Thank you, Randy. Good morning, everybody, and welcome to Nashville and our city's new Omni Hotel and Music City Center for the Investor Day portion of our annual store managers sales meeting. I just attended a general session with more than 1300 store managers and 100 of our multi unit managers all of which are frontline for tractor supply and they serve our customers every day. We just came over from the convention center. And I got to must tell you that the culture of this company is unlike any I've ever been associated with and the enthusiasm of this group, you'll see that when you go over and travel to store today is at all time high.
The purpose of this annual sales meeting is to bring them together as a team. It's to teach them. It's to learn from them. It's to prepare them for the all important spring season and to inspire them with new products on our vendor trade show floor and most importantly to recognize them for all the hard work and success they've had in 2013. Now last evening, I attended a region awards dinner where we presented more than 100 awards for a job well done to those teams.
One of the great things about Tractor Supply is that we have a culture here of recognizing success of our top performers among their peers. The culture here is one of teamwork, collaboration, recognition and that supports the idea that if the team wins, we all win. Shortly after this presentation, you will have the opportunity to tour the vendor trade show floor where you'll have the chance to observe 300 plus of our most important vendors who the responsibility of 70% of our total cost of goods. These vendors have the opportunity to interface with our store managers. They show them products.
They share information. They gather feedback and they teach them how to effectively sell their merchandise. Our managers pass this knowledge along to their store teams when they return. That's what's most important. Now after my comments this morning, you will hear from our Senior VP of Store Operations, Lee Downing following Lee will be our EVP of Merchandising and Marketing, Steve Barbarick and then following Steve, Tony, our CFO, will review our financial performance and discuss our financial targets.
We're asked often by those unfamiliar with our story about who is Tractor Supply really. And I must tell you what we are really is the largest farm retailer in the United States by a long margin. We have nearly 1300 stores and we are in every state with the exception of Alaska and Utah and we anticipate opening our first store in Utah later this year. Our stores are typically located in the counties surrounding metropolitan cities across the country And many of our customers, matter of fact most of them are rural lifestyleers who share a common bond. They shop Tractor Supply to purchase the items that they need to care for their home, their land, their pets and their large animals.
They have above average household incomes and they live in markets that have a lower cost of living. They're very passionate about this lifestyle. They're do it yourselfers. They're very hardworking people and they're all financially responsible. Now in 20 13, we exceeded $5,000,000,000 in annual sales for the first time in our company's 75 year history.
But as you'll see and hear today, we feel we are just getting started. Most importantly, we continue to be a mission and values driven company and we understand that we are all stewards of our culture. In nearly every meeting and presentation, we discuss our mission and values and what they mean to us as a company. They are the foundation of who we are. It's always discussed throughout the hiring process and our mission and values dictate how we conduct ourselves every day with both our customers and our vendor community.
Our mission here is to work hard, have fun and make money by providing legendary service and great products at every day value prices. Our values are straightforward. They're easily understood. We have these words in print throughout every facility on the walls of every building and I would bet if you check with the store managers on the floor, they'll all carry this card in their pockets. These have been in place for decades and they have served us well and they are the guiding principles how we operate our company today.
Now I had the opportunity in October to celebrate our 75th anniversary at the NASDAQ opening with Tony, our Board Chairman, Cindy Janison as well as 2 former Tractor Supply Chairman and CEOs, both Joe Scarlett and Jim Wright. Much of the credit for the company's current culture, its ongoing commitment to the mission and values and its great success really belong to Joe and Jim. Their vision and leadership provided Tractor Supply with the foundation we are continuing to build upon today. In addition to celebrating our 75th anniversary, last Monday was our 20th anniversary as a publicly traded company on NASDAQ. And over the 20 year period, Tractor Supply has been one of NASDAQ's top performing stocks.
Now as a company, our primary focus is on growing profit dollars. We consider profit dollar growth to be a more accurate indicator of retail performance than simply focusing on comp store sales. To growing operating profit, our philosophy is very simple. It's a balance between managing sales, margins and expenses. We focus more on growing market share than simply gross margin rate and we will not risk share for margin rate.
We test and learn all the time. Any given time you're in our stores, you will likely see products being tested. Through testing, we stay close to our customer and we continually learn from them regarding their evolving needs. We use a process called COE, correction of error. And it's not that we mean we've made a mistake.
What it means is this, that following every ad, every event or season, we gather individuals from the cross functional departments within the company so it could be operations, marketing, merchandising, supply chain, pricing and others. We bring them together in a conference room and for several hours we discuss and debate the things that first we did well on that season or event and then secondly the things we think we can improve upon. We walked away from that meeting after discussing the particular ad or event or season and we've now developed a documented plan for the next year. This is truly how we become more efficient as a company. At Tractor, there is a pipeline full of opportunities for many years to come and we understand that we cannot execute all of them today and really don't want to because there's only so much a company can digest effectively.
