SAN DIEGO, Jan. 22, 2026 /PRNewswire/ -- Petco (Nasdaq: WOOF) today announced the pricing of its previously announced senior secured notes offering and has agreed to issue and sell $600,000,000 in aggregate principal amount of new senior secured notes due on February 1, 2031, which will bear interest at a rate of 8.250% per annum (the "notes"). Completion of the notes offering is expected to occur on February 2, 2026 and is subject to, among other things, customary closing conditions. Petco intends to use t ...

Core Viewpoint - Petco is offering $650 million in new senior secured notes to refinance existing debt and for general corporate purposes [1][2]. Group 1: Notes Offering - The offering consists of $650 million in aggregate principal amount of new senior secured notes, subject to pricing and customary closing conditions [1]. - The notes will be guaranteed by Petco's subsidiaries and secured by first-lien and second-lien priority interests in fixed and current assets [3]. - The notes will not be registered under the Securities Act of 1933 and will be offered only to qualified institutional buyers or outside the U.S. [4]. Group 2: Use of Proceeds - The net proceeds from the notes will be used to repay Petco's existing term loan facility, cover related fees and expenses, and for general corporate purposes [2]. Group 3: Security and Priority - The notes will be effectively senior to existing and future unsecured indebtedness and will be equal to senior indebtedness secured on the same priority basis [3]. - The notes will be subordinated to any existing and future secured indebtedness that is not collateral for the notes [3].

Core Viewpoint - Petco (WOOF) is currently focusing on efficiency, which has led to a short-term decline in revenue, indicating a potential underestimation of the company's long-term value [1]. Group 1: Company Performance - Petco's revenue has experienced a decline, which is part of its strategy to enhance operational efficiency [1]. Group 2: Analyst Background - The author has a background in business writing, previously contributing to the Motley Fool Blogging Network and focusing on sectors such as restaurants, retailers, and food manufacturers [1].

Core Insights - Petco Health & Wellness Company Inc. is viewed as a potential investment opportunity despite recent price target adjustments by major financial institutions [1][2] Financial Performance - In Q3 2025, Petco reported a net sales decline of 3.1% to $1.46 billion and a comparable sales decrease of 2.2%, while adjusted EBITDA increased by 21% to $99 million, with a margin expansion of approximately 1.4% to 6.7% [3] - The company achieved a gross margin expansion of 0.75% to 38.9% and reduced SG&A expenses by $32 million, resulting in 0.97% expense leverage [3] Strategic Focus - Petco is shifting its strategy away from unprofitable sales towards high-margin services, with the Services and Other category growing to $255 million [4] - The veterinary business is a key area of growth, with the company exceeding hiring goals and achieving record-high doctor retention [4] Future Outlook - Petco has raised its full-year 2025 Adjusted EBITDA outlook to between $395 million and $397 million, while tightening its net sales forecast to a decline of 2.5% to 2.8% [5] - The company plans to slow the pace of store closures, ending the quarter with 1,389 US stores, as it targets a return to growth in 2026 [4]

Core Insights - Petco reported a data breach that made customers' personal information accessible online due to a setting in one of its software applications [1] - The company filed breach reports in California, Massachusetts, and Texas, indicating a widespread issue [2] Group 1: Breach Details - The breach was identified during a routine security review, and Petco took immediate steps to correct the issue [3] - In California, the breach notification indicated that the law requires notification if more than 500 residents are affected, although the specific number of affected consumers was not disclosed [2] - In Massachusetts, the breach affected seven residents, with compromised information including driver's licenses and credit or debit card numbers, but not Social Security Numbers or financial account information [3] Group 2: Impact in Texas - In Texas, 329 residents were affected, with the breach involving Social Security Numbers, driver's license numbers, financial information, and dates of birth [4] - Petco provided notice to consumers in Texas regarding the breach [4] Group 3: Response and Security Measures - Following the breach, Petco took part of its Vetco Clinics website offline after it was reported that customer records could be accessed online [5] - A spokesperson for Petco stated that the company has implemented and will continue to implement additional security measures to strengthen its systems [6]

Core Insights - The previous investment stance on Petco Health and Wellness (WOOF) was a sell rating due to weakening business fundamentals, while the market anticipated a recovery [1] - The current investment strategy focuses on long-term investments with short-term shorts to identify alpha opportunities, emphasizing a bottom-up analysis of individual companies [1] - The investment duration is medium to long-term, targeting companies with strong fundamentals, sustainable competitive advantages, and growth potential [1] Company Analysis - Petco Health and Wellness has shown signs of weakening fundamentals, which led to a sell rating in the past [1] - The market's expectation of recovery may not align with the actual performance of the company [1] Investment Strategy - The investment approach is centered on identifying solid fundamentals and growth potential in companies [1] - Incorporating short-term shorts into the investment strategy aims to uncover additional alpha opportunities [1]

Core Points - Petco recently experienced a cybersecurity incident that compromised personal information of an unspecified number of individuals [1][2] - Lynch Carpenter, LLP is investigating claims against Petco related to this data breach, indicating potential legal repercussions for the company [1][3] Data Breach Details - An unauthorized individual accessed Petco's network and may have obtained records containing personally identifiable information (PII), including names, Social Security numbers, driver's license numbers, dates of birth, and financial account information such as account numbers and credit or debit card numbers [2][4] - Individuals whose information was affected may be entitled to compensation, highlighting the potential financial implications for Petco [2] Legal Context - Lynch Carpenter is a national class action law firm with a strong track record in data privacy matters, representing millions of clients over more than a decade [3] - The firm has offices in Pennsylvania, California, and Illinois, indicating a broad geographic reach for potential claims against Petco [3]

