Executive Summary

Q4 2024 net revenue was $1.55B, down 7.3% year over year due to the loss of the 53rd week; comparable sales rose 0.5% YoY, and Adjusted EBITDA was $96.1M, modestly above the company’s prior outlook range .
Gross margin improved to ~38% YoY, aided by lapping prior-year inventory impairment and initial benefits from disciplined pricing and vendor negotiations; EBITDA margin was 6.2% vs 6.3% last year .
FY 2025 guidance targets Adjusted EBITDA of $375–$390M (+10%+ YoY) with net revenue down low single digits; Q1 2025 Adjusted EBITDA guided to $82–$83M (+~9% YoY at midpoint) .
Strategic reset emphasizes gross margin expansion, SG&A leverage, ROIC discipline, services optimization, and ~20–30 net store closures in 2025; leadership highlighted self-help actions rather than relying on macro tailwinds .
Consensus estimates from S&P Global for Q4 were not available at time of writing due to an access limitation; comparisons to Street are therefore unavailable and should be updated when accessible.*

What Went Well and What Went Wrong

What Went Well

Adjusted EBITDA of $96.1M came in ahead of internal expectations; management underscored progress returning to retail operating excellence and structural cost-out .
Gross margin expanded ~180 bps YoY to ~38% on lapping inventory impairment and better margin management (pricing, promotions, mix) .
Comparable sales increased 0.5% YoY, and leadership articulated a phased plan: foundational fixes (Phase 2) progressing ahead of future revenue growth initiatives (Phase 3) .

Key quotes:

“Our results in the fourth quarter demonstrate the progress we’ve made to return Petco to retail operating excellence…” — CEO Joel Anderson .
“Our #1 financial priority is clear, restoring the health of our economic model…gross margin expansion, SG&A leverage and ROIC.” — CFO Sabrina Simmons .
“We implemented thousands of price changes in the fall to be more competitive, both up and down.” — CEO Joel Anderson .

What Went Wrong

Net revenue decreased 7.3% YoY to $1.55B, reflecting the loss of the 53rd week; Adjusted EBITDA declined YoY to $96.1M (vs $105.3M last year) .
GAAP net loss remained negative at $(13.8)M (EPS $(0.05)); net margin was –0.9% as the turnaround continues .
Adjusted EPS was guided for Q4 (0.00–0.02) but not disclosed in actual results, limiting comparability to prior guidance and Street framing .

Financial Results

Income Statement and Profitability (Quarterly)

Metric	Q2 2024	Q3 2024	Q4 2024
Net Revenue ($USD Billions)	$1.52	$1.51	$1.55
GAAP Diluted EPS ($)	$(0.09)	$(0.06)	$(0.05)
Adjusted EBITDA ($USD Millions)	$83.5	$81.2	$96.1
Gross Profit ($USD Millions)	$580.7	$575.8	$589.3
Net Income Margin %	(1.6%)	(1.1%)	(0.9%)
Adjusted EBITDA Margin %	5.5%	5.4%	6.2%
Comparable Sales YoY %	+0.3%	+1.8%	+0.5%

Note: Q4 2024 quarter ended February 1, 2025; prior-year Q4 had 14 weeks.

Segment Net Sales Breakdown (as reported)

Segment	Q2 2024 ($MM)	YoY %	Q3 2024 ($MM)	YoY %	Q4 2024 ($MM)	YoY %
Products	$1,263.7	(1%)	$1,263.2	0%	$1,310.2	(8%)
Services & Other	$260.0	3%	$248.2	5%	$241.9	(5%)
Total Net Sales	$1,523.8	(0%)	$1,511.4	1%	$1,552.1	(7%)

KPIs and Balance Sheet

KPI	Q2 2024	Q3 2024	Q4 2024
Free Cash Flow ($MM)	$42.0	$(10.3)	$49.7 (FY)
Operating Cash Flow ($MM)	$69.4	$20.7	$177.7 (FY)
Cash & Cash Equivalents ($MM)	$127.6	$116.7	$165.8
Pet Care Centers (U.S.)	—	—	1,398 (year-end)
Weighted Avg Diluted Shares (MM)	273.1	274.5	276.3

Versus Estimates

Metric	Q4 2024 Actual	Q4 2024 Consensus	Surprise
Revenue ($B)	$1.55	N/A*	—
EPS ($)	$(0.05)	N/A*	—
Adjusted EBITDA ($MM)	$96.1	N/A*	—

