Tractor Supply Company (TSCO) shares dropped Thursday after the rural lifestyle retailer delivered a disappointing quarter and warned that shoppers are getting pickier about where they spend their money. The short version: people are still buying the essentials, but they're thinking twice about discretionary items.

The Numbers Tell a Story

Tractor Supply reported fourth-quarter earnings of 43 cents per share, missing the analyst consensus of 47 cents. Revenue came in at $3.898 billion, falling short of the $4 billion Street estimate. Not exactly the kind of beat you want to wake up to if you're a shareholder.

Net sales still managed to climb 3.3% to $3.90 billion, with comparable store sales edging up just 0.3%. The growth came largely from new store openings and the contribution from Allivet, the company's pet pharmacy acquisition.

"Our fourth quarter results came in below our expectations and reflected a shift in consumer spending, with essential categories remaining resilient while discretionary demand moderated," said Hal Lawton, President and CEO of Tractor Supply.

Margin Squeeze in Action

Here's where things get interesting. Gross profit actually rose 3.0% to $1.37 billion from $1.33 billion a year earlier. But gross margin slipped to 35.1% from 35.2%. The company managed to keep costs under control, but tariffs, heavier promotions, and higher delivery-related transportation expenses chipped away at profitability.

Operating income dropped 6.5% to $297.7 million from $318.3 million in the prior-year quarter. Net income declined 3.8% to $227.4 million from $236.4 million. The company opened 31 new Tractor Supply stores and one new Petsense by Tractor Supply location during the quarter.

Tractor Supply closed the quarter with $194.109 million in cash and equivalents, while inventories stood at $3.08 billion.

Looking Ahead with Caution

The outlook doesn't inspire a ton of confidence either. For fiscal 2026, Tractor Supply expects earnings of $2.13 to $2.23 per share, meaningfully below the $2.32 analyst estimate. The company is projecting net sales growth of 4% to 6% and comparable store sales growth of 1% to 3%.

Operating margin is expected to land between 9.3% and 9.6%. Capital expenditures are forecast at $675 million to $725 million, and the company plans to repurchase $375 million to $450 million worth of stock.

On the expansion front, Tractor Supply plans to open roughly 100 new stores in 2026 while continuing Project Fusion remodels and garden center transformations. The company also expects to complete its 11th distribution center and keep investing in store and digital technology.

TSCO Price Action: Tractor Supply shares were down 4.83% at $52.47 at the time of publication on Thursday.