Financial Data and Key Metrics Changes - In Q2 2025, net sales decreased by 2.3% with comparable sales down 1.4% due to 25 net store closures in 2024 and an additional 10 closures year to date, bringing the U.S. store count to 1,388 [23][24] - Gross margin expanded by over 120 basis points to 39.3%, driven by a disciplined approach to average unit cost and retail pricing [25] - SG&A expenses decreased by $36 million year over year, leveraging more than 150 basis points, contributing to a $41 million increase in operating profit to $43 million [26][27] - Adjusted EBITDA increased by $30 million to $114 million, expanding nearly 220 basis points to 7.6% as a percentage of sales [27] Business Line Data and Key Metrics Changes - The company is focusing on improving store performance, which has shown positive results, while e-commerce is being retooled for profitability [61] - The introduction of new product categories aimed at humans has been initiated, responding to customer interest in pet-themed products [14] Market Data and Key Metrics Changes - The pet industry is currently showing flat growth, but the company is maintaining its market share while improving profitability [80] - Customer sentiment has improved, as indicated by sequential increases in the Net Promoter Score (NPS) since the end of the previous year [10] Company Strategy and Development Direction - The company is in Phase two of its transformation, focusing on operational improvements and preparing for Phase three, which aims for profitable sales growth [19] - The North Star project is being implemented to enhance customer experience, service delivery, merchandising differentiation, and omnichannel capabilities [56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver improvements and raised the adjusted EBITDA outlook for 2025 to between $385 million and $395 million, an increase of roughly 16% at the midpoint [29] - The company is preparing for potential tariff impacts in the second half of the year, which are expected to be more significant [43] Other Important Information - Free cash flow for the quarter was over $50 million, with a cash balance of $190 million and total liquidity of $684 million [28] - The company is committed to a disciplined promotional strategy and improving customer experience as part of its growth initiatives [19][30] Q&A Session Summary Question: When can the firm be held accountable for generating a positive comp? - Management indicated that results will likely begin to show up in 2026, with the third quarter being the hardest compare of the year [33] Question: Were gross margin gains primarily from online promotions? - Management noted that the focus has been on improving store performance, which represents the majority of sales, while e-commerce is being cleaned up for profitability [34][36] Question: How did gross margin perform relative to expectations? - Management expressed satisfaction with the gross margin expansion, which was driven by a disciplined approach to pricing and promotional strategies [42] Question: What updates can be provided on planogram resets? - Management confirmed that planogram resets have been completed successfully, improving on-shelf availability and store productivity [50] Question: What is the status of the e-commerce retooling? - Management stated that the e-commerce channel is more profitable now, and ongoing improvements are being made to enhance the customer experience [61] Question: What is behind the increase in NPS scores? - Management attributed the increase to various improvements in store experience and customer engagement efforts [64] Question: What are the biggest remaining execution gaps? - Management indicated that the focus is now on investing back into the business and continuing to build on the progress made [73]

