TSCO 10-K & 10-Q changes, risk factors and insider trading

The success of our business depends in part on our ability to identify and respond promptly to evolving trends in demographics; consumer preferences, expectations and needs; and unexpected weather conditions, public health issues (including pandemics and quarantines and related shut-downs, re-openings, or other actions by the government) or natural disasters, while also managing appropriate inventory levels in our stores and distribution or fulfillment centers and managing an excellent customer experience. It is difficult to successfully predict the products and services our customer will demand. As our customers begin toincreasingly expect a more personalized experience, our ability to collect, use, and protect relevant customer data is important to our ability to effectively meet their expectations. Our ability to collect and use that data, however, is subject to a number of external factors, including the impact of legislation or regulations governing data privacy and security. In addition, each of our primary customer groups has different needs and expectations, many of which evolve as the demographics in a particular customer group change. We also need to offer more localized assortments of our merchandise to appeal to local cultural and demographic tastes within each customer group. If we do not successfully differentiate the shopping experience to meet the individual needs and expectations of or within a customer group, we may lose market share with respect to those customers.

Customer expectations about the methods by which they purchase and receive products or services are also becoming more demanding. Customers routinely use technology and a variety of electronic devices and digital platforms to rapidly compare products and prices, read product reviews, determine real-time product availability, and purchase products. Once products are purchased, customers are seeking alternate options for delivery of those products, and they often expect quick, timely, and low-price or free delivery and/or convenient pickup options. We must continually anticipate and adapt to these changes in the purchasing process. There is no guarantee that measures we take to address this, such as our store localization, direct sales, and Final Mile initiatives, will be successful or sufficient to address our customer’s needs.

An integral part of our business strategy includes the expansion of our store base through new store openings. ThisOur expansion strategy is dependent on our ability to find suitable locations, and we face competition from many retailers and other businesses for such sites. If we are unable to implement this strategy, our ability to increase our sales, profitability, and cash flow could be impaired. To the extent that we are unable to open new stores in the manner we anticipate (due to, among other reasons, site approval or unforeseen delays in construction), our sales growth may be impeded.

Although we have a rigorous real estate site selection and approval process, thereThere can be no assurance that our new store openings will be successful or result in incremental sales and profitability for the Company. New stores build their sales volumes and refine their merchandise selection over time and, as a result, generally have lower gross margins and higher operating expenses as a percentage of net sales than our more mature stores. As we continue to open new stores, there may be a negative impact on our results from a lower contribution margin of these new stores until their sales levels ramp to chain average, if at all, as well as from the impact of related pre-opening costs. Additionally, new stores can also impact the sales and contribution margins of existing stores located in close proximity.

We may, from time to time, acquire businesses we believe to be complementary to our business, such as the acquisition of Allivet, Inc. (“Allivet”) in December 2024. The success of an acquisition is based on our ability to make accurate assumptions regarding the valuation, operations, growth potential, integration, and other factors relating to the target business. Acquisitions may result in difficulties in assimilating acquired companies and may result in the diversion of our capital and our management’s attention from other business issues and opportunities. We may not be able to successfully integrate an organization that we acquire, including their personnel, financial systems, distribution, operations, and general operating procedures. If we fail to successfully integrate acquisitions, we could experience increased costs associated with operating inefficiencies which could have an adverse effect on our financial condition and results of operations. Also, while we employ several different methodologies to assess potential business opportunities, acquiredAcquired businesses may not achieve desired profitability objectives or other expectations, causing lower than expected earnings and cash flows which could adversely affect our financial performance and subsequently require impairment of long-lived assets, goodwill and other intangible assets.

Furthermore, the long-term impacts of climate change, whether involving physical risks (such as extreme weather conditions or rising sea levels) or transition risks (such as regulatory or technology changes, including the risk of evolving or diverging regulatory requirements and investor and consumer expectations in different jurisdictions) are expected to be widespread and unpredictable. These changes over time could affect, for example, consumer behavior and preferences, the availability and cost of certain consumer products and commodities, and energy (including utilities), which, in turn, may impact our ability to procure certain goods or services required for the operation of our business at the quantities and levels we or our customers require.

We rely on our distribution and transportation network, including third-party logistics providers, to provide goods to our stores and to our customers in a timely and cost-effective manner through deliveries to our distribution facilities from vendors and then from the distribution facilities or direct ship vendors to our stores or customers by various means of transportation, including shipments by sea, air, rail, and truck. Although we believe that our operations are efficient, disruptionsDisruptions due to extreme weather conditions, including snow and ice storms, flood and wind damage, hurricanes, tornadoes, extreme rain, fires and droughts have at times resulted and may in the future result in delays in the transportation and delivery of merchandise to our distribution centers, our stores, or our customers. Significant disruptions or delays in our distribution and transportation network could adversely affect sales and the satisfaction of our customers which could have a material adverse impact on our financial condition and results of operations.

