Petco Reports Second Quarter 2025 Financial Results

Raises Fiscal 2025 Earnings Outlook* , /PRNewswire/ -- Petco (Nasdaq: WOOF) today announced its second quarter 2025 financial results. Q2 2025 Overview Net sales of $1.5 billion decreased 2.3% year over year in line with the company's second quarter outlook Comparable sales decreased 1.4% year over year Gross profit margin expanded approximately 120 basis points to 39.3% as a percentage of net sales Operating income improved $40.6 million to $43.0 million GAAP net income improved $38.8 million to $14.0 million Adjusted EBITDA1 increased $30.3 million to $113.9 million "For the second quarter we once again delivered against our commitments, enabling us to raise our earnings outlook for the full year. The first half of this year established a solid foundation for our transformation as we continued to strengthen our economic model and improve retail operating fundamentals," said Joel Anderson, Petco's Chief Executive Officer. "As we look ahead to the remainder of this year, we will continue to execute on our objectives while also leaning into select targeted investments that we believe will help set the stage for a return to sustainable profitable growth." Full Year 2025 Outlook The company maintained its full year net sales outlook and raised its full year 2025 earnings outlook. In addition, the company provided its outlook for the third quarter of 2025. The Company's third quarter and full year 2025 outlook assumes that the tariffs on imports into the U.S. from China and other countries as of August 28, 2025 will stay at current or planned levels and do not increase for the remainder of the year. FY 2025 Outlook* Net Sales Down low single digits year over year Adjusted EBITDA $385 million to $395 million Net interest expense ~$130 million Capital Expenditures $125 million to $130 million Depreciation & Amortization ~$200 million Net Store Closures ~25 Third Quarter 2025 Outlook Q3 2025 Outlook* Net Sales Down low single digits year over year Adjusted EBITDA $92 million to $94 million *Assumptions in the outlook include that economic conditions, currency rates and the tax and regulatory landscape remain generally consistent, and that current or planned tariffs on imports into the U.S. from other countries remain at August 28, 2025 levels. Adjusted EBITDA is a non-GAAP financial measure and has not been reconciled to the most comparable GAAP outlook because it is not possible to do so without unreasonable efforts due to the uncertainty and potential variability of reconciling items, which are dependent on future events and often outside of management's control and which could be significant. Because such items cannot be reasonably predicted with the level of precision required, we are unable to provide outlook for the comparable GAAP measures. Forward-looking estimates of Adjusted EBITDA are made in a manner consistent with the relevant definitions and assumptions noted herein and in our filings with the Securities and Exchange Commission. (1) Adjusted EBITDA is a non-GAAP financial measure. See "Non-GAAP Financial Measures" for additional information on non-GAAP financial measures and a reconciliation to the most comparable GAAP measures. Earnings Conference Call Webcast Information: Management will host an earnings conference call on August 28, 2025 at approximately 4:30 PM Eastern Time to discuss the company's financial results. A live webcast of the conference call will be available on the company's Investor Relations page at https://ir.petco.com/news-and-events/events-and-presentations. A replay of the webcast will be available through the same link approximately two hours after the conference call. About Petco: We're proud to be "where the pets go" to find everything they need to live their best lives for more than 60 years — from their favorite meals and toys, to trusted supplies and expert support from people who get it, because we live it. We believe in the universal truths of pet parenthood — the boundless boops, missing slippers, late night zoomies and everything in between. And we're here for it. Every tail wag, every vet visit, every step of the way. We nurture the pet-human bond in the aisles of more than 1,500 Petco stores across the U.S., Mexico and Puerto Rico. Customers experience our exclusive selection of pet care products, services, expertise and membership offerings in stores and online at petco.com, and on the Petco app. In 1999, we founded Petco Love. Together, we support thousands of local animal welfare groups nationwide, and have helped find homes for ~7 million animals through in-store adoption events. Forward-Looking Statements: This earnings release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, concerning expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not statements of historical fact, including, but not limited to, statements regarding our Q3 and full year 2025 outlook, operational reset of our business, our competitive positioning, profitability, cost action plans and associated cost-savings, and our expectations regarding tariffs and associated impacts. Such forward-looking statements