Tractor Supply Cuts Outlook as Comparable Sales Retreat
Second-quarter net sales rose 2.3% to $4.54 billion as new stores offset weaker comparable demand.
Tractor Supply Company (TSCO), the rural lifestyle retailer, reported a 1.5% decline in second-quarter comparable-store sales and lowered its fiscal-year outlook as customer traffic weakened.
The decline reversed comparable-sales growth of 0.5% in the first quarter and 1.5% a year earlier, extending a slowdown from 3.9% growth in the third quarter of 2024. Comparable transactions fell 1.7%, while the average ticket increased 0.2%, compared with a 1.0% traffic decline and a 1.6% ticket gain in the first quarter.
Net sales rose 2.3% from a year earlier, slowing from 3.6% growth in the first quarter, as new stores outweighed the comparable-sales contraction. Net income fell 16.1% to $360.7 million, and diluted earnings declined to $0.69 a share from $0.81. Adjusted earnings were $0.81 a share.
Seasonal categories, including big-ticket products that had supported first-quarter results, weakened during the period, particularly in May. Companion-animal sales also remained below the company average, though trends improved during the quarter.
Gross margin increased to 37.1% from 36.9% as product-cost management and tariff-related benefits outweighed freight expenses and price-value investments. That gain was overtaken by higher costs: adjusted selling, general and administrative expenses rose 7.3% to $1.14 billion, and adjusted operating income fell 5.1% to $548.3 million.
Tractor Supply recorded $81.2 million of pretax adjustments connected with its companion-animal operations, including impairment and other Petsense charges tied primarily to restructuring and the planned closure of about 75 stores. The total also included a $5.9 million inventory write-down and $9.5 million of VIP Petcare acquisition costs.
The company now expects fiscal-2025 sales growth of 2.5% to 3.5%, down from its previous 4% to 6% range, and comparable-store sales ranging from a 1% decline to flat. Adjusted earnings are projected at $1.90 to $2.00 a share, while reported earnings are expected at $1.78 to $1.88 a share, down from the prior $2.13 to $2.23 forecast.
Following the outlook reduction, Tractor Supply withdrew the long-term financial framework introduced in December 2023 and said it expects to provide a replacement with fourth-quarter results. Inventory rose 13.9% to $3.52 billion as first-half operating cash flow fell 34.8% to $653.1 million, leaving the company to reset its longer-range targets amid slower sales and heavier working-capital demands.