Tractor Supply grew Q2 2026 sales 2.3% to $4.54B on new stores, but comparable sales fell 1.5% on fewer transactions; Petsense closures and the VIP Petcare deal cut GAAP EPS 14.9% to $0.69 (adjusted $0.81, flat), and full-year guidance was cut sharply.
Revenue
$4.5B
+2.3% YoY
Net income
$361M
-16.1% YoY
Diluted EPS
$0.69
-14.9% YoY
Operating margin
10.3%
Overview
Tractor Supply, the largest US rural lifestyle retailer (farm, ranch, pet and outdoor supplies), grew second-quarter 2026 net sales 2.3% to $4.54 billion, but only because it opened more stores. Sales at stores open at least a year — "comparable store sales," the retail industry's standard gauge of whether existing locations are doing more business — fell 1.5%, against a 1.5% gain a year earlier. Reported (GAAP) earnings per share dropped 14.9% to $0.69, weighed down by $81.2 million of pre-tax charges to shrink its Petsense pet-store chain and buy mobile vet clinic operator VIP Petcare. Excluding those charges, EPS was $0.81, flat with last year. The company also cut its full-year outlook sharply and withdrew the long-term targets it set in December 2024.
Key metrics
Metric
Q2 2026
Q2 2025
YoY Change
Net sales
$4,541.3M
$4,439.7M
+2.3%
Comparable store sales
-1.5%
+1.5%
-3.0 pts
Comparable transaction count
-1.7%
—
—
Comparable average ticket
+0.2%
—
—
Gross margin
37.05%
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A basis point (bp) is one-hundredth of a percentage point. The prior-year quarter had no adjustments, so its GAAP and adjusted figures are the same.
What drove sales: new stores up, existing stores down
Growth came entirely from expansion. Sales from new stores and the newly acquired VIP Petcare added $164.8 million, or 3.7 percentage points of growth, while the comparable-store base subtracted from it. The company opened 28 Tractor Supply stores and 3 Petsense stores in the quarter (68 Tractor Supply stores in the first half, versus 39 a year earlier).
The comp decline came from fewer shoppers, not smaller baskets: comparable transactions fell 1.7% while the average ticket rose only 0.2%. Management points to one month. Comps were positive in April and June, and the quarter's decline came from May, which the filing says was "pressured by softness in seasonal categories, including big-ticket items, as well as lower spending in discretionary categories." Companion animal (pet food and supplies, 21% of sales) "continued to perform below the Company average, although trends improved through the second quarter." What held up were the company's C.U.E. categories (consumable, usable and edible items like animal feed that customers rebuy regularly) and digital sales.
This extends a weak trend rather than being a one-off. First-quarter comps rose only 0.5%, and first-half comps are now down 0.6%. Over the six months, average ticket rose 0.8% but transactions fell 1.4%, so fewer customer visits is the persistent problem.
Margins: gross margin held, costs outran sales
Gross margin (the share of sales left after paying for the goods sold) rose 11 bps to 37.05%, or 24 bps to 37.2% excluding a $5.9 million Petsense inventory write-down. The company credits "disciplined product cost management and tariff-related benefits," partly offset by higher freight and price cuts to "strengthen the Company's price-value position." Merchandise pricing was not the problem this quarter.
The pressure was in operating costs. SG&A (selling, general and administrative expenses, which here includes depreciation and impairments) rose 14.4% to $1.22 billion, or 26.8% of sales versus 23.9%. Most of that jump is the one-time charges. Stripping them out, adjusted SG&A still grew 7.3%, about three times faster than sales, reaching 25.1% of sales (+118 bps). The company attributes that to "deleverage from lower comparable sales" (fixed store costs spread over flat sales) plus "higher medical claims and legal settlement expenses." Adjusted operating income fell 5.1%, so the underlying business earned less even before the charges.
One-off items: Petsense restructuring and VIP Petcare
Petsense restructuring. After a strategic review, management approved closing about 75 of the 209 Petsense small-format pet stores. Total charges were $5.9 million of inventory write-downs, $33.2 million of goodwill and intangible impairments (writing down the value placed on Petsense when it was bought) and $32.6 million of other impairment and restructuring costs. That is roughly a third of the chain being closed, which says the stand-alone pet-store format has not worked.
