NEW YORK, June 17, 2025 /PRNewswire/ -- Pomerantz LLP is investigating claims on behalf of investors of Petco Health and Wellness Company, Inc. ("Petco" or the "Company") (NASDAQ: WOOF). Such investors are advised to contact Danielle Peyton at [email protected] or 646-581-9980, ext. 7980.The investigation concerns whether Petco and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices. [Click here for information about joining the class action] On Jun ...

I focus on producing objective, data-driven research, mostly about small- to mid-cap companies, as these tend to be overlooked by many investors. From time to time, though, I also look at large-cap names, just to give a fuller sense of the broader equity markets.Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I ...

Financial Performance - Net sales decreased from $1.53 billion to $1.49 billion, representing a period-over-period decrease of 2.3%[82] - Operating income improved to $16.4 million, compared to an operating loss of $16.8 million in the prior year period[82] - Net loss attributable to Class A and B-1 common stockholders decreased from $46.5 million to $11.7 million[82] - Adjusted EBITDA increased from $75.6 million to $89.4 million[82] - Comparable sales change was a decline of 1.3% for the thirteen weeks ended May 3, 2025[84] - Adjusted EBITDA for the thirteen weeks ended May 3, 2025, was $89.4 million, compared to $75.6 million for the same period in 2024, representing a 18.2% increase[96] - Net sales for the thirteen weeks ended May 3, 2025, were $1.49 billion, a decrease from $1.53 billion in the same period in 2024, reflecting a 2.5% decline[96] - Adjusted EBITDA Margin improved to 6.0% for the thirteen weeks ended May 3, 2025, compared to 4.9% in the same period in 2024[96] Cost and Expenses - Gross profit margin improved to 38.2% from 37.8% year-over-year[87] - SG&A expenses as a percentage of net sales decreased from 38.9% to 37.1%[88] - Interest expense decreased by $3.3 million, or 9.0%, to $33.5 million[89] Cash Flow and Liquidity - Free Cash Flow for the thirteen weeks ended May 3, 2025, was $(43.9) million, compared to $(41.1) million for the same period in 2024, indicating a slight increase in cash outflow[100] - As of May 3, 2025, the company's liquidity was $647.9 million, including $133.3 million in cash and cash equivalents and $514.6 million available on the ABL Revolving Credit Facility[102] - Net cash used in operating activities was $(15.5) million for the thirteen weeks ended May 3, 2025, compared to $(8.4) million for the same period in 2024, primarily due to lower sales and higher incentive bonuses[106] - Cash used in investing activities decreased to $27.1 million for the thirteen weeks ended May 3, 2025, from $31.7 million in the same period in 2024, driven by fewer new pet care centers and hospitals[107] - Net cash used in financing activities was $(0.3) million for the thirteen weeks ended May 3, 2025, a decrease from $(5.6) million in the same period in 2024, due to lower tax withholding payments[108] Debt and Credit Facilities - The First Lien Term Loan outstanding as of May 3, 2025, was $1.60 billion, with variable interest rates that could increase annual cash interest by approximately $16.2 million if rates rise by 100 basis points[118] - The company has a secured asset-based revolving credit facility with availability of up to $581.0 million, maturing in 2029, to support its liquidity needs[109] Business Operations - Total pet care centers in the U.S. and Puerto Rico decreased from 1,423 to 1,393[84] - The company continues to experience momentum in services, driven by strategic investments in customer acquisition and retention[85]

Core Insights - Petco Health and Wellness reported a 2.3% year-over-year decline in net sales for Q1 2025, with comparable sales down 1.3%, but gross margin improved by 30 basis points to 38.2% [1] - Adjusted EBITDA increased by $13.8 million to $89.4 million, representing 6% of sales, indicating profitability improvements despite sales challenges [1] Sales and Margin Performance - The store count reached 1,393 after 30 net closures over the last six quarters, with gross margin improvement driven by average unit cost discipline and markdown optimization [2] - SG&A discipline resulted in over 180 basis points of expense leverage, approximately 60 basis points when excluding last year's disposition costs, reflecting operational efficiency amid weak demand [2][3] Strategic Initiatives - Petco is implementing targeted resets in pet consumables, increasing shelf capacity in dog food by over 10% to address out-of-stocks and labor inefficiencies [4] - The merchandising reset aims to enhance customer satisfaction and improve in-stock availability, directly addressing lost sales drivers [5] Cost Management and Profitability - Management emphasizes that cost containment is a permanent strategy, focusing on leveraging SG&A as sales recover rather than relying on temporary expense reductions [6][8] - The goal is to manage SG&A effectively to support operating margin expansion as sales grow, rather than solely focusing on cost-cutting [7] Future Outlook - For full-year 2025, Petco expects net sales to decline in the low single digits, with adjusted EBITDA projected between $375 million and $390 million, and 20-30 net store closures [9] - Q2 FY2025 adjusted EBITDA is anticipated to be $92 million to $94 million, reflecting an approximate 11% increase at the midpoint [9]