And I assure you, there are numerous initiatives that Tractor Supply will execute to as we expand our store base and grow our platform on the web. Now our Tractor Supply team deserves a lot of credit for the performance detailed on this slide. Tractor Supply has delivered comparable store transaction count increases for 23 quarters. And as you can see, these annual increases have ranged from 3% to 7.4% over the past 5 years. This is clearly a result of solid execution from our teams in the stores, the merchandising group, the marketing group and the supply chain group.
These results would indicate that not only have we become more relevant to our current customers, but that many new customers are being introduced to Tractor Supply as a brand. Steve Barberk will soon share more details on our merchandising and marketing plans that will ensure that we are building on this sales momentum going forward. Now through the macro challenges of weather events, commodity price fluctuations, droughts, hurricanes, political elections, high farm incomes, low farm incomes, overall company growth and investments, etcetera, Tractor Supply has continued to deliver year over year operating margin improvements on a quarterly basis. It was only 5 years ago in 2,009 that our operating margin was just 6%. Our 2014 business plan is projecting continued year over year increases and our current interim target is now 10.5%.
We ended 2013 at 10% and our plan is to continue growing operating margin by at least 25 basis points annually. The performance displayed on this chart is a result of our balanced approach to managing our business. We are focused on growing operating profit and creating shareholder value every day. Now our company has produced solid year over year EPS growth as well on a quarterly basis for several years. This again demonstrates the results of our balanced approach to managing our business through growing sales, increasing gross margins and managing expenses effectively, all continuing to invest in growing the business for the longer term.
I want to reinforce that our strategic focus for right now has not changed. At Tractor Supply, our focus remains on 3 areas: driving growth, creating efficiencies and developing our people. We are driving growth through a number of strategic initiatives such as leveraging our customer relationship management to increase customer spending, retention and new customer acquisition. We're testing and developing new destination product categories that have the opportunity to drive incremental gross profit. We're executing on our competitive positioning strategy and we're evolving our multichannel commerce and social capabilities.
Tractor Supply is committed to creating efficiencies through being a lean organization. Through our Tractor Value System or TVS process, we continue to take waste out, cost out and we work on the effort upstream in our processes to drive efficiencies. Additionally, our company is creating efficiencies through a number of other initiatives including systems and technology, supply chain improvements, centralized purchasing, SG and A Management and environmental impact programs. At Tractor Supply, as Lee will soon talk about, it's always been about taking care of the customer and developing our people. We believe in doing the right thing, respecting others, working as a team, taking individual initiative and being accountable for our results.
Our company was founded on these values and they remain our company's guiding principles today. And as an organization, we are focused on offering the tools to enable our people to learn and grow and we embrace the culture that promotes from within the organization and we provide our people with unlimited opportunity for advancement. Now as you can see from this map, there's still a substantial amount of growth in the Northeast for tractor supply and there is still considerable growth in the South and Southwest. The upper Midwest is where we have most of our competitors and the independents sit in that green zone and growth for now will be slower there. Now as you've already heard, we've entered 3 new states in 2013 Arizona, Nevada and Wyoming and we continue to be very pleased with the performance of our new stores in the West and for the chain in total.
But further Western expansion will mean infrastructure builds. We will need to build another distribution center likely in 2015 and it will have to be in the West because today we are fulfilling these locations from as far away as our Waverly, Nebraska and Waco, Texas distribution It is simply an equation that's easy to understand. As you review the growth plan for new stores, the need for capital spending will be necessary as we move farther west. I'll use just two examples of stores that we've opened in the west, our Greeley location, which was our first store in Colorado and it's been open for less than 2 years. And the adjacent photo is one of our Sierra Vista, Arizona store that opened in October of 2013 and both of these stores are performing very well against their new store pro form a metrics.
But I'd like to remind you that we are continuing to build our infrastructure with tools and technology that better meet our customers' needs, whether they shop with us in store or online. We have made great progress over the past several years and I believe this is reflected in our performance. We also continue to believe that there is tremendous opportunity ahead to grow our overall business, while we invest in the long term sustainability of our model. And there's really 4 key areas that I'll point out here, merchandising being 1, demand planning and logistics being 2, multichannel retail In merchandising, we're constantly evolving our offerings to meet the ever changing needs of our customers. Our stores average about 15,005 100 square feet.
So it's very important we utilize the 4 wall space effectively. Our customers expect a shopping experience where they can get in and get out of our stores quickly, find what they need and they have the confidence that we'll have the products they're looking for. In the supply chain, we are investing in tools to improve the planning of our assortments and the management of our in stock levels, both at the macro and more importantly, the local level. For example, based on feedback received from our store teams this past year, we made the strategic decision to continue with several spring and summer planograms throughout many of our Southern markets. That was something new we hadn't done in the past.
