Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 27, 2025 (the "2025 Form 10-K") and subsequent Quarterly Reports on Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements and information. The forward-looking statements included herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). All statements, other than statements of historical facts, which address activities, events, or developments that we expect or anticipate will or may occur in the future, including such things as sales and earnings growth, new store growth, estimated results of operations in future periods (including, but not limited to, net sales, comparable store sales, operating margins or operating margin rates, net income, and earnings per diluted share), the declaration and payment of dividends, the timing and amount of share repurchases, future capital expenditures (including their timing, amount, and nature) and sale-leasebacks, acquisitions, business strategy, strategic initiatives, expansion and growth of our business operations, and other such matters are forward-looking statements. Forward-looking statements are usually identified by or are associated with such words as "will," "plan," "intend," "would," "expect," "continue," "believe," "anticipate," "optimistic," "forecasted" and similar terminology. These forward-looking statements may be affected by certain risks and uncertainties, any one, or a combination of which, could materially affect the results of our operations. To take advantage of the safe harbor provided by the PSLRA, we have identified certain factors in Part I, Item 1A. "Risk Factors" in our 2025 Form 10-K, which may cause actual results to differ materially from those expressed in any forward-looking statements. These "Risk Factors" may be updated from time to time in our quarterly reports on Form 10-Q or other subsequent filings with the SEC.
Forward-looking statements made by or on behalf of the Company are based on our knowledge of our business and the environments in which we operate, but because of the factors listed above or other factors, actual results could differ materially from those reflected by any forward-looking statements. Consequently, all of the forward-looking statements made are qualified by these cautionary statements and those contained in the Company's 2025 Form 10-K and other filings with the Securities and Exchange Commission (the "SEC"). There can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or our business and operations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.
Seasonality and Weather
Our business is seasonal. Historically, our sales and profits are the highest in the second and fourth fiscal quarters due to the sale of seasonal products. We usually experience our highest inventory and accounts payable balances during our first fiscal quarter for purchases of seasonal products to support the higher sales volume of the spring selling season, and again during our third fiscal quarter to support the higher sales volume of the cold-weather selling season. We believe that our business can be more accurately assessed by focusing on the performance of the halves, not the quarters, due to the fact that different weather patterns from year-to-year can shift the timing of sales and profits between quarters, particularly between the first and second fiscal quarters and the third and fourth fiscal quarters.
Historically, weather conditions, including unseasonably warm weather in the fall and winter months and unseasonably cool weather in the spring and summer months, have unfavorably affected the timing and volume of our sales and results of operations. In addition, extreme weather conditions, including snow and ice storms, flood and wind damage, hurricanes, tornadoes, extreme rain, and droughts have impacted operating results both negatively and positively, depending on the severity and duration of these conditions. Our strategy is to manage product flow and adjust merchandise assortments and depth of inventory to capitalize on seasonal demand trends, but there is no guarantee that we will be able to successfully execute this strategy. For more information regarding the risks we face in this regard, see Item 1A. "Risk Factors-Weather and Climate Risks" in our 2025 Form 10-K.
Performance Metrics
Comparable Store Metrics
Comparable store metrics are a key performance indicator used in the retail industry and by the Company to measure the performance of the underlying business. Our comparable store metrics are calculated on an annual basis using sales generated from all stores open at least one year and all online sales and exclude certain adjustments to net sales. Stores closed during either of the years being compared are removed from our comparable store metrics calculations. Stores relocated during either of the years being compared are not removed from our comparable store metrics calculations. If the effect of relocated stores on our comparable store metrics calculations became material, we would remove relocated stores from the calculations. Allivet sales are considered comparable store sales one year after the transaction close date of December 30, 2024. Comparable store sales are intended only as supplemental information and are not a substitute for net sales presented in accordance with U.S. GAAP.
Transaction Count and Transaction Value
Transaction count and transaction value metrics are used by the Company to measure sales performance. Transaction count represents the number of customer transactions during a given period. Transaction value represents the average amount paid per transaction and is calculated as net sales divided by the total number of customer transactions during a given period.
Results of Operations
The following table sets forth, for the periods indicated, certain items in the Consolidated Statements of Income expressed as a percentage of net sales.
