Financial Data and Key Metrics Changes - In Q4 2024, the company reported revenue of $1,550,000,000, which was in line with prior outlook, and adjusted EBITDA of $96,100,000, exceeding expectations [9][28] - Fourth quarter gross profit decreased about 3% to $589,000,000, primarily due to the loss of the fifty-third week in 2024, while gross margin increased by 180 basis points to 38% [28] - Total SG&A was $571,900,000, or 36.8% of net sales, an increase of approximately 60 basis points year-over-year [29] - The company achieved positive free cash flow of $50,000,000 and ended the year with a cash balance of $182,000,000 [29] Business Line Data and Key Metrics Changes - Services are identified as the fastest-growing area within the pet category, with the company holding an established leadership position [9] - The company is focusing on improving its existing fleet of vet hospitals to drive services growth and improve margins with minimal capital [25] Market Data and Key Metrics Changes - The pet category is projected to reach $200 billion in the next five years, with ongoing humanization of pets serving as a significant tailwind for the company [8] - The company closed 25 net locations in 2024 and expects to close between 20 to 30 net locations in 2025 [31] Company Strategy and Development Direction - The company is transitioning from a singular focus on health and wellness to serving all pets and pet parents, aiming to regain market share in a fragmented market [5] - The strategy is divided into three phases: stabilizing profitability, strengthening retail fundamentals, and preparing for revenue growth [10][19] - The leadership team is focused on improving gross margin, leveraging SG&A, and enhancing return on invested capital [24][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to return to long-term profitable growth, emphasizing the importance of operational improvements and cost control [22][33] - The outlook for 2025 anticipates overall net sales to decline low single digits compared to the previous year, with adjusted EBITDA expected to be between $375,000,000 and $390,000,000 [32] Other Important Information - The company is committed to improving its economic model and operational performance, with a focus on gross margin expansion and disciplined capital allocation [24][26] - Management highlighted the importance of customer satisfaction and maintaining a competitive pricing strategy while avoiding low-margin sales [16][60] Q&A Session Summary Question: What infrastructure investments are needed for Phase three? - Management indicated that no significant infrastructure investments are required, focusing instead on cost control and improved EBITDA [37] Question: What are the low-hanging fruit for EBITDA improvement? - Management emphasized the importance of working every lever of the business to improve profitability, particularly in gross margin expansion and SG&A leverage [46][47] Question: How will the company regain market share? - Management acknowledged the need to strengthen profitability and cash flow before focusing on growth, with plans to identify growth levers in Phase three [56][57] Question: How will SG&A be managed with expected sales declines? - Management assured that customer needs remain a priority, and SG&A management will focus on leveraging existing resources without harming customer experience [59][60] Question: What is the outlook for inflation and promotions? - Management noted that the promotional environment remains steady year-over-year, with a focus on disciplined promotional strategies that enhance customer value [113][116]

PETCO FOURTH QUARTER AND FULL YEAR 2024 EARNINGS CALL March 26, 2025 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 s ...

Financial Data and Key Metrics Changes - In Q4 2024, the company reported revenue of $1.55 billion, aligning with prior outlook, and adjusted EBITDA of $96.1 million, exceeding expectations [13][44] - Gross profit decreased by approximately 3% to $589 million, primarily due to the loss of the fifty-third week in 2024, while gross margin increased by 180 basis points to 38% [43][44] - Total SG&A expenses were $571.9 million, or 36.8% of net sales, an increase of about 60 basis points year-over-year [44] Business Line Data and Key Metrics Changes - The services segment is identified as the fastest-growing area within the pet category, with the company holding an established leadership position [11] - The company is focusing on optimizing existing vet hospitals to drive services growth and improve margins with minimal capital investment [39] Market Data and Key Metrics Changes - The pet category is projected to reach $200 billion in the next five years, driven by the ongoing humanization of pets [11] - The company closed 25 net locations in 2024 and anticipates closing an additional 20 to 30 locations in 2025 [49][122] Company Strategy and Development Direction - The company is implementing a phased approach to restore profitability, focusing on improving the operating model, enhancing retail fundamentals, and optimizing product assortment [14][20] - The leadership team is committed to driving gross margin improvement and leveraging SG&A to enhance the economic model [41][42] - Future growth initiatives will include enhancing omnichannel capabilities and investing in services opportunities [30][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to return to long-term profitable growth, emphasizing the importance of operational improvements and cost control [32][52] - The outlook for 2025 anticipates overall net sales to decline low single digits compared to the previous year, with adjusted EBITDA expected between $375 and $390 million [48][49] Other Important Information - The company aims to achieve a debt-to-EBITDA leverage ratio below two times, focusing on profitability improvement [45] - Management is closely monitoring potential tariff impacts, particularly on inventory purchases from China, Canada, and Mexico, which represent only about 5% of total merchandise costs [46][47] Q&A Session Summary Question: What infrastructure investments are needed for phase three? - Management indicated that no significant infrastructure investments are required, focusing instead on improving EBITDA through disciplined operations [59][60] Question: What are the low-hanging fruit for EBITDA improvement? - Management highlighted the importance of gross margin expansion and leveraging SG&A as key areas for improvement [67][70] Question: How does the company plan to manage SG&A amid declining sales? - Management emphasized that SG&A leverage is about efficiency and effectiveness, ensuring customer needs are met without compromising service [86][87] Question: What is the company's approach to pricing and promotions? - Management stated that they are focused on rational pricing strategies and avoiding excessive promotional stacking to enhance profitability [151][153] Question: How does the company view the competitive landscape and market share? - Management acknowledged the need to sacrifice some sales for improved profitability but expressed confidence in regaining market share through operational improvements [80][84]

