Tractor Supply reaffirms fiscal 2026 outlook as third-quarter sales rise 5.1% to $3.91 billion

Tractor Supply reported third-quarter net sales of $3.91 billion, up 5.1% from $3.72 billion a year earlier, and reaffirmed the fiscal 2026 outlook it revised in July, a revision that came with a 1.5% comparable-sales decline and a 14.9% drop in diluted EPS in the second quarter. Diluted earnings per share fell 11.6% as reported to $0.43 from $0.49, or 12.2% on the rounded figures. The gross margin rate narrowed to 36.4% from 37.4% and comparable store sales rose 0.4% against a 3.9% gain a year earlier.

The quarter's sales trend improved as it went. The release said comparable store sales "improved sequentially through the quarter, moving from negative in July to modestly positive in August to further strengthening in September." The 0.4% gain combined a 0.7% increase in comparable average ticket with a 0.3% decline in comparable average transaction count. Seasonal categories such as wildlife supplies, equine and livestock, and truck, tool and hardware sold well, the consumable, usable and edible categories ran above the company average, and digital sales grew at a double-digit rate. Big-ticket items and companion animal stayed weak, though companion animal trends have improved since the first quarter.

Comparable sales turn positive while the margin rate narrows

Profit moved the other way. Gross profit rose 2.6% from a year earlier to $1.42 billion, but the gross margin rate fell a full point from that prior-year quarter, which the company blamed on higher transportation and fuel costs and on spending to strengthen its price-value position. SG&A expenses, including depreciation and amortization, rose 6.8% to $1.12 billion, or 28.6% of net sales from 28.1%, as lower comparable store sales cost the company leverage and a new distribution center added startup costs. Operating income fell 10.2% to $307.7 million from $342.7 million and net income fell 13.3% to $224.7 million from $259.3 million; an effective tax rate of 22.1% against 21.0% a year earlier added to the decline.

The reaffirmed range leaves $0.35 to $0.45 a share for the fourth quarter

The outlook is unchanged from the one published with second-quarter results on July 23: net sales growth of 2.5% to 3.5%, comparable store sales of (1%) to flat, an operating margin rate of 8.0% to 8.3%, an adjusted operating margin rate of 8.5% to 8.8%, net income of $930 million to $990 million, adjusted net income of $990 million to $1.05 billion, diluted EPS of $1.78 to $1.88 and adjusted diluted EPS of $1.90 to $2.00. The adjusted measures exclude the Petsense impairment and VIP Petcare acquisition costs booked in the second quarter.

The nine-month run rate is the baseline the fourth quarter has to fit. Diluted EPS of $1.43 through September leaves $0.35 to $0.45 for the fourth quarter to reach $1.78 to $1.88. The nine-month operating margin rate of 8.37% already sits above the 8.3% top of the full-year range, so the fourth quarter's reported rate has to come in below 8.37% for the year to finish at the top of the band; at the sales level of the quarter just reported, that leaves a fourth-quarter rate in the low 8s, inside the band rather than under it. The adjusted measure is the tighter constraint: the nine-month adjusted rate of 9.05% is above the 8.5% to 8.8% range, so on that basis the fourth quarter has to run below the 8.5% bottom for the year to land inside it. Hal Lawton, the chief executive, said "Our progress in the quarter and the actions underway give us confidence in our ability to deliver within our full-year guidance, which we are reaffirming today."

Total inventory and borrowings rise faster than sales

Total inventories were 11.25% higher than a year earlier, but the total carries a larger store base: new store sales were 4.4% of total sales in the quarter against 3.1% a year earlier, and the company opened 91 net new Tractor Supply stores in the first nine months. On its own per-store measure, which recasts the prior year to strip out the 74 Petsense stores closed, average inventory per store rose 4.8% from a year earlier to $1.29 million, while comparable store sales rose 0.4% in the same quarter, so inventory per store grew far faster than like-for-like demand. Annualized inventory turns slowed to 2.92 from 3.06. Long-term debt rose 27.87% from a year earlier. In the same quarter the company repurchased about 2.7 million shares for $88.5 million and paid $124.9 million of dividends, returning $213.4 million of capital to shareholders. Nine-month operating cash flow was $882.6 million, down from $1.31 billion a year earlier, with a $529.8 million increase in inventories as the main working-capital drag. Store counts moved too, with 23 new Tractor Supply stores opened and 74 Petsense by Tractor Supply stores closed as previously announced, leaving 2,486 Tractor Supply stores in 49 states and 135 Petsense stores in 21 states.

A fourth-quarter report, and a long-term framework still owed

The third-quarter call is scheduled for 10 a.m. ET today. The next dated disclosure is the fourth-quarter report, when Tractor Supply expects to provide an updated long-term financial framework; in July it withdrew the framework introduced at its December 2024 Investor Day. The release sets no fourth-quarter sales, comparable-store or margin assumption, and the full-year outlook carries no gross margin target, so the winter quarter is where the reaffirmed range is met or missed. The forward-looking statement also lists "the impact of the recent and potential future tariff announcements" among the factors that could change results, without putting a number on them.