Good afternoon, ladies and gentlemen. And welcome to the Tractor Supply Company's Conference Call to discuss First Quarter 2016 Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. We ask that all participants limit themselves to one question with one follow-up. 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 would now like to introduce your host for today's call, Ms. Christine Skold of Tractor Supply Company. Christine, please go ahead.

Thank you, operator. Good afternoon and thank you for joining us for Tractor Supply Company's quarterly earnings conference call. 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 are included in the company's 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 Chief Executive Officer. Greg, please go ahead.

Good afternoon, everyone. And thank you for joining us. On call with me today are Tony Crudele, our EVP and Chief Financial Officer; and Steve Barbarick, our EVP and Chief Merchandising, Marketing and Supply Chain officer. We are pleased with our result and execution of our business in the first quarter. Comparable store sales increased 4.9% and were driven by increases in both traffic and ticket. This was our 32nd consecutive quarter of positive comparable transaction count. Our sales were balanced across product categories and regions with all of our major product categories and geographic regions generating positive comparable store sales. Once again the Tractor Supply team did an excellent job managing the business this quarter and we believe our results demonstrate the resiliency of our business model. Our customers rely on us to be the most dependable supplier of everyday basic products for their rural lifestyle needs. They shop our stores regularly and they buy what they need, when they needed for their pets, animals, land and equipment. Some of their needs are year around. Some are seasonal and some are weather related. We know these seasons and weather can influence a timing of when our customers shop certain products and we also know it is our job to manage our inventory accordingly. One change that we implemented in the first quarter of this year was a flow of our seasonal inventory into our stores. Last year we had three regional set dates for spring merchandize which ranged from mid January through early February. Acting on feedback from our store managers and analyzing sales and inventory data, we changed our approach for 2016 and moved to five set dates this year. Starting with the south in late December and ending with the north in late February early March. This…

Thanks, Greg. And good afternoon, everyone. For the quarter ended March 26, 2016, on a year-over-year basis net sales increased 10.2% to $1.47 billion. Net income increased 16.6% to $66.7 million, and EPS increased 19% to $0.50 per diluted share. Comp store sales increased 4.9% in the first quarter, compared to an increase of 5.7% in the last year's first quarter. Comp transaction count increased for the 32nd consecutive quarter, gaining 4.2% on top of a 4.8% increase last year. As Greg mentioned sale trends were broad based both from a product and a geographic perspective. Everyday items continue to perform well and were key driver the comp transaction increase. Average comp ticket increased by 73 basis points on top of last year's 84 basis points increase. The increase was driven principally by an increase in number of SKUs per transaction partially offset by deflation. Sales of spring seasonal merchandize were also strong in the quarter as we experienced the March that was warmer than average and also warmer than last year. Spring seasonal category such as lawn and garden, riding lawn mowers, fencing, animal health and fly control performed very well. Winter seasonal sales were strong in January as the cold weather rolled in but sales softened in February which was much warmer than last year. Cold weather in January gave us the opportunity to clear most of our winter clothing specifically insulated auto wear. However, the cold weather was too brief to drive significant sales in certain hard line categories such as heating and log splitters. Other comments regarding sales in the quarter, comp sales were positive across all regions and major product categories with the strongest sales coming in the Southeast which was impacted less by the mild winter season. Big ticket comp sales increased slightly but…

[Operator Instructions] And we will take our first question from Seth Sigman with Credit Suisse.

Thanks for taking the question and congrats on a great quarter guys. You discussed the change in the flow of seasonal inventory into the stores. It seems that was pretty powerful change to help manage some of the weather volatility in the quarter. Is there a way to quantify the benefit in Q1? And do you see other opportunities in other quarters for changing the flow?

Seth, this is Steve Barbarick. I'd tell you it's really hard to quantify that specifically. As Greg mentioned in year's past we had three waves over two weeks, this year we went to five waves over eight weeks. Our planning department and our inventory teams have really matured to a level where we are able to do this. And we got the technology now to do it. I would tell you what we experienced in Q1 was quite favorable for us. And that something we will do going forward. And in the back half of the year I think we got a pretty good plan. We made some adjustments in the year's past and I don't see us making a lot of changes for the fall.