Company Performance - Petco Health & Wellness reported break-even quarterly earnings per share, missing the Zacks Consensus Estimate of $0.02, and compared to earnings of $0.02 per share a year ago, resulting in an earnings surprise of -100% [1] - The company posted revenues of $1.55 billion for the quarter ended January 2025, missing the Zacks Consensus Estimate by 0.02%, and down from $1.67 billion year-over-year [2] - Over the last four quarters, Petco has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Stock Performance - Petco shares have lost approximately 35.2% since the beginning of the year, while the S&P 500 has declined by -1.8% [3] - The current consensus EPS estimate for the coming quarter is $0.01 on $1.55 billion in revenues, and $0.07 on $6.28 billion in revenues for the current fiscal year [7] Industry Outlook - The Zacks Industry Rank indicates that the Retail - Miscellaneous sector is currently in the bottom 46% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor decisions [5]

Financial Performance - Q4 2024 net revenue was $1.6 billion, a decrease of 7.3% year over year, impacted by the loss of the 53rd week in 2023[4] - Full year 2024 net revenue totaled $6.1 billion, down 2.2% year over year, with comparable sales increasing by 0.3%[4] - Adjusted EBITDA for Q4 2024 was $96.1 million, compared to $105.3 million in the previous year, while full year adjusted EBITDA was $336.5 million, down from $401.1 million[4] - The company expects low single-digit percentage decline in net revenue for FY 2025, with adjusted EBITDA guidance of $375 million to $390 million[5] - Q1 2025 guidance indicates a low single-digit decline in net revenue, with adjusted EBITDA projected between $82 million and $83 million[6] - Gross profit for Q4 2024 was $589.3 million, a decrease of 2.8% year over year, while full year gross profit was $2.3 billion, down 1.3%[4] - GAAP net loss for Q4 2024 was $13.8 million, an improvement from a loss of $22.6 million in the previous year, while the full year net loss was $101.8 million compared to $1.3 billion in the prior year[4] Cash Flow and Assets - Operating cash flow for FY 2024 was $177.7 million, down from $215.7 million in the previous year, while free cash flow improved to $49.7 million from a negative $9.9 million[4] - Cash and cash equivalents increased from $136,649 million at the beginning of the period to $181,665 million at the end of the period, reflecting a net increase of $45,016 million[19] - Free Cash Flow improved to $49,683 million for the 52 weeks ended February 1, 2025, compared to a negative Free Cash Flow of $9,879 million for the 53 weeks ended February 3, 2024[26] - Total assets decreased from $5,363,152 million in 2024 to $5,194,430 million in 2025, a decline of approximately 3.15%[16] Liabilities and Equity - Total current liabilities rose from $1,113,143 million in 2024 to $1,139,163 million in 2025, an increase of approximately 2.33%[16] - The total stockholders' equity decreased from $1,184,429 million in 2024 to $1,113,630 million in 2025, a decline of approximately 5.98%[16] Inventory and Capital Expenditures - Merchandise inventories decreased from $684,502 million in 2024 to $653,329 million in 2025, a reduction of about 4.56%[16] - Cash paid for fixed assets decreased from $225,598 million in 2024 to $127,990 million in 2025, a reduction of about 43.3%[19] Profitability Metrics - The company reported a net margin of -1.7% for the 52 weeks ended February 1, 2025, compared to -20.5% for the previous year[23] - Net loss for the 52 weeks ended February 1, 2025, was $101,816 million, compared to a net loss of $1,280,210 million for the 53 weeks ended February 3, 2024[19] - Adjusted EBITDA for the 52 weeks ended February 1, 2025, was $336,526 million, down from $401,103 million for the 53 weeks ended February 3, 2024, representing a decrease of about 16.1%[23] Quarterly Performance - Net income for the 13 weeks ended February 1, 2025, was $10,224,000, a decrease of 17% compared to $12,311,000 for the same period in 2024[28] - EBITDA for the 13 weeks ended February 1, 2025, was $22,466,000, down 4.5% from $23,518,000 in the prior year[28] - The company reported a 50% share of EBITDA amounting to $11,233,000 for the 13 weeks ended February 1, 2025, compared to $11,759,000 in the same period last year[28] Expenses and Taxation - Depreciation expenses for the 13 weeks ended February 1, 2025, were $6,536,000, compared to $7,070,000 in the same period last year, reflecting a decrease of 7.5%[28] - Interest expense, net, decreased to $516,000 for the 13 weeks ended February 1, 2025, from $1,039,000 in the prior year, a reduction of 50%[28] - Income tax expense increased to $5,014,000 for the 13 weeks ended February 1, 2025, from $2,541,000 in the same period last year, representing a significant increase of 97%[28] Strategic Initiatives - The company plans approximately 20-30 net closures of real estate locations in FY 2025[5] - Petco's leadership team is focused on achieving double-digit adjusted EBITDA growth in 2025, aiming for sustainable profitable growth[4] - Acquisition and divestiture-related integration costs were incurred, reflecting the company's ongoing strategic transactions and business integration efforts[29] Foreign Currency Impact - The company incurred foreign currency losses of $176,000 for the 13 weeks ended February 1, 2025, compared to $557,000 in the same period in 2024[28]

