Good morning, ladies and gentlemen, and welcome to Tractor Supply Company's Conference Call to discuss Second Quarter 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. [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 would now like to introduce your host for today's call, Mary Winn Pilkington, Vice President of Investor and Public Relations for Tractor Supply Company. Mary Winn, please go ahead.

Thank you, Greg, and good morning, everyone. On the call today are Greg Sandfort, our CEO; Steve Barbarick, President and Chief Operating Officer; and Kurt Barton, our CFO. 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, it 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 reflected in the forward-looking statements are included at the end of the press release issued today and 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. Tractor Supply undertakes no obligation to update any information discussed in this call. After our prepared remarks, we'll open the call up for your questions. Please limit your questions to one and one related follow-up question if necessary. I appreciate your cooperation. We will be available for the call or follow-up after the call. Now it is my pleasure to turn the call over to Greg.

Thank you, Mary Winn, and good morning to everyone joining us on the call today. Overall Tractor Supply had a very solid second quarter which allowed for a strong first half performance for the Company. Our second quarter results were driven by sales strength across all geographic regions as well as both in comparable average ticket and traffic. We saw broad-based strength across our merchandising categories with notable strength in our core year-round categories and solid sales growth in our spring and summer assortments. Our second quarter results represent the eighth consecutive quarter of comparable store sales above 3%. And during the quarter the Tractor Supply team was very nimble across store operations, merchandising and our supply chain, which enabled us to capitalize on the shifting consumer demand for products across the many markets that we serve. At the same time, we were in stock for our customers for their everyday basic assortments that we know our customers rely on us to have, so that they can continue to live the out here lifestyle. Now that we are halfway – at the halfway mark of the year, we are updating our outlook for the full-year. And as we enter the third quarter we believe our merchandising and marketing initiatives accompany with our ONETractor strategy initiatives have us well positioned to drive our business for the second half of the year. Now let me touch on a few highlights from the second quarter as compared to the second quarter a year-ago. We delivered a strong comparable store sales increase of 3.2% in the second quarter with comp average ticket increasing 2.2% and transactions growing at 1% in the quarter. This marks over a decade of annual positive traffic growth. Net sales plus 6.3% to $2.4 billion for the quarter, as we…

Thanks, Greg, and good morning, everyone. I wanted to take a moment this morning to give you a brief update on product performance during the quarter. The progress we're making on building out our capabilities and look forward to the second half of the year. As Greg mentioned, during the quarter, we had a solid comp store sales performance driven by both average ticket as well as continued increases in traffic. The team was nimble and well-prepared to capitalize on the spring selling season with a great lineup of merchandise in our stores as well as online. Our strong average ticket growth of 2.2% was positively impacted by several factors including product mix and overall retail price management. We were able to capitalize on seasonal trends during the quarter. Our updated assortment of outdoor power equipment produced positive results. Tractor Supply continues to be a shopping destination for this important category. Turning to traffic. We've benefited from consistent performance and our everyday merchandise, otherwise known as consumable, usable and edible or CUE products. During the quarter, we were pleased with our sales dollars and unit growth across these consumable categories. For example, we experienced strength in product lines such as pet food and supplies, animal feed, live goods, grass seed and forge to name a few. As a company, our mission is to be a dependable supplier of basic maintenance products and it’s these products that drive repeat traffic to our stores. Turning to big-ticket sales. We had strengthened zero turn mowers, welders, and three-point equipment. Given the seasonal trends in the second quarter, especially in the Northeast and Midwest, we did experience some softness in our front engine molders, cooling products as well as trailers. We were lapping significant big-ticket growth in the second quarter of last year and…

Thank you, Steve, and good morning, everyone. Overall, we delivered a very balanced quarter that came in much in line with our expectations. For the second quarter of 2019 we had solid comp store sales growth of 3.2%. April and June were the strongest months of the quarter. With moisture levels and cooler conditions impacting our performance in May and to a lesser extent the early part of June in select markets. Petsense stores continue to have positive comp store sales increases in line with our chain average. For the second quarter, gross profit dollars increased 6.7% to $820.7 million. Gross margin improved by 11 basis points to 34.9%. The increased resulted principally from product mix and effective price management initiatives. Our merchandising and pricing teams did an excellent job both planning for and reacting to the shifting timeline relating to tariffs. In addition, for the first time in a few years, freight headwinds moderated and along with the favorable impact of our efficiency initiatives. Freight costs were essentially neutral year-over-year. Including depreciation and amortization SG&A as a percentage of net sales increased 24 basis points to 22.7%. The increase in SG&A as a percentage of net sales was primarily attributable to incremental costs associated with the new distribution center in Frankfort, New York, and to a lesser extent investment in team member wages. Partially offsetting these increases were leverage and occupancy and other costs from the increase in comparable store sales. Specific to our Frankfort distribution center we estimate that about 20 basis points of our SG&A increase as a percentage of sales is attributable to the ramp up of the DC in the second quarter. As the distribution center increases the number of stores it serves in the back half of the year. We anticipate deleverage to be…

