Tractor Supply Company (TSCO) Q3 2013 Earnings Report, Transcript and Summary

Randy Guiler - Director of Investor Relations Gregory A. Sandfort - Chief Executive Officer, President and Director Anthony F. Crudele - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Alan M. Rifkin - Barclays Capital, Research Division Lynda Guthmann - SunTrust Robinson Humphrey, Inc., Research Division Christopher Horvers - JP Morgan Chase & Co, Research Division John R. Lawrence - Stephens Inc., Research Division Scot Ciccarelli - RBC Capital Markets, LLC, Research Division Michael Lasser - UBS Investment Bank, Research Division Daniel R. Wewer - Raymond James & Associates, Inc., Research Division Mike Signore Denise Chai - BofA Merrill Lynch, Research Division Brian W. Nagel - Oppenheimer & Co. Inc., Research Division Peter S. Benedict - Robert W. Baird & Co. Incorporated, Research Division Joan L. Bogucki-Storms - Wedbush Securities Inc., Research Division Matthew J. Fassler - Goldman Sachs Group Inc., Research Division Charles Edward Cerankosky - Northcoast Research Jeff Black - Avondale Partners, LLC, Research Division Adam H. Sindler - Deutsche Bank AG, Research Division Simeon Gutman - Crédit Suisse AG, Research Division Joseph I. Feldman - Telsey Advisory Group LLC

Good afternoon, ladies and gentlemen, and welcome to the Tractor Supply Company's conference call to discuss third quarter 2013 results. [Operator Instructions] Please be advised that reproduction of this call, in whole or in part, is not permitted without written authorization of Tractor Supply Company. And as a reminder, this call is being recorded. I will now like to introduce your host for today's call, Mr. Randy Guiler of Tractor Supply Company. Please go ahead, sir.

Thank you, Stephanie. Good afternoon, and thank you for joining us. Before we begin, let me reference the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. This call may contain forward-looking statements that are subject to significant risks and uncertainties, including the future operating and financial performance of the company. Although the company believes the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct. Important risk factors that could cause actual results to differ materially from those reflected in the forward-looking statements were included in the company filings with the Securities and Exchange Commission. The information contained in this call is accurate only as of the date discussed. Investors should not assume that statements will remain operative at a later time. Lastly, Tractor Supply Company undertakes no obligation to update any information discussed in this call. I'm now pleased to introduce Greg Sandfort, Tractor Supply Company's President and CEO. Greg, please go ahead.

Thank you, Randy, and good afternoon, everyone. Thank you for your interest in Tractor Supply and for being on our call today. Our CFO, Tony Crudele, is with me on today's call. And after our prepared remarks, we will open the call for your questions. We were very pleased with our strong third quarter results and we -- with the continued momentum in our business. We reacted appropriately to an extended spring and summer selling season, and our stores were well stocked with the right products and the right inventory levels. Mild temperatures and the right product assortment drove strong sell-through of consumable, usable, edible C.U.E. products; seasonal merchandise; and in turn, that led to the strong comps, fewer seasonal clearance markdown and a significant improvement in gross margin rate. We believe we are well positioned heading into the all-important holiday season, and we will continue to execute our sales and margin-enhancing initiatives. Now let me provide a brief update on some of those initiatives. On the merchandise side, we are focused on continuing to drive foot traffic with our unique assortment of new and everyday maintenance products that fit our customer's lifestyle. Our C.U.E. program, which spans all 5 of our major categories of business, continues to perform very well and is driving sales over a wide variety of need-based products. In addition to food and feed, we saw strong third quarter sales in items such as twines, sprayers and chemicals and pet supplies, which are all C.U.E. items. While C.U.E. continued to drive both traffic and sales, we also saw strength in several seasonal big-ticket categories. In particular, sales of outdoor power equipment performed well during the quarter, benefiting from the extended spring and summer selling season as compared to last year. We continue to grow our lawn and garden programs. And with our increased focus on supporting local needs, we've expanded our lawn and garden offerings into our southern stores on a year-round program, and initial response has been very positive with the southern stores performing well in the third quarter. Also in the third quarter, we ran our annual pet appreciation week event. We refer to this as PAW in our stores. This was a weeklong event devoted to supporting the health, well being and safety of pets. Stores partnered with local agencies and community groups to offer adoptions and awareness programs throughout the week and weekend, and we promoted the event through our circulars and offered pet-related merchandise special offerings throughout the week. The PAW event, it drives awareness around our pet category and demonstrates our commitment to our customers towards supporting local agencies. We are becoming a destination store for pet food and care, and continue to broaden our customer reach in all of these categories. Exclusive brands represented approximately 31% of sales versus 25% in last year's third quarter. Our 4health line of dog food continues to be a top performer, and we are experiencing growth in our JobSmart line of hand tools and our GroundWork line of lawn and garden products as well. Now as we talk to the margin, on that side of the business, we're executing around 4 primary initiatives: inventory management, our seasonal conversion, price optimization, exclusive brands, and then strategic sourcing. We felt that we had the right product and inventory levels in our stores in the third quarter, which allowed us to benefit again from that extended spring and summer selling season, and we ended the quarter with far less seasonal clearance-related merchandise. We're very pleased with the progress in each of our margin-enhancing initiatives, and we believe we have plenty of opportunities still ahead. Now turning to new store growth. During the quarter, we opened our first store in Nevada, and our first store in Rawlins, Wyoming is scheduled to open this coming Saturday, that marking the 48th state of operation for Tractor Supply. We continued to be delighted with the performance of all of our new stores, and plan to continue to grow our square footage by 8% annually for the foreseeable future. We began servicing stores from our new distribution center in Macon, Georgia in the third quarter of this year. This new facility replaced our older distribution center that was nearing the end of its lease in Braselton, Georgia. The Macon DC houses a new direct import center, giving us more capacity for growth with import merchandise, and it is located closer to the port of Savannah, which is an important location for transportation cost and processing of direct import merchandise. Our teams worked tirelessly during the distribution center move, and we want to recognize them for their hard work and dedication. So a big thank you goes out to our General Manager, Kyle, and all the team members there in Macon, Georgia for a job really well done. I continue to be delighted with our cross-functional team's ability to execute as a result of the hard work, the smart work and the collaboration across the company. Our Store Support Center, distribution center and store teams continue to improve our processes while we focus on growing our overall business. I will now turn the call over to Tony to review our financial results and discuss our full year outlook. Then I'll have a few closing comments before proceeding to Q&A. Tony?