*Consensus from S&P Global was unavailable due to an access limitation at time of writing; update pending.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Revenue ($B)	Q4 2024	~$1.55B	Actual $1.55B	Met
Adjusted EBITDA ($MM)	Q4 2024	$90–$95	Actual $96.1	Beat
Adjusted EPS ($)	Q4 2024	$0.00–$0.02	Not disclosed	—
Net Interest Expense ($MM)	FY 2024	~$145 (Q2) → ~$140 (Q3)	Actual ~$144–$140 implied; 2025 guide ~$130	Lowered for FY24; Lower again for FY25
Capital Expenditures ($MM)	FY 2024	~$140 (Q2) → ~$130 (Q3)	FY 2025: $130–$140	Maintained range
Adjusted EBITDA ($MM)	FY 2025	—	$375–$390	Raised vs FY24 actual $336.5
Net Revenue	FY 2025	—	Down low single digits YoY	New
D&A ($MM)	FY 2025	—	~$200	New
Real Estate	FY 2025	—	~20–30 net closures	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q4 2024)	Trend
Retail fundamentals & margin discipline	“Strengthen retail fundamentals” and profitability focus (Q2/Q3 releases)	Explicit frameworks for AUC/pricing/promotions mix; margin expansion each quarter targeted	More specific execution detail; margin-first discipline
SG&A leverage	Broad efficiency goals	SG&A leverage as a pillar; mindset shift to ongoing discipline	Intensifying focus
ROIC discipline	Not emphasized earlier	ROIC rigor in capital allocation; ~40% of 2025 capex toward expansion/IT/digital testing	New/heightened
Services optimization (vet hospitals)	Services growth callouts	Optimize existing hospitals to lift utilization/margins with minimal capital	Execution focus
Store closures	Limited prior detail	25 net closures in 2024; 20–30 planned in 2025	Proactive portfolio pruning
Merchandising & vendor negotiations	General progress	Vendor negotiations, assortment optimization, strategic pricing frameworks	Strengthening
Tariffs/macro	Macro headwinds noted	Tariff exposure commentary; flexible supply chain; own-brand COGS exposure ~5%	Added specificity
Membership (Vital Care)	Not detailed	Enhancements planned; membership a growth lever (free + paid)	Positioned for future
Digital/e-commerce cost per order	Not detailed	Reduce split shipments, improve shipping efficiency and speed	Operational improvements
Fresh Frozen category	Not detailed	Highlighted as faster-growing area and future lever	Growth vector identified

Management Commentary

CEO Joel Anderson: “Our results in the fourth quarter demonstrate the progress we’ve made to return Petco to retail operating excellence…deliver double-digit adjusted EBITDA improvement in 2025 and set the business up for sustainable profitable growth.”
CFO Sabrina Simmons: “Our #1 financial priority is clear, restoring the health of our economic model…gross margin expansion, SG&A leverage and ROIC…will improve profitability, and quite importantly, free cash flow generation.”
CEO Joel Anderson: “We implemented thousands of price changes in the fall to be more competitive, both up and down…our price is in a good spot.”

Q&A Highlights

Phase execution: Management does not foresee significant infrastructure investments before returning to growth; focus remains on disciplined execution and ROIC .
EBITDA drivers: Largest 2025 levers are gross margin expansion and SG&A leverage; closures contributed ~1% sales decline entering 2025 from 2024 actions .
Tariff considerations: Direct tariff exposure in own brands is ~5% of merchandise COGS; strong vendor relationships and flexible supply chain to mitigate .
Membership & pricing: Vital Care remains strategic; pricing upgraded via thousands of changes; promotional stacking cleanup to protect margins .
Store fleet strategy: Expect optimizing assets on balance sheet before new growth; ~20–30 closures in 2025, likely back-half weighted .

Estimates Context

Wall Street consensus (S&P Global) for Q4 2024 was unavailable due to an access limitation; we will update the revenue/EPS/EBITDA comparison when accessible.*
Near-term, Street may revisit 2025 EBITDA and margin trajectory given explicit margin-first guidance, SG&A leverage, and portfolio actions, while keeping top-line cautious (down low single digits) .

Key Takeaways for Investors

The profit-improvement playbook is clear: pricing discipline, vendor negotiations, assortment optimization, SG&A leverage, and ROIC-focused capital allocation underpin margin expansion and FCF improvement .
2025 is a self-help year: management is not relying on macro/pet category acceleration to hit EBITDA guidance; top line guided down low single digits, with margin gains driving EPS/FCF .
Store portfolio optimization is a material driver: closures remove drag, improve EBITDA, and support leverage reduction; expect ~20–30 net closures in 2025 .
Services and Fresh Frozen are medium-term growth vectors: hospital utilization optimization and category leadership can aid revenue mix and margins without heavy capital .
Watch for Vital Care and membership enhancements: membership could become a tangible growth lever in 2026 as Phase 3 initiatives scale .
Near-term trading implications: positive if execution sustains quarterly gross margin expansion and Q1 EBITDA meets guidance; negative if price/promotional changes unduly pressure traffic or if tariff impacts materialize without vendor offsets .
Update estimate comparisons when S&P Global data becomes accessible to calibrate beat/miss assessments for Q4 and refine 2025 expectations.*

Footnote: Q4 2024 corresponds to the 13 weeks ended February 1, 2025 per company reporting .

*Consensus from S&P Global was unavailable due to an access limitation at time of writing; values will be added when accessible.

Petco Health & Wellness Company, Inc. (WOOF)·Q4 2024 Earnings Summary