Good morning, ladies and gentlemen, and welcome to Tractor Supply Company's Conference Call to discuss Third Quarter 2024 Results. [Operator Instructions] Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Tractor Supply Company. And as a reminder, this call is being recorded. I would now like to introduce 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.

Thank you, operator. Good morning, everyone. Thanks for taking the time to join us today. On the call today are Hal Lawton, our CEO; Kurt Barton, our CFO. After our prepared remarks, we'll open the call up for your questions. Seth Estep, our EVP and Chief Merchandising Officer, will join us for the question-and-answer session. Please note that we have 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 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, you 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 on this call. Given the number of people who want to participate, we respectfully ask you to please limit yourself to one question. If you have additional questions, please feel free to get back in the queue. I appreciate your cooperation. We will be available after the call for follow-ups. Thank you for your time and attention this morning. Now it's my pleasure to turn it over to Hal.

Thank you, Mary Winn, and good morning, everyone, and thank you for joining us today. My sincere thanks and appreciation go out to my fellow 50,000 Tractor Supply team members. I know we all have been watching the devastation over the last few weeks that's been wrecked by Hurricane Helene and Milton with great concern and heartbreak. Hurricane Helene struck particularly close to the heart for me, given my roots in East Tennessee. Tractor Supply has taken a multitude of actions, big and small to take care of our team members, customers, and communities during this difficult time. I'd like to give a special thank you to all our team members who rallied to help the communities impacted by this storm season. We will continue to be there for our team members, customers from our communities in the days and months ahead for the recovery process. I would also like to thank our many vendor partners who are stepping up in the recovery effort. As it relates to a sales benefit from our response, we had no material benefit in Q3, but have seen an impact in Q4 and additionally have been somewhat encouraged by the recent change of seasons. This morning, we shared some exciting news that we've entered into a definitive agreement to acquire Allivet, a leading online pet pharmacy. This is a company we know very well as they've been excellent partners to us in fulfilling our pet subscription business for the last couple of years. This is a great opportunity for us to bring another benefit to our 37 million Neighbor's Club members. Allivet offers a convenient and cost-effective way to get medications and specialty items for their pets and livestock. The addition of Allivet allows us to expand our total addressable market by about $15…

Thank you, Hal, and good morning to everyone on the call. As Hal mentioned, our third quarter top-line results were consistent with our expectations and in line with the results in the first half of the year. We saw continued strength in big ticket sales, while our discretionary categories remained pressured. Our seasonal category performance, exclusive of big ticket, was in line with chain average at a modest decline to prior year. Similar to the first half of the year, we saw strong performance in seasonal categories such as live goods, mulches and soils, grilling, and wildlife supplies. This was offset by softness in ag fencing, heating, outdoor living, and lawn and garden tools. As we expected, our C.U.E. performance was slightly below the chain average given the retail price deflation and moderating pet category trends the industry is experiencing. Retail price deflation, which was approximately 1% was in line with our expectations. The vast majority of this deflation came from our C.U.E. categories. As Hal mentioned, we are pleased with our unit movement in C.U.E. as we successfully managed through the impact of deflation this quarter and are now starting to lap the beginning of this deflationary cycle from last year. Our comp sales growth was relatively consistent across all regions of the chain within a range of down 2% to up modestly. The strongest regional performance was in Texhoma due to inventory investments made in big ticket, easier compares, and better overall weather compared to last year. This strength was offset by pressure in the Far West, Midwest, and Commonwealth as the summer heat lingered and a lack of the change of season to fall in these areas. As to the cadence of the quarter, all months were also in a relatively tight band of essentially plus or…

Thank you, Kurt. I continue to believe that the structural backdrop remains very attractive for Tractor Supply. We participate in a large, attractive, fragmented, and growing market. We're a consistent share gainer and have numerous tailwinds, including our Life Out Here strategic initiatives, our market being a beneficiary of continued net rural migration, and high-return new-store growth opportunities. Short-term and long-term, Tractor Supply is extremely well-positioned as the leader in Life Out Here. As we look to close the always important fourth quarter, we have exciting plans in place to drive sales. We're in the midst of launching our first Hometown Heroes Days. Veterans and first responders over-index in our communities and Tractor Supply is uniquely positioned to celebrate those who keep us safe and make Life Out Here possible. The event starts on Saturday with a chain-wide event with our stores hosting their community to interact with fire trucks, K-9 units, and ambulances as well as food trucks and local farmer markets. Over the two weeks, we will be offering special promotions to our hometown heroes, including 10% off on First Responders Day and Veterans Day. Hometown Heroes Days is the perfect way to drive excitement for this program and for Neighbor's Club more broadly. This is a unique event, which will further support and strengthen this important customer segment's shopping affinity with Tractor Supply and is a great way for us to give back to them. We have an exceptional lineup of innovative and new products as well as enticing values and fresh offerings for the fourth quarter. In big-ticket, highlights include Massimo golf carts, Liberty Safes, Tractor Cam cameras, even Ember patio heaters, and Blackstone Grills. In our CUE business, we're expanding our cat food assortment, testing new items such as freeze-dried sacks, adding exclusive SKUs and…

