Good morning, ladies and gentlemen and welcome to Tractor Supply Company's Conference Call to discuss Fourth Quarter and Full Year 2019 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 and one related 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. As a reminder, this call is being recorded. I would now like to introduce your host for today's call, Mary Winn Pilkington, Senior Vice President of Investor and Public Relations for Tractor Supply Company. Mary Winn, please go ahead.

Thank you, David. Good morning everyone. On the call today are Hal Lawton our CEO; Greg Sandfort, former CEO and Strategic Advisor; and Kurt Barton our CFO. After our prepared remarks, we'll open the call up for your questions. Seth Estep, our SVP of Merchandising will join us for the question-and-answer session. Now let me reference the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. This call may contain certain forward-looking statements that are subject to significant risks and uncertainties, including the future operating and financial performance of the company. In many cases, these risks and uncertainties are beyond our control. Although the company believes the expectations reflected in its forward-looking statements are reasonable and can give no assurance that such expectations or any of its forward-looking statements will prove to be correct and actual results may differ materially from expectations. Important risk factors that could cause actual results to differ materially from those related in these forward-looking statements are included at the end of the press release issued today and 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. Tractor Supply takes no obligation to update any information discussed in this call. In discussing the results of operations, we'll be providing adjusted net income and diluted earnings per share amount that exclude the impact of the executive transition agreement. You can find additional information regarding these non-GAAP financial measures in our earnings release, which is available in the Investors section of our website. Given the time constraints and the number of people who want to participate, we ask that you please limit your questions to one with a quick related follow-up. I appreciate your cooperation. We'll be available after the call for follow-up. Now, it's my pleasure to turn the call over to Greg.

Thank you, Mary Winn. Good morning everyone who's joining us on the call today. Before we discuss our fourth quarter results, I'd like to take a moment and update you on the CEO leadership change at Tractor Supply that we announced in December. Hal Lawton officially joined the company in mid-January as President and CEO. The board engaged in a thorough and comprehensive search to identify the right leader for this next chapter in the company's growth. I am very excited that the Board chose Hal as the next CEO for our company. Hal brings tremendous experience across multiple retailers including Home Depot, eBay and Macy's. And more importantly, Hal is a great cultural fit and I believe he is the right leader for the future growth of Tractor Supply. As we have previously communicated, I will continue to be available as an advisor to Hal and the company through August and will serve out my board term through May. My expectation is that this will be a very smooth transition. As this will be my last earnings call, I want to reiterate that it has been an honor and a privilege to serve as the CEO of Tractor Supply. The Tractor Supply Company is a special company with a unique culture like no other in retail. I believe the company is in great hands with Hal, as CEO. The company has a strong leadership team in place that is passionate about helping our customers live life out here. While the Tractor Supply chain has made tremendous progress in recent years, I believe there is considerable opportunity ahead. And now I'll turn the call over to Hal for a few comments before we address our quarterly results and outlook.

Thanks so much, Greg. Good morning, everyone. It's great to be at Tractor Supply. For many years in my retail career, I have watched and admired this company. Under Greg's leadership the team has achieved remarkable results and I'm honored to follow in his footsteps. As you are acutely aware the retail industry is experiencing disruption and reinvention at an unprecedented speed. Leading retailers need to excel at not only merchandising customer service and execution, but also at data, technology, flexible supply chains and productivity. The key for successful retailers, however, will continue to be the same a differentiated customer experience. With more than 2,000 stores complemented by our online sites, Tractor Supply has substantial scale, very high brand loyalty with our customers an incredible culture that is part of our secret sauce and a business model that is supported by a strong balance sheet and significant cash flow generation. At Tractor Supply, we have a differentiated experience, a robust set of competencies and are well-positioned to become an even more integral part of our customers' lives. I'm excited about the opportunity to continue to build on the One Tractor foundation the team has in place to drive the business forward. We are committed to executing on our 2020 initiatives and delivering on our plans for the coming year. The Tractor Supply team has been very welcoming me since the transition was announced. In the coming weeks and months, I'll be out in our stores and distribution centers, listening and learning as I spend time with our team members and customers. I look forward to engaging with you in the future. And now I'll turn the call back over to Greg.