Thank you, Kurt. And in closing, I'd like to thank the nearly 30,000 team members across our entire organization for their commitment to our mission and values and their focus on delivering a great experience every day to our Out Here lifestyle customers. Their passion for living our culture is a competitive advantage for us. And while we've had a strong first half, we know we have much work to do to finish this year. As a team, we are energized about our business and look forward to talking to you again later this year regarding our third quarter results. And with that, Mary Winn, we now like to open the lines for questions.

All right, Greg. We can poll for questions please.

[Operator Instructions] And first from JPMorgan, we have Chris Horvers.

Thanks. Good morning, everybody. So, question for you, as you think about the weather in the second quarter, do you think it was a headwind in the quarter? I mean, we know we had a sort of a tough compare in May, but April was easier on the spring front. So, do you think it was a headwind and could you quantify that? And then as you look ahead and just looking at the map, soil moisture levels are very high in many of your markets. You've had that sort of recent heat wave. So, do you think you'll have this extended spring season like you saw a few years ago?

Yes. Chris, this is Steve. I guess I would put it this way. I mean we're always navigating between year-over-year what's normal, what's not normal. When I look at the totality of the business, Greg mentioned that we had sprint in spring seasonal businesses that were positive for the quarter. I believe I mentioned it as well. What I would also say is when you look into Q3 because we're already several weeks into the Q3 for us right now. It's in line with what our expectations have been. And so last thing I would mention is, our inventory is in good position to take advantage of any extended summer selling season we might have. And while at the same time, we are well prepared to take care of customers if we have an early cold weather business centers in the quarter. So that's kind of how I see it shaping up. We're a nimble company and we can react pretty quickly.

And then as a follow-up, as you think about the tariff, how has you seen pricing play out in the market? What have you done and into what extent that, how did that expect your guidance for the back half of the year versus your original expectation?

Yes. Let me start with that. Chris, this is Steve and then maybe Kurt, you can follow-up on that. So, we're a year into it, believe it or not. So, the first wave of tariffs that we originally were passed through. And for tractor, we're in a little bit of a unique position being a needs-based company, which really serves us well at a time like this. Over the years, we've made some key investments and some pricing tools, whether they be webscraping that then feed into our pricing tool and allows us to know what's going on out there across the wide spectrum and manage our pricing accordingly. As you're well aware, our businesses hold up nicely in the past several quarters. And if you look at the business, I mean it's working well within the four walls of the box as well as geographically. So, we feel like our customers are in a pretty healthy position right now. And then the last thing I would say is we feel, we're well prepared to manage the general uncertainties of these tariffs going forward. Kurt?

Yes. And Chris, I'd add to that, and I’d just tag on to what Steve said at the end. One of the things we factored in and to the back half guidance is, just an overall consideration of the back half of the year. This is the time where the consumer, if you think from a macro standpoint, this is the back half where the consumer is going to have all of the impact of these first three layers of tariffs. And we felt it was prudent to make sure an overarching consideration was what does that do to the consumers spend and how will they adjust to all-in tariffs. And I would just say from a broad overarching theme, we had that as a key consideration when we designed the updated guidance for the year.

So, does that mean that some price a little less, but some volume headwind and a little bit of gross margin tucked in there, too? Headwind as well?

Well, we were just aware that those are all factors whether they all go in that same direction, but those are adjustments or variables that could happen with a back half that's got some level of uncertainty.

Understood. Best of luck in the back half.

Thank you.

And next from Evercore ISI, we have Oliver Wintermantel.

Yes. Good morning, guys. My question was, you mentioned the delay in the new store openings at this year. Could you give us a little bit more details what was driving that?

