Executive Summary

Q3 FY2025 results are not yet released; Petco scheduled its Q3 FY2025 earnings for after market close on Nov 25, 2025, with a 4:30pm ET call (key near-term catalyst) .
Entering Q3, management raised full-year 2025 Adjusted EBITDA guidance to $385–$395M from $375–$390M after Q2 profitability outperformance, while maintaining the full-year net sales outlook (down low single digits YoY) .
Q2 showed meaningful margin improvement on disciplined promo/pricing (AUR/AUC), SG&A leverage, and store execution; management flagged tariffs as a rising H2 headwind, most meaningful in Q4, and reiterated that Q3 is the toughest top-line compare of the year .
Management’s Q3 outlook called for net sales down low single digits YoY and Adjusted EBITDA of $92–$94M, implying sequential seasonality vs Q2 and prioritization of profitability and selective reinvestment (e.g., Leadership Summit, brand/merch initiatives) .

What Went Well and What Went Wrong

What Went Well

Material Q2 margin/earnings improvement: gross margin expanded ~120 bps to 39.3%; operating income improved by $40.6M to $43.0M; Adjusted EBITDA rose to $113.9M with margin up ~220 bps to 7.6% .
Store fundamentals and brand refresh: CEO highlighted positive customer response to reintroducing “Where the Pets Go” and in‑store events; NPS trended up sequentially, supporting the in‑store experience focus (“Petco truly is where the pets go in real life… initial results indicate it is resonating”) .
SG&A discipline and cash flow: SG&A decreased $36M YoY and leveraged >150 bps in Q2, aided by benefits optimization and store/labor efficiency; free cash flow in Q2 was ~$53.8M .

What Went Wrong

Top-line softness persists: Q2 net sales fell 2.3% and comps declined 1.4% YoY; management acknowledged transactions remain a drag even as basket/UPT held up .
Ecommerce softness from promo cleanup: management intentionally reduced “empty calorie” promos, especially online, which weighed on top-line as ecom retooling continues under a new leader .
Tariff headwinds intensifying in H2: minimal tariff impact in Q2, but management expects increasing impact in Q3 and “much more meaningful” in Q4; full-year outlook assumes no further tariff increases .

Financial Results

Note: Q3 FY2025 results are pending (scheduled Nov 25). Tables below show Q1–Q2 actuals and the company’s Q3 outlook where available.

Consolidated Financials

Metric	Q1 2025	Q2 2025	Q3 2025
Net Sales ($USD Billions)	$1.493	$1.489	Pending (Nov 25)
Comparable Sales (% YoY)	-1.3%	-1.4%	Down low single digits YoY (outlook)
Gross Margin (%)	38.2%	39.3%	N/A (results pending)
Operating Income ($USD Millions)	$16.4	$43.0	N/A (results pending)
GAAP Net Income (Loss) ($USD Millions)	$(11.7)	$14.0	N/A (results pending)
Diluted EPS ($)	$(0.04)	$0.05	N/A (results pending)
Adjusted EBITDA ($USD Millions)	$89.4	$113.9	$92–$94 (outlook)
Adjusted EBITDA Margin (%)	6.0%	7.6%	N/A (results pending)
Free Cash Flow ($USD Millions)	$(43.9)	$53.8	N/A (results pending)

Segment/Category Net Sales

Category	Q1 2025 ($USD Millions)	Q2 2025 ($USD Millions)
Products	$1,241.9	$1,225.6
Services and Other	$251.5	$262.9
Total Net Sales	$1,493.4	$1,488.5

Selected KPIs and Operating Metrics

KPI	Q1 2025	Q2 2025
Comparable Sales (% YoY)	-1.3%	-1.4%
Gross Margin (%)	38.2%	39.3%
Adjusted EBITDA ($M)	$89.4	$113.9
Adjusted EBITDA Margin (%)	6.0%	7.6%
Operating Income ($M)	$16.4	$43.0
GAAP Net Income ($M)	$(11.7)	$14.0
Diluted EPS ($)	$(0.04)	$0.05
Free Cash Flow ($M)	$(43.9)	$53.8
Ending U.S. Store Count	1,393	1,388

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales	FY 2025	Down low single digits YoY	Down low single digits YoY	Maintained
Adjusted EBITDA ($M)	FY 2025	$375–$390	$385–$395	Raised
Net Interest Expense ($M)	FY 2025	~130	~130	Maintained
Capital Expenditures ($M)	FY 2025	$125–$130	$125–$130	Maintained
Depreciation & Amortization ($M)	FY 2025	~200	~200	Maintained
Net Store Closures (Count)	FY 2025	20–30 (context)	~25	Updated (narrowed)
Net Sales	Q3 2025	N/A	Down low single digits YoY	New Q3 outlook
Adjusted EBITDA ($M)	Q3 2025	N/A	$92–$94	New Q3 outlook

Assumptions include tariffs staying at then-current/planned levels; company noted tariffs become increasingly impactful in Q3 and “much more meaningful” in Q4 .

