Good morning, ladies and gentlemen, and welcome to Tractor Supply Company's Conference Call to discuss Second Quarter 2021 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. And as a reminder, this call is being recorded. I would now like to introduce your call for -- your host for today's call Mrs. Mary Winn Pilkington, Senior Vice President of Investor and Public Relations for Tractor Supply Company. Mary Winn, please go ahead with your conference.

Thank you, operator. Good morning, everyone. Thanks for taking the time to join us today and I do hope you all are staying safe and well. On the call today are Hal Lawton, our CEO and Kurt Barton, our CFO. After our prepared remarks, we will open the call up for your questions. Seth Estep, our EVP and Chief Merchandising Officer will join us for the Q&A session. Please note that we've made a supplemental slide presentation available on our website to accompany today's earnings release. 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 certain 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. 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 will be available after the call for follow-up. Thank you for your time and attention this morning. And now, it's my pleasure to turn the call over to Hal.

Thank you, Mary Winn, and thank you to everyone for joining us this morning. Our thanks go out to the more than 45,000 Tractor Supply team members for their ongoing commitment to each other, our customers in the Out Here lifestyle. The team has been through a lot together over the last 15 months as an essential needs-based retailer, including necessary but cumbersome health and safety measures, surging volumes, the roll out of our Life Out Here strategy, supply chain disruptions, numerous digital investments, and more. The team has risen to each challenge to be there as the dependable supplier to our customers and the communities we call home. Thank you to the team for another great quarter. I would also like to say thank you to our vendor and supply chain partners as we work together to overcome the challenges in the global supply chain network. Together, we were able to support our customers as the dependable supplier for their Out Here lifestyle. Over the first 12 months of the pandemic, through the first quarter of 2021, our sales grew approximately 35%, or $3 billion. In the second quarter of 2021, as we are now comping the comp, we are pleased this momentum and all of the underlying trends have remained and continue to sustain. Looking at the second quarter. The Tractor Supply team delivered a very strong performance that exceeded our expectations as we achieved a 10.5% comparable store sales growth for the quarter and a 41% two-year stack. Our results prove yet again Tractor Supply's unique competitive advantages. Our relentless focus on being the dependable supplier for the Out Here lifestyle is embedded in our purpose as a company. Our Life Out Here strategy is still in the early days. We are seeing positive trends from our…

Thank you, Hal, and hello to everyone on the call today. As Hal shared many details on the second quarter, in my time on the call today, I would like to go into some of the specifics around our financial performance and our increased outlook for the full year. We are very pleased with our performance. These results demonstrate the strength and resilience of our business and our strategic initiatives. For the quarterly cadence, April and June were the strongest months of the comp store sales performance. All geographic regions and all major merchandising categories had comp store sales growth. We believe the underlying health of our business is structurally advantaged. A great example of this is the strength in our consumable, usable, and edible products. Our C.U.E. products represent the strength of our core business and what drives trips to the store. For the fifth consecutive quarter in a row, C.U.E. had comp store sales growth above 15%. Key subcategories such as poultry, livestock feed, and dry dog food were among the strongest categories with comp sales all greater than 25%. Of note, we are seeing strong retention rates of our new customers across every species of livestock and companion animal. For example, poultry, a hallmark homesteading category for Tractor Supply has the highest retention rate of the animal species for new customers and new to the category. Our big ticket categories, which were going against significant growth in the prior year, continue to have strong comp sales performance above the chain average. This was driven by strength in zero-turn mowers, safes, utility vehicles and trailers. Lastly, inflation contributed about 350 basis point to 400 basis point to comparable store sales in the quarter. Our second quarter gross margin rate was 35.8%, a decrease of 67 basis points. Year-over-year,…

