Can Tractor Supply Keep Its Margins Tight When Costs Keep Rising?

Tractor Supply just reported Q3 2025 earnings, and here’s the plot twist: tariffs and rising shipping costs should’ve crushed their margins, but they didn’t. Instead, gross margin actually expanded 15 bps YoY—how? Selective price hikes + tight cost control + a chunk of domestically sourced products that dodged tariff bullets.

But here’s the catch: TSCO is only halfway through the tariff impact cycle. Management is doing surgical price increases and customers aren’t pushing back yet, but that won’t last forever. Meanwhile, SG&A expenses tanked 29 bps due to higher incentive pay and lower sale-leaseback gains—not exactly sustainable.

The real test comes in 2026. Management’s calling it a “more normalized” year, expecting gross margin to keep expanding if top-line growth hits low-2% range and new initiatives like Direct Sales start paying for themselves. That’s optimistic but possible.

Valuation-wise? TSCO trades at a P/E of 46.8 vs industry average of 23.3—pricey. Consensus expects 2026 earnings up 10.5% YoY, but they’ve missed earnings 1.8% on average over the last four quarters.

The bottom line: Tractor Supply is navigating supply chaos better than peers right now, but margins staying this fat depends entirely on whether they can keep raising prices without losing customers. One slip-up and this narrative flips quick.