We may be adversely affected by legal, regulatoryregulatory, or market responses to global climate change.

Growing concern over climate change has led policy makers in the U.S. and elsewhere to consider the enactment of legislative and regulatory proposals that would impose mandatory requirements on greenhouse gas emissions. Such laws, if enacted, are likely to impact our business in a number of ways. For example, we use natural gas, diesel fuel, gasoline and electricity in conducting our operations. Increased government regulations to limit carbon dioxide and other greenhouse gas emissions may result in increased compliance costs and legislation or regulation affecting energy inputs, which could materially affect our profitability. We may also be subject to additional and more complex reporting requirements in the future. For example, the State of California recently amended the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act that will impose broad climate-related disclosure obligations on companies doing business in California. The SECimplementation adoptedof climatecertain changeof disclosurethese rulesrequirements was paused in November 2025 and remains subject to litigation, with the result that havethe beentiming stayedand pending completionoutcomes of judicialsuch review.court proceedings are currently unclear. If enacted, the disclosure rules could significantly increase compliance burdens and associated regulatory costs and complexity. Compliance with any new or more stringent laws or requirements, or stricter interpretations of existing laws, could require additional expenditures by us or our suppliers. In addition, regulatory uncertainty, changes in applicable rules and regulations, and regulations in different jurisdictions that may conflict with each other may make compliance more costly or difficult to achieve. Our inability to appropriately respond to such changes could adversely impact our business, financial condition, results of operations or cash flows. Additionally, we could suffer adverse reputational impacts if we are not able to respond to any new regulatory or market changes in a timely fashion, on the same timeline as our peers, or at all.

In July 2024, we announced a change in our goals relating to our carbon emissions goals and DE&I efforts. In addition, in 2025, we determined not to adopt climate targets in line with the Science Based Targets initiative. Our stakeholders may not be satisfied with our efforts or the changes in our goals, which could adversely affect public perception of our business, team member morale, customer or stockholder support as well as business and/or financial performance. For example, certain of our investors, as well as shareholder advocates, are placing an emphasis on how corporations address ESG including DE&I issues in their business strategy when making investment decisions and when developing their investment theses and proxy recommendations. Additionally, certain stock indices consider ESG factors in determining which companies qualify for inclusion. If our investors, shareholder advocates, or indices in which we are included react negatively to thefuture changes in our goals, it could have a negative impact on our stock price. Future changes to our ESG goals and strategies may further adversely impact our relationship with our team members, customers, stockholders, and other stakeholders, which could result in a reduction in sales, a negative impact on our stock price, and erosion of stockholder trust.trust or consumer perception. In addition, we may be subject to regulatory scrutiny, including potential enforcement action, if any of our regulators has a negative reaction to the changes in our goals or perceives our goals to conflict with regulatory requirements.

General economic and geopolitical conditions may adversely affect our financial performance.

Our results of operations may be sensitive to changes in overall economic and geopolitical conditions that impact consumer spending, including discretionary spending. A weakening of economic conditions affecting disposable consumer income such as lower employment levels, negative consumer outlook, uncertainty, instability or changes in business or political conditions, social and political causes and movements, including government shutdowns, changes in interest rates, inflation/deflation, higher tax rates,rates or tariffs, changes in the value of the U.S. dollar relative to other currencies, higher fuel and energy costs, higher labor and healthcare costs, the impact of natural disasters or acts of terrorism, general health epidemics or pandemics, and other economic matters could reduce consumer spending or cause consumers to shift their spending to competitors. A general reduction in the level of discretionary spending, shifts in consumer discretionary spending to our competitors or shifts in discretionary spending to less profitable products sold by us could result in lower net sales, slower inventory turnover, greater markdowns on inventory, and a reduction in profitability due to lower margins. Furthermore, natural disasters or acts of terrorism, public health epidemics or pandemics, and geopolitical tensions or incidents such as war, civil unrest, terrorist attacks or other acts of violence in the United States or in other areas of the world could adversely affect consumer spending or our operations, which could have a negative effect on our results of operations and financial condition.

Our failure to attract and retain qualified team members, increases in wage,wage and labor costs, and changes in laws and other labor issues could adversely affect our financial performance.

While theThe Company selects these third-party vendors carefully, it does not control theirthird party vendors’ actions or the components or manufacture of their products. Any problems caused by these third-parties, or issues associated with their products or workforce, including customer or governmental complaints, breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, and cyber-attacks or security breaches at a vendor could subject the Company to litigation and adversely affect the Company’s ability to deliver products and services to its customers and have a material adverse effect on our results of operations and financial condition.

