A New Field to Plow

Research evidence excerpt

A New Field to Plow

conjunction with a potentially more achievable Quarterly EPS ($)

framework, we think this could create an opportunity for sentiment to gradually 2026e 2026e 2027e 2027e

Quarter 2025 Prior Current Prior Current

improve. Focus now shifts to FY27 earnings power, and the removal of the financial Q1 0.34 - 0.31a - 0.33

framework opens three potential paths for how investors may interpret the reset: 1) Q2 0.81 - 0.81a - 0.82

Q3 0.49 0.51 0.41 - 0.47

new financial targets will be contingent on an industry recovery, 2) TSCO will resize Q4 0.43 0.46 0.42 - 0.47

its cost structure to protect margins in a slower demand environment, or 3) FY27 e = Morgan Stanley Research estimates, a = Actual Company reported data

will be framed as a transition year to reposition the business. We view the first two

as the more likely outcomes.

What Does the Withdrawal of the Long-Term Framework Actually Mean? For the

past several years, the central debate around the stock has remained largely

unchanged: when does demand recover? Following extraordinary performance

during the pandemic period (avg. comp of ~15% from 2020-2022), driven by rural

migration, elevated pet ownership, and outsized spending across the farm and

hobby category, TSCO assumed much of that demand would prove durable. Instead,

sales trends have steadily decelerated (avg. comp over the last 3 years at ~0.5%),

exposing a materially weaker underlying franchise than previously anticipated.

Importantly, the pet category, a cornerstone of the business, is beginning to lag the

industry, although fresh pet food momentum, brand assortment expansion, and

premium nutrition initiatives remain intact. Morgan Stanley does and seeks to do business with

companies covered in Morgan Stanley Research. As a result,