[Operator Instructions] Our first question comes from the line of Zach Fadem with Wells Fargo. Your line is now open. Please go ahead.

Hi, good morning. So now that about 25% of your stores have lawn and garden centers and roughly half of your stores are converted to Fusion. Curious if that historical mid-single-digit lift for the combination is still holding in this environment, which if it is, it would mean about 150 basis-points to the comp, if that's right. And then how should we think about the outlook for lawn and garden Fusion and any other store initiatives that you have planned for '25?

Hi, Zach, it's Hal Lawton and good morning, and thanks for joining us on the call. Yes, great milestone for us that we've reached with over 1,000 stores now in our Fusion format and 500 stores in our Garden Center format, over 500 stores. You think back to where we were in August of -- I mean, October of 2020 when we had zero of each. So come a long ways in a short amount of time. As we look forward, we feel good both about the pace that we're doing on our remodel program, which is between 175 and 225 stores a year. We've been consistently running at that pace the last couple of years. Of course, all new stores are built with the Fusion concept. And then between half and three-quarters of the stores just depending on a variety of factors are receiving the Garden Center a bit more on the new stores because we have a little more control of the setup, but the same on existing store remodels as well. And then, yes, we are continuing to be very pleased with the performance of Fusion. Those stores do continue to outpace the broader chain. Additionally, they continue to have higher customer scores on key areas of things like store environment, clean and uncluttered, those sorts of things. They also tend to have a higher female as well as a younger shopper base as well. So all the both quant and qual metrics that we've shared historically on Fusion continue to occur and we continue to be very pleased with the Garden Center business, while it's been a couple of years now of tougher spring/summer weather, we continue to have strong performance in live goods, as we talked about as well as all the other ancillary products that go around it. And then this year, we'll be using, as I talked about in our prepared remarks, the Fusion setup even to bring even a heightened and more well-done, fall execution as well as Winter Wonderland execution. So all in all, very good progress. And just to wrap it up. In my prepared remarks, I talked about the Farm and Ranch channel being negative in the kind of low to kind of mid-single digits, call it a minus 2%, minus 3%, maybe minus 4%. And you look at our overall growth of 1.6% and would point to many of our competitive advantages and strategic initiatives we have been implement -- that we've been investing in as the reasons for that share gain. And one of the important ones is Fusion as you -- as we just went through the numbers. So I think it's Fusion is doing well. It's a major contributor to our share gain and we're excited to continue the initiatives we turn into the back half of the decade.

Appreciate your time, Hal.

Thanks, Zach.

Thank you. Our next question is from the line of Chris Horvers with JPMorgan. Your line is now open. Please go ahead.

Thanks, and good morning. So I just want to talk about the weather and the storms. So can you talk about what the storms have done for your business so far and sort of what's embedded into the balance of the quarter? It seems like you're targeting about a roughly 2% comp in the fourth quarter. And then on the -- just on the margin front, you start to lap the transportation cost tailwinds as you talked about. Does the emergency response create some headwinds in gross margin that we should think about in the fourth quarter and does that DC headwind go away in SG&A? Thank you.