can generally be identified by the use of forward-looking terms such as "believes," "expects," "may," "intends," "will," "shall," "should," "anticipates," "opportunity," "illustrative," or the negative thereof or other variations thereon or comparable terminology. Although Petco believes that the expectations and assumptions reflected in these statements are reasonable, there can be no assurance that these expectations will prove to be correct or that any forward-looking results will occur or be realized. Nothing contained in this earnings release is, or should be relied upon as, a promise or representation or warranty as to any future matter, including any matter in respect of the operations or business or financial condition of Petco. All forward-looking statements are based on current expectations and assumptions about future events that may or may not be correct or necessarily take place and that are by their nature subject to significant uncertainties and contingencies, many of which are outside the control of Petco. Forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause actual results or events to differ materially from the potential results or events discussed in the forward-looking statements, including, without limitation, those identified in this earnings release as well as the following: (i) increased competition (including from multi-channel retailers, mass and grocery retailers, and e-Commerce providers); (ii) reduced consumer demand for our products and/or services; (iii) our reliance on key vendors; (iv) our ability to attract and retain qualified employees; (v) risks arising from statutory, regulatory and/or legal developments; (vi) macroeconomic pressures in the markets in which we operate, including inflation, prevailing interest rates and the impact of tariffs; (vii) failure to effectively manage our costs; (viii) our reliance on our information technology systems; (ix) our ability to prevent or effectively respond to a data privacy or security breach; (x) our ability to effectively manage or integrate strategic ventures, alliances or acquisitions and realize the anticipated benefits of such transactions; (xi) economic or regulatory developments that might affect our ability to provide attractive promotional financing; (xii) business interruptions and other supply chain issues; (xiii) catastrophic events, political tensions, conflicts and wars (such as the ongoing conflicts in Ukraine and the Middle East), health crises, and pandemics; (xiv) our ability to maintain positive brand perception and recognition; (xv) product safety and quality concerns; (xvi) changes to labor or employment laws or regulations; (xvii) our ability to effectively manage our real estate portfolio; (xviii) constraints in the capital markets or our vendor credit terms; (xix) changes in our credit ratings; (xx) impairments of the carrying value of our goodwill and other intangible assets; (xxi) our ability to successfully implement our operational adjustments, achieve the expected benefits of our cost action plans and drive improved profitability; and (xxii) the other risks, uncertainties and other factors identified under "Risk Factors" and elsewhere in Petco's Securities and Exchange Commission filings. The occurrence of any such factors could significantly alter the results set forth in these statements. Petco cautions that the foregoing list of risks, uncertainties and other factors is not complete, and forward-looking statements speak only as of the date they are made. Petco undertakes no duty to update publicly any such forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by applicable law, regulation or other competent legal authority. PETCO HEALTH AND WELLNESS COMPANY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited and subject to reclassification) 13 Weeks Ended 26 Weeks Ended August 2,2025 August 3,2024 August 2,2025 August 3,2024 Net sales: Products $ 1,225,605 $ 1,263,749 $ 2,467,496 $ 2,543,480 Services and other 262,924 260,006 514,432 509,415 Total net sales 1,488,529 1,523,755 2,981,928 3,052,895 Cost of sales: Products 747,143 787,103 1,513,428 1,579,825 Services and other 156,067 155,927 313,213 313,685 Total cost of sales 903,210 943,030 1,826,641 1,893,510 Gross profit 585,319 580,725 1,155,287 1,159,385 Selling, general and administrative expenses 542,297 578,257 1,095,906 1,173,699 Operating income (loss) 43,022 2,468 59,381 (14,314) Interest income (909) (672) (2,268) (1,090) Interest expense 33,297 36,805 66,791 73,622 Other non-operating loss — — — 2,665 Income (loss) before income taxes and income from equity method investees 10,634 (33,665) (5,142) (89,511) Income tax expense (benefit) 746 (4,651) 1,241 (9,128) Income from equity method investees (4,084) (4,191) (8,694) (9,077) Net income (loss) attributable to Class A and B-1 common stockholders $ 13,972 $ (24,823) $ 2,311 $ (71,306) Net income (loss) per Class A and B-1 common share: Basic $ 0.05 $ (0.09) $ 0.01 $ (0.26) Diluted $ 0.05 $ (0.09) $ 0.01 $ (0.26) Weighted average shares used in computing net income (loss) per Class A and B-1 common share: Basic 279,058 273,074 278,303 271,421 Diluted 