The politicaleconomic landscape in the U.S. contains uncertainty with respect to tax and trade policies, tariffs and regulationsregulations, and other geopolitical considerations affecting trade between the U.S. and other countries. We source a portion of our merchandise from manufacturers located outside the U.S., primarily in Asia and Central America. Major developments in tax policy orpolicy, trade relations, or diplomatic relationships, such as the disallowance of tax deductions for imported merchandise, the imposition of tariffs on imported products or retaliatory actions by countries affected by changes in U.S. tax and trade policies, could have a material adverse effect on our business, results of operations, and financial condition.

We source a portion of our merchandise from manufacturers located outside the U.S., primarily in Asia and Central America, and many of our domestic vendors have a global supply chain. The U.S. has recently imposed new or higher tariffs on certain products imported into the U.S. from China and other countries and could propose additional tariffs. The imposition of tariffs on imported products has increased our costs and could result in reduced sales and profits. The changes in certain tax and trade policies, tariffs and other regulations affecting trade between the U.S. and other countries enacted under the prior U.S. administration increased the cost of our merchandise sourced from outside of the U.S., which represents a large percentage of our overall merchandise. It remains unclear how tax or trade policies, tariffs or trade relations may change under the current U.S. administration, which could adversely affect our business, results of operations, effective income tax rate, liquidity and net income.

In addition, the imposition of tariffs by the U.S. has resulted in the adoption of tariffs by China and other countries on U.S. exports and could result in the adoption of additional tariffs by other countries as well. A resulting trade war or increasing trade tensions could have a significant adverse effect on world trade and the world economy. Further, the imposition of tariffs or other changes in world trade could have an impact on certain U.S. industries and consumersconsumers, could cause us to raise our prices and re-evaluate the sourcing of our products, and could consequently negatively impact the consumer demand for products that we sell.

Through our enterprise risk management, we continue to evaluate the impact of the effective and potential tariffs on our supply chain, costs, sales, and profitability as well as our strategies to mitigate any negative impact, including negotiating with our vendors, seeking alternative sourcing options, and adjusting retail selling prices. GivenIncreased tariffs have impacted our costs and margins, and given the uncertainty regarding the scope and duration of the current and potential tariffs, as well as the potential for additional trade actions by the U.S. or other countries, the future impact on our business, results of operations, and financial condition is uncertain but could be significant. Thus, we can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful in whole or in part. To the extent that our supply chain, costs, sales, or profitability are negatively affected by the tariffs or other trade actions, our business, financial condition, and results of operations may be materially adversely affected.

We rely on our distribution and transportation network, including third-party logistics providers, to provide goods to our stores in a timely and cost-effective manner through deliveries to our distribution facilities from vendors and then from the distribution facilities or direct ship vendors to our stores or customers by various means of transportation, including shipments by sea, air, rail, and truck. Any disruption, unanticipated expense, or operational failure related to this process could negatively affect our operations. For example, unexpected delivery delays (including delays due to weather, fuel shortages, work stoppages, global or regional health epidemics, product shortages from vendors, or other reasons) or increases in transportation costs (including increased fuel costs or a decrease in transportation capacity for overseas shipments) could significantly decrease our ability to provide adequate products to meet increased customer demand for certain products, or products at a desired price, resulting in lower sales and profitability. In addition, labor shortages or work stoppages in the transportation industry or long-term disruptions to the national and international transportation infrastructure that lead to delays or interruptions of deliveries could negatively affect our business. Also, a fire, tornado, snow or ice storm, or other disaster at one of our distribution facilities could disrupt our timely receiving, processing, and shipment of merchandise to our stores which could adversely affect our business. While we believe there are adequate reserve quantities and alternative suppliers available, shortagesShortages or interruptions in the receipt or supply of products caused by unanticipated demand, such as occurred during the COVID-19 pandemic, problems in production or distribution, financial or other difficulties of supplies, inclement weather or other economic conditions, including the availability of qualified drivers and distribution center team members, could adversely affect the availability, quality and cost of products, and our operating results.

We maintain a network of distribution facilities and have plans to build new distribution facilities and expand existing facilities to support our long-term strategic growth initiatives. Delays in opening new or expanded distribution facilities could adversely affect our future operations by slowing store growth or negatively impacting our fulfillment capabilities, which may in turn reduce revenue growth. In addition, distribution-related construction or expansion projectsprojects, such as our Final Mile initiatives, entail risks which could cause delays and cost overruns, such as: shortages of materials; shortages of skilled labor or work stoppages; unforeseen construction, scheduling, engineering, environmental, or geological problems; weather interference; fires or other casualty losses; and unanticipated cost increases. The completion date and ultimate cost of future projects could differ significantly from initial expectations due to construction-related or other reasons. We cannot guarantee that all projects will be completed on time or within established budgets.

