Will Tractor Supply's Margins Hold Steady Amid Rising Supply Costs?

Tractor Supply Company’s TSCO third-quarter 2025 results highlight a company navigating cost pressures with disciplined execution and strategic resilience. Management acknowledged that rising product, transportation and tariff-related costs were offset by selective price increases, combined with a stable commodity environment. As a result, the company delivered a resilient margin performance, countering inflationary pressures and rising supply costs with disciplined cost management and operational agility. Gross margin expanded 15 basis points (bps) year over year, supported by effective product costs management and consistent execution of the everyday low-price strategy. These factors more than offset the expected pressure from tariff costs.

However, selling and administrative expenses (SG&A) deleveraged 29 bps due to investments in strategic initiatives, higher incentive compensation and reduced sale-leaseback benefits. Tariff costs remain a notable pressure point, with management confirming that Tractor Supply is only halfway through the tariff impact cycle and continues to take surgical price increases where necessary, yet without seeing meaningful pushback from customers. The company’s high mix of domestically sourced C.U.E. categories provides a partial buffer, as does proactive assortment and sourcing diversification.

Looking forward, margin sustainability hinges on top-line momentum, seasonal performance and the scaling of strategic initiatives. Management expects 2026 to be a “more normalized” year, with diminishing SG&A pressure as new programs like Direct Sales begin to self-fund. This creates room for margin expansion once comp growth reaches the low-2% range. Tractor Supply expects gross margin expansion to continue into 2026, supported by disciplined cost management and effective tariff navigation.

Overall, while rising supply costs and tariffs pose ongoing challenges, Tractor Supply’s disciplined pricing, supply-chain efficiency and strong customer engagement position it well to defend and potentially expand margins in the medium term.

The Zacks Rundown for TSCO

TSCO’s shares have remained flat year to date against the industry’s fall of 1%. TSCO carries a Zacks Rank #3 (Hold).

From a valuation standpoint, TSCO trades at a forward price-to-earnings ratio of 46.8, higher than the industry’s average of 23.3.

The Zacks Consensus Estimate for TSCO’s fiscal 2025 and 2026 earnings implies a year-over-year rise of 3.4% and 10.5%, respectively. TSCO delivered a trailing four-quarter negative earnings surprise of 1.8%, on average.

Stocks to Consider

Some better-ranked stocks have been discussed below:

Ulta Beauty, Inc. ULTA operates as a specialty beauty retailer in the United States, Mexico, and Kuwait. At present, Ulta Beauty holds a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for ULTA’s current fiscal-year sales implies growth of 6.8% and earnings implies a decline of 3.8%, respectively, from the year-ago figures. ULTA delivered a trailing four-quarter earnings surprise of 16.29%, on average.

Boot Barn Holdings, Inc. BOOT operates specialty retail stores in the United States and internationally. At present, Boot Barn holds a Zacks Rank of 2.

The Zacks Consensus Estimate for Boot Barn’s current fiscal-year sales and earnings implies growth of 16.2% and 20.5%, respectively, from the year-ago figures. BOOT delivered a trailing four-quarter earnings surprise of 5.4%, on average.

Five Below, Inc. FIVE operates as a specialty value retailer in the United States. At present, Five Below holds a Zacks Rank of 2.

The Zacks Consensus Estimate for FIVE’s current fiscal-year sales and earnings implies a growth of 16.2% and 1.2%, respectively, from the year-ago figures. FIVE delivered a trailing four-quarter earnings surprise of 6.1%, on average.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research