Q4 2025 Earnings Summary
- Management is guiding for 14% EBITDA growth at the midpoint for 2025, driven by gross margin expansion and SG&A leverage, even while projecting sales to be down low single digits. This demonstrates their ability to improve profitability without relying on sales growth or a robust consumer environment.
- The company is optimizing its existing vet hospital fleet, which represents a highly efficient way to drive services growth with minimal capital investment. With services being the fastest-growing area of the pet category, this focused approach on maximizing existing assets could yield significant returns.
- Fresh Frozen remains a standout performer growing faster than the industry, and management has indicated plans to expand in this category. This represents a potential growth lever that could help differentiate Petco in the competitive pet retail landscape.
- Management openly acknowledged they are willing to sacrifice sales and market share in the short term to improve profitability, with CEO Joel Anderson confirming this is a "fair assessment" when directly asked. This suggests continued market share erosion against competitors should be expected while they focus on their transformation efforts.
- The company is guiding for negative sales growth in 2025, with CFO Sabrina Simmons explicitly stating they're "not counting on a positive comp to achieve our adjusted EBITDA guidance" and anchoring on "a low single-digit decrease in sales." This indicates fundamental growth challenges that won't be quickly resolved.
- Petco is accelerating store closures, with 25 net locations closed in 2024 (representing approximately $50 million in sales) and plans to close an additional 20-30 net locations in 2025. This significant reduction in physical footprint signals structural issues with store productivity and profitability.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | -7.3% (Q4 2025: $1,552.16M vs. Q4 2024: $1,674.5M) | Total Revenue declined by 7.3% YoY, reflecting a continuation of macroeconomic challenges and shifts in consumer spending from the previous period’s higher base. These conditions, along with pricing and promotional adjustments, contributed to a lower revenue figure in Q4 2025 compared to Q4 2024 vs.. |
Products Segment Revenue | -7.8% (Q4 2025: $1,310.27M vs. Q4 2024: $1,420.7M) | The decline of 7.8% YoY in the Products Segment Revenue mirrors overall reduced consumer discretionary spending and increased value-seeking behavior noted in Q4 2025. This drop builds on previous period trends where a higher revenue base was reported, highlighting challenges in product mix and promotional dynamics vs.. |
Operating Cash Flow | +104% (Q4 2025: 95,993K vs. Q4 2024: 47,023K) | A more than twofold increase in Operating Cash Flow indicates enhanced operational efficiency and tighter working capital management compared to Q4 2024. This improvement suggests successful control over costs and cash conversion initiatives that built upon the previous period’s performance vs.. |
Net Loss Improvement | 38.7% improvement (Q4 2025: (13,837)K vs. Q4 2024: (22,575)K) | The net loss narrowed by approximately 38.7%, driven by better cost management and a reduction in non-cash charges, such as impairments. This improvement shows a continued effort to reverse prior period losses, resulting in a smaller gap in Q4 2025 compared to Q4 2024 vs.. |
Liquidity Position | +32% (Q4 2025: 165,756K vs. Q4 2024: 125,428K) | The Liquidity Position strengthened by 32% YoY due to improved operating cash flow, reduced capital expenditures, and stronger cash reserves. This enhancement reflects the company's effective cash management strategies building on prior period adjustments and a more conservative capital allocation approach vs.. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted EBITDA | Q1 2025 | between $90M and $95M | between $82M and $83M | lowered |
Net Sales | Q1 2025 | no prior guidance | down low single digits | no prior guidance |
Net Sales | FY 2025 | no prior guidance | down low single digits | no prior guidance |
Adjusted EBITDA | FY 2025 | no prior guidance | between $375M and $390M | no prior guidance |
Gross Margin | FY 2025 | no prior guidance | expand gross margin rate each quarter | no prior guidance |
SG&A Leverage | FY 2025 | no prior guidance | focus on leveraging SG&A to improve profitability | no prior guidance |
Depreciation and Amortization | FY 2025 | no prior guidance | approximately $200 million | no prior guidance |
Net Interest Expense | FY 2025 | approximately $140 million | approximately $130 million | lowered |
Capital Expenditures | FY 2025 | $130 million | approximately $130 million to $140 million | raised |
