Petco Reports Improved Profitability in 2025 and Provides Positive 2026 Outlook Despite Slight Sales Decline

Petco Reports Q4 and Full Year 2025 Results, Outlines 2026 Outlook

Profitability Surpasses Expectations, Leverage Ratio Falls; 2026 Guidance Issued

San Diego, March 11, 2026 — Petco Health & Wellness Company, Inc. (Nasdaq: WOOF), a leading pet care retailer, announced its financial results for the fourth quarter and full year 2025. The company reported a marked improvement in profitability, a reduction in leverage, and provided guidance for fiscal 2026. The results show a company that has rebuilt its economic model, with management now shifting focus toward sustainable, profitable top-line growth.

Key Highlights for Investors

Profitability: Petco delivered profitability ahead of its previous outlook, with both Q4 and full year Adjusted EBITDA exceeding expectations.
Leverage Reduction: The company lowered its leverage ratio from 4.2x to 3.0x in 2025, improving financial strength and flexibility.
Return to Profit: Petco posted net income of \$9.1 million for FY2025, a significant turnaround from a loss of \$101.8 million in FY2024.
Cash Generation: Free cash flow more than tripled year-over-year, reaching \$187.0 million.
2026 Outlook: Guidance assumes a return to positive comparable sales (comps), with Adjusted EBITDA expected to rise further.
Debt Refinancing: Completed in February 2026, extending maturities to 2031 and optimizing the mix between fixed and floating rates.

Detailed Financial Results

Q4 2025 (vs. Q4 2024)

Net Sales: \$1.52 billion, down 2.4%, with comparable sales down 1.6%.
Gross Profit: \$580.8 million, down 1.4%; gross margin up 37 basis points to 38.3%.
Operating Income: \$31.9 million, up 83.2%; operating margin improved by 98 basis points to 2.1%.
Net Loss: \$2.6 million, an improvement from a \$13.8 million loss in Q4 2024.
Adjusted EBITDA: \$106.3 million, up 10.6% and above company outlook.
Store Closures: Net closure of 7 stores in the quarter.

Full Year 2025 (vs. 2024)

Net Sales: \$6.0 billion, down 2.5%; comparable sales down 1.6%.
Gross Profit: \$2.3 billion, down 0.8%; gross margin up 66 basis points to 38.7%.
Operating Income: \$120.4 million, up sharply from \$7.1 million; operating margin increased 190 basis points to 2.0%.
Net Income: \$9.1 million, up from a net loss of \$101.8 million.
Adjusted EBITDA: \$408.2 million, up 21.3% and above company outlook.
Free Cash Flow: \$187.0 million, up 276.3% (\$137.3 million increase).
Cash and Debt:
- Cash grew by \$91.0 million to \$256.7 million after voluntary debt repayment of \$95.0 million.
- Inventory fell by 9.7% (outpacing sales decline), reflecting improved inventory management.
- Total secured debt reduced to ~\$1.5 billion, down from \$1.595 billion.
Leverage Ratio: Reduced from 4.2x to 3.0x, a key metric for credit health and future borrowing costs.

2026 Guidance and Strategic Initiatives

Petco management emphasized that the company has completed much of its foundational restructuring and is entering a new phase focused on sustainable growth, innovation, and leveraging its unique, high-touch store ecosystem to drive market share.

Full Year 2026 Outlook

Net Sales: Expected to be flat to up 1.5% year-over-year.
Adjusted EBITDA: \$415–\$430 million.
Net Interest Expense: ~\$125 million.
Capital Expenditures: ~\$140 million.
Depreciation & Amortization: ~\$200 million.
Net Store Closures: 15–20 (indicating further optimization of store footprint).

Q1 2026 Outlook

Net Sales: Down 1% to flat year-over-year.
Adjusted EBITDA: \$92–\$94 million.

Assumptions for guidance include stable economic conditions, currency rates, regulatory environment, and tariffs, with fuel prices expected to normalize by the end of Q1 2026.

Balance Sheet and Cash Flow Position

Cash and Equivalents: \$256.7 million as of January 31, 2026.
Inventory: Down to \$590.2 million, demonstrating stronger inventory discipline.
Operating inline with improved cash generation: Net cash from operations rose by 76.8% to \$314.1 million.
Debt Maturity: Extended to 2031, reducing near-term refinancing risk and allowing for a more flexible capital structure.

Other Noteworthy Points for Shareholders

Operational Reset: The company completed a major operational reset, which drove improved profitability and sets the stage for future growth.
Guidance for Positive Comparable Sales in 2026: Management expects a return to positive comps, a key metric for retail growth.
Ongoing Cost Controls and Margin Expansion: Margin improvement was achieved even in a challenging sales environment, reflecting operational discipline.
Risks Highlighted: Petco cautioned about risks including competition, economic conditions, supply chain, labor costs, technology, and regulatory changes. Shareholders should be aware that these could materially impact future results.
Store Closures: Ongoing store optimization with 15–20 net store closures planned for 2026 may affect local market presence but should benefit overall profitability.
Debt and Liquidity: Improved leverage ratio and cash position reduce default risk and provide flexibility for capital allocation.

Potential Price Sensitive Items

Return to Profitability: The shift from a large net loss in 2024 to net income in 2025 is a major positive and may affect share value.
Free Cash Flow Surge: A 276% increase in free cash flow strengthens the investment case.
Lower Leverage and Extended Debt Maturities: These actions improve risk profile, potentially impacting credit ratings and investor sentiment.
Positive 2026 Outlook: Guidance for rising Adjusted EBITDA and a return to positive comps indicates management confidence in ongoing recovery and growth.
Store Rationalization: Ongoing closures could impact short-term revenue but are likely to enhance long-term profitability.

Conference Call

Petco will host an earnings conference call on March 11, 2026 at 4:30 PM ET. A live webcast and replay will be available on the company’s Investor Relations website.

About Petco

Petco operates over 1,500 stores across the U.S., Mexico, and Puerto Rico, offering a wide array of pet products, services, and adoption events. The company also supports thousands of local animal welfare organizations through Petco Love.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. All forward-looking statements are subject to risks and uncertainties as outlined by Petco. Investors should review the full earnings release and SEC filings before making any investment decisions.