Thanks, Greg, and good afternoon, everyone. For the quarter ended September 28, 2013, on a year-over-year basis, net sales increased 13.4% to $1.2 billion and net income grew by approximately 29% to $65 million or $0.46 per diluted shares. Comp store sales increased 7.5% in the third quarter compared to an increase of 2.9% in the last year's third quarter. As Greg mentioned, as a result of the late spring, ground moisture and mild temperatures, we experienced an extended spring selling season. Subsequently, we had solid sell-through in some of our key spring-summer categories, resulting in strong sales, limited seasonal markdowns and very strong year-over-year gross margin improvement. The animal and pet categories continued to perform well with strong comps that were above chain average. Seasonal categories such as live goods, certain gardening categories, outdoor living, riding lawnmowers and repair all performed very well. Comp transaction count increased for the 22nd consecutive quarter, gaining 6.7% on top of a 2.6% increase last year. C.U.E. items and the strength of the seasonal business drove traffic, and we remain pleased with our ability to drive repeat traffic into our stores for the everyday needs of our customers. Average comp ticket increased by 0.8% versus last year's 0.2% increase. The increase was primarily driven by inflation. Although big-ticket items performed well, it was not a significant driver of the average ticket increase. A few key points about the quarter. July and August were the strongest comp months as we experienced the extended spring. September, while a solid positive comp, was the softest comp month as temperatures remained warm, limiting sales of cold weather and heating products in the latter part of the month. On a regional basis, sales were strong across all regions. Big-ticket delivered a solid comp sales increase just slightly below the chain average. Riding lawnmowers, storage and trailers are examples of big ticket items that performed well. This was offset by sales of emergency response items as we cycled Hurricane Isaac and early quarter mid-Atlantic power outages in the third quarter of 2012. As we had anticipated, we saw inflation moderate as we cycled the high grain prices from last year. We estimate that the inflation impact on sales was approximately 100 basis points. We believe the limited impact from inflation further supports the strength of the quarter's comp sales. Sales of direct import items increased 28% versus Q3 last year and represented 10.5% of the sales mix in the quarter. Sales of exclusive branded products were also very strong in the quarter, increasing 26% year-over-year and representing approximately 31% of total sales. Turning now to gross margin, with -- which increased approximately 90 basis points to 34.4%. As we had discussed in the last conference call, we were cycling against limited gross margin improvement in the quarter last year, and we believe that the extended spring-summer selling in Q3 would assist us in better managing our clearance markdowns. This, in addition to our gross margin initiatives, resulted in strong gross margin gains in the quarter. So a few additional comments around gross margin. Our initial direct margin continues to improve as a result of our initiatives around price optimization, markdown management and strategic sourcing. The margin pressure from the merchandise mix shift of C.U.E. moderated, as we cycled against the higher inflation last year. We estimate that the mix had a negative impact of approximately 25 basis points on gross margin. As we cycled the higher grain prices last year and maintained gross margin dollars per unit, gross margin percentage is more stable. Freight as a percent of sales was essentially flat compared to the prior year, as favorable mix offset increased import activity. For the quarter, SG&A, including depreciation and amortization, was 26.2% of sales, reflecting 23 basis points of improvement from the prior year's quarter. As we had discussed in the past, we are focused on driving operating profit dollars. Although our increasing mix of C.U.E. sales negatively impacts gross margin rate, it drives sales growth and that allows us greater leverage of SG&A expenses. So we continue to effectively manage and leverage store-level operating expenses. And although we had a solid SG&A leverage as a result of the strong comp sales, it was offset by 2 factors: First, due to the strong results, we increased our full-year estimate and correspondingly increased our accrual for incentive compensation, which had a deleveraging impact on SG&A; secondly, we estimate that the additional costs related to our D.C. and data center relocations negatively impacted EPS by approximately $0.02 for the third quarter. We estimate this had approximate 40 basis point deleveraging impact on SG&A. Our effective income tax rate increased to 36.1% in Q3 compared to 35.5% last year. The increase was due principally to higher effective state tax rates and reduced federal tax credits, as well as a smaller percentage of incentive stock option disqualifications relative to a higher taxable income base. Turning to the balance sheet. At the end of Q3, we had cash balance of $46 million compared to $70.2 million last year. We had outstanding short-term debt of $40 million compared to 0 last year as we build inventory for the fall-winter season. During the third quarter, under the stock repurchase program, we acquired approximately 350,000 shares split-adjusted for $21.3 million. Our stock performed very well during the quarter, which limited the purchases under our matrixed 10b5-1 plan, and we estimate that the share repurchase program did not have a material impact on EPS for the quarter. Average inventory levels per store at quarter end were 2.8% higher than last year, while annualized inventory turns increased by 1 basis point and 3 basis points for the quarter and the year-to-date, respectively. We are pleased with the productivity of inventory during the quarter, and we exited the season in great shape. This increase in the per store inventory year-over-year resulted from the early receipts of Q4 seasonal merchandise and additional inventory to support the transition to our relocated Southeast distribution center. CapEx for the quarter was $58.2 million compared to $45.6 million last year. We opened 23 stores and closed 1 during the quarter compared to 17 store openings and 1 closing in the third quarter of 2012. The increase in capital spend relates to the increase in the new store openings in the quarter. Turning to the outlook. As a result of our stronger-than-expected operating performance in the third quarter, we are increasing our net income expectation for the full year 2013. We now expect net income to be in the range of $317 million to $322 million or $2.24 to $2.27 per diluted share. This compares to our previous guidance of $309 million to $315 million or $2.18 to $2.22 per diluted share. We now expect full year sales to range between $5.12 billion and $5.17 billion compared to our previous expectation of $5.1 billion to $5.17 billion. Correspondingly, same-store sales for the year expected to increase 4.2% to 5% compared to our prior expectation for an increase of 4% to 5%. Based on the limited volume of share repurchases year-to-date and the stock split, we are also adjusting our estimate for full year diluted share outstanding to approximately 141.7 million. We expect to open 100 to 102 stores this fiscal year. We have reduced our estimate for capital expenditures to a range of $210 million to $220 million as the timing of the expenditures for our new Store Support Center have been less than we forecasted, and several projects requiring CapEx have been reset for 2014. Inflation has tracked as expected, and we continue to estimate that it will be approximately 1% to 2% for the full year with the fourth quarter being relatively flat as we cycle the higher corn prices from a year ago and experience slight deflation in some categories. With respect to sales. We are well positioned heading into the fall and winter season, but we expect that moderating inflation and this prospect of deflation in certain categories will be a slight headwind to comp sales in the fourth quarter. Also impacting sales comparisons in the fourth quarter will be the shortened holiday selling period as a result of the shift of Thanksgiving holiday, which creates 1 less week between Thanksgiving and Christmas this year compared to last year. Also in the fourth quarter, we'll be cycling against the effects of Hurricane Sandy, which we estimated last year was approximately 30 basis points of comp sales attributable to emergency response merchandise. We expect weather conditions to be somewhat neutral compared to last year, although October has been warmer than last year, and we look forward to the colder weather. With respect to gross margin, we expect to continue to achieve gross margin rate improvement for the fourth quarter and the full year through the execution of our key gross margin initiatives. We do not expect the increase in Q4 to be the same -- of the same magnitude as Q3. Gross margin will benefit slightly from cycling some of the lower margin emergency response activity in Q4 last year related to Hurricane Sandy. Also, gross margin will benefit slightly from the increased number of new stores opened in the second half of the year. We still expect that the mix shift in freight cost will continue to be a headwind, but we expect this to be more modest, similar to the third quarter results. With respect to SG&A, we expect the remaining drag related to relocation of the Southeast distribution center and our corporate data center, which is principally related to the duplicated occupancy expense, will decrease to approximately $0.01 in the fourth quarter. Therefore, we expect EBIT margin increase in the fourth quarter to be driven by improvements in gross margin and, to a lesser extent, SG&A leverage. For the full year, we are reducing our forecasted effective tax rate to 36.6% from our previous guidance of 36.7%. The decrease results primarily from the reversal of various reserves for uncertain tax positions. Although we will provide full year guidance at our year-end conference call, consistent with our past practices, I want to highlight a few factors to consider in preparing your models for 2014. We will be transitioning next year to our new corporate Store Support Center. We'll be consolidating 3 leased facilities, and we'll incur lease write-off and various transition costs. As the Affordable Care Act rolls out, we forecast the medical expense will increase as the result of increased enrollment, along with the various charges that are embedded in the act. Also as we continue to expand out west, it is a longer supply chain and we will incur additional stem miles, which makes freight a slight headwind. We initially estimate that these 3 factors could have a $0.04 to $0.05 drag in 2014. Of course, we will better quantify these items when we provide our 2014 guidance on our fourth quarter call. So to conclude, we are very pleased with our execution in the quarter, and we believe that we took advantage of the extended spring-summer selling season. This is supported by the improvement across all key metrics that we just discussed, and we believe that we are well positioned to finish the year strong and deliver another great year. So with that, I will turn the call back to Greg.

