Earnings call transcript: Tractor Supply’s Q3 2025 beats EPS forecast, stock dips

Tractor Supply Company (TSCO) reported its third-quarter earnings for 2025, surpassing expectations with an EPS of $0.49 compared to the forecasted $0.48. Despite this, the company’s stock fell 2.97% in pre-market trading to $53.20. Revenue for the quarter aligned with forecasts at $3.72 billion, marking a 7.2% increase from the previous year. The company also reported a notable 3.9% rise in comparable store sales. According to InvestingPro analysis, Tractor Supply maintains a "GOOD" financial health score, though current valuations suggest the stock may be trading above its Fair Value.

Key Takeaways

• EPS exceeded expectations at $0.49, compared to the forecast of $0.48.
• Revenue matched forecasts at $3.72 billion, reflecting a 7.2% year-over-year growth.
• Stock price decreased by 2.97% in pre-market trading.
• Tractor Supply opened 29 new stores in Q3, expanding its footprint.
• The company anticipates net sales growth of 4.6% to 5.6% for fiscal 2025.

Company Performance

Tractor Supply demonstrated robust performance in Q3 2025, with net sales reaching a record $3.72 billion, a 7.2% increase from the previous year. The company maintained its leadership in the rural retail sector, driven by strong customer loyalty and strategic expansions. Comparable store sales grew by 3.9%, supported by a 2.7% increase in transactions and a 1.2% rise in average ticket size.

Financial Highlights

• Revenue: $3.72 billion, up 7.2% year-over-year.
• Earnings per share: $0.49, up from $0.45 in the previous year.
• Gross margin improved by 15 basis points to 37.4%.
• Capital return to shareholders exceeded $600 million year-to-date.

Earnings vs. Forecast

Tractor Supply’s actual EPS of $0.49 surpassed the forecast of $0.48 by 2.08%, while revenue matched expectations at $3.72 billion. This marks a consistent performance with a slight positive surprise in EPS, contributing to the company’s steady growth trajectory.

Market Reaction

Despite the earnings beat, Tractor Supply’s stock fell 2.97% in pre-market trading to $53.20. This decline could be attributed to broader market trends or investor concerns about future growth prospects. With a beta of 0.72 and historically low price volatility (InvestingPro Tip), the stock typically demonstrates more stability than the broader market. The stock remains within its 52-week range, with a high of $63.99 and a low of $46.85. Get exclusive access to detailed stock analysis and Fair Value calculations with a InvestingPro subscription.

Outlook & Guidance

For fiscal 2025, Tractor Supply projects net sales growth between 4.6% and 5.6%. The company plans to open 100 new stores in 2026 and anticipates maintaining transaction strength. It expects a normalized P&L year with potential operating margin improvements.

Executive Commentary

CEO Hal Lawton emphasized consumer resilience, stating, "Our consumer remains strong, resilient." CFO Kurt Barton projected a more normalized year for 2026, while another executive highlighted the company’s early stages in retail media, saying, "We’re in the first inning of retail media."

Risks and Challenges

• Supply chain disruptions could impact inventory levels.
• Economic uncertainties may affect consumer spending.
• Competitive pressures in the rural retail market.
• Tariff impacts on imported goods.
• Dependence on seasonal product performance.

Q&A

During the earnings call, analysts inquired about the direct sales initiative, which is generating $200,000 in weekly sales. Other topics included the strategic management of tariff impacts and the integration of AI across enterprise functions.

The earnings call provided a comprehensive overview of Tractor Supply’s performance and strategic direction, highlighting both achievements and areas of focus for future growth.

Full transcript - Tractor Supply Company (TSCO) Q3 2025:

Elisa, Conference Call Operator: Good morning, ladies and gentlemen, and welcome to Tractor Supply Company’s conference call to discuss third quarter 2025 results. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. We ask that all participants limit themselves to one question and return to the queue for additional questions. Please note that the queue for our question and answer session did not open until the start of this call. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Tractor Supply Company. As a reminder, this call is being recorded. I would now like to introduce your host for today’s call, Mary Winn Pilkington, Senior Vice President of Investor and Public Relations for Tractor Supply Company. Mary Winn, please go ahead.

Mary Winn Pilkington, Senior Vice President of Investor and Public Relations, Tractor Supply Company: Thank you, Elisa. Good morning, everyone. We appreciate your time and participation in today’s call. On the call today, participating in our prepared remarks are Hal Lawton, our Chief Executive Officer, and Kurt Barton, our CFO. We will also have Seth Estep, Rob Mills, John Ordus, and Colin Yankee join the call for the question and answer portion. Following our prepared remarks, we will open the floor for questions. Please note that a supplemental slide presentation has been made 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 risk and uncertainties, including the future operating and financial performance of the company. In many cases, these risks and uncertainties are beyond our control.

Although the company believes the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct, and actual results may differ materially from expectations. Important risk factors that could cause actual results to differ materially from those reflected in the forward-looking statements are included at the end of the press release issued today and in the company’s filings with the Securities and Exchange Commission. The information contained in this call is accurate only as of the date discussed. Investors should not assume that statements will remain operative at a later time. Tractor Supply Company undertakes no obligation to update any information discussed in this call. As we move into the Q&A session, please limit yourself to one question to ensure everyone has the opportunity to participate.

If you have additional questions, please feel free to rejoin the queue. We appreciate your understanding and cooperation. We will also be available after the call for any further discussions. Thank you for your time and attention this morning, and now it’s my pleasure to turn the call over to Hal Lawton.

Hal Lawton, Chief Executive Officer, Tractor Supply Company: Thank you, Mary Winn, and good morning, everyone, and thank you for joining us today. Before getting into our results, I want to thank our more than 52,000 Tractor Supply team members. Their commitment, hard work, and passion for life out here continue to set us apart. By delivering legendary service, they build the trust and loyalty that define our brand, and their dedication to our lifestyle remains the foundation of our leadership in rural retail. The Tractor Supply team delivered a strong third quarter in line with our expectations, driven by ongoing share gains in our consumable, usable, and edible businesses, agile execution through an extended summer season, and healthy transaction growth that was supported by our consistent focus on value and service. Our view is that our third quarter results largely mirrored the broader U.S. consumer environment, augmented by some share gain.

