Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 28, 2024 (the “2024 Form 10-K”) and subsequent Quarterly Reports on Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements and information. The forward-looking statements included herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). All statements, other than statements of historical facts, which address activities, events, or developments that we expect or anticipate will or may occur in the future, including sales and earnings growth, new store growth, estimated results of operations in future periods (including, but not limited to, sales, comparable store sales, operating margins, net income, and earnings per diluted share), the declaration and payment of dividends, the timing and amount of share repurchases, future capital expenditures (including their timing, amount and nature), sale-leasebacks, acquisitions, business strategy, strategic initiatives, expansion and growth of our business operations, and other such matters are forward-looking statements. Forward-looking statements are usually identified by or are associated with such words as “will,” “plans,” “intend,” “expect,” “believe,” “anticipate,” “optimistic,” “forecasted” and similar terminology. These forward-looking statements may be affected by certain risks and uncertainties, any one, or a combination of which, could materially affect the results of our operations. To take advantage of the safe harbor provided by the PSLRA, we have identified certain factors, in Part I, Item 1A. “Risk Factors” in our 2024 Form 10-K, including the impact of the recent tariff announcements and the corresponding macroeconomic pressures, which may cause actual results to differ materially from those expressed in any forward-looking statements. These “Risk Factors” may be updated from time to time in our quarterly reports on Form 10-Q or other subsequent filings with the SEC.

Forward-looking statements made by or on behalf of the Company are based on our knowledge of our business and the environment in which we operate, but because of the factors listed above or other factors, actual results could differ materially from those reflected by any forward-looking statements. Consequently, all of the forward-looking statements made are qualified by these cautionary statements and those contained in the Company’s 2024 Form 10-K and other filings with the Securities and Exchange Commission (the “SEC”). There can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or our business and operations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

Seasonality and Weather

Our business is seasonal. Historically, our sales and profits are the highest in the second and fourth fiscal quarters due to the sale of seasonal products. We usually experience our highest inventory and accounts payable balances during our first fiscal quarter for purchases of seasonal products to support the higher sales volume of the spring selling season, and again during our third fiscal quarter to support the higher sales volume of the cold weather selling season. We believe that our business can be more accurately assessed by focusing on the performance of the halves, not the quarters, due to the fact that different weather patterns from year-to-year can shift the timing of sales and profits between quarters, particularly between the first and second fiscal quarters and the third and fourth fiscal quarters.

Historically, weather conditions, including unseasonably warm weather in the fall and winter months and unseasonably cool weather in the spring and summer months, have unfavorably affected the timing and volume of our sales and results of operations. In addition, extreme weather conditions, including snow and ice storms, flood and wind damage, hurricanes, tornadoes, extreme rain, and droughts have impacted operating results both negatively and positively, depending on the severity and length of these conditions. Our strategy is to manage product flow and adjust merchandise assortments and depth of inventory to capitalize on seasonal demand trends, but there is no guarantee that we will be able to successfully execute this strategy. For more information regarding the risks we face in this regard, see Item 1A. “Risk Factors—Weather and Climate Risks” in our 2024 Form 10-K.

						16

Performance Metrics

Comparable Store Metrics

Comparable store metrics are a key performance indicator used in the retail industry and by the Company to measure the performance of the underlying business. Our comparable store metrics are calculated on an annual basis using sales generated from all stores open at least one year and all online sales and exclude certain adjustments to net sales. Stores closed during either of the years being compared are removed from our comparable store metrics calculations. Stores relocated during either of the years being compared are not removed from our comparable store metrics calculations. If the effect of relocated stores on our comparable store metrics calculations became material, we would remove relocated stores from the calculations. Allivet sales will be considered comparable store sales one year after the transaction close date of December 30, 2024. Comparable store sales are intended only as supplemental information and are not a substitute for net sales presented in accordance with U.S. GAAP.

Transaction Count and Transaction Value

Transaction count and transaction value metrics are used by the Company to measure sales performance. Transaction count represents the number of customer transactions during a given period. Transaction value represents the average amount paid per transaction and is calculated as net sales divided by the total number of customer transactions during a given period.