Thanks, Kurt. Tractor Supply has thrived over the last 15 months. We continue to operate from a position of strength and are committed to investing in the business. Our Life Out Here strategy is designed to capitalize on the attractive opportunity that we see in our nearly $110 billion total addressable market. We are transforming our stores through our Project Fusion remodel and side lot transformation, optimizing our technology in store and online and investing in how we operate our stores. I am incredibly proud of the progress the team has made in advancing our strategic priorities, especially amid a global pandemic and running the business at an elevated rate. So, let me share with you an update on how a few of our comp initiatives are progressing. I'll start with the field activity support team. The 1,200-plus person organization is designed to improve store labor productivity. Example task of the FAST team include execution of merchandising programs like center court, end-caps, clip strips, planogram resets, seasonal programs and our sales driving initiatives. Rolled out in the third quarter of last year, this team has made great progress in improving execution of our merchandising activity, which represents the second largest body of work for our store team members. Year-to-date, the execution of task by the FAST team is running at 97% or nearly 33 points higher than our base year of 2019. The FAST team is allowing the store teams to spend more time on customer service and improve their in-store execution. We believe the FAST team will continue to contribute to comparable store sales well into the future. Turning next to our Project Fusion store remodel program, recall, our Project Fusion is our state of the art space productivity program designed to enhance the customer experience in our mature…

[Operator Instructions] Your first question comes from Steven Forbes with Guggenheim Securities.

Good morning. So, Hal, I wanted to focus on the Neighbor's Club relaunch. So, maybe a two-part question here. If we look at the spending tiers, right, that are sort of defined by the program. Curious if you'd provide some context around how these tiers were determined. And any sort of color, right, that you could provide to help us better understand sort of what percentage of members today would qualify, right, for the preferred for plus tiers? Any color would be appreciated there.

Steve, of our now 21 million-plus Neighbor's Club members. And like kind of all loyalty programs, we try to -- as we created in this case three tiers, we tried to kind of reasonably distribute it with kind of a decreasing proportion across each of the three buckets. And then we also tried to create tier levels that would naturally encourage upward migration and discourage downward migration. I would say a few things. As we talked about on the call, our Neighbor's Club members now account for over 65% of our sales. Our retention rate on our Neighbor's Club members is over 80%, very strong retention rate on an annualized basis. And as we said, our highest -- our third tier of spending, which is the -- the Neighbor's Club Premium Plus, the retention rates there are over 95%. So we're seeing significant upward migration. We're seeing reduced downward migration. And the final thing I'll make a mention of is that our Neighbor's Club members, they make two more trips quarter on average than our non-Neighbor’s Club members. And our Neighbor's Club members had spent over $1,000 a year. We've got almost $2.5 million of those and that's increasing kind of on a daily basis. So, it's a very robust program with its 21-plus million members. We've seen over 5 million members join us in the last 12 months. We're seeing outstanding retention. We're seeing excellent migration. As we migrate them, the retentions are holding and actually improving, and we've seen a significant positive response to the roll out of the new program. As mentioned in our prepared remarks, since the roll out of the program, our Neighbor's Club members are significantly outcomping our overall chain average.

Thanks. And just a quick follow-up. If I think about the last few quarters, you provided some context around repeating trends. I think a percentage of customers repeating within 12 months, probably on a rolling basis. I think it was 50% last month. You mentioned sort of it's running at a high. So just any context around repeat trends that we think about the growth from the customer base, the experience over the past 18 months.

Yes. So our customer repeat shopping trends continue to remain very high. New customer retention rates continue to hover in that kind of 50-ish percent similar to last quarter and the previous quarters. And our customer -- our new customer counts were only slightly below our new customer counts from Q2 2020. And so for us, there's a lot of good news on the customer side. We saw 11 million last year. We saw 2.6 million, nearly 3 million in Q1. We're seeing kind of 50%-plus retention rates on those new customers. The way -- kind of an interesting way to think about it is, on the 11 million new customers we saw last year, 6 million have shopped with us again and 3 million of those joined the Neighbor's Club program. And so that's just -- if you think about that walk just some outstanding metrics retention, conversion to the Neighbor's Club program. And then again this quarter, we are seeing new customer counts nearly the same as the second quarter of 2020 at the beginning of the pandemic.

Thank you.

Thanks, Steven.

And your next question comes from the line of Simeon Gutman with Morgan Stanley.

Hey, good morning, everyone. Nice quarter. My first question is the stabilized period that you outlined at the earnings day, it hasn't really happened yet. I guess it has relative to last year, but the business is still growing. Can you talk about the factors that would argue that the business doesn't need to digest and therefore, continue to grow and then vice versa. What suggests that we are going to have a digestion period and we'll have a deeper stabilization period versus the way you expected it?