For the Fiscal Three | |||||||||||
| Months Ended | |||||||||||
|
March 28, 2026 |
March 29, 2025 | ||||||||||
| Net sales | 100.00% | 100.00% | |||||||||
| Cost of merchandise sold | 63.78 | 63.79 | |||||||||
| Gross profit | 36.22 | 36.21 | |||||||||
| Selling, general and administrative expenses | 26.20 | 25.56 | |||||||||
| Depreciation and amortization | 3.52 | 3.46 | |||||||||
| Operating income | 6.50 | 7.19 | |||||||||
| Interest expense, net | 0.53 | 0.57 | |||||||||
| Income before income taxes | 5.97 | 6.62 | |||||||||
| Income tax expense | 1.39 | 1.45 | |||||||||
| Net income | 4.58% | 5.17% | |||||||||
Note: Percentage of net sales amounts may not sum to totals due to rounding.
Fiscal Three Months (First Quarter) Ended March 28, 2026 and March 29, 2025
Net sales for the first three months of fiscal 2026 increased 3.6% to $3.59 billion from $3.47 billion in the first three months of fiscal 2025. The increase in net sales was driven by new store openings and, to a lesser extent, the 0.5% increase in comparable store sales. In the first three months of fiscal 2025, net sales increased 2.1% and comparable store sales decreased 0.9%.
The comparable store sales results for the first three months of fiscal 2026 included an increase in comparable average transaction value of 1.6%, partially offset by a comparable average transaction count decrease of 1.0%. Comparable store sales growth was primarily driven by positive comparable sales in four of five product categories, complemented by strength in big ticket items. Companion animal performance was below the Company average, reflecting softer demand trends, category shifts and an unfavorable product mix.
Sales from new stores were $109.7 million for the first three months of fiscal 2026, which represented 3.1 percentage points of the 3.6% net sales increase over the first three months of fiscal 2025 net sales. For the first three months of fiscal 2025, sales
from stores open less than one year were $97.9 million, which represented 2.9 percentage points of the 2.1% increase over the first three months of fiscal 2024 net sales.
The following table summarizes store growth for the fiscal three months ended March 28, 2026 and March 29, 2025:
Fiscal Three Months Ended | |||||||||||
| Store Count Information: |
March 28, 2026 |
March 29, 2025 | |||||||||
| Tractor Supply | |||||||||||
| Beginning of period | 2,395 | 2,296 | |||||||||
| New stores opened | 40 | 15 | |||||||||
| Stores closed | - | - | |||||||||
| End of period | 2,435 | 2,311 | |||||||||
| Petsense by Tractor Supply | |||||||||||
| Beginning of period | 207 | 206 | |||||||||
| New stores opened | - | 2 | |||||||||
| Stores closed | (1) | (2) | |||||||||
| End of period | 206 | 206 | |||||||||
| Consolidated, end of period | 2,641 | 2,517 | |||||||||
| Stores relocated | 2 | 3 | |||||||||
The following table indicates the percentage of net sales represented by each of our major product categories for the fiscal three months ended March 28, 2026 and March 29, 2025:
| Percent of Net Sales | |||||||||||
Fiscal Three Months Ended | |||||||||||
| Product Category: |
March 28, 2026 |
March 29, 2025 | |||||||||
| Livestock, Equine & Agriculture | 31 | % | 31 | % | |||||||
| Companion Animal | 26 | 27 | |||||||||
| Seasonal & Recreation | 19 | 19 | |||||||||
| Truck, Tool & Hardware | 15 | 14 | |||||||||
| Clothing, Gift & Décor | 9 | 9 | |||||||||
| Total | 100 | % | 100 | % | |||||||
| Note: Net sales by major product categories for the prior period have been reclassified to conform to the current year presentation. | |||||||||||
Gross profit increased 3.6% to $1.30 billion for the first three months of fiscal 2026 from $1.26 billion for the first three months of fiscal 2025. As a percent of net sales, gross margin in the first three months of fiscal 2026 was flat with the first three months of fiscal 2025 at 36.2%. The gross margin rate benefited from disciplined product cost management and the continued execution of an everyday low price strategy, offset by higher tariffs and delivery-related transportation costs.
Selling, general and administrative ("SG&A") expenses, including depreciation and amortization, increased 6.1% to $1.07 billion for the first three months of fiscal 2026 from $1.01 billion for the first three months of fiscal 2025. As a percent of net sales, SG&A expenses increased 70 basis points to 29.7% in the first three months of fiscal 2026 from 29.0% for the first three months of fiscal 2025. The increase in SG&A as a percent of net sales was primarily attributable to deleverage of fixed costs given the comparable store sales performance and an accelerated new store opening cadence, partially offset by an ongoing focus on productivity and cost discipline.
Operating income for the first three months of fiscal 2026 decreased 6.3% to $233.4 million compared to $249.1 million in the first three months of fiscal 2025.