Financial Data and Key Metrics Changes - In Q2 2025, net sales decreased by 2.3% with comparable sales down 1.4% due to 25 net store closures in 2024 and an additional 10 closures year to date, bringing the U.S. store count to 1,388 [22][24] - Gross margin expanded by over 120 basis points to 39.3%, driven by a disciplined approach to average unit cost and average unit retail [24][26] - Operating profit increased by $41 million year over year to $43 million, with adjusted EBITDA rising by $30 million to $114 million, expanding nearly 220 basis points to 7.6% as a percentage of sales [26][28] Business Line Data and Key Metrics Changes - The company is focusing on improving store performance, which has shown positive results, while e-commerce has been deprioritized temporarily to enhance profitability [16][60] - The relaunch of the loyalty program is aimed at strengthening long-term customer relationships, with personalized rewards being a key feature [14][15] Market Data and Key Metrics Changes - The pet industry is currently experiencing flat growth, but the company is maintaining its market share while improving profitability [78] - Customer sentiment has improved, as indicated by sequential increases in the Net Promoter Score (NPS) since the end of the previous year [9][66] Company Strategy and Development Direction - The company is in Phase two of its transformation, focusing on operational improvements and preparing for Phase three, which aims for a return to profitable sales growth [6][18] - Key pillars for future growth include enhancing store experiences, delivering services at scale, merchandising differentiation, and winning with omnichannel strategies [55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver improvements and raised the adjusted EBITDA outlook for 2025 to between $385 million and $395 million, reflecting a 16% increase at the midpoint [28] - The company anticipates that the impacts of tariffs will become more significant in the second half of the year, which may affect gross margins [42][90] Other Important Information - Free cash flow for the quarter was over $50 million, with a cash balance of $190 million and total liquidity of $684 million [27] - The company is committed to continuous improvement in inventory management, achieving a 9.5% reduction in ending inventory while maintaining higher in-stock levels for customers [27][63] Q&A Session Summary Question: When can the firm be held accountable for generating a positive comp? - Management indicated that results for a positive comp are expected to show up in 2026, as the third quarter is the hardest compare of the year [33] Question: Were gross margin gains primarily from online promotions? - Management clarified that the focus has been on improving store performance, which represents the majority of sales, while e-commerce has been more focused on profitability [34][36] Question: How did gross margin perform relative to expectations? - Management noted that gross margin expansion was a significant focus, with minimal tariff impact in Q2, but expected tariffs to have a more meaningful impact in the back half of the year [40][42] Question: What is the status of e-commerce and inventory projects? - Management stated that e-commerce improvements are ongoing, with a new leader making an impact, while inventory management has been successful with a focus on continuous improvement [60][63] Question: What are the biggest remaining execution gaps? - Management emphasized that the focus is now on the progress made and the confidence to invest back into the business, rather than identifying gaps [72] Question: What is the outlook for the fourth quarter adjusted EBITDA? - Management indicated that tariffs will have the most significant negative impact in Q4, but strong performance in the first half allows for selective investments in the second half [90]

Core Viewpoint - A class action lawsuit has been filed against Petco Health and Wellness Company, Inc. for allegedly making false or misleading statements regarding its business operations and prospects during the pandemic period [2][4]. Group 1: Lawsuit Details - The class action lawsuit is filed on behalf of all individuals and entities who purchased Petco securities between January 14, 2021, and June 5, 2025 [2]. - Investors have until August 29, 2025, to apply to the Court to be appointed as lead plaintiff in the lawsuit [2]. Group 2: Allegations Against Petco - The lawsuit alleges that Petco's pandemic-related growth was unsustainable and that its business model focused on premium pet food was flawed [4]. - It is claimed that the strength of Petco's differentiated product strategy was overstated, and the company downplayed the severity of operational issues [4]. - The defendants are accused of overstating Petco's ability to achieve sustainable and profitable growth [4].

Financial Performance - Operating income increased by approximately $41 million[11] - Adjusted EBITDA increased by roughly $30 million[11] - Free Cash Flow generated was about $54 million[11] - Net debt decreased by 4% from $1.46 billion to $1.40 billion[31] - Liquidity increased by 4% from $655 million to $684 million[31] - Q2 2025 Adjusted EBITDA margin was 7.6%, compared to 5.5% in Q2 2024[29, 39] Sales & Outlook - Net sales decreased by 2% year-over-year, from $1.524 billion to $1.489 billion[23, 42] - The company expects net sales to be down low single digits year-over-year for Q3 and full year 2025[34] - Adjusted EBITDA outlook for full year 2025 is $385 million to $395 million[34] - Net store closures are projected to be approximately 25 for the full year 2025[34] Strategic Initiatives - The company is focused on strengthening retail fundamentals, enhancing customer experience, and driving efficiencies[7, 14]