Store Closures | FY 2025 | no prior guidance | 20–30 net locations | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Profitability and Cost Management | In Q1, executives identified profitability (adjusted EBITDA, SG&A efficiency) as the top priority ( ). Q2 and Q3 discussions focused on structural cost transformation, gross margin expansion, and disciplined cost reductions ( ). | Q4 maintained the focus on EBITDA growth, margin expansion, and operational efficiency with detailed guidance and specific initiatives ( ). | Consistent focus with progressively more granular and confident guidance in Q4. |
Veterinary Services and Vet Hospital Optimization | Q1 through Q3 underscored improvement across vet hospitals, mobile clinics, and grooming enhancements with integrated service strategies ( ). | Q4 concentrated on optimizing existing vet hospitals (e.g., improving staffing and marketing) while omitting explicit mention of mobile clinics and grooming enhancements ( ). | A slight narrowing of scope, shifting from a broad integrated services approach to a focused improvement on vet hospital operations. |
Market Share Erosion and Negative Sales Growth Dynamics | Q1 explicitly mentioned sacrificing market share for higher profitability ( ). Q2 and Q3 did not directly detail this trade-off. | Q4 clearly acknowledged market share erosion and low-single-digit sales decline as a deliberate strategy to improve long-term profitability ( ). | The trade-off has re-emerged and been more clearly articulated in Q4 compared to earlier periods. |
Store Closures and Retail Footprint Optimization | Q1 noted a dynamic evaluation of real estate with no large-scale changes ( ). Q2 described a “fluid rolling” approach with mass closures ruled out; Q3 did not address it. | Q4 provided explicit figures (25 net closures in 2024; 20–30 expected in 2025) and a long-term optimization strategy for their 1,400-store footprint ( ). | There is a sharper, more detailed emphasis on retail footprint optimization in Q4. |
Fresh Frozen and Consumables Category Performance | Q1 reported flat consumables performance with initial inventory improvements and premium product focus ( ). Q2 noted modest consumables growth and strong fresh frozen performance; Q3 highlighted a 20% YoY increase for fresh frozen and 3% growth in consumables aided by a new inventory system ( ). | Q4 reiterated strong performance in fresh frozen and continued efforts to optimize consumables through enhanced inventory management, pricing, and vendor engagement ( ). | The category shows steady improvement with ongoing inventory system enhancements and a refined pricing strategy. |
Leadership Transitions and Organizational Uncertainty | Q1 described a period of uncertainty with a CEO vacancy and the appointment of an Executive Chairman along with restructuring ( ). Q2 marked the arrival of a new CEO with renewed strategic focus, and Q3 introduced additional leadership hires (e.g., Chief Revenue, Strategy officers) to drive transformation ( ). | Q4 reflects an established leadership structure under CEO Joel Anderson, with further key appointments solidifying the company’s direction and cultural revitalization ( ). | A clear progression from organizational uncertainty to stabilized, energetic leadership and greater operational clarity. |
Liquidity Strength and Free Cash Flow Outlook | Q1 reported negative free cash flow with strong liquidity metrics ( ). Q2 and Q3 continued to emphasize robust liquidity positions with free cash flow improvements driven by better inventory management and profitability initiatives ( ). | Q4 reinforced a strong liquidity position and positive free cash flow outlook, citing improved cash balances and explicitly tying free cash flow gains to profitability enhancements ( ). | Consistently strong liquidity with a sustained and gradually improving free cash flow outlook. |
Pet Adoption Trends and Consumer Demand Challenges | Q2 discussed a slowdown in pet adoptions and detailed consumer demand challenges such as softness in discretionary categories, while Q3 noted flat adoption trends with ongoing pricing and assortment adjustments ( ). | Q4 did not explicitly mention pet adoption trends or consumer demand challenges, shifting focus instead to internal operational improvements and cost management ( ). | The discussion on market-driven pet adoption trends has receded in Q4, suggesting a reduced strategic emphasis on external demand factors. |
Merchandising Excellence and Product Assortment Optimization | Q1 and Q2 highlighted merchandising as the largest opportunity for profitability, focusing on an end-to-end review of pricing and assortment along with rationalizing SKU offerings ( ). Q3 continued the emphasis by simplifying SKUs, optimizing vendor relationships, and strengthening pricing reviews ( ). | Q4 reaffirmed the comprehensive review of the merchandising model with an emphasis on competitive pricing frameworks, stronger vendor partnerships, and enhanced store merchandising to optimize the product mix ( ). | A steady and heightened focus on merchandising excellence, reflecting continuous commitment to assortment optimization and margin improvement. |
Research analysts covering Petco Health & Wellness Company.