We saw a strong start to the quarter, with spending trends moderating into September. This pattern aligned with what we observed across the retail landscape, and in our case, was amplified by two key dynamics. First, the tailwind of an extended spring and July, and second, the headwinds of unseasonably warm weather in September and the absence of emergency response. Let’s start with a few top-line sales highlights from the quarter. First off, we grew net sales 7.2% to a third-quarter record of $3.72 billion. Comparable store sales increased 3.9%, driven by a balance of transaction growth of 2.7% and average ticket growth of 1.2%. Importantly, we had positive comps in all three months, positive comps in 11 weeks, a flat comp in one, and negative comps in only one week.

We are particularly pleased to extend our track record of comp transaction growth, a hallmark of Tractor Supply and a strong signal of the health and engagement of our customer base. Our customers remain loyal and connected to their lifestyle, continuing to shop with us across categories and channels. Let’s turn to some customer engagement metrics, which remained a clear strength in the quarter. Customer satisfaction remains strong, with scores continuing their positive trajectory, marking a record 17 quarters of consecutive improvement. Additionally, we achieved record Q3 highs across some key customer metrics, including total customer count, Neighbor’s Club membership, reactivated customers, and retention rates. Neighbors Club continues to be a powerful differentiator and represents over 80% of our sales. We saw gains in member retention and spend per member, and our Hometown Heroes program continues to attract new customers.

We’re also making progress on how we serve customers using data. With the implementation of our new customer data platform last year, our team is now able to better personalize offers and messaging, helping us deliver more relevant and engaging experiences across channels. Now let’s shift to category performance in the third quarter. In line with recent quarters, the consumer remained discerning in their spending with categories that offer newness, strong value, and needs-based continuing to outperform. Our comparable store sales growth was driven by strong seasonal performance in spring and summer products, along with continued momentum in our core year-round queue categories. As we move from the second quarter into the third, seasonal categories strengthened meaningfully. After a more modest first half, we benefited from the bathtub effect of the extended summer season.

We believe this was about a 50 to 60 basis point contribution to the third quarter that would have historically been in the first half. As it relates to seasonal, the team did a great job capitalizing on the elongated summer season, whether through strategically positioned inventory, enhanced financing offers, or targeted labor investments. Across the company, our merchants, to our store teams, to our supply chain, the organization leaned in to capture every single sales opportunity. A great example of that execution was in our tractors and riders category, which delivered another strong quarter. Our industry-leading lineup of zero-turn mowers, combined with the disciplined inventory management and effective merchandising, continued to resonate with customers and drove share gains in this category in the quarter. Additionally, other categories in seasonal that saw standout results were lawn and garden, sprayers and chemicals, and power equipment parts and accessories.

In our hallmark area of queue, we saw stronger than average growth in livestock, equine, poultry feed and supplies, and wildlife supplies. In wildlife supplies, we continue to expand our position as a destination for outdoor enthusiasts across gun safes, deer corn, feeders, hunting blinds, attractors, trail cameras, and more. Our customers are responding to the depth of the inventory and the newness that we’re bringing into the category, including the launch of the Field & Stream brand. We now have nearly 50 SKUs in this brand available in-store and online, with a robust pipeline in development, and this launch strengthens our position as the destination for the out here lifestyle. In discretionary and weather-dependent categories, particularly those in the fall season, such as recreational vehicles, grilling, safes, and generators, sales continue to lag, reflecting both a cautious big ticket consumer and the absence of storm-related activity this year.

As it relates to big ticket, overall, the strength in tractors and riders offset the softness I just mentioned in discretionary and emergency response categories, resulting in essentially a flat comp performance for the quarter. Finally, in companion animal, trends remain stable but below company averages. The consumables business remains flattish, with seasonal strength in animal health, and we have seen some sequential improvement in pet supplies and equipment as well. We also continue to execute well across our strategic initiatives and operational priorities. Digital sales grew at a low double-digit rate, representing a notable sequential improvement from the second quarter. Nearly 80% of online orders were fulfilled by our stores, highlighting the strength of our local network and store base. Same-day delivery and deliver from store outperformed, reinforcing the convenience and reliability of our model and the value of the final mile capabilities that we’re building out.

Petsense by Tractor Supply marked its 20th anniversary. Congratulations to that team, and it highlights the differentiated pet specialty model out in rural America. Our distribution centers delivered another strong quarter of productivity gains, supported by disciplined execution and efficient inventory flow across the network. This execution helped ensure we remained in stock on the product our customers count on, particularly with the extended seasonal demand. Turning to pet pharmacy, we continue to see steady growth in orders and customer adoption. Each week, we’re seeing an increase in Neighbor’s Club subscriptions of prescription and over-the-counter products, leveraging our Allivet acquisition. Our customers continue to engage with our suite of pet services, which also includes pet washes and vet clinics. On the real estate front, we’ve remained disciplined and confident in our growth strategy. We opened 29 new Tractor Supply stores in the quarter, bringing our year-to-date total to 68.

New store productivity continues to perform very well. Our pipeline of 2026 and into 2027 remains robust, with significant runway for low-risk value-creating organic growth ahead. We also continue to invest in our existing store fleet. We now have 55% of our chain in the Project Fusion layout and nearly 700 garden centers. These are capital investments that provide a multi-year runway for growth and extend the terminal value of our stores. They help us be more relevant to both our core customers and our new customers, allowing us to garner a greater share of their spending and be the dependable supplier for their lifestyle. Finally, we’re making solid progress on advancing our Life Out Here strategic initiatives with a focus on direct sales and final mile. These initiatives strengthen our foundation for long-term growth and relevancy to our customers.

