Tractor Supply Company (NASDAQ:TSCO) Q4 2022 Earnings Call Transcript

Peter Keith: All right. Thanks and congrats on the continued success.

Hal Lawton: Thank you.

Operator: Our final question comes from the line of Peter Benedict with Baird. Peter, your line is now open.

Peter Benedict: Hey guys. Thanks for sneaking me in. I just wanted to ask a question around CapEx, came in above the forecast this past year. Curious if that’s just projects costing more? Or did you get through more of the projects than you thought? And then as you step back, CapEx is running around 5% of sales in the last couple of years. I think your outlook for 2023 would suggest a similar ratio. How do we think about the path of CapEx beyond 2023? Historically, you guys used to run around 3% of sales. You’ve been investing aggressively for good reason. But just curious how you would think about maybe the CapEx path as we move beyond 2023. Thank you.

Kurt Barton: Hey, Peter, this is Kurt. In regards to CapEx and your two questions, the growth in CapEx in 2022 at the high end of our expectations reflected a couple of things. Certainly, there’s inflation in the cost of building a distribution center, the new stores, et cetera, that was a piece of it. But also in this environment, the team has done an excellent job of ramping up and ensuring that all of the pieces that go into these fusion remodels that we’ve got the fixtures and all of the equipment ready to go. So the pipeline is in good shape for what we plan to use to grow into the 200 to 250 remodeled stores next year. And there’s some timing of that capital that impacted 2022. And then certainly, for 2023, we expect consistent numbers.

We’ve got a construction of a complete new distribution center in Maumelle, Arkansas. So for both years, they absorbed the $150 million-ish cost of some of our largest distribution centers in those years. And that leads to the second question that you had going forward, we really believe that as we said, these would be the two peak years that the biggest investment over the other years is really on the supply chain side. And it’s reverting back more to that over the next few years, $600 million, $650 million in capital going forward. And it’s a very planned, purposeful five-year growth to convert the supply chain and the stores into the new Life Out Here strategy, look and shopping experience for our customers. So I would expect to see that number come down a bit after 2023.

Peter Benedict: That’s great. Very helpful. Thank you.

Mary Winn Pilkington: Sure thing. For that, we’ll wrap up our call. Thanks, everyone, for joining us, and we look forward to speaking to you on our first quarter earnings call in April. I’m around. If anybody wants to reach out, please let me know and we’ll get you on the calendar. Thank you all. Have a great day.

Operator: This concludes today’s TSCO fourth quarter 2022 earnings call. Thank you for your presentation. You may now disconnect your lines.