Yes, Oliver. This is Kurt. I'd summarize it pretty simple. We pride ourselves on consistent execution and execution in this area includes adequately covering for the inherent risks and construction and opening stores. This year we didn't execute well on coverage for those inherent risks. And it shifted the time of new stores a bet. We've addressed the issue. This is specific to this year. The existing pipeline is strong and as I said, we continue to expect to hit our target goal of 80 stores this year. And continue to have confidence in our ability to open stores timely in 2020 with a robust pipeline of future sites in progress at this point.

Got it. Thank you. And just for the back end of the year. If you look at the first half, right, I see your comp ticket was certainly a lot stronger than your comp transactions. I mean both positive, which is great, but the ticket was stronger. How do you expect that playing out in the second half of the year? Are we – is ticket's going to go fast and traffic or do you see that a reversing? Thank you.

First, I'd say each quarter can be different, but in general our assumption is that with the cost pressures, it may be very similar in directionally in the back half of the year as you saw in the first half.

Got it. Thanks very much. And good luck.

Thank you.

Next we have Kate McShane with Goldman Sachs.

Hi, good morning. Thanks for taking my question. If I could just follow-up on the tariff question posed earlier. I wondered if you could talk through - just in terms of how successful you were at mitigating, I guess some of the headwinds, some tariffs, especially in light with some of the products on List 1 through 3 going from 10% earlier this year to 25% starting in June?

Sure. Kate, this is Steve. For the quarter, I believe we've showed that we were able to manage through that climate pretty well, margin rates, as Kurt mentioned we're positive and so the tools and technology we have today are really allowing us to use science to manage our business. And thus far we've managed it pretty well and we feel like going into the back half, we've got a plan to mitigate whatever those tariffs maybe. Understand one last thing here and that is that we have built up a very large consumable side of our business over the years. And so, the tariffs don't have probably as significant of impact on Tractor Supply as other retailers that are out there. And that's a benefit to us as we move forward.

Okay. Thank you. And if I could just follow-up on a ticket, it seemed like it was a little bit lower than it's been in the last few quarters. I know you mentioned some big tickets softness in the quarter. I just wondered if you could talk to us about how you think about big ticket for the rest of the year and how it influences overall ticket at the company?

Yes, this is Steve again, Kate. What I would say is in the quarter we were up against some very strong big tickets sales from a year-ago. And as I went down the longer list of – some of the weather trends or seasonal trends that we experienced in the quarter. Big ticket things like cooling and trailers, some front engine riders, tillers, they were all soft for us. And I think that had probably an overarching impact for the first half and certainly in the quarter there. As we move forward, every quarter is a little different. Whether it has or those seasonal trends have a bit of a different impact on us. So, I suspect that as we get into this and we're able to use our private label credit card with the new offering, as I mentioned, the $5 for 100 spend. I think that we may see a shift backwards and we should hopefully see some improvement on big ticket.

Thank you.

Next from Piper Jaffray we have Peter Keith.

Hey, thanks. Good morning. Congrats on a good first half of the year. I want to dig into both up the private label and the direct sourcing as percent of sales. So those are trending down year-on-year in the second quarter. Curious if you could address that of it's more of a seasonal dynamic if you're starting to see some impact from tariffs and certainly, I don't expect your Cap, Tap, but maybe address if you think that that direction can be reversed?

Peter, I will tell you that, we still have an emphasis around growing exclusive brands. But at the same time, and you may have heard me say this before, we are a branded house that offers exclusive brand as well. And the team has done a really nice job, working with the folks like Carhartt, Scotts and others to build out a broader portfolio of some of those strong national brands. And we're seeing strength in those businesses. So, while we've seen a slight decline in percentage of sales that wouldn't necessarily suggest that, it's a concern because we're growing the whole pie. And so, the team is still focused on that. We've talked about RIDGECUT launching here shortly in some other categories. So that's not a real concern of mine. In terms of direct sourcing, there's ebbs and flows to that. Some of its receipt timing et cetera. So that's not a concern either.

Okay. Thank you for that. Maybe, I guess a little bit different topic. We heard some rumblings about rising inflationary pressures. I think it's a little bit of a tariff related, but also commodity related. Maybe Kurt, could you give us your update on the inflation trends, looking at to the back half and then relate to that with the multi-year highs in corn prices. When do you think some of that impact could start to show up in your results?