The effective income tax rate was 23.2% in the first three months of fiscal 2026 compared to 21.8% in the first three months of fiscal 2025. The increase in the effective income tax rate in the first three months of fiscal 2026 compared to the first three months of fiscal 2025 was driven primarily by the timing of discrete items in the prior year fiscal quarter.
Net income for the first three months of fiscal 2026 decreased 8.3% to $164.5 million, or $0.31 per diluted share, as compared to net income of $179.4 million, or $0.34 per diluted share, for the first three months of fiscal 2025.
During the first three months of fiscal 2026, we repurchased approximately 2.3 million shares of the Company's common stock at a total cost of $118.0 million, excluding the 1% excise tax, as part of our share repurchase program and paid quarterly cash dividends totaling $126.4 million, returning $244.4 million to our stockholders.
Liquidity and Capital Resources
In addition to normal operating expenses, our primary ongoing cash requirements are for new store expansion, existing store remodeling and improvements, store relocations, distribution facility capacity and improvements, information technology, inventory purchases, repayment of existing borrowings under our debt facilities, share repurchases, cash dividends, and selective acquisitions as opportunities arise.
Our primary ongoing sources of liquidity are existing cash balances, cash provided from operations, remaining funds available under our debt facilities, operating and finance leases, and normal trade credit. Our inventory and accounts payable levels typically build in the first and third fiscal quarters to support the higher sales volume of the spring and cold-weather selling seasons, respectively.
We plan to continue to leverage our sale-leaseback program on both existing owned stores and future new store openings in order to help fund our planned owned store development over the next several years.
We believe that our existing cash balances, expected cash flow from future operations, funds available under our debt facilities, operating and finance leases, normal trade credit, and access to the long-term debt capital markets will be sufficient to fund our operations and our capital expenditure needs, including new store openings, existing store remodeling and improvements, store relocations, distribution facility capacity and improvements, and information technology improvements, for the next 12 months and the foreseeable future.
Debt
The following table summarizes the Company's outstanding debt as of the dates indicated (in millions):
| March 28, 2026 | December 27, 2025 | March 29, 2025 | |||||||||||||||
5.25% Senior Notes | $ | 750.0 | $ | 750.0 | $ | 750.0 | |||||||||||
1.75% Senior Notes | 650.0 | 650.0 | 650.0 | ||||||||||||||
3.70% Senior Notes | 150.0 | 150.0 | 150.0 | ||||||||||||||
| Senior credit facilities: | |||||||||||||||||
| Revolving Credit Facility | 590.0 | 230.0 | 550.0 | ||||||||||||||
| Total outstanding borrowings | 2,140.0 | 1,780.0 | 2,100.0 | ||||||||||||||
| Less: unamortized debt discounts and issuance costs | (14.3) | (15.0) | (17.3) | ||||||||||||||
| Total debt | 2,125.7 | 1,765.0 | 2,082.7 | ||||||||||||||
| Less: current portion of long-term debt | - | - | - | ||||||||||||||
| Long-term debt | $ | 2,125.7 | $ | 1,765.0 | $ | 2,082.7 | |||||||||||
| Outstanding letters of credit | $ | 77.6 | $ | 78.6 | $ | 76.8 | |||||||||||
For additional information about the Company's debt and credit facilities, refer to Note 4 to the Consolidated Financial Statements.
Cash Flows Provided by Operating Activities
Operating activities provided net cash of $91.1 million and $216.8 million in the first three months of fiscal 2026 and fiscal 2025, respectively. The $125.7 million decrease in net cash provided by operating activities in the first three months of fiscal 2026 compared to the first three months of fiscal 2025 is due to changes in the following operating activities (in millions):
| Fiscal Three Months Ended | |||||||||||||||||
| March 28, 2026 | March 29, 2025 | Variance | |||||||||||||||
Net income | $ | 164.5 | $ | 179.4 | $ | (14.9) | |||||||||||
| Depreciation and amortization | 126.6 | 120.1 | 6.5 | ||||||||||||||
Gain on disposition of property and equipment | (22.7) | (17.4) | (5.3) | ||||||||||||||
| Share-based compensation expense | 17.6 | 13.2 | 4.4 | ||||||||||||||
| Deferred income taxes | 23.5 | 1.7 | 21.8 | ||||||||||||||
| Inventories and accounts payable | (129.9) | (43.7) | (86.2) | ||||||||||||||
| Prepaid expenses and other current assets | (20.0) | (11.3) | (8.7) | ||||||||||||||
| Accrued expenses | (104.9) | (81.1) | (23.8) | ||||||||||||||
| Income taxes | 27.8 | 46.5 | (18.7) | ||||||||||||||
| Other, net | 8.6 | 9.4 | (0.8) | ||||||||||||||
Net cash provided by operating activities | $ | 91.1 | $ | 216.8 | $ | (125.7) | |||||||||||
Note: Amounts may not sum to totals due to rounding.