285,741 273,074 284,350 271,421 PETCO HEALTH AND WELLNESS COMPANY, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) (Unaudited and subject to reclassification) August 2,2025 February 1,2025 ASSETS Current assets: Cash and cash equivalents $ 188,748 $ 165,756 Receivables, less allowance for credit losses1 34,524 40,425 Merchandise inventories, net 608,506 653,329 Prepaid expenses 60,387 53,515 Other current assets 47,393 60,594 Total current assets 939,558 973,619 Fixed assets 2,311,922 2,265,915 Less accumulated depreciation (1,624,417) (1,540,477) Fixed assets, net 687,505 725,438 Operating lease right-of-use assets 1,314,618 1,302,346 Goodwill 980,064 980,064 Trade name 1,025,000 1,025,000 Other long-term assets 206,537 187,963 Total assets $ 5,153,282 $ 5,194,430 LIABILITIES AND EQUITY Current liabilities: Accounts payable and book overdrafts $ 423,269 $ 492,878 Accrued salaries and employee benefits 130,688 157,460 Accrued expenses and other liabilities 192,249 177,079 Current portion of operating lease liabilities 306,902 306,400 Current portion of long-term debt and other lease liabilities 5,458 5,346 Total current liabilities 1,058,566 1,139,163 Senior secured credit facilities, net, excluding current portion 1,580,688 1,578,091 Operating lease liabilities, excluding current portion 1,047,757 1,037,206 Deferred taxes, net 220,992 217,712 Other long-term liabilities 106,176 108,628 Total liabilities 4,014,179 4,080,800 Commitments and contingencies Stockholders' equity: Class A common stock2 242 239 Class B-1 common stock3 38 38 Class B-2 common stock4 — — Preferred stock5 — — Additional paid-in-capital 2,297,702 2,280,495 Accumulated deficit (1,146,748) (1,149,059) Accumulated other comprehensive loss (12,131) (18,083) Total stockholders' equity 1,139,103 1,113,630 Total liabilities and stockholders' equity $ 5,153,282 $ 5,194,430 ¹ Allowances for credit losses are $725 and $1,594, respectively ² Class A common stock, $0.001 par value: Authorized - 1.0 billion shares; Issued and outstanding - 242.1 million and 239.1 million shares, respectively ³ Class B-1 common stock, $0.001 par value: Authorized - 75.0 million shares; Issued and outstanding - 37.8 million shares ⁴ Class B-2 common stock, $0.000001 par value: Authorized - 75.0 million shares; Issued and outstanding - 37.8 million shares ⁵ Preferred stock, $0.001 par value: Authorized - 25.0 million shares; Issued and outstanding - none PETCO HEALTH AND WELLNESS COMPANY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited and subject to reclassification) 26 Weeks Ended August 2,2025 August 3,2024 Cash flows from operating activities: Net income (loss) $ 2,311 $ (71,306) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 98,649 99,305 Amortization of debt discounts and issuance costs 2,499 2,435 Provision for deferred taxes 1,113 (27,782) Equity-based compensation 18,209 29,348 Impairments, write-offs and losses on sale of fixed and other assets 522 7,069 Income from equity method investees (8,694) (9,077) Amounts reclassified out of accumulated other comprehensive loss (413) (2,274) Non-cash operating lease costs 205,005 207,605 Other non-operating loss — 2,665 Changes in assets and liabilities: Receivables 5,783 (2,083) Merchandise inventories 44,823 11,769 Prepaid expenses and other assets (9,487) (7,166) Accounts payable and book overdrafts (69,691) (9,644) Accrued salaries and employee benefits (26,729) 34,591 Accrued expenses and other liabilities 14,508 3,015 Operating lease liabilities (206,414) (209,738) Other long-term liabilities (1,556) 2,224 Net cash provided by operating activities 70,438 60,956 Cash flows from investing activities: Cash paid for fixed assets (60,516) (60,029) Cash paid for acquisitions, net of cash acquired — (259) Proceeds from investment — 998 Proceeds from sale of assets 2,425 1,019 Cash received from partial surrender of officers' life insurance — 206 Net cash used in investing activities (58,091) (58,065) Cash flows from financing activities: Borrowings under long-term debt agreements — 201,000 Repayments of long-term debt — (201,000) Debt refinancing costs — (3,028) Payments for finance lease liabilities (3,252) (3,528) Proceeds from employee stock purchase plan and stock option exercises 1,998 1,630 Tax withholdings on stock-based awards (3,026) (3,468) Proceeds from issuance of common stock — 2,500 Net cash used in financing activities (4,280) (5,894) Net decrease in cash, cash equivalents and restricted cash 8,067 (3,003) Cash, cash equivalents and restricted cash at beginning of period 181,665 136,649 Cash, cash equivalents and restricted cash at end of period $ 189,732 $ 133,646 NON-GAAP FINANCIAL MEASURES The following information provides definitions and reconciliations of the non-GAAP financial measures presented in this earnings release to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP). The company has provided this non-GAAP financial information, which is not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in this earnings release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in this earnings release. The non-GAAP financial measures in this earnings release