Oh. Hi, Chris, it's Kurt. In regards to I was taking notes on what I think there's about three points in there. There is the question on the storms. There's a question in regards to the margin on DC headwinds and or DC benefit and when does that turn in the emerging response. So let me just try to hit those things. In regards to the weather, I'll just mention Q3 first as I had mentioned some of that in prepared remarks. Leading up till about mid-September, just as an example, the business was running at a slight positive comp sales trend. And in the back two weeks, while we did see benefit like in emergency response from generators and others at the front-end of Hurricane Helene because that's one of those storms that really straddles both quarters. It was offset or more than offset by -- in that particular storm across most of the South and Southeast, just blanketed with storms. And so that dampened a bit of the overall traffic in the last week or two of September. As I mentioned, I see that more as a positive because that just defers some of the demand on the business. So both Helene and Milton have had net for the full year in Q4, a benefit to us. We'll have -- we have so many of the important weeks ahead of us. I won't quantify exactly what we expect from these storms, but generally, hurricanes have a modest level of benefit on each hurricane, and we anticipate that for Q4. Emergency response has a mixture of product, some of the bigger ticket generators lower, but has a mix of higher margins. So we do not anticipate the storm's emergency response really having an impact on margin in the fourth quarter. And yes, the distribution center been a headwind to SG&A in 2024 does start to cycle out as you get about 9 months to 12 months out. It really takes about that much time to be able to even out the inventory and be able to have the other distribution centers have a productivity offset to it. So we'll share more information on 2025 in regards to that in our January call.

Thank you. The next question is from the line of Chuck Grom with Gordon Haskett Research Advisors. Your line is now open. Please go ahead.

Hi, good morning. Thanks very much, guys. In the past on your third quarter calls, you've provided some early framework for the out year in terms of store count, margin, puts and takes, et cetera. Is there anything we should be mindful of as we build out our models for next year? And then along those lines, you have a long-term comp algo of 4% to 5%. I'm sure you don't want to underline getting to that next year, but can we think about the puts and takes over the next 12 months to 18 months on the comp front? Thank you.

Hi, Chuck. Good morning. I think on the two things I'd say as it relates to looking out into next year and beyond. One, I think we've got a very clear recipe of how we're operating our business right now in terms of, this year we increased from 70 new stores to 80 new stores, and we've talked about how we're moving to 90 new stores next year. And that is the recipe that we're planning on. We have an exciting portfolio of high-return new-store opportunities out there. We've been challenged by many of our investors to go capture that value sooner. And we're kind of moving in that direction. We talked earlier about our consistent remodel approach somewhere between 175 and 220 stores a year. If you think about that it kind of the average of that at 200 with 2,300 stores roughly right now. That means about every 10 years, we're remodeling a store, which is I think, a nice healthy run rate for a retailer. And other than that, there's no real outliers on how we're thinking about the business as we turn into next year as it relates to our long-term comp algorithm. I'd point to the same commentary we had on the last call, which is we look to return to that as quickly as possible and the two major factors impacting our doing so is inflation, deflation, and consumer spending nominally between services and goods. If you look at deflation, inflation, Kurt had some comments on that earlier and we start to lap some of that around now, and we'll continue to lap that over the next 6 months to 9 months and then start to really be through that cycle. And if we all look at the low price for corn was really middle of this year and we would -- but we also had the big dip down that we took last year starting in October. And then on goods to services, the consumer continues to have to shift a number of a good bit of their spend into services right now. If you look at whether it's rent, insurance costs, those sorts of things, I mean, services continues to outpace the spend on goods, somewhere in the range of 6 to 7 points versus, say, 1 to 2 points on goods. And you can see that kind of correspondingly into retail sales. And as I talked about in the call, we think retail sales were slightly positive in the 1%-ish, 1.5% range for Q3, our fiscal Q3 and our sales were right in line, if not slightly above that at the 1.6% range. So that's kind of how we see the macro-environment shaping up right now and what we see as we turn the corner to 2025. Thanks, Chuck.

Great. Thanks, Hal.

Thank you. The next question is from the line of Karen Short with Melius Research. Your line is now open. Please go ahead

Hi, thanks. Great to talk to you again and look forward to seeing you in December. So my question is, looking at 4Q when you look at the range of outcomes on sales and gross profit dollars and gross margins, it's pretty wide. So wondering if you could address that. And then also looking to -- so and commenting on more specifically puts and takes on 4Q on gross margins and SG&A. But then wanted to address more specifically the longer-term algo and when you think you can return to that? And I assume you'll address that at the Analyst Day, but any preliminary comments would be great.

