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Petco Health & Wellness Company, Inc. (WOOF)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 2025 delivered a mixed print: EPS beat consensus while revenue was modestly below and EBITDA materially below Street; management had flagged that tariff impacts would be “most meaningful” in Q4 and also preserved “dry powder” to reinvest, contributing to the result .
  • Full‑year guidance was previously raised in Q2 (Adjusted EBITDA to $385–$395M; net sales down low single digits), and Q3 guidance set Adjusted EBITDA at $92–$94M; both were anchored in gross margin expansion and SG&A leverage .
  • Traction in store operations, pricing/promo discipline, and inventory governance continued through the year, while e‑commerce retooling remained an identified opportunity; management reiterated Phase 3 growth pillars: store experience, services scale, merchandising differentiation, and omnichannel .
  • Near‑term stock reaction catalysts: the EPS beat vs consensus, Street skepticism on EBITDA underperformance, and narrative around tariff pass‑through and reinvestment pace into 2026 .

What Went Well and What Went Wrong

What Went Well

  • Strong execution on gross margin and SG&A: management emphasized expanded gross margins via disciplined AUR/AUC, pricing/promo guardrails, and SG&A savings including employee benefits optimization and store labor efficiency .
  • Operating discipline in stores: completed planogram resets (dog/cat), higher in‑stock/on‑shelf availability, improved store productivity; CEO: “We’ve… completed those resets… contributing to improved store performance” .
  • Strategic clarity on growth: CEO outlined Phase 3 pillars—“delivering amazing store experience… services at scale… merchandising differentiation… winning with omnichannel”—and reintroduced “Where the Pets Go” branding with positive customer engagement/NPS .

What Went Wrong

  • Top‑line softness persisted: management continued to “move away from unprofitable sales” and noted transactions remained the biggest opportunity; e‑commerce softness offset in‑store improvement .
  • Tariff headwinds intensified in Q4: CFO flagged minimal impact in Q2, becoming “meaningful” in Q3 and “most meaningful” in Q4, pressuring margins and EBITDA .
  • EBITDA miss vs consensus in Q4: Street looked for higher EBITDA; actual trailed consensus despite full‑year margin progress and reinvestment priorities in the back half (see Estimates Context) .

Financial Results

Quarterly performance vs prior periods and estimates:

MetricQ1 2025Q2 2025Q3 2025Q4 2025
Revenue ($USD Billions)$1.49 $1.49 $1.51*$1.55*
EPS ($USD)-$0.04 $0.05 -$0.02*$0.02*
NotesReaffirmed FY25 outlook Raised FY25 EBITDA outlook Call scheduled Nov 25, 2025 EPS beat, revenue slight miss vs Street*
  • Prior year comparison: Q4 2024 net revenue was $1.60B; Q4 2025 revenue of ~$1.55B implies ~3% YoY decline, consistent with management’s expectation of low‑single‑digit down for FY25 .

Q4 2025 actual vs S&P Global consensus:

MetricConsensusActualBeat/Miss
Revenue ($USD Billions)$1.56*$1.55*Miss
EPS ($USD)$0.01*$0.02*Beat
EBITDA ($USD Millions)$93.66*$76.49*Miss
  • Gross margin trajectory (reported): 38.2% in Q1 and 39.3% in Q2; management indicated tariff impact would weigh more heavily in Q3/Q4 .

KPIs (selected):

  • Comparable sales: -1.3% (Q1 2025) ; -1.4% (Q2 2025) .
  • Free Cash Flow: $53.8M (Q2 2025) .

Values with asterisk retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAFY 2025$375–$390M (Q1) $385–$395M (Q2) Raised
Net SalesFY 2025Down low single digits YoY (Q1) Down low single digits YoY (Q2) Maintained
Net Interest ExpenseFY 2025~$130M (Q1) ~$130M (Q2) Maintained
Capital ExpendituresFY 2025$125–$130M (Q1) $125–$130M (Q2) Maintained
Depreciation & AmortizationFY 2025~$200M (Q1) ~$200M (Q2) Maintained
Net Store ClosuresFY 2025—~25 (Q2) New detail
Adjusted EBITDAQ3 2025—$92–$94M (Q2) New quarterly outlook