Petco Health & Wellness (WOOF) came out with a quarterly loss of $0.01 per share versus the Zacks Consensus Estimate of a loss of $0.02. This compares to loss of $0.04 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 50%. A quarter ago, it was expected that this pet store chain would post earnings of $0.02 per share when it actually produced break-even earnings, delivering a surprise of -100%.Over the last four quarters, the co ...

Core Insights - Petco Health and Wellness Company reported a quarterly loss of four cents per share, aligning with analyst expectations [1] - Quarterly revenue was $1.49 billion, falling short of the $1.5 billion estimate and down from $1.53 billion in the same quarter last year [1] - The CEO highlighted the company's performance as a reflection of the team's execution and the resilience of the category [2] Financial Performance - Net sales of $1.5 billion represented a 2.3% decrease year-over-year, consistent with the company's first quarter outlook [4] - Comparable sales decreased by 1.3% year-over-year [4] - Gross profit margin improved by approximately 30 basis points to 38.2% as a percentage of net sales [4] Market Reaction - Following the earnings report, Petco's stock price dropped by 10.77%, trading at $3.23 during extended hours [3]

Financial Data and Key Metrics Changes - For Q1 2025, comparable sales decreased by 1.3% and net sales declined by 2.3% due to 25 net store closures in 2024 and an additional five closures in Q1, resulting in an ending store count of 1,393 [22][23] - Gross margin rate expanded by over 30 basis points to 38.2%, with improvements across both product and service segments [24] - Operating profit increased by $33 million to $16.4 million, and adjusted EBITDA rose by $13.8 million to $89.4 million, representing 6% of sales [25][26] - Free cash flow was negative $44 million, primarily due to incentive payouts during the quarter [27] Business Line Data and Key Metrics Changes - Services, the fastest-growing area, continues to deliver positive growth, with productivity improvements in both hospitals and grooming operations supporting gross margin expansion [15] - The grooming software upgrade has allowed for more flexibility in online appointments, with over 40% of appointments made online [14] - Merchandise excellence is being prioritized, with a focus on optimizing product assortment to align with consumer demand [9] Market Data and Key Metrics Changes - The company is navigating a stable pet adoption trend, which is not expected to significantly impact the financial outlook for 2025, as the focus is on internal improvements rather than external market conditions [32][33] - The overall pet category remains resilient, with consumable products driving business due to their needs-based nature [57] Company Strategy and Development Direction - The company is undergoing a transformation with a multi-phased approach aimed at improving operating models and restoring retail fundamentals [5][6] - Phase II focuses on executing identified work streams to enhance retail fundamentals and financial performance, with a strong emphasis on merchandise excellence and customer engagement [7][9] - A new membership program is being designed to create a personalized loyalty experience, expected to launch in 2026 [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategy and team execution, emphasizing the importance of improving retail fundamentals and delivering better financial performance [16][20] - The company is reiterating its full-year outlook for 2025, expecting net sales to decline in low single digits and adjusted EBITDA to be between $375 million and $390 million [29] Other Important Information - The company is focused on restoring the health of its economic model through gross margin expansion, SG&A leverage, and ROIC improvement [22] - The North Star project is underway to better understand customer segments and inform future strategies [19] Q&A Session Summary Question: What are you seeing in pet adoption trends and how do these trends impact your full year outlook? - Management noted that pet adoption trends are stable and not expected to significantly influence the financial outlook for 2025, which is viewed as a self-help story [32][33] Question: How are you ensuring guardrails to take permanent costs out while keeping the customer experience intact? - Management emphasized a change in mindset towards managing SG&A effectively rather than just cutting costs, focusing on high returns and business growth [34][36] Question: Can you discuss the top line journey and the repositioning efforts? - Management indicated that while the repositioning efforts are in early stages, they are identifying growth levers and focusing on omnichannel marketing and product innovation [40][42] Question: Can you elaborate on gross margin performance and expectations for the full year? - Management expressed satisfaction with the gross margin performance in Q1 and reiterated the goal of expanding gross margin for the year [49][50] Question: What insights can you provide regarding consumer behavior and spending? - Management noted that services continue to lead the business, driven by needs-based categories, while consumables showed expected softness [56][66] Question: What is the outlook on inflation and pricing? - Management stated that pricing strategies have been in place prior to recent macroeconomic changes, focusing on balancing customer needs with business health [82][84]