Got it. Okay. And then just one question on SG&A. I think the original guidance imply minimal leverage in 2016. I think you said Q1 was going to be most difficult year to get leverage. Obviously, Q1's SG&A leverage was pretty good. Tony, are you finding other opportunities here? And is it fair to think about potentially more expense leverage throughout the year just based on the comp outlook?

When we look at we obviously have a lot of initiatives that we have in place to try to drive cost out of SG&A. However, as we indicated in the first conference call as we look out over the year, we do anticipate SG&A being somewhat flattish to potentially negative and that should moderate some as we move through the year as we start to cycle against the Arizona Distribution Center and the mixing centers. And again I remind you that probably the fourth quarter we have the best potential to leverage SG&A because we have the additional sales week of the 53rd week.

We will take a next question from Peter Benedict with Robert Baird.

Hey, guys. Quick question on the gross margin which was obviously really good in the quarter. I am curious about the vendor support program that we are in the -- that Greg I think you mentioned in the press release. Are those short term type things or is there some duration to that? Can you maybe help us a little bit more on what the vendor support program entail?

Yes, Peter, I am not going to get in specifics necessarily but I would say that we are constantly working with our vendors to improve not just our cost but incentives to what we do. We did go back as we knew that the Arizona Distribution Center would be somewhat costly and ask for some support there. So that's specifically Tony mentioned was a one time deal.

And so Peter this is Tony. As it flows through to our inventory and our turns generally that type of vendor support would cycle through in about three to four months period. So the majority would be captured in the first quarter.

Okay. Good. That's helpful. And then Tony just with the debt it is on the balance sheet now and you gave kind of the year end target. What are you thinking in terms of interest expense for the year? And then longer term, how should we think about your appetite and leverage to this model as we go forward? Thank you.

Sure. Obviously, we anticipate interest expense to increase but not dramatically because as much as we anticipate having outstanding balances at the end of each quarter. There are periods where we have obviously the strong sales as we move to spring where we would not be in a borrow position. So we don't see is being a significant increase relative to an appetite. I think that one of the biggest drivers is the share repurchase program and so that would be a driver and again given how we set up the program, using the metrics and how the stock price move dictate how much we attribute to that program. And that would drive some of the outstanding debt on the balance sheet. So I think we clearly would like to support the stock and continue to do so. But we have a lot of flexibility when it comes to the capital structure because of repurchase program.

We will take our next question from Simeon Gutman with Morgan Stanley.

Hey, this is Joshua Siber on for Simeon. Can you parse out the $80 million sales difference between the Easter impact and the warm weather impact?

Joshua, this is Tony. Little difficult to do and I'd tell you it is really our best estimate this time and until we see how the full season plays out, it really is just that is an estimate. Again, hard to quantify if I gave you my best thought on it, it would probably one third Easter and the other half would be considered the pull forward. But again it is really a combination of the two. So we really prefer not to parse it out.

Sure. My follow up then is in the Southeast or in geographies where weather was more consistent with the norm; can you talk about what the trends look like there? Were the months evenly spread out or did March accelerate?

When we look at the geographic distribution, the strong as I have mentioned on the call was the Southeast and that was -- that area was a little bit more smooth throughout the three months. But for the most part as I had indicated January strong, February a little bit softer and then obviously some strength in March itself. But in all cases all three months were positive and I wanted to say pretty much throughout all geographic locations throughout the quarter.

We will take our next question from Jessica Mace with Nomura Securities.

Hi. Congrats on the nice quarter. My first question is about the health of the consumer. On your last call you made some comments about seeing some caution amongst consumers. And I was just wondering on the other side of the first quarter if you have any updates or any changes you've noticed in that behavior?

Jessica, this is Tony. I'll answer that since I have such handle on the consumer themselves but I'd tell you that really our outlook hasn't changed. We are basic need company and people are coming to us for their everyday needs and that is really the consistency of our business model. As we talked about big ticket relatively consistent and again consistent with chain average for the most part in the quarter. So again we have a resilient model because of the basic needs and supporting that of the rural lifestyle and we did not see any significant changes in the consumer patterns throughout the quarter.