Technology, Data Security, Cybersecurity, Business ContinuityContinuity, and Disaster Recovery Risks

We depend on information systems and technology, some of which are managed or provided by third-parties, for many activities important to our business. As do most retailers, we receive and store in our information systems certain personal and other sensitive information about our business, customers, team members, and vendors. Additionally, we also receive and process information permitting cashless payments as part of our in-store and online operations at TractorSupply.comTractorSupply.com, Petsense.com, and Petsense.comAllivet.com, and on our mobile application, some of which depend upon the secure transmission of confidential information over public networks. The information that we receive and store makes us subject to cybersecurity attacks and cyber incidents, which are occurring more frequently, are constantly evolving in nature, are becoming more sophisticated, and are being made by groups and individuals with a wide range of expertise and motives. We are the target of attempted cyber and other security threats and we continuously monitor our information technology networks and infrastructure in an effort to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact. While weWe have enhanced our cybersecurity processes and procedures in response to the general cybersecurity threat environment in recent years,years. weWe are not aware of any discrete cybersecurity threat, including as a result of any previous cybersecurity incidents, that has materially affected or is reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition. However, these security measures cannot provide absolute assurance or guarantee that we will be successful in preventing, detecting, or responding to every such breach or disruption and/or preventing the misuse of confidential information of our business, customers, team members, or vendors. Similar risks exist with respect to the third-party vendors on which we rely for aspects of our information technology support services and administrative functions, even if the attack or breach does not directly impact our systems or information.

Through our continued information technology enhancements, including the use of artificial intelligence, we believe we are able to provide an improved overall shopping environment and a Digital experience that empowers our customers to shop and interact with us from computers, tablets, smart phones, and other mobile communication devices. We use our websites, TractorSupply.comTractorSupply.com, Petsense.com, and Petsense.com,Allivet.com, and our mobile application as both a sales channel for our products and as a method of providing product, project, and other relevant information to our customers to drive in-store and online sales. Digital retailing is continually evolving and expanding, and we must effectively respond to changing customer expectations and new developments. The portion of total consumer expenditures with retailers occurring online and through mobile applications has continued to increase. The pace of this increase could further accelerate in the future. Our business has evolved from an in-store experience to interaction with customers across numerous channels, including in-store, online, mobile and social media, among others. Digital retailing is rapidly evolving, and we must keep pace with changing customer expectations and new developments by our competitors. Our customers are increasingly using mobile phones, tablets, computers, and other devices to shop and to interact with us through social media. We are making investments in our websites and mobile applications. If we are unable to make, improve, or develop relevant customer-facing technology in a timely manner, our ability to compete and our results of operations could be adversely affected. Disruptions, failures, or other performance issues with these customer-facing technology systems, including any artificial intelligence or machine learning systems we use now or may use in the future, could impair the benefits that they provide to our in-store and online business and negatively affect our relationship with our customers.

Although our Board of Directors has indicated an intention to pay future quarterly cash dividends on our common stock, any determination to pay or increase cash dividends on our common stock in the future will be based primarily upon our financial condition, results of operations, business requirements, and our Board of Directors’ continuing determination that the declaration of dividends is in the best interests of our stockholders and is in compliance with all laws and agreements applicable to the dividend. Furthermore, although our Board of Directors has authorized a share repurchase program of up to $6.50$7.50 billion, we may temporarily pause or permanently discontinue this program at any time or significantly reduce the amount of repurchases under the program. The share repurchase program does not have an expiration date. As of December 28,27, 2024,2025, the Company had remaining authorization under the share repurchase program of $487.3$1.13 million,billion, exclusive of any fees, commissions or other expenses.

Legal, RegulatoryRegulatory, and Compliance Risks

Additionally, we are subject to U.S. federal, state, and local employment laws that expose us to potential liability if we are determined to have violated such employment laws, including but not limited to, laws pertaining to minimum wage rates, overtime pay, discrimination, harassment, and wrongful termination. Compliance with these laws, including the remediation of any alleged violation, may have a material adverse effect on our business or results of operations.operations

We are subject to numerous federal, state, local, and foreign laws and governmental regulations including those relating to competition, environmental protection, personal injury, intellectual property, consumer product safety, building, land use and zoning requirements, workplace regulations, wage and hour, privacy and information security, pricing, record management, and employment law matters.matters, as well as laws, regulations and licensing requirements governing animal health products and services and pet pharmacy activities.

Our operations, including our outsourced exclusive brand manufacturing partners, are subject to regulation by the Occupational Safety and Health Administration (“OSHA”), the Food and Drug Administration (the “FDA”), the Department of Agriculture (the “USDA”), the Environmental Protection Agency (the “EPA”) and by various other federal, state, local and foreign authorities regarding the processing, packaging, storage, distribution, advertising, labeling and export of our products, including food and drug safety standards.