Thank you, Tony. As Tony said, we are very pleased with the way our business performed in the third quarter. We ended the quarter in solid shape from both the merchandise and inventory perspective, and believe we are well positioned to take advantage of the fourth quarter business ahead. While there is a lot of discussion about the current retail environment, we continue to see little change in the needs-based purchasing behavior of our consumers. Our business has evolved into a 12-month business, which today, is impacted less by seasonal, weather or micro trends the way it was a few years ago. We have become very efficient at managing inventory to address changes in weather, consumer preference and merchandise trends. In fact, we believe our ability to merchandise our stores with the right product at the right time has become a strategic advantage for Tractor Supply, and we remain really confident in our ability to execute our business over the long term. We are focused on driving operating profit dollars across the organization and maximizing return on capital. Sales, gross margin, expense leverage, inventory productivity and capital allocation are all important to driving capital returns, and we will continue to take a balanced approach to managing these variables and driving shareholder value. Operator, we would now like to open the call to questions.

[Operator Instructions] And we'll go first to Alan Rifkin with Barclays.

Question on the private label. I mean, it sounds like it increased by 600 basis points in the quarter alone. What do you think is the opportunity for continued increases on the private label side? And how much of a contribution to the gross margin gains did that private label increase give you?

Alan, this is Greg. Two things to talk to. One is, even though we had a very nice increase in our exclusive brand sales component for the quarter, I'm really reluctant to say that there's a number that we're reaching toward. And the reason I feel that way is that as we have grown these categories and we see the customer giving us the positive nod to their pocket book, their spend, it gives us confidence to take it out another ring. So even though we're sitting a little over 30%, the number is really hard to peg because it does vary by category, and sometimes by season of the year. The second thing is we don't usually comment about what kind of contribution margin is giving us out of the exclusive brands, but I can tell you that there's a range of hundreds of basis points improvement between what we can do on our own as we build it and source it and put it into our stores versus buying it as a national brand. And there's no question that there's been some significant movement in the direct margin side, which is really the first margin as we bring that product into our stores. Now the bottom line is, you have to sell it at pretty much the regular price. It has to be a good value to the customer in order for you to achieve the margin rates and take that to the bottom line. But we're very comfortable in the way we source the product today, build the product today that we're giving high quality, great value, and that's why we believe it's doing as well as it is.

We'll go next to David Magee with SunTrust.

This is Lynda Guthmann in for David. We just -- our first question is just what sort of approach you guys are taking towards holiday this year versus last year?

Lynda, this is Greg again. We approach every season with, I guess, a new set of challenges and opportunities that we see in front of us. We are being conservative from a standpoint of looking at our sales trends throughout the year. We use a process in our company called correction of error that we use every season as we go through it. And we're using that -- those data points that we captured last year, and that's how we built our plan for this fourth quarter. So what I would tell you is we see opportunities. We believe that trends in some of our businesses will continue through fourth quarter. And the all-important day after Thanksgiving weekend for us is a good indicator as to how the consumer will spend through the remainder of the holiday season. But we're feeling fairly positive right now about this season.

Okay. And then just a follow-up question. Are you seeing any weakness in stores that are maybe in a lower demographic?

No. I would tell you that we track all of our stores' sales and performances throughout. And I can't say, honestly, that we've seen any shift in our sales in markets that are maybe a little less demo.

We'll go next to Chris Horvers with JPMorgan. Christopher Horvers - JP Morgan Chase & Co, Research Division: So a question for you. You expanded the lawn and garden in the southern states into a year-round program. Can you talk about what exactly that means? Is that some of the plant categories as well? Is that keeping grass seed and fertilizer in stock? And can you maybe dimensionalize how many stores that is currently versus what it was a year ago?

Chris, this is Greg. First of all, yes, we -- you mentioned a few things that we're staying in business in those categories in a limited number of stores. What we basically have done is expanded some programs and live goods. We have maintained some of the plan-o-grams in the areas where you're going to see like insect repellants and fertilizers and different things of that nature that continue to be products people use in those markets throughout the year. It's several hundred stores that this program has stayed in this year, and we gave it the appropriate attention when it came to inventory support because we were hearing from our stores every year, "Listen, we're exiting the seasons too early. For us, there's some products we should carry year round." It's been a nice addition to the business. It really is just addressing the consumers' needs in those markets. That's what we've done. Christopher Horvers - JP Morgan Chase & Co, Research Division: Okay. And then as you maybe peel back the second quarter, and I know you're talking about some commentary on October. But what do you think like if you took out the extended season, what's sort of the baseline comp in the business, and is that what you're highlighting as you talk about the consistency of performance that you've seen?