Core Insights - Petco confirmed a data breach involving customers' personal information, including names, Social Security numbers, driver's license numbers, financial information, and dates of birth [1][3] Group 1: Data Breach Details - The data breach affected customers' personal information, including sensitive data such as Social Security numbers and financial information [1] - Petco filed legally required notices in California, Massachusetts, and Montana, indicating that at least one resident in Massachusetts and three in Montana were affected, while the number in California remains undisclosed [2] - The company served over 24 million customers in 2022, suggesting a potentially large number of affected individuals [3] Group 2: Company Response - Petco stated that the breach was due to a setting in one of its software applications that allowed certain files to be accessible online, which has since been corrected [3] - The company has implemented additional unspecified security measures following the incident [3] - Petco is offering free credit and identity theft monitoring services to the victims of the breach [6]

Financial Performance - Net sales decreased from $1.51 billion to $1.46 billion, representing a period-over-period decrease of 3.1% and a comparable sales decrease of 2.2%[81] - Operating income increased to $29.2 million, compared to $4.0 million in the prior year period[81] - Net income attributable to Class A and B-1 common stockholders was $9.3 million, compared to a net loss of $16.7 million in the prior year period[81] - Adjusted EBITDA increased from $81.2 million to $98.6 million[81] - Gross profit margin improved to 38.9% for the thirteen weeks ended November 1, 2025, compared to 38.1% for the same period in 2024[85] - Selling, General and Administrative (SG&A) expenses as a percentage of net sales decreased to 36.9% for the thirteen weeks ended November 1, 2025, compared to 37.8% for the same period in 2024[86] - Comparable sales change was a decrease of 2.2% for the thirteen weeks ended November 1, 2025[82] - Services and other sales increased by 2.6% to $254.8 million for the thirteen weeks ended November 1, 2025[83] Cash Flow and Liquidity - Free Cash Flow improved to $70.6 million for the thirty-nine weeks ended November 1, 2025, compared to a negative $9.4 million for the same period in 2024[98] - Net cash provided by operating activities was $160.5 million for the thirty-nine weeks ended November 1, 2025, up from $81.7 million for the same period in 2024[104] - Liquidity as of November 1, 2025, was $732.9 million, including cash and cash equivalents of $237.4 million and $495.5 million available on the ABL Revolving Credit Facility[100] Debt and Interest - Interest expense decreased by $3.0 million, or 8.3%, to $32.8 million for the thirteen weeks ended November 1, 2025, compared to $35.8 million for the same period in 2024[87] - The company has a secured term loan facility maturing on March 4, 2028, and an ABL Revolving Credit Facility with availability of up to $581.0 million[108] - As of November 1, 2025, the company had $1,595.3 million outstanding under the First Lien Term Loan with no amounts outstanding under the ABL Revolving Credit Facility[117] - A 100 basis points increase in variable rates on the First Lien Term Loan and ABL Revolving Credit Facility would increase annual cash interest by approximately $16.2 million[117] Tax and Accounting - The effective tax rate for the thirteen weeks ended November 1, 2025, was (205.4)%, resulting in an income tax benefit of $6.3 million, compared to an effective tax rate of 4.9% and a benefit of $0.9 million for the same period in 2024[89] - There have been no material changes to critical accounting policies and estimates compared to the 2024 Form 10-K[113] - The company reviews accounting policies, assumptions, estimates, and judgments to ensure financial statements are presented fairly in accordance with GAAP[112] Market Risks - The company is subject to market risks primarily associated with interest rate fluctuations and changes in credit standing[116] - The company has entered into cash flow hedges to limit maximum interest rates on a portion of its variable-rate debt[117] - The company does not enter into forward currency contracts to hedge foreign currency exposure, and a hypothetical 10% change in foreign currency exchange rates would not materially affect operating results[120] - Future results may differ materially from estimated results due to adverse changes in interest rates or debt availability[118] - The company’s expenses are generally denominated in the currencies of the jurisdictions where it operates[120] - Substantially all cash and cash equivalents were maintained at major financial institutions in the U.S., with current deposits likely exceeding insured limits[119] Operational Changes - The sales decrease was primarily due to lower transaction volume and a lower pet care center count, alongside a focus on profitability and margin management[83] - Total pet care centers in the U.S. and Puerto Rico decreased to 1,389 at the end of the period, down from 1,413[82] - Other non-operating income was $0 for the thirteen and thirty-nine weeks ended November 1, 2025, compared to $8.5 million and $5.8 million for the same periods in 2024[88] - The company anticipates that current resources and cash flows will be sufficient to finance operations and capital investments for at least the next 12 months[101]

Core Points - Petco disclosed a data breach involving customer personal information in a filing with California's attorney general [1] - The company identified a software application setting that allowed certain files to be accessible online and took immediate corrective actions [2][7] - Petco is offering free credit and identity theft monitoring services to affected customers as required by California law [5] Summary by Sections Data Breach Details - The breach affects at least 500 customers in California, with additional notifications sent to unspecified individuals in Massachusetts and three in Montana [4] - The specific types of personal information exposed have not been disclosed [2][3] Company Response - Petco has communicated with affected individuals and has implemented additional security measures to enhance application security [2][7] - The company is providing resources for credit monitoring in compliance with legal requirements if sensitive information like driver's license numbers or Social Security numbers were compromised [5]