Okay, thank you. And then my second question is on the transportation cost. I just wondered if you could review some of the moving pieces a little bit where you get a benefit from as a result of the southwest distribution center and then on some of the inbound on freight cost, what the outlook is for those and for the rest of the year?

Certainly. When it comes to the transportation cost, the key to the Arizona Distribution Center is that obviously we are reducing the outbound 10 miles to the store and we are very successful there and we saw a reduction in those transportation cost. But obviously the inbound from many of our eastern based vendors, the inbound miles increased substantially as well. So the key to the program go forward is to make sure that we have either additional facilities of the eastern vendor base and they opened up additional facilities out West and/or we bring on western based vendors. So when -- but the key to the distribution center really is as we move forward and then the stores that we open in the West now will not have that de-leveraging impact that we experienced as we had that accelerated growth out West. So as we bring on new stores out West, they will be less impactful to our transportation cost. And that's really the key benefit to the Arizona Distribution Center.

We will take a next question from Ben Bienvenu with Stephens.

Yes, thanks guys. Good afternoon. Just looking at the ticket the improvement there, you spoke to the basket getting bigger. What are some of the areas where you are seeing product merchandize resonate with customers to drive this and how sustainable do you think this trend is going forward?

Ben, Steve Barbarick here. What I'd tell you is we got a number of different levers to drive sales and one of those is drive aisle. And that's in cap the power panels clip through the center court, Greg referenced chick days earlier in his can remarks and we also had a garden event that took place in the center court. And we are seeing really good movement in both of those events as well as getting behind and working with our vendors on our in cap programs. So that's really would help to drive some of the increase in the basket. In terms of sustainability, this is the focus for us and it's something we are getting better at. And I'd hate to tell you that I wouldn't want to suggest that this is sustainable on every quarter we talk about the gain but I can tell you we are making concerted effort to put in front the customers those impulse buys as they shop our store for needs based product.

Great. And then looking at import sales continues to nicely tick up as a percentage of total sales, what are some of the categories that are driving the majority of the growth? And then when you look out to the future where do you see a lot of opportunities? What gets you excited about continuation of that penetration rate?

Over the last few years, we've really put a concerted effort into our exclusive brand program and product development. We've got a number of agents that we worked with overseas and the team and the merchandize team has done a very nice job building our exclusive brands. If you look at some of the new things we've added for example we got in the Travelier line a new lighting set for truck accessories. We've got ground works that came in which is in our garden program. And there is a variety of things that we've been bringing that customers seemed to really respond to. So this is continuous to be a focus for us and I believe that there are still lots of room we have ahead of us.

Our next question comes from Christopher Horvers with JPMorgan.

Thanks. Good morning. I wanted to follow up on the spring pull forward a little bit. I mean as you step back, I mean weather overall sounded like it was probably neutral considering how it played out for you on February, as you look at the trend of the quarter. Is that fair? And as you just think about with what you're seeing in April and what you saw in March, it was March more, okay, it was warmer than last year, but in the grand scheme of things, it arrived on a more on-time basis relative to the longer history of how seasonal sets up?

When we look at the quarter, net-net we would assess that weather was positive because we had a relatively cold January and then we had the early arrival of spring in March. So as much as February was little bit warmer and sales were little bit softer. Net-net so the quarter we felt very good about the weather trends. In our case, lot has to do with how the weather related to the prior year. And so when we make the comment that one it was a much warmer March overall than in history it was also much warmer than a prior year. So it does relate -- it does impact the timing of the sales. Now when we make assessment as to what the pull forward is, we do our best to look at some of the key category and we look at sort of the slope of the sales line to try to understand if it was accelerated and try to project what that means to quarter but again really for our business it is best that we look at it by the half and we have a lot of business left and we'll probably going to make much better assessment as we move through the quarter and see how the first half comes out.