Yes. Chris, this is Tony. When we look at -- it's obviously hard to break out some of the pieces in the business. A lot of what we look at is we'll segregate categories that we call year-round categories versus the seasonal categories. And it clearly was a solid split between those categories. So we felt that we had some significant drivers in both the foot traffic generation, as well as the sort of add-ons that we got from the spring selling season. I think, when you look at this year and last year, as we went through the first 9 months, we have a very comparable sort of 5%, 5.5% comp in both years. So it really represents the seasons throughout the first 9 months. And as we talked about, sometimes we will just have a shift between the quarters. But as you look at us on a full year basis, we look at it as very consistent performance. Christopher Horvers - JP Morgan Chase & Co, Research Division: And then finally, you mentioned $0.04 to $0.05 drag next year from some of those items that you had listed out. The consolidation of the 3 centers into the 1 corporate support center, could you perhaps share how much of the $0.04 to $0.05 that is? And is that representative of maybe how you think about the rent savings that you're going to have on a go-forward basis from consolidating?

Yes. At this point in time, we really didn't want to get into any specifics or details. What I was trying to do, Chris, was to make sure that as you model into next year, I know a lot of the analysts are looking at onetime charges this year, and obviously, looking at them as one-time and adding back to next year. And I just wanted to make it clear that there are a few other things as we enter into next year that will also provide a headwind. So again, I wanted to keep it top level in general. I want to be able to, at least, have some discussions as we go out in the last quarter so that you have a little bit of lead time when it comes to doing your modeling. I would tell you that relative to the transition, it's a good portion of that number. But as we get closer to the conference call next time and we give full guidance, we might be able to provide a little bit more specifics as to those numbers.

And we'll go next to John Lawrence with Stephens.

Can you comment a little bit on Alan's question on the exclusive labels? Obviously, that rate -- the process for several years has been to do a lot of tests in the stores. We've seen a lot of that over the years. Has that either -- can you just talk about that process? Are there more tests, or have we just gotten more tests in certain levels or in the sixth or seventh inning of the game and that are being more successful, or just talk about that process a little bit?

John, the testing process has been something that we have focused on for the last probably 3 years. And Steve and the team continued to bring new things to the store, whether it's in the center court, where we use the drive aisle areas, the end caps, or sometimes even 4-foot section resets, and it's limited. In groupings of stores, we don't push it across the company until we can prove the test to be successful. But we -- I would say, you're never in any inning when it comes to testing, because there's always new products, new things to be tried. You're always trying to stretch the envelope, and we have a philosophy here of fail often, early and cheaply. And so we're going to continue to push that strategy and bring our customers, the latest, the greatest and some of the more novel things that are out there in the market. And I would tell you that not all of them fall under the banner of exclusive brands. Some do, some don't. Some are some things that Steve and the team will find through our process of these vendor days that they have here, where we -- 3 or 4 days we dedicate 3 times a year, and new vendors come in and show us new products, and we make some selections and we try and test things. So process is healthy. Process is well run. It's well oiled. We're probably now in our fourth year of it, and it's just going to get better with time.

Great. And second question, can you tell me about your comments on big-ticket? Was that across the board regionally, and what were some of those areas that might have surprised you late in the quarter?

Big-ticket sales was, for the most part, yes, across the board in every region. And I think we weren't surprised by what we saw in outdoor power equipment because we saw the season extending. And I don't know that I would say there was really any major surprises there. I like the fact that we saw some push in our tool business and we saw some push in our garden tool business, the hand tool and garden tool business, which leads me to believe that consumers are understanding the value proposition that we're giving them in our store. So really no surprises, just delighted with the results.

We'll go now to Scot Ciccarelli with RBC Capital Markets.

The first question is do you think you cannibalize fourth quarter sales at all just due to the strong 3Q results, number one? Number two, can you just talk about the decline we've seen in corn prices? And is that one of the categories Tony was referencing in terms of where we might see some deflation?

Scot, a couple of things. I don't believe we cannibalize fourth quarter at all. There's a complete shift in the business as the weather starts to turn. We were just capitalizing on an extended, I'll call it, spring-summer season, and that helped us in third along with the C.U.E. businesses continuing to perform well. As far as corn prices and what Tony was referring to in the inflation-deflation component, yes, we're seeing a little bit of that in the mixture of some of our products. But remember, corn is not the primary ingredient in everything that we sell. It is a component of some things, but not all. So it does have some impact more in the feed business than probably any place else.

So where else would you be seeing deflation then? I thought that would be the natural, but it sounds like there might be something else then?

Generally, if we see deflation, it most likely will be in those categories.

We'll go next to Michael Lasser with UBS.

First on the gross margin performance in the third quarter. If you parse it out, how much do you think was sustainable driven by some of the initiatives within the company and how much was due to the late, extended spring selling season?

Well, Michael, obviously, there's a lot of overlap there. And I think we'd be doing a disservice trying to break out the component in those, to that extent. I can clearly tell you that all 3 were a driver as far as the margin goes, and it sort of really worked in tandem, all 3. I got all 4, were drivers in the -- as far as the initiatives go. But overall, the only aspect that I would always caution as far as the year-over-year is clearly the clearance piece and how we manage that year-over-year. So generally, the initiatives will drive and will be carried forward and sustainable. However, as we go through seasons, I think we've benefited significantly as we had the extended season and we had very successful inventory management and exit out of the season.

And a second question on the inflation-deflation piece. How long is typically the lag time between commodity price changes and what the experience is in your business? My question is really trying to get at, could you actually see deflation on your comp from commodity prices moving into 2014?

This is Greg, Michael. There's always that risk that as prices come down, we have to sell one point x times more units to offset the volume from a year ago. One of the things we track closely and we look at it, and we talk about this a lot is market share growth, market share growth. And so even though we may be moving down in retail price, we have that methodology here and it's pretty rigorous, that as we see prices -- the input prices start to come down, we stair-step down our retail prices. And sometimes we hold onto some of that margin. We don't give it all back because in many cases, we can be the leader of price in some of these categories with the amount of stores we have across the country now. So I would tell you that we do a very good job of managing deflation and inflation when it happens. We are very sticky on our retail, and we look for trying to take every penny to the bottom line if we can.

Michael, this is Tony. Let me just add that what's important to note is as much as we may have some headwinds on the sales line, when we have deflation, the gross margin rate will show improvement. Just as we had talked in the past when we have the inflation, the gross margin rate is a little bit more difficult to manage. So as management, it is our responsibility to be able to manage through both that inflation and deflation period. But as much as there may be pressure on the top line, we believe that we can benefit on the gross margin line.