The $125.7 million decrease in net cash provided by operating activities in the first three months of fiscal 2026 compared to the first three months of fiscal 2025 was primarily driven by management of inventory and accounts payable.
Cash Flows Used in Investing Activities
Investing activities used net cash of $171.3 million and $261.0 million in the first three months of fiscal 2026 and fiscal 2025, respectively. The $89.7 million decrease in net cash used in investing activities in the first three months of fiscal 2026 compared to the first three months of fiscal 2025 is due to changes in the following investing activities (in millions):
| Fiscal Three Months Ended | |||||||||||||||||
| March 28, 2026 | March 29, 2025 | Variance | |||||||||||||||
| New stores, relocated stores and stores not yet opened | $ | (93.7) | $ | (59.5) | $ | (34.2) | |||||||||||
| Existing stores | (52.6) | (43.0) | (9.6) | ||||||||||||||
| Information technology | (34.1) | (26.0) | (8.1) | ||||||||||||||
| Distribution center capacity and improvements | (22.0) | (8.0) | (14.0) | ||||||||||||||
| Corporate and other | (0.2) | (4.8) | 4.6 | ||||||||||||||
| Total capital expenditures | (202.6) | (141.3) | (61.3) | ||||||||||||||
| Proceeds from sale of property and equipment | 31.3 | 20.9 | 10.4 | ||||||||||||||
| Acquisition of Allivet, net of cash acquired | - | (140.6) | 140.6 | ||||||||||||||
Net cash used in investing activities | $ | (171.3) | $ | (261.0) | $ | 89.7 | |||||||||||
Note: Amounts may not sum to totals due to rounding.
The increase in capital expenditures for new stores, relocated stores and stores not yet opened in the first three months of fiscal 2026 is primarily driven by the increase in new store openings and the construction of owned, fixed-fee development stores. Capital expenditures for the first three months of fiscal 2026 included the opening of 40 new Tractor Supply stores compared to 15 new Tractor Supply stores during the first three months of fiscal 2025. Partially offsetting the increase in total capital expenditures, proceeds from the sale of property and equipment increased in the first three months of fiscal 2026 primarily driven by the sale of both new, fixed-fee development stores, and existing stores as part of our sale-leaseback program.
Capital expenditures for existing stores represent continued investments related to our Project Fusion remodels and side lot garden center transformations.
Capital expenditures for information technology represent continued support of our store growth, digital initiatives, and Company-wide strategic initiatives.
The increase in capital expenditures for distribution center capacity and improvements in the first three months of fiscal 2026 is primarily driven by the construction of our newest distribution center in Nampa, Idaho which is anticipated to begin operations in the fourth quarter of fiscal 2026.
The Company used net cash of $140.6 million for the acquisition of Allivet in the first three months of fiscal 2025.
Our projected capital expenditures, net of sale-leaseback proceeds, for fiscal 2026 are currently estimated to be in the range of approximately $675 million to $725 million. The capital expenditures include a plan to open approximately 100 Tractor Supply stores, continue Project Fusion remodels and side lot garden center transformations, complete construction of our Nampa, Idaho distribution center, and continue investing in store and digital technology.
Cash Flows Provided by Financing Activities
Financing activities provided net cash of $110.4 million and $24.5 million in the first three months of fiscal 2026 and fiscal 2025, respectively. The $85.9 million increase in net cash provided by financing activities in the first three months of fiscal 2026 compared to the first three months of fiscal 2025 is due to changes in the following (in millions):
| Fiscal Three Months Ended | |||||||||||||||||
| March 28, 2026 | March 29, 2025 | Variance | |||||||||||||||
| Net borrowings and repayments under debt facilities | $ | 360.0 | $ | 250.0 | $ | 110.0 | |||||||||||
| Repurchase of common stock | (118.0) | (95.1) | (22.9) | ||||||||||||||
| Cash dividends paid to stockholders | (126.4) | (122.4) | (4.0) | ||||||||||||||
| Net proceeds from issuance of common stock | 9.6 | 7.0 | 2.6 | ||||||||||||||
| Other, net | (14.8) | (15.0) | 0.2 | ||||||||||||||
Net cash provided by financing activities | $ | 110.4 | $ | 24.5 | $ | 85.9 | |||||||||||
Note: Amounts may not sum to totals due to rounding.
