you think ultimately goes through that transformation?

Yes. So I'll start at we just step back strategically, as we talked about at the beginning of our conversation here. One of our strategic pillars is around operate the Tractor way. And inside of that strategic pillar is the notion of driving space productivity in our stores. And we have an opportunity to drive space productivity not only through more optimal use inside of our store, but we are somewhat unique in that we have a 15,000 square foot concrete pad adjacent to our stores that [ spins in ] that we referenced as our side lot. Historically, that space has been used for the storage of agricultural equipment, fencing, things like stock tanks, sometimes you might have overflow inventory in the tents out there. But it's been -- if you're a kind of savvy Life Out Here shopper or someone that's very in tune with the farm and ranch retail segment, you're comfortable going out there. But I'd say the vast majority of our customers don't go out there, and it's more of a storage area than it is a merchandising area. The side lot transformation truly is a transformation of that side lot. We take all the inventory that's out there, add fixtures, we add racking. We start to use the vertical space that those provide us to get that inventory that's already out there more consolidated. Use the space that, that consolidation frees up to then put a kind of programs out there that will drive footsteps into our stores and drive sales. So importantly, one of the big efforts there is our garden center. So when we execute the side lot transformation, we add a 4,000 to 5,000 square foot garden center. Many other times, we'll add things like a feed room. And we have some other customer features that we might add as well depending on the nuance of that store, but all of them received a 4,000 to 5,000 foot garden center. And as it relates to garden, our customers tell us that's the category that they most participate in, in terms of the Out Here Lifestyle that we least address in terms of our assortment, so it's a big opportunity for us. It's very -- a great synergy with the Out Here Lifestyle that we're already addressing. And an opportunity to drive substantially increased sales out of our stores and leverage the space that we have outside and drive that overall space productivity up. So we're very bullish on the efforts. The guidance that we gave was between 150 and 200 stores this year. We're underway in that effort. We've got a little bit of a rolling start from last year. We're also starting to convert our new store pipeline to be inclusive of garden centers. And you'll see that start to play out a little bit towards the end of the year. And we look forward to sharing more details on those efforts as we kind of head towards our Q1 earnings call. And the last thing I'll say is we do think there's about 1,500 stores, of which the garden center and the side lot transformation is applicable, just based on store dynamics, volume sizes and their side lot configuration. Kurt, anything to add on how we think about the numbers? Oh, sorry, Liz.

Yes. No, go ahead. I was just going to ask Kurt in the last minute if he could talk about any returns on invested capital or other ways we can think about the potential uplift from those investments?

Yes. Liz, recognizing we're short on time. I've said that a few things. One, it's very early. So we'll talk real high level as it's going to take us through even the second quarter that really affirm some of our assumptions. Let me just give you the high level assumptions as we rolled this into our Life Out Here Strategy. The side lot and the fusion investments, which are the biggest capital investments, every year, as you try to grow your comp sales, you've got to have new drivers or initiatives that do that. We've typically said, and if you look back the last 10 years, 2% to 3% comps, and our Life Out Here Strategy assumption is higher than that, 4% to 5% comp. If you look at that difference between a previous average versus the go forward. The upsize from fusion and side lot really make up the difference of that, a few hundred stores a year, giving additional incremental comp sales. So you can back, into some extent, the benefit that we see from this. And then lastly, these investments run at good operating margins. We anticipate these are at the Tractor Supply operating margin rates.

Perfect. Well, thank you. This has been really, really helpful and informative. And we really thank you for the time today.

It's a pleasure.

Thank you.