Executive Summary

Q2 2025 delivered a modest beat on both revenue and EPS: net sales $4.44B vs Street $4.40B*, EPS $0.81 vs Street $0.80*; comps turned positive (+1.5%) with transactions +1.0% and ticket +0.5% . The quarter was the largest sales quarter ever per management .
Gross margin expanded 31 bps YoY to 36.94% on product cost discipline and everyday low price execution, while SG&A (ex-D&A) deleveraged 33 bps on planned growth investments; operating margin was 13.01% vs 13.22% last year .
FY25 guidance was reaffirmed (Net Sales +4% to +8%, comps 0% to +4%, Op margin 9.5%–9.9%, EPS $2.00–$2.18) and the buyback plan was reduced to $325–$375M for the year (down from January’s $525–$600M), reflecting disciplined capital allocation amid tariff-related working capital needs .
Catalysts: sequential comp acceleration into June and early Q3, Final Mile rollout (AOV ~$400, 75k Q2 deliveries, hubs+spokes reaching ~25% of chain by year-end) ; counterbalancing pressures include tariffs (primarily 2H impact), SG&A investments, and lower buyback pacing .

What Went Well and What Went Wrong

What Went Well

Comps inflected positive: +1.5% driven by transactions (+1.0%) and ticket (+0.5%); C.U.E. led, with “record Chick Days” and strong seasonal execution (garden centers and seasonal tents) .
Gross margin expansion: +31 bps to 36.94% on disciplined product cost management and everyday low pricing; big-ticket outperformed expectations .
Strategic and operational momentum: Final Mile scaling (145 hubs, +220 spokes; ~15% store coverage mid-year, targeting ~25% by YE), AOV near $400, 10x lower return rate vs alternatives; digital sales mid-single-digit growth with ~80% store-fulfilled .

Quote: “We delivered record results… our largest sales quarter ever, reaching $4.44 billion.” — Hal Lawton, CEO

What Went Wrong

SG&A deleverage: SG&A as % of sales rose to 23.9% (incl D&A 26.64%) on planned growth investments and modest fixed-cost deleverage .
Discretionary softness: pressure in select discretionary categories (e.g., pet hard lines, gun safes, air compressors); later-cycle spring businesses underperformed in Q2 (chemicals/sprayers/pressure washers), picking up into Q3 .
Tariff and transportation outlook: tariffs expected to create slight gross margin pressure in 2H; lapping prior transportation efficiencies implies modestly higher year-over-year transportation costs in the back half .

Financial Results

Headline metrics vs prior year and prior quarter

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($USD Billions)	$4.25	$3.47	$4.44
Diluted EPS ($USD)	$0.79	$0.34	$0.81
Comparable Store Sales (%)	(0.5)%	(0.9)%	1.5%
Gross Margin (%)	36.63%	36.21%	36.94%
SG&A (% of Sales, excl D&A)	20.84%	25.56%	21.17%
Depreciation & Amortization (% of Sales)	2.57%	3.46%	2.75%
Operating Margin (%)	13.22%	7.19%	13.01%
Net Income ($USD Billions)	$0.425	$0.179	$0.430

Actual vs Wall Street consensus (S&P Global)

Metric	Q2 2025 Consensus	Q2 2025 Actual
Revenue ($USD Billions)	$4.396*	$4.440
Primary EPS ($USD)	$0.80*	$0.81
Revenue - # of Estimates	26*	—
Primary EPS - # of Estimates	29*	—

Values retrieved from S&P Global.*

Bolded interpretation: Revenue and EPS were both modest beats versus consensus.*

Selected operational KPIs

KPI	Q2 2024	Q1 2025	Q2 2025
Average Transaction Value ($)	$63.46	$56.87	$63.68
Comp Avg Transaction Value (%)	0.1%	(2.9)%	0.5%
Comp Avg Transaction Count (%)	(0.6)%	2.1%	1.0%
Exclusive Brands (% of Sales)	26.7%	30.7%	27.6%
Imports (% of Sales)	10.9%	11.2%	10.9%
Stores End of Period (TSCO + Petsense)	2,459	2,517	2,542
Avg Inventory per Store ($000)	$1,138.0	$1,202.1	$1,155.0
Inventory Turns (annualized)	3.64	3.00	3.60
Capex – Quarter Total ($MM)	$192.6	$141.3	$210.3