Results of Operations

The following table sets forth, for the periods indicated, certain items in the Consolidated Statements of Income expressed as a percentage of net sales.

			For the Fiscal Three
			Months Ended
			March 29, 2025						March 30, 2024
Net sales			100.00%						100.00%
Cost of merchandise sold			63.79						64.04
Gross profit			36.21						35.96
Selling, general and administrative expenses			25.56						25.14
Depreciation and amortization			3.46						3.07
Operating income			7.19						7.75
Interest expense, net			0.57						0.35
Income before income taxes			6.62						7.40
Income tax expense			1.45						1.56
Net income			5.17%						5.84%

Fiscal Three Months (First Quarter) Ended March 29, 2025 and March 30, 2024

Net sales for the first quarter of fiscal 2025 increased 2.1% to $3.47 billion from $3.39 billion in the first quarter of fiscal 2024. The increase in net sales was driven by new store openings and the contribution from Allivet, partially offset by the comparable store sales decrease of 0.9%. In the first quarter of fiscal 2024, net sales increased 2.9% and comparable store sales increased 1.1%.

The comparable store sales results for the first quarter of fiscal 2025 included a comparable average transaction count increase of 2.1% and a comparable average ticket decrease of 2.9%. Comparable average transaction count growth reflects strength in year-round categories including consumable, usable and edible products and winter seasonal merchandise. Transaction growth was offset by a lower average ticket, driven primarily by a negative product mix from lower spring seasonal goods including related big ticket categories.

						17

Sales from new stores, including Allivet sales, were $97.9 million for the first quarter of fiscal 2025, which represented 2.9 percentage points of the 2.1% net sales increase over first quarter fiscal 2024 net sales. For the first quarter of fiscal 2024, sales from stores open less than one year were $65.3 million, which represented 2.0 percentage points of the 2.9% increase over first quarter fiscal 2023 net sales.

The following table summarizes store growth for the fiscal three months ended March 29, 2025 and March 30, 2024:

			Fiscal Three Months Ended
Store Count Information:			March 29, 2025						March 30, 2024
Tractor Supply
Beginning of period			2,296						2,216
New stores opened			15						17
Stores closed			—						—
End of period			2,311						2,233
Petsense by Tractor Supply
Beginning of period			206						198
New stores opened			2						4
Stores closed			(2)						—
End of period			206						202
Consolidated end of period			2,517						2,435
Stores relocated			3						1

The following table indicates the percentage of net sales represented by each of our major product categories for the fiscal three months ended March 29, 2025 and March 30, 2024:

			Percent of Net Sales
			Fiscal Three Months Ended
Product Category:			March 29, 2025						March 30, 2024
Livestock, Equine, & Agriculture			28		%				28		%
Companion Animal			28		%				27		%
Seasonal & Recreation			21		%				21		%
Truck, Tool, & Hardware			14		%				15		%
Clothing, Gift, & Décor			9		%				9		%
Total			100		%				100		%

Gross profit increased 2.8% to $1.26 billion for the first quarter of fiscal 2025 from $1.22 billion for the first quarter of fiscal 2024. As a percent of net sales, gross margin in the first quarter of fiscal 2025 increased 25 basis points to 36.2% from 36.0% in the first quarter of fiscal 2024. The gross margin rate increase was primarily attributable to disciplined product cost management and the continued execution of an everyday low price strategy.

Selling, general and administrative (“SG&A”) expenses, including depreciation and amortization, increased 5.1% to $1.01 billion for the first quarter of fiscal 2025 from $957.7 million for the first quarter of fiscal 2024. As a percent of net sales, SG&A expenses increased 81 basis points to 29.0% from 28.2% in the first quarter of fiscal 2024. The increase in SG&A as a percent of net sales was primarily attributable to planned growth investments, which included higher depreciation and amortization and the operations of the Company’s tenth distribution center, and deleverage of fixed costs given the comparable store sales decline. These factors were partially offset by ongoing focus on productivity and cost control, as well as a modest benefit from the Company’s ongoing sale-leaseback strategy.

Operating income for the first quarter of fiscal 2025 decreased 5.3% to $249.1 million from $263.1 million in the first quarter of fiscal 2024.

