Tractor Supply Company

Q2 net sales increased approximately 2% to $4.5 billion. Comparable store sales declined approximately 1.5%. Reported gross profit increased 2.6% to $1.68 billion and gross margin expanded 11 basis points to 37.1%; on an adjusted basis, gross profit increased 3.0% to $1.69 billion and gross margin was 37.2%, up 24 basis points. Reported SG&A increased 14.4% to $1.22 billion; adjusted SG&A increased 7.3% and deleveraged about 118 basis points. Adjusted operating income was $548.3 million and adjusted diluted EPS was $0.81. Full-year 2026 guidance now calls for net sales growth of approximately 2.5% to 3.5%, comparable store sales of negative 1% to flat, adjusted operating margin of 8.5% to 8.8%, and adjusted diluted EPS of $1.90 to $2.00. Management expects repurchase activity toward the high end of the original $375 million to $450 million range. They also said start-up costs for the new distribution center will create about a 20 basis point SG&A headwind in both Q3 and Q4, with about a 20 basis point gross margin benefit in Q4.

Hal Lawton said the business remains durable, but the quarter showed that customers are shopping more deliberately and prioritizing needs-based purchases over discretionary items. He emphasized that May was unusually difficult because of high fuel prices and drought, which hurt big-ticket and spring seasonal categories, but noted positive comps in April and June and sequential improvement in pet. He also framed the current actions as a reset: sharper focus on pet, better everyday value, a more productive store base, and more disciplined capital allocation, including closing weak Petsense stores and redirecting capital to higher-return opportunities.

Kurt Barton highlighted that gross margin held up despite freight pressure, helped by product cost management and tariff refunds, while SG&A was pressured by the Petsense charge, VIP Petcare acquisition costs, medical claims and legal settlements. He said inventory is in good shape, with average inventory per store up about 6.5% mainly from inflation and spring seasonal carryover, and described the incremental inventory as low risk. He also pointed to elevated freight and fuel costs, less tariff benefit in the second half, and new distribution center startup costs as the main drivers of the weaker second-half margin profile, while reiterating that the company remains cash-generative, has a strong balance sheet and expects buybacks near the top of the prior range.

Analysts focused on pet trends, the second-half comp outlook, pricing actions and how much of the margin pressure is temporary versus structural. Management said pet trends improved sequentially from Q1, reset activity is complete, Freshpet is performing well in about 250 stores, and the company is seeing better price-value perception, including about a 180 basis point improvement in customer survey results year over year. On the margin side, Barton said tariff benefits are choppy, Q3 will face more pressure than Q2, and the new DC should help Q4 gross margin; Lawton also said the company will provide an updated long-term framework with the Q4 earnings call.