Okay. Fair enough. In last quarter there was a big discussion around Texas and the oil patch and also new store productivity with -- on the Analyst Day with some of the stores at West such as Utah. So can you talk about in terms of Texas stores and oil patch itself? Did the gap widened or did gap relative to control group, or however you want to say it, actually stabilize at the level that you saw in the fourth quarter? And then can you talk about how are you seeing new store productivity in the stores out West? Thanks.

Sure. When it comes to the -- we will determine the oil patch store. The first thing is that transaction count remained very firm. But the difference between those stores and our control group was very consistent with what we saw in Q4. So that did not change dramatically. But it is -- we did like the performance of the stores because they were all positive in their performance relative to the control group. And we continue to drive sales through the stores for the foot traffic that we are getting. So generally what we see is that so the ticket maybe down because of some very specific type items that are sold in those areas. But day-to-day basic transactions continue to occur and drive business in those stores.

Chris, this is Greg. As far as the western stores and respect to that new store performance particularly Utah we talked about the last call, we are still building awareness in that market. And we have an executive trip that we make every quarter with the teams and we chose this past quarter to make the trip out to the West. We were in Phoenix market, Utah market, some other western market. And I must tell you we feel very strongly that it is an awareness issue and as we are seeing the store ramp, we are feeling very good about our future prospects out there. It is about market awareness. It is about how we positioned. There has been some competition in those markets as we’ve come in to them that it takes a little longer and I think we saw this a few years back when we were first entering the Florida market and the Louisiana market. So we are feeling good about it. I think the mix of our business out there is a little different than we've seen in other markets but we are figuring that out, rebalancing some of the store inventories and now with the southwest DC in position we can react to lot faster, so we are feeling very good actually about the West right now.

Our next question comes from Adam Sindler with Deutsche Bank.

Yes. Good afternoon, everyone. Congrats as well. Tony, real quickly on some of the just financials. Are you still looking at about $8.5 million for the DC for the year? I believe that's what you guided to. And still very front half weighted?

We had anticipated that would be the year-over-year drag that we would experience. So yes pretty much consistent what we've originally guided.

Great. And then just as we look at gross margins over the course of the year, could you remind us why again the fourth quarter is going to have such a difficult compare despite sort of the relatively in line gross margin from last year?

Yes. Again relative to the fourth quarter when we analyze it and we look at all the pluses and minuses are probably about 13 to 15 different impacts on that. And really just matter of looking at those and understanding what will by cycling against and where we see the tougher compares and as much as it is difficult to breakout all those pieces for you. It just turns out that the fourth quarter we believe would be one of the tougher comparisons.

Okay. Then just lastly, one thing you talk about is trying to keep on finding new products to introduce to drive some of the end caps and things like that. As you've moved more national, are there any thing maybe a local product that you've found that you've been able to bring back and take it more national? Anything from going out to the West, just outside of just opening new stores there, maybe from a merchandising standpoint?

Adam, that's a great question. I mean we are constantly in a test and learn mode. And whether it's local, whether it's testing in 25 stores, learning from it and rolling it forward, it's a constant pipeline of product that runs through the system and then gets expanded. We do all, a monthly review of all those tests that we've got going on. I'll use it one example a couple of years ago we tested kayaks in 50 stores and sold -- they sold pretty well, they exceeded sale through rate then we expanded it to more stores and this year all stores have kayaks and we are continue to see good momentum there. So I can't give you any one specific guidance but I could tell you that pipeline is pretty full and we are constantly reviewing the opportunity for further expansion of new merchandize.

Great. And then lastly on that anything on the ammo test? Is that in the stores yet, or when will that hit?

Well, actually, interesting you should ask, couple of weeks ago I guess maybe it was week or two ago we did roll forward with about 25 stores. Again it's still in the very early stages. Stores are still setting their merchandize and I suspect that on the next call we will be able to give you better and update.

We will take our next question from Michael Lasser with UBS.

Good evening. Thanks a lot for taking my question. So, Tony, on the $80 million should we expect that's going to all come out of the second quarter so if we just look at it last year it is about 100 basis points to the comp. So should we model whatever our comp estimate was before this quarter that we should essentially just take that down by a 100 basis points?

