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1. Company Snapshot

1.a. Company Description

Petco Health and Wellness Company, Inc., a health and wellness company, focuses on enhancing the lives of pets, pet parents, and its Petco partners.The company provides veterinary care, grooming, training, tele-health, and Vital Care and pet health insurance services, as well as veterinary services through Vetco mobile clinics.It also offers pet consumables, supplies, and services through its petco.com, petcoach.co, petinsurancequotes.com, and pupbox.com websites.


As of March 23, 2022, the company operated approximately 1,500 Petco locations in the United States, Mexico, and Puerto Rico that included a network of approximately 200 in-store veterinary hospitals.Petco Health and Wellness Company, Inc.was founded in 1965 and is headquartered in San Diego, California.

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1.b. Last Insights on WOOF

Petco Health and Wellness Company's recent performance was driven by strong earnings guidance and a solid first quarter. The company's adjusted EBITDA increased by $13.8 million to $89.4 million, demonstrating material profitability improvement. Additionally, Petco's gross margin expanded approximately 30 basis points to 38.2% as a percentage of net sales, indicating a positive trend. The company's operating income improved by $33.1 million to $16.4 million, and its GAAP net loss improved by $34.8 million to $11.7 million.

1.c. Company Highlights

2. Petco's Q3 2025 Earnings: A Step Towards Recovery

Petco's third-quarter 2025 results showed a decline in sales by 3.1% with comparable sales down 2.2%, largely driven by 34 net store closures. However, the company demonstrated a strong improvement in profitability metrics, with gross margin expanding 75 basis points to 38.9%, primarily due to a more disciplined approach to average unit retail and cost. Adjusted EBITDA increased 21% to $98.6 million, and adjusted EBITDA margin expanded nearly 140 basis points to 6.7% of sales. The company's EPS came in at $0.05, beating estimates of $0.01. Free cash flow for the quarter was $61 million, and year-to-date was $71 million, showcasing a strong improvement in cash generation.

Publication Date: Dec -02

📋 Highlights
  • Adjusted EBITDA Growth: Surged 21% to $98.6M, with margin expanding 140 bps to 6.7% of sales.
  • Gross Margin Expansion: Rose 75 bps to 38.9%, driven by disciplined pricing and cost controls.
  • Store Closures Impact: 34 net closures contributed to 3.1% sales decline and 2.2% comp drop in Q3.
  • Free Cash Flow Strength: Generated $61M in Q3 and $71M year-to-date, improving cash flow generation.
  • 2025 EBITDA Outlook Raised: Now $395–$397M (18% YoY growth at midpoint), despite full-year sales decline of 2.5–2.8%.

Guidance and Outlook

The company raised its adjusted EBITDA outlook for 2025 to $395-$397 million, an 18% year-over-year increase at the midpoint. For the fourth quarter, net sales are expected to be down low single digits, with adjusted EBITDA of $93-$95 million. The impact of tariffs will be more meaningful in Q4, mainly in the private label supplies area. As Joel Anderson, a key executive, noted, "This year, our primary focus was expanding margins, walking away from unprofitable sales, and building a strong foundation for sales growth in 2026."

Transformation and Growth Strategy

Petco's transformation is now shifting towards Phase 3, focusing on a return to growth. The company's strategy is built around four pillars: delivering compelling product and merchandise differentiation, a trusted store experience, winning with integrated services at scale, and serving customers with a seamless omni experience. The company is making progress on these initiatives, including improving shopability, infusing newness in 2026, and enhancing digital capabilities. Analysts estimate next year's revenue growth at -2.6%, but the company's efforts are expected to drive a gradual ramp in growth.

Valuation and Metrics

With a P/E Ratio of -388.14, P/B Ratio of 0.74, and EV/EBITDA of 7.78, the market seems to have priced in the challenges Petco is facing. However, the company's improving profitability and cash generation metrics, such as Free Cash Flow Yield of 6.87%, suggest a positive trajectory. The Net Debt / EBITDA ratio of 4.47 indicates that the company still has leverage to reduce. As the company prioritizes cash usage, first investing in its business and then focusing on debt paydown, it is likely to bring down leverage on an absolute basis and ratio.