Yes. Hey, Simeon, how are you? I'd start out with -- at the highest level, I'd say, there still continues to be a lot of uncertainty in the United States economy and globally, whether that's on -- certainly as it relates to COVID, the delta variant, the implications that has on mobility and on customer shopping behaviors. I'd say, if you track back to our October enhanced earnings day last year, kind of implied a bit in the graphic Kurt showed with a bit more of a return to normal mentality at some point that was more abrupt in nature. And I'd say, I think as we're all watching how COVID's playing out, that's certainly not the case. And so I'd also say that our business continues to evolve. And if you think back to them, we were talking about 50-50 on structural versus transitory in terms of trends. And I think we'd lean more towards structural now in the way we view our trend. If you think about pet, if you think about the millennial customer, if you think about homesteading, kind of rural revitalization, categories like poultry as an example. So last year, as we've said several times, we sold 11 million birds, half of those were to new customers. We're seeing, as mentioned by Kurt in his prepared remarks, outstanding retention of those customers last year that shopped with us on poultry coming back again this year. In fact, our retention rate is higher than any other animal feed or pet. So, I mean, it just shows you that the trends that began last year are really resonating and resilient and that momentum that we're seeing with our customers and in our business and with the lifestyle -- the Out Here lifestyle that we appeal to is holding incredibly strong. And I think in my prepared remarks I talked about the fact that between Q2 of 2020 and Q1 of 2021, we had grown $3 billion and 34% comps. And we were kind of coming into Q2, I think like many companies with certainly us wondering how we would comp the comp and we had guided to kind of flattish at the beginning of the year for that and perhaps even a little down and finished with a plus 10.5%, certainly exceeded our expectations. And it's really all about the underlying trends, the strength in our consumer behavior, new customers and the appeal of that Out Here lifestyle. And I think there is still a lot of uncertainty in the out years and quarters, but I would say we feel more confident in the structural orientation of the trends than we did last October.

Thank you for that. In terms of CapEx, I think Kurt had mentioned that it was relatively level in these outyears as it steps up from a couple of years ago. Does it peak in 2021? Do you spend further and accelerate into 2022, how should we think about cadence?

Simeon, this is Kurt. On the cadence over the next few years, as we pointed out, back in October when we launched our new long-term targets in the Life Out Here strategy, we said that we've got consistency in our investment, in the existing stores as we drive productivity with Fusion and side lot, but that where there may be some variation would be on the supply chain as we grow our supply chain, particularly new distribution centers. And so, as you've heard us in the last couple of quarters emphasize the importance of our investment in our supply chain, we are looking to accelerate and would see us shifting some of the supply chain investments earlier in the next few years. And so there may be higher than average in 2021, 2022, even 2023, but over the period of time, it still averages out about the five-year expectation that we gave. And the important thing is the recognition or our confidence in the structural nature of this business and therefore the importance of our timing of investments in the supply chain. So I see 2021 and 2022 pretty consistent in potential on capital as we emphasize ensuring the strength of our supply chain.

Thank you very much.

And your next question comes from the line Michael Lasser with UBS.

Good morning. Thank you for taking my question. And particularly C.U.E. It's hard to imagine that -- poultry or livestock products are growing as fast as you've been experiencing. But at some point or is this success starting your -- where you are not going to scale they're going to be more promotional, there has been no share losses. So, at what point do you see this risk holding in the next several quarters?

Hey, Michael, how are you and thanks for joining our call this morning. Yes, I'll start with the fact that we're confident. We're taking share really across every major category that we have in the business, both in stores and online. If you look at the profile between new customers, existing customers, both are showing strong comp, transaction growth, average ticket growth, and as I said in our prepared remarks, more customers are shopping trucks more than ever, they are visiting us more frequently and they are shopping -- they are spending more when they are shopping us. What I would say is, we participate in a very attractive large $110 billion market, where our share kind of based on our new guidance would be barely above 10%. There is a lot of share gain out there and also a lot of share to still be competed with. We're dominantly very focused on our customer and just making sure that the initiatives and the actions that we take are out there to create the best customer experience that we can, whether that's investments in our team members to drive that legendary customer service or investments in inventory to ensure we're in stock for our customers. I would say, as it relates to the promotional environment, we've not -- we've had very little to no promotions in Q1 and Q2 of this year and that's our expectation really for the balance of the year. And I really expect the competitive environment to remain similar for no other reason because of the supply/demand situation that's out there. And the global supply chain is disrupted as I've seen it in my 25 plus years in retail and everyone is working hard to just keep inventory in their stores. And I think that mindset would prevail over any sort of promotional share push that anyone has. I would also just comment that we don't directly compete with really any primary retailer. Being a lifestyle retailer, one of our benefits is that we play across a handful of large categories that are uniquely tailored to our customer, but typically, when we are competing with other companies, it's on a one-off category basis and we really appeal to that whole lifestyle. But I don't anticipate an increase in the promotional environment in the market or certainly for us anywhere near on the near or medium term horizon.