Let's Our strategic focus continues in multichannel and those investments are generating positive increases in business. Our plan is to continue this with this strategy and we're taking a very much a longer term to more disciplined approach adding platform capabilities based upon a more thorough understanding of our customers' expectations and preferences as we monitor their interaction with our site. On the customer relationship management front, we're investing in several areas to more clearly identify and reach our existing and potential new customers and Steve will talk more about that in detail during his presentation. So I think it's clear that as a management team, we continue to be intensely committed intensely focused on delivering shareholder value to our investors and driving growth and creating efficiencies through developing our people. But I turn let me turn the presentation over here before I turn it over to Lee, let me take a few minutes and tell you a little bit about Lee Downing.
Lee joined the company in October of 2010 and has more than 15 years of experience in retail leadership. He is responsible for leading 19,000 plus store team members and 1300 store locations across 9 regions. These teams served our customers more than 116,000,000 times in 2013 and they are a key component to driving both repeat traffic and transactions for our stores. You will hear from Lee from time to time on our quarterly calls and I wanted to provide him today the opportunity to speak to you regarding our store operations initiative. I want to thank each of you for taking time to travel to Nashville today to learn more about our company.
And now I'll turn the presentation over to Lee Dowding, our Senior Vice President of Store Operations. Thank you. Thanks, Greg. I'm very excited this morning to be able to present to you the 4 key operations initiatives that we're working on right now. And in operations, we like to keep it simple.
So in order to do so, we came up with an acronym that really makes our stores understand what we're trying to do. And that acronym is TSC NE, and that stands for Team, Sales, Customers and Execution. This is what we talk about at every meeting. This is what we talk about when we're out in stores, and this is what we focus on. Let me start with team.
It's all about the people. As Greg said, and we say in meetings all the time, it's the who before the what. Our team is the most important thing that we focus on. We start with hiring our customers. It's what makes us different.
It's what makes our customers understand. When they come into shop, they talk to our team and they understand what they're looking for because they are our customer. They have relationships in the community. They're pre established relationships, and they understand exactly how to upsell that customer because they know what they need. 2nd, we reward success.
Every team member in the store is eligible for bonus. They have a monthly sales goal that they talk about every day. The manager will meet with them and huddle and say, here's what we have to do today and the team gets behind that. On average over the past 3 years, our store teams have achieved their sales bonus 8 out of 12 months of the year. And over the past 3 years, as we talk to our store managers, we have seen them achieve approximately 80% of their bonus on the year.
Team retention. Retention. Store manager turnover is in the mid teens and among the best in retail. Our overall team member turnover, which includes the entire team, is in the low 30 percent, which again, best in retail. Last night, I was at the same dinner that Greg was, and it was very exciting as we sat in front of the group and we had service awards.
Greg talked about over 100 profit awards. In the room I was in when we did service awards, we had 15 members of the team that had been with the company more than 5 years. So this morning, I thought, well, gosh, I'm curious just to know exactly how many team members and store managers that we have that have been with the company over 5 years. Over 6.61 store managers out of our 1300 100 stores have been with the company over 5 years. Retention is extraordinarily important to us.
And when somebody comes to Tractor Supply, they stay. They stay because we develop people. We develop people from inside the organization. 70% of our promotions come from within. The reason for that is it maintains our culture.
As we talk and we meet with them, they understand where they came from, they understand where we're going and they have a relationship with all those around them. And it's just a way for us to understand how we're going to move forward. Next, I'll talk about sales. Sales in the stores, Steve delivers the product and in stores, it's about the know how. It's what do stores know and how can they communicate to the customers.
And we start that with product knowledge training and training programs. It's about not only that we teach them monthly that we have training categories, but it's that our team teaches each other. They teach each other about farming. They teach each other about welding and they teach each other about things that they may not know when they first come to work there. So we have cross training in all areas.
There's frequent communication. We encourage feedback. Greg and Steve and I get e mails from stores almost daily, giving us ideas, talking to us about their feedback. We have a manager advisory board and a district manager advisory board that come in quarterly, meet with our teams and give feedback on all the things that they see happening in the stores. Steve and his team have town hall meetings.
They go out into the field. They meet to talk about merchandise. They get feedback from the stores about what we can do better. And as we're attending this week, we have the semi annual sales meetings. It's an exciting opportunity for all the store managers to interact with us and to interact with the vendors.
So we have over 300 vendors that they can talk to, find out about new products and understand how they're going to sell those products. We talk about success. As you walk the sales floor today, you'll see that many of the vendors list the top 10, top 15 or top 20 stores in that particular product. Stores come to us and talk to us about, hey, do you see us? We're in the top 20, and it's very exciting time.