To summarize, the third quarter demonstrated the strength and consistency of our model, healthy customer engagement, strong execution, and continued progress on our Life Out Here strategy. As we look ahead, we believe it is appropriate and timely to narrow our fiscal 2025 guidance. This guidance reflects our year-to-date performance and outlook for the remainder of the year. We remain excited about our strategy and our ability to deliver long-term value for our shareholders. With that, I’ll turn the call over to Kurt to provide more detail on our performance and outlook.

Kurt Barton, Chief Financial Officer, Tractor Supply Company: Thank you, Hal, and good morning to everyone on the call. As Hal highlighted, our third quarter top-line performance aligned with our expectation. Each period of the quarter delivered positive results, supported by consistent transaction growth throughout. Sustained growth in transactions remains a hallmark of Tractor Supply Company and a key indicator of the health of our business model. In addition, all geographic regions across the chain delivered positive comparable store sales for the quarter. These results underscore the broad-based nature of our performance and the consistency we are seeing in the business. This was especially evident in the performance of our queue categories, which outperformed the chain average and had mid-single-digit comparable store sales growth every month of the quarter.

While the early part of the quarter benefited from the extended spring selling season, the later portion was pressured by lingering summer heat and dry conditions, with no meaningful shift to fall weather. As far as emergency response sales, while we did not receive a significant year-over-year sales lift from emergency response last year, we did have a hurricane event in 2024 that provided some benefit to sales. This year, we had no emergency weather-related activity, which represented a modest headwind to our third quarter comparisons. Let me add a few additional comments on our comparable store sales to complement Hal’s remarks. The transition from price deflation to modest inflation year over year was consistent with our expectations for the quarter. Average ticket increased 1.2%, driven principally by higher average unit retail.

This was primarily the result of a higher but stable commodity cost environment and, to a lesser extent, selective price adjustments as higher product costs flowed through our supply chain. Moving down our income statement, our gross margin increased 15 basis points to 37.4%, in line with our expectations. This performance reflects the continued discipline of our merchant team in managing product costs and consistent execution of our everyday low-price strategy. These benefits more than offset the anticipated pressure from tariff costs and higher transportation costs as we lapped last year’s benefit from the opening of a new distribution center, along with the modest cost increase to support our strategic investment in final mile delivery. We remain very pleased with our ability to expand gross margin in this environment, which speaks to the strength of our cost management initiatives.

Selling, general and administrative expenses, including depreciation and amortization, were $1.05 billion, up 8.4% from last year. As a percent of net sales, SG&A deleveraged 29 basis points to 28.1%. This outcome was in line with our expectations and reflects a few puts and takes. There were primarily three drivers of the deleverage. First, the planned strategic investments in our business to launch initiatives such as direct sales initiative. Second, higher incentive compensation from stronger performance, primarily at the store level, and the lap from last year’s lower accruals. Third, a lower benefit year over year from our sale leaseback strategy. These factors were partially offset by ongoing productivity initiatives and leveraging fixed costs from the stronger sales performance. Importantly, within gross margin and SG&A, we view our investment spending as critical to supporting our strategic priorities and long-term growth, while continuing to balance expense discipline with the opportunities ahead.

Our effective tax rate decreased to 21.0% from 22.3% in the third quarter last year, largely due to the timing of planned tax strategies for the purchase of federal tax credits, which we expect to normalize over the full year. On a year-to-date basis, our effective tax rate is 22.3%, just 10 basis points higher than last year’s rate. Diluted EPS was $0.49, up from $0.45 in the prior year. Our inventory position remains in excellent shape. Our average store inventory is up a modest 3.4%, reflecting healthy sell-through and strong inventory management by the team. Year to date, we’ve returned more than $600 million of capital to our shareholders through dividends and share repurchases. As we look ahead, we’re focused on finishing the year with the same discipline and agility that have guided our results year to date.

The fourth quarter carries typical seasonal variability, but we’re confident in our ability to respond quickly to changing conditions and deliver within our outlook range. For the fourth quarter, we anticipate comparable store sales growth in the range of 1% to 5%, reflecting a wider set of possible outcomes given the current consumer environment. Keep in mind, winter weather is often the primary driver of our fourth quarter business, more so than the holidays and the related gift buying. As a result of this outlook, we are narrowing our fiscal 2025 guidance range. We now expect net sales growth of 4.6% to 5.6%, comparable store sales growth of 1.4% to 2.4%, operating margin between 9.5% and 9.7%, and diluted EPS in the range of $2.06 to $2.13.

Shifting further out, while we are not giving formal guidance for 2026, and with a caveat that we are still in the planning process and the macro environment can change rapidly, I thought it would be helpful to make a few comments about how we are thinking about next year. As we look to 2026, we expect to open 100 new stores compared to 90 this year. This increase reflects our continued confidence in the strength of our new store economics and the long-term growth potential of our model. We anticipate a consistent pace of openings throughout the year. For 2026, we are optimistic about maintaining the step-up in comps that we are forecasting for the second half of this year. We expect transactions to remain a strength, with average tickets staying positive and the early benefits of our strategic investments contributing to that momentum.

This level of comp sales growth should also support progress in our operating margin rate. To that end, we would anticipate fiscal 2026 to be a more normalized year as it relates to our investment levels and the corresponding pressure on operating margin. This normalization provides the foundation for improved profitability. Based on our model, we see an inflection point in operating margin expected around the low 2% comp sales range, with margin rate expanding proportionally as comp sales growth increases beyond that level. Stepping back, with our peak capital investment cycle as a percent of sales now behind us, we believe 2026 will reflect continued P&L normalization. This progress positions us to deliver solid sales growth with margin improvement opportunity in line with our comp sales performance. We look forward to sharing our official guidance for 2026 during our Q4 call in January.

In closing, we remain focused on disciplined execution and the factors within our control. Our Life Out Here strategy continues to position Tractor Supply Company well to navigate the current environment, maintain our industry leadership position, and deliver sustainable value over time. I’ll turn the call over to Hal to wrap up.