						18

The effective income tax rate was 21.8% in the first quarter of fiscal 2025 compared to 21.1% in the first quarter of fiscal 2024. The increase in the effective income tax rate in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024 was driven primarily by a decrease in stock compensation activity.

Net income for the first quarter of fiscal 2025 decreased 9.5% to $179.4 million, or $0.34 per diluted share, as compared to net income of $198.2 million, or $0.37 per diluted share, for the first quarter of fiscal 2024.

During the first quarter of fiscal 2025, we repurchased approximately 1.7 million shares of the Company’s common stock at a total cost of $94.0 million, excluding the 1% excise tax, as part of our share repurchase program and paid quarterly cash dividends totaling $122.4 million, returning $216.4 million of capital to our stockholders.

Liquidity and Capital Resources

In addition to normal operating expenses, our primary ongoing cash requirements are for new store expansion, existing store remodeling and improvements, store relocations, distribution facility capacity and improvements, information technology, inventory purchases, repayment of existing borrowings under our debt facilities, share repurchases, cash dividends, and selective acquisitions as opportunities arise.

Our primary ongoing sources of liquidity are existing cash balances, cash provided from operations, remaining funds available under our debt facilities, operating and finance leases, and normal trade credit. Our inventory and accounts payable levels typically build in the first and third fiscal quarters to support the higher sales volume of the spring and cold-weather selling seasons, respectively.

We plan to continue to leverage our sale-leaseback program on both existing owned stores and future new store openings in order to help fund our planned owned store development over the next several years.

We believe that our existing cash balances, expected cash flow from future operations, funds available under our debt facilities, operating and finance leases, normal trade credit, and access to the long-term debt capital markets will be sufficient to fund our operations and our capital expenditure needs, including new store openings, existing store remodeling and improvements, store relocations, distribution facility capacity and improvements, and information technology improvements, for the next 12 months and the foreseeable future.

Debt

The following table summarizes the Company’s outstanding debt as of the dates indicated (in millions):

						March 29, 2025						December 28, 2024						March 30, 2024
5.25% Senior Notes						$	750.0					$	750.0					$	750.0
1.75% Senior Notes						650.0						650.0						650.0
3.70% Senior Notes (a)						150.0						150.0						150.0
Senior credit facilities:
Revolving Credit Facility						550.0						300.0						200.0
Total outstanding borrowings						2,100.0						1,850.0						1,750.0
Less: unamortized debt discounts and issuance costs						(17.3)						(18.0)						(20.3)
Total debt						2,082.7						1,832.0						1,729.7
Less: current portion of long-term debt						—						—						—
Long-term debt						$	2,082.7					$	1,832.0					$	1,729.7
Outstanding letters of credit						$	76.8					$	74.1					$	62.2

(a) Also referred to herein as the “Note Purchase Facility,” referring to the Note Purchase and Private Shelf Agreement dated as of August 14, 2017 by and among the Company, PGIM, Inc. and the noteholders party thereto, as amended through November 2, 2022, under which the notes were purchased.

For additional information about the Company’s debt and credit facilities, refer to Note 6 to the Consolidated Financial Statements.

						19

Cash Flows Provided by Operating Activities

Operating activities provided net cash of $216.8 million and $257.4 million in the first three months of fiscal 2025 and fiscal 2024, respectively. The $40.6 million decrease in net cash provided by operating activities in the first three months of fiscal 2025 compared to the first three months of fiscal 2024 is due to changes in the following operating activities (in millions):

			Fiscal Three Months Ended
			March 29, 2025						March 30, 2024						Variance
Net income			$	179.4					$	198.2					$	(18.8)
Depreciation and amortization			120.1						104.3						15.8
(Gain)/loss on disposition of property and equipment			(17.4)						1.3						(18.7)
Share-based compensation expense			13.2						14.4						(1.2)
Deferred income taxes			1.7						9.1						(7.4)
Inventories and accounts payable			(43.7)						(67.0)						23.3
Prepaid expenses and other current assets			(11.3)						4.3						(15.6)
Accrued expenses			(81.1)						(48.4)						(32.7)
Income taxes			46.5						41.8						4.7
Other, net			9.4						(0.6)						10.0
Net cash provided by operating activities			$	216.8					$	257.4					$	(40.6)

Note: Amounts may not sum to totals due to rounding.

