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Earnings call · Jul 2026 (Q2 FY27)

Petco Health & Wellness Company Q2 FY27 earnings call WOOF

Sep 2, 2026 Source

Executive summary

Petco Q2 FY27 — Positive Comps and Strategic Progress

Petco reported positive comparable sales for the second quarter, driven by progress across its Phase 3 strategy, despite initial friction from the Petco Perks membership relaunch. The company is now focusing on personalization and loyalty to unlock future growth, alongside the rollout of a new store prototype and expansion of its vet hospital network. Financial discipline remains a priority, evidenced by significant debt reduction and reaffirmed full-year guidance.

Highlights

5

  • Delivered positive comparable sales of 0.6% for the second consecutive quarter.

  • Adjusted EBITDA reached $122 million, exceeding the company's outlook.

  • Voluntarily prepaid an additional $75 million in debt, bringing total repayments to $170 million over the last 9 months.

  • Gross margin rate expanded 37 basis points to 39.7%, including a $6.8 million net tariff refund.

  • Customer count grew slightly in Q2, indicating an inflection point.

Concerns

3

  • The relaunch of the Petco Perks membership program negatively impacted Q2 net sales, particularly in services, due to higher-than-projected point redemption velocity.

  • The dog business remains soft with adoptions down slightly industry-wide.

  • Ongoing supply chain headwinds, including fuel and tariff costs, are expected in the second half of the year.

Guidance & targets

CategoryTargetConfidence
Full-year Net Sales
flat to up 1.5%
high materiality
High
Full-year Adjusted EBITDA
$415 million and $430 million
high materiality
High
Q3 Sales Growth
0.4% to 1% year over year
medium materiality
High
Q3 Adjusted EBITDA
$100 million and $103 million
medium materiality
High
Full-year Net Interest Expense
about $122 million
low materiality
High
Full-year Depreciation and Amortization
about $200 million
low materiality
High
Full-year Capital Expenditures
about $140 million
medium materiality
High
Full-year Net Store Closures
between 15 and 20
low materiality
High
New Vet Hospitals Openings
begin to open additional vet hospitals
medium materiality
High
New Store Format Rollout
identifying the stores that would benefit from this layout
medium materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Services
Ongoing strength in services, with hospital sales productivity improving. Vet diet sales are a key example of ecosystem synergies.
Total pet visits: double-digit growthDoctor days: expanded double digitsVet diet sales (dogs and cats): double digits versus last year
————
Consumables
Positive growth and positive comparable sales, indicating hard work paying off and strategy working. Consumables are a key traffic driver.
Comparable sales: positive
—positive growth——

WOOF operating KPIs by quarter

WOOF operating KPIs stated on its earnings calls, by fiscal quarter
KPI Apr 2026 Q1 FY27This call Jul 2026 Q2 FY27Change vs prior quarter
Stores US
1,378 We ended the quarter with 1,378 stores in the US Source transcript
1,377 During the quarter, we had 1 net store closure, and we ended the quarter with 1,377 stores in the US Moving on to margin results. Source transcript
-0.1%

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

ProductTypeDetails
Science Diet Single Protein Dog Food Rollslaunch
Candy Shoplaunch
Own brand innovation in bedding and cleanuplaunch
Travel category expansionexpansion

Risks & headwinds

Membership program point redemption velocity Q2 FY27

Negative impact on Q2 net sales, particularly in services. Prior to rollout, sales and comp run rates were ahead of Q2 outlook of 0.3%.

Mitigation:Acted swiftly to deploy post-launch guardrails on redemption velocity. Peak redemptions are now behind us. Focus shifting to personalization and loyalty.

Softness in dog business Ongoing, expected to rebound in 2027

Adoptions are down slightly industry-wide.

Mitigation:Diversification into cat, companion animal, and services. Self-help initiatives to fix the dog business and be ready for market rebound.

Ongoing supply chain headwinds Second half of FY27

Impacts from fuel and tariffs, described as 'normal, manageable headwind'.