Michael, good question. When we look at it there is that potential, we really believe it's just too early to tell what the impact would be again it's just an estimate. If you use that $80 million and you took it out of the quarter it would represent about a 1% change in the comp sales. But again it is just our best estimate at the time and there are a lot of sales that we had so it is too difficult to just make the assessment that all of it would come out of April.

And can you make any changes to your cost structure as such or it is what it is we just go with it?

Obviously, we'll look at the variable expenses and which main driver would be your payroll. So we will align our payroll with what we see the sales trends are today April as we move into May. And some of that is really more trending, more current trending as we look at the sales in a particular period. But other than that the expense structure for the most part would be intact.

And then Greg I just want to clarify your comments. When you talk about new store productivity you reference the western portion in United States, we've seen previously that if there were any issue with new store productivity and the lack of brand awareness, it was mostly around those stores in Utah. So is there something to have changed you viewpoint, or is it mostly semantic?

No. This new -- overall an aggregate to new stores are performing very well and they are performing at or above pro forma forecast. But in -- not just I won't just say Utah Utah, I just say in a few places in the West, we've seen little slower ramp but that's now beyond us and we are now starting to see the stores performed to a level that is acceptable to us and it kind of fits in with what we expected initially. So it's not just Utah although it was a little bit slower start initially. We are learning. The West is a new market for us. We were in California and I think before we start expansion to the West I think the furthest we were, was probably Colorado. There is lot of room in between that particular state. But we are feeling very solid now that we have -- we understand those markets better. We now have been out there a little over year of most of store base. And I think we are -- there are no concerns for us going forward with the West.

And I would add Michael that when we do our calculation new store productivity, we did see an increase this quarter over Q4 last year.

It was better than it was last year. So as we talked about it is in the high 60s versus this quarter 70% but that still little bit lower than they had been historically. So should we assume that as you add more stores in the West and because you've already got a base there your brand awareness is better and new store productivity should improve over time? Especially because I think you said in the past that new -- that the stores out West are actually little bit more productive once they reach total maturity.

Yes. As we continue to grow out there in brand awareness. I think that pieces would be that it would take less time for us to gain market share as the brand becomes more aware and accepted out West.

We will take our next question from Peter Keith with Piper Jaffray.

Hey, thanks for taking the question. I was curious on some of the bigger ticket trends. It sounds like weather was both the positive and negative. I guess just kind of looking forward here with some of the spring some are merchandize with lawn mowers. How do you feel about that general demand and some of the category dynamics performing here for the next few quarters?

The big ticket itself as Tony mentioned we did see some benefit in Q1 in terms of plus numbers mainly driven by riders and as well as trailers, some of that was a bit pull forward. We feel like we've got the right assortments out there. We've gone through, we've measured right assortment, and we review our assortments. We are a need based retailer, so if there is demand I would tell you I feel pretty good about it. Tony said it's still early in the game here in Q2. And right now it's hard to assess but I'd tell you we've got the right product out in our stores.

Okay. Thanks for that Steve. My follow up would be just on the gross margin expansion which is obviously been observed is very good. Should we think about the margin expansion that you saw as sort of best of the year, given what sounded like there was some one-time vendor support for the DC and then maybe some benefits around that extended seasonal set?

Okay. I'll go ahead start this one. This is Steve again. The one thing about gross margin specifically is that we got a plan. And it all starts there. We talked earlier about exclusive brands, product development, some of the import goods we got come in. We also -- our systems are much more science than art based price optimization, clearance price optimization and so in Q1 there was a shift. Tony mentioned earlier that we did have some clearance coming out of Q4. But we were able to beat that with some regular price as well as some vendor support dollars. So what I'd tell is as I feel good that we've got a plan and the teams executing to it. Tony, you have anything to add.

Yes. Peter, I highlighted the vendor support relative to the distribution center because that is more of one time issue. But when we look at the margin we have a lot of real positive that occurred. And obviously Steve touched on but that the price management the import the exclusive brand was all very favorable this quarter. The fuel was positive, the way we manage promotion was much more favorable than the prior year. The way we cleared the merchandize. So net-net as much as we -- I played that one item, I would agree with the original perception that it was a very strong margin quarter for us.

