• Revenue: $1.55 billion for the fourth quarter, in line with prior outlook.
• Adjusted EBITDA: $96.1 million, with a margin rate of 6.2%.
• Gross Margin: Increased by 1,180 basis points to 38%.
• SG&A Expenses: $571.9 million, representing 36.8% of net sales, up 60 basis points from last year.
• Comparable Sales: Up 50 basis points year over year for the fourth quarter.
• Free Cash Flow: $50 million positive for 2024.
• Cash Balance: Improved to $182 million.
• Store Locations: Closed 25 net locations in 2024, ending with 1,398 pet care centers in the US.
• 2025 Outlook - Net Sales: Expected to be down low single digits compared to last year.
• 2025 Outlook - Adjusted EBITDA: Expected between $375 and $390 million.
• 2025 Outlook - Store Closures: Expect to close between 20 to 30 net locations.

• Warning! GuruFocus has detected 4 Warning Signs with WOOF.

Release Date: March 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Petco Health and Wellness Co Inc (NASDAQ:WOOF) delivered fourth-quarter revenue of $1.55 billion, in line with prior outlook, and adjusted EBITDA of $96.1 million, exceeding expectations.
• The company has a strong leadership team with extensive retail industry expertise, which is accelerating operational improvements.
• Petco Health and Wellness Co Inc (NASDAQ:WOOF) is focusing on improving gross margins and leveraging SG&A to enhance profitability.
• The company is optimizing its product assortment and pricing strategy to align more closely with consumer demand and preferences.
• Petco Health and Wellness Co Inc (NASDAQ:WOOF) is committed to enhancing its omnichannel capabilities and digital experience to stimulate growth.

Negative Points

• Petco Health and Wellness Co Inc (NASDAQ:WOOF) expects overall net sales to decline by low single digits in 2025.
• The company plans to close between 20 to 30 net locations in 2025, following the closure of 25 net locations in 2024.
• Petco Health and Wellness Co Inc (NASDAQ:WOOF) is not relying on a positive comp to achieve its adjusted EBITDA guidance, indicating potential challenges in sales growth.
• The company is focusing on reducing costs and improving profitability, which may involve sacrificing some sales and market share in the short term.
• Petco Health and Wellness Co Inc (NASDAQ:WOOF) faces risks related to potential tariff impacts on its own brands and national brands, which could affect merchandise costs.

Q & A Highlights

Q: Joel, could you elaborate on the infrastructure or digital capabilities needed for phase 3 growth? A: Joel Anderson, CEO: We are currently focused on implementing and executing phase 2, which involves cost control and improving EBITDA. There are no significant infrastructure investments needed for phase 3, but we need to be disciplined in delivering improved EBITDA. Sabrina Simmons, CFO, added that about 40% of CapEx is for expansion, including IT infrastructure and digital investments, preparing for phase 3 growth.

Q: Sabrina, what are the low-hanging fruits for EBITDA improvement? A: Sabrina Simmons, CFO: The opportunity lies in fundamental retail practices. We aim for disciplined gross margin expansion by working with vendors, pricing, and reducing promotional stacking. On the SG&A line, we focus on efficiency and effectiveness, leveraging SG&A to improve profitability.

Q: How do you plan to regain market share if you're sacrificing sales for profitability? A: Joel Anderson, CEO: In the short term, we are focusing on profitability and cash flow improvement. Long-term, we aim to strengthen profitability and cash flow, lower leverage, and then focus on growth in phase 3 by identifying growth levers and testing them.

Q: Can you discuss the expected mix shift between supplies, hard goods, and services? A: Sabrina Simmons, CFO: We are not relying on a mix shift to meet our guidance. If it happens, it will be a positive tailwind, but our guidance does not depend on it.

Q: What are the largest building blocks for the 14% EBITDA increase guidance? A: Sabrina Simmons, CFO: The two biggest levers are expanding gross margin and leveraging SG&A. We are focused on both, not leaning into one at the expense of the other, to deliver balanced and adaptable improvements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.