Hal Lawton, Chief Executive Officer, Tractor Supply Company: Thanks, Kurt. As we look at the remainder of the year and into 2026, we’re focused on finishing strong and building momentum on our investments in the next phase of our Life Out Here strategy. For the balance of the year, our priority remains on being a dependable supplier, delivering compelling value, and providing more meaningful in-store and online experiences. Let me share some of the key in-store and merchandising activities that we have planned. We remain excited about the continued momentum of our Hometown Heroes program, which is part of our Neighbor’s Club benefits for military service members, veterans, and first responders. This year, in the weeks leading up to Veterans Day, we’ll be executing our Hometown Heroes Days. A highlight of the event is our self-proclaimed National Hometown Heroes Day on Saturday, November 1.

This day comes to life at our stores as a unique opportunity to connect with our communities in very special ways, from touch-and-truck events to Americana-themed crafts for kids, to thank you notes to our hometown heroes and an honor wall. These types of events create a lot of energy and excitement in our stores, and if you get a chance, it’s a great day to be in them. The winter and holiday season always creates a sense of fun and excitement across our business as our teams showcase the best of Tractor Supply Company for our customers and communities. Customers truly rely on us for their winter essentials like wood pellets, propane heaters, fireplaces, insulated jackets, gloves, boots, and more. In the fourth quarter, we’re leaning into that responsibility with depth of inventory, the right price, and fresh and trusted brands that reinforce our relevance.

While holiday gets the spotlight, it’s winter readiness that drives the heart of our business and where we consistently show up for our customers when they need us most. Once again, our now famous six-foot holiday rooster is capturing customer attention and social buzz, a great example of the fun and discovery in retail theater that define the Tractor Supply Company experience in the holiday season. Additionally, in recreational products, exclusive minibikes and gun safes position this as a destination for unique gifts at a great price. This year’s tool shop event brings outstanding value to our customers with leading brands and exclusive TSC offerings in power tools, accessories, and storage. This event highlights us as a gifting destination for the homesteader lifestyle. Our holiday sets always bring energy and excitement to our stores, but as I said, what truly drives our business in the fourth quarter is the weather.

When winter weather arrives, our customers know they can depend on Tractor Supply Company. In addition to strong merchandising and store execution in the fourth quarter, our teams remain focused on setting up the Life Out Here 2030 initiatives for success as we head into 2026. From localization and direct sales to pet and animal RX to final mile, exclusive and private brands, and retail media, the team is fully engaged in executing detailed roadmaps that will drive growth and long-term value creation. To close, we operate in a large, attractive market that rewards consistency, connection, and authenticity to a lifestyle. Our investments in our new store base, in our existing stores, in our technology, in our supply chain, and in our talent are strengthening our competitive advantage and enabling us to consistently gain share.

Combined with strong new store returns, ongoing rural migration, and disciplined expense management, we believe we are well positioned to deliver long-term value for our shareholders. With that, let’s open up the call for questions.

Elisa, Conference Call Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove your question from the queue, please press star two. Additionally, if you are using a speakerphone, please remember to pick up your handset before asking your question. We ask that all participants limit themselves to one question and return to the queue for additional questions. Once again, please press star one to join the questions queue. We will pause here as questions register. The first question is from the line of Steven Forbes with Guggenheim. Please go ahead.

Good morning, everyone. Hal, curious if you can give us an update specifically around the direct sales rep build out. Maybe how many do you plan to have in place by year end? What will the final mile coverage be on a % of the store base? Lastly, just how should we be thinking about the benefit of the incremental sales potentially offsetting the initial startup cost associated with the initiative next year? It sort of sounds like you’re implying that there’s a potential sort of net benefit to margin next year as this program ramps and you start getting the benefit of sales flow through.

Hal Lawton, Chief Executive Officer, Tractor Supply Company: Good morning, Stephen, and thanks for joining us on the call and thanks for the question about direct sales. I’ll give a couple of high-level comments and then turn it over to John to provide further detail. At the highest level, what I’d say is we remain incredibly bullish and confident in our direct sales initiative. It’s off to an excellent start, right on top of the expectations that we set at the beginning of the year in terms of rollout, sales rep ramping, the sales attributed to that ramping, et cetera. As we’ve been clear, this year there was some expense investment that we’ve made in that business to get it launched and ramped. That’s embedded in the guidance that we’ve been giving throughout the year.

As it relates to next year, we are looking for the initiative to self-fund itself, so there will be no further incremental investment into the initiative as it’s ramping now and starting to self-fund itself. I’ll turn it over to John to give some of the highlights on the number of reps we’ve hired recently and over the last nine months and how they’re doing on sales and what our outlook for next year is.

John Ordus, Executive (Direct Sales), Tractor Supply Company: Yeah, thanks. Hey, Stephen. Good morning. Our direct sales business continues to scale rapidly with reps covering over 300 stores now. I think it’s 312 as of today. Our big barn customers are comping at nearly 50% with our direct sales specialists working directly with them, and we’re selling over $200,000 a week now in sales, so it can continue to ramp pretty fast. We’re taking that legendary service that our stores do a great job in, and we’re taking it up to the big barn customer. I’ll give you just a quick example of a recent customer. A customer in the Florida market was buying feed at a competitor somewhere else. After three visits, and it normally takes about three to four visits for us to complete that sale, that customer decided to move to us.

They’re buying 80 bags of feed now, two skids of feed, buying them every other week, and we’re able to create that relationship and an ongoing relationship. We’ll continue to build on that basket as we go. Our team builds these relationships with our customers, and our specialists have over 10 years, on average 10 years of experience in this industry, and 100% of them live the lifestyle. We’re very pleased with the people we’ve hired. We’re very pleased with where we’re at. We’ve done four cohorts now, four training classes. The first class in April, and that’s starting to ramp up faster, and we’re seeing that ramp as each week as that class ramps up. To answer your question on specialists, we’re at 48 specialists right now.

