Petco Health and Wellness Co Inc - Class A
Q4 2025 Earnings
Includes a $565 thousand loss on extinguishment and modification of debt and $11.3 million income tax expense despite a pre-tax income of only $1.9 million
Market Reaction
S&P 500 over the same 30 days: +4.26%.
Did WOOF Beat Earnings? Q4 2025 Results
Petco Health & Wellness delivered a mixed fourth quarter for fiscal 2025, nudging past revenue expectations while falling short on the bottom line in a way that caught Wall Street off guard. Net sales slipped 2.4% year-over-year to $1.52 billion, edging just above the $1.51 billion consensus, but GAAP diluted EPS came in at a loss of $0.01, swinging to a loss where analysts had expected roughly breakeven, weighed down by an $11.3 million income tax charge despite pre-tax income of only $1.9 million, along with a $565 thousand loss on debt extinguishment and modification. The more encouraging story was in profitability: operating income climbed 83.2% to $31.86 million, and Adjusted EBITDA rose 10.6% to $106.29 million, well above management's own outlook. Shares jumped roughly 12% in pre-market trading on the results. Looking ahead, Petco projects fiscal 2026 net sales flat to up 1.5%, a return to positive comparable sales, and Adjusted EBITDA of $415 million to $430 million, signaling management's confidence that the company's operational reset is beginning to take hold.
- Gross margin expansion of 37 basis points to 38.3% in Q4
- SG&A expense reduction contributing to operating income growth of 83.2%
- Inventory reduction of 9.7% versus sales decline of 2.5%
- Adjusted EBITDA margin expanded to 7.0% from 6.2% in Q4
- Operating cash flow increased 76.8% to $314.1 million for the full year
“In fiscal 2025, we strengthened our leadership team and rebuilt the foundation of our economic model, enabling us to exceed our profitability goals. With that work largely complete, we are entering the next phase of our strategy focused on driving sustainable, profitable top-line growth.”
Petco Health & Wellness CEO, on the earnings call
Forward Guidance & Outlook
For fiscal 2026, Petco expects net sales flat to up 1.5% year-over-year with a return to positive comparable sales, Adjusted EBITDA of $415-$430 million, net interest expense of approximately $125 million, capital expenditures of approximately $140 million, depreciation and amortization of approximately $200 million, and approximately 15-20 net store closures. For Q1 2026, the company expects net sales down 1% to flat year-over-year and Adjusted EBITDA of $92-$94 million. Guidance assumes tariffs on U.S. imports remain at March 11, 2026 levels and that economic conditions, currency rates, and tax/regulatory landscape remain generally consistent.
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Figures from SEC filings and company reports. Not investment advice.