My follow-up question is on [indiscernible] accelerate from last quarter. Where do you expect that to go during the next few quarters?

Yes, Michael, this is Kurt. You stated the results accurate on the last quarter. Let me give quick backdrop and that will lead towards the back half, but we entered the year expecting 100 to 200 basis points of retail inflation throughout the year that quickly produced in Q1 closer to 300 basis points, principally from commodities. And then as we shifted into Q2, at the 350 to 450 basis points of retail benefit from inflation. One, it demonstrates the ability, as Hal mentioned, to be able to adjust pricing appropriately. But the increase in Q2 over Q1 was principally related to transportation costs and other non-commodity type based cost increases. We see in the back half of the year staying at elevated levels. And we would anticipate that the numbers in Q2, it would be at that level and potentially at moderately higher levels throughout the back half. And in this inflation environment, I always like to remind that our merchants in our business, we deal with inflation and deflation every year and they are managing this excellent and we feel we've got the ability right now in the consumer sentiment, the less price elasticity in their behavior to be able to manage the inflation environment very well throughout this year.

Great, thank you so much.

And your next question comes from Chuck Grom with Gordon Haskett.

Thanks and good morning. My question is on Side Lot. Is it possible now with a few quarters under your belt to give us some update on the sales that you've this spring and any other learnings that you plan to apply to the balance of the stores you are going to open this year in the side lot format? And then as a follow-up, you talked about 60% to 70% of the fleet potentially holding side lot. I'm curious how quickly you think you're going to accomplish all that cycle?

Yes, hey Chuck, how are you? And thanks for joining the call today. I'd start out with both Fusion and side lot. We are very pleased with the results. And we've made a lot of progress over the last six to nine months on both of these efforts. We've rolled out, as we mentioned, we've got over 160 Fusions done, over 60 side lot transformations done. In addition to the work on those individual stores, we've brought the project management in-house. We're reducing our construction times and lowering costs and we see lots of opportunity to continue to do that as we move forward. Particularly on the side lot, we've iterated on kind of the plans several times and keep optimizing the format every -- as we roll it out. But we are very pleased with the results, with the progress we made in both. On the results, what I'd say is, we typically, I think, kind of historically in retail, it's the same in all my experiences. You start to really get a good feel for how the remodel lift is playing out kind of three to four months after the store kind of reopens and the remodels and complete. Most of our remodels haven't been open that long. So we're really kind of waiting over the next three to six months to start to see how that data set plays out. But what I'd say is, for the stores that have been open kind of over that period of time, they are at the levels that we anticipated in our initial business case. And we have more of those on the Fusion than we do on the side lot. But we're very pleased with the results of both projects. And as I mentioned in my prepared remarks, the customer excitement around us becoming more of a destination in garden has been more significant than we even anticipated and we are even more bullish on that as we move forward. As it relates to the penetration of the kind of how long, we'll -- I think you can expect to hear us share more of that over time. But I'd say directionally over about a five-year time frame, you should think about kind of the Fusion stores for the most -- the vast majority of our stores having Fusion and on side lot really around that 60% to 70%. I think we're feeling more bullish around getting more of our store base done with Fusion than maybe were even six months ago, just the way that project is going, the cost that we're doing at it. They were doing it for the early read on the lift we're seeing and then the need just to continue to kind of remodel our store base.

That's very helpful. And just a quick follow-up I know this is unrelated I apologize. But given some new over the past few days about this delta variant, I'm curious, if you've seen any choppiness in some of the regions that you operate on vaccinations?