Our next question comes from Seth Basham with Wedbush Securities.

Good afternoon and thank you for taking my question. I really want to talk about comps first. Tony, if we adjust out the $18 million from the 1Q results, two-year stack basis, you're still producing comps that are north of 9%. If we were to trend that out for the rest of year, you'd be above your guidance range for the year. Is there a reason why on that adjusted basis we should assume that two-year stack comps should decelerate through the year?

When we look at that, Steve and I are looking at each other and I am not sure if it is a matter of how we do our forecasting and maybe some of the conservative nature in the numbers. But we will take a look at the seasons; we will take a look at how we developed our product plan throughout the year. We'll look at the year-over-year and in some cases we may actually go three years deep to look at some of the comparison. So our modeling is built from the bottom up and so we think that as much as the time it maybe a little conservative. We think that as we started the year and we continue through the years, we think that it is very reasonable guidance.

Seth, the only thing I would add is that Q1 comparison was pretty challenging and I think we feel really good about where we came in. Tony did mention there were some pull forward. Q2 is not going to be an easy quarter either. We had a good solid comp last year and with some favorable weather so it's hard to look out and be able to forecast but I think we've got a pretty good plan in place.

Got you. Fair enough. And then secondly, I was hoping you could touch a little bit more on your new store plans, where you opened geographically in the first quarter, any differences in timing year-over-year, and then where you're trimming back? I think you took your guidance down by up to 5 stores for the year.

The guidance for the full year was consistent with our original guidance. Again we expect to open about 50% of the stores in the first half of the year. And 50% obviously in the back half of the year. The only difference that we see this year is that we are little bit less stores in the West. We had a very focused push over the last two years to get the number of stores, create a large base in the southwest so that we could open the distribution centers and get some of the economic benefit from that. So as we look out at this year we see few less stores in the West. We were running about 35% to 40%, we expect to be a little bit more and say the 25% range when it comes to the western stores. And additionally, we anticipate opening a few more second use real estate versus built to suit locations. And that would mean some additional capital probably maybe the $5 million to $10 million range. But those are the only two differences that we see as we move through the new store opening plan.

Got it. And one last follow-up if I may. Greg, you mentioned that you've learned a lot in the West and you're approaching your openings out there differently. Can you provide any color about what you're doing differently? That would be helpful.

I make it short. I think we have to keep our foot down on the pedal when it comes to marketing to make sure that we stay with these stores little longer. There are couples of things that are unique in some of these markets from merch standpoint that we've learned and we've addressed that now. And I think we become very good listeners to our teams out there. And what we are doing from a local market presence and that could be interacting with local rodeos with different 4H and FFA groups so there is a heightened what I would call awareness out there who we are now versus our initial approach. And these little different and maybe what we've done in some of the markets where we've an existing presence. It is not overbearing but those learnings we are applying.

We will take our next question from Stephen Tanal with Goldman Sachs.

Good afternoon, guys. Thanks for taking my question. If you could just size the impact of freight or transport to gross margin rate. I know you've done that in the past. I'm curious there, if you can help with that?

Yes. I can give you a general idea. I try not to break all the components down into basis points because there are so many factors that are attributed to the freight line and gross margin. So the once that I identified has having an impact or somewhat minimal impact, they were generally in the same range and generally would be less than 10 basis points of impact to the gross margin line.

Got it. Okay. I guess as I think about it, it sounds like the inbound may be getting a little bit worse than the color that we got last quarter. Do you think that's a fair read? And separately, do you think you can start to leverage that line at some point this year, even if oil prices start to move in the other direction?

When we look out we would expect to see a similar impact in Q2 and we would expect that to start to moderate as we move through the year and start to get the benefits of the distribution center and moving some of our vendors to western ship points. So we expected to start to moderate as we move through the year but net-net for the year we expected to be just slight drag on margin.

Got it. That's helpful. And just lastly if you could just tell us on the seasonal reset it sounds like maybe there is another change or near positive benefit in maybe 3Q or 4Q. What do you think that timing looks like if you don't mind?