[Executive Summary & Outlook](index=1&type=section&id=Executive%20Summary%20%26%20Outlook) [Q2 2025 Highlights](index=1&type=section&id=Q2%202025%20Overview) Petco delivered on its commitments in Q2 2025, leading to a raised full-year earnings outlook. The company saw improvements in gross profit margin, operating income, GAAP net income, and Adjusted EBITDA, despite a slight decrease in net and comparable sales Q2 2025 Performance Metrics | Metric | Q2 2025 Performance | Change YoY | | :-------------------------- | :------------------ | :--------- | | Net sales | $1.5 billion | -2.3% | | Comparable sales | -1.4% | -1.4% | | Gross profit margin | 39.3% | +120 bps | | Operating income | $43.0 million | +$40.6 million | | GAAP net income | $14.0 million | +$38.8 million | | Adjusted EBITDA | $113.9 million | +$30.3 million | [Full Year 2025 Outlook](index=1&type=section&id=Full%20Year%202025%20Outlook) Petco maintained its full-year net sales outlook but raised its full-year 2025 earnings outlook, reflecting confidence in its transformation efforts and improved retail operating fundamentals. The outlook assumes current tariff levels remain consistent * The company **maintained its full year net sales outlook** and **raised its full year 2025 earnings outlook**[4](index=4&type=chunk) FY 2025 Outlook | Metric | Outlook | | :-------------------------- | :-------------------- | | Net Sales | Down low single digits year over year | | Adjusted EBITDA | $385 to $395 million | | Net interest expense | ~$130 million | | Capital Expenditures | $125 to $130 million | | Depreciation & Amortization | ~$200 million | | Net Store Closures | ~25 | [Third Quarter 2025 Outlook](index=1&type=section&id=Third%20Quarter%202025%20Outlook) Petco provided specific guidance for the third quarter of 2025, anticipating a continued slight decline in net sales but a solid Adjusted EBITDA range Q3 2025 Outlook | Metric | Outlook | | :-------------------------- | :-------------------- | | Net Sales | Down low single digits year over year | | Adjusted EBITDA | $92 million to $94 million | [Company Information](index=2&type=section&id=Company%20Information) [About Petco](index=2&type=section&id=About%20Petco) Petco is a leading pet care retailer with over 60 years of experience, operating more than 1,500 stores across the U.S., Mexico, and Puerto Rico, alongside online platforms. The company offers a wide range of pet products, services, and expertise, and supports animal welfare through its Petco Love foundation * Petco has been serving pet needs for **over 60 years**, offering meals, toys, supplies, and expert support[10](index=10&type=chunk) * The company operates **over 1,500 stores** across the U.S., Mexico, and Puerto Rico, with an online presence at petco.com and via the Petco app[10](index=10&type=chunk) * Petco founded **Petco Love** in **1999**, which supports local animal welfare groups and has facilitated **approximately 7 million animal adoptions**[10](index=10&type=chunk) [Forward-Looking Statements & Risks](index=2&type=section&id=Forward-Looking%20Statements%20%26%20Risks) This section outlines the nature of forward-looking statements within the earnings release, emphasizing that they are subject to significant uncertainties and contingencies. It also details a comprehensive list of risks that could cause actual results to differ materially from projections, including competition, consumer demand, macroeconomic pressures, and operational challenges * Forward-looking statements are based on current expectations and assumptions about future events and are subject to **significant uncertainties and contingencies**, many outside Petco's control[11](index=11&type=chunk)[12](index=12&type=chunk) * Key risks include **increased competition**, **reduced consumer demand**, **reliance on key vendors**, ability to attract and retain employees, **macroeconomic pressures** (inflation, interest rates, tariffs), and **operational challenges** like managing costs and IT systems[12](index=12&type=chunk) * Other risks involve **business interruptions**, **catastrophic events**, **maintaining brand perception**, **product safety concerns**, and the ability to successfully implement **operational adjustments and cost action plans**[12](index=12&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) [Condensed Consolidated Statements of Operations](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The condensed consolidated statements of operations show Petco's financial performance for the thirteen and twenty-six weeks ended August 2, 2025, compared to the prior year. The company reported a significant improvement in net income and operating income for both periods 13 