Tractor Supply (NASDAQ:TSCO) executives said the company finished fiscal 2025 with steady progress in its long-term strategy but acknowledged fourth-quarter results fell short of expectations as consumer spending shifted toward essentials and away from discretionary categories. Management also highlighted a quieter storm season as a meaningful headwind compared with the prior year, when storm recovery demand contributed more than the company initially estimated.
Fourth-quarter performance missed expectations amid storm and discretionary headwinds
Chief Executive Officer Hal Lawton said fourth-quarter results came in below internal expectations, citing three primary factors. First, the company lapped storm recovery related to Hurricane Helene and Milton, which management now believes was a larger contributor to 2024 performance than originally estimated. In contrast, 2025 was described as a historically quiet storm season, with no hurricanes making landfall in the continental U.S. for the first time in a decade. Management estimated the shift created roughly a 100-basis-point headwind to comparable sales, most pronounced in the South Atlantic.
Third, the company pointed to underperformance in select holiday periods and seasonal categories, including holiday décor, toys, some pet items such as dog toys and snacks, and power tools. Management attributed this to a highly promotional holiday environment combined with softer demand, noting the trends appeared category- and quarter-specific and consistent with broader retail patterns.
Sales grew modestly as essentials outperformed and big-ticket lagged
For the fourth quarter, net sales increased 3.3% to $3.9 billion, while comparable store sales rose 0.3%, driven by modest growth in average ticket. Diluted earnings per share were $0.43, which management said reflected modest sales growth, elevated promotional activity, and continued investment in strategic initiatives.
The company’s digital business delivered high single-digit growth. Tractor Supply posted positive comparable sales in 11 of 15 regions, but this was offset by declines in two South Atlantic regions, which management linked to lapping storm activity.
Customer metrics remained solid in the quarter, with identified customer counts increasing about 2%, while spend per customer moderated slightly. Consumable, usable, and edible categories delivered low- to mid-single-digit comparable growth led by livestock, equine and poultry, and wildlife supplies. Winter seasonal categories posted modest comparable growth, with cold-weather conditions described as largely neutral for the quarter. Offsetting that strength, big-ticket and emergency response categories together declined at a high single-digit rate.
Margins pressured in Q4 by promotions, delivery costs, and tariffs
Chief Financial Officer Kurt Barton described a quarter that started soft in October as the company lapped hurricane response, followed by a rebound in November as colder weather arrived and the storm lap dissipated. December, inclusive of Black Friday, produced modest gains, though Barton said broader retail sales growth stepped down in December.
Average ticket increased 0.3%, driven by roughly two points of retail inflation offset by softness in big-ticket categories and a decline in units per transaction. Barton said inflation reflected a higher commodity cost environment and selective price adjustments as higher product costs moved through the supply chain.
Fourth-quarter gross margin declined about 10 basis points year over year. Barton attributed the change to incremental tariffs, elevated promotional activity, and higher delivery-related transportation costs, partially offset by cost management. He said the largest variance versus expectations was the promotional environment around Black Friday and Cyber Week, as customers were more deliberate in allocating spending. Management characterized the promotional pressure as transitory and specific to fourth-quarter conditions. For the full year, gross margin expanded 16 basis points, which Barton said underscored underlying strength in the margin structure.
SG&A, including depreciation and amortization, rose about 70 basis points to 27.5% of sales, driven by planned investments and fixed-cost deleverage at a lower rate of comparable sales growth, partially offset by productivity and cost control. Operating income declined 6.5% year over year in the quarter.
Inventory per store was up about 5%, with roughly one-third of the increase tied to tariffs. Barton said the remaining portion reflected deliberate actions to support demand and in-stock levels going into 2026, adding that the company was comfortable with its inventory position.
Full-year 2025: sales up 4.3% and continued strategic buildout
For fiscal 2025, net sales increased 4.3% to $15.5 billion, driven by new store growth, the addition of Allivet, and comparable store sales gains of 1.2%. Diluted EPS was $2.06. Lawton said customer service scores reached all-time highs and Neighbor’s Club membership represented more than 80% of sales. The company also cited high team member engagement and turnover near historic lows, particularly at the store manager level.
Tractor Supply opened 99 stores in 2025 and reported “robust early” new store productivity. The company also opened its first bulk distribution center in 2025 and broke ground in Idaho on its 11th distribution center. Management said distribution centers delivered mid-single-digit productivity improvements for the year while maintaining strong safety and engagement results.
On key strategic initiatives, management highlighted progress in localization and remodels, noting 160 stores localized by year-end and nearly 60% of stores in the Project Fusion format. Final-mile delivery expanded to more than 210 delivery centers covering nearly 25% of the store base, and the company ended the year with about 50 direct sales specialists covering 375 stores.
In pet and animal prescriptions, Lawton said 2025 focused on building the foundation and integrating Allivet into the Tractor Supply ecosystem. While customer adoption was slower than management wanted early in the year, Allivet accelerated throughout 2025 and delivered about $100 million in sales for the year.
2026 outlook: “normalization,” modest comp growth, and continued investment
For fiscal 2026, Tractor Supply projected total sales growth of 4% to 6% and comparable sales growth of 1% to 3%, supported by continued average unit retail (AUR) growth and modest transaction growth. Barton said the company expects continued gross margin expansion driven by cost management initiatives, growth in exclusive brands, retail media, and supply chain efficiencies, partially offset by delivery costs and tariffs. He also said the company is not anticipating gross margin retraction in the first half, though expansion is expected to be stronger in the second half.
The company forecast operating margin of 9.3% to 9.6% and diluted EPS of $2.13 to $2.23, assuming an effective tax rate of about 22% and interest expense generally consistent with 2025. Net capital spending is expected to be $675 million to $725 million, with plans to open 100 new stores. The company expects share repurchases of $375 million to $450 million, or about 1% to 1.5% of shares outstanding.
Management also provided detail on growth initiatives for 2026, including expanding Chick Days, refreshed assortments in lawn and garden and riders, expanded outdoor and wildlife recreation aisles in about 500 stores by mid-year, and further rollout of Freshpet following a pilot. On logistics and selling capabilities, management said it plans to add more than 150 final-mile hubs in 2026, reaching about 375 hubs and covering more than 50% of stores by year-end, and to approximately double the direct sales specialist count.
During Q&A, management said early first-quarter trends were tracking above plan, but emphasized seasonality and that March represents more than 40% of first-quarter sales. Barton also said the tariff impact in 2026 is expected to be similar to the second half of 2025 and that the company has been able to offset tariff pressure through cost management and selective price increases.
The company said it will release first-quarter 2026 earnings on Tuesday, April 21, due to a scheduling conflict.
About Tractor Supply (NASDAQ:TSCO)
Tractor Supply Company (NASDAQ: TSCO) is a specialty retailer focused on products for the home, farm, ranch and outdoors. The company operates a network of physical retail locations complemented by an e-commerce platform, offering a one-stop source of supplies and equipment for customers with rural and suburban lifestyles. Its merchandise assortment targets a range of needs, from animal and livestock care to maintenance, outdoor power equipment, and seasonal products.
Product categories include animal feed and supplies, pet products, fencing and fencing supplies, equine equipment, lawn and garden tools, work clothing and footwear, and small agricultural and outdoor power equipment.
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