VIP Petcare acquisition. Closed May 28, 2026, for a purchase price of $133.8 million (net cash outlay $129.8 million), plus $9.5 million of deal costs expensed in the quarter. VIP Petcare is the largest US provider of mobile veterinary clinics. Together with the Allivet online pet pharmacy bought in 2025, it shifts the pet business toward services and prescriptions and away from Petsense stores.
The tax rate also flattered the bottom line. The effective tax rate fell to 19.8% from 23.2%, which the 10-Q attributes mainly to buying transferable federal tax credits, plus the tax effect of the one-time charges. Adjusted EPS stayed flat at $0.81 even though adjusted operating income fell 5.1%, helped by the lower tax rate and fewer shares after buybacks.
Cash flow and balance sheet
Operating cash flow for the first half was $653.1 million, down from $1.00 billion. The biggest swing was a $337.6 million outflow in income taxes tied to the tax-credit purchases, plus a $106.1 million worse contribution from inventory and payables.
Inventory was $3.52 billion at quarter-end, 13.9% above the $3.09 billion a year earlier. That is well ahead of 2.3% sales growth, though part of it reflects 130 more stores. It is worth watching given the weak seasonal selling in May.
In the first half the company returned $505.3 million to shareholders ($253.3 million of buybacks for about 6.2 million shares, and $252.0 million of dividends). That was $260.9 million in Q2 alone.
Takeaway: Tractor Supply's merchandise margins are fine. Its problem is fewer customer visits (comparable transactions -1.7%) against a cost base that keeps growing, so even the adjusted numbers show operating income falling 5.1% on 2.3% sales growth. The flat $0.81 adjusted EPS looks steadier than the business because a lower tax rate and buybacks are holding it up.
Outlook: a large guidance cut
Management cut every fiscal 2026 target and withdrew the long-term financial framework from its December 2024 Investor Day. It plans to give a new framework with fourth-quarter 2026 results.
FY2026 guidance
Prior (Jan / Apr 2026)
Updated (Jul 23, 2026)
Net sales growth
+4% to +6%
+2.5% to +3.5%
Comparable store sales
+1% to +3%
-1% to flat
Operating margin
9.3% to 9.6%
8.0% to 8.3% (adjusted 8.5% to 8.8%)
Net income
$1.11B to $1.17B
$930M to $990M (adjusted $990M to $1.05B)
Diluted EPS
$2.13 to $2.23
$1.78 to $1.88 (adjusted $1.90 to $2.00)
Even on an adjusted basis, the EPS midpoint falls from $2.18 to $1.95, about 11% lower, and the adjusted margin range is 80 bps below the old one. With first-half net income at $525.2 million, the new net income range implies about $405–465 million in the second half. First-half comps were -0.6%, so the full-year comp range of -1% to flat allows for a second half no better than the first.
CEO Hal Lawton called May "unusually adverse" and said the company is "responding with urgency by strengthening our companion animal business, reinforcing our value position and improving productivity." Our read is that the cut is bigger than one bad month would explain. Traffic has been falling since the start of the year, companion animal has lagged the company average all year, and adjusted SG&A is growing about three times as fast as sales. Price cuts to defend value will pressure gross margin in the second half, while the tariff benefit and the lower tax rate that helped this quarter may not repeat. The things to check in the third quarter (fall and winter season) are whether transactions turn positive, whether companion animal keeps improving, and whether inventory, now up 13.9% year over year, is sold through without heavy markdowns. A new distribution center in Nampa, Idaho, is due to open in the fourth quarter.
Source: Tractor Supply Form 10-Q for the quarter ended June 27, 2026 (filed August 6, 2026), with guidance from the Q2 and Q1 2026 earnings releases (Form 8-K Exhibit 99.1, July 23 and April 21, 2026). Adjusted figures are company-defined non-GAAP measures that exclude the Petsense impairment/restructuring and VIP Petcare acquisition costs.