Mitigation:Flexibility from solid H1 profit performance allows absorption and offset of headwinds, and investment in growth initiatives.

Competitive pricing pressure Ongoing

Other companies reinvesting tariff refunds into price.

Mitigation:Constantly evaluating market pricing. Petco differentiates with its experience ecosystem, differentiated product, newness, in-store events, and services.

What to watch in Q3 FY27

Membership program personalization & loyalty impact

2027
Current Initial friction from high redemption, now focusing on capabilities.
Target Positive impact to emerge.

Why it matters

This is a key catalyst that supports long-term growth and strengthens customer relationships through personalized offers.

The balance of the year will be focused on these capabilities, and we expect a positive impact to emerge in 2027.

Q&A highlights

Is customer count inflecting, and how dependent is the next phase of transformation on this, given the existing customer base?

Customer count did inflect slightly in Q2, marking a good start. However, the company sees significant opportunity to grow Net Sales Per Active Customer (NSPAC) by migrating infrequent customers across digital, stores, and services, even without substantial new customer growth.

“Look, we actually did see that inflection in Q2 of our total customer base actually growing slightly. So that's call it a good start to having reached the bottom and start to grow from there.”

asked by Michael Lasser · answered by Joel Anderson

2 min read 6 chapters

Detailed narrative

Membership Program Relaunch and Future Focus

Petco successfully relaunched its customer membership program, Petco Perks, in late January, making point redemption significantly easier. While this drove incredible customer engagement, it also negatively impacted Q2 net sales, particularly in services, due to higher-than-projected redemption velocity. The company has since deployed guardrails, and with peak redemptions now behind them, the focus shifts to unlocking personalization and loyalty capabilities, with a positive impact expected to emerge in 2027.

Strategic Pillars and Growth Drivers

The company is gaining traction across its four strategic pillars. This includes adding newness and innovation, improving digital capabilities, investing in vet hospitals, and connecting services to the center of the store. Key growth areas highlighted are consumables, which saw positive growth, and companion animals, with particular strength in live reptiles and pet-friendly gardening products. The strategy emphasizes diversification beyond the soft dog business.

Ecosystem Synergies and Omnichannel Integration

Petco is leveraging its integrated omnichannel ecosystem to deepen customer relationships. The Autoship sign-up capability has been rolled out across physical stores, aiming to increase NSPAC (Net Sales Per Active Customer) among infrequent store shoppers, as digital Autoship customers typically spend 2 to 3 times more. The veterinary business continues strong performance with double-digit growth in pet visits and doctor days, and vet diet sales for dogs and cats also grew double digits, showcasing cross-shop opportunities.

New Store Prototype and Remodel Strategy

A new store prototype, tested in a 7-store market since May, is designed to enhance customer discovery, enjoyment, and associate expertise. Features include interactive companion animal habitats and integrated nutrition advice in grooming salons. Initial results are highly encouraging, showing a sizable lift in new/reactivated customers, transaction counts, basket sizes, comp sales, margins, and NPS. Petco plans to expedite more remodels in 2026 before identifying stores for a broader rollout starting in 2027.

Second Half and Q3 Initiatives

Key drivers for Q3 and beyond include a partnership with Hill's Pet Nutrition for the Q3 launch of Science Diet Single Protein Dog Food Rolls, supported by new in-store chillers. Inventory investments are focused on accelerating new assortments and own brand innovation in supplies. The company is also maximizing physical footprint through retailtainment events like Catco Month and Halloween photo opportunities, designed to drive store traffic and engagement.

Financial Discipline and Leverage Reduction

Petco has demonstrated consistent financial discipline, marking its seventh consecutive quarter of delivering on profitability and cash flow goals. This has allowed for significant leverage reduction, including a recent $75 million voluntary debt prepayment, bringing total repayments to $170 million over the last nine months. The company remains focused on achieving its target leverage ratio of 2x.

AI-generated summary of the company's earnings call. Not investment advice.