Stores did not cover their own costs

Tractor Supply Company lifted net sales by 2.3% to $4.54 billion (€3.89 bn) in the quarter ended 27 June and at the same time confirmed the closure of approximately 75 Petsense by Tractor Supply stores. Comparable store sales fell 1.5%, against a rise of 1.5% a year earlier, with transaction count down 1.7% and the average ticket up 0.2%. The company attributed the shortfall to May, when seasonal and discretionary categories weakened; April and June were positive. Companion animal continued to trade below the group average, although trends improved through the quarter.

Petsense operated 209 stores in 23 states at the end of the quarter, so the closures affect more than a third of the chain, leaving roughly 134 sites. President and CEO Hal Lawton cited ‘negative four-wall cash flow’ at the stores concerned – meaning they did not cover their own store-level running costs, before any allocation of central overheads. He said the step would improve returns and free up resources for higher-return opportunities.

He described Petsense as not directly connected to the core Tractor Supply business, in contrast to the online pharmacy Allivet and the mobile veterinary provider VIP Petcare, whose acquisition closed during the quarter. CFO Kurt Barton said the repositioning was intended to produce a more profitable business better matched to the Tractor Supply stores. Which locations are affected has not been disclosed.

The restructuring carried $65.8 m in impairment and other charges, alongside $9.5 m in VIP Petcare acquisition costs and a $5.9 m inventory write-down. Gross margin nevertheless edged up to 37.1% from 36.9%, helped by product cost management and tariff-related benefits. Operating income fell 19.2% to $467.1 m and net income 16.1% to $360.7 m; diluted earnings came to $0.69 per share, or $0.81 adjusted.

Expansion continued elsewhere: 28 Tractor Supply and 3 Petsense stores opened during the quarter, taking the core chain to 2,463 outlets in 49 states. The group cut its full-year outlook to net sales growth of 2.5% to 3.5% and comparable store sales between minus 1% and flat, and withdrew the long-term financial framework presented at its investor day in December 2024. Adjusted earnings are now put at $1.90 to $2.00 per diluted share. An updated framework is due with the fourth-quarter results.