The $40.6 million decrease in net cash provided by operating activities in the first three months of fiscal 2025 compared to the first three months of fiscal 2024 was primarily driven by the change in accrued expenses, resulting from the timing of accruals and related payments, as well as the decrease in net income year over year.

Cash Flows Used in Investing Activities

Investing activities used net cash of $261.1 million and $152.3 million in the first three months of fiscal 2025 and fiscal 2024, respectively. The $108.7 million increase in net cash used in investing activities in the first three months of fiscal 2025 compared to the first three months of fiscal 2024 is due to changes in the following investing activities (in millions):

			Fiscal Three Months Ended
			March 29, 2025						March 30, 2024						Variance
New stores, relocated stores and stores not yet opened			$	(59.5)					$	(61.7)					$	2.2
Existing stores			(43.0)						(57.8)						14.8
Information technology			(26.0)						(24.4)						(1.6)
Distribution center capacity and improvements			(8.0)						(13.1)						5.1
Corporate and other			(4.8)						(0.2)						(4.6)
Total capital expenditures			(141.3)						(157.2)						15.9
Proceeds from sale of property and equipment			20.9						4.9						16.0
Acquisition of Allivet, net of cash acquired			(140.6)						$	—					(140.6)
Net cash used in investing activities			$	(261.0)					$	(152.3)					$	(108.7)

Note: Amounts may not sum to totals due to rounding.

The capital expenditures for new stores, relocated stores and stores not yet opened in the first three months of fiscal 2025 included 15 new Tractor Supply stores compared to 17 new Tractor Supply stores during the first three months of fiscal 2024. The Company also opened two new Petsense by Tractor Supply stores during the first three months of fiscal 2025 compared to four new stores during the first three months of fiscal 2024.

						20

The decrease in capital expenditures for existing stores in the first three months of fiscal 2025 as compared to the first three months of fiscal 2024 primarily reflects the timing of spend related to internal space productivity and side lot garden center transformations.

Capital expenditures for information technology represent continued support of our store growth and our Digital initiatives, as well as improvements in security and compliance and other strategic initiatives.

The decrease in capital expenditures for distribution center capacity and improvements in the first three months of fiscal 2025 as compared to the first three months of fiscal 2024 primarily reflects a reduction in distribution center construction projects. The first quarter of fiscal 2024 reflects costs related to the Maumelle, Arkansas distribution center, which began operations in the second quarter of fiscal 2024. The first quarter of fiscal 2025 reflects costs related to existing distribution center improvements.

Our projected capital expenditures, net of sale leaseback proceeds, for fiscal 2025 are currently estimated to be in the range of approximately $650.0 million to $725.0 million. The capital expenditures include a plan to open approximately 90 Tractor Supply stores, continue Project Fusion remodels and side lot garden center transformations, begin construction on our Nampa, Idaho distribution center, and open approximately 10 new Petsense by Tractor Supply stores.

On December 30, 2024, the Company completed its acquisition of Allivet, an online pet pharmacy. Net cash used in investing activities includes the cash used for the acquisition of Allivet, net of cash acquired as part of the transaction.

Cash Flows Used in Financing Activities

Financing activities provided net cash of $24.5 million in the first three months of fiscal 2025 compared to using net cash of $238.1 million in the first three months of fiscal 2024. The $262.6 million change in net cash provided by financing activities in the first three months of fiscal 2025 compared to the first three months of fiscal 2024 is due to changes in the following (in millions):

			Fiscal Three Months Ended
			March 29, 2025						March 30, 2024						Variance
Net borrowings and repayments under debt facilities			$	250.0					$	—					$	250.0
Repurchase of common stock			(95.1)						(117.8)						22.7
Cash dividends paid to stockholders			(122.4)						(118.8)						(3.6)
Net proceeds from issuance of common stock			7.0						21.7						(14.7)
Other, net			(15.0)						(23.2)						8.2
Net cash provided by/(used in) financing activities			$	24.5					$	(238.1)					$	262.6

Note: Amounts may not sum to totals due to rounding.