We’ll continue to look at markets for the remaining of this year where we’ll have modest growth with another eight to 10 reps. As we get to next year, we’ll continue to follow the final mile team as they grow out there. We’ll let them get established, and then we’ll come in a little bit behind them, and then we’ll start doing direct sales in those same markets. Our average ticket continues to be strong, about seven times the company average, and we’re very pleased with what we’re seeing in the departments that are driving the sales. The departments that we thought they would: feed, fencing, and equine feed being the big one.

Thank you.

Elisa, Conference Call Operator: Thank you. The next question is from the line of Michael Lasser with UBS. Please go ahead.

Good morning. Thank you so much for taking my question. The question is on any changes you’re seeing around the consumer behavior who lives in the Life Out Here environment, especially because the perception is that trends have slowed quarter to date, and folks are wondering, is that due to just the weather, or is there something more that’s going on? As part of it, you were helpful in giving some color on the contribution from your initiatives, $200,000 in incremental sales per week. If you could build on that and give us a sense for how you think about that contribution as you move into next year across all of the initiatives that you have in place. Thank you very much.

Hal Lawton, Chief Executive Officer, Tractor Supply Company: Hey, Michael, and thanks for joining the call today, and good morning to you. I’ll start out first just on the state of our consumer. Our consumer remains strong, resilient. We shared some of the metrics in our prepared remarks, but we had exceptional customer metrics in Q3, whether it relates to engagement and their shopping patterns or whether it relates to overall customer satisfaction. Those trends have not changed dramatically as we’ve moved into Q4, very much steady as she goes. I’ll highlight a couple of things on that. As we all know, the core component of that is our queue business. Our queue business continues to run very stable and very much in line with our year-to-date trends, and that’s the fundamental underpinnings and foundation of our business.

Certainly would acknowledge that the first couple of weeks here, three weeks or so of October, have had unfavorable weather for us, but it’s in the last few days started to get cool across the country, and we feel very good about the outlook for the balance of the quarter that’s reflected in our guidance of 1% to 5% comp. As we talked about in our prepared remarks as well, the biggest driver of variation in our sales in a Q4 is a winter storm. If you go back over the last decade or so, it’s about 50/50 in those last two weeks. If you get a polar vortex or a really, really significant cold snap, you look at like 2018, I think, as a great example for this quarter where it started out warm in October. Very similarly, our first couple of weeks were tougher comps.

There was a government shutdown going on, and holiday sales that year were some of the weakest holiday sales in the last decade, and we still put up a 5.7% comp for that year, I mean for that quarter, because the last two weeks we had incredibly strong winter business. We think our guidance reflects if you go back over the last decade plus, we’re right in that the guidance range we’ve given that midpoint of 3% comp is even if you exclude like 2020 and 2021 where we had really high comps those two years, you exclude those, our center point is still right at about a 3% for comp for Q4. We feel really good about the guidance we’ve given in Q4. It is all about the cold weather and winter that starts to happen in December. We’re really optimistic about our holiday.

We’ve got a lot of things locked and loaded for that. Our hometown heroes event should give us the opportunity to get into the market very early in a very unique way for Tractor Supply Company. I just can’t say enough positive things about how we’re thinking about the balance of Q4, and we feel as bullish on Q4 as we did three months ago on our most previous earnings call. As it relates to the comments John made on direct sales, Michael, I’d say a few things. First off, John mentioned we’ve got a little over 40 sales reps right now, 48 sales reps in place. I’d say 20 to 25 of them are really doing the bulk of the sales driving right now out of that first cohort, second cohort of classes, and driving that $250,000 a week we’re seeing right now. We’re ramping sequentially every single week.

We feel really good about the continued benefit that that’s going to drive for us into next year. We always talked about 2026 would be when you’d start to see the impact of the initiatives in our results. At our next earnings call, we certainly will be providing guidance for 2026 and more detail on how the initiatives layer into that guidance. No doubt direct sales will be a complement and a driver of our growth next year. Thanks so much for the question, Michael.

Thank you very much.

Elisa, Conference Call Operator: Thank you. The next question is from the line of Kate McShane with Goldman Sachs. Please go ahead. Kate, please ensure your line is unmuted.

Kate McShane, Analyst, Goldman Sachs: Sorry about that. We wanted to ask a few more questions around pricing and tariffs. The color you gave around ticket was helpful. How should we be thinking about ticket in Q4, especially when it comes to like-for-like price increases? When it comes to the change that we saw or the narrowing in the top line of guidance today, how much of that is because of the change in terms of what you were expecting to flow through in terms of price?

Seth Estep, Executive, Tractor Supply Company: Hey, Kate. This is Seth. Thanks for the question. For tariffs and kind of pricing, and as we look ahead, I would just kind of take a step back first and just say first and foremost that I just really highlight to the team that we have the tools and the team in place, and have done a really nice job up to this point to navigate. At this point, we’re about halfway through the initial incremental tariff impact kind of year over year as it’s kind of flown through to the P&L. We have taken some price where we have needed to here and there. Where we have, we have not seen a lot of elasticities yet. It has driven a little bit of AUR, but not a lot of elasticities.

When we think about a look ahead, I would just say our top priority really is to continue to be that advocate of value for our customers. Our guidance implies that we’re going to continue to navigate the additional costs that flow through to the P&L in Q4 as a result of these tariffs. Where we do take price, we’re going to continue to be surgical. We do have a portfolio approach. As you know, Q is such a big part of our business, 40 to 45%. You think about that and mostly domestic based on that, it continues to be operating within kind of in line with where we are kind of today and foresee that kind of going forward. As we think about price, as we look ahead, again, we’re going to continue to navigate. Our focus again is on value perception. It’s on managing margins.

At the end of the day, we’re going to continue to make sure that we are priced right to make sure that we continue to take market share.

Elisa, Conference Call Operator: Thank you. The next question is from Scot Ciccarelli with Truist. Please go ahead.

Good morning, guys. Kurt provides some comments on 2026. When you guys look at next year and the operating income margin expansion you referenced, is the potential on the 2%+ comp coming from SG&A leverage? Is it coming from gross? Is there a mix? Can you just provide any more color or clarity around the thought process around that? Thank you.