It's all about a sales culture. We complete the project. We offer additional items, and we trust that the team and the customer are communicating to drive that next sale. The customer. We do whatever it takes to make sure our customers are happy.
And the way we do that is we GURAL the customer. Many of you probably heard us say this before, but I'll explain it a little bit. GURAS stands for greet, uncover, recommend and ask. And it's what our team does when the customers come in and they look for products. And you may ask what does this mean besides it's a chant at our meeting.
But Guru Raw, actually, when we talk to the team, we talk about it actually does drive sales. When we track this measure and we see what the stores do, if they get all 4 of these metrics, it raises their average ticket by 20%. So when we get stores to GuruRaleigh customer, we drive additional sales. We develop customer relationships. We talk all the time about the difference in Tractor Supply and other retailers is the relationship.
We are not transaction based. We are relationship based. When someone comes to Tractor Supply, they are coming to see Bill or John or Carrie or whoever it may be in the store. It's not about just coming to get their product. We talk to store managers about learning a customer's name a week and more importantly, we need to learn their dog's name.
If we know that, we've got them for life. We share success stories. We recognize our teams. In the back rooms, we have special success boards where we put up success stories for our teams. It doesn't have to be big.
It can be as small as they did a great job yesterday working in the clothing department and they helped an extra customer. So it can be small or it can be large. And we really get actionable feedback. We have a third party vendor that tracks our customer loyalty scores, and they've done so for 7 years. We're consistently around 80% on highly satisfied customers.
That has improved over all the 7 years. And today, we believe that we still have an opportunity to improve. What a highly satisfied customer does is they'll drive by the competitor to get to us. And that's what we encourage our teams to do is find highly satisfied customers. Last is execution.
Execution is important here at Tractor Supply because we've got to make sure that we're consistent across the country. When someone shops in California and they shop in Maine, we want them to see a very consistent store. It may have local opportunities. They may be able to find certain products they want, but we want them to get the same feel that they're in a Tractor supply. We have consistent store processes.
In order to do that, we utilize CVS. As we move freight, as we clean the store, as we set our circulars, we have specific processes that stores use to do that. Our leadership visits. All of this group, our RVPs and our district managers all visit stores very frequently. But when we visit stores, probably different than most companies, we are actually asking for feedback and that's most of what the visit is about.
It's not necessarily about assessing the store because the store manager is capable of doing that. It's about finding feedback and delivering it back to the store sports center. And last, we maintain store standards because we measure them. We measure our stores very simply, just like in school. You get an A, a B, a C, a D or an F.
And it is all about people, cleanliness of the store in stock and the customer service. So we make it very simple for stores. When we leave, the store manager, the district manager and any of us all agree on how the store has been measured. And it's all about improving. So with that, our store standards and our ability to execute is all driven by the fact Steve is going to deliver us products.
So I'm going to get Steve up here to talk about that. Thank you, Lee. I guess, it was about a year ago, I had a chance to get in front of this group and talk about our sales and margin drivers. And I'm going to go through and do a bit of a refresher on that. And then I'm going to turn to marketing and go over what our marketing initiatives are and kind of introduce you to that as well.
Let's get grounded first in our merchandising principles. And this is what we stayed true to. 1st, we're going to be the most dependable supplier of basic maintenance needs. We're going to differentiate ourselves through our products and the brands that we carry in our stores and online. We will offer value that exceeds our customers' expectations.
We're going to excite the customer with a treasure hunt experience of new products, and we're going to maintain commitment to supporting the out here lifestyle and customer. So as a reminder, these were the merchandising initiatives we went through last year, Q being consumable, usable, edible. We continue to expand our assortments here. We're doing more investment in inventory and we're being priced right locally and we continue to gain market share. Localization.
Our customers don't care that we have 1300 stores. What they care about is the 1 store in their community, the brands they want, the product they want, when they want it. Driveisle merchandising. Again, making that center court more productive, looking at all the events that we have, and you'll see these when you go out to Hendersonville today, the Chick Days event, the Garden event and other events that we put out there continue to drive comp store sales because there's new products in these events. And then finally, new products.
At Tractor Supply, it's about a culture of risk taking and a philosophy of failing early, often and cheaply. We have a pipeline of opportunities and a structured test program that allows us to roll out new programs. And at Tractor Supply, it is not about a silver bullet, but rather 1,000 BBs that will continue to drive comp store sales. In terms of gross margin, we continue to see a real benefit in our pricing team being more integrated in with our merchants. We're making progress when it comes to price optimization.
