Petco Health and Wellness pany(WOOF) - 2025 Q2 - Quarterly Results

Q2 2024 Financial Highlights and Business Overview Petco's Q2 2024 results show a slight revenue decline to $1.52 billion, with comparable sales up 0.3%, driven by growth in consumables and services despite a drop in supplies and companion animal sales, leading to weakened profitability Q2 2024 Key Financial Metrics | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $1.52 billion | $1.53 billion | -0.5% | | Comparable Sales | +0.3% | N/A | N/A | | GAAP Net Loss | $(24.8) million | $(14.6) million | +70% | | GAAP EPS | $(0.09) | $(0.05) | +66% | | Adjusted EBITDA | $83.5 million | $112.6 million | -25.8% | | Adjusted Net Income | $(5.9) million | $16.3 million | -136.2% | | Operating Cash Flow | $69.4 million | $96.6 million | -28.2% | | Free Cash Flow | $42.0 million | $44.6 million | -5.8% | - By business segment, performance was mixed in Q2 2024 compared to the prior year: - Consumables: Up 1.5%[2] - Services and Other: Up 3.1%[2] - Supplies and Companion Animal: Down 4.7%[2] - CEO Joel Anderson highlighted ongoing efforts to strengthen retail fundamentals and improve profitability, expressing optimism about future opportunities to capture greater market share and create shareholder value[3] Financial Outlook The company issued guidance for fiscal Q3 2024, projecting revenue of approximately $1.5 billion, Adjusted EBITDA between $76 million and $80 million, and an Adjusted EPS loss of $(0.03) to $(0.04), with full-year net interest expense and capital expenditures unchanged FQ3 2024 Guidance | Metric | FQ3 2024 Guidance | | :--- | :--- | | Net Revenue | ~ $1.5 billion | | Adjusted EBITDA | $76 million to $80 million | | Adjusted EPS | $(0.03) to $(0.04) | Full-Year 2024 Guidance | Metric | 2024 Guidance (Unchanged) | | :--- | :--- | | Net interest expense | ~$145 million | | Capital Expenditures | ~$140 million | Consolidated Financial Statements This section details Petco's consolidated financial statements, covering operations, balance sheets, and cash flows Condensed Consolidated Statements of Operations For the 13 weeks ended August 3, 2024, total net sales decreased slightly to $1.52 billion, gross profit fell by 2% to $580.7 million, and a significant 90% drop in operating income to $2.5 million resulted in a net loss of $24.8 million, a 70% increase from the prior-year period Condensed Consolidated Statements of Operations (In thousands) | (In thousands) | 13 Weeks Ended Aug 3, 2024 | 13 Weeks Ended Jul 29, 2023 | % Change | | :--- | :--- | :--- | :--- | | Total net sales | $1,523,755 | $1,530,734 | (0.5%) | | Gross profit | $580,725 | $593,004 | (2.1%) | | Operating income (loss) | $2,468 | $24,037 | (89.7%) | | Net loss | $(24,823) | $(14,606) | 70.0% | | Diluted loss per share | $(0.09) | $(0.05) | 66.0% | Consolidated Balance Sheets As of August 3, 2024, Petco's total assets were $5.28 billion, a slight decrease from $5.36 billion at the fiscal year's start, with total liabilities stable at $4.15 billion and total stockholders' equity declining to $1.13 billion from $1.18 billion Consolidated Balance Sheets (In thousands) | (In thousands) | August 3, 2024 | February 3, 2024 | | :--- | :--- | :--- | | Total current assets | $941,893 | $951,744 | | Total assets | $5,276,647 | $5,363,152 | | Total current liabilities | $1,117,851 | $1,113,143 | | Total liabilities | $4,145,164 | $4,178,723 | | Total stockholders' equity | $1,131,483 | $1,184,429 | Consolidated Statements of Cash Flows For the 26 weeks ended August 3, 2024, net cash provided by operating activities significantly decreased to $61.0 million from $134.3 million, with net cash used in investing activities at $58.1 million and financing activities at $5.9 