Services and Membership Program

The company is seeing a significant opportunity to grow services, which will be a key component of its growth in 2026. Services in stores are coming together, with a halo effect on the overall business. Petco is also on track to relaunch its membership program in 2026, with live testing in several markets in Q4, and expects a positive impact on same-store sales growth.

3. NewsRoom

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Why Petco Stock Popped Today

Nov -26

Source: fool.com

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Top Stock Movers Now: Robinhood, Dell, Deere, HP, and More

Nov -26

Source: investopedia.com

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Petco Health and Wellness Company, Inc. (WOOF) Q3 2026 Earnings Call Transcript

Nov -26

Source: seekingalpha.com

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Petco Health & Wellness (WOOF) Q3 Earnings Beat Estimates

Nov -25

Source: zacks.com

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Petco Reports Third Quarter 2025 Financial Results

Nov -25

Source: prnewswire.com

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5 Stocks For the 60% Surge in Pet Spending

Nov -12

Source: 247wallst.com

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Petco to Host Third Quarter 2025 Earnings Conference Call on Nov. 25, 2025

Nov -11

Source: prnewswire.com

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Why ULTA & 3 Retail-Miscellaneous Stocks Could Be the Next Big Winners

Oct -10

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.21%)

6. Segments

Consumables

Expected Growth: 2.5%

Petco's consumables segment growth of 2.5% is driven by increasing pet humanization, premiumization of pet food, and rising demand for natural and organic products. Additionally, the company's omnichannel strategy, loyalty programs, and partnerships with pet food manufacturers contribute to the growth.

Supplies and Companion Animals

Expected Growth: 1.8%

Petco's Supplies and Companion Animals segment growth of 1.8% is driven by increasing pet humanization, rising disposable income, and growing demand for premium and natural pet food. Additionally, the company's omnichannel strategy, loyalty programs, and expanding veterinary services contribute to the segment's growth.

Services and Other

Expected Growth: 2.2%

Petco's Services and Other segment growth of 2.2% is driven by increasing demand for pet grooming and training services, expansion of veterinary services, and growth in pet insurance offerings. Additionally, the company's focus on digital transformation, including online booking and telehealth services, has contributed to the segment's growth.

7. Detailed Products

Pet Food and Treats

Petco offers a wide range of high-quality pet food and treats from popular brands, catering to different life stages, breeds, and dietary needs.

Pet Grooming and Hygiene

Petco offers a range of pet grooming and hygiene products, including shampoos, conditioners, brushes, and dental care products.

Pet Health and Wellness

Petco offers a range of pet health and wellness products, including supplements, vitamins, and medications.

Pet Accessories and Toys

Petco offers a wide range of pet accessories and toys, including collars, leashes, beds, and interactive toys.

Pet Services

Petco offers a range of pet services, including veterinary care, grooming, and training.

Pet Insurance

Petco offers pet insurance plans to help pet owners cover unexpected veterinary expenses.

8. Petco Health and Wellness Company, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Pet owners have some flexibility to choose alternative pet care services, but Petco's strong brand recognition and loyalty programs help to mitigate this threat.

Bargaining Power Of Customers

Pet owners have some bargaining power due to the availability of online retailers and other pet care services, but Petco's wide range of products and services helps to maintain customer loyalty.

Bargaining Power Of Suppliers

Petco relies on a diverse range of suppliers for its products, which reduces the bargaining power of individual suppliers. However, suppliers of popular pet food brands may have some bargaining power.

Threat Of New Entrants

While new entrants may emerge in the pet care industry, Petco's established brand and extensive store network create barriers to entry.

Intensity Of Rivalry

The pet care industry is highly competitive, with many retailers and online platforms competing for market share. Petco must continually innovate and improve its offerings to maintain its market position.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 61.63%
Debt Cost 5.09%
Equity Weight 38.37%
Equity Cost 10.30%
WACC 7.09%
Leverage 160.64%

11. Quality Control: Petco Health and Wellness Company, Inc. passed 1 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Hour Loop

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Growth: 7.1

Quality: 6.5

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Momentum: 10.0

Volatility: 0.0

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National Vision

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Value: 7.5

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Quality: 2.1

Yield: 0.0

Momentum: 3.0

Volatility: 1.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

3.01$

Current Price

3.01$

Potential

-0.00%

Expected Cash-Flows