Yes. Hi, Karen. On the long-term algo, maybe hit that one first. I very much, as I've said just a moment ago, look-forward to getting back to our long-term algo. We don't see any internal issues in terms of returning to our long-term algo. Our market continues to be incredibly favorable in terms of just the overall optics of our market, the strength of our markets, attractiveness of our markets. Our position and competitive differentiation in the market is as strong as it's ever been. We think the combination of those two absolutely in normal operating kind of circumstances lead to our long-term algo. We're very confident in our ability to return to that long-term algo and the two main things that we're watching in the context of returning to that are, as I mentioned earlier, the goods to services split on overall consumer expenditures. And then two, how inflation, deflation plays out and then that plays into our average ticket. As we've talked about in the past, our recipe is really a 50% growth based on average ticket, 50% growth based on comp transactions. The goods to services shift is much more about a transactions type of headwind. And then the inflation, deflation, obviously being an average ticket headwind. We do see that both the pressure, the headwinds on both of those dissipating into 2025. I think the question is to what degree and over what period of time through '25. And we will share more of that, a little bit of that in our Investor Day. And then certainly, you'll hear our perspective on that in our Q4 earnings call. As it relates to the range of outcomes in sales in Q4, I'll address that and then Kurt can speak to some of the gross margin ins and…

Yes, Karen, here's how we look at the gross margin and the SG&A in the fourth quarter. And I'd start by saying the all year, the business has been remarkably consistent. And so I'll refer to Q4 versus some of the highlights of Q3. We had 56 basis-points of benefit in Q3 as it was really the last quarter before we start to lap the significant benefit we started to see last year in fourth quarter on both transportation and our cost-saving and our cost-cutting initiatives. And so we'll have only a modest level of benefit remaining on transportation and cost in fourth quarter, that will for the most part likely be offset by product mix. So gross margin is relatively, give or take a bit more flattish year-over-year in Q4. And then on the SG&A side, the -- a lot of the puts and takes are similar other than in Q3, we were cycling 35 basis points benefit of a one-time depreciation. In Q4, we'll still have roughly 20 basis points, 25 basis points of pressure on the new distribution center. We anticipate a little bit more leverage on the comp sales as we anticipate positive comp sales for the fourth quarter. So you really see yourself moving in that in about a 50, 60, 65 basis points of pressure from SG&A in the fourth quarter as it's a -- it does not have as much of the one times as, say, Q3 does. So net, that does put operating margin in an unfavorable decline from year-over-year, but that's always been in our expectations for fourth quarter as we were lapping the strongest performance year-over-year.

Thank you. Hopefully, you just bring women's wranglers to your stores.

We'll make a note of that.

Thank you. The next question is from the line of Michael Lasser with UBS. Your line is now open. Please go ahead.

Good morning. Thank you so much for taking my question. My question is how one of the key debates is can Tractor Supply get back to the historic levels of 1% to 2% growth in traffic. It seems like what you're suggesting is the ability to get back to that level of traffic growth on a consistent basis is going to be macro dependent where it will be influenced by the shift from services to goods. Yet, Tractor being a more needs-based retailer that has more consistent trends in areas like consumables CUE have held up relatively well. So what specifically do you see as influencing the assortment or category performance that will improve in a more robust economic environment, more robust retail environment to drive that traffic growth? And as you see a little bit less gross margin expansion because of some of the drivers from this year stayed, would you be willing to sacrifice some gross margin in order to drive the traffic growth? Thank you very much.

Hi, Michael, thanks for the question. First-off, I'd -- maybe I'll just step back, if I look at our growth over the last five years post-COVID, which I think is the second-highest in all of retail -- major retailers out there, the key to that has been strength in both average ticket and comp transactions. So it's not -- comp transaction growth has not only been a highlight of Tractor Supply for the last 30 years, 20 years, but also in the last five. And I would say of most retailers out there, we're one of the few that have been -- that have strong positive like double-digit positive comp transaction growth over a multi-five-year period. So I'd put our transaction growth over the last five years up against anyone. Second of all, I think if you look at retail right now, overall transaction growth in retail is either flat to negative in general right now. And so when you look at our modestly positive comp transactions, you combine that with overall transactions given our new-store growth and our comp transactions, I would argue we are in the top-quartile right now of retail in terms of overall transactions. So I look at --- I'm very pleased with how we've grown our transaction last five years, how we've held those transactions and even in the context of this environment that we're in, how we're modestly positive comping transactions and then with our new stores having strong couple of points of transaction growth. Then as I look forward, I think it really does all come down to the goods-to-services shift and then our customers having a little bit more money to spend on items in our stores. And that's going to make its way into that extra half of transaction a year to them and it's also going to make its way a little bit into the units per transaction. But I think what we're seeing on our comp transactions being muted a bit is very comparable to what's happening in all the rest of retail. And I certainly believe as retail moderates back to its normal levels, rising tides will lift all boats. And those of us that continue to have positive comp transactions will continue to see stronger positive comp transactions as that occurs. Anyway, I'll just -- I'll leave it at that. Thanks, Michael.