We've recently extended our contract with our 3rd party in Revionix and we will be introducing a clearance module in the back half of twenty fourteen, which should give us value in 2015 and we continue to see upside in our promotional pricing. At Tractor Supply Company, we will always be a branded house, but we will augment our assortments with exclusive brands. Exclusive brands this past year grew. They are now 30% of our sales or 1 point $6,000,000,000 at retail. In terms of strategic sourcing, we have domestic and we have international.
On the domestic front, our merchants are working hard to find multiple suppliers to support us in our exclusive brands, which are bringing value in leveraging our cost and being a more dependable supplier. Internationally, we grew our imports by 30% this past year. And then finally, inventory management. It all starts with the allocation of product. Our planning team is now more seasoned.
And then as an organization, we're embracing the idea of getting $0.60 on a dollar on the forefront rather than a quarter on dollar after the season. So we're taking markdowns earlier and that's really benefiting us. So let's talk about marketing. And I'm going to spend a little bit more time here since this is relatively new to this group. There's 4 key drivers for us in the marketing initiatives we have.
The first is increasing our sales to our existing customers. This is really important. At the same time, we want to expand our customer base. We differentiate through how we're local or that community connection that we have. And then finally, it's a matter of building the Tractor Supply brand.
So let's talk about each one of these. 1st, driving traffic with existing customers. We still believe there's more opportunity here. When you look at multichannel and digital marketing, it's a matter of content online so our existing customers can come and do research before they come into our stores to purchase product. We also believe there's an opportunity as we expand the long tailed assortments that we have today and finally, e mailing our existing customers to bring them back to the web or into our stores.
When it comes to advertising distribution, we alter our ad distribution based on the content of our circulars or direct mail. And then finally, customer relations management. This slide shows a funnel, and it starts with gathering data. Our objective when it comes to CRM is to leverage a deep understanding of our customers, who they are, how they shop and how they want to interact with TSC to deliver personalized and relevant communications that will increase their loyalty to Tractor Supply Company. Again, first, it's a matter of collecting the data.
We do so through attribution or purchase behavior, shopping behavior, contact information and then getting information like profile, lifestyle and preference data. Today, we're collecting zip codes, phone numbers and we have tax exempt numbers. The future is an affinity program where customers opt in to be part of a Neighbor's Club. Once we've got that information, it falls into a database. We do analytics on it.
We segment those customers by recency or frequency, could be product preference. We do customer research. And today, that segmentation is based upon store purchase behavior. The future will be segmented in a multidimensional, it will be behavior based and it will be omnichannel. It's one thing to have the data and it's another thing to make it actionable and that's where personalized communications come in.
This is the action step. These customers want relevant content. They want it to be dynamic versus static communication. They want it to be all through all channels, whether it be through stores, tractorsupplydot com, social, mobile or the customer call center. Today, a lot of that's being done through direct mail and e mail.
The future will be triggered communications. It will be 1 on 1 messaging across all channels in real time. What that will result in is increased customer retention and loyalty. Our customer profile today is broken down into 3 buckets. We have the hobby farmer, the lifestyleer and business.
A hobby farmer tends to spend more at Tractor Supply. The ticket is typically larger. There's a lower household penetration. They tend to buy large animal feed, hardware, lubricants and pet food. And generally, they're older, they own more land, they live further from our stores and they're destination shoppers.
This is the core of our base. The Lifestyleer, and this is an exciting segment here, we believe continues to grow. They spend less, but there's more of them. They tend to buy things like pet food, pet supplies, hardware, birdseed. They tend to be younger, own less land, live closer to our stores, and they're a convenient and When it comes to where they're located, they tend to be closer to our stores and they tend to be a bit more of a convenient shopper.
And that's just some insights into our existing customers. But it's one thing to talk about our existing customers, another thing to talk about new customers and growing that base. It's important that as we grow that base that we don't disenfranchise our core customer or dilute the value of the Tractor Supply brand. We'll do this in a couple of ways. We'll market broad appeal categories such as Pet, lawn and garden, heating and apparel.
We'll use prospect marketing, which I'll talk about here in a moment. And we'll drive trial with our existing vehicles. So here are some existing vehicles, and I wanted to talk about a couple of them. The first here is a pet insert, okay? Now this pet insert includes strong national brands.
And what we've done with this insert is put it through shared mail and put it through newspaper, and we did it between 5 10 miles around our stores. So again, trying to attract new customers in as a convenience play. When it comes to lawn and garden, what you'll find there is we'll tend to buy broad search words on the web. Our new mover program introduces the Tractor Supply brand to customers that have just moved into our communities. Another exciting one and one that we tested this past year is we partnered with a third party mobile vet service that comes in and takes care of customers with animals.
And it worked incredibly well. We think we brought in some new customers as well, and we'll be rolling that out to more stores this coming year. And then finally, digital ads will help us bring in new customers. At Trekker Supply Company, though, it's about being local. And this is a real differentiator for us.