Founded in 1938, Tractor Supply Company (the “Company” or “Tractor Supply” or “we” or “our” or “us”) is the largest rural lifestyle retailer in the United States (“U.S.”). The Company is focused on supplying the needs of recreational farmers, ranchers, and all those who enjoy living the rural lifestyle (which we refer to as the “Out Here” lifestyle). As of December 28,27, 2024,2025, we operated 2,5022,602 retail stores in 49 states under the names Tractor Supply Company and Petsense by Tractor Supply. Our stores are located primarily in towns outlying major metropolitan markets and in rural communities. We also operate websites under the names TractorSupply.comTractorSupply.com, Petsense.com, and Petsense.com,Allivet.com as well as a Tractor Supply Company mobile application. Through our stores and e-commerce channels, we offer the following comprehensive selection of merchandise:

In fiscal 2025, we opened 99 new Tractor Supply stores in 36 states and five new Petsense by Tractor Supply stores in four states and closed four Petsense by Tractor Supply stores. In fiscal 2024, we opened 80 new Tractor Supply stores in 34 states and 11 new Petsense by Tractor Supply stores in seven states. In fiscal 2023, we opened 70 new Tractor Supply stores in 28 states and 13closed newthree Petsense by Tractor Supply stores in nine states.stores. This resulted in a selling square footage increase of approximately 4% in fiscal 2025 and 2% in fiscal 2024 and 3% in fiscal 2023.2024.

Net sales increased 2.2%4.3% to $15.52 billion in fiscal 2025 from $14.88 billion in fiscal 2024 from $14.56 billion in fiscal 2023.2024. Comparable store sales increased 1.2% in fiscal 2025 as compared to an increase of 0.2% in fiscal 2024 compared to a flat growth rate in fiscal 2023.2024. Gross profit increased 3.2%4.8% to $5.65 billion in fiscal 2025 from $5.40 billion in fiscal 2024 from $5.23 billion in fiscal 2023,2024, and gross margin increased 3416 basis points to 36.4% of net sales in fiscal 2025 from 36.3% of net sales in fiscal 20242024. fromOperating 35.9%margin decreased 41 basis points to 9.5% of net sales in fiscal 2023.2025 Operating income decreased 30 basis points tofrom 9.9% of net sales in fiscal 2024 from 10.2% of net sales in fiscal 2023.2024. For fiscal 2024,2025, net income was $1.10 billion, or $2.06 per diluted share, compared to $1.10 billion, or $2.04 per diluted share, compared to $1.11 billion, or $2.02 per diluted share, in fiscal 2023.2024.

We ended fiscal 20242025 with $251.5$194.1 million in cash and cash equivalents and outstanding long-term debt of $1.83$1.77 billion, after returning $1.03$848.5 billionmillion to our stockholders through stock repurchases and quarterly cash dividends.

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. AnAllivet Orscheln storesales will be considered a comparable store sales one year after itsthe point-of-saletransaction systemclose conversion.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.

We also have established a reserve for estimating inventory shrinkage between physical inventory counts. The reserve is established by assessing the chain-wide average shrinkage experience rate, applied to the related periods’ sales volumes. Such assessments are updated on a regular basis for the most recent individual store experiences. Our general policy is to perform physical inventories at least once a year for each store that has been open more than twelve months.

We do not believe our merchandise inventories are subject to significant risk of obsolescence in the near term. However, changes in market conditions or consumer purchasing patterns could result in the need for additional reserves. Our impairment reserves contain uncertainties because the calculations require management to make assumptions and to apply judgment regarding forecasted customer demand and the promotional environment. The estimated store inventory shrink rate is based on historical experience. We believe historical rates are a reasonably accurate reflection of future trends. Our shrinkage reserve contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding future shrinkage trends, the effect of loss prevention measuresmeasures, and merchandising strategies.

We have not made any material changes in the accounting methodology used to recognize inventory impairment reserves or shrinkage in the financial periods presented. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate impairment or shrinkage. However, if assumptions regarding consumer demand, clearance potential or inventory loss for certain products are inaccurate, we may be exposed to losses or gains that could be material. A 10% change in our inventory impairment reserve as of December 28, 2024, would have affected net income by approximately $2.5 million in fiscal 2024. A 10% change in our shrinkage reserve as of December 28,27, 2024,2025 would have affected net income by approximately $4.7 million in fiscal 2024.2025.

We self-insure a significant portion of our workers’ compensation insurance and general liability (including product liability) insurance plans. We have stop-loss insurance policies to protect from individual losses over specified dollar values. Provisions for losses related to our self-insured liabilities are based upon periodicperiodic, independentindependent, actuarially determined estimates that consider a number of factors including historical claims experience, loss development factors, and severity factors.

Our impairment loss calculationcalculations containscontain uncertainties because they require management to make assumptions and to apply judgment to qualitative factors as well as estimate future cash flows and asset fair values, including forecasting projected financial information and selecting the discount rate that reflects the risk inherent in future cash flows.

The following table sets forth, for the periods indicated, certain items in the Consolidated Statements of Income expressed as a percentagepercent of net sales.

