Core Viewpoint - A class action lawsuit has been filed against Petco Health and Wellness Company, Inc. and certain officers for alleged violations of federal securities laws during the Class Period from January 14, 2021, to June 5, 2025, seeking damages for misleading statements regarding the company's business and financial performance [1][8]. Company Overview - Petco is a specialty retailer offering a variety of pet products and services, including consumable and non-consumable products, as well as in-store veterinary and grooming services [4]. - A key business metric for Petco is comparable sales, which measures the change in period-over-period net sales from physical locations and digital sites [4]. Financial Performance and Misrepresentation - Petco claimed to benefit from pandemic-related tailwinds, including increased pet adoption rates, and positioned itself as a health-focused pet company capitalizing on trends of "pet humanization" and "premiumization" [5]. - However, as these pandemic-related tailwinds diminished, Petco's sales and profitability metrics began to decline significantly, with a notable downturn in mid-2023 [6]. - Despite worsening financial conditions, Petco's management continued to affirm optimistic financial guidance for FY 2023, including adjusted EBITDA of $520 million to $540 million and adjusted EPS of $0.40 to $0.48 [7]. Class Action Allegations - The complaint alleges that Petco's management made materially false and misleading statements about the sustainability of its business model and the strength of its product strategy, which were overstated [8]. - Specific allegations include the unsustainability of pandemic-related tailwinds, downplaying the severity of issues affecting sales, and overstating the company's ability to deliver sustainable growth [8]. Recent Financial Disclosures - On August 24, 2023, Petco revised its FY 2023 adjusted EBITDA guidance down to $460 million to $480 million and adjusted EPS to $0.24 to $0.30, leading to a 20.64% drop in stock price [9][10]. - Further negative revisions were made on November 29, 2023, with adjusted EBITDA guidance lowered to approximately $400 million and adjusted EPS to approximately $0.08, resulting in a 28.91% decline in stock price [11][12]. - In March 2024, Petco reported a GAAP net loss of $1.3 billion and acknowledged that its premium product-focused business model was not sustainable [13]. Market Reaction - Following the negative financial disclosures, Petco's stock price experienced significant declines, including a drop to $2.06 per share after the March 2024 results [14]. - On June 5, 2025, Petco reported a 1.3% year-over-year decline in comparable sales, larger than Wall Street estimates, leading to a further 23.2% drop in stock price [17][18].

Core Viewpoint - Petco Health and Wellness Company, Inc. reported its first quarter 2025 financial results, reaffirming its fiscal 2025 net sales and earnings outlook, which now includes the impact of tariffs [3][4]. Q1 2025 Overview - The company achieved net sales of $1.5 billion, a decrease of 2.3% year over year, aligning with its first quarter outlook [9]. - Comparable sales fell by 1.3% year over year [9]. - Gross profit margin improved by approximately 30 basis points to 38.2% of net sales [9]. - Operating income increased by $33.1 million to $16.4 million [9]. - GAAP net loss improved by $34.8 million to $11.7 million [9]. - Adjusted EBITDA rose by $13.8 million to $89.4 million [9]. Full Year 2025 Outlook - The company reaffirmed its full year 2025 net sales and earnings outlook, assuming current tariffs on imports from China and other countries remain unchanged for the rest of the year [4][6]. - The second quarter 2025 guidance includes net sales expected to decline by low single digits year over year, with Adjusted EBITDA projected between $92 million and $94 million [7][4]. Financial Metrics - Adjusted EBITDA for Q1 2025 was reported at $89.4 million, with a margin of 6.0% [22][29]. - The company anticipates net interest expense of approximately $130 million and capital expenditures between $125 million and $130 million for the full year [6][4]. - Depreciation and amortization expenses are expected to be around $200 million [6]. Cash Flow and Liquidity - The net cash used in operating activities for Q1 2025 was $15.5 million, compared to $8.4 million in Q1 2024 [25]. - Free Cash Flow for Q1 2025 was reported at $(43.9) million, slightly worse than $(41.1) million in Q1 2024 [25][23]. Company Background - Petco 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].