Tractor Supply: 3Q25 Immediate Call Postmortem
Going to call this quarter a lesson in reality. Even if management really thought it was possible to do a 4% comp this year, they never should have had that scenario in guidance given the aggressive acceleration required in 2H25 (7%+). Now everyone is left to wonder why a 7%+ comp scenario in 4Q25 is no longer in the new guidance, particularly when this is a business of “halves”. Takes away from what really was an outstanding result this quarter – the transaction growth of 2.7% was very impressive (best since 3Q21).
Didn’t take Hal long to blame weather: “headwinds were seasonally warm September and absence of emergency response”. Shouldn’t that mean 4Q will be even better given that we should always view their results in “halves”?
Am surprised Hal called out gun safes because that category seemed perpetually on sale for over a year now.
They expect to maintain the step up in comps they are forecasting in 2H25 throughout 2026. Am sure investors can believe that right now for 1Q26 but compares get much more difficult after that and they haven’t faced a difficult compare since 2Q24 (was down 0.5% that quarter). The three-year stack got slightly worse this quarter too, which doesn’t provide great confidence about their ability to “comp the comp” next year.
Hal isn’t as super bullish as he was last quarter. Zaccone asked the best question today on why there would be a 1% comp in the guidance range for 4Q25. Hal’s answer was simply “kind of a reflection of what we are seeing” and “dominantly based on weather”. How are we supposed to have confidence in their expectation for the step up in comps to continue throughout all 2026?
Wonder if the sell side (many follow me here) read my Tractor Supply note in August (Shift The Tractor To Second Gear Before It Stalls) as everybody all over direct sales contribution math. Hearing very different numbers now then what they said last quarter of “75,000” deliveries just that quarter and average order of “$400”. Now it’s “$200k” a week according to John or “$200-$250k” if you listen to Hal instead. Very confusing to tie all this together, particularly because last quarter they said the largest order was “more than $40k”. Bulk of business being done by 25 sales reps (48 in total). So that means on an annual basis a single rep pulls in somewhere between $210k-$410k a year?
Happy Spencer from Wolfe asked about new store growth. Wish he would have asked about construction costs instead though.
We will dig into a lot of this later (particularly final mile math implied by the entirely new data points). But overall, right now think this passage from our note in August remains quite relevant today.
*These are our unabridged quick thoughts and notes from the call. We get them out as soon as possible after the call ends. Management has given some topics to dig deeper into and will circle back afterwards with much more in depth work on what was mentioned. You can find that work (and more on Tractor Supply and other retail/consumer research) at the website link here: M Squared Capital.
Originally posted on X and Substack.