Net sales increased 2.2%4.3% to $15.52 billion in fiscal 2025 from $14.88 billion in fiscal 20242024. The increase in net sales was driven by new store openings, the contribution from $14.56Allivet, billionand the 1.2% increase in fiscalcomparable 2023.store sales. Comparable store sales increased 0.2%1.2% from the prior year and represented $14.44$15.04 billion in sales. The comparable store average transaction value decreased 0.6%0.2% and comparable store average transaction count increased 0.8%1.4% for fiscal 2024,2025, as compared to ana decrease of 0.6% and increase of 0.4% and decrease of 0.4%0.8% in fiscal 2023,2024, respectively. Comparable store sales performancegrowth reflectswas merchandisedriven category performance within a relatively tight band, withby strength in Seasonalboth C.U.E. and seasonal categories, partially offset by softness in emergency response and discretionary categories andincluding big ticket merchandise. The growth of C.U.E. products was in line with the chain average as positive unit growth was offset by average unit price pressure, principally due to commodity price deflation.products.

The following table indicates the percentagepercent of net sales represented by each of our major product categories during fiscal 20242025 and 20232024:

Gross profit increased 3.2%4.8% to $5.65 billion in fiscal 2025 compared to $5.40 billion in fiscal 2024 compared to $5.23 billion in fiscal 2023.2024. As a percent of net sales, gross margin increased 3416 basis points to 36.4% for fiscal 2025 compared to 36.3% for fiscal 2024 compared to 35.9% for fiscal 2023.2024. The gross margin rate increase was primarily attributable to lower transportation costs along with disciplined product cost management initiatives and the continued execution of an everyday low price strategy. This wasstrategy, partially offset by unfavorablehigher producttariffs mix,and primarilyincreased fromdelivery-related growthtransportation in big ticket categories, which have below chain-average margins.costs.

Total selling, general and administrative (“SG&A”) expenses, including depreciation and amortization, increased 4.8%6.6% to $4.19 billion in fiscal 2025 from $3.93 billion in fiscal 2024 from $3.75 billion in fiscal 2023.2024. As a percent of net sales, SG&A expenses increased 6357 basis points to 26.4%27.0% from 25.8%.26.4%. The increase in SG&A as a percentagepercent of net sales was primarily attributable to the Company’s planned growth investments, which included higher depreciationinvestments and amortizationfixed and the onboarding of a new distribution center, as well as modestcost deleverage of the Company’s fixed costs given the level of comparable store sales growth. These factors were partially offset by both a disciplined focus on productivity and ongoing cost control, as well as a modest benefit from the Company’s ongoing sale-leaseback strategy.

Our effective income tax rate decreased to 22.1%21.6% for fiscal 20242025 compared to 22.7%22.1% in fiscal 2023.2024. The primarydecrease driverswas fordriven primarily by the decreasebenefit inassociated with the Company'spurchase effectiveof incometransferable federal tax rate year over year were a decrease in state income taxes and an increase in federal credits, partially offset by a reduction in the benefit from overall annual stock compensation activity.

We manage our business and financial ratios to target an investment-grade bondcredit rating, which has historically allowed flexible access to financing at reasonable market costs. As of December 28,27, 2024,2025, and the date of this filing, February 20,19, 2025,2026, the Company's senior unsecured debt is rated “Baa1,” by Moody’s Investor Services with a stable outlook and “BBB” by Standard & Poor’s with a stable outlook. These ratings have been obtained with the understanding that Moody’s Investors Services and Standard & Poor’s will continue to monitor our credit and make future adjustments to these ratings to the extent warranted. The ratings are not a recommendation to buy, sell or hold our securities, may be changed, superseded or withdrawn at any timetime, and should be evaluated independently of any other rating.

Operating activities provided net cash of $1.42$1.64 billion and $1.33$1.42 billion in fiscal 20242025 and 2023,2024, respectively. The $86.8$214.5 million increase in net cash provided by operating activities in fiscal 20242025 compared to fiscal 20232024 was due to changes in the following (in millions):

The $86.8$214.5 million increase in net cash provided by operating activities is primarily driven by both increasedthe increase in deferred income taxes, primarily attributable to the impact of the One Big Beautiful Bill Act (the “OBBBA”), and the effective management of our inventory and accounts payable and timing of accruals and related payments.payable.

Investing activities used net cash of $643.9$778.6 million and $653.1$643.9 million in fiscal 20242025 and 2023,2024, respectively. The $9.2$134.7 million decreaseincrease in net cash used in investing activities, including capital expenditures,activities in fiscal 20242025 compared to fiscal 20232024 was due to changes in the following (in millions):

Capital expenditures for information technology reflectrepresent continued support of our store growth and our Digital initiatives, as well asgrowth, improvements in mobility in our stores, our digital initiatives, increased security and compliancecompliance, and other Company-wide strategic initiatives.