Yes. Peter, this is Kurt. We often in the quarters, we'll give you some indication on commodity level inflation and as we've been seeing in the past few quarters, some modest level of commodity inflation, Q2 saw that as well. We did continue to see some level of impact. We'd estimate around 50 basis points of commodity level inflation on the cost as well as the topline average ticket. And there's a number of variables in there and we would say based on our estimates to [wherever] we can see. We'd anticipate the back half to probably stay similar to that range of commodity level impact on the inflation factor.

And how about on – do you think corn prices will eventually speak in to those numbers as we look out to next year?

Yes. This is Steve. It's very interesting. I'm not really sure. Right now, we do see an increase in grains, mainly corn. It depends on how the harvest goes. I mean if yields come out higher than what was expected, you will see corn prices declined. And so, we're keeping close tabs on that now working with our suppliers. It's too hard to gauge. I guess we'll probably know here in a couple of months once they get into the fields.

Okay, sounds good. Thanks a lot guys and good luck.

Thank you.

Thank you.

And we have Simeon Gutman with Morgan Stanley.

Hey, good morning. Nice quarter – guys.

Good morning.

Thanks, Simeon.

My first question is, on the full-year margin guide. I think it's flat to up 10 bps or so. And to get to the midpoint, I think its average is about 25 bps of positive in the second half. Does that spread evenly across Q3 and Q4?

I'd say the way we factor – this fourth quarter has more potential for the margin expansion in the Q3. But our guidance is that overall throughout the second half that we anticipate that with some SG&A deleverage at a lesser extent and gross margins modestly improving that we've got good upside throughout the back half.

Okay. And then my follow-up, I guess related is on freight. You mentioned it was I guess a little bit better than you expected. I think – I don't think it was supposed to really taper until the second half. So, what's causing that? Is it just spot rates, which have come in or it's something about your process getting better and then does that mean it's an incremental positive or good guy to the back half? Now that it's become a positive a little sooner?

Sure. This is Kurt, Simeon. In regards to the performance in Q2, it's a mixture of both things that we're controlling as well as more the macro and on a macro standpoint it's, it's a bit more than just spot rates. There is an improvement over all that we see in the capacity. The average carrier rates are moderating and we've done a great job with our initiatives of renegotiations in the process as well as controlling the use of spot rates. The things that we've done to reduce the stem miles and increase the capacity or the amount of value in the loads have also benefited. And those are some of the things that we're real proud of the transportation team to jump on and address that ahead of our schedule and that benefited second quarter. Our anticipation though was those types of benefits would start to hit in Q3 and Q4, so no real change to our expectation in the back half from transportation.

Okay. Thanks guys. Appreciate it.

And next we have Daniel Imbro with Stephens.

Hey. Good morning, guys. Thanks for taking our questions.

Hey Dan.

I had a few questions on some of your geographic exposure in different markets. I guess first kind of starting on your more ag exposed markets, given the delay we saw on the planting season, our sense from the industry was that many of those markets could end up facing actual headwinds this year despite the spike in commodity prices. Have you seen those markets soften at all? Or what are some of your more ag exposed markets looking like through the second quarter given the rain?

Hey, Daniel. This is Greg. Let me address that one. If you have done the study of our business and the farm store business, you will know that most of these ag markets are in the upper Midwest of the country. There's some in northern California, but primarily upper Midwest. Those areas from a seasonal trend’s standpoint had been softer due to tremendous amounts of moisture, and probably I would say a little bit more on the basis of elongated cool weather. And we anticipated that. And as the weather is now drying and as weather is warming, we're seeing those areas of the country come back into the normal, we'll call it normal performance of the business. But remember, we're not directly ag related. A large production farming operations are not really who we address. We address the more called a casual, individual who has some properties, some land, and probably has a two or three acre garden. It's not the production side. So yes, we'll fill a little bit of that drag in those markets. But to be very honest with you as the weather is warmed and things have improved from a condition of moisture, we're very pleased with what we're seeing in the business.

Great. That's helpful. And then just on a similar related topic, moving geographies, thinking about the energy markets, obviously crude volatile year-to-date, but how consistent have those markets held up? Obviously, the last cycle seems a little bit different than this one, but just yet, we'd love an update on those. Thanks.