Core Insights - Petco Health and Wellness Company, Inc. reported a net revenue of $1.6 billion for Q4 2024, a decrease of 7.3% year over year, impacted by the loss of the 53rd week in 2023 [8] - The company aims for double-digit adjusted EBITDA growth in 2025, with guidance for adjusted EBITDA between $375 million and $390 million [2][3] - Petco's full year 2024 adjusted EBITDA was $336.5 million, down from $401.1 million in the previous year [8] Q4 2024 Overview - The CEO highlighted progress in returning Petco to retail operating excellence, with comparable sales increasing by 0.5% year over year [2] - Gross profit for Q4 2024 was $589.3 million, a decrease of 2.8% from $606.3 million in the previous year [8] - The GAAP net loss for Q4 2024 was $13.8 million, an improvement from a net loss of $22.6 million in the prior year [8] Full Year 2024 Overview - Total net revenue for the full year 2024 was $6.1 billion, down 2.2% year over year [8] - The company reported a GAAP net loss of $101.8 million for the full year, significantly improved from a net loss of $1.3 billion the previous year, which included a $1.2 billion non-cash goodwill impairment charge [8] - Operating cash flow for the full year was $177.7 million, compared to $215.7 million in the previous year [8] 2025 Guidance - For FY 2025, Petco expects net revenue to decline in low single digits year over year [2] - The company anticipates net interest expense of approximately $130 million and capital expenditures between $130 million and $140 million [2] - The guidance includes expectations for around 20-30 net closures of real estate locations [2] First Quarter 2025 Guidance - For Q1 2025, Petco projects net revenue to decrease in low single digits year over year, with adjusted EBITDA expected to be between $82 million and $83 million [3]

Core Insights - Petco Health and Wellness Company, Inc. will release its fourth quarter 2024 earnings results and full-year fiscal 2025 outlook on March 26, 2025, at approximately 4:00 p.m. Eastern [1] - A conference call to discuss the financial and operating performance will follow at approximately 4:30 p.m. Eastern [1] - The earnings release and presentation will be available on the company's Investor Relations page, with a replay accessible until April 9, 2025 [2] Company Overview - Founded in 1965, Petco is a health and wellness company focused on improving the lives of pets and their owners [3] - The company operates over 1,500 pet care centers across the U.S., Mexico, and Puerto Rico, offering a range of products and services including grooming, training, and veterinary care [3] - Petco Love, an independent nonprofit organization, collaborates with local animal welfare groups and has facilitated the adoption of nearly 7 million animals through in-store events [3]

