Shares of Rural Lifestyle Retailer tractor supply (TSCO 1.60%) The company got a shock after its first quarter results came out this week.
The market reaction was understandable. Revenue grew only 3.6% year over year to $3.59 billion, comparable store sales increased only 0.5%, and earnings per share fell to $0.31 from $0.34 in the year-ago quarter.
What was the weight in the first quarter? Management said its companion animal products line grew comparable sales by more than 100 basis points.
But the more important question for investors now is whether this quarter exposed a broken story or simply a stressed category inside a business that still looks fairly sustainable.
Image Source: Getty Images.
a weak spot
Companion animals, a product category largely dependent on pet food, are no small part of the business. Tractor Supply’s 2025 annual report shows the category accounted for 24% of net sales last year, which helps explain why weakness in the category could spook investors.
During Tractor Supply’s first-quarter earnings call, CEO Hal Lawton said, “Dog ownership, particularly in larger breeds, has come under pressure (…)” Additionally, Lawton said the company under-indexes in cats and fresh and premium nutrition – parts of the companion animal segment that have been performing well recently.
Combining this weak segment with weak growth in other areas, it is no surprise that the company’s comparable store sales are struggling.
Additionally, the company’s selling, general and administrative (SG&A) expenses increased 6.1% in the quarter – faster than revenue. And management said one reason for the deleverage was comparable store sales running below the 2% breakeven threshold.
It is also worth noting that the broader growth profile had already cooled before this report. Tractor Supply reported 3.9% comparable sales growth in the third quarter of 2025. It declined to 0.3% in the fourth quarter. And now it has come down to 0.5% in Q1.
some rays of hope
Still, I don’t think the quarter was as weak as the stock’s reaction suggests.
Management said four out of five product categories saw positive sales growth. And six of its seven geographic regions were positive. Additionally, digital sales grew at a strong double-digit rate. And management said high-value customers are on board, with the number of active customers continuing to grow. Finally, the company said its big-ticket categories grew at a mid-single-digit rate.
There were also some utility timing issues in the quarter. During the call, Lawton said there was more emphasis on pet sales in the first quarter than the rest of the year. Therefore the weakness in the category had a much greater impact on the quarter than the negative impact it had on other periods.
What’s more, Tractor Supply reaffirmed its 2026 outlook for net sales growth of 4% to 6%, comparable sales growth of 1% to 3% and earnings of $2.13 to $2.23 per share. And Chief Financial Officer Kurt Barton also said the company expects strong earnings per share Growth in Q2 and Q4.
Lawton went even further during the call, saying, “We don’t view this as a structurally low-growth business.”
And the company is addressing its pet food issue. The company said it is expanding fresh and frozen pet food from about 80 stores to more than 250 stores by the end of May, and will reach 700 stores by the end of the year. Management also said that approximately one-third of customers who purchased Freshpet in the initial pilot were either new to the category or had reactivated it at Tractor Supply.
today’s change
(-1.60%) $-0.64
current price
$38.94
key data points
market cap
$21B
day limit
$38.30 -$40.14
52wk range
$38.30 -$63.99
volume
624K
average volume
7.1M
gross margin
33.24%
dividend yield
2.35%
time to buy?
At Wednesday’s close, Tractor Supply had a $0.96 annual dividend vest dividend yield Of about 2.5%. It’s a much more interesting starting point than what investors were getting before this week’s selloff. And this comes from a company that has raised its dividend for the 17th consecutive year.
Valuation also looks better now.
Shares are trading at around 19 multiple times earnings – A valuation that’s borderline bargain territory for a high-quality company like Tractor Supply.
After all, Tractor Supply still has a business mix that provides flexibility. Livestock, horse, agriculture, and companion animals – the need-based categories that keep customers coming back in any market – together account for 51% of 2025 sales.
Overall, I think the decline in the stock is a good buying opportunity for investors seeking dividend income from a sustainable business.