Okay. And you're not particularly concerned because you do have some discrete expense items coming up at the turn of calendar with Obamacare, the headquarters move, that you'd get pinched a little bit if you do see deflation and then some inflation in your cost structure? It's not an excessive risk to be mindful of?

At this point in time as we model it out, we're not overly concerned. Obviously, it depends as to the magnitude that we see. But as we move forward, we have shown, as through '08 and '09, that we can effectively manage through a deflationary period.

We'll go next to Dan Wewer with Raymond James. Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: More of a long-term question. In some of your recent meetings conferences, you've been talking more about e-commerce opportunities for Tractor Supply. I mean, frankly, when I think about your business and the bulky products, it looks to me that last mile delivery is a big challenge, but what am I missing? I mean, what do you see as an omni-channel opportunity for Tractor, how it could begin to play out in the next few years?

Well, first, let me say that it will be a slow ramp, because you are right. There are challenges with many of the products we sell. If we felt we could move those through a supply chain and to the customer cost effectively, it is challenging. However, that being said, there's a tremendous amount of traffic that's coming to our site for information, first; for exchange of information, second. So it's information about products, then they're exchanging information amongst themselves. The customers are talking between themselves. And there are things that we can execute from a delivery to the consumer, either it's drop ship or it's buy online, pick up at store, variations of that, that can work very effectively for Tractor Supply. Our challenge is going to be getting the SKU base structure out there appropriately, and then understanding the cost component of moving that product through our supply chain or from the manufacturer to the customer. And those are -- that's a mixture of variables. It's not like dealing with jewelry or apparel. We have everything in this store, so there are some categories where it will be much more difficult, some categories where it will be fairly easy. I believe that there's a long tail portion for us longer term that could be very beneficial. A customer is coming to tractorsupply.com and saying "I'm looking for a unique part for a 1953 9N Ford tractor. Where would I look for it? Well, I'll go to tractorsupply.com." And we can pop things up and through our alliances with other manufacturers, be able to have an availability of product there for the customer to choose from. They click buy from us, it's fulfilled from that manufacturer. So I could go on and on about what I believe, Dan, this can be, but it will be a slow ramp. I do think there's a lot of benefit here. And one thing you can't forget about is the social aspect of what's going on with the websites right now. We have a social aspect to our company already. If you ever shop in our stores, and you see how our customers interact with one another and the team members, that's translating to the web. And we're cognizant of that in making sure that we're playing -- going to play in that space effectively. Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: And just one other separate question. During your prepared comments, you were talking about, I believe you called it, the PAW program. This is relating more to domestic pets, right, dogs and cats?

Yes. Pet awareness week is basically what PAW means. Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: Is this part of your animal business actually becoming bigger and growing faster?

What I would comment to is that I think more customers are starting to discover Tractor Supply as a store that, even though the name says Tractor Supply, there are a number of products inside that they would buy from us. And some of this is word of mouth, some of this is through some of our testing of some new marketing methodologies, but we are and can be a store for many more people than just this core rural customer. And I think that's where we're seeing some of this growth. Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: So just for people who live in smaller towns that -- who have dogs and cats that you're recognizing that as an opportunity?

Yes. I think, they may have been shopping at the local pet store, and now they're saying, "Tractor Supply is a great option."

And we'll go now to Mark Miller with William Blair.

This is actually Mike Signore for Mark. I know in the Q&A, you kind of mentioned you were pleased with the new store performance. I'm wondering if you could just maybe elaborate on that since you have entered a bunch of new markets here more recently.

Certainly. As we've headed west, we've just been very pleased with the performance of those stores. And as we backfill as well, we just feel that the stores come out a lot stronger. We understand the markets better and we've been getting the right merchandise there. So we're really pleased with the performance of the stores, and they continue to beat the pro formas in which we've established for them.

Okay. I mean, when you look at like the new stores over the past couple of quarters versus maybe the new stores last year, I mean, are they performing better than those? Because I guess, when we look at the calculated new-store productivity number, it actually looks a little bit lower. So I'm wondering if that's just kind of a mathematical thing based on what you're saying. It sounds like it would be.

It should be mathematical. Both years have been very good years for us and they've performed very similarly.

And we'll now go to Denise Chai with Bank of America Merrill Lynch.

Just want to talk about your traffic growth for a minute because, I mean, your growth was just so impressive there. So I'm wondering if you really saw a really meaningful contribution from new customers, the aware non-shopper perhaps coming in for pet supplies as you were just talking about. Or were you mainly seeing increased frequency of trip by existing customers?

Denise, this is Greg. We can track existing customers a lot easier than we can track new customers, to be very honest, unless they come in to the -- some promotional event that we've done and we can, through bar coding, be able to know that they are a new customer to file. I can tell you this, we are seeing increased footsteps from the customer base we have, which leads me to believe that we are becoming more of their sole destination and they're spending more of their wallet with us. We are still working on some of the new customer acquisition strategies. And at this point in time, I don't have much to talk to you about that. But that is also another piece of the focus.

Denise, this is Tony. When we look at and talk to vendors and get data points, it's very clear that we are taking market share. So there is a good portion of new customers that we're attracting.

Got it. And also wanted to follow up on private label. You said that it varies by category and by season. So could you kind of walk us through that a little bit, where and when penetration is heaviest and lightest?

Well, ironically, the penetration is not that different, really, spring to fall because the categories shift, but I'll give you an example. In the spring season, you may have GroundWork's products in -- all across the garden categories. In the fall, you may have products in heating that you wouldn't see in the spring season. So these are some of the changes that occur between spring and fall. Now I'll just give you 2 examples. There's many more, but that's some of the things we have to -- we consider. And there are some brands that run across the store every day like C.E. Schmidt. You'll see spring apparel and footwear there. You'll also see fall apparel and footwear in those brands. So it's a combination really of all 3.

Okay, got it. And just lastly, as you expanded into new markets like Colorado and Nevada, are you seeing any kind of competitive response? And can you talk about maybe how mix and seasonality might be different in these markets? I mean, what are some of the nuances that you're finding in these newer markets?

I can speak to this. Tony will probably chime in. Typically what happens when we go into a new market, before we go, we do our research, and we look at a couple of things. One is what is the current competition doing and doing well? So we have to be able to match up. Secondly, where are their gaps? Where are they vulnerable? And we look for those. And then we put -- we kind of make that decision. Then the third piece is, we say, "Where do we, as Tractor Supply, win and where can't they compete with us?" And to be honest, it's still early in the game in the West to say that everything that we're learning as we go into these markets, we've got it figured it out. But I will tell you that we've had great success using some of this formula going into new markets and getting these stores as close to right as we can with assortment and then some of our marketing approaches. We also do something quite different with adding a new store team that babysits these new stores for that first year and listens to their needs and the wants from the customers that possibly we could have missed when we first opened. So it's a pretty thorough process.