million, resulting in a net cash decrease of $3.0 million Consolidated Statements of Cash Flows (In thousands) | (In thousands) | 26 Weeks Ended Aug 3, 2024 | 26 Weeks Ended Jul 29, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $60,956 | $134,265 | | Net cash used in investing activities | $(58,065) | $(105,815) | | Net cash used in financing activities | $(5,894) | $(65,768) | | Net decrease in cash | $(3,003) | $(37,318) | Non-GAAP Financial Measures This section reconciles non-GAAP financial measures like Adjusted EBITDA, Adjusted EPS, and Free Cash Flow to GAAP for operational insights Reconciliation of Net Loss to Adjusted EBITDA The company reported Adjusted EBITDA of $83.5 million for Q2 2024, a decrease from $112.6 million in the prior year, with the Trailing Twelve Month Adjusted EBITDA at $336.7 million as of August 3, 2024 Adjusted EBITDA Reconciliation (In thousands) | (In thousands) | 13 Weeks Ended Aug 3, 2024 | 13 Weeks Ended Jul 29, 2023 | | :--- | :--- | :--- | | Net loss | $(24,823) | $(14,606) | | Adjusted EBITDA | $83,523 | $112,578 | Trailing Twelve Month Adjusted EBITDA (In thousands) | (In thousands) | TTM Ended Aug 3, 2024 | TTM Ended Jul 29, 2023 | | :--- | :--- | :--- | | Adjusted EBITDA | $336,666 | $501,681 | Reconciliation of Diluted EPS to Adjusted EPS For Q2 2024, Petco's Adjusted Net Loss was $5.9 million, or $(0.02) per share, contrasting with an Adjusted Net Income of $16.3 million, or $0.06 per share, in the prior-year quarter, after adjustments for non-core items and a normalized tax rate Adjusted EPS Reconciliation | Per share amounts | 13 Weeks Ended Aug 3, 2024 | 13 Weeks Ended Jul 29, 2023 | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $(0.09) | $(0.05) | | Adjusted EPS (Non-GAAP) | $(0.02) | $0.06 | Adjusted Net Income Reconciliation (In thousands) | (In thousands) | 13 Weeks Ended Aug 3, 2024 | 13 Weeks Ended Jul 29, 2023 | | :--- | :--- | :--- | | Net loss (GAAP) | $(24,823) | $(14,606) | | Adjusted Net (Loss) Income | $(5,949) | $16,257 | Reconciliation of Free Cash Flow Free Cash Flow for the 13 weeks ended August 3, 2024, was $42.0 million, slightly down from $44.6 million in the prior year, while the 26-week period saw a sharp decline to $0.9 million from $20.2 million due to lower operating cash flow Free Cash Flow Reconciliation (In thousands) | (In thousands) | 13 Weeks Ended Aug 3, 2024 | 13 Weeks Ended Jul 29, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $69,370 | $96,614 | | Cash paid for fixed assets | $(27,388) | $(51,973) | | Free Cash Flow | $41,982 | $44,641 | Other Information This section provides background on Petco and important disclosures regarding forward-looking statements and associated risks About Petco Founded in 1965, Petco is a pet health and wellness company operating over 1,500 pet care centers across the U.S., Mexico, and Puerto Rico, offering a comprehensive ecosystem of products, services, and solutions through physical and digital platforms - Petco operates over 1,500 pet care centers in the U.S., Mexico, and Puerto Rico[6] - The company provides a full range of pet wellness products, services, and solutions, accessible in-store and online[6] Forward-Looking Statements This report contains forward-looking statements regarding the company's guidance, business plans, and future performance, which are subject to numerous risks and uncertainties that could cause actual results to differ materially - The earnings release includes forward-looking statements concerning Q3 and full-year 2024 guidance, operational plans, and profitability goals[7] - Statements are subject to significant risks and uncertainties, such as competition, consumer demand, inflation, and supply chain issues, as listed in the company's SEC filings[7]