Well, this is Greg again. It's quite a bit different than the last cycle. But here is what I would tell you that there's been some modest level of commodity inflation, but not great. Steve mentioned about our retail price management programs, which helps us to make sure that we're pricing accordingly. We're not seeing any current waning in the oil markets. The rig counts and employments seem to be stable and oil is running around $60 a barrel. So really not a major consideration. It's more moderate today than it's ever been. I think the oil companies had a great learning a few years ago from what they experienced. And so geographically, it is somewhat limited now to say, I would say the Western Texas corridor. So, I think we're feeling pretty good about what we see and the performance of the business in those markets.

Great. Best of luck guys.

Thank you.

And from Credit Suisse, we have Seth Sigman.

Hey guys. Good morning. Thank you for taking the question. I wanted to follow-up on the guidance and the implications for the second quarter. So, I think you had talked about Q1 coming in better than you expected. It sounds like Q2 is about in line. I'm just curious, maybe just to clarify, have you made any changes to your assumptions for the back half of the year? I know you made that comment about the delayed openings, wasn't sure if that implied maybe lower growth in the back half than you were expecting previously. If you could just clarify that, that would be helpful.

Yes. Seth, this is Kurt. In regards, as your question is a little bit about how do we frame up the guidance in the back half, and I’d start by saying from an overarching view, our guidance reflects the belief in the strength of the business and not only the first half strength, but also what we expect for the back half. And I think it's demonstrated Best Buy; our updated guidance has an annual 3% to 4% comp rate for the year. But when considering the back half and the updated guidance, it reflects really three things. First, a solid performance in the first half as you mentioned with some upside results that we factored in particularly related to Q1. The second thing is on the back half as I mentioned, we did factor in the impact not only the topline, but the bottom line for the timing shifts on new stores as well as the shift on the income tax rate. Whereas I mentioned, we believe some of that discrete benefit shifted into the first half of the year out of the first – out of the second half and drives a higher tax rate in the second half. And those two factors do impact our expectation on the bottom line for the back half of the year. And as I mentioned earlier, the third thing, certainly a level of consideration for the macro issue that the consumer may be facing as they adjust to an all in tariffs. Wrapping it all up. The back half is very much in line with our original expectation with the adjustment for those two items that I mentioned and consistent, performance, evidence with the strength of the business, the first half continuing into the second half.

Okay, that's helpful. And then maybe just to follow-up here. The bridge to the second half margin improvement with your guiding here. Can you just talk about some of the areas where you are making progress and driving operating efficiencies and then we talked a little bit about transportation already? First quarter and second quarter you had really good underlying SG&A performance. Can you maybe help isolate some of the buckets where you're making progress and also what is expected to ramp as we move through the year to deliver that better flow through? Thank you.

Sure. On the gross margin side, the assumptions are simply the strength of the merchandising team been able to manage through these varying costs with improving year-over-year freight costs. As you move to the SG&A area, we anticipate, as I said earlier that the new distribution center will have a less of a deleverage impact in the back half than it did the first half. And we're also recognizing we're facing some cost compares last year that we don't believe we'll repeat at the same level. Lastly, the profit improvement initiatives are showing some traction we're receiving and anticipating some benefits, particularly in areas of occupancy where some of the indirect procurement and managing the costs and things we can control are driving some benefit and those are things that we're putting in place and laying the foundation over the last six to nine months.

Okay, great. Thank you so much. Appreciate it.

And next we have Steve Forbes with Guggenheim.

Good morning. I want to start with the 2019 class of stores. Right. I know we're early here in and you mentioned the delay in openings, but the initial productivity that's far looks above trends. Maybe just comment on the outlook for this year's class as it pertains to the foot footprint, right new versus existing and then sales productivity outlook relative to the average.

Yes. Steven, this is Kurt. I agree with you. We’ve very excited proud of the new store productivity. The model continues to be a strength of our business and the real estate team does a fantastic job of identifying sites and utilizing the greater customer data that we've got to make sure we're opening a strong stores in the right locations. And we're pleased with new store productivity so far this year and we think 2019 will be a real strong class and it helps give us more confidence in the strength of the pipeline as well. In regards to the overall performance on topline. We don't anticipate from an average sales standpoint that really varies significantly different from the history. Particularly with what I showed and walked through at the Investor Community Day. It's just a strength in the level of not only ramp up, but the productivity of the new stores.

