What happened

Shares of Tractor Supply (TSCO 1.07%) were moving higher today. The rural-lifestyle-focused retailer posted weak results in its second-quarter earnings report this morning, but increased its long-term store opening target, indicating it sees greater opportunity in the market.

As a result, the stock closed up 4.2%.

Two people working in a garden.

Image source: Getty Images.

So what

In a challenging quarter for much of the retail sector, Tractor Supply reported comparable sales growth of 2.5% in the second quarter and said revenue was up 7.2% to $4.18 billion, which missed estimates at $4.26 billion.

The company said sales of consumable, usable, and edible products were strong, while demand for seasonal goods and big-ticket items was down.

Gross margin improved from 35.5% to 36.2%, but selling, general, and administrative expenses increased from 22.1% to 22.8% due to planned growth investments and higher depreciation and amortization expenses. On the bottom line, earnings per share increased from $3.53 to $3.83, below the consensus at $3.92.

CEO Hal Lawton acknowledged some headwinds, saying: "As has been well documented, U.S. consumer spending on goods is moderating. Additionally, our business was further impacted by seasonal underperformance, particularly in June. Consequently, our second quarter results, while solid, were below our expectations."

However, he also said that following the market share gains of the last three years and due to the potential for the company to expand its competitive advantages, it is increasing its long-term store target to 3,000 organic locations from a previous goal of 2,800. Additionally, it plans to accelerate store openings to 90 a year starting in 2025, up from 80 new stores in 2024, and said it was competing in a total addressable market of $180 billion. The company finished the quarter with 2,181 Tractor Supply stores.

The company also said it would implement a sale-leaseback real estate strategy of 117 stores to fund new development.

Now what

Tractor Supply also lowered its full-year guidance. It now sees revenue of $14.8 billion to $14.9 billion, down from $15 billion to $15.3 billion, and it expects diluted earnings per share of $10.20 to $10.40, compared to earlier guidance of $10.30 to $10.60.

While the guidance cut is disappointing, investors are right to look past it to the improved long-term outlook.