Core Viewpoint - Petco is undergoing a significant leadership transition aimed at strengthening its retail fundamentals, driving profit improvement, and returning to growth, with new appointments expected to unlock value for customers, partners, and shareholders [1][7]. Leadership Changes - Sabrina Simmons has been appointed as Chief Financial Officer, effective February 17, bringing over 20 years of executive-level financial experience, previously serving as CFO at Gap, Inc. [3][4][7]. - Michael Romanko has been named Chief Customer and Product Officer, effective February 24, with a strong background in product development and branding, previously holding a decade-long role at Five Below, Inc. [5][7]. - Jack Stout has been appointed Chief Merchandising Officer, effective February 24, with over 20 years of experience in merchandising and planning, previously serving as Executive Vice President at 7-Eleven, Inc. [9][10][7]. Strategic Focus - The new leadership team will work closely with existing executives to execute against the company's 2025 objectives and prepare for a return to growth [1][2]. - Simmons will focus on financial strategy, long-term business planning, and investor relations initiatives, leveraging her familiarity with Petco's business [3][4]. - Romanko aims to elevate the Petco brand by sourcing unique products and enhancing customer experience [6][5]. - Stout is focused on strengthening retail fundamentals and improving merchandising capabilities [10][9]. Company Overview - Petco, founded in 1965, operates over 1,500 pet care centers across the U.S., Mexico, and Puerto Rico, offering a range of products and services aimed at improving the lives of pets and their owners [11].

Core Viewpoint - Petco Health & Wellness (WOOF) has received a Zacks Rank 1 (Strong Buy) upgrade, indicating a positive outlook driven by rising earnings estimates [1][4]. Earnings Estimates and Ratings - The Zacks rating system is primarily based on a company's changing earnings picture, with the Zacks Consensus Estimate reflecting EPS estimates from sell-side analysts [2]. - The Zacks rating upgrade for Petco signifies an optimistic earnings outlook, which is likely to lead to increased buying pressure and a rise in stock price [4][6]. Impact of Earnings Estimates on Stock Prices - Changes in a company's future earnings potential, as indicated by earnings estimate revisions, are strongly correlated with near-term stock price movements [5]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, influencing their buying and selling actions, which subsequently affects stock prices [5]. Recent Performance of Petco - For the fiscal year ending January 2025, Petco is projected to earn -$0.07 per share, reflecting a significant change of -177.8% from the previous year [9]. - Over the past three months, the Zacks Consensus Estimate for Petco has increased by 5.7%, indicating a positive trend in earnings estimates [9]. Zacks Rank System - The Zacks Rank system categorizes stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [8]. - Petco's upgrade to Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, suggesting a strong potential for market-beating returns in the near term [11].

Core Viewpoint - Momentum investing focuses on "buying high and selling higher," contrasting with traditional strategies of "buying low and selling high" [1] Group 1: Momentum Investing Strategy - Momentum investing can be risky as stocks may lose momentum if their valuations exceed future growth potential [1] - Identifying the right entry point for momentum stocks is challenging, leading to potential losses if the stock price does not continue to rise [1] Group 2: Bargain Momentum Stocks - Investing in bargain stocks that have recently shown price momentum may be a safer strategy [2] - The Zacks Momentum Style Score is useful for identifying strong momentum stocks, while the 'Fast-Paced Momentum at a Bargain' screen helps find attractively priced stocks [2] Group 3: Petco Health & Wellness (WOOF) - Petco Health & Wellness (WOOF) has a four-week price change of 16.6%, indicating strong recent price momentum [3] - WOOF has gained 5.6% over the past 12 weeks, demonstrating its ability to deliver positive returns over a longer timeframe [4] - The stock has a beta of 1.89, suggesting it moves 89% higher than the market in either direction, indicating fast-paced momentum [4] Group 4: Valuation and Earnings Estimates - WOOF has a Momentum Score of A, indicating a favorable time to invest [5] - The stock has a Zacks Rank 2 (Buy) due to upward revisions in earnings estimates, which attract more investor interest [6] - WOOF is trading at a Price-to-Sales ratio of 0.25, meaning investors pay 25 cents for each dollar of sales, indicating a reasonable valuation [6] Group 5: Additional Investment Opportunities - Besides WOOF, there are other stocks that meet the criteria of the 'Fast-Paced Momentum at a Bargain' screen, suggesting further investment opportunities [7] - Zacks offers over 45 Premium Screens tailored to different investing styles, aiding in stock selection [8]