Earnings Call Themes & Trends

Topic	Q1 2025 (June call)	Q2 2025 (Aug call)	Q3 2025 (current period)	Trend
Pricing/Promo Discipline	AUR/AUC processes; SKU‑level pricing; margin expansion priority	Continued discipline; promo clean‑up especially in ecom; margin beat	Results pending; outlook maintains discipline	Improving profitability; top-line still balancing act
Tariffs	FY guide reaffirmed including current tariffs; limited direct exposure (~7%)	Minimal Q2 impact; “meaningful” in Q3, “much more meaningful” in Q4	Guide assumes no increases; monitoring	Escalating headwind into Q4
Ecommerce Retool	Early phase; leadership/roadmap; omnichannel opportunity	New ecom leader; friction removal; profitability over growth near term	Ongoing; results pending	Sequential foundational work
Store Experience/Services	Planogram resets; services as moat; software upgrades	NPS rising; in‑store events; services scaling	Continued focus; results pending	Strengthening differentiation
Loyalty	Relaunch planned 2026; de‑emphasized paid loyalty near term	2026 launch reiterated; drag from paid loyalty de‑emphasis	No update pre‑call	Rebuild in progress
Inventory/Operations	Inventory down 5% YoY; process rigor	Inventory down ~9.5% YoY; labor/ops efficiency gains	Ongoing	Better in‑stocks with leaner inventory
Macro/Category	Pet adoption stable; self‑help year	Category fairly flat; focus on profitability	N/A	Neutral macro; self‑help levers dominate

Management Commentary

“For the second quarter we once again delivered against our commitments, enabling us to raise our earnings outlook for the full year… strengthen our economic model and improve retail operating fundamentals.” — CEO Joel Anderson .
“Gross margin expansion was driven by a more disciplined approach to both average unit cost and average unit retail, including stronger guardrails… manage pricing and promotional strategies.” — CFO Sabrina Simmons .
“We reintroduced our beloved ‘Where the Pets Go’ tagline… Initial results indicate it is resonating with strong feedback and positive reactions… sequential increases in our NPS score since the end of last year.” — CEO Joel Anderson .
“We are lapping the toughest sales compare of the year in the third quarter… adjusted EBITDA [Q3] between $92M and $94M.” — CFO Sabrina Simmons .
“Services… in many ways… our moat… ecosystem of grooming, hospital, and center of store is something Petco only can do.” — CEO Joel Anderson .

Q&A Highlights

Timing of positive comps: Management expects the comp inflection to be a 2026 outcome; Q3 is the toughest compare of the year .
Gross margin drivers and tariffs: Margin beat driven by pricing/promo discipline; tariffs minimal in Q2 but meaningful in Q3 and much more meaningful in Q4 .
Ecommerce cleanup vs stores: Intentional cleanup of online promo stacking; store focus first; ecom now more profitable but still early in retooling .
Transactions vs basket: UPT/basket healthy; transactions remain the biggest opportunity, with marketing/events aimed at driving traffic .
Q4 EBITDA cadence: Tariff headwinds and selective reinvestment imply Q4 pressure vs Q3; management keeping “dry powder” for investments and volatility .

Estimates Context

Wall Street consensus (S&P Global) for Q3 FY2025 was requested but unavailable due to a data access limit at the time of this analysis; therefore, a comparison to consensus cannot be provided now (we will update post‑release). Values retrieved from S&P Global (unavailable at this time).
Company Q3 outlook (proxy for near-term expectations): net sales down low single digits YoY; Adjusted EBITDA $92–$94M .

Key Takeaways for Investors

Near-term catalyst: Q3 FY2025 print and call on Nov 25; focus on margin durability vs rising tariff headwinds and the sequentially lower seasonal EBITDA pattern in Q3 .
Profitability inflection is real: Q2 delivered strong gross margin expansion and SG&A leverage, supporting the full-year EBITDA raise despite muted sales .
Top-line rebuild is methodical: Expect continued store-first execution, services-led differentiation, and ongoing ecom retool; management targets a comp inflection in 2026 .
Watch tariffs and reinvestment: Management flagged tariffs as more impactful in Q3 and most in Q4, with selective reinvestment to seed phase‑three growth potentially weighing on near-term EBITDA cadence .
Operational discipline should continue: Inventory down ~9.5% YoY with better in-stocks, improved planograms, and labor/ops efficiency underpin margin resilience .
Guidance framework: FY2025 net sales down low single digits; Adjusted EBITDA raised to $385–$395M; Q3 EBITDA outlook $92–$94M sets the bar for the print .

Appendix: Company Outlook Extracts

FY2025: Net sales down low single digits YoY; Adjusted EBITDA $385–$395M; Net interest ~ $130M; Capex $125–$130M; D&A ~ $200M; ~25 net store closures .
Q3 2025: Net sales down low single digits YoY; Adjusted EBITDA $92–$94M .

Sources

Q3 timing press release (call schedule): Nov 11, 2025 .
Q2 FY2025 press release and financial statements: Aug 28, 2025 .
Q2 FY2025 earnings call transcript: Aug 28, 2025 .
Q1 FY2025 press release and financial statements: June 5, 2025 .
Q1 FY2025 earnings call transcript: June 5, 2025 .

Petco Health & Wellness Company, Inc. (WOOF)·Q3 2025 Earnings Summary