I'd start with our -- our business has over the last 15, 18 months now has remained incredibly consistent and we've said that on a number of calls, consistent across regions, consistent in category trends, consistent week to week, consistent month to month. As we said, all 13 weeks of this past quarter were positive comps, obviously all three months were positive comps. We exited June with strong momentum and even as we certainly -- as a nation, as we've seen this delta variant pickup, we've not seen any impact on our trends whether at a national level or at a regional level and that's very similar to what we observed last year and I think it's almost -- I hate to say, but I think the lack of mobility sometimes driven by these outbreaks actually plays to the benefit of Tractor Supply. I think it's demonstrated that when folks are spending more time at their homes with their families, their pets, their animals, their land, they buy and Tractor Supply to be kind of that one-stop shop resource for them to continue all those hobbies that they love and they are just spending more time doing those hobbies. And so while we certainly want and wish the country to return to normal as fast as possible, the delta variant, we don't see it as a potential threat. If anything, maybe some upside to it from our business results -- from a business results perspective.

Thank you, Hal. Good luck.

And your next question comes from the line of Chuck Cerankosky with Northcoast Research.

Good morning, everyone. If we look at sales trends over the past two quarters and, Hal, could you tie it to the TV advertising you've been doing and did that lead into this relationship with the PDR?

We want to own Life Out Here and we think we have the credibility to do so and are viewed that way by our customers. And as I mentioned in -- we do an awareness survey of our customers twice a year. In our last earning call, I mentioned our unaided brand awareness in November of 2019 was 37% and then 18 months later, right as we're exiting Q1, it was up to 51%. So we've seen a 14 point -- sorry, a 17 point increase -- 34% to 51%, a 17 increase in our unaided brand awareness. Much of that is obviously our core customer, but a lot of it is off of the millennial customer. And as we mentioned last quarter, we saw a 4 point increase in our millennial customer penetration year-over-year. And as I mentioned in our prepared remarks, that trend continued in Q2. So we think the work we're doing in marketing is broadening the aperture of consumers' understanding of Tractor Supply and driving unaided and aided awareness and kind of driving footsteps into our stores. As we said, we continue to have strong comp transactions across the board and we're really excited about the partnership with PVR. We think it's a category that resonates well with our customer and one with over 200 activities a year that we can do a lot of activation across the areas of the country where our customers are. And it will be a great partnership. As I also mentioned in my prepared remarks, we are also -- we have launched a large marketing campaign targeted towards the millennials. And up until now, the majority of our above-the-line marketing has been TV and kind of Facebook based. And on TV, it's really been around news media. And we think that's been very successful for our core customer. Those are the major places that they engage with media. The millennial customer, as we all know, engages in different types of media. They are on Pandora, Spotify, YouTube. And so what this led us do is actually create a very different creative concept called Welcome to Life Out Here, explaining who Tractor Supply is and then talk about those first two, three hobbies that they might engage in: backyard poultry, backyard gardening, pets, things like that. They are kind of starter categories, if you will, in Life Out Here. We're very excited about that work and the initial feedback from customers is outstanding. And just hats off to the marketing team for all the work they've done to really drive awareness of our business and drive footsteps into our store.

Thank you, Hal

And your next question comes from the line of Peter Benedict with Baird.

Hi, good morning everyone. I will ask first questions here. The first, Kurt, your second half plan implies some negative incremental margins. I know you talked about some of the investments you are making etcetera. I'm just curious kind of your view on that, how that comes about. Maybe the -- give us an idea of maybe the magnitude of the gross margin decline or visioning relative to 2Q's 65% to 70% decline. And a follow-up would be just about your P&L flexibility as we look longer term in the event that sales to slow or even turn down a bit, what levers do you have to pull in that environment? Thanks so much.