Our projected capital expenditures, net of sale leasebacksale-leaseback proceeds, for fiscal 20252026 are currently estimated to be in athe range of approximately $650.0$675.0 million to $725.0 million. The capital expenditures include a plan to open approximately 90100 Tractor Supply stores, continuingcontinue Project Fusion remodels and side lot garden center transformations, complete construction on our Nampa, Idaho distribution center, and openingcontinue approximatelyinvesting 10in newstore Petsenseand bydigital Tractor Supply stores.technology.

Financing activities used cash of $922.5$914.1 million and $486.4$922.5 million in fiscal 20242025 and 2023,2024, respectively. The $436.1$8.4 million increasedecrease in net cash used in financing activities in fiscal 2024,2025 compared to fiscal 2023,2024 was due to changes in the following (in millions):

The Company’s Board of Directors has authorized common stock repurchases under a share repurchase program which was announcedmost inrecently increased by $1.00 billion on February 2007.12, 2025. The authorizationtotal amount ofauthorized under the program, which has been increased from time to time, is currently authorized for up to $6.50$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 December 27, 2025, the Company had remaining authorization under the share repurchase program of $1.13 billion, exclusive of any fees, commissions or other expenses.

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, store closures, estimated results of operations in future periods (including, but not limited to, net sales, comparable store sales, operating margins or operating margin rates, adjusted operating margin rates, net income, adjusted net income, earnings per diluted share and adjusted 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.

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 arehave been considered comparable store sales one year after the transaction close date ofsince December 30, 2024.2025. VIP Petcare sales will be considered comparable store sales after one year. Comparable store sales are intended only as supplemental information and are not a substitute for net sales presented in accordance with U.S. GAAP.

Fiscal Three Months (FirstSecond Quarter) Ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025 Net sales for the firstsecond three monthsquarter of fiscal 2026 increased 3.6%2.3% to $3.59$4.54 billion from $3.47$4.44 billion in the firstsecond three monthsquarter of fiscal 2025. The increase in net sales was driven primarily by new store openingsopenings, and,partially tooffset by a lesserdecline extent,of the 0.5% increase1.5% in comparable store sales. In the firstsecond three monthsquarter of fiscal 2025, net sales increased 2.1%4.5% and comparable store sales decreasedincreased 0.9%.1.5%.

Sales from new stores and VIP Petcare were $109.7$164.8 million for the firstsecond three monthsquarter of fiscal 2026, which represented 3.13.7 percentage points of the 3.6%2.3% net sales increase over thesecond first three months ofquarter fiscal 2025 net sales. For the firstsecond three monthsquarter of fiscal 2025, sales from stores open less than one year were $97.9$126.7 million, which represented 2.93.0 percentage points of the 2.1%4.5% increase over thesecond first three months ofquarter fiscal 2024 net sales.

The following table summarizes store growth for the fiscal three months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025:

The following table indicates the percentage of net sales represented by each of our major product categories for the fiscal three months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025:

Selling, general and administrative (“SG&A”) expenses, including depreciationdepreciation, amortization and amortization,impairment, increased 6.1%14.4% to $1.07$1.22 billion for the firstsecond three monthsquarter of fiscal 2026 from $1.01$1.06 billion for the firstsecond three monthsquarter of fiscal 2025. As a percent of net sales, SG&A expenses increased 70284 basis points to 29.7%26.8% in the firstsecond three monthsquarter of fiscal 2026 from 29.0%23.9% forin the firstsecond three monthsquarter of fiscal 2025. The increase in SG&A as a percent of net sales was primarily attributable to deleverageimpairment and other charges for the Petsense business of fixed$65.8 million due to a restructuring of the business as well as acquisition costs givenof $9.5 million for the comparableacquisition storeof VIP Petcare. On an adjusted basis, SG&A expenses increased 7.3% to $1.14 billion for the second quarter of fiscal 2026. As a percent of net sales, adjusted SG&A expenses in the second quarter of fiscal 2026 increased 118 basis points to 25.1%. The increase in adjusted SG&A as a percent of net sales performancewas primarily attributable to deleverage from lower comparable sales, as well as higher medical claims and anlegal acceleratedsettlement new store opening cadence, partially offset by an ongoing focus on productivity and cost discipline.expenses.

Operating income for the firstsecond three monthsquarter of fiscal 2026 decreased 6.3%19.2% to $233.4$467.1 million comparedfrom to $249.1$577.8 million in the firstsecond three monthsquarter of fiscal 2025. On an adjusted basis, operating income for the second quarter of fiscal 2026 decreased 5.1% to $548.3 million.