Being a small box retailer that hires our customer, recognizes the value of local assortments and serves a defined lifestyle gives us a competitive advantage in the markets that we're in. Our support of the 4H and FFA, these are current future customers as well as future team members. Our sponsorships of local fairs and community events makes us somewhat unique. And finally, we empower our stores by giving them a budget and allowing them to spend money in the communities that they serve. Just a little bit about 4H.
They're focused on elementary and middle school youth. There's 6,300,000 active members in the communities that we serve. In this past year, our store operations team raised over $1,000,000 to support 4H. When it comes to the SFA, they're focused on the next tier of students, high schoolers. There's approximately 600,000 of these members that we serve.
And last year, we raised about $360,000 to put 284 of these 4 H'ers through college as part of a fund that we raised. What's really remarkable here is the dollars that we're raising are coming from our customers and back to those communities, not just coming from Tractor Supply Company. And then finally, it's about awareness. In Tractor Supply being the authority for the lifestyle and our customers who live life out here as well as developing exclusive brands that support that lifestyle. We want to be all things to all people when it comes to their needs regarding the lifestyle that they live.
So online, for example, if you want to know anything about chickens, go online today and it will tell you what kind of chicken breed you should have, what to feed them, how to keep them alive and keep them warm and how to breed them. We do the same thing with a lot of other categories that are important to our customer. So it's not a matter of just putting a lot of categories online. We look for those categories that most support the lifestyle that we serve. When it comes to exclusive brand offerings, you can see the portfolio up here.
Our strategic approach here is about developing these brands to support that lifestyle. It's about offering high quality and differentiated products that builds loyalty to the Tractor Supply brand. So we've got a lot going on the sales side, good work happening on the margin front in a way to talk to our existing customers as well as new customers and build loyalty long term with Tractor Supply. At this time, I'd like to bring Tony Credell to the front. Thanks, Steve.
All right, I'll tell you that Steve and Lee do a terrific job. They make my job very, very simple. So I like just to be able to paint a picture with these numbers that they deliver to me. So take a quick look at 2013 and to recap just exactly how they did. We opened up 102 stores.
We grew our comp sales at 4.8% and that's on top of the prior year of 5.3%. And we also went through a lot of different weather trends, which I really believe shows that we can adjust, we can react, we can deliver in different types of environments and We also increased gross margin 40 basis points. We've talked a lot about our initiatives that we've had over the last 2 to 3 years. Steve continues to push through those and we get tremendous results and we still believe there's a long runway ahead of us there. SG and A improved by 20 basis points based on that strong comp.
We drove a lot of leverage there. And again, we're very focused on the bottom line and making sure that we become much more efficient as an organization and drive that EPS growth. It gave us the opportunity to return $68,500,000 in dividends to our shareholders as well as the opportunity to repurchase $129,000,000 in stock. That all translates to increase in EPS of over 22%. This is the 4th straight year that we've topped that number, 22% increase.
So looking ahead at 2014, Steve's talked a lot about sales initiatives he has and gross margin. So I want to touch on just a few of the boxes on this chart. First, the store growth again will be over 100 new store units. Our forecast is at 102 to 100 and 6 new units. 1 of the key boxes here though is the store traffic.
We've been able to grow traffic increase at 23 consecutive quarters and we believe we can continue to that trend. Steve has the initiatives in place. We have the basic products that our folks need and use out in the rural lifestyle. And we believe that that will continue to drive traffic. And when we get them into the store, I know that Lee's team is going to be able to work with them, they'll bura them and they'll make that sale.
So we can continue to drive a strong comp store sales number. Deflation, we talked a little bit about on a conference call that we anticipate a little deflation this year. We're looking at some flat to potentially 100 basis points of deflation. Last year, we had 70 points of inflation. So there's a potential swing of about 170 basis points.
So I'd like to delve into that in a little bit more detail on the next slide. As we turn over to margin, we have the initiatives that are working. We look at inventory management. We have price management, strategic sourcing and we continue to drive down markdowns. And that on a quarterly basis as we manage that continue to drive our gross margin improvement.
One of the other boxes I'd like to touch on is really the mix headwind. In the past, as we've grown our basic Q products, we know that they have a below average gross margin below chain average gross margin and they also require some additional freight. What we've seen over the past 2 years is that headwind has started to decrease. And that has a lot to do with as we've been able to price manage these queue items, the gross margin starts to creep a little bit higher and gets much closer to our chain average. So the mix headwind has moderated.
When we were at generally around 25 basis points of headwind, now we've seen and we have to make go forward to be around 10 basis points to 15 basis points. So there's a real positive improvement there as well. I want to take a little time and talk about SG and A. Each year as we look forward, we will make specific callouts that we see that will be impacting our performance during the course of the year. So I wanted to clarify, in the top box, when we talk about initiatives and technology and building that on various initiatives throughout the last at least 8 years that I've been there.