We have Brian Nagel with Oppenheimer. Brian W. Nagel - Oppenheimer & Co. Inc., Research Division: So the question I got just on -- you mentioned big-ticket in your prepared remarks and in response to some of the questions. So maybe just revisit that again. How much per contributor to the comps was big-ticket? And if you look at big-ticket here in the third quarter, did it differ significantly from what we saw earlier in the year?

Yes. When it comes to big-ticket, like I had stated in the prepared remarks, it was just slightly under the chain average. So as a percent of the total, it didn't impact the overall comp significantly. And as I alluded to in the comments as well, when it comes to the average ticket itself, it just didn't have a significant impact to the average ticket. So overall, we're really pleased with how it performed, obviously, driven by the extended spring. But overall, it was very consistent with the overall performance of the company. Brian W. Nagel - Oppenheimer & Co. Inc., Research Division: So just to clarify, an extended spring selling season, is that -- would that typically benefit or hurt big-ticket sales?

In this case, it would benefit because some of the categories, in particular, riding lawnmowers, was very strong during the August -- July and August period. However, it was offset by some of the emergency response that we experienced last year related to Hurricane Isaac and as well as there was some Mid-Atlantic power outages in the early part of the quarter. Also, we talked a little bit about the end of September as we look -- as we await cold weather. A lot of times, we may have some cold weather product merchandise, chainsaws, heating, et cetera, that we sell at the end of the quarter and we did not have those sales. So it was a little bit of a mixed bag, but generally driven by the power equipment storage category and strong sales in trailers.

We'll go now to Peter Benedict with Robert Baird. Peter S. Benedict - Robert W. Baird & Co. Incorporated, Research Division: Tony, on the CapEx reduction for this year, of the range, I'm not sure I heard you correctly. Was it that the costs are coming in less than you had anticipated or they're just coming later so they're going to hit next year?

I'd love to tell you that they're coming in less, but we are right on plan. It's just really the staging of the payments itself based -- when we look out throughout the rest of the year, they're going to probably trail what we had anticipated at the beginning of the year, and that's principally related to the new Store Support Center. As we roll into next year, I am still going to vigorously try to maintain our $250 million target. There may be a few additional projects that will drive that number up a little bit, but I'm going to try to maintain the CapEx in that range to try to keep some consistency from year-to-year. Peter S. Benedict - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then the expenses in the P&L that were related to some of this activity, the relocations and whatnot. I think you said it was going to be $0.01 in the fourth quarter. So does that total like $9.5 million this year? I think that was a little higher than what you guys had thought at the beginning of the year. First, are my numbers correct? And then secondly, what were -- why were the costs higher?

Generally, it was about where we had anticipated. And I, unfortunately, get a little confused as we did the stock split. But we had said originally, I want to say 5 to 7, so that takes me to about 3.5 on the high end. We definitely came in at around the high end when you add up all the quarters. Peter S. Benedict - Robert W. Baird & Co. Incorporated, Research Division: Right, okay. And then last question maybe, Greg, can you talk about some of the operational initiatives that you guys have underway? I'm thinking specifically things around systems. I know you have a new demand forecasting tool that you guys lined up, labor management and then also the supply chain, the mixing centers. Just maybe you can give us a sense of kind of the timing of those coming out and what type of benefits you're expecting.

All right. Well, Peter, we'll start in reverse. We'll talk mixing centers, still operating out of Waco. Test has proven itself. We are looking for sites currently. And I believe we'll have a site located hopefully about the first -- or end of this year and start to really get this thing operational. As far as other initiatives, demand planning, we are currently working now with SaaS, and we will start to roll into that new format next year. And it will take about 18 months to roll it completely out and have it through the entire company, touching all of the parts of the merchandising group that it needs to. As far as other things in the supply chain, we're spending a lot of time there trying to understand what labor management can mean. We do have it up and running in one of our buildings. We are liking what we are seeing initially with the reporting and our ability to be able to interact with the team members out there and give them goals and objectives as they're doing their picking and sortings and building of pallets and such within the mix of the goods that are coming to the building. We also have another new component in that Macon facility, the import center. And really what that's being used for is to stage a lot of the bulk inventory that comes in from the Far East and stage it in that building and not have to pre-distribute. We can do it post. So we can start looking at keeping that bulk there, pushing minimal quantities to the stores initially. And then as the demand of sales are generated, we'll then start to push that bulk in that building out to those distribution centers based upon the needs of those stores. And that's very unique. It is something that we've been talking to for a while. We now have it in process. So far, so good as far as what we're seeing from that, but there's a lot of learnings there, a lot of learnings. Peter S. Benedict - Robert W. Baird & Co. Incorporated, Research Division: Sure, that makes sense. Can that import center be helpful to the fourth quarter? Or is that something more next year?

It's going to be more next year as we start turning the corner into the spring.

And we'll go now to Joan Storms with Wedbush.

I just had a follow-up question on CapEx. And Tony, I think you had talked about the timing for the new DC out west, and how is that CapEx number going to look? You delayed a little bit into 2014. If you can comment on that at all and maybe into 2015.

As far as 2014 goes, we anticipate in 2015 to have a Southwest distribution center. We would expect to incur some costs next year most likely with either the acquisition of land, but we do not plan to have significant expenditures around that. It could range to maybe $4 million to $5 million. So I don't see that as any type of deviation from our 5-year forecast on CapEx. When it comes to the Store Support Center, as much of some of the payments are lagging our forecast, we still maintain being on budget. And as we move into 2014, again, I've targeted $250 million of CapEx in our long-term forecast, and I'd like to try to stay within that guard rail.

And we will go next to Matthew Fassler with Goldman Sachs.

I want to go back to gross margin, which I know has gotten some air time already today. Just want to think about whether this represents a breakout quarter in a sustainable basis. For 5 out of the past 7 quarters, your gross margin was flat to down. And I know that there are some idiosyncratic reasons, weather-related and natural disasters, et cetera that contributed to that. That being said, a lot of the underlying drivers that kicked in here were in place then, whether it be imports and exclusives, et cetera. Is there a step function or tipping point of some sort for any of these initiatives that you think got traction here in Q3 that you think continues to produce at a faster rate than we might have seen over the past several quarters as we look forward?