The effective income tax rate was 23.2%19.8% in the firstsecond three monthsquarter of fiscal 2026 compared to 21.8%23.2% in the firstsecond three monthsquarter of fiscal 2025. The increasedecrease in the effective income tax rate in the firstsecond three monthsquarter of fiscal 2026 compared to the firstsecond three monthsquarter of fiscal 2025 was driven primarily byreflects the timingincome tax benefit associated with the purchase of discretetransferable itemsfederal inincome tax credits, as well as the priorone-time yearcharges fiscalassociated quarter.with the restructuring of the Petsense business and the acquisition costs associated with VIP Petcare.

Net income for the firstsecond three monthsquarter of fiscal 2026 decreased 8.3%16.1% to $164.5$360.7 million, or $0.31$0.69 per diluted share, as compared to net income of $179.4$430.0 million, or $0.34$0.81 per diluted share, for the firstsecond three monthsquarter of fiscal 2025. On an adjusted basis, net income for the second quarter of fiscal 2026 was $423.5 million or $0.81 per diluted share.

During the firstsecond three monthsquarter of fiscal 2026, we repurchased approximately 2.33.9 million shares of the Company’s common stock at a total cost of $118.0$135.3 million, excluding the 1% excise tax, as part of our share repurchase program and paid quarterly cash dividends totaling $126.4$125.6 million, returning $244.4$260.9 million of capital to our stockholders.

Operating activities provided net cash of $91.1$653.1 million and $216.8$1.00 millionbillion in the first threesix months of fiscal 2026 and fiscal 2025, respectively. The $125.7$349.5 million decrease in net cash provided by operating activities in the first threesix months of fiscal 2026 compared to the first threesix months of fiscal 2025 is due to changes in the following operating activities (in millions):

The $125.7$349.5 million decrease in net cash provided by operating activities in the first threesix months of fiscal 2026 compared to the first threesix months of fiscal 2025 was primarily driven by the purchase of transferable federal tax credits within income taxes, as well as management of inventory and accounts payable. These decreases were partially offset by the increase in accrued expenses, primarily driven by the purchase of a federal tax credit which was executed during the second quarter of fiscal 2026 and will be paid in the first quarter of fiscal 2027.

Investing activities used net cash of $171.3$495.6 million and $261.0$448.7 million in the first threesix months of fiscal 2026 and fiscal 2025, respectively. The $89.7$46.9 million decreaseincrease in net cash used in investing activities in the first threesix months of fiscal 2026 compared to the first threesix months of fiscal 2025 is due to changes in the following investing activities (in millions):

The increase in capital expenditures for new stores, relocated stores and stores not yet opened in the first threesix 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 threesix months of fiscal 2026 included the opening of 4068 new Tractor Supply stores compared to 1539 new Tractor Supply stores during the first threesix months of fiscal 2025. Partially offsetting the increase in total capital expenditures, proceeds from the sale of property and equipment increased in the first threesix months of fiscal 2026 primarily driven by the sale of both new, fixed-fee development stores,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 andinclusive of side lot gardentransformations centerand transformations.other enhancements.

The increase in capital expenditures for distribution center capacity and improvements in the first threesix months of fiscal 2026 is primarily driven by the construction of our newest distribution center in Nampa, IdahoIdaho, which is anticipated to begin operations in the fourth quarter of fiscal 2026.

The Company used net cash of $140.6$129.8 million for the acquisition of VIP Petcare in the first six months of fiscal 2026 and net cash of $139.9 million for the acquisition of Allivet in the first threesix 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 andinclusive of side lot gardentransformations centerand transformations,other enhancements, complete construction of our Nampa, Idaho distribution center, and continue investing in store and digital technology.

Cash Flows ProvidedUsed byin Financing Activities

Financing activities providedused net cash of $110.4$120.0 million and $24.5$579.6 million in the first threesix months of fiscal 2026 and fiscal 2025, respectively. The $85.9$459.6 million increasedecrease in net cash providedused byin financing activities in the first threesix months of fiscal 2026 compared to the first threesix months of fiscal 2025 is due to changes in the following (in millions):

The $85.9$459.6 million increasedecrease in net cash providedused byin financing activities is primarily due to incremental borrowings under the Company’s Revolving Credit Facility in the first threesix months of fiscal 2026, partially offset by a modestan increase in the repurchase of common stock.

During the first threesix months of fiscal 2026 and fiscal 2025, the Company's Board of Directors declared the following cash dividends:

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 MarchJune 28,27, 2026, the Company had remaining authorization under the share repurchase program of $1.01$873.4 billion,million, 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 and six months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, respectively (in thousands, except per share amounts):

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 MarchJune 28,27, 2026, the Company had contractual commitments of approximately $55.3$34.8 million related to the construction of our newest distribution center in Nampa, Idaho. As of MarchJune 28,27, 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.

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.10-K other than the impairment charges recognized in the second quarter of fiscal 2026 related to a restructuring of the Petsense business.

For recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of MarchJune 28,27, 2026, refer to Note 1 to the Consolidated Financial Statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.