TSCO: Hard Reset Priced In; Still Need to Move Past Q2 Shortfall & Likely Tough Q3; Cutting Estimates & PT

研报英文原文证据摘录

TSCO: Hard Reset Priced In; Still Need to Move Past Q2 Shortfall & Likely Tough Q3; Cutting Estimates & PT

Tractor Supply Company Equity Research

Topics that matter most into earnings

• Our -1% Q2 comp incorporates April improvement (likely +LSD%), but softer May/June trends

(-LSD%) via tougher compares, choppy weather and lingering consumer/macro pressures. July

is TSCO's hardest compare of the year (+8-9%), and our -3% Q3 comp sits -350bps below

Consensus, with our Q4 model shaking at flat (Q2-Q4 2-year in the 0-1% range). Needless to say,

FY26 is shaping up to be a lost year for TSCO, and as the page turns to FY27 recovery potential,

any signs of Pet/pricing progress would be well received.

• Sentiment is near all-time lows (short interest ~6%), and it made sense for TSCO to hold off on

a reset until better visibility into July/Q3. That said, a FY26 cut is well telegraphed and estimates

need to be low enough for shares to step out of the penalty box.

○ We believe a more realistic FY26 outlook could include: 1) +1%-3% sales growth (vs. +4%-6%

prior); 2) Comps of -1%-2% (vs. +1%-3%); 3) EBIT margins of 8.4%-8.7% (vs. 9.3%-9.6%); and

4) EPS of $1.80-$1.90 (vs. $2.13-$2.23 and Consensus of $2.09).

• With a host of new assortment initiatives (fresh/frozen, cat, in-store refreshes, etc.) aimed at

improving Pet market share, signs of progress represent a key driver in the months ahead. Further,

we look for added color around the VIP Petcare acquisition (rationale, timing, integration costs,

etc.).

Key takes from our June catch up

• TSCO is acting with a sense of urgency around initiatives (in-store cat/dog area refreshes landing

in Q2, coolers for fresh/frozen food rollout, etc.). TSCO's EDLP strategy was a source of share in