Guidance Changes

Metric	Period	Previous Guidance (Jan 30, 2025)	Updated/Current Guidance	Change
Net Sales Growth	FY 2025	+5% to +7%	+4% to +8% (reaffirmed Jul 24)	Range widened
Comparable Store Sales	FY 2025	+1% to +3%	0% to +4% (reaffirmed Jul 24)	Lowered low-end
Operating Margin Rate	FY 2025	9.6% to 10.0%	9.5% to 9.9% (reaffirmed Jul 24)	Trimmed
Net Income ($B)	FY 2025	$1.12–$1.18	$1.07–$1.17 (reaffirmed Jul 24)	Lowered
EPS (Diluted) ($)	FY 2025	$2.10–$2.22	$2.00–$2.18 (reaffirmed Jul 24)	Lowered
Share Repurchases ($MM)	FY 2025	$525–$600	$325–$375 (updated, Jul 24)	Lowered
Capital Expenditures, net ($MM)	FY 2025	$650–$725	Reaffirmed approach; no Q2 update	Maintained
Interest Expense ($MM)	FY 2025	$65–$70 (CFO)	Not updated in Q2 release	Maintained
Effective Tax Rate (%)	FY 2025	22.2%–22.5% (CFO)	Not updated in Q2 release	Maintained
Dividend per Share (Quarterly) ($)	Current	$0.23 declared Aug 7	$0.23 in Q2 financials	Maintained

Earnings Call Themes & Trends

Topic	Q4 2024 (Q-2)	Q1 2025 (Q-1)	Q2 2025 (Current)	Trend
Demand/mix and deflation	Strong transactions; deflation ~100 bps drag in Q4; big-ticket resilience; guided comps +1–3% FY25	Spring delayed; comps (0.9)% with transactions +2.1%; deflation ~50 bps; C.U.E. unit growth high	Comps +1.5% with transactions +1.0% and ticket +0.5%; deflation impact “neutral”; sequential improvement into June/July	Improving comps, deflation easing
Tariffs	No FY25 tariffs assumed in Jan guide; imports ~12% of sales	Embedded 90-day tariff receipts into Q2 view; multiple scenarios for 2H pricing elasticity	Tariffs primarily 2H pressure; limited AUR impact to date; surgical pricing planned	Elevated uncertainty, managed
Final Mile & supply chain	New DC; transport efficiencies helped gross margin	Launching direct sales and Final Mile; scaling hubs and localized archetypes	145 hubs + 220 spokes; ~15% coverage mid-year, targeting ~25% YE; AOV ~$400; 75k Q2 deliveries; 10x lower returns	Scaling; strong early metrics
Customer & loyalty	Neighbor’s Club 38M; robust loyalty	40M club; record retention; Chick Days building engagement	41M members; >80% sales; record customer metrics; rural macro supportive	Strengthening
Pet & Rx	Allivet accretive long-term; RX seasonality modest	Integrated TractorSupply Rx; early traction	Pet trough passed; resets and RX momentum; Purina Days event	Gradual recovery

Management Commentary

“We grew net sales by 4.5% with a comparable store sales increase of 1.5%. This was our largest sales quarter ever, reaching $4.44 billion. Diluted EPS was $0.81.” — Hal Lawton, CEO
“Gross margin expanded by 31 basis points to 36.9%, driven by disciplined product cost management and consistent execution of our ongoing everyday low-price strategy.” — Kurt Barton, CFO
“By year-end, we anticipate having about 25% of the chain with Final Mile capabilities… average order size of nearly $400… a 10 times lower return rate.” — Colin Yankee, CSCO
“We remain confident in our outlook… and reaffirming our fiscal 2025 guidance.” — Kurt Barton, CFO

Q&A Highlights

Back-half acceleration: Management expects a “step change” in 2H comps on balanced ticket/transactions, favorable weather laps, and rural macro strength; momentum strengthened into July .
Tariffs and pricing: 2H AUR uplift expected from Q categories and tariff timing; surgical, SKU-level pricing with elasticity monitoring; substantial vendor negotiations and diversified sourcing underway .
Final Mile economics: Hubs+spokes rollout with strong customer satisfaction and repeat engagement; ability to throttle expense; revenue from direct sales, online bulk orders, and in-store delivery enablement .
Buyback pacing: FY buyback lowered to $325–$375M to fund inventory working capital amid tariffs and higher rates; still targeting ~1% float reduction .
Competitive landscape: TSCO leverages legendary service, assortment, and value to compete across fragmented rural competitors and national entrants .

Estimates Context

Q2 2025 results modestly beat consensus: revenue $4.44B vs $4.40B*, EPS $0.81 vs $0.80*; 26 revenue estimates and 29 EPS estimates were recorded.*
FY25 guidance reaffirmation suggests Street should focus on 2H comp acceleration drivers (transactions, AUR turn, weather laps) against tariff-driven gross margin headwinds and moderated buybacks .