Thank you very much.

Thank you. The next question is from the line of Steven Forbes with Guggenheim Partners. Your line is now open. Please go ahead.

Good morning. This is Julio Marquez on for Steve. Hal, curious if you could expand on how the 37 million Neighbor's Club members informed the decision to acquire Allivet. Any -- I guess, how many Neighbor's Club use an online solution for the pet pharmacy needs? And any other color you can help contextualize the opportunity there would be great. Thank you.

Yes, thanks. We are really excited about the acquisition of Allivet. I think it's a great example of kind of a tuck-in acquisition. They've been a partner to us for a few years now as our pet Rx provider. What we've observed over those few years has been best-in-class in terms of both their nationwide prescription licensing capabilities, their distribution centers and their ability to get product shipped out in 24 hours, their ability to get prescriptions approved and partner with the veterinarians, their excellent website, their strong management team and importantly also excellent financial condition. So we feel all-around. It's a great business, one that we're excited and thrilled to welcome into the Tracker Supply family and we look forward to bringing that feature of a low cost affordable, wide array of prescriptions for pets and animals to our customers. As you said, we have 37 million-plus members of our Neighbor's Club program. It's a highly engaged membership program, one that we continue to add value in and our customers continue to further and further become loyal around. And we think the combination of Allivet with our Neighbor's Club is going to just be a great mix and we look forward to over the next few years, getting the deal done, approved, closed, and then starting to bring that to our Neighbor's Club members in the ways that we've brought the additional features and benefits that we have to them. Very excited about it and more to come at our Investment Community Day on that topic on December 5th.

Great. And just a quick follow-up. Kurt, following two years of flattish comps, has there been any change to the building blocks behind that 10.10% to 10.6% long-term EBIT margin guidance, realizing productivity plays a role? But are there any margin factors there that are maybe structurally higher today than where you originally framed it?

No, really, there's not anything significant in our algorithm to attend 1 to a 10.6% and recognizing that we're going to continue to invest for the long term. The last two years, the comp sales puts pressure on our ability to leverage the SG&A and it's really been the difference. The team has just done a phenomenal job though, finding ways to offset that. And there are a number of cases on productivity in both our stores and our logistics distribution team that have just done a phenomenal job finding new opportunities for productivity. So the team has done well to be able to maintain that 10-plus operating margin in the last couple of years. So the algorithm is still intact. And Hal has mentioned all the different reasons of our expectations of being able to get back to the long-term algo and that just gives a better opportunity to avoid the pressures of SG&A. So I feel very confident with the long-term algo still at this point.

Thank you. The next question is from the line of Peter Benedict with Baird. Your line is now open. Please go ahead.

Hi, good morning, guys. Thanks for taking the question. Maybe one for Seth. Just around the big ticket strength, it certainly continues to be unique relative to most of retail. You talked about some innovation, I think some sharp pricing on these items. I'm just curious if you could expand on it. Any other factors helping here? I don't know the use of private credit has been playing a role. And how do you guys think about like replacement cycles for some of those bigger ticket categories? Is that potentially starting to tick in here? I'm just kind of curious if you expand on that a little bit. Thank you.

Yes. Hi, Peter. Thanks for the question. Just overall with big ticket, as we mentioned, we definitely are very pleased with the performance there as Q3 really was much in line with the strength of the performance as we exited Q2 and we really were able to maintain that. You know, the third quarter, it was our third consecutive quarter of big ticket growth and as you mentioned in some of the categories that we've had, whether it be like Zero-turns, Front Engine Eiders, Rec Vehicles, and a couple of other categories. I would point to a couple of things that have really differentiated us a little bit from the market, I believe. I would start with just the product lineup itself. I think the merchants have done a fantastic job of line structure in these categories where we are offering quality, high-value products across multiple brands, bringing innovation. We are working on differentiation with exclusive features and they're really built and tailored to our customer, right, and their customer needs with kind of the large animal or the large acre ownership across a lot of our customers. The next thing I would say is just some of the strategic inventory investments that Kurt mentioned earlier as well. When we exited Q2, we made sure we saw some of the strength here and we're looking at the weather patterns and we placed inventory in those -- in these categories to make sure that we can continue to maintain that as we went after it. And then the last thing I would just say is private-label credit card. Our private-label credit card momentum has been very strong, with that, our supplier base are partnering with us to continue to drive that. And when you just kind of combine those things together, whether it be the lineup itself, the value quality proposition, designing programs specific to the lifestyle of our customer, and then coupling that with things like our offerings, both with private-label credit cards and leveraging our Neighbors Club, it's really a combination of all those together that's really playing on it. Team is building 2025 right now either I think you'll see they'll continue to expand on those things and really excited about the lineup as we move into next year.