Kurt Barton, Chief Financial Officer, Tractor Supply Company: Yes, Scott. What you heard from me in my remarks, I’d summarize by saying we expect and see momentum in our gross margin expansion in 2026. The pressures on SG&A that you saw this year, we had said we were going to make a very purposeful investment to launch final mile and direct sales, and that was going to put 15 to 20 basis points of pressure on operating margin in 2025. As you heard Hal mention just a second ago, the next cohorts and the 2026 launch, we anticipate paying for itself, and there’s no incremental pressure on SG&A. Between that and some of the transitory type items that were pressured this year, SG&A has less pressure in 2026 as we see it today, allowing us to be able to leverage at a lower, more normalized comp rate, as I mentioned, in that low 2% range.

Just as an example for Q3 and even our expectation for Q4 of this year, with 20 basis points of pressure on initiatives, on year-over-year pressure from incentive comp, just compares, and even some timing on the benefit or the pressure on sale leaseback, you look at the core of the business, and SG&A is in a really good shape. It’s really another great example of how at this point we can leverage on SG&A at a lower comp rate and be able to grow operating margin modestly if we achieve that low to mid 2% range. It’s really about being able to move past the investments, and I hope that helps in regards to seeing the potential for next year.

Elisa, Conference Call Operator: Thank you. The next question is from the line of Steven Zaccone with Citigroup. Please go ahead.

Great. Good morning. Thanks very much for taking my question. I wanted to ask on the same store sales growth. To follow up on Michael’s question earlier, the fourth quarter, why does the low end of the guide include a 1% comp? Third quarter was back to algo. Just help us understand why there’s a wider range for the fourth quarter, what gets you to the low end versus the high end. As we think about 2026, thanks for the preliminary views, is there anything to be mindful of first half versus second half, just since inflation was a factor in first half versus second half this year?

Hal Lawton, Chief Executive Officer, Tractor Supply Company: Good morning, Scott. As it relates to Q4, it’s really just reflective of the range of outcomes that we see in the fourth quarter. As we’ve mentioned previously, kind of dominantly based on weather. If you go back and look at our kind of 10-year trend on the fourth quarter, that’s kind of the range that we’ve seen historically in this quarter. I’d just say that’s kind of reflective of what we’re seeing. The second thing I’d say as it relates to next year, there’s really not a lot of ins and outs on the sales side for next year. A little bit of maybe of Q3 benefit that I referenced in my earnings scripts that might flow into Q2. Other than that, I think the sales should be pretty straightforward.

You probably got a little more AUR benefit in the first half of the year than the second half of the year, at least what we know now. Kurt mentioned we’ve got a DC opening next year. That’s got a little bit of a startup cost that’ll impact operating margin in the first half. We get the cost of goods benefit on that on the second half from a new discount we get with our vendors for opening up a new DC. That should pretty much wash itself out for next year just between the two halves a little bit. I’d say nothing too out of the ordinary next year.

I think that’s one of the big things that Kurt’s prepared remarks we were trying to get across was that we expect it to be very much more of a normalized year than we’ve had in the last five or six years, whether that’s across our P&L, whether that’s across commodity, deflation, inflation, et cetera.

Elisa, Conference Call Operator: Thank you. The next question is from the line of Zach Battam with Wells Fargo. Please go ahead.

Hey, good morning. Kurt, on your 2026 comments, maybe we could talk a bit more about the comp building blocks. Maybe we talked a little bit about direct sales. Maybe we could touch on Allivet and curious how you think about other things like commodity inflation and tax refund stimulus. Adding this all up, is it fair to anticipate a return to comp algo in 2026?

Kurt Barton, Chief Financial Officer, Tractor Supply Company: The information that I’ve shared thus far is about the length of what at this point I think it’s appropriate to share on our thoughts for 2026. It’s really been intended to say the P&L is more normalizing, and at a run rate relatively consistent with what you’re seeing in the second half of this year, there’s an opportunity for margin inflection. We certainly will be able to share some of the details on how we build up to our guidance range for comp sales in the back half of the year. Things that we’ve said thus far that I’ll just reiterate that it’s important to understand. We see AURs continuing to be in a positive scenario the back half of this year and going into 2026. Transactions continue to be a core foundation for our comp sales growth, and we anticipate that for 2026.

In general, the consumer continues to engage in the lifestyle. We have a solid demand for our core business. We anticipate transactions and ticket to both contribute. The strategic initiatives which just launched this year, including Allivet, we’re excited about the momentum. We anticipate that each of them will give some contribution. At this point, early in each of those stages, those contributions are important to be able to show the acceleration, the momentum of the business, but won’t be the key drivers of the comp sales growth. We’ll give you more information on what our range is and what the key contributors are in our January call.

Elisa, Conference Call Operator: Thank you. The next question is from the line of Charles Grom with Gordon Haskett Research Advisors. Please go ahead.

Hey, good morning, guys. Thanks very much. Maybe a question for Seth or John or maybe Rob. Given the increasing tariff drop, curious if you’re making any changes to your seasonal assortment for the holidays. Some other retailers have talked about swapping out certain products. If so, how that supplementing of assortments could impact sales or gross margins here in the fourth quarter. Just one quick follow-up for Kurt. I think historically your leverage gets you about 15 bps above or below. Would that still be the case based on that low 2% potential comp next year? Thank you.

Kurt Barton, Chief Financial Officer, Tractor Supply Company: Hey, Chuck. This is Seth. I’ll start and then I’ll kick it over to Kurt for your second question. For holiday, I would just say going back to post the April announcements of the tariffs, the team did a really great job analyzing all the programs that were set aside for the back half, looking at where we thought there could be elasticities or tariffs could come in and went right away to kind of adjusting potential buys and things of that nature. I would tell you that there’s not a significant meaningful amount of updates and shifts that occurred other than maybe going from direct importing some products to finding domestic supply and demand, looking for products that had other countries and origins of supply.