And we believe that we can drive those initiatives and we can support those initiatives through our earnings power in the P and L. And so we believe that it's basically those initiatives on an ongoing basis are embedded in our P and L and the way that we at funding those initiatives. Now when we look at something like this, the store support center and the new building that we're building so that we can consolidate our 3 leases. That's a special call out for 2014. But again, when we look at the capital side of that, the focus really is on the long term, because we believe and is a very good use of capital.
The impact in 2014 is not necessarily building the transition costs that are involved in moving us to that facility and then the lease exit costs. So that's the call out when it comes to that the store support center, not necessarily building the infrastructure and incurring additional carry for the next several years, we believe that's a positive. It's really the focus is on the transition cost. Then we step down to DC capacity. And the way we look at the capital relative to the distribution centers is that we know we have to build out that infrastructure.
But as we continue to move west, we need to become more efficient. So there is a potential to have some drag over a period of time as we continue to either upgrade our Northeast facility, as we brought on our Southeast distribution center this year and or as we expand out into the Southwest and eventually into the Northwest United States. However, we know again long term great use of capital, it will make us more efficient. And then the last call out is the Affordable Care Act. That's something that obviously is new.
It's in its initial year. But as we move forward into the following years, again, it becomes embedded into our cost structure. So we believe that we can drive these initiatives and fund these initiatives as we continue to grow our EPS in the mid teens. So I wanted to touch briefly on managing commodity expense. As I mentioned earlier, we expect to have some slight deflation during the course of this year.
And that has we've adjusted our comp sales accordingly. And it's really a very simple process. If in an inflationary time, that will become a tailwind for our comp sales. At the same time, it becomes a headwind for the gross margin rate. As we enter into a period where we have deflation, it of course will be a negative to our comp sales, but at the same time it will be a positive impact to our gross margin So we've had in place, we've had processes to manage our pricing effectively.
And we've been able to prove this out as in 1,009 and the tail end of 2,009 Q4, we experienced 5 quarters of deflation that ranged anywhere from 20 basis points to 250 basis points and we managed to do that very effectively. And in fact, I would represent that we are in a better position now to manage through any pricing changes, because we have a much more mature team and we have a pricing tool in place that gives us the ability to better manage those prices. Every quarter has actually ranged between about 6.2% to 7.7%. So again, we've been able to manage through inflationary periods and deflationary periods with the business. And the key is that we are bottom line oriented.
So it's not a matter of whether it's the comp sales or the gross margin rate. It's what how are we going to translate that to the bottom line? And as long as we stay focused on that, we can continue to drive results. So the financial engine. This is really the basis in which we look at driving the business, the financial returns and rewarding the shareholders.
Very simple model. We've talked about this in the past. The first piston in the engine sales. And we can drive that 1st with unit growth. So we have our 8% unit growth that again we have been able to demonstrate over the past several years that we can grow at that rate without having any significant impact to our business.
So we're very comfortable with an 8% growth rate. Comp sales, we have the initiatives in place. Stephen's talked about those. We feel we can continue to drive that engine in the sales piston. That translates into profitability.
Obviously, sales growth is one of the pistons as well as improving gross margin. And again, as Steve has mentioned, we have a lot of headway as we continue on with our initiatives on the gross margin front. And then we continue to manage SG and A. As much as we need to build our infrastructure, we do that in a very strategic method. And every one of our initiatives is tied back to 1 of to our strategic planning.
And we tie the capital to each one of that and we allocate in a very efficient manner. So we'll continue to watch the expenses and manage those expenses as tightly as possible. So that will generate our cash flow. 1st and foremost, we need to make sure we have the right merchandise to our customers. So we constantly are investing in inventory.
At the same time, we invest in the tools to manage that inventory properly and we've been able to increase churns 6 of the 8 years that I've been here. And the last 5 years, we've been able to increase our churns every year. Then when it comes to the expense management we talked about, but what's critical here is then we're going to take some of this cash we're going to reinvest it back in the operations. And you've seen that over the years. It might be an infrastructure, it might be initiatives, but we're going to be doing those things that we can continue to drive sales and continue to become a more efficient, continuously improving organization, driving profitability.
So bottom line is, we're going to be able to have significant cash available for our shareholders to return in forms of dividend and in share repurchase. And of course, driving the share performance will be our EPS growth. So let's take a look at the free cash flow. This is very consistent with what we discussed last year at this time. So our model seems to be working very well.
