Petco Reports Modest Sales Increase and Significant Operating Income Recovery

Petco Health and Wellness Company, Inc. reported its financial results for the thirteen weeks ended November 2, 2024, revealing a modest increase in net sales and a significant improvement in operating income compared to the same period last year. The company generated total net sales of $1.51 billion, a 1.2% increase from $1.49 billion in the prior year. For the thirty-nine weeks ended November 2, 2024, net sales decreased slightly to $4.56 billion from $4.58 billion. The company reported an operating income of $4.0 million, a notable recovery from an operating loss of $1.23 billion in the previous year, which was primarily impacted by a goodwill impairment charge of $1.22 billion.

In terms of profitability, Petco's net loss attributable to Class A and B-1 common stockholders was $16.7 million for the latest quarter, a significant reduction from a net loss of $1.24 billion in the same quarter last year. The company’s Adjusted EBITDA also increased to $81.2 million from $72.2 million year-over-year, indicating improved operational efficiency. The gross profit for the quarter rose to $575.8 million, representing a gross profit margin of 38.1%, up from 36.8% in the prior year, attributed to better product mix and cost management.

Operationally, Petco reported a slight increase in comparable sales of 1.8% for the quarter, driven by growth in service-related sales, which rose by 8.6%. However, sales in the supplies and companion animals category declined, reflecting a broader trend of reduced consumer spending on discretionary items amid ongoing macroeconomic pressures. The company operated 1,413 pet care centers at the end of the reporting period, down from 1,429 a year earlier, indicating a strategic consolidation of its physical footprint.

Petco's balance sheet as of November 2, 2024, showed total assets of $5.21 billion, a decrease from $5.36 billion at the end of the previous fiscal period. The company’s cash and cash equivalents stood at $116.7 million, down from $125.4 million. Total liabilities were reported at $4.09 billion, with a significant portion attributed to senior secured credit facilities. The company amended its asset-based revolving credit facility in March 2024, increasing its total availability to $581 million, which provides additional liquidity as it navigates the current economic landscape.

Looking ahead, Petco remains cautious about the impact of macroeconomic factors such as inflation and interest rate pressures on consumer spending. The company is focused on enhancing its omnichannel strategy and improving customer retention while managing costs effectively. Petco's management expressed optimism about its ability to adapt to changing market conditions and continue its transformation initiatives, although they acknowledged the uncertainties that could affect future performance.