I would just say that the team did a really nice job pivoting to those other countries of origins as well as taking advantage of opportunistic buys so that we can make sure that we have a really compelling offering as it comes and we look ahead to holiday. We’re really confident when we look ahead and be able to manage not only tariffs, but also being able to offer that kind of assortment that our customers expect for us around this time of year. I’ll kick it over to Kurt and let him go to the second question. Yeah. Going back to my comments about moving beyond the peak investment cycle gives us the ability at lower comp rates, more historical Tractor Supply Company norms to be able to have some level of inflection in operating margin.

When we gave our long-term guidance, we said we generally look in this guidance range to be able to grow our operating margin 5, 10, 15 basis points annually. As we are able to achieve comp sales above that inflection point, I believe that scenario is very much in play for 2026.

Elisa, Conference Call Operator: Thank you. The next question is from the line of David Bellinger with Mizuho. Please go ahead.

Hey, good morning, everyone. Thanks for the question. I want to ask you about the hunting supplies expansion. We’ve noticed the rollout of ammo dens and the ammunition category as part of our checks. Can you help us size the revenue opportunity and the potential comp uplift there? How many stores can this reach, and any early reads from your core customer? Thank you.

Kurt Barton, Chief Financial Officer, Tractor Supply Company: Hey, David. This is Seth. Hey, thanks for the question. I would start with just saying that wildlife and recreation supplies have been a core kind of category growth strategy for us. If we go back even over the last five years, we continue to be really, really pleased with the growth of the categories and those items as we’re looking at those in the store. When it goes directly to ammo, I would say ammo for us was just kind of a natural extension to that kind of outdoor wildlife and recreation category. We are the market leader in safes. We are growing significantly in, call it, feed and attractants. When you look at those categories, ammo is kind of like that next iteration of queue when you think about that wildlife category for us. Today, I would tell you we’re in roughly about half of the chain.

We’ve ramped that recently where we started with a small pilot and we’re pleased with the initial results. We also have it online. I’d say for a little bit for the foreseeable future, it would be in about that kind of store count as we kind of go into 2026 and we continue to manage that out. Again, ammo is kind of that natural extension to it. I would just say more broadly, you’re going to continue to see us go deeper and deeper into wildlife and outdoor recreation categories because not only has it been a key growth driver for us in the business for the last five years, as we look ahead, that’s part of the things that you’re seeing with us with the Field & Stream partnership that we’re launching, we’re having those new exclusives kind of coming out.

For us, we’re looking at that as like what’s that kind of next category of growth similar to what we’ve seen over poultry kind of over the course of the last five years, 10 years, etc. Thanks for the question.

Elisa, Conference Call Operator: Thank you. The next question is from the line of Christopher Horvers with JP Morgan. Please go ahead.

Thanks. Good morning. Thanks for taking my question. A couple of follow-up on the top line. You talked about 50 to 60 bps of spring seasonal demand, spring summer shifting into the third quarter. You also talked about some fall headwinds. Was that 50 to 60 sort of a smaller tailwind as you think about how it played out in September? As you think about the ticket component of comp following up on an earlier question, into the Seth, you mentioned you’re about halfway through rolling out pricing, but also into the fourth quarter, your mix goes more highly towards imported goods. Would you think that ticket could perhaps be up 2.5% in the fourth quarter or maybe a little bit more given the mix shifts? Thanks so much.

Kurt Barton, Chief Financial Officer, Tractor Supply Company: Hey, Chris. It’s Kurt. In regards to the ticket question, we anticipate that our ticket will have a similar, maybe slightly higher impact on the fourth quarter for some of the things that you mentioned. The ticket had minimal impact this quarter on mix, including big tickets. Ticket is benefiting from the stable commodity market with some slight increase in the input cost, including tariffs. That may moderate up a bit in the fourth quarter. We’ve always said that in this quarter there’s volatility in regards to elasticity as well. Some of that includes for ticket how much impact may be in the basket, et cetera. We look at both transactions and ticket being a key contributor to the fourth quarter and maybe more outsized on ticket in the fourth quarter than it was the third quarter.

Transactions will move in regards to demand for the business, and particularly, as Hal mentioned earlier, the demand related to cold winter weather impact. Look at it that way in regards to the benefit. Remind me the first part of your question, Chris.

Yeah, Kurt. Was weather, do you think that 50 to 60 basis point lift from the shift from 2Q to 3Q on the seasonal business, do you think it was less of a tailwind considering what happened in September, or is that sort of your view of the net impact of weather in the third quarter?

I’ll just step back on the third quarter in general. We often say, is the quarter favorable or unfavorable weather related? Third quarter overall was favorable from a weather perspective. There’s been some puts and takes in there. If it’s relatively a point of comp benefit from a good solid weather condition in the third quarter, that’s a pretty good range to look at it. Within there, Hal mentioned that areas on a delayed start to the second quarter and then the bathtub effect, some of that is what fell into July that may often be part of the second quarter. Overall, particularly July and August were set up as a favorable solid third quarter. On the tail end of it, you had a headwind on there. We do overall look at the third quarter as a solid, good, favorable weather condition type quarter.

Elisa, Conference Call Operator: Thank you. The next question is from the line of Robert Ohmes with Bank of America. Please go ahead. Robert, please ensure your line is unmuted.

Seth Estep, Executive, Tractor Supply Company: Sorry about that. Sorry, just two quick questions. Maybe how can we get an update on retail media for Tractor Supply Company? Then another question for the team would just be, I think you guys on the release you put out mentioned softness in select discretionary categories. A little color on that. Was it apparel? Sounds like it wasn’t big ticket overall, but would love to get any color on that. Thank you.

Hal Lawton, Chief Executive Officer, Tractor Supply Company: Hey, Robert. Thanks so much for the question today. I’ll take the second one, then I’ll toss it to Rob to share some details on direct sales. I’m sorry, on retail media. As it relates to the softness in discretionary, really not much difference in what we saw in Q3 than what we saw in Q1 and Q2. The seasonal big ticket certainly continues to resonate with customers when there’s a need. They’re purchasing. We saw that in July and August with riding lawn mowers, as we called out. On the flip side, if there’s not a big driver of demand right now, we still see customers being a little bit cautious in their purchase of big ticket. For us, those are things like, say, dog kennels and crates. It could be things like that we’ve called out also, like trailers and gun safes.