Thank you. And then as a follow-up, right, if you think back to the Analyst Day, you specifically discuss various store productivity initiatives. Right, and I think we are sort of in a test phase with a lot of those back in May. So maybe updated us on the anticipated timing of the rollout of these strategies, right receiving et cetera. And what the learnings are thus far?

Sure. This is Kurt again. We're right on track with our plans. As we mentioned back in May. And just as a reminder, our store productivity initiative included a lot of reengineering of process, particularly back office or inventory handling. And additionally, with some tools like mobility, scheduling tools. All of that gets packaged together and then introduced to the stores as they get trained and rolled out. And so, we're right on track with our plan to methodically go through the stores throughout the back half of the year with a target goal of completing the rollout by the end of the year. What that means is, it's factored into our guidance. There's not a lot of efficiency driven in the back half as we're rolling this out, but it puts us in a great position to be able to capitalize that in 2020 and beyond.

Thank you.

And next we have Chuck Grom with Gordon Haskett.

Hey, guys. Good morning, guys.

Good morning, Chuck.

Can you tell us a little more the gross margin puts and takes in the quarter? And I guess what factors were less of a tailwind in the second quarter versus the first quarter? And then how we should be framing out the third and fourth quarter?

Yes. Chuck, this is Kurt. Our performance on the gross margin side was very much in line with our expectations. As we mentioned, it benefited both from product mix and price management, price management being the larger of those two teams did an excellent job as we mentioned, utilizing the pricing systems to manage the rising costs. But compared to Q1, we mentioned in Q1 that we benefited from some discreet opportunities, whether it be mixed or the pricing specific to coming out of the winter selling season and did a fantastic job of capturing sales at better marks. The second quarter was really a matter of just executing to the plan and driving good pricing along with the benefit of some product mix and not having headwinds from the freight side of it. We would anticipate that those are the primary factors in the back half of the year. Freight moving from neutral to targeting to having some benefit from that and then utilizing the expertise of the merchant team and the systems to drive some benefit from the pricing.

Okay, great. And then just a bigger picture on the Neighbor's Club and I think the 12 million members you have today, as you map out the various customer lifecycles. I'm just curious like what you're learning and what it's taught you about how to better engage with both new and existing customers?

Yes. This is Steve. I would tell you that the system has really benefited us in a lot of ways. We're continuing to take the data, segment the data. We can look at frequency now. We can look yet cross sell, up sell. As I mentioned earlier, when we do a campaign now, that campaign is no longer manually managed and kind of paint brushed across a lot of customers. We can have thousands of different deployments of that exact campaign with different banner, ads and whatnot. So, as we dig deeper and deeper into the data, it's just a rich stream that's coming back out and it's becoming more actionable across the entire organization. Kurt even talked about the performance of new stores, a lot of the data now we're able to use across the organization. So, whether it be tapping into the lapsed customer that we haven't seen in several months, whether it be communicating and engaging a customer that we just onboarded, the treasure trove of data is going to benefit us go forward.

Great. Thanks very much. Good luck.

And next from Wells Fargo, we have Zach Fadem.

Hey, good morning.

Good morning.

Could we talk about private label credit card impact in the quarter, just given the financing offers? Curious, how that's impacted ticket in your topline relative to last year? And then any color on the impact of new signups in the quarter versus existing cardholders would also be helpful?

Zach, yes, this is Kurt. A great question and we're excited about what the private label credit card is doing and believe it is a driver of the business. All metrics continue to be showing solid growth in line with our expectation, what we targeted. We saw growth in tender in both big ticket and broadly across the store. So, we know its resonating helping us in an environment of rising costs to show a value-added. The level of applications in new signups continue to be strong double-digit growth and helping us build the program. Our team members in the stores are embracing it. They're selling better than ever before and we continue to work on enhanced training and systems improvement. Last thing is to say that between those and what Steve mentioned about the new value, we're driving in the back half with the 5% reward. We believe that's going to resonate in all four corners of the store, help drive comps and improve and be part of our whole Neighbor's Club drive loyalty with our consumers. So, the lot of the data I mentioned at the May, Investor Community Day is still applicable. And we're moving in our progress rate towards our target of three to five years seeing this at about a 10% tender mix.

Great. Thanks Kurt. And then quickly on your CUE categories, could you refresh us on the subscription efforts here? You've called it out as an opportunity in the past. I know you don't push it. But any commentary on progress and whether you still think this can be a meaningful opportunity going forward?