may differ from similarly titled measures used by other companies. Adjusted EBITDA Adjusted EBITDA is considered a non-GAAP financial measure under the Securities and Exchange Commission's (SEC) rules because it excludes certain amounts included in net income calculated in accordance with GAAP. Management believes that Adjusted EBITDA is a meaningful measure to share with investors because it facilitates comparison of the current period performance with that of the comparable prior period. In addition, Adjusted EBITDA affords investors a view of what management considers to be Petco's core operating performance as well as the ability to make a more informed assessment of such operating performance as compared with that of the prior period. Please see the company's Annual Report on Form 10-K for the fiscal year ended February 1, 2025 filed with the SEC on March 31, 2025 for additional information on Adjusted EBITDA. The table below reflects the calculation of Adjusted EBITDA for the thirteen and twenty-six weeks ended August 2, 2025 compared to the thirteen and twenty-six weeks ended August 3, 2024. (dollars in thousands) 13 Weeks Ended 26 Weeks Ended Reconciliation of Net Income (Loss) Attributable to Class A and B-1 Common Stockholders to Adjusted EBITDA August 2,2025 August 3,2024 August 2,2025 August 3,2024 Net income (loss) attributable to Class A and B-1 common stockholders $ 13,972 $ (24,823) $ 2,311 $ (71,306) Add (deduct): Interest expense, net 32,388 36,133 64,523 72,532 Income tax expense (benefit) 746 (4,651) 1,241 (9,128) Depreciation and amortization 49,284 49,718 98,649 99,305 Income from equity method investees (4,084) (4,191) (8,694) (9,077) Asset impairments and write offs 76 3,561 522 7,069 Equity-based compensation 8,789 11,914 18,209 29,348 Other non-operating loss — — — 2,665 Mexico joint venture EBITDA (1) 10,360 9,902 20,558 20,398 Acquisition and divestiture-related costs (2) — — — 3,719 Other costs (3) 2,329 5,960 5,990 13,642 Adjusted EBITDA $ 113,860 $ 83,523 $ 203,309 $ 159,167 Net sales $ 1,488,529 $ 1,523,755 $ 2,981,928 $ 3,052,895 Net margin (4) 0.9 % (1.6 %) 0.1 % (2.3 %) Adjusted EBITDA Margin 7.6 % 5.5 % 6.8 % 5.2 % (1) Mexico joint venture EBITDA represents 50 percent of the entity's operating results for all periods, as adjusted to reflect the results on a basis comparable to Adjusted EBITDA. In the financial statements, this joint venture is accounted for as an equity method investment and reported net of depreciation and income taxes because such a presentation would not reflect the adjustments made in the calculation of Adjusted EBITDA, we include the 50 percent interest in the company's Mexico joint venture on an Adjusted EBITDA basis to ensure consistency. The table below presents a reconciliation of Mexico joint venture net income to Mexico joint venture EBITDA. 13 Weeks Ended 26 Weeks Ended (in thousands) August 2,2025 August 3,2024 August 2,2025 August 3,2024 Net income $ 8,167 $ 8,822 $ 17,387 $ 18,377 Depreciation 6,793 6,996 13,390 13,944 Income tax expense 3,935 3,903 8,101 7,359 Foreign currency loss (gain) 696 (380) 404 99 Interest expense, net 1,129 463 1,833 1,016 EBITDA $ 20,720 $ 19,804 $ 41,115 $ 40,795 50% of EBITDA $ 10,360 $ 9,902 $ 20,558 $ 20,398 (2) Acquisition and divestiture-related integration costs include direct costs resulting from acquiring, integrating, or divesting businesses. These include third-party professional and legal fees, losses on sales of divestitures, and other integration-related costs that would not have otherwise been incurred as part of the company's operations. (3) Other costs include, as incurred: restructuring costs and restructuring-related severance costs; legal reserves associated with significant, non-ordinary course legal or regulatory matters; and costs related to certain significant strategic transactions. (4) We define net margin as net loss attributable to Class A and B-1 common stockholders divided by net sales and Adjusted EBITDA margin as Adjusted EBITDA divided by net sales. Free Cash Flow Free Cash Flow is a non-GAAP financial measure that is calculated as net cash provided by operating activities less cash paid for fixed assets. Management believes that Free Cash Flow, which measures the ability to generate additional cash from business operations, is an important financial measure for use in evaluating the company's financial performance. The table below reflects the calculation of Free Cash Flow for the thirteen and twenty-six weeks ended August 2, 2025 compared to the thirteen and twenty-six weeks ended August 3, 2024. (in thousands) 13 Weeks Ended 26 Weeks Ended August 2,2025 August 3,2024 August 2,2025 August 3,2024 Net cash provided by operating activities $ 85,892 $ 69,370 $ 70,438 $ 60,956 Cash paid for fixed assets (32,104) (27,388) (60,516) (60,029) Free Cash Flow $ 53,788 $ 41,982 $ 9,922 $ 927 SOURCE Petco - Investor Relations WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM? 440k+ Newsrooms & Influencers 9k+ Digital Media Outlets 270k+ Journalists Opted In

Petco Reports Second Quarter 2025 Financial Results

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