The $85.9 million increase in net cash provided by financing activities is primarily due to incremental borrowings under the Company's Revolving Credit Facility in the first three months of fiscal 2026, partially offset by a modest increase in the repurchase of common stock.
Dividends
During the first three months of fiscal 2026 and fiscal 2025, the Company's Board of Directors declared the following cash dividends:
| Date Declared |
Dividend Amount Per Share of Common Stock | Record Date | Date Paid | |||||||||||||||||
| February 10, 2026 | $ | 0.24 | February 24, 2026 | March 10, 2026 | ||||||||||||||||
| February 12, 2025 | $ | 0.23 | February 26, 2025 | March 11, 2025 | ||||||||||||||||
It is the present intention of the Company's Board of Directors to continue to pay a quarterly cash dividend; however, the declaration and payment of future dividends will be determined by the Company's Board of Directors in its sole discretion and will depend upon the earnings, financial condition, and capital needs of the Company, along with any other factors that the Company's Board of Directors deem relevant.
Share Repurchase Program
The Company's Board of Directors has authorized common stock repurchases under a share repurchase program, which was most recently increased by $1.00 billion on February 12, 2025. The total amount authorized under the program, which has been increased from time to time, is currently $7.50 billion, exclusive of any fees, commissions, or other expenses related to such repurchases. The share repurchase program does not have an expiration date. The repurchases may be made from time to time on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased under the program will depend on a variety of factors, including price, corporate and regulatory requirements, capital availability, and other market conditions. Repurchased shares are accounted for at cost and will be held in treasury for future issuance. The program may be limited, temporarily paused, or terminated at any time without prior notice. As of March 28, 2026, the Company had remaining authorization under the share repurchase program of $1.01 billion, exclusive of any fees, commissions, or other expenses.
The following table provides the number of shares repurchased, average price paid per share, and total cost of share repurchases pursuant to our publicly announced repurchase plan during the fiscal three months ended March 28, 2026 and March 29, 2025, respectively (in thousands, except per share amounts):
Fiscal Three Months Ended | |||||||||||
| March 28, 2026 |
March 29, 2025 | ||||||||||
| Total number of shares repurchased | 2,324 | 1,727 | |||||||||
| Average price paid per share | $ | 50.75 | $ | 54.39 | |||||||
Total cost of share repurchases (a) | $ | 118,811 | $ | 93,827 | |||||||
(a) Effective January 1, 2023, the Company's share repurchases are subject to a 1% excise tax as a result of the Inflation Reduction Act of 2022. Excise taxes incurred on share repurchases represent direct costs of the repurchase and are recorded as a part of the cost basis of the shares within treasury stock. The cost of shares repurchased may differ from the repurchases of common stock amounts in the consolidated statements of cash flows due to unsettled share repurchases at the end of a period and excise taxes incurred on share repurchases.
Significant Contractual Obligations and Commercial Commitments
For a description of the Company's significant contractual obligations and commercial commitments, refer to Note 12 to the Consolidated Financial Statements included under Part II, Item 8 in our 2025 Form 10-K for the fiscal year ended December 27, 2025. As of March 28, 2026, the Company had contractual commitments of approximately $55.3 million related to the construction of our newest distribution center in Nampa, Idaho. As of March 28, 2026, there has been no other material change in the information disclosed in the 2025 Form 10-K for the fiscal year ended December 27, 2025.
Critical Accounting Policies and Estimates
Management's discussion and analysis of the Company's financial position and results of operations are based upon its Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make informed estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company's critical accounting policies, including areas of critical management judgments and estimates, have primary impact on the following financial statement areas:
| - | Inventory shrinkage reserve | ||||
| - | Self-insurance reserves | ||||
| - | Impairment of long-lived assets | ||||
| - | Impairment of goodwill and other indefinite-lived intangible assets | ||||
See Note 1 to the Consolidated Financial Statements in our 2025 Form 10-K for a discussion of the Company's critical accounting policies. The Company's financial position and/or results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies. In the event estimates or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information. There have been no changes to our critical accounting policies and estimates as previously disclosed in our 2025 Form 10-K.
New Accounting Pronouncements
For recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of March 28, 2026, refer to Note 1 to the Consolidated Financial Statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.