Hey, Peter, thanks for the question. And two questions, margin second half and then our ability to be nimble and some of the profitability enhancement opportunity. So, on the second half, when we look at the operating margin, here's how we view it and frame it up. Our gross margin in the pandemic was really the source of the beat in the operating margin and we view the second half really about the gross margin performance. We anticipate Q3's gross margin performance where we've got more visibility to Q3 at this point, very much similar in line with the performance of Q2. As we get further into the second half of the year, we've taken a fairly prudent approach. There is more uncertainty beyond one more quarter and we've always given a little bit more certainty on the most recent or the most nearest quarter. For the second half, we've recognized -- or the fourth quarter, we've recognized supply chain disruptions, inflation factors, as well as the holiday season and what level of competitive nature. And so we've certainly reflected some of those uncertainties in the fourth quarter and the operating margin on the back half of the year really rides on our performance with the gross margin. And as I said earlier and second quarter shows, we've really been able to manage in this environment very well. The business is structurally very sound. We have a lot of confidence in our business in our back half and if some of the uncertainties don't play out, we acknowledge there is potentially some upside to the guidance that we've given. In regards to flexibility, we always have strong profit improvement process going on and a few of the factors that we are focused on right now where we've got some ability to be able to adjust would be in the supply chain. The work that we're doing to reduce stem miles and to continue to just lever the size of this organization drive efficiency in there, as well as our ability to be nimble on variable cost. If there is any sort of shift in the momentum of the business, we're able to shift very well in regards to variable costs in both distribution and stores to be able to adjust on that. We've got a solid profit improvement initiative that is driving some of the efficiencies and these are the active offsets that we have going on to be able to help us maintain operating margins well above the 2019 ranges while we're making important investments in the business.

Right. Thanks so much.

Operator, maybe time for one more call.

All right and your last question comes from the line of Zach Fadem with Wells Fargo.

Hey, good morning. Thanks for fitting me in today. So, Kurt, you suggested in the past that the 100 basis points of gross margin expansion in 2020 was largely related to muted promo, low clearance environment. And now that we're halfway through this year and you've seen the environment more or less continue, can you just talk us through the long-term state of the gross margin line and to what extent the current 35% plus margin is the right way to think about this business or are there reasons to believe that the historical 34% range is more appropriate as promos and clearance inevitably return?

As we've said throughout this pandemic, to your point, we've seen over 100 basis points of our operating margin improvement over pre-pandemic really coming from gross margin as you mentioned. We've said that we anticipate, over time, as we cycle the pandemic, we expected somewhat normalization on some of those factors, the promo, the clearance. While we do anticipate and are very disciplined in holding to it everyday low pricing and giving our customers the best price we can, our long-term guidance assume some normalization. Now, we acknowledge that if -- with our guidance shows that a second year in 2021, we'll maintain operating margins of above that long-term target range. And so as we go -- as we get further through 2021, we certainly as we manage this business see as things start to normalize, we'll address the long-term expectations on gross margin, but we're going to always continue to offer strong everyday low pricing. We're going to focus on gaining market share and focus on driving unit growth. So price is going to be very important to us in leveraging the strength of the size of our business to have an efficient and nimble supply chain. So as we get more visibility, we will certainly acknowledge the gross margin, operating margin trends compared to our long-term target. For right now, we're not reaching beyond the visibility in certainly the next couple quarters.

And a quick follow-up on that. I mean, in 2019, you had $10 billion sales day. Last year that stepped up to $10.5 billion and this year it's going to step up more to $12 billion. Could you guys talk about the scale advantages you generated and how that should translate at the gross margin and operating expense lines?

Hey, Zack, it's Hal. And again thanks for joining the call today and I'd say a few things. First off, on the scale advantage, it'd say it dominantly gives us an opportunity in the market. With our 8 distribution centers, moving towards 11, the relationships that we have with our vendors and the meaningfulness of that, with the technology investments we're able to make. As an example every single one of our team members wears a Theater headset that really creates an optimal customer service experience in the stores. We're in the process of rolling out new handheld devices for every team member inside the stores as well. Those sorts of investments are enabled by our scale and they are enabled -- and they are really focused on helping us create, gain and capture market share and drive top line sales. And as we've talked many times, our main goal is to grow at a rate faster than the market. That's what's implied in our long-term operating trends and that's how our business is performing now. And then on the operating profit rate, as you said, we've been able to - our outlook is to hold SG&A flat or down and we've been - we've done that over the last six quarters and anticipate continuing to do so. So as we've grown our sales and grown our sales base, we've been reinvesting in the business, but doing at a point where we're not deleveraging there and it's - whether it's in the capital line or in our team member line, and we view our team members as a strategic asset. We are a customer service driven retailer. We are not a retailer where you're going to walk in, pick the item you want, go to a self-checkout and never talk…

Makes sense. Appreciate the context.

Great. Thank you everyone. Dan, that will wrap up our call today. So thank you for joining us. Marianne and I will be around for any questions and will look forward to speaking to you at our call in October.

Ladies and gentlemen, this does conclude today's conference all. Thank you for your participation. You may now disconnect your lines.