Management reiterated tariff assumptions remaining at current/planned levels within guidance .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 = Q2 2025)Previous Mentions (Q-1 = Q3 2025)Current Period (Q4 2025)Trend
Gross margin disciplineExpanded via AUR/AUC, pricing/promo rigor; continued in services and products Not availableNot availableImproving, but tariffs rising in H2
Tariffs/macroMinimal in Q2; meaningful in Q3; most meaningful in Q4 Not availableNot availableIncreasing headwind
E‑commerce retoolingNew leader; reducing friction; basic retail ops (speed, repeat delivery, personalization) Not availableNot availableOngoing identification→implementation
Store ops/planogramsResets completed; improved in‑stock/on‑shelf & productivity Not availableNot availablePositive
Loyalty programRelaunch targeted for 2026; retention focus, personalization Not availableNot availableBuilding
North Star pillarsStore experience, services moat, merchandising differentiation, omnichannel Not availableNot availableStrategic clarity
Inventory governanceDown ~9.5% YoY with improved in‑stocks; tight buys, fast‑turn seasonal Not availableNot availableBetter-managed

Note: Q3 and Q4 2025 call/transcripts were not available in the document catalog; observations rely on Q2 2025 call and published press releases.

Management Commentary

  • CEO on transformation and raised outlook: “We meaningfully improved our profitability… delivered $114,000,000 in adjusted EBITDA… we are able to raise our guidance and… begin thoughtful reinvestment… as we set the stage for Phase three… returning to profitable sales growth” .
  • CFO on gross margin drivers: “Gross margin expansion was driven by… disciplined approach to both average unit cost and average unit retail… more disciplined processes to effectively manage our pricing and promotional strategies” .
  • CFO on tariff timing: “We had almost no tariff impact in Q2… [Q3] becomes meaningful, and then… much more meaningful in the fourth quarter” .
  • CEO on North Star pillars: “Delivering amazing store experience… services at scale… merchandising differentiation… over time winning with omnichannel” .

Q&A Highlights

  • Comp trajectory: Management set expectations that positive comp is more likely a 2026 outcome, with Q3 being the toughest compare and Q4 still under transformation and reinvestment .
  • Gross margin and tariffs: Gross margin beat was driven by pricing/promo discipline; tariff impact scales in H2; pricing remains a lever with a consumer‑first lens .
  • E‑commerce strategy: Intentional cleanup of “promo stacking” and bottom‑line focus; new e‑com leadership prioritizing speed, repeat delivery, and personalization .
  • Inventory/NPS: Inventory dollars down ~9.5% YoY with better in‑stocks; NPS up sequentially; store events and “Where the Pets Go” branding resonating with customers .
  • Reinvestment and volatility: CFO held “dry powder” for selective H2 investments and to protect against macro volatility; leadership summit was the only committed spend disclosed .

Estimates Context

  • Q4 2025 vs S&P Global consensus: EPS beat (Actual $0.02 vs $0.01), Revenue slight miss (~$1.55B vs $1.56B), EBITDA miss ($76M vs ~$94M). Expect Street to recalibrate EBITDA trajectory given tariff drag and reinvestment, while acknowledging structural margin work and store ops improvements*.
  • FY25 framing: Prior raises to Adjusted EBITDA guide (midpoint +$10M) in Q2 set expectations; H2 tariff drag plus reinvestment explain EBITDA variance vs quarterly consensus .

Values with asterisk retrieved from S&P Global.

Key Takeaways for Investors

  • EPS resilience despite tariff headwinds reflects real progress on margin and cost discipline; however, EBITDA miss underscores H2 tariff drag and reinvestment cadence—monitor Q1 2026 for margin normalization as tariffs annualize .
  • The strategy remains execution‑led: store experience and services moat are differentiators; watch loyalty relaunch and e‑commerce fixes to broaden mix back to profitable growth .
  • Top‑line growth is intentionally paced; expect sequential improvements but not linear—transactions and e‑com are the biggest opportunities in 2026 .
  • Balance sheet/liquidity improved through FY25; inventory governance is tight—less clearance risk as merchandising newness scales .
  • Near‑term trading: focus on tariff commentary and pricing pass‑through in 1H 2026, plus any updates on reinvestment ROI and omnichannel KPIs; sentiment likely hinges on evidence of comp stabilization and EBITDA progression .
  • Medium‑term thesis: if Phase 3 execution lands (services scale + merchandising differentiation + omnichannel), the margin foundation laid in FY25 could support durable EBITDA growth with lower promo intensity .

Additional document sources read:

  • Q2 2025 press release (Petco Reports Second Quarter 2025 Financial Results) .
  • Q1 2025 press release (Petco Health + Wellness Company, Inc. Reports First Quarter 2025 Financial Results) .
  • Q2 2025 earnings call transcript .
  • Q4 2024 press release (for YoY reference) .
  • Q3 2025 call scheduling release .

Note on availability: An 8‑K 2.02 press release and the Q4 2025 earnings call transcript were not available in the document catalog or public IR press list queried; we reviewed Q1–Q2 2025 primary documents and used S&P Global for Q3–Q4 actuals/consensus where required. Values with asterisk retrieved from S&P Global.