Thank you. The next question is from the line of Peter Keith with Piper Sandler. Your line is now open. Please go ahead.

Hi, thanks. Good morning, everyone. Congrats on the continued market share gains. I wanted to ask about technology. So Hal, you had referenced some greater data integrity and personalization with Neighbor's Club. I was wondering how you're leveraging technology and AI to provide those solutions and anything that we might think about going into next year that could perhaps provide some type of sales benefit.

Yes, good morning, Peter, and thanks for the question. I'd say we are infusing machine learning, data science, AI, really across the business both in our own analytics frameworks, also in leveraging our -- software providers capabilities, whether that's in things like Reflexis on inventory management or whether that's with our new CDP in terms of customer insights and personalization. And then I'm really proud that we're also building solutions internally to drive, as I've shared earlier, kind of better customer service in our stores. And whether that's through things like tractor vision, where we're upgrading our camera software and hardware technologies to be able to leverage our cameras to drive improved customer service through a variety of use cases, whether that's at the register on the apron in our garden centers or whether that's through our Hey GURA tool that we have that all of our team members are able to use to ask to get further knowledge inside of our stores when they're dealing with customers or when they just want to educate themselves. But we have a broad variety of things that we're using all really to drive improved customer service productivity with our team. Also in our distribution centers, we're doing that. We're using vision technology to be able to look at the packing of trucks, to look at left-offs of trucks to watch, to use it to manage the yard. So whether it's operationally in our DCs, whether it's for customer service in our stores or whether it's in our merchants or marketing use it for behind-the-scenes analytics and personalization. We're leveraging data science and machine learning and AI across the board. Thanks, Peter, for the question.

Thank you.

Operator, we'll have time for one more question.

Thank you, Mary Winn. Our final question comes from the line of Scot Ciccarelli with Truist. Your line is now open. Please go ahead.

Good morning, guys. Thanks for squeezing me in. First, a quick clarification. I think it might have been on Chuck's question. Are you expecting this year's same-SKU deflation to flip to same-SKU inflation in '25? And then kind of related to that, are you able to quantify to any degree the pressure on your business from the decline in farm income that we've seen because of commodity deflation? Thanks.

Hi, Scott, this is Kurt. On deflation, for the first-nine months of the year, it's generally ran in-line with our plan and expectations. We have seen a bit of a additional step-down, modest on some of the commodities. I expect Q4 to have a similar but slightly less deflationary impact than Q3. But it really looks like today, if you're trying to peg when is there a point neutrality that that's been punted out anywhere from three to six months and you will have a much better view in January on what the expectation is on 2025. All indication is we are shifting out of a deflationary environment towards an inflationary one. The timing of when that conversion flips, we first thought it would be late 2024, early 2025, that could be Q1, Q2 of next year. And then in regards to your second question, remind me again that point?

Yes, just farm income broadly has been under pressure because of commodity deflation and just trying to figure out, have you guys been able to quantify the impact on your bills? Thanks.

Yes. For years, we've looked at the farm income level in strong years and soft years. And it can have either an indirect slight halo or overhang on there and we really don't see much of a correlation to that. And as you know, I'll just point out our majority of our customers are not professional farmers. It's not their number-one source of income. And they if anything, we look sometimes at the overall market area and if there's an indirect benefit to that market area and how the non-farmers may spend. At this point, we're not really seeing anything that points to that in our business today.

All right. Well, that will get us to the top of the hour and wrap-up our Q&A for today. As always, we're available for any follow-up calls. Please be on the lookout for the invitation to our Investment Community Day in December that Hal referenced earlier and please reach-out if you need any further information. We look-forward to the event and thank you for your interest in Tractor Supply.

This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.