Some of those everyday bigger ticket businesses that we sell, there’s just a little bit of kind of cautiousness from the consumer on that. It’s been that way all year. I think what we were trying to call out in Q3 is that the strength in riders offset the weakness there. Also, the weakness we mentioned in the last couple of weeks of emergent response, as you can imagine, we sold a lot of generators in weeks 38 and 39 of last year. It contributes to big ticket growth and contributes to average ticket growth, and we didn’t have those sales this year. I wouldn’t call anything new out in big ticket in Q3 as it relates to even the trends we saw in the first half.

Seth Estep, Executive, Tractor Supply Company: All right. Good morning, Robert. This is Rob. Hope all’s well. First, from a retail media perspective, we’re continuing to make really strong progress. We entered this year with retail media with two primary objectives: one, to expand our partnerships and ultimately drive revenue. We’re on track for this year to deliver a triple retail media revenue growth year over year. We’re very pleased about that. We’re doing that by expanding the partnership count over 80%. Our average partner revenue is up by nearly 50%. We’re introducing new products and capabilities to our partners, such as branded pages, offsite products, and expanding our in-store display retail media offerings. We’re really early still into retail media. I would call it kind of say the first inning, but we’re really pleased with the progress the team’s made. We have extreme focus.

We have strong value proposition back to our partners, really focusing on the footsteps in the rural market area. In 2026, we’re going to double down, expanding our vision to more of the self-service capabilities, the model related to more product placement related to ads, as well as products in general. With these expansions, the momentum that we’re seeing in our partnership, as well as just continuing to put the focus on our value proposition, we feel we’re well positioned going into 2026. We’re very pleased. The team’s done a great job.

Elisa, Conference Call Operator: Thank you. The next question is from the line of Peter Benedict with Baird. Please go ahead.

Hi, good morning, guys. Thanks for taking the question. I guess I’ll ask on AI, just maybe an update on what you guys are doing in that area and what your kind of outlook is for how you’re going to layer it into Tractor Supply Company. Thank you.

Hal Lawton, Chief Executive Officer, Tractor Supply Company: Yeah, hey, Peter. Thanks so much for the question on AI. We’ve got a lot of exciting things going on on that front. I’m going to break it into three buckets: enterprise-level software. The second is custom-built, well, now we call it off-the-shelf enterprise software. Second, I’d call custom-built enterprise software. The third I would talk about is around agents and automation. First off, on the enterprise kind of purchased software, all of our vendors that we work closely with are now rolling in AI modules, AI analysis, AI capabilities, whether that’s in ERP systems, whether that’s in replenishment systems, marketing, et cetera. We are fast adopters there where appropriate, obviously with clarity of understanding of functionality and security. On the second one, in terms of custom-built, we talked about that several times in the past.

Those software systems applications that we built out, we continue to scale, we continue to refine, and they’ve become more and more key parts of just how we operate every single day. Whether that’s HeyGura, which is increasing in its use, whether that’s Tractor Vision in terms of our customers calling out when customers need help in areas that our team members might not have visibility to them, or whether that’s in Corso, which drives day-to-day operational tasks. Those are just three examples of custom-built applications that are scaled out now and continue to ramp in their impact and use by our team members. On the third one around kind of automation and agent build-out, over the last six months, we’ve done an enterprise integration with OpenAI. We now have over 1,200, I think 1,500 users that now have OpenAI enterprise accounts. That’s integrated with our Snowflake data lake.

What that allows us to do now is to start really across the organization building agents to automate and make things simpler and faster. An example of that would be in, say, our FAST team, where in the past, when a FAST team member would finish a planogram reset, they would take a picture, they would send it to their district manager, district FAST supervisor, they would review it and provide manual feedback. We’ve now built up the capability where when that picture is taken, AI assesses the picture and gives immediate feedback to the team member, and our district FAST supervisor only has to get involved with escalations. It just makes everybody’s job more efficient and allows us to execute faster. Kudos to the team across really all dimensions of our organization for embracing it and driving that productivity enhancement that it can provide.

Elisa, Conference Call Operator: Alyssa, we’ve got time for maybe just one more quick question. Let’s see if we can slip one more in.

Kate McShane, Analyst, Goldman Sachs: Great. Thank you.

Elisa, Conference Call Operator: Our final question will come from the line of Spencer Hannes with Wolfe Research. Please go ahead.

Good morning. Thanks for the question. I just wanted to ask on store growth, stepping up for next year, where do you see most of that growth being centered? Is it new or infill markets? How are you thinking about the cannibalization from that growth and the returns on those stores as well?

John Ordus, Executive (Direct Sales), Tractor Supply Company: Yeah, thanks for the question. Appreciate it. On new store growth, first I’d just say, as we look backwards, the last 18, 24 months, there were some questions around our new store productivity being lower, and we talked about there was a lot of noise in there. As we said then, ex the noise, we’ve been running pretty consistent, and we continue to be pretty consistent. The new store productivity numbers of late are continuing to show that our new store productivity is running strong and consistent. Our new stores are performing above pro forma. Our site selection and model is the best we’ve ever had, and our pipeline is strong. The real estate and construction team are doing an excellent job continuing to build out these stores in the right locations.

We know that cannibalization, we can build out markets, we can grow the overall market, and we’re seeing cannibalization numbers coming even lower than what we predict them to be. We know that the growth’s out there. We see growth across the entire United States, but a lot of our growth will continue to be in the West as we’re opening a new DC out there, and Idaho will continue to grow stores up there as well.

Elisa, Conference Call Operator: All right. Alyssa, I know we’ve hit the top of the hour, so that will wrap our call. I’m around anytime anybody needs anything at all. Thank you all for joining our call today. Thank you. This will conclude today’s conference call. Thank you all for your participation. You may now disconnect your lines.

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