Weeks Ended August 2, 2025 vs. August 3, 2024 | Metric | August 2, 2025 (in thousands) | August 3, 2024 (in thousands) | | :----------------------------------- | :---------------------------- | :---------------------------- | | Total net sales | $1,488,529 | $1,523,755 | | Gross profit | $585,319 | $580,725 | | Operating income (loss) | $43,022 | $2,468 | | Net income (loss) attributable to Class A and B-1 common stockholders | $13,972 | $(24,823) | | Basic Net income (loss) per share | $0.05 | $(0.09) | 26 Weeks Ended August 2, 2025 vs. August 3, 2024 | Metric | August 2, 2025 (in thousands) | August 3, 2024 (in thousands) | | :----------------------------------- | :---------------------------- | :---------------------------- | | Total net sales | $2,981,928 | $3,052,895 | | Gross profit | $1,155,287 | $1,159,385 | | Operating income (loss) | $59,381 | $(14,314) | | Net income (loss) attributable to Class A and B-1 common stockholders | $2,311 | $(71,306) | | Basic Net income (loss) per share | $0.01 | $(0.26) | [Consolidated Balance Sheets](index=5&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) The consolidated balance sheets provide a snapshot of Petco's financial position as of August 2, 2025, compared to February 1, 2025. Key changes include a slight increase in cash and cash equivalents, a decrease in merchandise inventories, and a reduction in total liabilities Consolidated Balance Sheet Highlights (in thousands) | Metric | August 2, 2025 | February 1, 2025 | | :-------------------------------- | :------------- | :--------------- | | Cash and cash equivalents | $188,748 | $165,756 | | Merchandise inventories, net | $608,506 | $653,329 | | Total current assets | $939,558 | $973,619 | | Fixed assets, net | $687,505 | $725,438 | | Total assets | $5,153,282 | $5,194,430 | | Total current liabilities | $1,058,566 | $1,139,163 | | Total liabilities | $4,014,179 | $4,080,800 | | Total stockholders' equity | $1,139,103 | $1,113,630 | [Consolidated Statements of Cash Flows](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) The consolidated statements of cash flows for the twenty-six weeks ended August 2, 2025, show an increase in net cash provided by operating activities and a net decrease in cash, cash equivalents, and restricted cash compared to the prior year 26 Weeks Ended August 2, 2025 vs. August 3, 2024 (in thousands) | Cash Flow Activity | August 2, 2025 | August 3, 2024 | | :----------------------------------- | :------------- | :------------- | | Net cash provided by operating activities | $70,438 | $60,956 | | Net cash used in investing activities | $(58,091) | $(58,065) | | 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 end of period | $189,732 | $133,646 | [Non-GAAP Financial Measures](index=7&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) [Adjusted EBITDA](index=7&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA is a non-GAAP financial measure used by management to assess core operating performance and facilitate period-over-period comparisons. Petco reported a significant increase in Adjusted EBITDA and Adjusted EBITDA Margin for both the thirteen and twenty-six weeks ended August 2, 2025 * Adjusted EBITDA is a **non-GAAP financial measure** that management believes is **meaningful for investors** to compare current and prior period performance and **assess core operating performance**[23](index=23&type=chunk) Adjusted EBITDA (in thousands) | Metric | 13 Weeks Ended Aug 2, 2025 | 13 Weeks Ended Aug 3, 2024 | 26 Weeks Ended Aug 2, 2025 | 26 Weeks Ended Aug 3, 2024 | | :-------------------- | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Adjusted EBITDA | $113,860 | $83,523 | $203,309 | $159,167 | | Adjusted EBITDA Margin | 7.6% | 5.5% | 6.8% | 5.2% | [Free Cash Flow](index=9&type=section&id=Free%20Cash%20Flow) Free Cash Flow, a non-GAAP measure, is calculated as net cash provided by operating activities less cash paid for fixed assets. It is considered an important indicator of the company's ability to generate additional cash from business operations. Petco reported a substantial increase in Free Cash Flow for both the thirteen and twenty-six weeks ended August 2, 2025 * Free Cash Flow is a **non-GAAP financial measure** calculated as **net cash provided by operating activities less cash paid for fixed assets**, used to evaluate the company's ability to **generate additional cash**[29](index=29&type=chunk) Free Cash Flow (in thousands) | Metric | 13 Weeks Ended Aug 2, 2025 | 13 Weeks Ended Aug 3, 2024 | 26 Weeks Ended Aug 2, 2025 | 26 Weeks Ended Aug 3, 2024 | | :-------------- | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Free Cash Flow | $53,788 | $41,982 | $9,922 | $927 |