Yes. This is Steve. We're a testimony company and this is one of the capabilities we put out there to better understand what our customers might be interested from us. We did expand the assortment out to some more animal health products, so it's not just pet food and supplies related. There's still a lot of learning to be done. And I would say at this point we're going to continue to learn as we go. The goal ultimately not only to be able to serve our customer with convenience, it might be a play down the role where we're able to connect with customers that want pellet type deliveries and more business-to-business type aspects of what we might be able to use the tool for. So, as we're thinking forward, the subscription of a bag of dog food or a treat is one thing. We're trying to think and make this more global and really tie it back to our ONETractor strategy.

Got it. Appreciate the color guys.

And next we have Peter Benedict with Baird.

Hey guys. Just a clarification. I mean Kurt, can you talk a little bit more about this new store delays. I'm just still a little unclear as to what that was. Was that construction delays more broadly and just you guys weren't as on top of it as you normally are or was there an internal issue? I understand it's transitory. It doesn't sound like it could be an issue going forward, but I just was – I'm still a little confused as to what drove that?

Yes. Peter, appreciate the question. I'll try to help clarify on it. In the first half of the year, there were weather challenges, there are often with new stores, there are challenges just with getting through planning and regulations in the local municipalities. And we could point to all of those things and say that the weather or the regulatory items were there. But we have that and we in our view, we say we are challenged and it's our job to offset those headwinds. And we faced a lot of those headwinds and probably more headwinds than normal, and that was part of the challenge of getting stores open. And for us as a team, we look at that as an executional issue and say, we can do better at making sure that we can have the offsets that can help us not have shift in timing of stores when those headwinds pop-up like they did.

Okay. Now that's helpful. And then just lastly, just on Neighbor's Club, and you guys are not giving the full numbers anymore on that. But as we think about it from a comp store basis, do you feel like you've kind of reached the penetration at least in the existing stores in terms of the number of members for customer, I mean per store? And that the growth from here, just be basically new stores or are you continuing to see some growth in members per store? Thanks.

Yes. Peter, this is Steve. And yes, we continue to see the program grow in comp stores as well as new stores. And it's still growing at a really good clip, which is exciting. And then when you add on to that, what we're doing with what Kurt talked about with the private liberal credit card, I think we'll even see more engagement and more enrollment. So again, it continues to expand. The data continues to come in. We're building out our CRM team and we're excited about what the future looks like in terms of being able to use that data and action it.

Great. I appreciate that Steve. Thanks a lot guys.

Greg, we'll try to flip in one more question please.

Okay. In that case, we'll take the final question from Brandon Fletcher with Bernstein.

Hey guys, great quarter.

Thanks Brandon.

I don't want to simplify your very complex business and all the hard work of everybody, but if we do what we do on the street and make this just to growth algorithm, got 6% of store growth, maybe 3% of sales, 3% of buybacks and dividends. You can adjust those however you want half a point either way that gets you to 12% kind of the center point of your growth algo. We were so impressed with the quality of the talent that you have and those that you brought in to do some really awesome stuff on analytics and supply chain and finance, et cetera. It sounds to me if you have all these awesome people, there must be some headwinds hiding in there that we'd love to have any color on. So, we know what all these great people are fighting against as to why, you know, the algorithm is kind of comfortable at 12% and that isn't reach higher beyond that. Thanks.

Yes, sure. This is Kurt. I'll start on that. And we look at our guidance as confirming that we're doing what we'd said we do this year driving a strong comp sales performance, driving great topline, operating margin expansion with a real solid EPS growth rate. And that continues into the back half of the year. And for us, we have a lot to be excited about what we're driving overall for the expectation and guidance, which is raising that a bit from original expectation. So, the business is strong. There's a lot to be excited about it. I've mentioned it earlier; we're going to make sure halfway through the year with the consumer that is going to be facing a number of changes. We're going to be realistic with what the outcome can be in this environment. But all that given Tractor Supply has got a great algorithm as you mentioned, and great performance expected for 2019.

Okay, great. Thank you.

All right. Greg, that'll wrap up our call. I want to say thank you to everyone for joining us, and Mary Ann and I are around today if you have any questions for follow-up and we look forward to talking to you in October. Thank you.

Ladies and gentlemen, that does conclude our conference for today. Thank you for joining us. You may now disconnect.