Financial Data and Key Metrics Changes - For Q1 2025, comparable sales decreased by 1.3% and net sales declined by 2.3%, attributed to 25 net store closures in 2024 and an additional five closures in Q1, resulting in a total store count of 1,393 [24] - Gross margin rate increased by over 30 basis points to 38.2%, with improvements across both product and service segments [25] - Operating profit rose to $16.4 million, an increase of $33 million compared to the previous year, while adjusted EBITDA increased by $13.8 million to $89.4 million, representing 6% of sales [27][28] - Free cash flow was negative $44 million, primarily due to incentive payouts during the quarter [28] Business Line Data and Key Metrics Changes - Services, the fastest-growing segment, continues to show positive growth, with productivity improvements in both veterinary and grooming operations supporting gross margin expansion [16] - The company is optimizing product assortment to align more closely with consumer demand, focusing on higher productivity brands and SKUs [10] - The cat category product reset was completed in May, and the dog category reset was initiated, aimed at increasing shelf capacity and improving customer experience [11][12] Market Data and Key Metrics Changes - The company noted stable pet adoption trends, indicating that it is not relying on external factors for financial improvements in 2025 [34] - The overall pet market remains resilient, with consumable categories driving business due to their needs-based nature [60] Company Strategy and Development Direction - The company is focused on a multi-phased approach to improve its operating model and restore retail fundamentals, with Phase I completed and Phase II underway [5][6] - A new membership program is being designed to enhance customer loyalty, expected to launch in 2026 [20] - The company aims to improve its marketing message to be more solutions-oriented and to enhance customer engagement through data-driven strategies [21][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategy and the team's ability to unlock Petco's full potential, despite navigating a challenging trade environment [22][23] - The leadership team is aligned on the goal of returning Petco to an industry-leading position, emphasizing the importance of improving retail fundamentals and financial performance [22][23] Other Important Information - The company reiterated its full-year outlook for 2025, expecting net sales to decline in the low single digits and adjusted EBITDA to be between $375 million and $390 million [30] - The company is actively managing tariff exposure, with owned brand inventory purchases from impacted countries representing about 7% of total merchandise costs [29][30] Q&A Session Summary Question: What are you seeing in pet adoption trends and how do these trends impact your full year outlook? - Management noted stable pet adoption trends and emphasized that 2025 is a self-help story for Petco, not reliant on external factors for financial improvements [34][35] Question: How are you ensuring guardrails to take permanent costs out while keeping the customer experience intact? - Management highlighted a change in mindset towards cost management, focusing on leveraging SG&A rather than just cutting costs [36][39] Question: Can you provide insights on the top line journey and the repositioning efforts? - Management indicated that while external observers may see limited progress, internally, they are identifying growth levers and implementing strategies for improvement [42][44] Question: Can you discuss gross margin performance and expectations for the full year? - Management expressed satisfaction with the gross margin performance in Q1 and reiterated the goal of expanding gross margins for the year [51][52] Question: How is the mix of revenue indicating consumer behavior? - Management noted that services continue to lead the business, driven by needs-based categories, while consumables showed expected softness [60][67] Question: What is the outlook on inflation and pricing? - Management stated that while they are monitoring inflation, they have not seen significant spikes and are focused on balancing customer needs with business health [83][84] Question: Have you identified price gaps and how are you addressing them? - Management confirmed that they are analyzing pricing at the SKU level and have identified opportunities to adjust prices to improve competitiveness [86][87]

FOR IMMEDIATE RELEASE: June 5, 2025 Petco Health + Wellness Company, Inc. Reports First Quarter 2025 Exhibit 99.1 Contacts: Investor Relations Media Relations Tina Romani Lisa Stark investorrelations@petco.com Lisa.stark@petco.com Financial Results Reaffirms Fiscal 2025 Net Sales and Earnings Outlook* San Diego, June 5, 2025 – Petco Health and Wellness Company, Inc. (Nasdaq: WOOF) today announced its first quarter 2025 financial results. Q1 2025 Overview "We are pleased to deliver first quarter earnings res ...

June 5, 2025 First Quarter 2025 Earnings Call Safe Harbor and Non-GAAP Measures This Presentation 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 othe ...