On an operating cash flow basis, we anticipate over the next 4 years to have $2,200,000 in cash flow. As we talked about in capital expenditures, we're trying to maintain CapEx expenditures, CapEx at $250,000,000 a year. We had targeted this year to be around $240,000,000 to $250,000,000 as well. However, we came in actually at $220,000,000 And what we believe is as we manage that CapEx to $250,000,000 and get that into our run rate, we'll again be able to start to leverage that depreciation runoff. So but net bottom line, free cash flow, we're looking at $1,200,000,000 of free cash flow that will be available to return to our shareholders.
So when we look at the capital deployment and the $250,000,000 annually, first, we focus on growth. We are a growth retailer and there are not many, if any, hardline retailers that are growing at 8 in our stores and updating those stores. Again, I believe that we have that in our run rate today. So we'll look at technology and improving the technology. We continue to invest in loss prevention, EAS, camera systems to reduce shrink in the stores.
And we also are investing in energy management. So we're looking at the lighting in the stores as well as some solar power on some of our stores. So we'll continue to make investments, but we believe that there'll be investments that will benefit our stores and make us more efficient as we move forward in the future. And then again, we look at the infrastructure and we've talked about infrastructure, the store support center, the distribution network and technology. And under the technology caption, we're really looking at initiatives such as the multi channel CRM that Steve talked about, demand planning.
So again, as we make these investments, future. So once we invest in our growth, we look at the remaining cash flow and we want to be able to return that to our shareholders. And we have a very disciplined approach and it's a very balanced approach. So we first we look at the dividend. Right now, we're returning $0.13 per share on a quarterly basis.
Our target is to have a 20% to 25% payout ratio. And so that is our goal and we are very close within that range. The other key is we want to be a dividend grower. And this is where a balance takes place, where we need to make sure that people first and foremost know that we are a growth retailer. But at the same time, we want to be able to grow that dividend.
And our target is to grow at 15% to 20%. Now we've exceeded those numbers the past 2 years. But again, we believe that we can, on a sustained basis, grow our dividend 15% to 20%. And then on the share repurchase. The share repurchase is really the balancing piece in our allocation.
And we have targets there. And again, it forces us to be very disciplined in how we look at capital and how we return shareholder value and create shareholder value. Now this is a very critical aspect. And with yesterday's announcement of a $1,000,000,000 increase in our authorization for the share repurchase, basically doubling our share repurchase program to $2,000,000,000 It's very obvious that this is a critical element in what we believe in generating shareholder value and creating that shareholder value and returning it to the shareholders. So our targets are to be at 40% to 45% of operating cash flow.
So that is our target as far as share repurchase. And that looking at our free cash flow model that can range between $170,000,000 to $290,000,000 annually. Now, as we've talked in the past, we use a matrix approach during our restricted trading periods. And so we'll set a target based on the intrinsic based on our calculation of the intrinsic value of the stock. So there can be some volatility as far as how the program repurchases.
But I can assure you that as the stock dips at all from our intrinsic value, the matrix generates much more significant buys relative to the intrinsic value that we set. So we want to be in the marketplace. It is our goal to a great way to reward our shareholders. So how we've done? I think when you look at the numbers from 2,008 to 2013 on a compound annual growth rate, stores have increased 8.3% annually.
Sales have increased 11.4% annually. Net income, the CAGR is 24.9% and split adjusted EPS has grown at 26.4%. So again, we believe that the programs that we have in place that are very again disciplined, focused, tied to a strategy, we believe returns significant results and in turn significant shareholder value. So as far as our growth targets, we again believe that they are very, very compelling. Store growth at 8%.
Comp store sales, we believe will range between 3% to 5% on a long term basis. And obviously, we'll adjust that guidance based on the impact on inflation as we did this year. We have a target of improving operating margin at 25 basis points. And again, we believe that's achievable. This year's range that we provided was 20 to 30 basis points.
On a long term basis, we want to be able to deliver 25 basis points of operating margin improvement. We want to continue to invest and grow in the business and we talked about sort of maintaining at that $250,000,000 CapEx investment. And then that provides us the ability to return cash to the shareholders through the dividend and the share repurchase. And that takes us to our target goal of growing EPS in the mid teens. So looking at reasons to invest in Tractor Supply, we clearly are a growth company in a very unique niche with a winning strategy.
And again, very proven over the past several years. There's a lot of passion, a lot of rigor. Hopefully, when you're out on the floor today on the trade show floor, you'll see that energy not only just with our store management, but also with our vendors. We have key initiatives that are in place. They're working.
They are they have supported our business over the last several years. And again, we feel that it's a long runway and we can continue to drive sales, drive gross margin improvement and be able to manage those investments. And then, we believe that we have a defined capital allocation strategy. We have capital allocation process tied to our strategic initiatives and we have very specific goals as far as our dividend and our share repurchase program and how we want to be able to create value for our shareholders and return to them. So with that, that will conclude our webcast portion of our presentation today.