Core Viewpoint - Berger Montague is investigating potential securities fraud claims against Petco Health and Wellness Company, following a federal securities class action lawsuit related to misleading statements about its pandemic-driven growth and product strategy [1][2]. Summary by Relevant Sections Allegations of Misleading Statements - The complaint alleges that Petco made false and misleading statements regarding the sustainability of its pandemic-driven growth and premium product strategy, which led to a significant decline in its stock price, including a drop of over 20% on August 24, 2023 [2]. Impact on Stock Price and Investor Confidence - The lawsuit indicates that the alleged misstatements contributed to substantial losses for Petco, particularly during the Class Period from January 14, 2021, to June 5, 2025, with continued downward revisions to earnings guidance and multiple leadership changes affecting investor confidence [2][3]. Changes in Product Strategy - Petco's efforts to adjust its product mix by introducing lower-cost pet food options contradicted prior public statements, highlighting the severity of the Company's challenges and further impacting investor sentiment [3].

Core Viewpoint - Johnson Fistel, PLLP has initiated an investigation into Petco Health and Wellness Company, Inc. for potential breaches of fiduciary duties and violations of federal securities laws [1][2] Group 1: Investigation Details - The investigation follows a recently filed securities fraud class action complaint alleging that six of Petco's officers made materially false and misleading statements regarding the company's business and operations [2] - Specific allegations include that Petco's pandemic-related growth was unsustainable and that the company's business model focused on premium pet food was overstated [2] - The complaint claims that the defendants downplayed the severity of issues affecting Petco's business and overstated the company's ability to achieve sustainable, profitable growth [2] Group 2: Shareholder Rights - Current stockholders who held Petco stock before January 14, 2021, are encouraged to contact Johnson Fistel to discuss their legal rights, which may include pursuing changes to corporate governance practices and seeking recovery of funds [3] - The investigation may allow shareholders to request a court-approved incentive award at no cost [3] Group 3: About Johnson Fistel - Johnson Fistel, PLLP is a nationally recognized shareholder rights law firm with multiple offices across the United States, representing individual and institutional investors in derivative and class action lawsuits [4]

Core Viewpoint - Berger Montague is investigating potential securities law violations involving Petco Health and Wellness Company, with a class action lawsuit filed for investors who acquired Petco securities between January 14, 2021, and June 5, 2025 [1][2] Group 1: Legal Action and Allegations - A class action lawsuit has been initiated on behalf of investors who purchased Petco securities during the specified Class Period [1][2] - The complaint alleges that Petco made materially false and misleading statements regarding its pandemic-related advantages and the sustainability of its premium pet food business model [3] - It is claimed that the Company overstated its ability to achieve profitable growth while downplaying operational challenges, leading to significant stock price declines [3] Group 2: Stock Performance Impact - Petco's stock price experienced a drop of over 20% on August 24, 2023, following a downward revision of its financial guidance [3] - Further declines in stock price occurred after subsequent disclosures and changes in leadership [3]

Core Points - A class action securities lawsuit has been filed against Petco Health and Wellness Company, Inc. for alleged securities fraud affecting investors between January 14, 2021, and June 5, 2025 [1] - The lawsuit claims that Petco's pandemic-related business advantages were not sustainable and that the company's business model, which focuses on premium pet food, was overstated [2] - Defendants are accused of downplaying the severity of issues within the company and overstating Petco's ability to achieve sustainable, profitable growth [2] Case Details - The lawsuit highlights that Petco's differentiated product strategy was exaggerated and that necessary changes to address underlying issues were not adequately communicated [2] - It is alleged that the public statements made by the defendants were materially false and misleading throughout the relevant period [2] Next Steps - Investors who suffered losses in Petco during the specified timeframe have until August 29, 2025, to request appointment as lead plaintiff, although participation in any recovery does not require this [3] - Class members may be entitled to compensation without any out-of-pocket costs or fees [3] Why Levi & Korsinsky - Levi & Korsinsky has a strong track record in securing significant settlements for shareholders and is recognized as one of the top securities litigation firms in the United States [4]

Core Viewpoint - A class action lawsuit has been filed against Petco Health and Wellness Company, Inc. for allegedly making materially false and misleading statements regarding its business operations and prospects during the pandemic [2][4]. Group 1: Lawsuit Details - The lawsuit is on behalf of all individuals and entities who purchased or acquired Petco securities between January 14, 2021, and June 5, 2025, with a deadline of August 29, 2025, for investors to apply as lead plaintiffs [2][4]. - Allegations include that Petco's pandemic-related growth was unsustainable and that the company overstated its product strategy and ability to deliver sustainable growth [4]. Group 2: Legal Representation - Bragar Eagel & Squire, P.C. is representing the investors in this class action lawsuit and encourages affected individuals to contact them for more information [5][6].