Matt, I'll speak to it, and I know Tony has got some comments. We have said all along that we thought the third and fourth quarter this year, we would see some improvement in margin rate. We knew that there was some deflation coming into play. We also knew that our mix of exclusive brand products and our import -- the strategic import programs we're going to start to ramp as we go into this fall. So that's a direct margin push, good guys. So we knew there were some factors coming into this that made us feel more comfortable that we had some running room here on rate. And we believe that is sustainable. Now you still got headwinds. You still got headwinds with some of -- freight. You've still got headwinds with a mix with C.U.E., but the headwinds were a little eased this quarter in comparison to earlier quarters of the year.

I would echo Greg's comments and just say that having the later spring, we had good positive margins from some of our spring categories that we may not normally see in the July, August time frame. And so that was a driver. And again, as I mentioned earlier, when it comes to clearing out of seasons, that can have an impact on a particular quarter and it will vary from quarter-to-quarter how we exit seasons. So again we're very successful on how we managed through the spring exit and that obviously has a positive impact on the margins.

What was the year-to-date increase, if you would? I know you typically have this quarter, but quarter-to-quarter if you have it, the year-to-date increase in exclusives and imports, just so we could compare the third quarter run rate.

Yes. I have to get you the exact number. I thought that we were up approximately on a full year basis -- on a quarter basis we were up almost a full percentage point, but I don't have the year -- the full year number.

One thing, Matt, what we can tell you is Q3 of 2012 to Q3 of 2013, there was about a full 3 points worth of movement, 27.5% to probably over 30% to 31%, so nice movement.

And so that seems like the breakout element of this potentially. The second question, just to make sure that we frame the $0.04 to $0.05 headwind that you talked about on SG&A from various factors next year against the extra items that you might have booked this year, because we know there are some of those, what will that -- sort of the exogenous items end up being, you think, for 2013 when all is said and done?

Well, when we talk about the data center and the distribution center relocations, they clearly were the largest drivers, and they would be onetime events. As we move into 2014, the move of the Store Support Center would be a one-time event. Obviously, as we start to move to 2014, we can make a better assessment as to the impact of the Affordable Care Act, as well as getting a feel for the impact on freight when it comes to our supply chain in the West stores. So it is a little bit different than on a year-over-year basis as these discrete items in 2013 are a onetime charge, whereas next year they may be more embedded in the run rate.

Got it. So if we're to isolate -- if we're to take out health care and take out freight, which both of those I know are big and potentially recurring, you're saying the $0.04 to $0.05 number, I still think was a number for next year, correct? Or are all those factors in there?

All the 3 factors that I mentioned constitute the $0.04 to $0.05. And again, I'm just trying to give you an overall perspective early on so that it doesn't come as any surprise when we have our more detailed call, fourth quarter call.

And just to finish up, the discrete onetime items that you booked this year related to headquarters consolidation, things like that, that I know have weighed on your numbers certainly this quarter and, I guess, will in the fourth quarter a little bit, where will that aggregate for the year?

It looks like it's around about $0.04.

Got it. So it sounds like in essence, the extra charges, I mean, they'll be there, but they might not change the expense run rate because you have some items that you'll cycle off?

Correct.

And we will go next to Chuck Cerankosky with Northcoast Research.

First, a technical question. You talk about bulk imports that you'll be staging. Could you give us a few examples of what types of products those might be?

Yes. When you look at spring, as an example, it could be lawn carts. It could be, let me think, wheelbarrows, things of that nature, things that you would be bringing in, in bulk because you're importing them. And instead of trying to push those out to every store in a pre-distribution process using last year's sales as history, we would rather see that inventory sitting in one large location. And as the sales start to develop in the season, then you start to push that inventory out to those DCs that feed the stores in those regions. So it's a more precise way of allocating inventory to sales. That's the advantage.

All right. I understood the concept. I was thinking in terms of like bulk feeder, that kind of thing, I see what you mean.

No, no. That's perishable. This would be hardlines-type product, yes.

Got you, got you. Turning to your business, you're a retailer that covers a very wide demographic, and we still have this bifurcated economic recovery. How are you able to reach out and cultivate customers that are able to spend more and purchase more of those big-ticket items. Are you actively doing that in any way?

Well, first of all, I would probably challenge you on a -- this wide customer base you're talking about. We really are pretty narrow in the customer we try to target. These people that live outside the cities, that live in this lifestyle, it's a pretty narrowed group. However, the store itself does appeal and can appeal to many other segments. Now getting to the piece about how do we cultivate customers and how we're selling big-ticket, our customers typically buy out of need. So when you think about that, you say, if they buy a piece of outdoor power equipment and they've spent good money on that, let's say, they've spent $3,000 or $4,000, they will take care of that piece of equipment for a period of time. And what we saw back in the early part of the recession was instead of replacing, they were repairing and extending life. Now we may have seen in the second half of this summer, the extended season here, a little bit of the fact that some of those units couldn't extend the life and so they had to replace them. And I'm not telling you that we're in that cycle. But clearly, that extended season gave us some opportunity to sell some more units, and it's possible some of those units couldn't -- the life couldn't be extended. But we talk to our customers very specifically through the Internet, through direct mail, through our marketing process that talks to them more directly. It's not broad based. It's very targeted. And we have a very targeted base of -- in our databases here in the marketing department. So I would tell you that we know them probably better than many of the people we compete with. We know many of their buying patterns and their needs. We need to learn more, but we play off of that and we send them offers and we talk to them directly about the things that they're interested in. And I think that's probably one of the unique things about us with our customer base.

We'll go now to Jeff Black with Avondale Partners.

And just a quick question. Are C.U.E. margins improving in any like-for-like area? And do we just expect headwinds to abate? Or are the 4 strategies you're using in the rest of the segments -- do they have an opportunity to, over time, improve C.U.E. margins?

Yes. Definitely, when it comes to the C.U.E. items, we would expect that they will moderate slightly as they become a larger piece of the base. So the deviation from that, I'd say, base or norm will become less and will be less impactful. We have seen some improvement in certain categories, but you have to remember that the C.U.E. items really expand all 5 of the major categories, and there are so many different SKUs that you're going to have various mix from quarter-to-quarter. So I don't think you can really look at it and say, "Okay, C.U.E. items, the margins have improved and that's what's driving the moderation." I think you have a combination of things, as we've talked about. As we move into a deflationary period, gross margin percent improves, so you have that. You have some improved margins as we move into some of the newer stores. So there's a lot of different variables as well as the price optimization and improvement in prices. Now that, obviously, would be sustainable as far the improvement in the C.U.E. margins. So a lot of different variables. And again, it's our responsibility to manage those.

We'll go now to Adam Sindler with Deutsche Bank.

