Petco Health and Wellness pany(WOOF) - 2026 Q2 - Quarterly Results

Executive Summary & Outlook Q2 2025 Highlights 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 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] 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 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 About Petco 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] * 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] * Petco founded Petco Love in 1999, which supports local animal welfare groups and has facilitated approximately 7 million animal adoptions[10] Forward-Looking Statements & Risks 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][12] * 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] * 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] Financial Statements Condensed Consolidated Statements of Operations 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 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 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 Adjusted EBITDA 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] 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 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] 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 |