Thank you, Hal. And now let's move on to the results. Overall, 2019 was a solid year for Tractor Supply with record sales and earnings. While the fourth quarter of 2019 did not meet our expectations on the topline the team did a great job of controlling those things we could manage. And as a result, we delivered operating profit margin expansion for both the quarter and the year. The most significant factor weighing on our sales results in the fourth quarter was unfavorable seasonal weather trends. Across many of our markets we were negatively impacted in the quarter with unseasonably warm temperatures, which hampered our ability to drive topline sales in numerous seasonal categories. As I have shared with you consistently over time, the Tractor Supply customer is a needs-based demand-driven shopper and there is relatively little that will influence the customers' purchasing decision if that need doesn't exist. Given the stronger traffic trends -- the softer traffic trends, we were unable to capitalize on impulse or ancillary purchases. And as you have heard from other retailers I believe the six fewer days between Thanksgiving and Christmas over the prior year impacted our customers' gift-giving purchase activity to a greater degree than we had anticipated. Over my 12 years with Tractor Supply, I have experienced the seasonal impacts before the fourth quarter of 2015 and again in the first quarter of 2017. And as always was the case when temperatures arrived with a seasonal change, the sales demand also returned. Despite the softness in our comp store sales, the underlying health of our business remains solid as evidenced by the continued strength of our core year round farm and ranch categories, which generated overall solid comp sales increases in line with our expectations and historical norms. The teams executed…

Thanks, Greg. Please accept my many thanks for your friendship and your leadership. On behalf of the entire team, thank you for all you've done for Tractor Supply for the last 12 years. Now, let's get right into the results for the fourth quarter and the year. Sometimes weather-driven demand can help sales growth and then sometimes, it works against us. Every quarter can be a little different at Tractor Supply. What is at the core of our mission is that, we are there for our customers, with the right products they need at that time and the right price. To build on what Greg shared with you, our comparable store sales performance was driven by continued strength in our core farm and ranch categories, such as livestock feed, sensing forage and animal health. Offsetting this strength was softness in categories such as generators, rubber footwear, heating equipment, safes insulated outerwear and toys. Within consumables, our pet food category average unit retail was impacted by the industry trend of trade down from grain-free products. Of significance, our data shows that we are retaining our customers, given the sales trends across the breadth of our product category offering. In the quarter, we continued to drive comp increase of tonnage or pounds sold, as total pounds of pet food. As well, our pet supplies categories were up mid-single digits on a comparable store basis. We would anticipate the trade down trend to continue in the first half of 2020, until we cycle in the third quarter. The unfavorable trends Greg mentioned, coupled with lapping the hurricane benefit from emergency to response categories in the fourth quarter of 2018, impacted our big ticket performance. We experienced softer results across generators, safes, stoves and air compressors. Last year in the fourth quarter, we shared…

Thank you, Kurt. David, we'll now open the line for questions.

And we'll take our first question from Michael Lasser with UBS. Q - Michael Lasser Good morning. Thanks a lot for taking my question and Greg congratulations. And Hal best of luck. A - Harry Lawton Thank you. Q - Michael Lasser My question is on traffic. You're suggesting that the year will improve as it goes on. So, when can we really expect that traffic is going to get better? A - Kurt Barton Michael, this is Kurt. The traffic trends for Tractor Supply as Greg mentioned, the core of the business has been very consistent throughout 2019. And really the significant headwind that we face in any particular quarter are more about the compares as we saw in 2019. And as we look at fourth quarter and transition into 2020, the traffic headwinds were more related to the weather and seasonal trends. So looking ahead to 2020, I pointed out to you, the toughest compares in first quarter and even indicated what we've seen thus far in January from less than ideal weather conditions. Outside of that, we anticipate to be able to drive comps in both traffic and ticket and the compares on traffic to ease more in the second half of the year. Q - Michael Lasser And really a follow-up question is putting the 1.5% to 3% comp guidance for this year in the context of a 3% plus long-term comp guide target, the market's historically relied on maybe 1% to 2% growth in traffic and 1% to 2% growth in ticket. Is that still a reasonable expectation over the long run? Because some may argue that given how much -- how many initiatives have been in place the traffic from the quarter -- from the fourth quarter may signal that traffic growth moving forward…