Tractor Supply (TSCO 0.23%) shareholders lost ground to a falling market this week. The rural lifestyle retailer shed 11% through trading on Thursday compared to a 3% slump in the S&P 500, according to data provided by S&P Global Market Intelligence.
The decline was sparked by news from peers in the industry suggesting a weakening selling environment.
Walmart and Target each lowered their short-term earnings outlook this week, causing most retailers' stocks to fall in sympathy with these giants. Both companies said they are seeing strong customer traffic and sales trends overall.
However, shoppers appear to be shifting demand away from many niches that had been popular in earlier phases of the pandemic, like outdoor furnishings. Consumers are becoming more price conscious, too, as inflation jumps.
That shift could hurt Tractor Supply's business, which has benefited from unusually high demand for its rural lifestyle products. The main fear is that the company will follow its larger peers in reducing its 2022 earnings outlook at its next operating update.
There was no hint of that type of profit pressure in Tractor Supply's late April report, which covered the selling period that ended in late March. Yet its biggest seasonal period is the spring, as shoppers tend to spend more on pet and livestock supplies at that time.
If Tractor Supply sees a similar demand shift to Target's, executives might need to lower profit expectations. Target said operating margin will likely fall to around 6% of sales this year compared to prior expectations of around 8%. Tractor supply forecast an over 10% margin back in April, but the retailer could reduce that prediction in its next operating update in mid-July.