The $262.6 million change in net cash provided by financing activities in the first three months of fiscal 2025 compared to the first three months of fiscal 2024 is primarily due to incremental borrowing under the Company’s Revolving Credit Facility in the current period.

Dividends

During the first three months of fiscal 2025 and fiscal 2024, the Company's Board of Directors declared the following cash dividends:

Date Declared						Dividend Amount Per Share of Common Stock**(a)**						Record Date						Date Paid
February 12, 2025						$	0.23					February 26, 2025						March 11, 2025
February 5, 2024						$	0.22					February 26, 2024						March 12, 2024

(a) All share and per share information has been adjusted to reflect the five-for-one Stock Split effective December 20, 2024.

						21

It is the present intention of the Company’s Board of Directors to continue to pay a quarterly cash dividend; however, the declaration and payment of future dividends will be determined by the Company’s Board of Directors in its sole discretion and will depend upon the earnings, financial condition, and capital needs of the Company, along with any other factors that the Company’s Board of Directors deem relevant.

Share Repurchase Program

The Company’s Board of Directors has authorized common stock repurchases under a share repurchase program which was announced in February 2007. The aggregate total authorized amount of the program, which was increased by $1.00 billion on February 12, 2025, is currently $7.50 billion, exclusive of any fees, commissions, or other expenses related to such repurchases. The share repurchase program does not have an expiration date. The repurchases may be made from time to time on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased under the program will depend on a variety of factors, including price, corporate and regulatory requirements, capital availability, and other market conditions. Repurchased shares are accounted for at cost and will be held in treasury for future issuance. The program may be limited, temporarily paused, or terminated at any time without prior notice. As of March 29, 2025, the Company had remaining authorization under the share repurchase program of $1.39 billion, exclusive of any fees, commissions, or other expenses.

The following table provides the number of shares repurchased, average price paid per share, and total cost of share repurchases pursuant to our publicly announced repurchase plan during the fiscal three months ended March 29, 2025 and March 30, 2024, respectively (in thousands, except per share amounts):

			Fiscal Three Months Ended
			March 29, 2025						March 30, 2024
Total number of shares repurchased (a)			1,727						2,481
Average price paid per share (a)			$	54.39					$	47.31
Total cost of share repurchases (b)			$	93,827					$	118,543

(a) All share and per share information has been adjusted to reflect the five-for-one Stock Split effective December 20, 2024.

(b) Effective January 1, 2023, the Company’s share repurchases are subject to a 1% excise tax as a result of the Inflation Reduction Act of 2022. Excise taxes incurred on share repurchases represent direct costs of the repurchase and are recorded as a part of the cost basis of the shares within treasury stock. The cost of shares repurchased may differ from the repurchases of common stock amounts in the consolidated statements of cash flows due to unsettled share repurchases at the end of a period and excise taxes incurred on share repurchases.

Significant Contractual Obligations and Commercial Commitments

For a description of the Company’s significant contractual obligations and commercial commitments, refer to Note 11 to the Consolidated Financial Statements included under Part II, Item 8 in our 2024 Form 10-K for the fiscal year ended December 28, 2024. As of March 29, 2025, there has been no other material change in the information disclosed in the 2024 Form 10-K for the fiscal year ended December 28, 2024.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of the Company’s financial position and results of operations are based upon its Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make informed estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company’s critical accounting policies, including areas of critical management judgments and estimates, have primary impact on the following financial statement areas:

-			Inventory valuation
-			Self-insurance reserves
-			Impairment of long-lived assets
-			Impairment of goodwill and other indefinite-lived intangible assets

See Note 1 to the Consolidated Financial Statements in our 2024 Form 10-K for a discussion of the Company’s critical accounting policies. The Company’s financial position and/or results of operations may be materially different when reported

						22

under different conditions or when using different assumptions in the application of such policies. In the event estimates or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information. There have been no changes to our critical accounting policies and estimates as previously disclosed in our 2024 Form 10-K.

New Accounting Pronouncements

For recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of March 29, 2025, refer to Note 1 to the Consolidated Financial Statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.