Yes. I am not specifically sure. I said can you repeat the question.

Yes. Going from three to five seasonal resets, is there another change upcoming in this year, and which quarter does that affect?

Yes. Earlier I think I have mentioned that in Q1 we were able to do that. We went from three waves in two weeks to five waves in eight. Next in the fall we are going to keep a very consistent program that what we've done traditionally. I think we are much more accurate then. So there won't be a change in the fall.

We will take our next question from Dan Wewer with Raymond James.

Thanks. Greg wanted to follow-up on your comments about the benefits from Revionics. Are you continuing to get benefits from the initial markup module or are most of the current benefits coming from markdown management?

Dan, we are in two modules right now. Regular price and clearance. So we kind of cover both sides. We haven't turned on promotional yet. And it is not all about mark up. It is actually a combination of can we find margin or can we find can we drive sales. And so what you turn price optimization on it is an ever moving and living, increasing process and when we are moving to different markets we are going to try different things, test different price elasticity. So you are correct. You will see some improvement on mark down or clearance for that side we are seeing some improvements in our regular price pricing and how we can stay competitive in market. And it's really we needed a system because of all the different pricing strategies we got throughout the country. We are in 49 states. We are not a single regular price on everything and every state being the same. So that is another reason why we put the system in.

When you think about the promotional pricing module that's available, are you committed to making that investment? And how will the pay back on that compare to the first two applications?

At this point in time we have not made a decision that we would move forward with a promotional pricing module. We are still working to the first two. If we do make that decision then you can bet that we are going to see some type of return on investment or we wouldn't do it.

And then Tony, just to follow up once more on the sales pull forward comment. Are you seeing anything in the results in April that would confirm that you moved some revenues from April into March?

There could be some potential. And again that goes into our calculation and estimate of the $80 million. Obviously, again a little bit difficult assessment because as we moved into April the weather was little cooler. So there was an impact there. So we are constantly assessing as we move through the quarter but obviously as this warm weather is moved in we are really optimistic about the May and June and timeframe and our spring assortment.

[Operator Instructions] We will take our next question from Chuck Cerankosky with Northcoast Research.

Good afternoon, everyone. Nice quarter. Could you talk a little bit about how some of the marked down discipline you took in the fourth quarter set you up for the first quarter and how you make sure inventory weren't too low going into the first quarter? Especially the seasonal merchandize.

Yes. Chuck, this is Steve Barbarick. There are two types of seasonal merchandize. There is product that we bought for Christmas is not necessarily cold product related. And we sold through that really well. It was the more seasonal clearance that we ended up carrying over and I believe at that the last call we talked about the percentage that we carried over. A lot of retailers would have probably taken marked down a lot quicker and panic to some degree. But a lot of the product that we have our whole good that are pretty much standby is year-to-year. And we took a very disciplined approach. We didn't panic in Q4; we took methodical mark down where we could. We do have a clearance price optimization that looks specifically at clearance by individual location so we can cluster those types of products. When we got into the first quarter we had the benefit of that winter. Colder weather hit us from January. And we had enough of merchandize up north knowing that we went for these five waves of allocation. And it really paid off for us. Now we still are carrying some of that inventory over. I don't want to say that we sold completely through but it's good inventory that we can bring out for next year and the carry over is minimal compared to the total inventory investment that we have out there today. So the team did a really nice job. I think it was a discipline approach. We use both art and science based on some of what we are looking at and we came out of it really well.

And regarding the five ways from my perspective in northeast Ohio, I think some of that like it looks like the chick programs come in later here this year than last. That would be maybe part of it. I'd tell you where you would see the biggest and most significant impact is really more in the seasonal, some of the power equipment and things like that. So where we would have set stores probably in new area in early February the stores would have been set a little bit later up north towards the end of February. And the southern stores really benefited because they actually got product two weeks earlier than what they traditionally would have gotten products. So as Greg said earlier we were able to capitalize on an earlier spring in the south and keep some of that quarter related merchandize out on the floor through really the month of February and start setting spring at that point.

We will take our next question from Scot Ciccarelli with RBC Capital Markets.