One quick question on gross margins again. So I guess, historically, when we look back over how you guys perform, especially in a seasonal quarter, there is sometimes bifurcation between how comps go and how gross margins go. Typically, when you're comping better, it's a lot of OPE, and that has a drag on margins. Or in the case like this quarter, you had very strong traffic, a lot of it is often C.U.E.-related. Again, a drag on margins. But gross margins were much better than expected. I mean, clearly, you had some onetime things going on here. But I mean, are you starting to see -- and one thing, I guess, I wanted to build out on this, you did call out a little bit less drag from transportation and mix. Looking forward, especially as you backfill the Northeast, which is a lot more dense, do you think there's any point in time where you cross the threshold and you start to, not necessarily leverage, but sort of flatten out the negative impact from mix and transportation?

Wow. Adam, that was about 10 questions in one, I think, that you just asked us. Let's start maybe talking a little bit about the gross margin in general and the components of it. Typically, when we have inflation, okay, we see comps moving up and sometimes pressure on margin. Vice versa, when we have deflation, we see sometimes some pressure on comp sales, but we see margin rate moving. What you're seeing right now in our business is a different blend again and the blends will be changing as the company evolves. C.U.E. has become more important. Not all of C.U.E. is low, low, low margins, but a lot of that high-velocity, high-volume stuff that is low in value is lower in margin. So as that mix would grow, and as Tony said, it looks like it's going to start to moderate because there's other parts of the store that Steve and the team are driving sales behind, it makes the blend a little different than it was in second quarter and it'll probably be a little different again in fourth quarter. And you say, "Well, why do you say that?" Well, in fourth quarter, I've got a lot of high margin, I'll call it, gift-type products sitting in the store that if it translates and I sell more of that at the higher margin rate, I take that to the bottom line, that takes some of the pressure off to the mix of the margin again. So because of the kind of store we are -- we're not just an apparel store. We're not just a feed store. We're not just a tools store. We're not just an outdoor power equipment store. All these mixtures of things, it is our responsibility as the manager of this company to look at these constantly, look at the balances, make sure that when we're planning our marketing, our advertising, our presentations in the stores, where we plan to drive our business, we understand those triggers and those levers. And it is -- it's not easy. And I would tell you that the operators in the store side, in Lee's group and Steve's group on the merchandise side, they're talking constantly about mix. They're talking constantly about the constitution of our average sale in the store, what is it looking like today versus 3 months, versus a year ago? So this threshold you're talking about is at some point when you get to a certain level of velocity, do things start to level out and do costs kind of stabilize? I think as we work this process of understanding, using maybe the mixing-center concept as a variable, we can start taking cost out of high-velocity, high-volume, low-value product. That's going to be a big plus for us. But I can't tell you that we've got all of that figured out yet, but that's a component of C.U.E. that we're working on. And I have confidence we will find the answer at some point, and that will help us start to level some of these fluctuations. But I will tell you that weather plays a role, a consumer confidence will play a role, timing of events and such play a role. So there's so many variables here, Adam, that it's not an easy conversation to have, to be honest.

We will go now to Simeon Gutman with Crédit Suisse. Simeon Gutman - Crédit Suisse AG, Research Division: I'll ask 2 questions, and I'll put them up front because I realized it's running late. First, Tony to close out on the SG&A piece, and I'll keep it high-level because I'm sure you didn't want to speak about it this much. Maybe encapsulating some of what Matt was asking earlier, if you look at onetime stuff and then onetime stuff year-versus-year, is there any reason to believe that the threshold in which the business gets expense leverage, should that be any different next year?

If I look year-over-year, I don't believe that it would be too different. I would say, I'm expecting it to be similar. Simeon Gutman - Crédit Suisse AG, Research Division: Okay, that's helpful. And then second of all, just honing in on September. Some retailers out there look like they had some type of abrupt slowdown in business, and I know you called out September being a little bit slower in terms of the month, but it was seasonal. How do you, I guess, disaggregate -- and I'm sure you've seen a lot of the data -- disaggregate some of the seasonal from a customer that, in disguise, might have been getting a little weaker?

Again, it is very difficult to try to differentiate between the 2. However, being with the business for as long as we have, when we look at the customer, we look at core categories, we see how they're spending their dollars, we could tell that the driver, principally in the back half of September, really was more the cold-weather products. And so that gave us comfort that it wasn't necessarily the customer, but it was more of a seasonal issue as we transition into fall/winter.

We'll go to our final question from Joe Feldman with Telsey Advisory Group.

I wanted to just go back to the transactions count being -- consistently being up, and was wondering are you guys seeing anything different? You mentioned that you're seeing a lot of the same customers shop. So I'm wondering, are you just seeing people trying to stretch their paychecks by shopping more frequently, but spending a little less each time? Or I guess, how should we think about that, and maybe where the state of the economy is right now in your markets?

Joe, this is Greg. I would tell you first that the transaction values are very similar to what they were in prior quarters. So we're not seeing them spending really more or less. I think what we truly are seeing is, as Tony mentioned earlier, 2 things: One, current consumer base giving us more of their wallet. They're buying more things with us. Remember, we talked earlier about how we take a customer who's maybe buying in the equine area and we start to talk to them through our marketing vehicles and our capture of information about other pets that they may have and other products they may want to entertain buying from us because we know that horse or equine customers have other pets. And we're starting to see some of that movement. We can track that. The second thing is, clearly, it's a market share game, and we're seeing market share growing. We're being told that by the industries that we do business in, and that's many new customers for the most part.

Got you. And do you think the market share is coming from -- you've always talked about kind of going into smaller areas and taking out some mom-and-pops? Or do you -- are you seeing it maybe from the other big-box players that are out there?

Really hard to say where it's coming from. I would tell you that I think it's customers are finding us to be a better solution for them. Maybe it's an easier shop for them, it's a more convenient shop for them, it's a one-stop shop. We talk about that all the time. I honestly believe that's what it is. And as we look at the basket of the sale, we're starting to see that there's more things going into that basket from some of those current consumers that we do track.

And with no further questions, this will conclude our conference. Thank you, all, for your participation.

Okay. In closing, I'd like to thank all of those who are invested in Tractor Supply, and I'd like to personally thank and recognize all of our hard-working team members who serve our customers each and every business day. As many of you have heard me say before and comment, retail is really all about people. And I recently had the opportunity to visit a number of our new Western store locations, and I continue to be impressed with the quality of our team members that are serving our customers out there. Our field management continues to place great emphasis on hiring hard-working, knowledgeable team members with winning attitudes. Tractor Supply is celebrating its 75th anniversary this year and was founded on a core set of values that remain our company's guiding principles today. I am proud to be -- to play a role here and to be part of this organization, and I remain very excited about the many opportunities that lie ahead of us. Thank you, all, and we look forward to speaking to you again on our fourth quarter year-end earnings call.