Goldman Sachs Sees Petco (WOOF) Poised for 2026 Growth Driven by Unique Strength in High-Margin Veterinary Services

Core Insights - Petco Health & Wellness Company Inc. is viewed as a potential investment opportunity despite recent price target adjustments by major financial institutions [1][2] Financial Performance - In Q3 2025, Petco reported a net sales decline of 3.1% to $1.46 billion and a comparable sales decrease of 2.2%, while adjusted EBITDA increased by 21% to $99 million, with a margin expansion of approximately 1.4% to 6.7% [3] - The company achieved a gross margin expansion of 0.75% to 38.9% and reduced SG&A expenses by $32 million, resulting in 0.97% expense leverage [3] Strategic Focus - Petco is shifting its strategy away from unprofitable sales towards high-margin services, with the Services and Other category growing to $255 million [4] - The veterinary business is a key area of growth, with the company exceeding hiring goals and achieving record-high doctor retention [4] Future Outlook - Petco has raised its full-year 2025 Adjusted EBITDA outlook to between $395 million and $397 million, while tightening its net sales forecast to a decline of 2.5% to 2.8% [5] - The company plans to slow the pace of store closures, ending the quarter with 1,389 US stores, as it targets a return to growth in 2026 [4]