Hey, guys. How are you? Great. A bit of strategic question. I know it is kind of talked around and a lot of weather-related questions, but when you wind up getting the kind of weather impact that you did in the first quarter, does that change how you plan your merchandising or inventory sets for 2Q?

Again, this is Steve Barbarick. We set for a season. We don't set necessarily for a quarter. And our quarters are while they are fiscal they are kind of calendar so that March, April timeframe you never know. There is always a bit of shift. So we look at the season and we manage to season. We don't necessarily manage our inventories to quarter.

Okay. That makes sense. And then just a quick follow-up for Tony. Something people have asked about previously, and just wondering if you had any more recent thoughts on it, is the potential ability to improve payables to inventory ratio and potentially take some working capital out of your operation. You had inventory up by $100 million, payables essentially flat. Just wondering what's the right way to think about the payable to inventory ratio going forward, and again, what is the opportunity set there?

Yes. Scot, I absolutely agree with you and I think you should continue to call Steve Barbarick on that. But we do have some plans in place but I would agree whole heartily it is something that we need to have more discipline around and be more aggressive relative to that because it clearly is sort of the one whole back when it comes to-- there are returns on invested capital.

We will take a next question from Joe Feldman with Telsey Advisory Group.

Hi, guys. Thanks. Just wanted to ask about the loyalty program. That is one something I don't think we talked about today, just latest trends. I know at the Analyst Day, you said it was about 140 stores in the test mode, and just any more data or color you could share would be helpful.

Happy to do it Joe. We are in -- as you mentioned 140 stores, we got about six months now of earning and what I would tell you is that the opting rate by our consumers have actually exceeded original expectations. We knew that we had fairly loyal customer and it wasn't really till we have the program out there that we realize that they were very interested and wanting to hear from us and being part of a program. In the stores that we've had in We've seen nice attribution increases and understanding who are our customer is and getting a deeper knowledge. Now just give you a couple of examples. In the stores where we got the Neighbors Club program from a transaction standpoint we went from really about mid 30s to mid 50s, so we've seen nice increase in transaction attribution and in sales attribution that numbers go up from the little 50s to the mid 60s. We are using that data now because the goal of this was to collect the information and then start personalizing communication after them using email. And we've been doing just that. We've got now record of the response rates from our customers. And the communication back and forth regarding either content or special offers or trying to get them into the shop across the store. So we are very enthusiastic about the program and at this point we are looking forward next step. We don't yet; we are not prepared to make a comment as to where we are going roll it or how many stores will get it. But we are optimistic that this is something that's going to add value.

That's great. Good, thanks for the update on that. And then so one another quick question. Any also an update on some of the pet resets that you have done in terms of maybe lift and if there is any kind of way you can see what's been driving, how much that's driven comp or--?

Well, I won't get into the specifics Joe but I would tell you Greg mentioned it earlier. Our customer's index is very high when it comes to animal ownership. And that includes dogs and cats as well. And we go through a pretty rigorous category management review of the pet aisle supplies, treat as well as pet food every year and in some cases twice a year. We are seeing growth. We look at three different segments. We look at the grocery segment, we look at the science segment and we look at the premium, super premium segments. And I would tell you we are seeing growth in all three of those segments. We put a lot of our real estate as well as some of our marketing into the super premium side of the business in our investments. And we think we are getting a very nice pay off. Customers are responding favorably and I think that's one of the things that maybe growing our transaction count. We talk a lot about CUE and being needs based and this would be example of that.

And that concludes today's question-and-answer session. Mr. Sandfort, at this point I will turn the conference back to you for any additional or closing remarks.

Thank you, operator. As we look ahead to 2016, we continue to be excited about the opportunities that lie ahead for Tractor Supply. We are pleased with the first quarter results and the year is off to a good solid start. But there is still a lot of business ahead as Tony mentioned. We will continue to invest in our infrastructure, our system improvements and our omni channel business as we target mid-teens EPS growth. Thank you for your support of our company. We look forward to speaking to you again in July regarding our second quarter performance.

This does conclude today's conference. Thank you for your participation.