Tractor Supply NASDAQ: TSCO reported third-quarter net sales growth of 5.1% to $3.91 billion, as comparable sales rose 0.4% and sales trends improved through the quarter. The company said momentum continued into October, supported by stronger transaction trends, gains in digital sales and customer response to investments in everyday value.
Diluted earnings per share were $0.43 for the quarter. Operating income totaled $307.7 million, producing an operating margin of approximately 7.9%. Chief Executive Officer Hal Lawton said the company is focused on improving comparable sales, restoring profitability and refining its investment priorities following a period of significant capital spending.
Sales Trends Improved Through Quarter
Comparable sales increased 0.4% in the third quarter, on top of 3.9% comparable growth a year earlier. Average ticket rose 0.7%, while transactions declined 0.3%. Lawton said transaction trends improved over the course of the quarter, with comparable sales moving from a decline of less than 1% in July to modest growth in August and solid growth in September.
The stronger finish extended into October. Lawton said the company was posting positive comparable transactions and positive comparable sales during the first three and a half weeks of the fourth quarter. He characterized weather conditions as broadly neutral and attributed the performance primarily to market-share gains and operational initiatives rather than external tailwinds.
Sales strength was led by wildlife supplies, equine and livestock, truck, tool and hardware, and seasonal products. The company’s consumable, usable and edible categories also accelerated during the quarter, according to Chief Financial Officer Kurt Barton. Digital sales rose approximately 16%, with growth in traffic and conversion.
Big-ticket categories and companion animal products remained softer, though the company said pet trends improved sequentially. Companion animal comparable sales moved from roughly negative 4% in the first quarter to negative 3% in the second quarter and negative 2% in the third quarter. Including new stores, Allivet and VIP Petcare, total pet sales grew 5%.
Value Investments and Pet Initiatives
Lawton said Tractor Supply expects about $100 million in tariff refunds during 2026 and plans to invest roughly 40% of that benefit in customer value, with the remainder helping offset higher freight costs. The company has concentrated price investments on approximately 50 everyday-essential products.
Management said those products generated strong unit growth and contributed to higher customer price perception. Chief Merchant Seth Estep said the price investments were increasing transactions, units per transaction and broader basket spending rather than encouraging customers to purchase only discounted items.
The company said it will continue emphasizing price competitiveness while selectively raising prices in response to higher costs. Lawton said the retail market has acted “very rationally” as Tractor Supply has begun making pricing adjustments.
In pet, the company is expanding Freshpet distribution and raised its year-end rollout target to about 1,000 stores from more than 700 stores. Estep said about 40% of customers purchasing Freshpet were new or reactivated pet customers at Tractor Supply. The company also reported triple-digit growth in its subscription business and said Allivet has been integrated as the prescription fulfillment platform for VIP Petcare.
Margins Pressured by Transportation Costs
Gross profit increased 2.6% to $1.42 billion, while gross margin declined about 90 basis points from a year earlier to approximately 36.4%. Barton said higher fuel costs, carrier rates and investments in price value were the largest pressures. Tariff-related benefits partially offset those costs.
The company recognized about $70 million of tariff refund benefits in gross margin during the second quarter and $15 million during the third quarter, with another $15 million expected in the fourth quarter. Tractor Supply expects fourth-quarter gross margin to be down modestly year over year, with Barton citing a base-case range of roughly 10 to 30 basis points lower.
Management expects the new distribution center in Nampa, Idaho, to provide approximately 15 to 20 basis points of gross-margin benefit beginning in the fourth quarter. The facility created 15 basis points of startup costs in third-quarter SG&A, however.
SG&A expenses totaled approximately $1.12 billion, or 28.6% of sales, compared with 28.1% a year earlier. The increase reflected fixed-cost deleverage tied to lower comparable sales and Nampa startup costs, partly offset by productivity initiatives, lower incentive compensation and sale-leaseback benefits.
Cost Actions and 2027 Planning
Lawton said Tractor Supply is not comfortable operating below a 9% operating margin and is pursuing measures intended to restore margins above that level over time. The company expects renegotiated vendor-support agreements to generate more than $50 million in annualized benefits next year and is targeting more than $75 million in additional annual SG&A reductions over 2027 and 2028.
Those reductions are expected to come from completed Petsense closures, benefits-program changes, store productivity initiatives, supply-chain efficiencies, corporate cost actions and technology and process improvements. Management said the $75 million target is incremental to the operating-margin leverage it expects when comparable sales exceed roughly 2%.
The company also expects depreciation growth to moderate to the mid-single digits or lower in 2027 following several years of elevated investment. Capital expenditures are expected to fall below 4% of sales in 2027 and beyond.
For 2026, Tractor Supply reaffirmed its guidance and said it expects positive comparable sales in the fourth quarter, while noting uncertainty around weather, discretionary spending and large-ticket purchases. It now expects net capital expenditures of $675 million to $700 million and share repurchases of $425 million to $450 million.
Looking ahead, the company plans to moderate 2027 new-store openings to approximately 85 to 90 locations, calling the change a capital-allocation decision rather than a change in its long-term view of a 3,200-site opportunity. It also plans to use a more flexible, lower-capital seasonal garden center format and expand its outdoor recreation and wildlife supplies program to a meaningful number of stores by the end of next year.
About Tractor Supply (NASDAQ:TSCO)
Tractor Supply Company NASDAQ: TSCO is a specialty retailer serving the needs of farmers, ranchers, hobby farmers, pet owners, gardeners and other rural lifestyle customers. The company operates under the Tractor Supply banner and focuses on products that support everyday rural living, land maintenance and animal care.
Its merchandise includes livestock and pet feed, animal health and care products, fencing, hardware, tools, power equipment, lawn and garden supplies, work clothing, footwear, automotive products and seasonal goods.
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