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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 Strong Foundation for Future Growth

Petco's third-quarter 2025 results showed a net sales decline of 3.1%, with comp sales down 2.2%, primarily due to 34 net store closures. Despite the sales decline, the company reported an adjusted EBITDA of $98.6 million, a 21% increase year-over-year, driven by a disciplined approach to pricing and promotional strategies, which expanded gross margin by 75 basis points to 38.9%. The company's operating margin also expanded over 170 basis points, and EPS came in at $0.05, beating estimates of $0.01642. Free cash flow for the quarter was $61 million, and year-to-date was $71 million.

Publication Date: Jan -11

📋 Highlights
  • EBITDA Growth and Margin Expansion:: Adjusted EBITDA surged 21% to $98.6M, with margin expanding 140 bps to 6.7% despite sales declines.
  • Updated 2025 EBITDA Outlook:: Raised guidance to $395–$397M, reflecting 18% YoY growth at the midpoint, driven by margin discipline and operational efficiency.
  • Operational Efficiency Gains:: SG&A costs fell $32M, and operating margin expanded over 170 bps, offsetting 34 store closures impacting sales by 3.1%.
  • Free Cash Flow Strength:: Generated $61M in Q3 and $71M YTD, supported by inventory discipline and margin expansion, with sustainable growth planned.
  • 2026 Growth Strategy:: Phase 3 focuses on four pillars (product differentiation, store experience, services, omni-channel) to drive comp growth, with services and digital as key differentiators.

Segment Performance and Outlook

The Services segment has seen some headwinds due to the deprioritization of a program, but a new membership program is on track for a 2026 rollout. The company views services as a key differentiator and moat, with a halo effect on the overall business. As Joel Anderson mentioned, "We're growing pet EBITDA market share, with EBITDA up despite sales being down." The company expects a return to growth in consumables and supplies, driven by its 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.

Valuation and Cash Flow

Petco's current valuation metrics indicate a relatively low P/S Ratio of 0.14 and an EV/EBITDA of 6.41. The company's free cash flow yield is 15.58%, suggesting a strong ability to generate cash. With a focus on investing in the business, debt paydown, and leverage reduction, Petco is prioritizing cash usage. The company's net debt to EBITDA ratio is 3.72, indicating some leverage, but the improving free cash flow profile should help reduce this metric.

Guidance and Future Expectations

The company raised its adjusted EBITDA outlook for 2025 to between $395 million and $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 between $93 million and $95 million. Analysts estimate next year's revenue growth at 0.6%. While the company is not providing detailed guidance for 2026, it expects a gradual ramp in sales growth, driven by its four pillars, with fewer net store closures than in 2025.

3. NewsRoom

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Petco Announces Completion of Refinancing and Glenn Murphy's Transition to Chairman

Feb -02

Source: prnewswire.com

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Petco Announces Pricing of its $600,000,000 Offering of Senior Secured Notes

Jan -22

Source: prnewswire.com

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Petco Announces $650,000,000 Offering of Senior Secured Notes

Jan -21

Source: prnewswire.com

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Petco Announces Launch of Debt Refinancing Transaction; Reaffirms Fourth Quarter and Full Fiscal Year 2025 Outlook

Jan -12

Source: prnewswire.com

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Petco Health And Wellness Company, Inc. (WOOF) Q3 2025 Earnings Call Transcript

Jan -08

Source: seekingalpha.com

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Analyzing Maison Luxe (OTCMKTS:MASN) and Petco Health and Wellness (NASDAQ:WOOF)

Jan -07

Source: defenseworld.net

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Petco Is Still Becoming A More Efficient Company

Dec -30

Source: seekingalpha.com

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Petco Health and Wellness (NASDAQ:WOOF) vs. Five Below (NASDAQ:FIVE) Head-To-Head Comparison

Dec -23

Source: defenseworld.net

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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National Vision

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Value: 4.9

Growth: 2.4

Quality: 3.5

Yield: 0.0

Momentum: 10.0

Volatility: 4.0

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Petco

A-Score: 3.4/10

Value: 9.2

Growth: 5.1

Quality: 3.0

Yield: 0.0

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Value: 10.0

Growth: 1.2

Quality: 2.9

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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

2.47$

Current Price

2.47$

Potential

-0.00%

Expected Cash-Flows